EXHIBIT 4.19
FINOVA
Schedule to
Loan and Security Agreement
Borrower: HOLD BILLING SERVICES, LTD
Address: ▇▇▇▇▇ ▇▇-▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Date: March __, 1997
This Schedule forms an integral part of the Loan and Security Agreement between
the above Borrower and FINOVA Capital Corporation ("FINOVA") dated the above
date, and all references herein and therein to "this Agreement" shall be deemed
to refer to said Agreement and to this Schedule.
TOTAL FACILITY (Section 1.1):
SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000)
LOANS (Section 1.2):
Revolving Loans: a revolving line of credit consisting of loans against
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Borrower's Eligible Receivables in an aggregate outstanding principal amount not
to exceed the lesser of:
(a) an amount equal to the amount of the Total Facility,
or
(b) an amount equal to a maximum of seventy five percent
(75%)of the net amount of Eligible Receivables ("LEC Advance Percentage");
provided, however, that the amount available under the foregoing formula with
respect to any given Eligible Receivable shall in no event exceed the amount
advanced by Borrower to the Approved Customer in connection with Borrower's
purchase of the applicable LEC Receivable (the "Borrowing Base").
Notwithstanding the foregoing, in the event that FINOVA shall deem ATAC
to be an Approved Customer, loans against Eligible Receivables which are ATAC
Receivables shall in no event exceed the lesser of (a) $200,000 or (b) an amount
which is equal to seventy-five percent (75%) of the face amount of all ATAC
Receivables which are Eligible Receivables.
For the purposes of this section, absent an Event of Default, the LEC
Advance Percentage shall initially be seventy three percent (73%). Provided,
however, that for every increase in the LEC Dilution Factor by one percentage
point (1.0%) in excess of fifteen percent (15%), the LEC Advance Percentage
shall decrease by up to two percentage points (2.0%). If the LEC Dilution Factor
decreases to fourteen percent (14%) or lower, FINOVA may, in its sole
discretion, increase the LEC Advance Percentage to seventy-five (75%) percent.
In addition, FINOVA shall determine the LEC Dilution Factor, in its
reasonable discretion, based on the results of its periodic field examinations
or on such other information as may be available to FINOVA from time to time.
CONDITIONS PRECEDENT (Section 2.1):
The obligation of FINOVA to make the initial advance hereunder is
subject to the fulfillment, to the satisfaction of FINOVA and its counsel, of
each of the following conditions, in addition to the conditions set forth in
Sections 2.1 and 2.2 of the Agreement: (a) Borrower shall have excess borrowing
availability under the Borrowing Base of not less than $500,000, after giving
effect to the initial advance hereunder and after having paid in full or making
provision for payment in full of all of Borrower's accounts payable outstanding
beyond thirty (30) days of their due date and all book overdrafts; (b) Borrower
shall have delivered to FINOVA those certain Validity and Support Agreements in
form and substance satisfactory to FINOVA signed by ▇▇▇▇▇▇ ▇. Box and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇., respectively; (c) FINOVA must have reviewed all Agreements for
Billing Services and Billing Services Agreements and related arrangements and
found such contracts and arrangements satisfactory in form and substance to
FINOVA; (d) there shall have been no material adverse change, as of the Closing
Date, in the business, operations, profits or prospects of Borrower, or in the
condition of the assets of Borrower from that which was represented by the
financial information, dated December 31, 1996, delivered by Borrower to FINOVA;
(e) FINOVA shall have reviewed and found acceptable, in its sole discretion, the
Partnership Interest Purchase Agreement dated as of May 3, 1996 among ▇▇▇▇▇
Communications, Inc., ▇▇▇▇▇ Acquisition Sub, Inc., Hold Billing & Collection,
L.C., ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇.
Box and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and all amendments thereto and FINOVA will have
received evidence satisfactory to FINOVA, in its sole discretion, that present
and former owners have invested (and continues to have invested) in Borrower at
least One Million ($1,000,000) Dollars in cash equity; (f) Borrower shall have
provided FINOVA with Subordination Agreements, in form and substance acceptable
to FINOVA, executed respectively by ▇▇▇▇▇▇ ▇. Box, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and
Home Owners Long Distance Incorporated; (g) Borrower shall have delivered duly
executed and recordable UCC-3 assignment forms assigning to FINOVA all UCC-1
financing statements filed by Borrower against its Customers; and (h) Borrower
shall have delivered to FINOVA employment contracts, in form and substance
acceptable to FINOVA, covering ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. Box. Borrower
shall cause the conditions precedent set forth in Section 2.1 of this Agreement
and set forth above in this Schedule to be satisfied on or before the date of
the initial advance hereunder.
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INTEREST AND FEES (Section 3.1):
Interest. Borrower shall pay FINOVA interest on the daily outstanding
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balance of Borrower's Revolving Loans at the "Contract Rate." The Contract Rate
shall equal one and one half percentage points (1.50%) in excess of the Base
Rate. The Base Rate shall equal the "prime rate" of Citibank, N.A. as announced
from time to time by Citibank, N.A. as its "prime rate". The interest rate
chargeable hereunder shall be increased or decreased, as the case may be,
without notice or demand of any kind, upon any change in the Base Rate. Each
change in the Base Rate shall be effective hereunder on the day of any change in
Citibank, N.A.'s "prime rate". Interest charges and all other fees and charges
herein shall be computed on the basis of a year of 360 days and actual days
elapsed and shall be payable to FINOVA in arrears on the first day of each
month. Upon the occurrence and continuance of an Event of Default, interest
shall accrue at two percentage points (2.0%) in excess of the rate set forth
above.
Unused Line Fee. Borrower shall pay to FINOVA an unused line fee equal
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to one-half of one percent (.50%) per annum of the unused portion of the Total
Facility. The unused line fee shall be deemed fully earned at the time when due
and is payable monthly commencing upon the first day of the month after the date
of this Agreement and continuing on the first day of every month thereafter.
Loan Fee. Borrower shall pay to FINOVA a loan fee in an amount equal to
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Seventy Five Thousand Dollars ($75,000), which has been fully earned as of the
Closing. The Loan Fee shall be payable in thirty-six (36) equal, consecutive
monthly installments of $2,083.34 each commencing on the Closing Date and
continuing on the first day of each month thereafter, provided, however, that if
an Event of Default shall occur, the Loan Fee shall become immediately due and
payable in full without notice or demand. In the event of any early termination
of the Agreement the entire balance of the Loan Fee shall be due and owing on
the date of termination without notice or demand of any nature.
Examination Fees. Borrower agrees to pay to FINOVA a fee in the amount
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of Six Hundred Dollars ($600) per person per day, plus all costs and expenses of
such persons, in connection with each examination, audit or visitation by FINOVA
prior to or after the date hereof (which, absent the occurrence of an Event of
Default, will be limited to one examination per calendar quarter).
Collateral Management Fee. Borrower agrees to pay to FINOVA a
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collateral management fee in the amount of $1,000.00 per month payable monthly
in arrears on the first day of each month commencing with the first month after
the date of this Agreement and continuing on the first day of every month
thereafter.
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REPORTING REQUIREMENTS (Section 5.2)(all to be in form and substance acceptable
to FINOVA):
1. Borrower shall provide FINOVA with monthly schedules of open advances by LEC
and Customer aged by Advance Date within ten (10) days after the end of each
month.
2. Borrower shall provide FINOVA with monthly accounts payable agings aged by
invoice date, and outstanding or held check registers within ten (10) days after
the end of each month.
3. Borrower shall provide FINOVA with internally prepared monthly unaudited
financial statements within thirty (30) days after the end of each month.
4. Borrower shall provide FINOVA with annual operating budgets (including income
statements, balance sheets and cash flow statements, by month, together with a
list of all material assumptions made by Borrower in preparing such annual
operating budgets) for the upcoming fiscal year of Borrower, in draft form, not
more than thirty (30) days after the end of each fiscal year of Borrower and
upon approval of Borrower's Board of Directors, not more than thirty (60) days
after the end of each fiscal year of Borrower.
5. Borrower shall, upon FINOVA's request, provide FINOVA with certified Federal
excise tax receipts and state and local utility tax receipts.
BORROWER INFORMATION:
Borrower's State of Registration (Section 12.1): Texas
Fictitious Names/Prior Names/Mergers (Section 12.2): HBC Financial Services,
Ltd. is a trade name
Borrower and Collateral Locations (Section 12.16): ▇▇▇▇▇ ▇▇-▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Eligible LECs (Section 18.1): New England Telephone and Telegraph Company
▇▇▇▇ South
▇▇▇▇ Atlantic Operating Telephone Companies
Nevada ▇▇▇▇
Sprint Operating Telephone Company
Southwestern ▇▇▇▇ Telephone Company
Pacific ▇▇▇▇
U.S. West Communications, Inc.
Ameritech
GTE Telephone Operations
New York Telephone Company
FINANCIAL COVENANTS (Section 13.14):
Borrower shall comply with all of the following covenants. Compliance shall
be determined as of the end of each quarter, except as otherwise specifically
provided below:
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Total
Debt Service Borrower shall have and maintain at all times a Total Debt
Coverage Ratio. Service Coverage ratio greater than the ratio set forth below
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for the periods corresponding thereto:
Ratio Quarter Ending
1.1 to 1.0 November 30, 1997 and all fiscal
quarters thereafter (which end on the
last day of each February, May, August
and November of each year)
As used in this section and throughout the Agreement,
Total Debt Service Coverage Ratio shall equal the
ratio of (A) Operating Cash Flow-Actual; to (B) Total
Debt Service.
The calculation of Total Debt Service Coverage Ratio
shall be performed quarterly on a twelve (12) month
rolling basis (except for any period prior to
February 28, 1998 for which measurements shall be on
a cumulative basis relating back to April 1, 1997).
All calculations shall be based on the profit and
loss statements of Borrower, prepared in accordance
with generally accepted accounting principles.
NEGATIVE COVENANTS (Section 14):
Capital Expenditures: Borrower shall not make or incur any Capital
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Expenditure if, after giving effect thereto, the
aggregate amount of all Capital Expenditures by
Borrower in any fiscal year would exceed $150,000.
Indebtedness: Borrower shall not, other than as permitted in
Section 14.11 of the Agreement, create, incur, assume
or permit to exist any additional Indebtedness
(including Indebtedness in connection with Capital
Leases).
TERM (Section 16.1):
The initial term of this Agreement shall be three (3) years from the date
hereof (the "Initial Term") and may automatically be renewed for successive
periods of one (1) year each upon the express written agreement of FINOVA (each,
a "Renewal Term"), unless earlier terminated as provided in Section 16 or 17
above or elsewhere in this Agreement.
TERMINATION FEE (Section 16.4):
The Termination Fee provided in Section 16.4 shall be an amount equal to
the following percentage of the Total Facility:
(i) three percent (3%), if such termination occurs prior to the first
anniversary of this Agreement;
(ii) two percent (2%), if such termination occurs on or after the first
anniversary of this Agreement but prior to the second anniversary of this
Agreement; and
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(iii) one percent (1%), if such termination occurs on or after the
second anniversary of this Agreement but prior to the third anniversary of this
Agreement.
Notwithstanding the foregoing, provided no Event of Default has occurred
and is continuing and no event has occurred and is continuing which, with the
giving of notice, passage of time or both, will become an Event of Default, and
provided further that there has not occurred any material adverse change in
Borrower's business or financial condition from the date of the Closing,
Borrower may request in writing that the Total Facility amount be increased,
with all other terms and conditions set forth in the Agreement to remain
unchanged (including, without limitation, provisions regarding pricing, fees and
the expiry date of the credit facility). If FINOVA elects not to increase the
Total Facility amount when the conditions set forth in the immediately preceding
sentence are satisfied, in the reasonable judgment of FINOVA, then the
Termination Fee described above will be waived by FINOVA provided Borrower
obtains a new credit facility in the amount of the requested increased Total
Facility amount or in a greater amount on terms and conditions substantially the
same as contained in the Agreement within 90 days of FINOVA's rejection of such
request. If Borrower terminates the facility but has not replaced FINOVA in
compliance with the foregoing by the end of the aforementioned 90 day period,
the Termination Fee shall be immediately due and payable at the expiration of
such period. Borrower shall be liable for the full Termination Fee if
termination occurs for any other reason other than as expressly set forth above.
ADDITIONAL DEFINITIONS (Section 18.1):
"EBITDA" means the following, without duplication, for any period, each
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calculated for such period: (A) net income plus (B) any
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provision for (or less any benefit from ) income and franchise
taxes included in the determination of net income; plus (C)
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interest expense deducted in the determination of net income;
plus (D) amortization and depreciation deducted in the
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determination of net income; plus (E) losses (or less gains)
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from asset dispositions or other non-cash items (excluding
sales, expenses or losses related to Current Assets) included
in the determination of net income; less (F) after tax
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extraordinary gains (or plus after tax extraordinary losses);
less (G) all management fees and distributions to ▇▇▇▇▇ to the
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extent not deducted in the calculation of net income above,
each of the above as calculated in accordance with generally
accepted accounting principles, consistently applied.
"Fiscal Year" Borrower's fiscal years each ending December 31.
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"GAAP" means generally accepted accounting principles as set forth in
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statements from Auditing Standards No. 69 entitled "The
Meaning of "Present Fairly in Conformance with Generally
Accepted Accounting Principles in the Independent Auditors
Reports" issued by the Auditing Standards Board of the
American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting
Standards Board (or any successor authority) that are
applicable to the circumstances as of the date of
determination.
"Investment" means, with respect to any Person, any loan, advance,
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extension of credit, capital contribution to, investment in or
purchase of the stock or other securities of, or interests in,
any other Person; provided, that "Investment" shall not
include current customer and trade accounts which are payable
in accordance with customary trade terms.
"LEC Dilution
Factor" means the average, as calculated by FINOVA, of the dilution
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factors charged by LECs to Borrower, calculated as a
percentage, (a) the numerator of which is all non-cash
reductions to LEC Receivables made by LECs; (b) the
denominator of which
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is equal to confirmed ▇▇▇▇▇▇▇▇ under the Billing Tapes
transmitted by Borrower directly to LECs.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary
(including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement
to give any security interest).
"Operating Cash
Flow-Actual" for any period, Borrower's EBITDA less (A) all Capital
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Expenditures actually made by Borrower during such period not
financed; and (B) any income or franchise taxes actually paid
by Borrower.
"Permitted
Encumbrances" means the following types of Liens:
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(a) Liens or deposits for taxes, assessments or other
governmental charges not yet due and payable or, if due and
payable, which are being contested in good faith and for which
adequate reserves have been established in accordance with
GAAP but only if such Liens have not been filed or recorded;
(b) Statutory Liens of landlords, carriers, warehouseman,
mechanics, materialmen and other similar liens imposed by law,
which are incurred in the ordinary course of business for sums
not more than thirty (30) days delinquent or which are being
contested in good faith; provided, that a reserve or other
appropriate provision, if any, as shall be required by GAAP,
shall have been made therefor;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance and other types of social security, or
to secure the performance of tenders, statutory obligations,
surety, stay, customs and appeal bonds, bids, leases,
government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money);
(d) Deposits, in an aggregate amount not to exceed $100,000
made in the ordinary course of business to secure liability to
insurance carriers;
(e) Liens for purchase money obligations permitted hereunder
not to exceed $50,000 in the aggregate;
(f) Leases or subleases granted to others and licenses of
intellectual property granted to others, in any such case not
interfering in any material respect with the business or
property of any Loan Party;
(g) Easements, rights-of-way, restrictions, zoning
restrictions, encroachments, protrusions and other similar
charges or encumbrances or other Liens which appear on the
title policies, commitments or surveys delivered to and
approved by FINOVA, with respect to easements, rights of way,
restrictions, encroachments, protrusions, other similar
charges or encumbrances, which are hereafter replaced on the
property, in each case (i) not interfering in any material
respect with the ordinary conduct of the business of any Loan
Party or the value of any collateral, (ii) not affecting the
perfection or the priority of the Liens granted in favor of
FINOVA, and (iii)
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otherwise not interfering in any material respect with the
Liens granted in favor of FINOVA.
(h) Any interest or title of a lessor or sublessor under any
lease permitted by this Agreement; and
(i) Liens arising from filing Uniform Commercial Code
financing statements regarding leases permitted by this
Agreement.
"Prepared
Financials" means the balance sheets of Borrower as of December 31, 1996,
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and as of each subsequent date on which audited balance sheets
are delivered to FINOVA from time to time hereunder, and the
related statements of operations, changes in stockholder's
equity and changes in cash flow for the periods ended on such
dates.
"Senior Debt
Service" for any period, the sum of payments made or required to be
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made by Borrower during such period for the following (i)
interest on the Loans; (ii) fees payable to FINOVA pursuant to
this Agreement; and (iii) payments associated with a Capital
Lease.
"Subordinating
Creditors" means ▇▇▇▇▇▇ ▇. Box, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and Home Owners
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Long Distance Incorporated.
"Total Debt
Service" for any period, the sum of payments made (or, as to clause (i)
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of this sentence, required to be made) by Borrower during such
period for the following: (i) Senior Debt Service and (ii)
principal and interest payments on the Subordinated Debt.
DISBURSEMENT (Section 19.12):
Unless and until Borrower otherwise directs FINOVA in writing, all loans
shall be wired to Borrower's following operating account: NationsBank of Texas
ABA#___________, Account #▇▇▇-▇▇▇▇-▇▇▇ To Credit HOLD BILLING SERVICES, LTD.
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Borrower:
HOLD BILLING SERVICES, LTD.
By: HBS, Inc.
By:________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice President
Attest:____________________________
Secretary or Ass't Secretary
Borrower's Tax I.D. No.: _________
FINOVA CAPITAL CORPORATION
By:______________________________
Title:____________________________
