EXHIBIT 10.20
BANK OF AMERICA
BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This Agreement dated as of May ________, 1997 between Bank of America
Texas, N.A. (the "Bank") and New West Communications, Inc. (the
"Borrower"); formerly known as New West Acquisition Corp.
1. DEFINITIONS. In addition to the terms which are defined elsewhere in this
Agreement, the following terms have the meanings indicated for the purposes of
this Agreement:
1.1 "BORROWING BASE." means the lesser of:
(a) One Million Five Hundred Thousand and no/100 Dollars ($1,500,000.00); or
(b) the sum of:
(i) 80% of the balance due on Acceptable Receivables; and
(ii) 55% of the value of Acceptable Inventory or 60% of the Borrowing
Base, reducing 50% of the Borrowing Base at September 30, 1997.
In determining the value of Acceptable Inventory to be included in the Borrowing
Base, the Bank will use the lowest of the Borrower's cost, or (ii) the
Borrower's estimated market value, substantiated by evidence satisfactory to
Bank in its reasonable discretion.
1.2 "ACCEPTABLE RECEIVABLE" means an account receivable which satisfies the
following requirements:
(a) The account has resulted from the sale of goods or the performance of
services by the Borrower in the ordinary course of the Borrower's
business.
(b) There are no conditions which must be satisfied before the Borrower is
entitled to receive payment of the account. Accounts arising from COD
sales, consignments or guaranteed sales are not acceptable.
(c) The debtor upon the account does not claim any defense to payment and has
not asserted any counterclaim or offsets against the Borrower.
(d) The account represents a genuine obligation of the debtor for goods sold
and accepted by the debtor, or for services performed for and accepted by
the debtor.
(e) The Borrower has sent an invoice to the debtor in the amount of the
account.
(f) The account is owned by the Borrower free of any title defects or any
liens or interests of others except the security interest in favor of the
Bank.
(g) The debtor on the account is not any of the following:
(i) an employee, affiliate, parent or subsidiary of the Borrower, or an
entity which has common officers or directors with the Borrower.
(ii) the U.S. government or any agency or department of the U.S.
government unless the Bank agrees in writing to accept the
obligation and the Borrower complies with the procedures in the
Federal Assignment of Claims Act of 1940 with respect to the
obligation.
(iii) any state, county, city, town or municipality.
(iv) any person or entity located in a foreign country.
(v) any person or entity to whom the Borrower is obligated for goods
purchased by the Borrower or for services performed for the
Borrower. This will not exclude accounts upon which any such debtor
is obligated to the extent that the accounts exceed the amount of
the Borrower's obligation to such debtor.
(h) The account is not in default. An account will be considered in default if
any of the following occurs:
(i) The account is not paid within the 90-day period starting on its
invoice date;
(ii) The debtor obligated upon the account suspends business, makes a
general assignment for the benefit of creditors, or fails to pay its
debts generally as they come due; or
(iii) Any petition is filed by or against the debtor obligated on the
account under any bankruptcy law or any other law or laws for the
relief of debtors
(i) The account, when added to all other accounts that are obligations of the
same debtor, does not cause that debtor's total obligations to the
Borrower to exceed 20% of the balance due on all Acceptable Receivables.
It is provided, however, that if the debtor obligated upon an account is a
regional Xxxx company, the limitation applicable to such debtor will be
increased to 100%.
(j) The account is not the obligation of a debtor who is in default (as
defined above) on 10% or more of the accounts upon which such debtor is
obligated.
(k) The account does not arise from the sale of goods which remain in the
Borrower's possession or under the Borrower's control.
(1) The account is not evidenced by a promissory note or chattel paper.
(m) The account is otherwise reasonably acceptable to the Bank.
1.3 "ACCEPTABLE INVENTORY" means raw materials and finished goods inventory
which satisfies the following requirements:
(a) The inventory is owned by the Borrower free of any title defects or any
liens or interests of others except the security interest in favor of the
Bank.
(b) The inventory is permanently located at locations which the Borrower has
disclosed to the Bank and which are reasonably acceptable to the Bank. If
the inventory is covered by a negotiable document of title (such as a
warehouse receipt) that document must be delivered to the Bank.
(c) The inventory is held for sale in the ordinary course of the Borrower's
business and is of good and merchantable quality. Inventory which is
obsolete, unsalable, damaged, defective, discontinued or slow-moving or
which has been returned by the buyer, is not acceptable. Display items,
work-in-process and packing and shipping materials are not acceptable.
(d) The inventory is not placed on consignment.
(e) The inventory has had a sale in the past 12 months or has not been
otherwise identified by Borrower as obsolete.
(f) The inventory is otherwise reasonably acceptable to the Bank.
2. FACILITY NO. 1 LINE OF CREDRT AMOUNT AND TERMS
2.1 LINE OF CREDIT AMOUNT. During the availability period described below, the
Bank will provide a line of credit to the Borrower. The amount of the line of
credit (the "Facility No. 1 Commitment") is equal to the amount of the Borrowing
Base.
This is a revolving line of credit. During the availability period, the Borrower
may repay principal amounts and reborrow them.
Each advance must be for at least Twenty Five Thousand and no/100 Dollars
($25,000.00), or for the amount of the remaining available line of credit, if
less.
The Borrower agrees not to permit the outstanding principal balance of the line
of credit to exceed the Facility No. 1 Commitment.
2.2 AVAILABILITY PERIOD. (a) The line of credit is available between the date of
this Agreement and September 30, 1998 (the "Expiration Date") unless an Event of
Default has occurred and is continuing. (b) At any time and from time to time,
the Borrower may terminate in whole or reduce in part the Facility No. 1
Commitment, provided that any such partial reduction shall be in an aggregate
amount not less that $25,000 or integral multiples thereof. The amount of any
such termination or reduction may not thereafter be reinstated.
2.3 INTEREST RATE. The interest rate is the lesser of (a) the maximum lawful
rate of interest permitted under applicable usury laws, now or hereafter enacted
(the "Maximum Rate"), or (b) the rate (the "Basic Rate") that is equal to the
Bank's Reference Rate.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of interest payable shall be the Maximum Rate until the Bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during the period
of time the Basic Rate exceeded the Maximum Rate.
The Reference Rate is the rate of interest publicly announced from time to time
by the Bank in Irving, Texas, as its Reference Rate. The Reference Rate is set
by the Bank based on various factors, including its costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans. The Bank may price loans to its customers at, above, or
below the Reference Rate. Any change in the Reference Rate will take effect at
the opening of business on the day specified in the public announcement of a
change in the Reference Rate.
2.4 CONDITIONS TO EACH EXTENSION OF CREDIT. Before each extension of credit
under the line of credit, including the first, the Borrower will deliver the
following to the Bank if requested by the Bank:
(a) a borrowing certificate, in form and detail satisfactory to the Bank,
setting forth the Acceptable Receivables and the Acceptable Inventory on which
the requested extension of credit is to be based.
2.5 REPAYMENT TERMS.
(a) The Borrower will pay interest on October 31, 1996 and on the last day of
each month thereafter until payment in full of any principal outstanding under
this line of credit. (b) The Borrower will repay in full all principal and
accrued unpaid interest or other charges outstanding under this line of credit
no later than the Expiration Date.
3. FACILITY NO. 2: TERM LOAN AMOUNT AND TERMS
3.1 LOAN AMOUNT. The Bank agrees to provide a term loan to the Borrower in the
amount of One Million Five Hundred Thousand and no/100 Dollars ($1,500,000.00)
(the "Facility No. 2 Commitment").
3.2 AVAILABILITY PERIOD.
The loan is available in one disbursement from the Bank between the date of this
Agreement and October 30, 1996 unless the Borrower is in default.
3.3 INTEREST RATE. Unless the Borrower elects an optional interest rate as
described below, the interest rate is the lesser of (a) the maximum lawful rate
of interest permitted under applicable usury laws, now or hereafter enacted (the
"Maximum Rate"), or (b) the rate (the "Basic Rate") that is equal to the sum of
the Bank's Reference Rate plus 0.50 percentage points.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of interest payable shall be the Maximum Rate until the Bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during the period
of time the Basic Rate exceeded the Maximum Rate.
3.4 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest on December 31, 1996
and on the last day of each quarter thereafter and upon payment in full of the
principal of the loan. (b) The Borrower will repay principal in 19 successive
quarterly installments of Fifty Three Thousand Five Hundred Seventy Two and
no/100 Dollars ($53,572.00) each, starting December 31, 1996, and in one final
installment on September 30, 2001 in the amount of the remaining principal
balance plus all accrued unpaid interest. (c) The Borrower may prepay the loan
in full or in part at any time.
Prepayments of portions of the loan bearing interest at Bank's Reference Rate
may be made without penalty or premium. The prepayment will be applied to the
most remote installment of principal due under this Agreement
3.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's
Reference Rate, the Borrower may elect to have all or portions of the loan
(during the availability period and during the term repayment period) bear
interest at the rate(s) described below during an interest period agreed to by
the Bank and the Borrower, provided, however, that the Borrower shall not have
the option or right to elect to have all or any portion of the loan line of
credit bear interest at the rate(s) described below when such rate(s) exceeds
the Maximum Rate. Each interest rate is a rate per year. Interest will be paid
on the last day of each interest period, and on the last day of each quarter
during the interest period. At the end of any interest period, the interest rate
will revert to the rate based on the Reference Rate, unless the Borrower has
designated another optional interest rate for the portion.
3.6 LONG TERM RATE. The Borrowers may elect to have all or portions of the
principal balance of the loan bear interest at the rate equal to the lesser of
(a) the Maximum Rate, or (b) the Long Term Rate, subject to the following
requirements:
(a) The interest period during which the Long Term Rate will be in effect will
be one year or more.
(b) The "Long Term Rate" means the fixed interest rate the Bank and the
Borrowers agree will apply to the portion during the applicable interest period.
(c) Each Long Term Rate portion will be for an amount not less than One Hundred
Thousand Dollars ($100,000).
(d) Any portion of the principal balance of the loan already bearing interest at
the Long Term Rate will not be converted to a different rate during its interest
period.
(e) The Borrowers may prepay the Long Term Rate portion in whole or in part. The
Borrowers will give the Bank irrevocable written notice of the Borrowers'
intention to make the prepayment specifying the date and amount of the
prepayment. The notice must be received by the Bank at least 5 banking days in
advance of the prepayment. All prepayments of principal on the Long Term Rate
portion will be applied on the most remote principal installment or installments
then unpaid. (f) Each prepayment of a Long Term Rate portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied by payment of all
accrued interest on the amount of the prepayment and the prepayment fee
described below.
(g) The prepayment fee will be the sum of fees calculated separately for each
Prepaid Installment as follows: (i) The Bank will first determine the amount of
interest which would have accrued each month for the Prepaid Installment had it
remained outstanding until the applicable Original Payment Date, using the Long
Term Rate; (ii) The Bank will then subtract from each monthly interest amount
determined in (i), above, the amount of interest which would accrue
for that Prepaid Installment it were reinvested from the date of prepayment
through the Original Payment Date, using the following rate: (A) If the Original
Payment Date is more than 5 years after the date of prepayment the Treasury Rate
plus one-quarter of one percentage point (B) If the Original Payment Date is 5
years or less after the date of prepayment the Money Market Rate. (iii) If (i)
minus (ii) for the Prepaid Installment is greater than zero, the Bank will
discount the monthly differences to the date of prepayment by the rate used in
(ii) above. The sum of the discounted monthly differences is the prepayment fee
for that Prepaid Installment
(h) The following definitions will apply to the calculation of the prepayment
fee:
"Money Market" means the domestic certificate of deposit market, the eurodollar
deposit market or other appropriate money market selected by the Bank.
"Money Market Rate" means the fixed interest rate per annum which the Bank
determines could be obtained by reinvesting a specified Prepaid Installment in
the Money Market from the date of prepayment through the Original Payment Date.
"Original Payment Dates" mean the dates on which principal of the Long Term Rate
portion would have been paid if there had been no prepayment if a portion of the
principal would have been paid later than the end of the interest period in
effect at the time of prepayment, then the Original Payment Date for that
portion will be the last day of the interest period.
"Prepaid Installment" means the amount of the prepaid principal of the Long Term
Rate portion which would have been paid on a single Original Payment Date.
"Treasury Rate" means the interest rate yield for U.S. Government Treasury
Securities which the Bank determines could be obtained by reinvesting a
specified Prepaid Installment in such securities from the date of prepayment
through the Original Payment Date.
(i) The Bank may adjust the Treasury Rate and Money Market Rate to reflect the
compounding, accrual basis, or other costs of the Long Term Rate portion. Each
of the rates is the Bank's estimate only and the Bank is under no obligation to
actually reinvest any prepayment. The rates will be based on information from
either the Telerate or Reuters information services, The Wall Street Journal, or
other information sources the Bank deems appropriate.
(j) If at any time during any applicable interest period the Long Term Rate
shall exceed the Maximum Rate and thereafter the Long Term Rate shall become
less than the Maximum Rate, the rate of interest payable shall be the Maximum
Rate until the Bank shall have received the amount of interest it otherwise
would have received if the interest payable had not been limited by the Maximum
Rate during the period of time the Long Term Rate exceeded the Maximum Rate.
4. FEES AND EXPENSES
4.1 UNUSED COMMITMENT FEE. The Borrower agrees to pay the Bank a fee on any
difference between the Facility No. 1 Commitment and the amount of credit it
actually uses, determined by the weighted average loan balance maintained during
the specified period. The fee will be
calculated at 3/8% per year on the last day of each quarter, starting on
December 31, 1996 and continuing through September 30, 1998.
4.2 REIMBURSEMENT COST. (a) The Borrower agrees to immediately repay the Bank
for expenses that include, but are not limited to, filing, recording and search
fees, appraisal fees, title report fees. (b) The Borrower agrees to reimburse
the Bank for any expenses it incurs in the preparation of this Agreement and any
agreement or instrument required by this Agreement Expenses include, but are not
limited to, reasonable attorneys' fees. (c) The Borrower agrees to reimburse the
Bank for the cost of periodic audits and appraisals of the real or personal
property collateral securing this Agreement, at such intervals as the Bank may
reasonably require but not to exceed annual except if an Event of Default has
occurred and is continuing. The audits and appraisals may be performed by
employees of the Bank or by independent appraisers.
4.3 NO EXCESS FEES. Notwithstanding anything to the contrary in this Section 4,
in no event shall any sum payable under this Section 4 (to the extent, if any,
constituting interest under any applicable laws), together with all amounts
constituting interest under applicable laws and payable in connection with the
credit evidenced hereby, exceed the Maximum Rate or the maximum amount of
interest permitted to be charged, taken, reserved, received or contacted for
under applicable usury laws.
5. COLLATERAL
5.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in security
agreement(s) executed by the Borrower.
(a) Machinery and equipment
(b) Inventory.
(c) Receivables.
6. DISBURSEMENTS, PAYMENTS AND COSTS
6.1 INTEREST CALCULATION. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 365 day year and
the actual number of days elapsed.
6.2 DEFAULT RATE. Upon the occurrence and during the continuation of any Event
of Default under this Agreement, advances under this Agreement will at the
option of the Bank bear interest at the lesser of (a) the Maximum Rate and (b) a
rate per annum which is 2.00 percentage points higher than the rate of interest
otherwise provided under this Agreement. This will not constitute a waiver of
any default
7. CONDITIONS The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement.
7.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by the
Borrower and each guarantor or subordinating creditor of this Agreement and any
instrument or agreement required under this Agreement have been duty authorized.
7.2 SECURITY AGREEMENTS. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest), which the Bank requires.
7.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor of
the Bank are valid, enforceable, and prior to all others' rights and interests,
except those the Bank consents to in writing.
7.4 CONSENT TO REMOVAL. For any personal property collateral located on real
property which is subject to a mortgage or deed of trust or which is not owned
by the Borrower, a Consent to Removal from the owner of the real property and
the holder of any mortgage or deed of trust
7.5 INSURANCE. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement
7.6 GUARANTY. Guaranty signed by Xxxxxx International, Inc. in an amount as set
forth in the Guaranty.
7.7 SUBORDINATION AGREEMENTS. Subordination agreements in favor of the Bank
signed by Marwit Capital Company, L.P.
7.8 GOOD STANDING. Certificates of good standing for the Borrower from its state
of incorporation and from any other state in which the Borrower is required to
qualify to conduct its business.
8. REPRESENTATIONS AND WARRANTIES When the Borrower signs this Agreement the
Borrower makes the following representations and warranties. Each request for an
extension of credit constitutes a renewed representation. (a) The Borrower is a
corporation duly formed and existing under the laws of the state where
organized. (b) This Agreement and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers. (c) This Agreement is a
legal, valid and binding agreement of the Borrower, enforceable against the
Borrower in accordance with its terms, and any instrument or agreement required
hereunder, when executed and delivered, will be similarly legal, valid, binding
and enforceable. (d) In each state in which the Borrower is required to be
licensed or qualified, it is properly licensed or qualified, in good standing,
and, where required, in compliance with assumed name statutes, except where the
failure to be so licensed or qualified or to comply with such statutes would not
have a material
adverse effect on the Borrower's business, financial condition, or ability to
repay the Loan. (e) This Agreement does not conflict in any material respect
with any law, agreement concerning or obligating Borrower for more than Ten
Thousand and no/100 Dollars ($10,000.00), or obligation by which the Borrower is
bound. (f) All financial and other information that has been or will be supplied
to the Bank is: (i) sufficiently complete to give the Bank accurate knowledge of
the Borrower's (and any guarantors) financial condition. (ii) in form and
content reasonably required by the Bank and (iii) in compliance with all
government regulations that apply. (g) There is no lawsuit, tax claim or other
dispute pending or threatened against the Borrower, which, if lost would impair
in any material respect the Borrower's financial condition or ability to repay
the loan, except as have been disclosed in writing to the Bank. (h) All
collateral required in this Agreement is owned by the grantor of the security
interest free of any title defects and any liens or interests of others, except
those which have been approved by the Bank in writing or are permitted in
Section 9.13 of this Agreement or in the Security Agreement. (i) The Borrower
possesses all permits, memberships, franchises, contracts and licenses required
and all trademark rights, trade name rights, patent rights and assumed name
rights necessary to enable it to conduct the business in which it is now engaged
(such will not be considered "necessary to enable Borrower to conduct its
business," if the failure to obtain same would not materially adversely affect
Borrower's, business financial condition, or ability to repay the Loan). (j)
There is no event which is, or with notice or lapse of time or both would be, an
Event of Default under this Agreement. (k) All inventory which is included in
the Borrowing Base is of good and merchantable quality and free from defects.
(l) The Borrower is in full compliance with all applicable requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); provided
that such will only be considered out of compliance if the failure to comply
could reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan. (m) The Borrower's place of
business (or, if the Borrower has more than one place of business, its chief
executive office) is located at the address listed under the Borrower's
signature on the Agreement
9. COVENANTS The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
9.1 USE OF PROCEEDS. To use the proceeds of the credit only to:
FACILITY NO.1: partial finance of acquisition of New West Communications, Inc.;
support the purchase of inventory, financing of accounts
receivable and general corporate purposes.
FACILITY NO.2: partial finance of acquisition of New West Communications, Inc.
9.2 FINANCIAL INFORMATION. To provide the following financial information and
statements and such additional information as requested by the Bank from time to
time, all in form and detail acceptable to the Bank:
(a) Within 120 days of the end of each fiscal year of the Borrower, the
Borrower's annual financial statements. These financial statements must be
audited by a Certified Public Accountant ("CPA") reasonably acceptable to
the Bank.
(b) Within 30 days of each period's end, the Borrower's quarterly financial
statements. These financial statements may be Borrower prepared.
(c) Guarantor's annual financial statements in form satisfactory to the Bank
within 120 days of the end of each fiscal year of the Borrower. These
financial statements must be audited by a Certified Public Accountant
("CPA") reasonably acceptable to the Bank.
(d) A borrowing certificate setting forth the respective amounts of Acceptable
Receivables and Acceptable Inventory as of the last day of each month
within twenty (20) days after month end.
(e) Statements showing an aging of the Borrower's receivables within twenty
(20) days after the end of each month.
(f) Statements showing an aging of the Borrower's accounts payable within
twenty (20) days after the end of each month
(g) Inventory stock status report within twenty (20) after the end of each
month.
(h) A compliance certificate within thirty (30) days after each quarter.
(i) Promptly upon the Bank's request, such other statements, loss of property
and accounts, budgets, forecasts or reports as to the Borrower and as to
each guarantor of the Borrower's obligations to the Bank as the Bank may
reasonably request
9.3 CURRENT RATIO. The Borrower shall maintain a ratio of current assets to
current liabilities of at least 1.25:1.0, measured quarterly.
For purposes of this calculation, the principal outstanding under Facility No. 1
will be included as a current liability.
9.4 CAPITAL FUNDS. The Borrower shall maintain capital funds equal to at least
the sum of the following, measured quarterly:
(a) Three Million Two Hundred Thousand and no/100 Dollars ($3,200,000.00);
plus
(b) the sum of 75% of net income after income taxes (without subtracting
losses) earned in each fiscal year commencing September 30, 1997.
"Capital Funds" means the gross book value of the Borrower's assets less total
liabilities exclusive of "Subordinated Debt". "Subordinated Debt" means debt
subordinated to the Bank in a manner acceptable to the Bank, including without
limitation the debt of Borrower in favor of Marwit Capital Company, LP
("Marwit") evidenced by that certain Senior Convertible Note dated of even date
herewith in the
original principal amount of $1,250,000, executed by Borrower as maker, and
payable to the order of Marwit.
9.5 TOTAL LIABILITIES TO CAPITAL FUNDS. The Borrower shall maintain a ratio of
Total Liabilities Not Subordinated to Capital Funds not exceeding the amounts
indicated for each period specified below:
Period Ratio
------ -----
December 31, 1996 quarterly
through September 30, 1997 1.00:1.0
December 31, 1997 and
quarterly thereafter 0.75:1.0
"Total Liabilities Not Subordinated" means the sum of current liabilities plus
long term liabilities, excluding debt subordinated to the Borrower's obligations
to the Bank in a manner acceptable to the Bank.
9.6 ADJUSTED EBITDA. The Borrower shall maintain an Adjusted EBITDA of at least
One Million Two Hundred Thousand and no/100 Dollars ($1,200,000.00).
"Adjusted EBITDA" means the sum of net income before taxes, total interest
expense, depreciation and amortization and before the prior owner's profit
participation.
The Adjusted EBITDA will be calculated annually commencing September 30,1997,
using fiscal year results.
If Borrower maintains an Adjusted EBITDA of at least One Million Six Hundred
Thousand ($1,600,000.00) and is in compliance with all other covenants, then the
Guaranty from Xxxxxx International, Inc. will be reduced to Five Hundred
Thousand and no/100 Dollars ($500,000.00), measured upon receipt of Borrower's
fiscal year 1997 audited financial statement. The Guaranty will be reduced to
zero, measured upon receipt of Borrower's fiscal year 1998 audited financial
statement if Borrower maintains an Adjusted EBITDA of at least One Million Six
Hundred Thousand ($1,600,000.00) and is in compliance with all other covenants.
9.7 FIXED CHARGE COVERAGE RATIO. The Borrower shall maintain a Fixed Charge
Coverage Ratio of at least 1.25:1.0. "Fixed Charge Coverage Ratio" means net
income before taxes, depreciation and amortization ("EBITDA") divided by the sum
of cash taxes, interest expense (based on Senior debt & Subordinated debt),
scheduled debt payments (based on Senior debt & Subordinated debt), and capital
expenditures.
At March 31, 1997 there will be a one time calculation of the Fixed Charge
Coverage Ratio as defined above, except that 50% of scheduled Facility No. 2
debt payments will be used. This ratio will be calculated at the end of each
fiscal quarter beginning September 30, 1997, using the results of that quarter
and each of the 3 immediately preceding quarters.
9.8 CASH FLOW RECAPTURE. Defined as EBITDA less cash taxes, interest expense,
scheduled debt payments, and capital expenditures, multiplied by fifty percent
(50%) to reduce the Facility No. 2 principal balance, measured annually
beginning with receipt of fiscal year end 1997 CPA audited financials on
Borrower. Cash Flow Recapture capped at Two Hundred Fifty Thousand and no/100
Dollars ($250,000.00) per fiscal year, with a lifetime cap of Five Hundred
Thousand and no/100 Dollars ($500,000.00).
9.9 NET WORTH (GUARANTOR). The Guarantor shall maintain net worth equal to at
least Twelve Million no/100 Dollars ($12,000,000.00), measured annually. "Net
worth" means the gross book value of the Borrower's assets less total
liabilities, including but not limited to accrued and deferred income taxes, and
any reserves against assets.
9.10 PROFITABILITY (GUARANTOR). The Guarantor shall maintain a positive net
income after taxes and extraordinary items for each fiscal year end.
9.11 OTHER DEBTS (BORROWER). The Borrower agrees not to have outstanding or
incur any direct or contingent debts or capital lease obligations (other than
those to the Bank), or become liable for the debts of others without the Bank's
prior written consent. This does not prohibit (a) Acquiring goods, supplies, or
merchandise on normal trade credit. (b) Endorsing negotiable instruments
received in the usual course of business. (c) Obtaining surety bonds in the
usual course of business. (d) Debt secured by liens permitted in Section 9.13.
(a) Additional debts for the acquisition of fixed or capital assets, which do
not exceed a total principal amount of Fifty Thousand and no/100 Dollars
($50,000.00) outstanding at any one time.
9.12 OTHER DEBTS (GUARANTOR). The Guarantor agrees not to have outstanding or
incur any direct debt without the Bank's prior written consent. This does not
prohibit (a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of business.
(c) Obtaining surety bonds in the usual course of business. (d) Additional debts
for business purposes which do not exceed a total principal amount of One
Hundred Fifty Thousand and no/l00 Dollars ($150,000.00) outstanding at any one
time.
9.13 OTHER LIENS. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower now or later owns, except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due or remaining payable up to 120 days without
any penalty or that are being contested in good faith.
(c) Liens imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens, and other similar liens arising in the
ordinary course of business securing obligations which are not overdue for
a period of more than 30 days.
(d) Other liens arising in the ordinary course of business which are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not materially detract from the value of
its property or its assets or materially impair the use thereof in the
operation of it business, including any landlord's liens.
(e) Liens for taxes, assessment or other governmental charges which are not
yet due or which are being actively contested in good faith by appropriate
proceedings.
(f) Liens arising from material adverse legal judgements (including liens in
connection with appeal bonds) not in excess of $200,000 (after taking
insurance coverage into account).
(g) Additional liens which, together with the liens permitted under
subparagraphs 9.11(d), above, secure obligations in a total principal
amount of Fifty Thousand and no/100 Dollars ($50,000.00) outstanding at
any one time.
(h) Subordinate position on accounts receivable, inventory, and equipment in
favor of Marwit Capital.
9.14 CAPITAL EXPENDITURES. The Borrower agrees not to spend or incur obligations
(including the total amount of any capital leases) for more than One Hundred
Thousand and no/l00 Dollars ($100,000.00) in any single fiscal year to acquire
fixed or capital assets.
9.15 CHANGE OF OWNERSHIP (GUARANTOR). The Guarantor agrees not to cause, permit
or suffer any change, direct or indirect, in the Borrower's capital ownership of
New West Acquisition Corp.
9.16 NOTICES TO BANK. Notify the Bank in writing not later than five (5)
business days after the earlier of when Borrower obtains, actual knowledge or
receives written notice thereof of (a) any lawsuit over Two Hundred Thousand and
no/100 Dollars ($200,000.00) against the Borrower. (b) any material dispute
between the Borrower and any government authority. (c) any failure to comply
with this Agreement, (d) any change in the Borrower's name, legal structure,
place of business, or chief executive office if the Borrower has more than one
place of business.
9.17 BOOKS AND RECORDS. To maintain adequate books and records.
9.18 AUDITS. To allow the Bank and its agents to inspect Borrower's properties
and to make available to the Bank and its agents for examination, audit and
copying, books and records of the Borrower, in each case at any reasonable time.
If any of the Borrower's properties, books or records are in the possession of
any third party (other than legal counsel) the Borrower authorizes such third
party (other than legal counsel) to permit the Bank or its agents to have access
to and perform inspections or audits of such books or records and to respond to
the Bank's requests for information concerning such properties, books and
records; provided that the Bank shall have given notice to the Borrower a
reasonable time prior to such an inspection, audit or request for information
and, if a representative of the Borrower is available, shall permit a
representative of the Borrower, at the Borrower's option, to be present at the
time of such inspection, audit or response to request for information.
9.19 COMPLIANCE WITH LAW. To comply with the laws, (including any assumed name
statute), regulations, and orders of any government body with authority over the
Borrower's business. The Borrower shall comply at all times with all applicable
requirements of ERISA, Borrower will only be considered out of compliance
hereunder the failure to comply could reasonably be expected to materially
adversely effect Borrower's business, financial condition, or ability to repay
the Loan.
9.20 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises the Borrower now has. Borrower will only be considered out of
compliance hereunder if the failure to Maintain or preserve same could
reasonably be expected to materially adversely effect Borrowers business,
financial condition, or ability to repay the Loan.
9.21 MAINTENANCE OF PROPERTIES. To make any necessary repairs, renewals, or
replacements to keep the Borrower's properties that are, in the Borrower's sound
business judgement necessary for the conduct of the Borrower's business, in good
working condition.
9.22 PERFECTION OF LIENS. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
9.23 COOPERATION. To take any action reasonably requested by the Bank
to carry out the intent of this Agreement
9.24 INSURANCE. (A) INSURANCE COVERING COLLATERAL. To maintain all risk property
damage insurance policies covering the tangible property comprising the
collateral and any insurance usual for Borrower's business. Each insurance
policy must be in an amount reasonably acceptable to the Bank The insurance must
be issued by an insurance company reasonably acceptable to the Bank and must
include a lender's loss payable endorsement in favor of the Bank in a form
acceptable to the Bank. (b) GENERAL BUSINESS INSURANCE. To maintain insurance
reasonably satisfactory to the Bank as to amount nature and carrier covering
property damage (including loss of use and occupancy) to any of the Borrower's
properties, public liability insurance including coverage for contractual
liability, product liability and workers' compensation, and any other insurance
which is usual for the Borrower's business. (c) EVIDENCE OF INSURANCE. Upon the
request of the Bank, to deliver the Bank a copy of each insurance policy or, if
permitted by the Bank a certificate of insurance listing all insurance in force.
9.25 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written consent:
(a) engage in any business activities substantially different from the
Borrower's present business; (b) liquidate or dissolve the Borrower's business;
(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination; (d) acquire or purchase a business or its assets; or (e) sell
or otherwise dispose of any assets for less than fair market value or enter into
any sale and leaseback agreement covering any of its fixed or capital assets.
9.26 SUBORDINATED DEBT PREPAYMENTS. Not to make any unscheduled prepayments of
principal on account of any Subordinated Debt
10. DEFAULT. If any of the following events (each an "Event of Default") occurs,
the Bank may do one or more of the following: (i) declare the Borrower in
default (ii) stop making any additional credit available to the Borrower, (iii)
exercise any and all rights and remedies as may be available to the Bank under
the terms of any collateral documents, security instruments, debt instruments or
any other document or instrument executed in connection herewith or in any way
related hereto, (iv) exercise any and all rights and remedies as may be
available to the Bank at law
or in equity, and (v) declare the entire debt created and evidenced hereby to be
immediately due and payable in full, whereupon the entire unpaid principal
indebtedness evidenced hereby, and all accrued unpaid interest thereon, shall at
once mature and become due and payable without presentment, demand, protest,
grace or notice of any kind (including, without limitation, notice of intent to
accelerate, notice of acceleration or notice of protest), all of which we hereby
severally waived by the Borrower. If a bankruptcy petition is filed with respect
to the Borrower, the entire debt outstanding under this Agreement will
automatically become due immediately.
10.1 FAILURE TO PAY. The Borrower fails to make a payment under this Agreement
within 3 days after the date when due.
10.2 NON-COMPLIANCE. The Borrow fails to perform any obligation after Borrower
obtains actual knowledge hereof or receives written notice thereof from the Bank
under (a) this Agreement and such failure continues for 20 days, (b) any other
agreement made in connection with this loan and such failure continues for 20
days, or (c) any other material agreement the Borrower has with the Bank or any
affiliate of the Bank and such failure continues past any grace or cure period
provided for in such agreement
10.3 CROSS-DEFAULT Any default occurs under any agreement in connection with any
credit in excess of Fifty Thousand and no/100 Dollars ($50,000.00) the Borrower
has obtained from anyone else or which the Borrower has guaranteed and such
failure continues after the lapse of any applicable grace or cure period.
10.4 LIEN PRIORITY. The Bank fails to have an enforceable first lien (except for
any liens permitted hereunder and prior liens to which the Bank has consented in
writing) on or security interest in any property given as security for the loan.
10.5 FALSE INFORMATION. The Borrower has given the Bank materially false or
misleading information or representations that were materially false or
misleading at the time given or made. Borrower will only be considered 10 have
given materially false or misleading information or representations if same
could reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan.
10.6 BANKRUPTCY. The Borrower files a bankruptcy petition, a bankruptcy petition
is filed against the Borrower and such involuntary petition is not dismissed
within 60 days after such filing, or the Borrower makes a general assignment for
the benefit of creditors.
10.7 RECEIVERS. A receiver or similar official is appointed for the Borrower's
business, or the business is terminated.
10.8 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower which shall not have been dismissed, discharged, stayed pending appeal
or bonded within 60 days after entry, or the Borrower enters into any settlement
agreements with respect to any litigation or arbitration, in an aggregate amount
of Two Hundred Thousand and no/100 Dollars ($200,000.00) or more in excess of
any insurance coverage.
10.9 GOVERNMENT ACTION Any government authority takes action with respect to the
Borrower that the Bank reasonably believes materially adversely affects the
Borrower's financial condition or ability to repay.
10.10 DEFAULT UNDER GUARANTY OR SUBORDINATION AGREEMENT. Any guaranty,
subordination agreement security agreement, deed of trust or other document
required by this Agreement is revoked in whole or in part violated or no longer
in effect.
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
11.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
11.2 GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY TEXAS LAW.
11.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and the
Bank's successors and assignees. The Borrower agrees that it may not assign this
Agreement without the Bank's prior written consent The Bank may sell
Participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees who have
agreed to be bound by the provisions of Section 11.15. If the loan is assigned,
the purchaser will have the right of set-off against the Borrower.
11.4 ARBITRATION. (a) This paragraph concerns the resolution of any
controversies or claims between the Borrower and the Bank, including but not
limited to those that arise from: (i) this Agreement (including any renewals,
extensions or modifications of this Agreement); (ii) any document agreement or
procedure related to or delivered in connection with this Agreement (iii) any
violation of this Agreement or (iv) any claims for damages resulting from any
business conducted between the Borrower and the Bank, including claims for
injury to persons, property or business interests (torts). (b) At the request of
the Borrower or the Bank, any such controversies or claims will be settled by
arbitration in accordance with the United States Arbitration Act THE UNITED
STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS AGREEMENT PROVIDES THAT IT IS
GOVERNED BY TEXAS LAW. (c) Arbitration proceedings will be administered by the
American Arbitration Association and will be subject to its commercial rules of
arbitration. (d) For purposes of the application of the statute of limitations,
the filing of an arbitration pursuant to this paragraph is the equivalent of the
filing of a lawsuit and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statutes of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss the
arbitration on that basis. (e) If there is a dispute as to whether an issue is
arbitratable, the arbitrators will have the authority to resolve any such
dispute. (f) The decision that results from an arbitration proceeding may be
submitted to an authorized court of law to be confirmed and enforced. (g) This
provision does not limit the right of the Borrower or the Bank to: (i) exercise
self-help remedies such as setoff, (ii) foreclosure against or sell any real or
personal property
collateral; or (iii) act in a court of law before, during or after the
arbitration proceeding to obtain: (A) an interim remedy; and/or (B) additional
or supplementary remedies. (h) The pursuit of a successful action for interim,
additional or supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank, including the
suing party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit
11.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. If the Bank waives a default, it may enforce a
later default. Any consent or waiver under this Agreement must be in writing.
11.6 COSTS. If the Bank incurs any expenses in connection with administering or
enforcing this Agreement, or if the Bank takes collection action under this
Agreement it is entitled to costs and reasonable attorneys' fees, including any
allocated costs of in-house counsel.
11.7 ATTORNEYS' FEES. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys' fees
(including any allocated costs of in-house counsel, incurred in connection with
the lawsuit or arbitration proceeding, as determined by the court or arbitrator.
11.8 DESTRUCTION OF BORROWER'S DOCUMENTS. The Bank will not be obligated to
return any schedules, invoices, statements, budgets, forecasts, reports or other
papers delivered by the Borrower, other than original documents which the
Borrower is legally required to retain. The Bank will destroy or otherwise
dispose of such materials at such time as the Bank, in its discretion, deems
appropriate.
11.9 RETURNED MERCHANDISE. Until the Bank exercises its rights to collect the
accounts receivable as provided under any security agreement required under this
Agreement, the Borrower may continue its present policies for returned
merchandise and adjustments. Credit adjustments with respect to returned
merchandise shall be made immediately upon receipt of the merchandise by the
Borrower or upon other disposition of the merchandise by the debtor in
accordance with the Borrower's instructions. If a credit adjustment is made with
respect to any Acceptable Receivable, the amount of such adjustment shall no
longer be included in the amount of such Acceptable Receivable in computing the
Borrowing Base.
11.10 VERIFICATION OF RECEIVABLES. The Bank may in the Event of Default, either
orally or in writing, request confirmation from any debtor of the current amount
and status of the accounts receivable upon which such debtor is obligated. At
any other time, the Bank may reasonably request confirmation from any other
debtor of the current amount and status of accounts receivable using a third
party acceptable to the Bank, at cost to the Borrower.
11.11 INDEMNIFICATION. The Borrower agrees to indemnify the Bank against, and
hold the Bank harmless from, all claims, actions, losses, costs and expenses
(including attorneys' fees and allocated costs for in-house counsel) incurred by
the Bank and arising from any convention whether well-founded or otherwise, that
there has been a failure to comply with any law regulating the Borrower's sales
or leases to or performance of services for debtors obligated upon the
Borrower's accounts receivable and disclosures in connection therewith. This
indemnity will survive repayment of to Borrower's obligations to the Bank and
termination of this Agreement
11.12 NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses, or by
telecopy to the telecopier number on the signature page of this Agreement, or to
such other addresses as the Bank and the Borrower may specify from time to time
in writing. In the event of telecopier use, original notices to follow by
personal delivery or first class mail.
11.12 PRIOR AGREEMENT SUPERSEDED. This Agreement supersedes the Business Loan
Agreement (Receivables and Inventory) entered into as of October 8, 1996,
between the Bank and the Borrower, as such agreement has been amended from time
to time prior to the date hereof, and any credit outstanding thereunder shall be
deemed to be outstanding under this Agreement
11.13 USURY LAWS. It is the intention of the parties hereto to comply with
applicable usury laws; accordingly, it is agreed that notwithstanding any
contrary provision herein or in any note or other agreement or commitment
between Borrower and Bank, whether written or oral, expressed or implied, Bank
shall never be entitled to charge, receive, or collect, nor shall amounts
received by Bank be credited so that Bank shall be paid, as interest a sum
greater than interest at the Maximum Rate. It is the intention of the parties
that this Agreement and all notes and other instruments evidencing or securing
the payment of the indebtedness outstanding hereunder, or executed or delivered
in connection herewith, shall comply with applicable law. If Bank ever contracts
for, charges, receives or collects anything of value which is deemed to be
interest under applicable law, and if the occurrence of any circumstance or
contingency, whether acceleration of maturity, prepayment delay in advancing
proceeds, or other event, should cause such interest to exceed the maximum
lawful amount any amount which exceeds interest at the Maximum Rate shall be
applied to the reduction of the unpaid principal balance outstanding hereunder
or any other indebtedness owed to Bank by Borrower, and if all such indebtedness
is paid in full, any remaining excess shall be paid to Borrower. In determining
whether the interest hereon exceeds interest at the Maximum Rate, the total
amount of interest shall be spread throughout the entire term of such
indebtedness until its payment in full. To the extent that TEX. REV. CIV. STAT.
XXX. art 5069-1.04, as amended (the "Act"), is relevant to the Bank for the
purposes of determining the Maximum Rate, the parties elect to determine the
Maximum Rate under the Act pursuant to the "indicate rate ceiling" from time to
time in effect, as referred to and defined in article 1.04(a)(1) of the Act;
subject, however, to any right the Bank may have subsequently under applicable
law, to change the method of determining the Maximum Rate.
11.14 WAIVERS; RELEASES; ENFORCEMENT. The Borrower and all guarantors of the
indebtedness evidenced by this Agreement severally waive diligence in collecting
and bringing suit against any party, and agree (a) to all extensions and partial
payments, with or without notice, before or after maturity, (b) to any
substitution, exchange or release of any security now or hereafter given for
such indebtedness, and (c) that it shall not be necessary for to Bank, in order
to enforce payment
of such indebtedness, to first institute or exhaust the Banks remedies against
the Borrower or any other party liable therefor or against any security for such
indebtedness.
11.15 CONFIDENTIALITY. The Bank agrees to take reasonable precautions and
exercise due care to maintain the confidentiality of all non-public confidential
information provided in connection with this Agreement or any document executed
in connection herewith and agrees that it shall not use any such information for
any purpose or in any manner other than pursuant to the terms contemplated by
this Agreement. The bank may disclose such information (i) to BankAmerica
Corporation affiliates and other related entities, (ii) at the request of any
Bank regulatory authority or in connection with an examination of the Bank by
any such authority, (iii) pursuant to subpoena or other court process, (iv) when
required to do so in accordance with the provisions of any applicable law or
regulation, (v) at the express direction of any agency of any State of the
United States or at any other jurisdiction in which the Bank conducts its
business, (vi) to its independent auditors and other professional advisors that
have a reasonable need or basis for access thereto and provided that such
persons agree to be bound by the terms of this Section 11.15 and (vii) to the
extent reasonably required in connection with any proceeding to enforce its
rights hereunder, provided, however, the Bank shall instruct such independent
auditors or other professional advisors to keep such information confidential in
accordance with the terms of this Section 11.15; provided further, that in the
event of any disclosure of non-public information pursuant to any of clauses
(ii), (iii), (iv) and (vi) above, the Bank shall make a good faith attempt to
the extent practicable, to notify Borrower of any such disclosure of non-public
information at least three (3) Business Days prior to disclosing such
information, and in any event shall notify Borrower of such disclosure as soon
as practicable.
11.16 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE INSTRUMENTS AND
DOCUMENTS EXECUTED IN CONNECTION HEREWTTH REPRESENT 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.
This Agreement is executed as of the date stated at the top of the first page.
Bank of America Texas, NA. New West
Communications, Inc.
By:________________________________ By:_______________________________
Xxx X. Xxxx, Vice President Xxxxx Xxxxxx, Chairman
Telecopy No.: ____________________ Telecopy No.: ____________________
Address where notices to the Bank Address where notices to the
are to be sent: Borrower are to be sent:
Bank of America Texas, N.A. 3000 Weslayan, Ste 350
Attn: Commercial Loan Services Xxxxxxx, Xxxxx 00000
000 Xxxx Xxxxxx Xxx. 0000
Xxxxxxx, Xxxxx 00000
