1
EXHIBIT 10.3(A)
U. S. SMALL BUSINESS ADMINISTRATION
SAN ANTONIO DISTRICT OFFICE
FEDERAL BUILDING
727 EAST DURANGO - ROOM A527
SAN ANTONIO, TEXAS 78206
Loan Number GP-767,982-3006-SA
AUTHORIZATION AND LOAN AGREEMENT
(GUARANTY LOANS)
Liberty National Bank
900 Congress Avenue
Austin, Texas 78701
Your request dated September 16, 1994, for SBA to Guarantee 53.57% of a Loan in
the amount of $1,400,000 to be made by lender to
SURREY, INC. (A TEXAS CORPORATION)
13110 Trails End Road
Leander, Texas 78641
is hereby approved pursuant to Section 7(a) of the Small Business Act as
amended.
1. THE FOLLOWING FORMS ARE HEREWITH ENCLOSED:
a. Three copies of SBA Note, one to be executed by the
Borrower, the other two to be conformed. The original executed
copy must be retained by you and one conformed copy must be
sent to SBA immediately after first disbursement, together
with a guaranty fee of 2% of the amount guaranteed. This fee
shall be paid by Lender within 90 days of the date of this
Authorization and Lender may charge the Borrower for such fee
only after the Lender has paid the fee and an initial
disbursement was made on the loan.
b. Copies of the SBA Settlement Sheet, Form 1050, are to
be completed and executed by Lender and Borrower to reflect
each disbursement. Prompt reporting of disbursements is
necessary. Return the first two copies ("Denver FOD" copy and
"Servicing Office" copy) to SBA.
c. Compensation Agreements, Form 159, shall be executed
by Borrower, each representative and Lender and returned to
SBA if Borrower has employed an attorney, accountant or other
representative, or if Borrower is charged fees for services by
Lender or an associate of Lender. If no such fees have been
charged, please write "None" and return the form, executed by
the Lender and Borrower, to SBA.
SBA Form 529B Page 1
2
d. The original of this Authorization (and documents
itemized below if any) shall be executed prior to first
disbursement and retained in loan file by the Lender. A copy
of the Authorization, amendments and itemized documents should
be given to the Borrower.
2. THIS AUTHORIZATION IS SUBJECT TO:
a. Provisions of the Guaranty Agreement between Lender
and SBA, dated January 18, 1991.
b. First disbursement of the Loan being made not later
than three (3) months (January 17, 1995), and no disbursement
bang made later than six (6) months (April 17, 1995), from the
date of this Authorization, unless such time is extended
pursuant to prior written consent by SBA.
c. Receipt by Lender of evidence that there has been no
unremedied adverse change since the date of the Application,
or since any of the preceding disbursements, in the financial
or any other condition of Borrower, which would warrant
withholding or not making any such disbursement or any further
disbursement.
d. The representations made by Borrower in its loan
application, the requirements or conditions set forth in
Lender's application form, including the supporting documents
thereto, the conditions set forth herein and any future
conditions imposed by Lender (with prior SBA approval).
3. TERMS OF LOAN:
a. Repayment term, interest rate(s), and maturity.
Initial interest rate shall be 9.50%;
Interest rate shall vary each quarter and shall not
exceed prime rate plus 1.75%;
Installment amount shall be $16,329 beginning one
(1) month from date of note;
Frequency of installments shall be monthly; Maturity
of loan shall be Twelve (12) years from
date of note; and all other terms and conditions
stated in the SBA Note (SBA Form 147) provided
with this Authorization and Loan Agreement.
b. Use of Proceeds: (Show specific uses for which loan
is authorized.)
(1) Approximately $150,000 to make improvements.
SBA Form 529B Page 2
3
(2) Approximately $1,123,000 for debt repayment
as follows:
(a) approximately $42,000 to Liberty
National Bank to refinance existing
equipment term loans.
(b) approximately $18,000 to North Rim
Development (R. Luce) refinance
existing real estate loan.
(c) approximately $388,000 to The Money
Store Investment Corporation/SBA to
refinance existing SBA loan.
(d) approximately $245,000 to Liberty
National Bank/SBA to refinance
existing SBA loan.
(e) approximately $130,000 to Liberty
National Bank/SBA to refinance
existing SBA loan.
(f) approximately $300,000 to Liberty
National Bank to term out an existing
revolving line of credit loan.
(3) Approximately $ 127,000 for working capital
accounts payable.
TOTAL LOAN $1,400,000
(4) Proceeds not expended for purposes indicated
above may be disbursed for operating expenses
provided the amount does not exceed $15,000.
(5) In order to eliminate the need of numerous
joint payee checks for small amounts, Lender is
authorized to make disbursements to borrower of
$10,000 for the purpose of purchasing inventory or
equipment provided that subsequent like disbursements
are withheld until borrower has accounted for the
earlier disbursement by presentation to Lender of
cancelled checks, paid invoices and/or receipts.
(6) Interim loans made by Lender subsequent to
date of this Authorization for the purposes outlined
above may be repaid with SBA loan proceeds (this does
not include renewals of notes existing prior to SBA
loan approval). SBA Form 1050 "Settlement Sheet" must
show the actual use of the interim funds and
correspond to the uses specified above.
SBA Form 529B Page 3
4
c. Collateral:
(1) If any of the collateral pledged as security
for this loan is sold in bulk or outside the normal
course of business, the entire debt shall become due
and payable at the option of the lender.
(2) Deed of Trust constituting a first lien on
land and improvements located at 13110 Trails End
Road, Leander, Texas. First lien to include the
existing land an 30,000 sq. ft. of improvements plus
the additional 9,000 sq. ft. and new septic system
to be build with loan proceeds. Legal description is
as being Lots No. 2, 3 and 4 of North Rim, a
subdivision in Travis County, Texas according to the
map or plat of record in Volume 83, pages 161A -164A,
Plat Records of Travis County, Texas. Evidence of
title and priority of lien will be based upon
Mortgagee Title Policy.
(3) First lien evidenced by Security Agreement(s)
and UCC-1 filing(s) on all the following now owned
and hereafter acquired (including proceeds):
(a) equipment
(b) inventory
(c) furniture and fixtures
located at 13110 Trails End Road, Leander, Texas.
(4) Second lien evidenced by Security
Agreement(s) and UCC-1 filing(s) on all the following
now owned and hereafter acquired (including
proceeds):
(a) accounts receivable
located at 13110 Trails End Road, Leander, Texas;
subject only to a prior security interest in favor of
Liberty National Bank of a $250,000 Revolving Line of
Credit with a borrowing base of 70% of accounts
receivable less than 60 days old.
(5) Prior to first disbursement the appropriate
UCC lien searches must be made to determine Lender's
priority of lien.
(6) Written agreement of stockholders that, prior
to payment in full of the above described
indebtedness, they will not transfer or sell any of
their shares of stock in the Borrower without the
prior written consent of the Lender and SBA. Failure
to obtain written consent may be considered
SBA Form 529B Page 4
5
a default under the terms of the Note or this
Authorization.
Borrower hereby agrees not to issue
additional stock or reclassify any of its outstanding
shares of stock without the prior written consent of
the Lender and SBA. Failure to obtain written
consent may be considered a default under the terms
of the Note or this Authorization.
(7) Personal guaranty on forms supplied by SBA
(SBA Form 148) executed by James K. Olson and wife,
Louise K. Olson.
(8) Personal guaranty on forms supplied by SBA
(SBA Form 148) executed by John B. van der Hagen and
wife, Mary A. van der Hagen.
4. TO FURTHER INDUCE LENDER TO MAKE AND SBA TO GUARANTY THIS
LOAN, LENDER AND SBA IMPOSE THE FOLLOWING CONDITIONS:
a. Execution of all documents required in Item 1 above.
b. Reimbursable Expenses. Borrower will, on demand,
reimburse Lender for any and all expenses incurred, or which
may be hereafter incurred, by Lender from time to time in
connection with or by reason of Borrower's application for,
and the making and administration of the Loan.
c. Books, Records, and Reports. Borrower will at all
times keep proper books of account in a manner satisfactory to
Lender and/or SBA. Borrower hereby authorizes Lender or SBA to
make or cause to be made, at Borrower's expense and in such
manner and at such times as Lender or SBA may require, (a)
inspections and audits of any books, records and papers in the
custody or control of Borrower or others, relating to
Borrower's financial or business conditions, including the
making of copies thereof and extracts therefrom, and (b)
inspections and appraisals of any of Borrower's assets.
Borrower will furnish to Lender and SBA for the 12 month
period ending on the last day of the borrower's fiscal year
and annually thereafter (no later than 2 months following the
expiration of any such period) and at such other times and in
such form as Lender may prescribe, Borrower's financial and
operating statements. Borrower hereby authorizes all Federal,
State and municipal authorities to furnish reports of
examinations, records, and other information relating to the
conditions and affairs of Borrower and any desired information
from reports, returns, files and records of such authorities
SBA Form 529B Page 5
6
upon request therefor by Lender or SBA. Year-end statements to
be prepared by an independent public accountant.
LENDER IMPOSED:
(1) Quarterly financial statement on business,
including balance sheet, profit and loss statement,
aged accounts receivable and accounts payable
listings. These quarterly reports are to be submitted
to Lender with 30 days of the end of each quarter. An
annual Corporate tax return (Form 1120) is due within
30 days of timely filing.
(2) Annual personal financial statements,
including cash flow statement and contingent
liability statement, with 30 days of the end of each
calendar year. Annual personal tax returns (Form
1040) is due within 30 days of timely filing.
d. Borrower shall not execute any contracts for
management consulting services without prior approval of
Lender and SBA.
e. Distributions, and Compensation. Borrower will not,
without the prior written consent of Lender or SBA (a) if
Borrower is a corporation, declare or pay any dividend or make
any distribution upon its capital stock, or purchase or retire
any of its capital stock, or consolidate, or merge with any
other company, or give any preferential treatment, make any
advance, directly or indirectly, by way of loan, gift, bonus,
or otherwise, to any company directly or indirectly
controlling or affiliated with or controlled by Borrower, or
any other company, or to any officer, director or employee of
Borrower, or of any such company, (b) if Borrower is a
partnership or individual, make any distribution of assets of
the business of Borrower, other than reasonable compensation
for services, or give any preferential treatment, make any
advance directly or indirectly, by way of loan, gift, bonus,
or otherwise, to any partner or any of its employees or to any
company directly or indirectly controlling or affiliated with
or controlled by Borrower, or any other company.
f. Other Provisions:
(1) The borrower agrees, to the extent feasible,
to purchase only American-made equipment and products
with the proceeds of this loan.
SBA Form 529B Page 6
7
(2) Prior to first disbursement, the Lender must
be in receipt of evidence of the kind described below
from an independent authoritative source which is
sufficient to indicate to the Lender that the
property is not in a special flood hazard area
(SFHA). Property is defined as the asset(s) financed
as a part of the SBA financial assistance and/or
other collateral deemed necessary by the field
office. If such evidence is not provided to the
Lender, the borrower must obtain, and maintain, a
Standard Flood Insurance Policy (SFIP) or other
appropriate special hazard insurance in amounts and
coverages equal to the lesser of (1) the insurable
value of the property or (2) the maximum amount of
coverage available. Borrower can show that special
flood hazard insurance has been acquired by
submitting a copy of the policy or providing evidence
of premium payment for the appropriate coverage to a
licensed insurance agent. Borrower will not be
eligible for either any future disaster assistance or
SBA business loan assistance if the special flood
hazard insurance is not maintained as stipulated
herein throughout the entire term of this loan.
As evidence that the property is not located
within a special flood hazard area subject to
flooding, mudslides, the Lender may rely on a
determination of special flood hazard area status by
the borrower's property & casualty insurance company,
real estate appraiser, title insurance company, a
local government agency or other authoritative source
acceptable to SBA which would ordinarily have
knowledge of the special flood hazard area status for
the property.
(3) Note (SBA Form 147) and all loan documents to
be executed by corporate officers authorized to incur
the debt in a Resolution of the Board of Directors.
(4) Prior to final disbursement Lender must
obtain the original of the life insurance policy and
an assignment of the policy acknowledged by the
insuring company on the life of James K. Olson in the
initial amount of $500,000, which policy may, at the
option of Borrower, be decreasing term insurance.
Initial disbursements may be made upon receipt of
evidence from insurance company or its agent that the
named insured has applied for insurance in at least
the indicated amount and has
SBA Form 529B Page 7
8
paid the first month premium. Liberty National Bank
is to be the Assignee and hold original policy.
(5) Prior to final disbursement, Lender must
obtain the original of the life insurance policy and
an assignment of the policy acknowledged by the
insuring company on the life of John B. van der Hagen
in the initial amount of $500,000, which policy may,
at the option of Borrower, be decreasing term
insurance. Initial disbursements may be made upon
receipt of evidence from insurance company or its
agent that the named insured has applied for
insurance in at least the indicated amount and has
paid the first month premium. Liberty National Bank
is to be the Assignee and hold original policy.
(6) Hazard insurance must be obtained by the
Borrower in an amount sufficient to protect Lender's
interest in collateral, with Lender shown as Loss
Payee.
(7) Borrower agrees that any fixed asset valued
in excess of $50,000 shall not be purchased in any
one fiscal year without the prior written consent of
the Lender.
(8) Prior to first disbursement, Borrower must
furnish to Lender an Employer Identification Number
issued by Internal Revenue Service.
(9) Borrower shall provide Lender with written
notice of intent to prepay part or all of this loan
at least 15 business days prior to the anticipated
prepayment date. A prepayment shall be defined as any
payment made ahead of schedule that exceeds 20% of
the then outstanding balance.
(10) Lender agrees that, in the event of a default
by the Borrower, it will execute any right of off-set
available to it. All funds received are to be placed
against the outstanding loan balance prior to the
Bank requesting that SBA honor its guaranty.
(11) Prior to first disbursement, Lender shall
obtain for Lender by Lender an AS-BUILT APPRAISAL
EQUAL TO CONSTRUCTION COST BY STATE CERTIFIED
APPRAISER INDICATING VALUE OF AT LEAST $650,000 ON
LAND AND BUILDING LOCATED AT 13110 TRAILS END ROAD,
LEANDER, Texas. Lender, not applicant, shall engage
and issue directives to Appraiser.
SBA Form 529B Page 8
9
(12) Prior to any disbursement of any funds and
prior to commencement of construction, Lender shall
be in receipt of the following:
(a) Copy of signed construction contract
from contractor acceptable to Lender in the
amount of not more than $150,000.
(b) Evidence satisfactory to Lender that
Builder's Risk and Workman's Compensation
insurance is being carried by the contractor.
(c) Complete plans and specifications
covering the proposed construction.
(d) Agreement signed by Borrower that no
material change in the approved plans and
specifications will be ordered or permitted
without prior written consent of the Lender
and Surety Company issuing any surety bond.
(e) Evidence that proposed construction
conforms with applicable zoning, building,
and sanitary codes.
(f) SBA Form 601 (Applicant's Agreement
of Compliance) executed by Borrower and
Contractor.
(13) In the construction of a new building or an
addition to a building, the construction must conform
with the "National Earthquake Hazards Reduction
Program Recommended Provisions for the Development of
Seismic Regulations for New Buildings." Compliance
with these requirements shall be evidenced by a
certificate issued by a licensed building architect,
construction engineer or similar professional, or a
letter from a state or local government agency
stating that the issuance of an occupancy permit is
required and is subject to conformance with building
codes and that the local building codes include the
Seismic Standards.
(14) Lender shall make interim inspections and
final inspection of the construction as it deems
necessary for the sole internal use of Lender.
(15) Progress payments may be made by Lender at
its sole discretion at intervals determined by the
Lender and based upon Borrower's and Contractor's
certification of amount of work completed and
SBA Form 529B Page 9
10
accepted, less 10% retainage to be disbursed upon
final completion of construction and execution by
Borrower and Contractor of an affidavit that
construction is complete and that all bills have been
paid.
(16) Prior to first disbursement, Lender shall
make a field visit to the site for
environmental/general inspection and obtain from
Borrower an executed Environmental Questionnaire and
Disclosure Statement on 13110 Trails End Road,
Leander, Texas. Lender shall review the environmental
statement and field visit results and determine
whether there is reason to believe that hazardous
substances are present on the property which is
hypothecated. If Lender makes such a determination,
it shall advise SBA before any disbursement of loan
proceeds. *At the sole discretion of either SBA or
the Lender, Borrower may be required to obtain a
Phase I Environmental Risk Report Site Assessment on
the hypothecated property satisfactory to Lender and
SBA.
(17) Borrower represents, warrants and
acknowledges that:
(a) at the time the loan application was
submitted, Borrower was and continues to be
in compliance with all Local, State and
Federal laws and regulations pertaining to
hazardous substances;
(b) Borrower has no knowledge of any
contamination from hazardous substances of
any real or personal property pledged as
collateral for this loan, which is in
violation of any such laws and regulations;
(c) Borrower assumes full responsibility
for all costs incurred in any clean-up
involving hazardous substances and agrees to
indemnify Lender and SBA against payment of
any such costs, and further agrees to execute
a separate indemnification agreement if
demanded by Lender or SBA;
(d) Until full repayment of the loan,
Borrower shall promptly notify Lender and SBA
if it knows, suspects or believes there may
be a hazardous substance in or around the
real property securing this loan or if
Borrower and/or such property are subject to
any
SBA Form 529B Page 10
11
investigation by any Government Agency
pertaining to any hazardous substance.
This written Loan Agreement represents the final agreement between the parties
and may not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties.
5. PARTIES AFFECTED. This Agreement shall be binding upon
Borrower and Borrower's successors and assigns. No provision stated
herein shall be waived without the prior written consent of SBA. The
Loan shall be administered as provided in the Guaranty Agreement.
Philip Lader
Administrator
/s/Dan L. Cifers Chief Finance Division October 17, 1994
- ------------------------------------------------------------------------
By (Signature) Title Date
Borrower hereby agrees to the conditions imposed herein and further agrees that
the terms and conditions herein are for the benefit of, and may be enforced by,
Lender and SBA. This Authorization and Loan Agreement Lender and amendments
constitute the Loan Agreement between Lender and Borrower and it is agreed by
the undersigned that this instrument is not a contract to loan money.
SURREY, INC. (A TEXAS CORPORATION)
By: /s/John B. van der Hagen 11/17/94
-----------------------------------------------------------------
President Date
John B. van der Hagen
Attest:
/s/Mary A. van der Hagen 11/17/94
- --------------------------------------------------------------------
Secretary Date
Mary A. van der Hagen
NOTE: Corporate applicants must execute Authorization, by duly authorized
officer, and seal must be affixed and duly attested; partnership applicants
must execute in firm name, together with signature of a general partner.
SBA Form 529B Page 11