EXHIBIT 10.5
[LOGO] REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement ("Agreement") is entered into as of June
30, 1994 between Union Bank ("Bank") and VDI ("Borrower") with respect to the
following:
1. THE REVOLVING CREDIT ("LOAN")
1.1 Amount $2,000,000
1.2 Purpose: The Loan will be used for the following purpose working
capital.
1.3 Availability period: present through June 30, 1995
1.4 Interest rate: The interest rate shall be calculated at that rate set
forth in the promissory note ("Note") required under Article 3.
1.5 Principal and interest payments: At the times set forth in the Note
required under Article 1.11
1.6 Loan fee: N/A Dollars ($ N/A ) payable on .
1.7 Fee on unutilized portion of the Loan: On N/A, 19 and on the
day of each month thereafter until , 19 , or the earlier
termination of the Loan, Borrower shall pay to Bank a fee of N/A % per
year on the average daily unused portion of the Loan for the preceding
month computed on the basis of actual days elapsed over a year of 360
days.
1.8 Other fee: N/A
1.9 Balances: Borrower shall maintain all of its major accounts with Bank
during the term of the Loan, including any compensating balances as set
forth in Article 5.4.
1.10 Any prepayment fee and the calculation therefor shall be set forth in
the Note.
1.11 Method of Making Advances under the Loan: Borrower shall execute Bank's
standard promissory note, and each disbursement in a minimum amount of
$10,000 under the Note shall be made during the availability period in
accordance with the Bank form of authorization to disburse executed by
the Borrower. The Bank shall enter each amount borrowed and repaid on
the back of the Note, and such entries shall be prima facie evidence of
the amount of the Loan outstanding. Bank may use an alternate method
to evidence the amount of the Loan outstanding. Notwithstanding
anything to the contrary contained herein, Borrower agrees that for at
least N/A consecutive days during each twelve month period, there shall
be no Loan outstanding under this Revolving Credit Agreement.
1.12 See Attachment.
2. COLLATERAL
Security for the payment and performance of all sums and all other
obligations under this Agreement shall be evidenced by the documents executed
by Borrower and/or accommodation pledgor in connection with this Loan.
3. CONDITIONS TO AVAILABILITY OF THE LOAN
Before Bank is obligated to make any advance, Bank must receive all of the
following, each of which must be in form and substance satisfactory to Bank:
3.1 The original, executed Note;
3.2 Original, executed security agreement(s) and deed(s) of trust covering
the collateral referenced in Article 2;
3.3 All collateral referenced in Article 2 in which Bank wishes to have a
possessory security interest;
3.4 Financing statement(s) executed by Borrower;
3.5 Evidence that the security interests and liens in favor of Bank are
valid, enforceable, and prior to the rights and interests of others,
except those consented to in writing by Bank;
3.6 Continuing guaranty(ies) in favor of Bank, executed by Robert Bajorek;
R. Luke Stefanko;
Borrower shall cause each Guarantor to submit not later than ninety
(90) days after the end of each fiscal year the Guarantor's financial
statement, confirmed as to its correctness by Guarantor's signature,
either on Bank's form therefor or prepared by an independent certified
public accountant as of the end of each fiscal year;
3.7 Subordination agreement(s) in favor of Bank on its standard form
executed by N/A;
3.8 Evidence that the execution, delivery, and performance by Borrower of
this Agreement and the execution, delivery, and performance by Borrower
and any corporate guarantor or corporate subordinating creditor of any
instrument or agreement required under this Agreement, as appropriate,
have been duly authorized.
4. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants (and each request for an advance shall be
deemed a representation and warranty made on the date of such request) that:
4.1 Borrower is a corporation duly organized and existing under the laws of
the state of its organization and the execution, delivery, and
performance of this Agreement are within Borrower's powers, have been
duly authorized, and are not in conflict with the terms of any charter,
bylaw, or other organization papers of Borrower;
4.2 The execution, delivery, and performance of this Agreement are not in
conflict with any law or any indenture, agreement, or undertaking to
which Borrower is a party or by which Borrower is bound or affected;
4.3 All financial information submitted by Borrower to Bank, whether
previously or in the future, is and will be true and correct in all
material respects upon submission and is and will be complete upon
submission insofar as may be necessary to give Bank a true and accurate
knowledge of the subject matter thereof;
4.4 Borrower is properly licensed and in good standing in each state in
which Borrower is doing business, and Borrower has qualified under, and
complied with, where required, the fictitious name statute of each state
in which Borrower is doing business;
4.5 There is no event which is, or with notice or lapse of time or both
would be, an Event of Default (as defined in Article 6) under this
Agreement;
4.6 Borrower is not engaged in the business of extending credit for the
purpose of, and no part of the Loan will be used for, purchasing or
carrying margin stock within the meaning of the Federal Reserve Board
Regulation U; and
4.7 All defined benefit pension plans as defined in the Employees Retirement
Income Security Act of 1974, as amended ("ERISA"), of Borrower meet, as
of the date hereof, the minimum funding standards of Section 302 of
ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.
5. COVENANTS
Borrower agrees, so long as the Loan is available and until full and final
payment of all sums outstanding under this Agreement and the Note, Borrower
will:
5.1 At all times maintain:
(a) A ratio of current assets to current liabilities of at least N/A
Current assets are defined as cash and other assets reasonably
expected to be realized in cash, sold, or consumed within one year,
or during the operating cycle of the business of the Borrower,
whichever is longer. Current liabilities are defined as those
obligations whose liquidation is reasonably expected to require the
use of existing resources classified as current assets, or the
creation of other current liabilities.
(b) A quick ratio of cash, accounts receivable and marketable securities
to current liabilities of at least .70 : 1.0 ;
(c) Net working capital equal to at least $ N/A (Net working capital
shall mean the excess of current assets over current liabilities);
(d) A minimum tangible net worth of $ 2,800,000 (Tangible net worth
shall mean net worth after deducting patents, trademarks, goodwill
and other similar intangible assets); and
(e) A ratio of total liabilities(1) to tangible net worth(2) of not
greater than 2.0 : 1.0 .
(1) including current portion of subordinated debt.
(2) plus long term portion of subordinated debt.
(f) Cash Flow Coverage to be no less than 1.1 at YE 12/31/94.
Defined as follows:
Numerator: Net income plus depreciation and amortization
expense.
Denominator: Interest Expense plus current portion of long term
debt (including subordinated debt and capital lease
obligations) plus unfinanced equipment purchases/
leases (to be defined as capital expenditures plus
capital leases incurred during prior 12 months less
term debt and capital lease obligations incurred
during prior 12 months.)
(g) The company will not post an operating or net loss in any two
consecutive quarters of any fiscal year.
(h) Borrower will notify Bank on a quarterly basis of year to date
dollar amount of assets acquired under capital leases.
(i) Borrower will not incur any liens on equipment located at the Tulsa,
Oklahoma facility.
5.2 Give written notice to Bank within fifteen (15) days of:
(a) All litigation affecting Borrower where the amount is One Hundred
Thousand Dollars ($100,000) or more;
(b) Any substantial dispute which may exist between Borrower and any
governmental regulatory body or law enforcement authority;
(c) Any Event of Default under this Agreement or any event which, upon
notice or a lapse of time or both, would become an Event of Default;
(d) Any other matter which has resulted or might result in a material
adverse change in Borrower's financial condition or operations; and
(e) Any change in Borrower's name or principal place of business.
5.3 Furnish to Bank:
(a) Within thirty (30) days after the close of each of the first three
fiscal quarters, its financial statement as of the close of that
quarter prepared in accordance with generally accepted accounting
principles by [X] Borrower's chief financial officer; [x] a(n)
(independent/certified/public or applicable combination thereof)
accountant selected by Borrower and reasonably satisfactory to Bank;
(b) Within 90 days after the close of each fiscal year, a copy of its
financial statement prepared on a(n) review (internal, compilation,
review, audited) basis in accordance with generally accepted
accounting principles applied on a basis consistent with the
previous year by [ ] Borrower's chief financial officer; [X] a(n)
independent certified public (independent/certified/public or
applicable combination thereof) accountant selected by Borrower and
reasonably satisfactory to Bank.
(c) Monthly account receivable agings within twenty (20) days of month
end.
5.4 Maintain on deposit with Bank average daily collected demand deposit
balances equal to at least N/A % of the average daily outstanding
balance of the Loan and N/A % of the committed amount of the Loan.
Balances shall be calculated by Bank in its sole discretion after
reduction for (a) uncollected funds, (b) reserve requirements of the
Federal Reserve Board, and (c) balances necessary to compensate Bank for
account activity charges and cost of all services provided by Bank to
the Borrower and not paid under a separate agreement. These balances
shall be computed N/A as of the last day of each N/A. Borrower shall be
charged a fee for any deficiency for such N/A equal to N/A of the per
annum rate of % plus the average Union Bank Reference Rate for the
N/A multiplied by the amount of average daily balances which Borrower
would have had to maintain on deposit with Bank to make up the
deficiency. This fee shall be due and payable ten (10) days after Bank
notified Borrower of the amount due and owing. Failure to maintain
required balances shall not be a default hereunder unless and until
Borrower shall fail to pay the fee when due.
5.5 Pay or reimburse Bank for any out-of-pocket expenses incurred by it in
connection with this Agreement or on any agreements or financing
statements or other instruments delivered under this Agreement.
5.6 Maintain and preserve all rights, privileges and franchises now enjoyed,
conduct Borrower's business in an orderly, efficient and customary
manner, keep all Borrower's properties in good working order and
condition, and from time to time make all needed repairs, renewals or
replacements so that the efficiency of Borrower's properties shall be
fully maintained and preserved.
5.7 Maintain and keep in force in adequate amounts such insurance as is
usual in the business carried on by Borrower.
5.8 Maintain adequate books, accounts and records and prepare all financial
statements required hereunder in accordance with generally accepted
accounting principles and practices consistently applied, and in
compliance with the regulations of any governmental regulatory body
having jurisdiction over Borrower or Borrower's business and permit
employees or agents of Bank at any reasonable time to inspect Borrower's
properties, and to examine or audit Borrower's books, accounts and
records and make copies and memoranda thereof.
5.9 At all times meet, for all Borrower's defined benefit pension plans as
defined in the Employees Retirement Income Security Act of 1974, as
amended ("ERISA"), the minimum funding standards of Section 302 of
ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA will occur with respect to any such plan.
5.10 At all times comply with, or cause to be complied with, all laws,
statutes, rules, regulations, orders and directions of any governmental
authority having jurisdiction over Borrower or Borrower's business.
5.11 Except as provided in this Agreement, or in the ordinary course of
business as currently conducted, not make any loans or advances, become
a guarantor or surety, pledge its credit or properties in any manner,
extend credit.
5.12 Not purchase the debt or equity of another person or entity except for
savings accounts and certificates of deposit of Bank, direct U.S.
Government obligations and commercial paper issued by corporations with
top ratings of Moody's or Standard & Poor's, provided all such permitted
investments shall mature within one year of purchase.
5.13 Not create, assume or suffer to exist any mortgage, encumbrance,
security interest, pledge, or other lien (including the lien of an
attachment, judgment, or execution), securing a charge or obligation, on
or in any of Borrower's property, real or personal, whether now owned or
hereafter acquired, except to Bank and as set forth in Articles 5.17 and
5.18.
5.14 Not sell or discount any receivables or evidence of indebtedness, except
to Bank, borrow any money, incur directly or indirectly, any liabilities
for borrowed money, except pursuant to agreements made with the Bank.
5.15 Neither liquidate, dissolve, enter into any consolidation, merger,
partnership, or other combination; nor convey, sell, or lease all or the
greater part of its assets or business; nor purchase or lease all or the
greater part of the assets or business of another.
5.16 Not engage in any business activities or operations substantially
different from or unrelated to present business activities and
operations.
5.17 Not, in any single fiscal year of Borrower, expend or incur obligations
of more than One Million Seven Hundred Fifty Thousand Dollars
($1,750,000) for the acquisition of fixed or capital assets. Fifty
Thousand
5.18 Not, in any single fiscal year of Borrower, enter into the lease of any
personal property which would cause Borrower's aggregate annual
obligations under all such leases to exceed N/A Dollars ($ ).
6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default") shall
terminate any obligation on the part of Bank to make or continue the Loan
and, at the option of Bank, shall make all sums of interest and principal
outstanding under the Loan immediately due and payable, without notice of
default, presentment or demand for payment, protest or notice of nonpayment
or dishonor, or other notices or demands of any kind or character:
6.1 Borrower shall default in the due and punctual payment of the principal
of or the interest on the Note or any renewal thereof, and such default
shall not be cured within ten (10) business days after the occurrence
thereof; or
6.2 Any representation or warranty made by Borrower herein or in any
certificate or financial or other statement heretofore or hereafter
furnished by Borrower or its officers or any Guarantor shall prove to be
in any material respect false and misleading; or
6.3 Default shall be made by Borrower in the due performance or observance
of any covenant or condition of this Agreement and such default shall
not, within ten (10) days after Borrower has knowledge thereof, have
been cured; or
6.4 The filing by Borrower of any petition under the bankruptcy,
reorganization, arrangement, insolvency, or other debtor's relief laws,
or the filing against Borrower of any such petition or the appointment
of a receiver, trustee or liquidator of all or a substantial part of
Borrower's assets if the filing against Borrower is not dismissed within
thirty (30) days thereafter; or
6.5 The making by Borrower of an assignment for the benefit of creditors; or
6.6 The voluntary suspension of business by Borrower; or
6.7 Any guarantee or subordination agreement required hereunder is breached
or becomes ineffective, or any Guarantor or subordinating creditor
disavows or attempts to terminate such guarantee or subordination
agreement; or
6.8 If, in the opinion of Bank, there is a materially adverse change in the
financial condition of Borrower or any Guarantor, or for any reason Bank
believes that the prospect of payment or performance pursuant to the
Note, any other indebtedness of Borrower to Bank, this Agreement or any
other agreement or instrument required by Bank in connection with the
Loan has been impaired; or
6.9 Borrower shall commit or do, or fail to commit or do, any act or thing
which would constitute an event of default under any of the terms of any
other agreement, document, or instrument executed, or to be executed by
it and concerning the obligation to pay money. Notwithstanding the
foregoing, Bank shall have no duty to make any advance to Borrower
during any cure period provided for in Sections 6.1, 6.3 and/or 6.4.
7. MISCELLANEOUS
7.1 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, provided, however, that
Borrower shall not assign this Agreement or any of the rights, duties or
obligations of Borrower hereunder without the prior written consent of
Bank.
7.2 No consent or waiver under this Agreement shall be effective unless in
writing and signed by an officer of the Bank. No waiver of any breach
or default shall be deemed a waiver of any breach or default thereafter
occurring.
7.3 This Agreement, and any instrument or agreement required under this
Agreement, shall be governed by and construed under the laws of the
State of California.
7.4 All documents executed in connection with this Agreement shall be Bank's
standard form or a form acceptable to Bank.
7.5 Litigation and Attorneys' Fees. Borrower will pay promptly to Bank,
without demand, reasonable attorneys' fees (including but not limited to
the reasonable estimate of the allocated costs and expenses of in-house
legal counsel and legal staff) and all costs and other expenses paid or
incurred by Bank in collecting or compromising the Loan or in enforcing
or exercising its rights or remedies created by, connected with or
provided in this Agreement or any other agreement or instrument required
by Bank in connection with the Loan, whether or not suit is filed. If
suit is filed, only the prevailing party shall be entitled to attorneys'
fees and court costs.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
BORROWER
UNION BANK, a California banking
corporation VDI
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By: /s/ Bonnie Rowan By: /s/ Sandra C. May
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Title VP Title Chief Financial Officer
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By: By:
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Title Title
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ADDRESS WHERE NOTICES TO BANK ADDRESS WHERE NOTICES TO BORROWER
ARE TO BE SENT ARE TO BE SENT
5200 West Century Blvd. 6920 Sunset Blvd.
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Los Angeles, CA 90045 Hollywood, CA 90028
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