FOURTH AMENDMENT TO CREDIT AGREEMENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), made and
entered into as of April 10, 2000, is by and between Health Risk Management,
Inc., a corporation organized under the laws of the State of Minnesota (the
"Borrower"), and U.S. Bank National Association, a national banking association
(the "Bank").
RECITALS
A. The Bank and the Borrower entered into an Amended and Restated
Revolving Credit and Term Loan Agreement dated as of May 1, 1998, as amended by
a First Amendment to Credit Agreement dated as of January 27,1999, as amended by
a Second Amendment to Credit Agreement dated as of June 30, 1999 and as amended
by a Third Amendment to Credit Agreement dated as of December 21, 1999 (as
amended, the "Credit Agreement").
B. The Borrower desires to amend certain provisions of the Credit
Agreement, and the Bank has agreed to make such amendments, subject to the terms
and conditions set forth in this Amendment.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby covenant
and agree to be bound as follows:
Section 1. Capitalized Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the Credit
Agreement, unless the context shall otherwise require.
Section 2. Amendments. The Credit Agreement is hereby amended as
follows:
2.1 Amended Definitions. The definitions of "Fixed Charge Coverage
Ratio" contained in Section 1.1 of the Credit Agreement is deleted in its
entirety and the following definition is substituted in lieu thereof:
"Fixed Charge Coverage Ratio": For any period of determination, the
ratio of:
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(a) Consolidated Net Income during such period, plus consolidated
interest expense of the Borrower and its Subsidiaries during
such period, plus for any fiscal quarter ending on or prior to
September 30, 2000, the $2,000,000 reserve charge taken by
HRMPA for the fiscal quarter ended December 31, 1999, minus
Capital Expenditures (other than Software Capital
Expenditures) during such period, minus Software Capital
Expenditures during such period, plus consolidated
depreciation and amortization for the Borrower and the
Subsidiaries during such period, to
(b) consolidated interest expense of the Borrower and its
Subsidiaries during such period, plus all scheduled payments
of principal upon interest-bearing Indebtedness of the
Borrower or any Subsidiary during such period, plus all
obligations of the Borrower or any Subsidiary as lessee under
any Capitalized Lease during such period, plus all scheduled
payments of interest or principal under the Surplus Note
during such period and without duplication, plus one-third of
the aggregate amount outstanding upon the Revolving Note on
the last day of such period,
all as determined in accordance with GAAP.
2.2 Repayment. Section 4.1(b) of the Credit Agreement is deleted in its
entirety and the following is substituted in lieu thereof:
(b) Term Loan. The unpaid portion of the Term Loan shall be payable in
installments of $350,000, payable on that last day of each month of
each year, commencing on April 30, 2000, and a final payment equal to
all outstanding principal on January 31, 2002.
2.3 Amended Financial Covenants. Sections 8.17 through 8.21 of the
Credit Agreement are deleted in their respective entirety and the following
sections are substituted in lieu thereof:
Section 8.17 Consolidated Net Worth. At any time permit its
Consolidated Net Worth to be less than the sum of (a)$30,500,000 plus
(b) 85% of its cumulative positive Consolidated Net Income attributable
to the period from and after March 31, 2000.
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Section 8.18 Consolidated Net Income. At any time permit its
Consolidated Net Income to be less than the following indicated amount
for the applicable fiscal quarter of the Borrower:
Minimum Consolidated
Net Income Fiscal Quarter Ended
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$500,000 March 31, 2000
$750,000 June 30, 2000
$750,000 September 30, 2000
$750,000 December 31, 2000
$1,450,000 March 31, 2001
$1,550,000 June 30, 2001
$1,650,000 September 30, 2001
$1,750,000 December 31, 2001
$1,850,000 March 31, 2002
Section 8.19 Cash Flow Leverage Ratio. At any time permit the
ratio of the Cash Flow Leverage Ratio for the period of four
consecutive fiscal quarters ending on such date to be greater than (a)
0.90 to 1.00 as of March 31, 2001 and June 30, 2001 and (b) 0.75 to
1.00 as of September 30, 2001 and the last day of each fiscal quarter
occurring thereafter.
Section 8.20 Fixed Charge Coverage Ratio. At any time permit
the Fixed Charge Coverage Ratio for any period of four consecutive
fiscal quarters to be less than 1.20 to 1.00 for the four fiscal
quarters ended on March 31, 2000 and for the four fiscal quarters ended
on the last day of any fiscal quarter occurring thereafter.
Section 3. Effectiveness of Amendments. The amendments contained in
this Amendment shall become effective upon delivery by the Borrower of, and
compliance by the Borrower with, the following:
3.1 This Amendment, duly executed by the Borrower.
3.2 A copy of the resolutions of the Board of Directors of the
Borrower authorizing the execution, delivery and performance of this
Amendment certified as true and accurate by its Secretary or Assistant
Secretary, along with a certification by such Secretary or Assistant
Secretary (i) certifying that there has been no amendment to the
Articles of Incorporation or Bylaws of the Borrower since true and
accurate copies of the same were previously delivered to the Bank, and
(ii) identifying each officer of the Borrower authorized to execute
this Amendment and any other instrument or agreement executed by the
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Borrower in connection with this Amendment (collectively, the
"Amendment Documents"), and certifying as to specimens of such
officer's signature and such officer's incumbency in such offices as
such officer holds.
3.3 Certified copies of all documents evidencing any necessary
corporate action, consent or governmental or regulatory approval (if
any) with respect to this Amendment.
3.4 Reaffirmations of Security Agreement in the forms of
Exhibits A-1, A-2 and A-3, duly executed by the corporations indicated
therein.
3.5 The Borrower shall have paid to the Bank a non-refundable
amendment fee in the amount of $25,000.
3.6 The Borrower shall have satisfied such other conditions as
specified by the Bank, including payment of all unpaid legal fees and
expenses incurred by the Bank through the date of this Amendment in
connection with the Credit Agreement and the Amendment Documents.
Section 4 Defaults and Waivers.
4.1 Events of Default.
(a) Consolidated Net Worth. The Borrower defaulted
under Section 8.17 of the Credit Agreement by permitting its
Consolidated Net Worth to be less than the amount specified in
such Section as at December 31, 1999.
(b) Consolidated Tangible Net Income. The Borrower
defaulted under Section 8.18 of the Credit Agreement by
permitting its Consolidated Net Income to be less than
$950,000 as at December 31, 1999 for the fiscal quarter ended
on that date.
(c) Fixed Charge Coverage Ratio. The Borrower
defaulted under Section 8.20 of the Credit Agreement by
permitting the Fixed Charge Coverage Ratio to be less than
1.05 to 1.00 as of December 31, 1999 for the four fiscal
quarters ended on that date.
4.2 Waiver. Upon the date on which this Amendment becomes
effective, the Bank hereby waives the Borrower's Defaults and Events of
Default described in the preceding Sections 4.1(a) through 4.1(c) (the
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"Existing Defaults"). The waiver of the Existing Defaults set forth
above is limited to the express terms thereof, and nothing herein shall
be deemed a waiver by the Bank of any other term, condition,
representation or covenant applicable to the Borrower under the Credit
Agreement (including but not limited to any future occurrence similar
to the Existing Defaults) or any of the other agreements, documents or
instruments executed and delivered in connection therewith, or of the
covenants described therein. The waivers set forth herein shall not
constitute a waiver by the Bank of any other Default or Event of
Default, if any, under the Credit Agreement, and shall not be, and
shall not be deemed to be, a course of action with respect thereto upon
which the Borrower may rely in the future, and the Borrower hereby
expressly waives any claim to such effect.
Section 5. Representations, Warranties, Authority, No Adverse Claim.
5.1 Reassertion of Representations and Warranties, No Default. The
Borrower hereby represents that on and as of the date hereof and after giving
effect to this Amendment (a) all of the representations and warranties contained
in the Credit Agreement are true, correct and complete in all respects as of the
date hereof as though made on and as of such date, except for changes permitted
by the terms of the Credit Agreement, and (b) there will exist no Default or
Event of Default under the Credit Agreement as amended by this Amendment.
5.2 Authority, No Conflict, No Consent Required. The Borrower
represents and warrants that the Borrower has the power and legal right and
authority to enter into the Amendment Documents and has duly authorized as
appropriate the execution and delivery of the Amendment Documents and other
agreements and documents executed and delivered by the Borrower in connection
herewith or therewith by proper corporate, and none of the Amendment Documents
nor the agreements contained herein or therein contravene or constitute a
default under any agreement, instrument or indenture to which the Borrower is a
party or a signatory or a provision of the Borrower's Articles of Incorporation,
Bylaws or any other agreement or requirement of law, or result in the imposition
of any lien on any of its property under any agreement binding on or applicable
to the Borrower or any of its property except, if any, in favor of the Bank. The
Borrower represents and warrants that no consent, approval or authorization of
or registration or declaration with any person, including but not limited to any
governmental authority, is required in connection with the execution and
delivery by the Borrower of the Amendment Documents or other agreements and
documents executed and delivered by the Borrower in connection therewith or the
performance of obligations of the Borrower therein described, except for those
which the Borrower has obtained or provided and as to which the Borrower has
delivered certified copies of documents evidencing each such action to the Bank.
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5.3 No Adverse Claim. The Borrower warrants, acknowledges and agrees
that no events have been taken place and no circumstances exist at the date
hereof whichwould give the Borrower a basis to assert a defense, offset or
counterclaim to any claim of the Bank with respect to the Borrower's obligations
under the Credit Agreement as amended by this Amendment.
Section 6. Affirmation of Credit Agreement, Further References,
Affirmation of Security Interest. The Bank and the Borrower each acknowledge and
affirm that the Credit Agreement, as hereby amended, is hereby ratified and
confirmed in all respects and all terms, conditions and provisions of the Credit
Agreement, except as amended by this Amendment, shall remain unmodified and in
full force and effect. All references in any document or instrument to the
Credit Agreement are hereby amended and shall refer to the Credit Agreement as
amended by this Amendment. The Borrower confirms to the Bank that the Borrower's
obligations under the Credit Agreement, as amended by this Amendment are and
continue to be secured by the security interest granted by the Borrower in favor
of the Bank under the Security Agreement, and all of the terms, conditions,
provisions, agreements, requirements, promises, obligations, duties, covenants
and representations of the Borrower under such documents and any and all other
documents and agreements entered into with respect to the obligations under the
Credit Agreement are incorporated herein by reference and are hereby ratified
and affirmed in all respects by the Borrower.
Section 7. Merger and Integration, Superseding Effect. This Amendment,
from and after the date hereof, embodies the entire agreement and understanding
between the parties hereto and supersedes and has merged into this Amendment all
prior oral and written agreements on the same subjects by and between the
parties hereto with the effect that this Amendment, shall control with respect
to the specific subjects hereof and thereof.
Section 8. Severability. Whenever possible, each provision of this
Amendment and the other Amendment Documents and any other statement, instrument
or transaction contemplated hereby or thereby or relating hereto or thereto
shall be interpreted in such manner as to be effective, valid and enforceable
under the applicable law of any jurisdiction, but, if any provision of this
Amendment, the other Amendment Documents or any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto shall
be held to be prohibited, invalid or unenforceable under the applicable law,
such provision shall be ineffective in such jurisdiction only to the extent of
such prohibition, invalidity or unenforceability, without invalidating or
rendering unenforceable the remainder of such provision or the remaining
provisions of this Amendment, the other Amendment Documents or any other
statement, instrument or transaction contemplated hereby or thereby or relating
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hereto or thereto in such jurisdiction, or affecting the effectiveness, validity
or enforceability of such provision in any other jurisdiction.
Section 9. Successors. The Amendment Documents shall be binding upon
the Borrower and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Bank and the successors and assigns
of the Bank.
Section 10. Legal Expenses. As provided in Section 10.2 of the Credit
Agreement, the Borrower agrees to reimburse the Bank, upon execution of this
Amendment, for all reasonable out-of-pocket expenses (including attorneys' fees
and legal expenses of Dorsey & Whitney LLP, counsel for the Bank) incurred in
connection with the Credit Agreement, including in connection with the
negotiation, preparation and execution of the Amendment Documents and all other
documents negotiated, prepared and executed in connection with the Amendment
Documents, and in enforcing the obligations of the Borrower under the Amendment
Documents, and to pay and save the Bank harmless from all liability for, any
stamp or other taxes which may be payable with respect to the execution or
delivery of the Amendment Documents, which obligations of the Borrower shall
survive any termination of the Credit Agreement.
Section 11. Headings. The headings of various sections of this
Amendment have been inserted for reference only and shall not be deemed to be a
part of this Amendment.
Section 12. Counterparts. The Amendment Documents may be executed in
several counterparts as deemed necessary or convenient, each of which, when so
executed, shall be deemed an original, provided that all such counterparts shall
be regarded as one and the same document, and either party to the Amendment
Documents may execute any such agreement by executing a counterpart of such
agreement.
Section 13. Governing Law. THE AMENDMENT DOCUMENTS SHALL BE GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT
OF LAW PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS, THEIR HOLDING COMPANIES AND THEIR AFFILIATES.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date and year first above written.
BORROWER:
HEALTH RISK MANAGEMENT, INC.
By: /s/ Thomas P. Clark
Title: Chief Financial Officer
BANK:
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Jason Tornow
Title: Corporate Banking Officer
