April 29, 1997
IWL Communications, Inc.
00000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Re: Proposed secured working capital line of credit and proposed
guidance line of credit from Bank One, Texas, N.A. ("BANK ONE") to
IWL Communications, Inc. ("BORROWER")
Gentlemen:
This letter constitutes the commitment (this "COMMITMENT") of Bank One
to make a secured revolving line of credit (the "WORKING CAPITAL LOAN"), and
a secured guidance line of credit (the "GUIDANCE LINE") (the Working Capital
Loan and the Guidance Line are sometimes collectively referred to as the
"LOANS"), on the following terms and conditions:
1. BORROWER: IWL Communications, Inc., an existing Texas corporation.
2. MAXIMUM PRINCIPAL AMOUNT OF LOANS: The maximum amount of the Working
Capital Loan shall be Five Million and No/100 Dollars ($5,000,000.00). The
maximum amount of the Guidance Line shall be Five Million and No/100 Dollars
($5,000,000.00). The Working Capital Loan shall be subject to a borrowing
base as described below.
3. USE OF PROCEEDS: The proceeds of the Working Capital Loan are to be
used for working capital needs and general corporate purposes. The proceeds
of the Guidance Line shall be used to finance Borrower's purchase and
subsequent lease of communications equipment. Bank One shall make advances
under the Guidance Line only in its sole and absolute discretion.
4. RATE AND PAYMENT:
4.1 INTEREST RATE: Subject to the terms and conditions of the notes
evidencing the Loans and prior to the occurrence of a default, the per annum
rates of interest on the Loans shall be, at Borrower's option, either (a)
Bank One's base rate of interest, or (b) the 30, 60, or 90 day adjusted LIBO
rate, plus 275 basis points. The interest rates on the Loans shall be
calculated at a daily rate equal to 1/360 of the annual percentage rate which
the Loans bear. In no event shall the interest due and payable under the
Loans exceed the maximum rate or amount of interest allowed by applicable
law. After the occurrence of a default, interest on the Loans shall be the
lesser of Bank One's base rate of interest plus 4% or the maximum rate of
interest allowed by applicable law.
4.2 PAYMENTS: During the term of the Loans, interest only shall be due
and payable monthly. The entire unpaid principal balance of the Loans and all
accrued but unpaid interest thereon shall be due, as to the Working Capital
Loan, on October 31, 1998, and as to the Guidance Line, May 1, 1998.
4.3 MANDATORY PREPAYMENT: In addition to Borrower's regular monthly
payments under the Loans, Borrower shall apply the portion of the lease
payments received by Borrower related to the equipment portion (as agreed to
by Bank One and Borrower) of the leases (the "FUNDED LEASES") of
communications equipment (the "LEASED EQUIPMENT") acquired with the proceeds
of the Guidance Line, as a payment on the Guidance Line. Borrower shall
establish a lockbox account with Bank One into which the lessees under
the Funded Leases shall be instructed to send all payments under the Funded
Leases. Borrower shall also make such additional monthly payments on the
Working Capital Loan as shall be necessary for the outstanding principal
balance of the Working Capital Loan to be less than or equal to the Borrowing
Base (defined in SECTION 6 below).
5. REDUCE COMMITMENT; VOLUNTARY PREPAYMENTS: Borrower may reduce the
commitment under the Working Capital Loan; provided, that Borrower prepays
the Working Capital Loan such that the outstanding principal balance of the
Working Capital Loan is less than the commitment as so reduced. Any
reduction in the commitment for the Working Capital Loan shall be in an
amount in excess of $1,000,000, and whole multiples of $1,000,000 thereafter;
and, in no event, shall the commitment for the Working Capital Loan be less
than $2,000,000, unless the entire Working Capital Loan commitment is
terminated. Borrower may make voluntary prepayments on the Guidance Line,
and any such voluntary prepayments shall not be subject to a prepayment
penalty. Any such prepayments shall be applied first to accrued but unpaid
interest and then to principal in the inverse order of maturity.
6. BORROWING BASE: In no event shall the outstanding principal balance of
the Working Capital Loan ever exceed the "Borrowing Base". The "Borrowing
Base" is defined as the sum of eighty percent (80%) of all eligible accounts
receivable not more than ninety (90) days past invoice date, plus fifty
percent (50%) of the book value of all approved, useable inventory. The
approved accounts receivable shall exclude government and foreign
receivables, inter-company receivables, receivables from any account debtor
where more than 10% of the accounts owed by such account debtor are more than
90 days past due, and other receivables designated by Bank One. The
inventory component of the Borrowing Base shall exclude work-in-progress and
shall not exceed the lesser of fifty percent (50%) of the aggregate Borrowing
Base or $1,000,000 at any time. No more than twenty-five (25%) of the
accounts receivable included in the Borrowing Base shall represent amounts
owed from the same party (or its affiliates), except for accounts agreed to
by Bank One in writing.
7. USAGE FEE: In consideration of Bank One's agreement to reserve
sufficient funds from which to make disbursements of the Working Capital
Loan, Borrower shall pay to Bank One a usage fee at a rate per annum equal to
.375% times the average daily unused portion of the Working Capital Loan,
payable quarterly.
8. TERM: The Loans shall mature and be payable in full (including without
limitation, all principal and accrued but unpaid interest thereon), and any
unfunded commitment under the Working Capital Loan shall expire as provided
in SECTION 4.2 of this Commitment.
9. COLLATERAL: The Loans shall be secured by a first lien security
interest in all equipment, machinery, accounts receivable, inventory and
other assets now or hereafter owned by Borrower, including, without
limitation, all Funded Leases (the "PROPERTY").
10. GUARANTY: The Loans shall be guaranteed by Xxxxxxxx X. Xxxxxxxx,
provided, that such guaranty of the principal balance of the Loans shall be
limited to
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$500,000 and shall be released if, prior to the occurrence of a default,
Borrower successfully completes an initial public offering of its stock.
11. COMMITMENT EXPIRATION: Unless extended in writing by Bank One and
Borrower, this Commitment shall expire and be void on May 16, 1996, if not
accepted by Borrower. In addition, if this Commitment is accepted by
Borrower, the Loans must be funded on or before June 30, 1996, on the terms
provided herein, or this Commitment shall terminate on such date.
12. COSTS: Whether or not the Loans close, Borrower shall pay all costs and
expenses incurred by Bank One in connection with the Loans (pre and post-
closing), including, but not limited to, all closing costs and attorneys'
fees. Such costs and expenses shall be due and payable prior to the closing
of the Loans. Borrower shall reimburse Bank One for all such costs and
expenses paid by Bank One. If the Loans close as herein provided, Bank One
agrees that it will pay $4,000 of the closing attorney's fees.
13. QUALITY OF DOCUMENTS AND ITEMS: Each document and item required to be
executed and/or submitted to Bank One pursuant to this Commitment or the Loan
Documents (as herein defined) shall be satisfactory in form, substance and
content to Bank One and its legal counsel.
14. CONDITIONS OF THE LOANS: Each of the following conditions must be
satisfied prior to closing the Loans:
14.1 LOAN DOCUMENTS: Borrower shall deliver to Bank One such fully
executed promissory notes, security agreements, lease assignments, financing
statements, loan agreements and all other documents evidencing, securing or
pertaining to the Loans as required by Bank One (collectively, the "LOAN
DOCUMENTS"). The Loan Documents will provide that the Loans are cross-defaulted
and cross-collateralized. In addition to the conditions of closing the Loans
set forth in this Commitment, all conditions to closing contained in the Loan
Documents must be satisfied prior to the Closing Date.
14.2 LEASES: Fundings under the Guidance Line shall only be permitted
with respect to communications equipment and installation pursuant to leases
which (a) have a term of not more than 60 months or the estimated useful life
of the Leased Equipment, (b) have been assigned to Bank One as collateral for
the Loans and the lessee thereunder has executed and delivered to Bank One
an estoppel letter in form and substance acceptable to Bank One, (c) have
been delivered to Bank One (which include all originally executed leases),
and (d) have as lessees companies formed and with principal offices in the
United States. Bank One shall be entitled as a condition to any funding under
the Guidance Line that it receive and approve the financial condition of any
lessee under a proposed Funded Lease, and, if the financial condition of the
proposed lessee is unacceptable to Bank One, a guaranty of a parent or
related company to such lessee which is acceptable.
14.3 AUTHORITY AND CAPACITY INSTRUMENTS: Borrower shall deliver to
Bank One a copy of its articles of incorporation (certified by the Secretary
of State of the state of incorporation), bylaws, resolutions authorizing the
transactions contemplated by the Loan Documents and incumbency certificate
duly certified by an appropriate officer of Borrower, together with all
documents required by Bank One's legal counsel to evidence the good standing,
authority and capacity of all entities required to execute the Loan Documents
on behalf of Borrower.
14.4 INSURANCE: Borrower shall deliver to Bank One policies or
certificates of liability, hazard insurance, business interruption insurance,
and such other insurance coverage as Bank One may require naming Bank One as
loss payee. The insurers, types of coverage and amounts of coverage must be
satisfactory to Bank One.
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14.5 NO MATERIAL ADVERSE CHANGE: There shall not have occurred in the
opinion of Bank One a material adverse change in the financial condition of
Borrower since the date of the latest financial statements delivered to Bank
One.
14.6 UCC SEARCHES: Borrower shall deliver or cause to be delivered to
Bank One such searches of the Uniform Commercial Code records as Bank One may
require to evidence that Bank One has a first and prior security interest in
and to the Property.
14.7 LEGAL OPINIONS: Xxxxxxxx shall deliver to Bank One a written
opinion, addressed to Bank One, from Xxxxxxxx's attorney, including, without
limitation, an opinion favorably opining as to the due authorization of the
Loan Documents, the existence and good standing of Borrower, the compliance
by Borrower with all applicable governmental requirements and otherwise being
in form and substance satisfactory to Bank One.
14.8 MISCELLANEOUS: Borrower shall deliver to Bank One all other
documents or items that are required by any of the Loan Documents.
15. COVENANTS: The Loan Documents will include, but not limited to, the
following covenants:
15.1 FINANCIAL STATEMENTS OF BORROWER: Borrower shall provide Bank One
with annual audited financial statements prepared in accordance with generally
accepted accounting principles ("GAAP") within ninety (90) days after the end of
each annual accounting period, accompanied by an officer's certificate of
compliance satisfactory to Bank One (a "CERTIFICATE OF COMPLIANCE"). Borrower
shall also provide Bank One with (i) quarterly financial statements prepared
in accordance with GAAP, within thirty (30) days after the end of each quarter,
(ii) monthly borrowing base reports and accounts receivable listings and agings,
within forty-five (45) days after the end of each monthly accounting period, and
(iii) within forty-five (45) days after the end of each quarterly accounting
period, an officer's Certificate of Compliance. Borrower shall deliver to Bank
One copies of any and all public filings and any reports or other information
delivered to its shareholders.
15.2 MINIMUM TANGIBLE NET WORTH: Borrower shall have a minimum tangible
net worth equal to $3,200,000, plus the amount of the net proceeds from any
equity offering, plus, beginning June 30, 1998, and at the end of each fiscal
quarter thereafter, fifty percent (50%) of the net earnings for the immediately
preceding fiscal quarter.
15.3 DEBT TO WORTH RATIO: Borrower shall not permit Borrower's total
debt to tangible net worth to be greater than 3.45 to 1 at closing and
1.00:1 at June 30, 1997, and thereafter.
15.4 FIXED CHARGE RATIO: Borrower shall not permit the ratio of
Xxxxxxxx's earnings before interest, taxes, depreciation, amortization and
other non-cash expenses to the current maturities of Borrower's long term
debt, interest expense and lease expense to be less than 1.25:1 at any time.
Such ratio shall be calculated on a rolling four quarter basis.
15.5 CURRENT RATIO: Borrower shall not permit its current assets, as
computed in accordance with GAAP, to current liabilities, as computed in
accordance with GAAP, to be less than 1.15:1 at any time.
15.6 LOANS TO OTHERS: Borrower shall not make any loans to
shareholders or any other party without the prior written consent of Bank One.
15.7 DIVIDENDS: No dividends or other forms of distributions shall be
made to shareholders without the prior written consent of Bank One.
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15.8 DEBT: Borrower shall not incur any debt except any indebtedness
which exists on the closing date of the Loans which has been disclosed to (and
is acceptable to Bank One), indebtedness owed to Bank One, and trade payables
incurred in the ordinary course of business.
15.9 TREASURY STOCK: Borrower shall not purchase any treasury stock
without the prior written consent of Bank One.
15.10 LIENS; PLEDGES: Borrower shall not encumber any of Borrower's
assets other than the liens and security interests in favor of Bank One and
except for any encumbrances which exist on the closing date of the Loan and
which have been disclosed to (and are acceptable to) Bank One.
15.11 AUDIT: Bank One shall be entitled to conduct or have conducted at
Bank One's expense internal audits of Borrower's inventory and accounts
receivable.
15.12 SUBSIDIARY CAPITAL INVESTMENT: Borrower shall make no new capital
investment in Borrower's subsidiaries in excess of $250,000, without the prior
written consent of Bank One.
15.13 CHANGES IN OWNERSHIP: Borrower shall make no changes in its basic
business or in its management (i.e. the chief executive officer, chief
financial officer and president) without the prior written consent of Bank
One. There shall not occur a change in the ownership of Borrower other than in
connection with an initial public offering or approved employee stock option
plans. Borrower shall not participate in any mergers or any disposal of its
assets other than the sale or lease of inventory and fixed assets in the
ordinary course of business without the prior written consent of Bank One.
15.14 INSPECTION: Borrower shall grant Bank One full authority to
inspect Borrower's records and/or Property at any time at Xxxxxxxx's premises.
16. DISBURSEMENTS OF THE LOANS: All disbursements of the Loans shall be
subject to the conditions thereto contained in any of the Loan Documents and
shall be made only in accordance with the requirements for disbursements of
the Loans contained in any of the Loan Documents.
17. DEFAULTS. The Loan Documents shall contain such events of default as
Bank One shall determine to be appropriate, including, without limitation, the
failure of Borrower to make any payment required by the Loan Documents, the
breach by Borrower of any covenant contained in the Loan Documents, the
occurrence of any misrepresentation or breach of warranty, the bankruptcy or
liquidation of Borrower and any breach by Borrower of any governmental
regulation, or the occurrence of a default under any Funded Lease.
18. GENERAL CONDITIONS:
18.1 ASSIGNABILITY: Neither this Commitment nor any interest in it may
be assigned by Borrower without Bank One's prior written approval.
18.2 LOAN APPLICATION: The issuance of this Commitment is based upon
the accuracy of Xxxxxxxx's representations and statements, any loan
application and all additional information, representations, exhibits and
other matters submitted to Bank One for its consideration. Bank One shall have
the option to declare this Commitment to be breached if there shall have been
any material misrepresentation, misstatement, omission or any material error in
anything submitted to Bank One, or, if prior to the initial disbursement of
the Loans, there shall have been a material adverse change in the state of
facts submitted to Bank One, or Borrower is insolvent, dissolved, or is the
subject of any bankruptcy or other debtor relief proceeding or any levy,
attachment,
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garnishment, sequestration or similar judicial process, or has not paid in
full any final money judgment against it.
18.3 APPLICABLE LAW: THIS COMMITMENT AND THE LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH TEXAS LAW, EXCEPT TO THE EXTENT
THAT THE LAWS OF ANOTHER JURISDICTION GOVERN THE CREATION, PERFECTION OR
ENFORCEMENT OF INTERESTS, OR THE REMEDIES, RELATED TO THE COLLATERAL, OR TO
THE EXTENT THAT FEDERAL LAW MAY APPLY.
This commitment is subject to the requirements of the Comptroller of the
Currency, Federal Deposit Insurance Corporation, and all other governmental
regulations to which Bank One and/or any participating lender is subject.
Further, the failure of Borrower to comply with any of the aforementioned
requirements, and/or the deliberate falsification or misrepresentation of any
information in the documents submitted to Bank One and upon which this
Commitment is issued shall render this Commitment invalid at Bank One's option.
18.4 PARTICIPATION OR SALE OF THE LOANS: Bank One shall have the right
to sell the Loans or an undivided ownership or participation in the Loans and
to disclose in confidence such information regarding Borrower and/or the
Property as is necessary to effectuate any such sale (including, but not
limited to, financial information). Borrower shall execute, acknowledge and
deliver any and all instruments requested by Bank One in connection with such
sale.
18.5 OUTSIDE COUNSEL/ACCOUNTANTS: Bank One shall have the right to
retain the services of outside legal counsel and accountants in connection
with the administration and monitoring of the Loans, and in enforcing any of
the Loan Documents. The costs of such legal counsel and accountants shall be
paid by Xxxxxxxx.
19. MODIFICATIONS: No modification or waiver of the terms of this Commitment
shall be made unless such modification or waiver is in writing and signed by
Bank One.
20. OTHER TERMS AND CONDITIONS: This Commitment is a basic outline of
certain terms and conditions of the Loans and does not necessarily include the
details of such terms and conditions. In addition, this Commitment does not
include all of the terms and conditions of the Loans. The detailed terms and
conditions for the Loans will be contained in the Loan Documents.
21. FINAL AGREEMENT: THIS WRITTEN 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.
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22. ACCEPTANCE: Please indicate your acceptance of this Commitment by
signing a copy of the same and returning it to Bank One (to the attention of
Xxxx X. Xxxx).
BANK ONE
BANK ONE, TEXAS N.A.
By: /s/ Xxxx X. Xxxx
---------------------------------
Xxxx X. Xxxx
Vice President
The undersigned accepts and agrees to all of the terms and conditions of this
Commitment on this 20th day of May, 1997.
IWL COMMUNICATIONS, INC.
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxxxx Xxxxxxxx
-------------------------------
Title: CEO
------------------------------
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BANK ONE, TEXAS, NA Tel 000 000 0000
0000 Xxxx Xxxxxx
Xxxxxx XX 000000
[LOGO]
May 19, 1997
Xx. Xxxxxxx X. Xxxxxxxx, CPA
Chief Financial Officer
IWL Communications, Inc.
00000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Dear Ric:
This letter shall serve as an amendment to Section 4.1 INTEREST RATE of the
Commitment Letter between IWL Communications, Inc. ("Borrower") and Bank One,
Texas, NA ("Bank One").
The Working Capital Loan interest rate changes to the following format:
At closing and up until Bank One receives Borrower's fiscal year 1997
audited financial statement the interest rate will be the Borrower's
option of Prime + 0% or LIBOR + 2.40%. After Bank One has received
Xxxxxxxx's fiscal year 1997 audited financial statement, Xxxxxxxx has
successfully completed their IPO, and Borrower is not in default with
the loan agreement, the interest rate will be lowered to the Borrower's
option of Prime minus 1/2% or LIBOR + 2.00%. In addition, the unused fee
will be lowered to 1/4%.
The Guidance Line interest rate changes to the following format:
At closing and up until Bank One receives Borrower's fiscal year 1997
audited financial statement the interest rate will be no higher than
the Borrower's floating rate option of Prime + 0% or LIBOR + 2.40%.
After Bank One has received Xxxxxxxx's fiscal year 1997 audited financial
statement, Xxxxxxxx has successfully completed their IPO, and Borrower is
not in default with the loan agreement, the floating rate option will be
lowered to no higher than the Borrower's option of Prime minus 1/2% or
LIBOR + 2.00% and no lower than Prime minus 1% or LIBOR + 1.25%. The fixed
rate option will be no higher than Treasury's + 2.40% and no lower than
Treasury's + 1.25%. The determining factor will be the credit quality of
Xxxxxxxx's lessee. An example would be a AA rated or better lessee would
receive the lowest pricing.
Ric, as you know, all of us at Bank One are extremely excited about this
opportunity. We hope that this creative interest rate structure reiterates
our desire to do business with XXX. I would also like to make another cost
saving offer to you. If you do move your borrowing relationship to Bank One,
we will pay for your first set of new checks, deposit slips and endorsement
stamp. We feel that we are the right bank for IWL for many reasons. Not the
least being the fact that we can grow with you and be your bank for the next
ten, twenty, thirty years. We want to develop and grow a relationship that
will be mutually beneficial for all of us. If you have any questions, please
do not hesitate to call.
Sincerely,
/s/ Xxxx X. Xxxx
----------------------------
Xxxx X. Xxxx
Vice President
