SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] - Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
or
[ ] - Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-21089
GOLDEN BEAR GOLF, INC.
- --------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 65-0680880
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
11780 U.S. HIGHWAY ONE, NORTH PALM BEACH, FLORIDA 33408
- --------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
(561) 626-3900
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The Registrant had outstanding 2,744,962 shares of Class A Common Stock (par
value $.01 per share) and 2,760,000 shares of Class B Common Stock (par value
$.01 per share) as of November 7, 1997.
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<CAPTION>
GOLDEN BEAR GOLF, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
PAGE
----
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of
September 30, 1997 (Unaudited) and December 31, 1996........................ 3
Consolidated Condensed Statements of Operations (Unaudited) for the
Three Months and Nine Months Ended September 30, 1997 and 1996.............. 4
Consolidated Condensed Statements of Cash Flows (Unaudited)
for the Nine Months Ended September 30, 1997 and 1996....................... 5
Notes to Consolidated Condensed Financial Statements (Unaudited)............... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................... 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................... 19
Signatures .............................................................................. 20
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,606,416 $ 16,477,420
Accounts receivable, net 8,671,472 5,352,224
Due from International 261,582 843,235
Costs and estimated earnings in excess of billings on
uncompleted contracts 6,565,986 3,341,500
Inventory 2,728,710 1,953,857
Prepaid expenses and other current assets 1,124,663 221,800
------------ ------------
Total current assets 20,958,829 28,190,036
PROPERTY AND EQUIPMENT, net 28,512,250 18,347,927
INTANGIBLES AND OTHER ASSETS 8,668,319 4,868,919
------------ ------------
Total assets $ 58,139,398 $ 51,406,882
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,020,200 $ 3,542,187
Accrued liabilities 2,996,648 1,871,915
Billings in excess of costs and estimated earnings on
uncompleted contracts 525,772 419,705
Deferred revenue 1,534,543 449,515
Current portion of notes payable and capital leases 1,069,033 1,313,383
------------ ------------
Total current liabilities 9,146,196 7,596,705
------------ ------------
NOTES PAYABLE AND CAPITAL LEASES, net of current portion 11,969,020 5,556,667
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 20,000,000 shares authorized,
no shares issued and outstanding -- --
Common stock-
Class A, $.01 par value, 70,000,000 shares authorized,
2,744,962 and 2,744,812 shares issued and
outstanding at September 30, 1997
and December 31, 1996, respectively 27,450 27,448
Class B, $.01 par value, 10,000,000 shares authorized,
2,760,000 shares issued and outstanding 27,600 27,600
Additional paid-in capital 40,856,943 40,850,358
Retained earnings (deficit) (3,887,811) (2,651,896)
------------ ------------
Total shareholders' equity 37,024,182 38,253,510
------------ ------------
Total liabilities and shareholders' equity $ 58,139,398 $ 51,406,882
============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited statements.
3
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<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
REVENUES: 1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Golf Division-
Golf centers and other revenues $ 5,363,643 $ 1,502,462 $ 13,917,060 $ 2,250,511
Related party commissions 288,675 258,985 1,041,652 946,651
------------ ------------ ------------ ------------
Total golf division 5,652,318 1,761,447 14,958,712 3,197,162
------------ ------------ ------------ ------------
Construction Division 9,722,403 6,482,256 23,922,613 13,654,879
------------ ------------ ------------ ------------
Marketing Division-
Golf instruction revenues 915,756 578,562 3,558,916 2,721,719
Licensing and other revenues 1,111,918 688,592 3,054,268 1,927,445
Income from operations of JNAI 130,030 189,901 874,544 787,897
Related party management fees 119,780 176,250 402,280 363,750
------------ ------------ ------------ ------------
Total marketing division 2,277,484 1,633,305 7,890,008 5,800,811
------------ ------------ ------------ ------------
Total revenues 17,652,205 9,877,008 46,771,333 22,652,852
------------ ------------ ------------ ------------
OPERATING COSTS AND EXPENSES:
Construction and shaping costs 7,102,439 5,311,901 20,573,791 11,298,458
Operating expenses 7,820,904 3,251,833 22,129,824 7,755,377
Compensation recorded on sale of
shares to management -- -- -- 3,000,000
General and administrative 983,070 1,083,863 3,603,003 2,745,597
expenses
Depreciation and amortization 709,964 46,022 1,689,772 209,808
------------ ------------ ------------ ------------
Total operating costs and
expenses 16,616,377 9,693,619 47,996,390 25,009,240
------------ ------------ ------------ ------------
Income (loss) from operations 1,035,828 183,389 (1,225,057) (2,356,388)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 33,068 194,913 237,906 202,389
Interest expense (289,956) (48,499) (711,100) (93,569)
Other (180,537) 14,067 (174,028) 25,497
------------ ------------ ------------ ------------
Total other income (expense) (437,425) 160,481 (647,222) 134,317
------------ ------------ ------------ ------------
Income (loss) before income
taxes 598,403 343,870 (1,872,279) (2,222,071)
PROVISION (BENEFIT) FOR
INCOME TAXES 234,986 187,992 (636,364) 213,368
------------ ------------ ------------ ------------
Net income (loss) $ 363,417 155,878 $ (1,235,915) (2,435,439)
============ ============
PRO FORMA INCOME TAX BENEFIT (112,715) (127,331)
------------ ------------
Pro forma net income (loss) $ 268,593 $ (2,308,108)
============ ============
EARNINGS PER SHARE:
Net income (loss) per share $ 0.07 $ (0.22)
============ ============
Pro forma net income
(loss) per share $ 0.06 $ (0.65)
============ ============
Weighted average common and common
equivalent shares outstanding 5,506,187 4,731,838 5,505,687 3,577,279
============ ============ ============ ============
</TABLE>
4
The accompanying notes are an integral part of these unaudited statements.
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<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
------------- -------------
<S> <C> <C>
Net loss $ (1,235,915) $ (2,435,439)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,689,772 209,808
Depreciation included in construction and shaping costs 24,963 135,526
Provision for doubtful accounts receivable 138,100 7,886
Compensation recorded on sale of shares to management -- 3,000,000
Changes in assets and liabilities:
Accounts receivable (3,457,348) (1,695,913)
Due from International 581,653 288,051
Costs and estimated earnings in excess of billings on
on uncompleted contracts (3,224,486) (972,957)
Inventory (774,853) (529,953)
Prepaid expenses and other current assets (902,863) (245,310)
Deferred income taxes, net (842,292) --
Other assets (865,034) 18,880
Accounts payable (521,987) (135,102)
Accrued liabilities 1,124,733 910,883
Billings in excess of costs and estimated earnings on
uncompleted contracts 106,067 70,305
Deferred revenue 1,085,028 277,101
------------ ------------
Net cash used in operating activities (7,074,462) (1,096,234)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of golf centers (1,515,236) (12,834,625)
Capital expenditures, net (6,528,837) (1,077,646)
------------ ------------
Net cash used in investing activities (8,044,073) (13,912,271)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net -- 35,262,245
Proceeds from sale of common stock -- 1,500,000
Proceeds from exercise of stock options 50,400 80,400
Proceeds from note payable - shareholder -- 1,625,000
Repayment of note payable - shareholder -- (1,625,000)
Proceeds from note payable -- 1,800,000
Payments on notes payable and capital leases (944,961) (146,304)
Proceeds from revolving credit facilities, net 1,185,905 (150,000)
Transfers to International -- (225,838)
Other (43,813) --
------------ ------------
Net cash provided by financing activities 247,531 38,120,503
------------ ------------
Net (decrease) increase in cash and cash equivalents (14,871,004) 23,111,998
CASH AND CASH EQUIVALENTS, beginning of period 16,477,420 347,010
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 1,606,416 $ 23,459,008
============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited statements.
5
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<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) - (CONTINUED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1996
---------- ----------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING
AND INVESTING ACTIVITIES:
Compensation recorded on sale of shares to management $ -- $3,000,000
Notes payable issued in connection with the acquisition of
golf centers $3,074,000 $1,350,000
Golf center acquisitions accounted for as capital leases $ -- $2,465,757
Acquisitions of equipment and furniture accounted for as
capital leases $2,022,316 $ --
Notes payable issued in connection with the acquisition of
equipment $ 830,743 $ --
</TABLE>
The accompanying notes are an integral part of these unaudited statements.
6
<PAGE>
GOLDEN BEAR GOLF, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited Consolidated Condensed Financial Statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the audited Consolidated
Financial Statements and Notes thereto included in Golden Bear Golf, Inc.'s
("Golden Bear" or the "Company") Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, as filed with the Securities and Exchange Commission.
The results of operations and cash flows for the three and nine-month periods
ended September 30, 1997 are not necessarily indicative of the results of
operations or cash flows which may be reported for the remainder of fiscal 1997.
Golden Bear was formed on June 7, 1996 to enter into an exchange agreement which
was consummated on August 1, 1996 upon the closing of an initial public offering
of Golden Bear's Class A Common Stock. Parties to the plan of reorganization
included, among others, Golden Bear's affiliates, Golden Bear Golf Centers, Inc.
("Golf Centers"), Paragon Construction International, Inc. ("Paragon")
(collectively, the "Constituent Companies") and Golden Bear International, Inc.
("International"), a privately owned company controlled by Jack Nicklaus.
Pursuant to the exchange agreement, Golden Bear acquired all of the outstanding
common stock of the Constituent Companies in exchange for an aggregate of
1,668,000 shares of its Class A and Class B Common Stock. In addition, Golden
Bear acquired certain assets and assumed certain liabilities of International
("International Carve-out") in exchange for 1,332,000 shares of Class B Common
Stock. The transaction was accounted for on a historical cost basis in a manner
similar to a pooling of interests as Golden Bear and the Constituent Companies
had common stockholders and management. Therefore, the financial statements of
Golden Bear and the Constituent Companies for all periods prior to the
reorganization are presented in a combined format.
In order to maintain consistency and comparability between periods presented,
certain amounts have been reclassified from the previously reported financial
statements in order to conform with the financial statement presentation of the
current period.
DEFERRED INCOME TAXES
Included in intangibles and other assets on the accompanying Consolidated
Condensed Balance Sheet as of September 30, 1997 is a net deferred income tax
asset of $842,292, comprised primarily of the unrealized net operating loss
carryforwards generated by the operating loss incurred for the first quarter of
fiscal 1997. Management believes the Company will generate sufficient taxable
income in future periods to absorb such net operating loss carryforwards and it
is more likely than not that the net deferred tax asset as of September 30, 1997
will be realized. Accordingly, no valuation allowance was established against
the net deferred tax asset as of such date. Management's estimates of future
taxable income are subject to revision due to, among other things, the Company's
ability to achieve continued growth, obtain sufficient financing to fund such
growth and successfully integrate the operations of the golf centers acquired
to-date. Such factors are further discussed in Management's Discussion and
Analysis of Financial Condition and Results of Operations.
7
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
PRO FORMA INCOME TAXES
Prior to becoming a C Corporation upon the reorganization of the Company on
August 1, 1996, Golf Centers and Paragon were S Corporations for Federal and
state income tax reporting purposes and International Carve-out was a division
of International, which was also an S Corporation. As S corporations prior to
the reorganization, Golf Centers, Paragon and International have historically
only paid foreign income taxes and have not paid United States Federal and state
income taxes. Accordingly, pro forma income taxes have been reflected in the pro
forma net income (loss) and pro forma net income (loss) per share data presented
in the accompanying Consolidated Condensed Statements of Operations to show the
effects on the Company's operations as if the relevant entities had been C
Corporations during all of the periods presented. The pro forma taxes reflect
consideration of all permanent differences between book and tax income at the
Company's estimated effective tax rate of 39%.
PRO FORMA NET INCOME (LOSS) PER SHARE
Pro forma net income (loss) per share is computed by dividing pro forma net
income (loss) by the weighted average common and dilutive common equivalent
shares outstanding for each period. Common stock equivalents include the
dilutive effect of all outstanding stock options using the treasury stock
method. The calculations used to compute the weighted average common and common
equivalent shares outstanding in the accompanying Consolidated Condensed
Statements of Operations are based upon the following:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Average common shares outstanding 5,504,962 4,657,675 5,505,279 3,552,558
Average dilutive stock options
outstanding 1,225 74,163 408 24,721
--------- --------- --------- ---------
5,506,187 4,731,838 5,505,687 3,577,279
========= ========= ========= =========
</TABLE>
Effective December 15, 1997, the Company will be required to adopt Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which
among other changes, will require that basic earnings per share be computed
without regard to any outstanding common equivalent shares. Basic earnings per
share as computed under SFAS No. 128 would not differ materially from the pro
forma net income (loss) per share amounts presented in the accompanying
Consolidated Condensed Statements of Operations.
2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted construction and shaping contracts
consist of the following for contracts recognized under the
percentage-of-completion method of accounting:
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
Costs incurred on uncompleted contracts $ 42,210,558 $ 23,604,746
Estimated earnings 1,447,638 2,446,337
------------- ------------
43,658,196 26,051,083
Less billings to date 37,617,982 23,129,288
------------- ------------
$ 6,040,214 $ 2,921,795
============= ============
8
<PAGE>
2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS - (CONTINUED)
The amounts associated with costs and estimated earnings on uncompleted
construction and shaping costs are included in the accompanying Consolidated
Condensed Balance Sheets under the following captions:
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 6,565,986 $ 3,341,500
Billings in excess of costs and estimated
earnings on uncompleted contracts (525,772) (419,705)
----------- -----------
$ 6,040,214 $ 2,921,795
=========== ===========
3. NOTES PAYABLE AND CAPITAL LEASES
<TABLE>
<CAPTION>
Notes payable and capital leases consist of the following:
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Note payable to financial institution, due in
monthly principal installments of $10,000
plus interest at prime + 3/4%, with
balloon payment due at maturity in August, 2003 $ 1,660,000 $ 1,760,000
Notes payable to sellers of golf centers, with
interest ranging from 0% to prime + 1-1/4%,
maturing through June, 2004(1) 3,826,641 1,367,008
Capital lease obligations secured by certain golf
center facilities, maturing through April, 2025 2,434,264 2,454,457
Deferred profit participation obligation, payable
quarterly, discounted at an effective rate of 9%,
matures December, 2006 398,940 419,097
Capital lease obligations secured by equipment and
furniture, maturing through September, 2002(2) 1,885,037 --
Revolving credit facility with a bank, with interest
at prime payable quarterly, matures in
September, 1999(3) 2,011,881 --
Revolving credit note with a bank, with interest at
8-1/2% payable monthly, repaid in September, 1997(4) -- 825,976
Notes payable, with principal and interest ranging
from 8-3/4% to 10-3/4% payable monthly, maturing
through August, 2000(5) 821,290 --
Secured credit note, with principal and interest at
9-1/2% payable monthly, matured in July, 1997 -- 43,512
----------- -----------
13,038,053 6,870,050
Less current portion (1,069,033) (1,313,383)
----------- -----------
$11,969,020 $ 5,556,667
=========== ===========
<FN>
(1) In September 1996, the Company issued non-interest bearing notes payable of
$600,000 in connection with the purchase of East Coast Facilities. Such
notes, which had certain defined payment terms and an outstanding principal
balance of $267,008 at December 31, 1996, were repaid in full at their
maturity in September 1997. Also in September 1996, the Company issued a
note payable for $750,000 in connection with its acquisition of Highlander
Facilities. The note is secured by certain property and equipment of the
golf center and bears interest at 8% payable monthly, with the entire
principal due in August 2001.
</FN>
</TABLE>
9
<PAGE>
3. NOTES PAYABLE AND CAPITAL LEASES - (CONTINUED)
(1) In December 1996, the Company issued a note payable for $350,000 in
connection with the purchase of MacDivott's Golf Center. The note is secured
by certain property and equipment of the golf center and bears interest at
prime + 1/2% payable quarterly, with the entire principal due in December
1999. In August 1997, the Company purchased a mini-golf facility located
adjacent to MacDivott's Golf Center and issued a promissory note for
$175,000 in connection with such acquisition. The promissory note is secured
by certain property and equipment of the mini-golf facility and requires
quarterly principal payments of $6,250 plus interest at prime + 1%. Based on
such required quarterly payments, the note will be fully amortized in June
2004. The outstanding principal balance on the note was $168,750 at
September 30, 1997. See Note 7.
In January 1997, the Company incurred certain secured indebtedness
aggregating approximately $2.1 million in connection with the purchase of
Oasis Golf Center. In August 1997, the Company repaid a $200,000
non-interest bearing installment due on such indebtedness and in September
1997, the Company made another $200,000 payment and modified the terms of
the remaining obligations. The remaining obligations were consolidated into
a $1.8 million promissory note requiring monthly payments of principal and
interest at prime + 1 1/4% calculated on a ten year amortization schedule.
In addition to such recurring monthly installments, the Company is also
obligated to make additional annual $50,000 principal payments in September
of each year through 2002 at which time any remaining outstanding principal
is payable in a balloon payment. See Note 7.
In February 1997, the Company issued a note payable for $800,000 in
connection with the purchase of Caddy-Shack Golf Dome. The note is secured
by certain property and equipment of the golf center and requires quarterly
payments of $38,820 representing the amortization of principal and interest
at 9%. Based on such required quarterly payments, the note will be fully
amortized in March 2004. The outstanding principal balance on the note was
$757,891 at September 30, 1997. See Note 7.
(2) During the period May through September of 1997, the Company acquired
certain construction equipment, office furniture and phone systems equipment
by entering into financing arrangements that were accounted for as capital
leases. Such capital lease obligations have terms of up to five years and
require monthly payments representing principal and interest at rates
ranging from 9% to 9.6%.
(3) In September 1997, the Company entered into a definitive credit agreement
with a bank for a $10 million revolving credit facility to be used to
finance the working capital required to fund the Company's continued growth
as well as for general corporate purposes. The credit agreement provides for
a term of two years with an option on the part of the bank for a one year
extension. Outstanding borrowings, which bear interest at the prime rate
payable quarterly, are secured by Company assets excluding various golf
center properties and certain other assets pledged to secure other long-term
indebtedness. The credit agreement contains customary conditions and
covenants with respect to the conduct of the Company's business, including
dividend payment limitations, and requires the maintenance of various
financial ratios.
(4) In September 1997, the Company repaid outstanding borrowings and terminated
future availability under a previously existing revolving credit note. The
borrowings were repaid using proceeds from the new $10 million revolving
credit facility that the Company entered into in September 1997.
(5) During the period June through August of 1997, the Company financed the
purchase of certain construction equipment and vehicles by issuing notes
payable secured by the assets purchased. Such notes payable have terms of up
to three years and require monthly payments representing principal and
interest at rates ranging from 8 3/4% to 10 3/4%.
10
<PAGE>
4. ARBITRATION CLAIMS
In August 1995, Paragon brought an arbitration claim against a customer for
breach of contract. Paragon alleges it has properly completed the construction
relating to the renovation of the customer's golf course and is seeking final
payment of retainage and related amounts due, together with additional damages,
totaling approximately $350,000. Simultaneous to this claim of arbitration, the
customer filed a counterclaim of arbitration against Paragon for alleged
construction defects in the renovation of its golf course. Although the customer
recently claimed its damages were in excess of $1.2 million, the initial claim
submitted by the customer in arbitration was for $750,000. The ultimate outcome
of this matter is not determinable at this time; accordingly no provision for
loss regarding this matter had been established at September 30, 1997.
5. OPERATIONS OF JNAI
The apparel licensing activities of the Company in the Far East are conducted
through Jack Nicklaus Apparel International ("JNAI") and its various
partnerships. The Company serves as a 50% general partner and is generally
entitled to receive 50% to 66-2/3% of the cash distributions of the various
partnerships' operations. The Company's investment in JNAI is recorded on the
equity method.
<TABLE>
<CAPTION>
The following is a summary of the operating results of JNAI:
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Licensing revenues $ 643,606 $ 540,867 $ 2,274,679 $ 2,310,819
Operating expenses 331,911 137,575 592,826 499,592
Provision (benefit) for income
losses 51,635 23,490 (67,235) 235,433
=========== =========== =========== ===========
Net income $ 260,060 $ 379,802 $ 1,749,088 $ 1,575,794
=========== =========== =========== ===========
</TABLE>
6. RELATED PARTY TRANSACTIONS
The amounts included in the accompanying Consolidated Condensed Balance Sheets
under the caption "Due from International" consist of amounts due to the
following:
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
Golden Bear Golf, Inc. $ 324,050 $ 807,231
Paragon -- 22,329
International Carve-out (62,468) 13,675
--------- ---------
$ 261,582 $ 843,235
========= =========
The $324,050 balance due Golden Bear Golf, Inc. at September 30, 1997 is
comprised primarily of International's allocable portion of certain costs
associated with maintaining shared office space in Singapore and commissions on
specific design related revenues collected by Nicklaus Design, a division of
International. The balance also includes amounts owed by International in
connection with the reimbursement of certain allocated payroll and other costs
which are paid by the Company.
Pursuant to an office sharing agreement, the Company had subleased its corporate
office facilities from International through July 31, 1997. The rent expense
incurred under such sublease for the first seven months of fiscal 1997 was
$358,755. Effective August 1, 1997, the Company entered into a separate lease
agreement for its corporate office facilities directly with the owner of such
facilities.
11
<PAGE>
6. RELATED PARTY TRANSACTIONS - (CONTINUED)
The Company also has an office staff sharing agreement with International which
provides for the sharing of the services of certain specifically identified
office staff and personnel that can effectively serve the needs of both
organizations. During the first nine months of fiscal 1997, a total of $431,200
attributable to payroll and related costs associated with such shared employees
was allocated to International.
In addition, the Company maintains certain office space in Singapore that is
shared with International. During the nine months ended September 30, 1997, a
total of $224,000 of costs associated with maintaining such facilities was
allocated to International.
International has retained the Company as the exclusive manager and
representative to market the personal endorsement services of Jack Nicklaus,
pursuant to which the Company is generally entitled to approximately 20% - 30%
of the personal endorsement fees received by Mr. Nicklaus. During the nine
months ended September 30, 1997 and 1996, the Company earned revenues for
services provided in this capacity of $402,280 and $363,750, respectively.
Pursuant to a design services marketing agreement, the Company markets golf
course designs worldwide for Nicklaus Design for which it generally receives 10%
of the gross design fees collected by International. During the nine months
ended September 30, 1997 and 1996, the Company earned commissions for such
services of $1,041,652 and $946,651, respectively.
7. ACQUISITIONS
Effective January 1, 1997, the Company entered into a long-term lease agreement
for certain assets and the underlying real property utilized in connection with
the Sunset Golf Center, an existing golf practice and instruction facility
located in Beaverton, Oregon. The lease term is for a period of 20 years and
provides for annual rentals equal to the greater of a minimum base rent or a
percentage rent calculated based on the gross revenues of the project. Under the
terms of the lease agreement, the Company is required to invest at least
$500,000 in improvements to the property prior to the end of the second lease
year.
On January 31, 1997, the Company purchased the Oasis Golf Center, an existing
"dome" type golf practice and instruction facility located in Plymouth,
Michigan, for $3.2 million of which $1.0 million was paid in cash at the closing
and the remainder was evidenced by a $1.0 million secured promissory note and
certain other obligations to pay $1.2 million. The cash portion of the purchase
price was funded from the proceeds of the Company's initial public offering. The
fair value of net assets acquired (substantially all property and equipment) was
approximately $1.8 million, resulting in the recording of goodwill in the amount
of $1.4 million which will be amortized over the 20 year term of the related
ground lease for the underlying property.
On February 28, 1997, the Company purchased Caddy-Shack Golf Dome, an existing
golf practice and instruction facility located in Williamsville, New York, for
approximately $1.1 million of which $300,000 was paid in cash at the closing and
$800,000 was evidenced by certain secured promissory notes. The $300,000 paid at
the closing was funded from the proceeds of the Company's initial public
offering. The fair value of net assets acquired (substantially all property and
equipment) was approximately $500,000, resulting in the recording of goodwill in
the amount of $600,000 which will be amortized over the expected 20 year term
(including renewal options) of the related ground lease for the underlying
property.
On August 12, 1997, the Company purchased a mini-golf facility located adjacent
to the previously acquired MacDivott's Golf Center located in Royal Oak,
Michigan, for $225,000 of which $50,000 was paid in cash at closing and $175,000
was represented by a promissory note. In connection with the acquisition, the
Company entered into a ground lease for the underlying real property for an
initial term of approximately 11 years, with three options to renew for
additional five year terms each.
12
<PAGE>
7. ACQUISITIONS - (CONTINUED)
All of the foregoing acquisitions were accounted for under the purchase method
of accounting. Accordingly, the results of operations of these golf centers are
included in the accompanying Consolidated Condensed Statements of Operations for
all periods starting with their respective acquisition dates. Had these
acquisitions occurred as of January 1, 1997, the Company's summarized unaudited
pro forma results of operations for the nine months ended September 30, 1997
would have been as follows.
Total revenues $47,130,167
Loss from operations $(1,154,853)
Pro forma net loss $(1,205,630)
Pro forma net loss per share $ (0.22)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company operates its business through three divisions: the Golf Division,
the Construction Division and the Marketing Division. The Golf Division owns,
operates and licenses the Company's golf practice and instruction facilities
under the JACK NICKLAUS GOLF CENTER, JACK NICKLAUS ACADEMY OF GOLF and GOLDEN
BEAR GOLF CENTER brand names, is involved in the marketing of golf course design
services on behalf of designers, primarily Nicklaus Design, and provides golf
course management and consulting services throughout the world. The Construction
Division provides technical construction services principally in connection with
the construction and renovation of golf courses. The Marketing Division is
involved primarily in the licensing of NICKLAUS, JACK NICKLAUS and GOLDEN BEAR
branded products throughout the world, the operation of the NICKLAUS/FLICK GOLF
SCHOOLS and the generation of marketing fees related to Jack Nicklaus' personal
endorsements.
The Company was formed on June 7, 1996 to enter into a reorganization agreement
which was consummated on August 1, 1996 upon the closing of an initial public
offering of the Company's Class A Common Stock. Parties to the plan of
reorganization included, among others, the Company's affiliates, Golf Centers,
Paragon and International, a privately owned company controlled by Jack
Nicklaus. Pursuant to the agreement, the Company acquired all of the outstanding
common stock of Golf Centers and Paragon in exchange for shares of its Class A
and Class B Common Stock. In addition, the Company acquired certain assets and
assumed certain liabilities of International in exchange for shares of its Class
B Common Stock. The transaction was accounted for on a historical cost basis in
a manner similar to a pooling of interests as Golden Bear, Golf Centers and
Paragon had common stockholders and management.
Consistent with the Company's strategy to increase its ownership and operation
of golf practice and instruction facilities, the Company has entered into
purchase and lease agreements pursuant to which it has acquired a total of 14
facilities to-date. Many of the existing facilities acquired by the Company
required extensive renovations and the construction of additional features such
as miniature golf and pro shops to upgrade such facilities to the Company's
standards. Delays associated with the completion of the conversion process at
certain acquired golf centers unfavorably impacted the ability of such
facilities to generate revenues commensurate with expense levels and a number of
these golf center facilities are not expected to contribute to the Company's
operating performance through the remainder of the current fiscal year.
Although the Company currently intends to continue it's strategy of increasing
the number of golf center facilities that it owns and operates, the timing of
new centers will depend on many factors, including obtaining sufficient
financing and the successful integration of the operations of the golf centers
which have been acquired. New acquisitions will be deferred as the Company
focuses on completing the remaining renovations at its existing golf centers and
on improving the profitability of such centers. In addition to the acquisition
of existing golf center facilities, the Company is also evaluating the benefits
associated with constructing new facilities rather than acquiring existing
facilities. However, any future additions of golf center facilities will be
subject to obtaining sufficient financing and there is no assurance that the
Company will obtain appropriate financing on favorable terms, or at all.
With respect to its construction activities, the Company has continued to
receive new project awards, bringing total project backlog as of September 30,
1997 to over $100 million.
14
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1996
Total revenues for the three months ended September 30, 1997 increased 78.7%
over the comparable period of 1996. All of the Company's operating divisions
contributed to the increase in total revenues, with the Golf, Construction and
Marketing Divisions posting revenue growth of 220.9%, 50.0% and 39.4%,
respectively, for the current quarter.
Golf Division revenues increased to $5.7 million during the third quarter of
fiscal 1997 from $1.8 million for the third quarter of 1996, due to the 14 golf
centers that were owned and operated by the Company during the entire current
quarterly period in contrast to only two such centers that were in operation for
the full three months of the third quarter of the prior year. Although the
Company acquired a total of six golf center facilities during the third quarter
of 1996, the majority of these were acquired in the month of September and
accordingly, such centers did not contribute significantly to revenues during
the prior year period. Revenues of the Construction Division increased to $9.7
million for the current quarterly period from $6.5 million during the comparable
period of last year as the Company continued work on several new large projects
that were awarded during the current year. Marketing Division revenues increased
to $2.3 million during the three months ended September 30, 1997 compared to
$1.6 million for the same quarterly period of 1996 due primarily to revenues
derived from a corporate marketing alliance that the Company recently entered
into with VISA USA, Inc., together with an increase in golf instruction
activities.
Operating income increased to $1.0 million for the three months ended September
30, 1997 compared to $0.2 million for the comparable period of the prior year.
The increase in operating income for the current quarter resulted primarily from
the increase in total revenues and an increase in the gross margin realized by
the Construction Division, offset in part by increased operating expenses.
Operating expenses as a percentage of total revenues increased to 44.3% for the
third quarter of the current year from 32.9% for the comparable quarter of last
year, due primarily to the relative increase in golf centers operations, which
incur higher levels of operating expenses in contrast to that of the Company's
other operations.
General and administrative expenses, which are comprised primarily of personnel
related costs, decreased slightly to $1.0 million for the three months ended
September 30, 1997 from $1.1 million for the three months ended September 30,
1996. Depreciation and amortization increased to $0.7 million during the third
quarter of 1997 from less than $0.1 million for the third quarter of 1996 due to
the sizable increase in property and equipment associated with the acquisition
and conversion of the twelve golf center facilities acquired since the beginning
of the third quarter of 1996.
Interest expense for the third quarter of the current year was approximately
$0.3 million attributable primarily to indebtedness associated with the
Company's acquisition of golf centers and certain construction equipment.
Interest expense for the comparable period of 1996 was not material to the
Company's results of operations. Interest income of $0.2 million for the three
months ended September 30, 1996 was primarily attributable to earnings on the
unexpended proceeds from the Company's initial public offering which had been
invested in short-term commercial paper instruments and repurchase agreements.
Interest income for the comparable quarter of the current year was not material
to the results of operations for such period.
Prior to becoming a C Corporation upon the reorganization of the Company on
August 1, 1996, the various entities that comprised its operations were S
Corporations and therefore not subject to United States Federal and state income
taxes. Prior to the reorganization, such entities generally paid only foreign
income taxes. Accordingly, a pro forma income tax benefit has been included in
the pro forma net income and pro forma net income per share amounts presented
for the three months ended September 30, 1996 to show the effects on the
Company's operations as if the relevant entities had been C Corporations for
both of the three-month periods presented. The pro forma taxes reflect
consideration of all permanent differences between book and tax income at the
Company's estimated effective tax rate of 39%.
15
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1996
Total revenues for the nine months ended September 30, 1997 increased 106.5%
over the comparable period of 1996. The $24.1 million increase in total revenues
during the current nine-month period was principally the result of an $11.8
million or 367.9% increase in Golf Division revenues, coupled with a $10.3
million or 75.2% increase in Construction Division revenues. The increase in
Golf Division revenues was attributable to the acquisition of 14 golf centers
since April 15, 1996, which contributed to revenues starting with their
respective acquisition dates. In contrast, the Company owned only eight golf
centers as of the end of the third quarter of last year, five of which where
acquired during the month of September 1996. Construction Division revenues
increased during the current nine-month period as the Company commenced work on
several new large projects that were obtained during the current fiscal year.
Marketing Division revenues increased by $2.1 million or 36.0% for the nine
months ended September 30, 1997 compared to the same nine-month period of 1996,
due primarily to an increase in golf instruction activities and other revenues
associated with a new strategic marketing alliance with VISA USA, Inc.
The Company incurred net operating losses of $1.2 million and $2.4 million
during the first nine months of 1997 and 1996, respectively. The operating loss
incurred for the first nine months of 1996 included a one-time, non-cash charge
of $3.0 million representing compensation deemed to have been received by
certain executive officers in connection with their purchase of shares in Golf
Centers prior to the Company's initial public offering. Exclusive of the effects
of the $3.0 million charge, the $1.8 million increase in the net operating loss
incurred during the current nine-month period was primarily attributable to an
increase in operating expenses, which as a percentage of total revenues, were
47.3% and 34.2% for the nine months ended September 30, 1997 and 1996,
respectively. The increase in operating expenses was due primarily to the
relative increase in golf centers operations, which incur higher levels of
operating expenses in contrast to that of the Company's other operations.
Various start-up costs associated with converting and upgrading certain golf
centers to Company standards also contributed to the increase in operating
expenses as well as a one-time severance charge of $0.6 million relating to
personnel changes made in connection with the Company's appointment of new
presidents in both its Golf Centers and Paragon subsidiaries.
The increase in the operating loss incurred during the first nine months of 1997
was also impacted by a decrease in the gross margin realized by the Construction
Division, an increase in the level of spending on general and administrative
expenses, together with an increase in the amounts charged to depreciation and
amortization expense. The decrease in the gross margin realized by the
Construction Division during the current nine-month period was primarily
attributable to costs associated with the completion of specific construction
projects that were contracted for in previous years.
General and administrative expenses, which are comprised primarily of personnel
related costs, increased to $3.6 million for the nine months ended September 30,
1997 from $2.7 million for the nine months ended September 30, 1996. The
increase in general and administrative expenses was attributable to additions of
personnel and planned systems upgrades, together with the increased costs
associated with the expansion of the Company's businesses and operating the
Company as a separate public company.
Charges to depreciation and amortization increased to $1.7 million during the
first nine months of 1997 from $0.2 million for the comparable period of 1996
due to the increase in property and equipment associated with the acquisition
and conversion of the twelve golf center facilities acquired since the beginning
of the third quarter of the prior year.
Interest income during the first nine months of both 1997 and 1996 remained
relatively constant at $0.2 million, comprised primarily of earnings on the
unexpended proceeds from the Company's initial public offering which were
invested in short-term commercial paper instruments and repurchase agreements.
Interest expense for the first nine months of the current year increased to $0.7
million from $0.1 million for the comparable period of the prior year,
attributable primarily to indebtedness associated with the Company's acquisition
of golf centers of which larger principal amounts were outstanding for longer
periods of time during the first nine months of the current year.
16
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1996 - (CONTINUED)
Prior to becoming a C Corporation upon the reorganization of the Company on
August 1, 1996, the various entities that comprised its operations were S
Corporations and therefore not subject to United States Federal and state income
taxes. Prior to the reorganization, such entities generally paid only foreign
income taxes. Accordingly, a pro forma income tax benefit has been included in
the pro forma net loss and pro forma net loss per share amounts presented for
the nine months ended September 30, 1996 to show the effects on the Company's
operations as if the relevant entities had been C Corporations for both of the
nine-month periods presented. The pro forma taxes reflect consideration of all
permanent differences between book and tax income at the Company's estimated
effective tax rate of 39%. Such pro forma taxes do not reflect a deduction for
the $3.0 million non-cash charge, which was not deductible for Federal and state
income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
On August 1, 1996, Golden Bear closed an initial public offering of 2,484,000
shares of its Class A Common Stock and received net proceeds (after deducting
underwriting discounts and offering costs) of approximately $35.2 million. The
net proceeds, which have been fully expended by the Company as of September 30,
1997, were utilized for the following purposes, (i) approximately $13.6 million
was used to fund the acquisition of golf centers, (ii) approximately $10.2
million was utilized for working capital purposes, (iii) approximately $9.0
million was used for capital improvements to the acquired golf center facilities
and other capital expenditures, (iv) approximately $1.6 million was utilized to
repay indebtedness incurred by the Company in connection with the acquisition of
the Cool Springs Golf Center which had been funded by Jack Nicklaus and (v)
approximately $0.8 million was used for the repayment of other indebtedness. As
of September 30, 1997 and December 31, 1996, the Company had working capital of
$11.8 million and $20.6 million, respectively.
To provide for additional liquidity, the Company entered into a definitive
credit agreement with a financial institution on September 26, 1997 for a $10
million revolving credit facility. Advances under such facility will be used to
finance the working capital requirements of the Company. The credit agreement
provides for an initial term of two years with an option on the part of the
financial institution to extend for one additional year. Borrowings under the
facility are secured by Company assets excluding various golf center properties
and certain other assets pledged to secure other long-term indebtedness. The
credit agreement contains customary conditions and covenants with respect to the
conduct of the Company's business, including dividend payment limitations, and
requires the maintenance of various financial ratios.
In addition, the Company repaid outstanding indebtedness and terminated future
availability under a previously existing revolving credit note. Such
indebtedness was repaid in September 1997 using proceeds from the new $10
million credit facility. The Company also modified the terms of certain
obligations previously incurred in connection with the acquisition of Oasis Golf
Center. For further details regarding these and other transactions involving
Company indebtedness, see Note 3 of the Consolidated Condensed Financial
Statements included herein under Part I, Item 1.
Actual spending on the acquisition or construction of additional golf centers in
the future will depend on, among other things, the availability of funds, the
identification and availability of suitable properties or facilities on terms
satisfactory to the Company, the location and condition of existing facilities
(i.e. whether significant capital improvements are necessary), whether the
Company acquires or leases the related land, competitive developments and
strategic marketing decisions.
17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - (CONTINUED)
The Company believes that its current cash position, together with availability
under its new revolving credit facility and cash provided by operations will be
sufficient to meet its operating needs through the latter part of fiscal 1998.
However, the acquisition or development of additional golf centers will be
subject to obtaining additional financing. The Company is considering obtaining
additional funds through various means, including public offerings or private
placements of debt or equity securities. The Company may also finance
acquisitions by entering into leasing arrangements or by utilizing seller
financing with deferred payment terms which might reduce the initial up-front
cash requirements on the part of the Company. Leasing arrangements and seller
financing have previously been utilized by the Company to fund all or a portion
of the purchase price associated with the acquisition of certain golf centers.
There is no assurance that the Company will be able to obtain additional
financing in a timely manner, on favorable terms, or at all. To the extent that
the Company is not able to obtain additional funds, the Company may be required
to delay or reduce its acquisition and expansion strategy.
CURRENCY FLUCTUATIONS
Although substantially all of the Company's contracts are denominated in United
States dollars, fluctuations in the value of foreign currencies relative to the
United States dollar could impact the Company's results of operations. A
substantial portion of the revenues of the Company's overseas licensees are
generated in foreign currencies and accordingly, fluctuations in the value of
these currencies relative to the United States dollar could adversely affect the
Company's profitability. Royalty payments received by the Company or by its JNAI
equity investee relating to foreign licensing arrangements are generally based
on the exchange rate at the time of payment. In addition, the Company's
construction contracts outside of the United States are also generally
denominated in United States dollars and accordingly, the effective cost to
customers for construction services performed overseas will increase or decrease
as foreign currencies fluctuate relative to the United States dollar, unless the
Company changes its United States dollar prices to reflect the fluctuations in
currency. During the second and third quarters of 1997, the Company's JNAI joint
venture entered into futures contracts to hedge its anticipated receipt of
certain royalty payments denominated in Japanese Yen. Apart from these futures
contracts on the part of JNAI which were not material to the Company's results
of operations, the Company does not currently engage in hedging activities with
respect to currency fluctuations, but may do so in the future. Furthermore, from
an overall business point of view, the Company has historically engaged in
significant business activities in Japan and Asia. To the extent that markets in
these geographic areas are volatile and unfavorably impact our customers, such
events could have an adverse effect on the Company's operations in the region
going forward.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Quarterly Report on Form 10-Q contains forward-looking statements made
pursuant to the safe harbor provisions of the Securities Litigation Reform Act
of 1995. These forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and uncertainties, many of
which are beyond the Company's control, including but not limited to, economic,
competitive and other factors affecting the Company's operations, markets,
products and services, expansion strategies and other factors discussed
elsewhere in this report and the documents filed by the Company with the
Securities and Exchange Commission. Actual results could differ materially from
these forward-looking statements. In light of these risks and uncertainties,
there can be no assurance that the forward-looking information contained in this
report will in fact prove accurate. The Company does not undertake any
obligation to revise these forward-looking statements to reflect future events
or circumstances.
18
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 Credit Agreement for $10 Million Revolving Credit Facility, dated as
of September 26, 1997, among Golden Bear Golf, Inc., SunTrust Bank,
South Florida, N.A., as Agent and the Lenders Party Thereto.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three-month period
ended September 30, 1997.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLDEN BEAR GOLF, INC.
By: /s/ RICHARD P. BELLINGER
---------------------------------------------
Richard P. Bellinger
President and Chief Executive Officer
By: /s/ STEPHEN S. WINSLETT
---------------------------------------------
Stephen S. Winslett
Senior Vice President and Chief Financial
Officer
Date: November 7, 1997
20
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10 Credit Agreement for $10 Million Resolving Credit Facility, dated
as of September 26, 1997, among Golden ear Golf, Inc., SunTrust
Bank, South Florida, N.A., as Agent and the Lenders Party
Thereto.
27 Financial Data Schedule (for SEC use only).
EXHIBIT 10
------------------------------
CREDIT AGREEMENT
AMONG
GOLDEN BEAR GOLF, INC.,
SUNTRUST BANK, SOUTH FLORIDA, N.A., AS AGENT,
AND
THE LENDERS PARTY HERETO
------------------------------
DATED AS OF SEPTEMBER 26, 1997
$10,000,000.00 REVOLVING CREDIT FACILITY
------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
SECTION 1. DEFINITIONS.................................................................... 1
1.1 Defined Terms.............................................................. 1
1.2 Other Definitional Provisions.............................................. 7
SECTION 2. THE REVOLVING CREDIT FACILITY;
AMOUNT AND TERMS OF ADVANCES.................................................. 8
2.1 The Revolving Credit Facility.............................................. 8
2.2 Making of Advances and Funding Mechanics................................... 8
2.3 Use of Proceeds............................................................ 10
2.4 Revolving Credit Notes; Loan Accounts...................................... 10
2.5 Interest Rate.............................................................. 10
2.6 Repayment.................................................................. 11
2.7 Revolving Credit Termination Date.......................................... 11
2.8 Fees....................................................................... 12
2.9 Payments and Computations.................................................. 12
2.10 Prepayments under Revolving Credit Facility................................ 14
2.11 Sharing of Payments, Etc................................................... 14
2.12 Increased Costs, Capital Adequacy, Illegality, Etc......................... 15
SECTION 3. LETTERS OF CREDIT.............................................................. 16
3.1 Letter of Credit Facility; Issuance of Letters of Credit................... 16
3.2 Letter of Credit Fees...................................................... 16
3.3 Reimbursement Obligations.................................................. 17
3.4 Lenders' Obligations....................................................... 18
3.5 Agent's Obligations........................................................ 18
SECTION 4. COLLATERAL, GUARANTIES AND SUBORDINATION....................................... 19
4.1 Lien and Security Interest in All Assets of the Borrower................... 19
4.2 Guaranties................................................................. 19
4.3 Lien and Security Interest in All Assets of the Guarantors................. 19
4.4 Subordination; Permitted Prior Liens and Permitted Subordinate Liens....... 20
4.5 Cross-Collateral; Cross Default............................................ 20
SECTION 5. REPRESENTATIONS AND WARRANTIES................................................. 21
5.1 Corporate Existence; Compliance with Law; Name History..................... 21
5.2 Corporate Power and Authorization to Execute Loan Documents; No
Conflict; No Consent....................................................... 21
5.3 Enforceable Obligations.................................................... 22
5.4 Financial Condition........................................................ 22
5.5 No Litigation.............................................................. 22
5.6 Investment Company Act; Regulation......................................... 23
5.7 Disclosure and No Untrue Statements........................................ 23
i
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5.8 Title to Assets; Leases in Good Standing................................... 23
5.9 Payment of Taxes........................................................... 23
5.10 No Default Under Agreement or Instruments.................................. 24
5.11 Patents, Trademarks, Licenses, Etc......................................... 24
5.12 Government Contract........................................................ 24
5.13 ERISA Requirement.......................................................... 24
5.14 Solvency................................................................... 24
5.15 Location of Offices........................................................ 24
5.16 Subsidiaries............................................................... 24
SECTION 6. CONDITIONS OF LENDING.......................................................... 25
6.1 Continuing Accuracy of Representations and Warranties...................... 25
6.2 No Default................................................................. 25
6.3 Borrowing Certificate...................................................... 25
6.4 Opinion of Borrower's Counsel.............................................. 25
6.5 Approval of Agent's Counsel................................................ 25
6.6 Loan Documents............................................................. 25
6.7 Insurance.................................................................. 26
6.8 Supporting Documents....................................................... 26
SECTION 7. AFFIRMATIVE COVENANTS.......................................................... 26
7.1 Financial Reports and Other Information.................................... 26
7.2 Payment of Indebtedness to Agent; Performance of Other Covenants;
Payment of Other Obligations............................................... 28
7.3 Conduct of Business; Maintenance of Existence and Rights................... 28
7.4 Maintenance of Property.................................................... 28
7.5 Right of Inspection; Discussions........................................... 28
7.6 Notices.................................................................... 29
7.7 Payment of Taxes; Liens.................................................... 29
7.8 Insurance of Properties.................................................... 29
7.9 True Books................................................................. 30
7.10 Observance of Laws......................................................... 30
7.11 Further Assurances......................................................... 30
7.12 ERISA Benefit Plans........................................................ 30
7.13 Withholding Taxes.......................................................... 30
7.14 Change of Name, Principal Place of Business, Office, or Agent.............. 30
7.15 Financial Covenants........................................................ 31
7.16 Operating Accounts......................................................... 32
7.17 Hedging Requirements....................................................... 32
7.18 Affirmative Covenants relating to Subsidiaries............................. 32
SECTION 8. NEGATIVE COVENANTS............................................................. 33
8.1 Other Indebtedness......................................................... 33
8.2 Limitations on Mortgages, Liens, Etc....................................... 33
8.3 Guaranties................................................................. 33
8.4 Merger, Acquisition, Sale of Assets, Dissolution, Etc...................... 34
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8.5 Federal Reserve Regulations................................................ 34
8.6 Changes in Governing Documents, Accounting Methods, Fiscal Year............ 35
8.7 Capital Expenditures....................................................... 35
8.8 Dividends, Etc............................................................. 35
8.9 Change in Control.......................................................... 35
8.10 Negative Covenants Relating to Subsidiaries................................ 35
SECTION 9. EVENTS OF DEFAULT.............................................................. 35
9.1 Payment of Indebtedness Under Loan Documents............................... 35
9.2 Representation or Warranty................................................. 36
9.3 Covenants Under the Loan Documents......................................... 36
9.4 Cross-Default.............................................................. 36
9.5 Payment, Performance, or Default of Other Indebtedness..................... 36
9.6 Liquidation; Dissolution; Bankruptcy; Etc.................................. 36
9.7 Involuntary Bankruptcy, Etc................................................ 36
9.8 Change in Control.......................................................... 37
9.9 Judgments.................................................................. 37
9.10 Attachment, Garnishment, Liens Imposed by Law.............................. 37
9.11 Corporate Existence, Transfer of Property.................................. 37
9.12 Subsidiaries............................................................... 37
SECTION 10. RIGHTS AND REMEDIES........................................................... 37
10.1 Remedies Available Under Loan Documents and Otherwise...................... 37
10.2 Remedies Upon Event of Default............................................. 37
SECTION 11. THE AGENT..................................................................... 38
11.1 Appointment, Authorization, and Action....................................... 38
11.2 Exculpation; Reliance by the Agent........................................... 38
11.3 Agent and Affiliates......................................................... 39
11.4 Lender Credit Decision....................................................... 39
11.5 Enforcement by Agent......................................................... 40
11.6 Indemnification.............................................................. 40
11.7 Failure to Act............................................................... 40
11.8 Successor Agent.............................................................. 40
SECTION 12. MISCELLANEOUS................................................................. 41
12.1 Lien on Deposits; Set-Off.................................................. 41
12.2 Payment of Expenses, Including Attorneys' Fees and Taxes................... 41
12.3 Notices.................................................................... 42
12.4 Governing Law.............................................................. 42
12.5 Venue; Personal Jurisdiction............................................... 42
12.6 Severability and Enforceability of Provisions.............................. 42
12.7 Counterparts; Facsimile Signatures; Effective Date......................... 42
12.8 No Waiver.................................................................. 42
12.9 Cumulative Remedies........................................................ 43
12.10 Course of Dealing; Amendments; Waiver...................................... 43
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12.11 Waiver of Default.......................................................... 43
12.12 Table of Contents; Headings................................................ 43
12.13 Reliance Upon, Survival of and Materiality of Representations and
Warranties, Agreements, and Covenants...................................... 44
12.14 Complete Agreement; No Other Consideration................................. 44
12.15 Legal or Governmental Limitations.......................................... 44
12.16 Binding Obligation on Successors and Assigns............................... 44
12.17 Assignments and Participations............................................. 44
12.18 Confidential Information................................................... 46
12.19 Waiver of Trial by Jury.................................................... 47
</TABLE>
EXHIBITS
A. Pro Forma Revolving Credit Master Promissory Note
B. Form of Borrowing Certificate
C. Form of Compliance Certificate
SCHEDULES
4.4 Permitted Prior Liens
5.1 Subsidiaries; Reorganizations
5.5 Litigation
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement") is made and entered into as of
this 26th day of September, 1997, by and between GOLDEN BEAR GOLF, INC., a
Florida corporation (together with its successors and permitted assigns,
"Borrower"), the lenders which are or may in the future be listed on the
signature pages hereof (together with their successors and permitted assigns,
individually a "Lender" and collectively the "Lenders,") and SUNTRUST BANK,
SOUTH FLORIDA, NATIONAL ASSOCIATION, as agent for the Lenders (together with any
successor agent appointed pursuant to the provisions herein, the "Agent").
BACKGROUND
Borrower has applied to Lenders for a revolving line of credit
availability in the maximum aggregate principal amount of Ten Million and No/100
Dollars ($10,000,000.00). Lenders have agreed to the request of Borrower upon
the terms and conditions described in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, and conditions herein, Borrower, the Lenders, and Agent
agree as follows:
SECTION 1. DEFINITIONS.
1.1 DEFINED TERMS. cept as otherwise expressly provided in this
Agreement, the following capitalized terms shall have the respective meanings
ascribed to them for all purposes of this Agreement:
"Advance" has the meaning specified in Subsection 2.1(a) hereof.
"Agent" means SunTrust Bank, South Florida, N.A., in its capacity as
agent hereunder and under the other Loan Documents, together with any successor
agent appointed pursuant to the provisions hereof.
"Agreement" means this Credit Agreement, as the same may be amended,
supplemented, restated, replaced, or otherwise modified from time to time in
accordance with the provisions hereof.
"Application" means any application delivered to Agent for or in
connection with issuance of any Letter of Credit pursuant to Section 3 hereof,
in Agent's standard form for such Letters of Credit.
"Assignment and Acceptance Agreement" has the meaning specified in
Subsection 12.17 hereof.
"Borrower" means Golden Bear Golf, Inc., a Florida corporation, and its
successors and permitted assigns.
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"Borrower Security Agreements" has the meaning set forth in Section 4.1.
"Borrowing" denotes the aggregation of Advances of one or more Lenders
to be made to the Borrower pursuant to Section 2 on a single date.
"Borrowing Certificate" has the meaning defined in Section 6.3.
"Business Day" means a day that is not a Saturday, a Sunday, or a day on
which Agent is closed pursuant to authorization or requirement of law.
"Capital" means Total Funded Debt plus shareholder's equity, as defined
by GAAP.
"Capital Expenditures" means, with respect to any Person for any period,
the sum, without duplication, of the aggregate amount of all expenditures of
such Person during such period which, in accordance with GAAP, is required to be
included in, or is properly included by such Person as additions to, property,
plant or equipment (including leasehold improvements) or other similar fixed
asset accounts of such Person.
"Change in Control" shall mean, as applied to the Borrower, that, (a)
Jack W. Nicklaus shall cease to own at least 51% of the combined voting power of
all classes of capital stock of the Borrower, or (b) any Person or "Group" (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
but excluding (A) any employee benefit or stock ownership plans of the Borrower,
and (B) Nicklaus Family Members (as defined on page 53 of that certain
Prospectus of the Borrower, dated July 31, 1996, pursuant to which 2,160,000
shares of Class A Common Stock of the Borrower were offered to the public),
shall have acquired more than twenty-five percent (25%) of the combined voting
power of all classes of common stock of the Borrower, except that the Borrower's
purchase of its common stock outstanding on the date hereof which results in one
or more of the Borrower's shareholders of record as of the date of this
Agreement controlling more than fifty percent (50%) of the combined voting power
of all classes of the common stock of the Borrower shall not constitute an
acquisition hereunder.
"Closing Date" means the last date on which this Agreement is executed
and delivered by Borrower and by Agent for the Lenders.
"Compliance Certificate" has the meaning defined in Section 7.1(g).
"Consistent Basis" means, in reference to the application of Generally
Accepted Accounting Principles, that the accounting principles observed in the
current period are comparable in all material respects to those applied in the
preceding period.
"Consolidated Net Income" for any period means the net income (or loss)
of Borrower and its Subsidiaries on a consolidated basis for such period (taken
as a single accounting period) determined in conformity with Generally Accepted
Accounting Principles, applied on a Consistent Basis.
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"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements as of such date.
"Continue," "Continuation," and "Continued" refer to a continuation of
an Advance from one Interest Period to the next Interest Period.
"Current Assets" means current assets as defined by GAAP.
"Current Liabilities" means current liabilities as defined by GAAP.
"Default Rate" has the meaning specified in Subsection 2.5(a)(ii)
hereof.
"EBITDA" means earnings before interest expense, taxes, depreciation and
amortization, plus one-time, non-recurring non-cash charges, all as defined by
GAAP.
"Encumbrance" means any lien, claim, security interest, pledge,
hypothecation, charge, or encumbrance of any nature of kind.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" means any of the events specified in Section 9
hereof.
"Federal Funds Rate" means a fluctuating interest rate per annum equal
to the weighted average of the rates per annum, rounded upward to the nearest
one-hundredth of one percent (1/100%), on overnight federal funds transactions
with members of the Federal Reserve System, arranged by federal funds brokers,
as published for such day (or if such day is not a Business Day, for the next
preceding Business Day) by the Board of Governors of the Federal Reserve System
in Publication H.15 (519), or, if such rate is not published for any day which
is a Business Day, the average of the quotations for such day for such
transactions received by Agent from three (3) federal funds brokers of
recognized standing selected by Agent.
"Funded Debt" for any Person shall mean, with respect to such person,
the sum of all indebtedness for money borrowed, purchase money mortgages,
capitalized leases, synthetic lease debt, together with any indebtedness
outstanding under asset securitization vehicles, conditional sales contracts and
similar title retention debt instruments, including any current maturities of
such indebtedness, which by its terms matures more than one year from the date
of any calculation thereof and/or which is renewable or extendable at the option
of the obligor to a date beyond one year from such date. Funded Debt shall also
include the redemption amount with respect to any redeemable preferred stock of
such person or its Subsidiaries required to be redeemed within the next twelve
months.
"Generally Accepted Accounting Principles" or "GAAP" means those
principles of accounting set forth in Opinions of the Financial Accounting
Standards Board or the American
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Institute of Certified Public Accountants which are applicable in the
circumstances as of the date of any report required herein or as of the date of
an application of such principles as required herein.
"Guarantor(s)" means individually and collectively, all present and all
hereafter acquired direct or indirect Subsidiaries of the Borrower, including
without limitation, Golden Bear Golf Centers, Inc., a Florida corporation,
Paragon Construction International, Inc., a Florida corporation, Golden Bear
Club Services, Inc., a Florida corporation, and GBRS Corp., a Florida
corporation, as to all of the Obligations (as herein defined). All of the above
Guarantors shall jointly and severally guarantee repayment and performance of
all of the Obligations.
"Guaranties" means collectively, the absolute unconditional and
continuing guaranties executed by each Guarantor in favor of Agent for the
benefit of Lenders, as modified and/or reaffirmed from time to time,
guaranteeing repayment of the Obligations, as specified in Section 4.2.
"Indebtedness" of any Person means (a) all indebtedness of such Person
for borrowed money or for the deferred purchase price of property or services
(other than current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), (b) all
obligations of such Person under conditional sale or other title retention
agreements relating to assets purchased by such Person, (c) all other
indebtedness of such Person evidenced by notes, bonds, debentures, or similar
instruments, (d) all obligations of such Person under capital leases, (e) all
obligations of such Person in respect of letters of credit or acceptances issued
or created for the account of such Person, and (f) all net obligations of such
Person under interest rate and currency hedging agreements.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, or other similar
agreement or arrangement designed to protect Borrower against fluctuations in
interest rates.
"Late Fee" has the meaning specified in Subsection 2.6(c) hereof.
"Lenders" means, collectively, the Persons identified as "Lenders" which
are, or from time to time may become, listed on the signature pages of this
Agreement, together with their successors and permitted assigns pursuant to
Subsection 12.17 hereof, and "Lender" means any one of the Lenders.
"Lending Office" means, with respect to Agent or a Lender, the office of
Agent or such Lender specified as its "Lending Office" on the signature pages
hereto or in the Assignment and Acceptance Agreement pursuant to which a Lender
becomes a Lender, or such other office of such Lender as such Lender may from
time to time specify in writing to Agent or such other office of Agent as Agent
may from time to time specify in writing to Borrower and the Lenders.
"Letter or Credit" means any letter of credit (whether a standby letter
of credit or commercial documentary letter of credit) issued by the Agent
pursuant to the provisions of Section 3 of this Agreement.
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<PAGE>
"Letter of Credit Sublimit" means an amount equal to Two Million U.S.
Dollars ($2,000,000.00).
"Loan" means any Advance hereunder, and "Loans" means collectively, the
Advances made hereunder.
"Loan Documents" means this Agreement, the Revolving Credit Notes, any
Tax Indemnification Agreements, and the Guaranties, the Borrower Security
Agreements, each of the Subsidiary Security Agreements, and any and all
financing statements, other security agreements, instruments or documents
delivered or to be delivered by the Borrower or any of the Guarantors pursuant
to this Agreement.
"Loan Payment Account" shall have the meaning defined in Section 2.9(a).
"Material" (or words derived therefrom) as used in this Agreement, means
the measure of a matter of significance which shall be determined as being an
amount equal to the lesser of (i) One Million United States Dollars
($1,000,000.00) or (ii) Five Percent (5%) of the consolidated net worth of the
Borrower and its Consolidated Subsidiaries, as defined by GAAP, as of the most
recent fiscal quarter end.
"Material Adverse Effect" means a Material adverse effect upon (a) the
business, operations, properties, assets, prospects, or financial condition of
Borrower and its Consolidated Subsidiaries taken as a whole, or (b) the validity
or enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of Agent or the Lenders hereunder or thereunder, or (c) the
ability of the Borrower to perform its obligations under this Agreement, or (d)
the ability of the Borrower or any of the Subsidiaries or Guarantors to perform
their respective obligations under any of the Loan Documents.
"Obligations" shall have the meaning defined in Section 4.1 hereof.
"Permitted Prior Liens" shall have the meaning defined in Section 4.4.
"Permitted Subordinate Liens" shall have the meaning defined in Section
4.4.
"Person" means any corporation, business entity, natural person, firm,
joint venture, partnership, trust, unincorporated organization, association,
government, or any department or agency of any government.
"Prime Rate" shall mean the higher of (i) the rate which Agent announces
from time to time as its prime lending rate, as in effect from time to time, and
(ii) the Federal Funds Rate, as in effect from time to time, plus one-half of
one percent (1/2%) per annum (any changes in such rates to be effective as of
the date of any change in such rate). The Agent's prime lending rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Agent may make commercial loans or other loans
at rates of interest at, above, or below the Agent's prime lending rate.
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"Pro Rata Portion" means, with respect to a Lender, the quotient
obtained by dividing the Revolving Credit Commitment of the Lender by the
aggregate Revolving Credit Commitments of all the Lenders.
"Required Lenders" means at any time the Lenders owning or holding in
the aggregate at least 67% of the aggregate unpaid principal amount of the
Advances or, in the event that no Advances are outstanding, the Lenders having
at least 67% of the aggregate amount of the Revolving Credit Commitments.
"Revolving Credit Commitment" means the amount set forth on the
signature pages hereto with respect to a Lender, or, if there has been a full or
partial assignment of a Revolving Credit Commitment pursuant to the provisions
of Subsection 12.17 hereof, as may be reflected on the records of Agent with
respect to such assignment based on the respective Assignment and Acceptance
Agreement.
"Revolving Credit Facility" means the commitments of the Lenders to make
Advances to Borrower pursuant to Subsection 2.1 hereof.
"Revolving Credit Notes" has the meaning specified in Subsection 2.4
hereof, and "Revolving Credit Note" means any one of the Revolving Credit Notes.
"Revolving Credit Termination Date" means the date two (2) years after
the Closing Date hereunder (or such later date as may be agreed to by Lender
pursuant to Section 2.7), or, if such day is not a Business Day, the next
succeeding Business Day, or such earlier date on which all amounts outstanding
hereunder and under the Revolving Credit Notes shall be due and payable pursuant
to the terms hereof.
"Senior Funded Debt" shall mean Total Funded Debt less: (a) any debt
that is subordinated in structure or priority to other debt; (b) preferred
stock; and (c) similar instruments.
"Senior Revolving Debt" shall mean all indebtedness under the Revolving
Credit Facility described herein.
"Solvent" means, with respect to any Person, that as of the date of
determination, both (a)(i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
obligations) of such Person and (z) greater than the amount that will be
required to pay the probable liabilities of such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe or reasonably should believe that it will incur, debts beyond
its ability to pay such debts as they become due and (b) such Person is solvent
within the meaning given that term and similar terms under applicable laws
relating to fraudulent transfers.
"Subsidiary" means, for any Person, any corporation, partnership, or
other entity of which fifty percent (50%) or more of the securities or other
ownership interests having ordinary voting
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power to elect the board of directors or having direct power to perform
functions similar to that of a board of directors is at the time directly or
indirectly owned or controlled by such Person. Unless the context clearly
indicates otherwise, the term "Subsidiary" refers to a Subsidiary of Borrower
existing on the date of execution hereof or becoming a Subsidiary at any time
thereafter.
"Subsidiary Security Agreements" has the meaning set forth in Section
4.3.
"Tangible Net Worth" shall mean net worth as defined by GAAP less the
sum of all goodwill and intangible assets, for the Borrower and its Consolidated
Subsidiaries.
"Tax Indemnification Agreements" means any documentary stamp tax and
intangible tax agreements executed by Borrower in favor of a Lender from time to
time.
"Total Funded Debt" shall mean and include all Funded Debt of the
Borrower and its Subsidiaries, plus all Funded Debt of other entities or persons
which has been guaranteed by the Borrower or any Subsidiary or which is
supported by a letter of credit issued for the account of the Borrower or any
Subsidiary.
"Unused Fee" has the meaning defined in Section 2.8(a).
. 1.2 OTHER DEFINITIONAL PROVISIONS
(a) The terms "material" and "materially" shall have the
meanings ascribed to such terms under Generally Accepted Accounting Principles
as such would be applied to the business of Borrower or others, except as the
context shall clearly otherwise require; (b) all of the terms defined in this
Agreement shall have such defined meanings when used in other documents issued
under, or delivered pursuant to, this Agreement unless the context shall
otherwise require; (c) words in singular shall include the plural and words in
plural shall include the singular, unless the context clearly requires
otherwise; (d) accounting terms to the extent not otherwise defined shall have
the respective meanings given them under, and shall be construed in accordance
with, Generally Accepted Accounting Principles; (e) the words "hereby,"
"hereto," "hereof," "herein," "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; (f) words of any gender shall include
all other genders; and (g) whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of such parties unless the context shall expressly provide otherwise.
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SECTION 2. THE REVOLVING CREDIT FACILITY;
AMOUNT AND TERMS OF ADVANCES.
. 2.1 THE REVOLVING CREDIT FACILITY
(a) Each Lender severally agrees, on the terms and conditions
set forth herein, that prior to the Revolving Credit Termination Date, and so
long as there exists no Event of Default or circumstance which with the giving
of notice or passage of time would become an Event of Default, it will, upon the
request of Borrower, make advances to Borrower ("Advances") in an aggregate
amount not to exceed at any time outstanding such Lender's Revolving Credit
Commitment; PROVIDED HOWEVER, that at no time shall the sum of (i) all
outstanding Advances plus (ii) the face amount of all outstanding Letters of
Credit plus (iii) (without duplication) all outstanding reimbursement
obligations related to Letters of Credit under Section 3, ever exceed the
aggregate of the Revolving Credit Commitments of the Lenders. During such
period, subject to the limits set forth herein, Borrower may borrow, repay, and
reborrow in accordance with the terms hereof.
(b) If at any time the aggregate principal amounts outstanding
under the Advances of any Lender plus such Lender's Pro Rata Portion of the face
amount of all outstanding Letters of Credit (plus, without duplication, any
reimbursement obligations due to such Lender with respect to Letters of Credit
under this Agreement) exceeds the Revolving Credit Commitment of such Lender,
Borrower shall prepay, without premium or penalty, the Advances so as to cause
the aggregate outstanding amounts thereunder plus such Lender's Pro Rata Portion
of the face amount of all outstanding Letters of Credit (plus, without
duplication, any reimbursement obligations due to such Lender with respect to
Letters of Credit under this Agreement) to be equal to or less than such
Lender's Revolving Credit Commitment.
(c) All Advances shall be subject to the terms and conditions of
this Agreement and shall bear interest at the Prime Rate, as set forth in
Section 2.5. All Advances shall be made by the Lenders simultaneously and
proportionately to their Pro Rata Portion of the aggregate Revolving Credit
Commitments.
. 2.2 MAKING OF ADVANCES AND FUNDING MECHANICS
(a) The Advances shall be made upon irrevocable written notice
from Borrower to Agent (effective upon receipt) no later than 12:00 p.m.
(Eastern Time) two (2) Business Days prior to the date of any proposed Advances
(with any notice given after the specified time being deemed to have been given
on the following Business Day). Each such notice shall be given in writing
delivered by hand or transmitted to Agent by facsimile transmission, telex, or
cable, specifying the proposed (i) date of borrowing, (ii) aggregate amount of
borrowing, and (iii) manner of receipt of the funds, and shall be accompanied by
a Borrowing Certificate executed by the chief financial officer of Borrower as
required by Subsection 6.3 hereof. Each request for Advances shall be in the
aggregate minimum amount of $100,000.00 or an integral multiple of $100,000.00
in excess thereof.
(b) Neither Agent nor any Lender shall incur any liability to
Borrower in acting upon any written notice referred to above that Agent believes
in good faith to have been given by the
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President, Chief Executive Officer, Chief Financial Officer, Assistant
Secretary, or Treasurer of Borrower, or other Person designated by Borrower to
Agent as authorized to borrow on behalf of Borrower or for otherwise acting in
good faith under this Subsection, and, upon funding of Advances by Agent or any
Lender in accordance with this Agreement pursuant to any such written notice,
Borrower shall be deemed to have received Advances hereunder.
(c) Each notice of a proposed borrowing shall be irrevocable and
binding on Borrower. Borrower shall indemnify each Lender against any out of
pocket loss, costs, or expense incurred by such Lender as a result of any
failure of Borrower to fulfill on or before the date specified for an Advance
all conditions for such borrowing set forth in Section 6 hereof, or as a result
of any purported revocation of such borrowing request or any other reason for
nonfunding of such Advance, including, without limitation, any loss (including
loss of anticipated profits), cost, or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund the Advance, when such Advance is not made on such date.
(d) Agent shall give each Lender notice of each request for
Advances in writing or by telephone, telex, facsimile transmission, or cable,
not later than 2:00 p.m. (Eastern Time) on the date of receipt of such request,
provided that if the request was not received prior to 12:00 p.m. (Eastern
Time), Agent shall give such notice no later than 9:00 a.m. (Eastern Time) on
the following Business Day. Not later than 12:00 p.m. (Eastern Time) on the date
specified in such notice, each Lender shall make available to Agent, at its
Lending Office, in immediately available funds, the Lender's Pro Rata Portion of
such borrowing. After Agent's receipt of such funds, Agent will make such funds
available to Borrower no later than 2:00 p.m. (Eastern Time) on the date
specified in the notice. Each Advance shall be made to the Borrower by crediting
the amount of the Advance to the general deposit account of Borrower maintained
with Bank, except as otherwise specified in writing by Borrower.
(e) Unless Agent shall have received notice from a Lender prior
to the date of any proposed borrowing that such Lender will not make available
to Agent such Lender's Pro Rata Portion of the borrowing, Agent may assume that
the Lender has made such portion available to Agent on the date of such
borrowing in accordance with the provisions hereof. Agent may, in reliance upon
such assumption (but shall not be required to), make available to Borrower a
corresponding amount. If and to the extent that the Lender shall not have so
made such Pro Rata Portion available to Agent, the Lender and Borrower severally
agree to repay to Agent forthwith upon demand, to the extent not collected from
the other, such corresponding amount together with interest thereon, for each
day from the date such amount is made available to such Borrower until the date
such amount is repaid to Agent at (i) in the case of Borrower, the interest rate
applicable at the time to the Advances comprising the borrowing, and (ii) in the
case of the Lender, the Federal Funds Rate. If the delinquent Lender shall repay
to Agent such amount (with interest), the amount so repaid shall constitute the
Lender's Advance as part of such borrowing for purposes of this Agreement. If
Borrower shall repay to Agent such corresponding amount, such payment shall not
relieve the delinquent Lender of its obligations hereunder.
(f) The failure of any Lender to make an Advance to be made by
it as part of any borrowing, when required to do so by the provisions hereof,
shall not relieve any other Lender of its
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obligation hereunder to make its Advance on the date of such borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Advance to be made by such other Lender. Nothing herein shall prejudice any
rights or remedies that Borrower may have against any Lender as a result of any
failure by such Lender to make an Advance hereunder.
(2.3) USE OF PRRE. Advances shall be used by Borrower for working
capital and general corporate purposes of the Borrower and the Subsidiaries of
the Borrower which are Guarantors, subject to the restrictions hereinafter
stated. No proceeds of any Advance hereunder shall be used for (i) any
acquisition of any business or (ii) any joint venture or other alliance or
contractual arrangement with another business. Borrower must obtain the prior
written consent of the Required Lenders to use the proceeds of Advances for any
acquisition of any equipment or other assets if the total purchase price of such
equipment or other assets exceeds One Million Dollars ($1,000,000.00). If the
Required Lenders so consent, such acquisition of equipment or other assets may
be made only to the extent the same is in the ordinary course of business of the
Borrower and the Subsidiaries of the Borrower which are Guarantors.
. 2.4 REVOLVING CREDIT NOTES; LOAN ACCOUNTS
(a) The aggregate indebtedness of Borrower to the Lenders
resulting from the Advances shall be evidenced by a promissory note of Borrower
to each of the Lenders in a principal amount equal to such Lender's Revolving
Credit Commitment payable to the order of such Lender, in substantially the form
of Exhibit "A" hereto (as may be amended, renewed, increased, restated,
replaced, or otherwise modified from time to time, the "Revolving Credit
Notes"). Each such Lender is irrevocably authorized by each Borrower to endorse
its Note(s) and each Lender's record shall be prima facie evidence; provided,
however, that the failure of a Lender to make, or an error in making, a notation
thereon with respect to any Loan shall not limit, expand or otherwise affect the
obligations of the Borrower hereunder or under any such Note to such Lender;
provided further that in the event of any Loans evidenced both by Loan Accounts,
as provided in Section 2.4(b) hereof, and by Note(s), the Loan Accounts shall
govern as prima facie evidence of the amount of the Loans made by the Lenders
and the Agent to the Borrower and the interest and payments thereon.
(b) The Advances made by each Lender shall be evidenced by one
or more loan accounts or records (the "Loan Accounts") maintained by such Lender
in the ordinary course of business. The Loan Accounts maintained by the Agent,
as Lender, and each Lender shall be prima facie evidence of the amount of the
Advances, as the case may be, made by the Lenders to the Borrower and the
interest and payments thereon. Any failure to record or any error in doing so
shall not, however, limit, expand or otherwise affect the obligations of the
Borrower hereunder.
. 2.5 INTEREST RATE
(a) Borrower shall pay interest on the unpaid principal amounts
of Advances from the date of such Advances until such principal amounts shall be
paid in full, at the following rates per annum:
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(i) with respect to all Advances, a rate equivalent to the
Prime Rate in effect from time to time, which rate shall be
adjusted daily to reflect changes in the Prime Rate, with each
adjustment to be effective on the day the change occurs;
(ii) after the maturity or due date of the Advances
(whether by acceleration or otherwise), a rate equivalent to two
percent (2%) per annum above the rate per annum required to be
paid on such Advances pursuant to paragraphs (i) or (ii) above
(the "Default Rate").
(b) Borrower shall pay interest in respect of any other
obligations (other than Advances and interest thereon) of Borrower under the
Loan Documents after the date when due at a rate per annum equal to two percent
(2%) per annum above the rate per annum described in paragraph (i) above.
(2.7) Interest and principal of the Advances shall be paid to Agent for
the ratable account of the Lenders as follows:
(a) Interest on the Advances shall be paid quarterly in arrears
on the last day of each March, June, September, and December of each year, and
on the Revolving Credit Termination Date, and shall be paid to and including
each of such dates.
(b) Advances shall be Continued as provided herein, and all
outstanding principal, if not sooner paid, shall be paid on the Revolving Credit
Termination Date.
(c) If any payment of interest is more than ten (10) days late,
Borrower will pay to Agent, for the account of the Lenders, a late charge equal
to five percent (5%) of the payment (the "Late Fee"); provided, however, that no
Late Fee shall be charged for interest accruing after acceleration of principal
(and prior to any reinstatement). The provisions herein for a Late Fee shall not
be deemed to extend the time for any payment or to constitute a "grace period"
giving Borrower a right to cure such default.
2.7 REVOLVING CREDT TERINATION DATE. All Borrowings outstanding under
the Revolving Credit Facility shall be due and payable in full on the Revolving
Credit Termination Date. The Borrower shall not request and the Lenders will not
be required to make or consider requests for Revolving Credit Advances after the
Revolving Credit Termination Date. The Borrower may, by written notice to the
Agent (which shall promptly deliver a copy to each of the Lenders), given not
more than one hundred twenty (120) days nor less than ninety (90) days prior to
the Revolving Credit Termination Date, in effect, request that the Lenders
extend the then scheduled Revolving Credit Termination Date. Upon delivery of
such notice by the Borrower, the Required Lenders shall determine, in their sole
and absolute discretion, whether to extend the Revolving Credit Termination Date
for one (1) additional year on the same terms and conditions as set forth in
this Agreement, and Agent shall give written notice to Borrower on or before the
date thirty (30) days prior to the Revolving Credit Termination Date, as to
whether the Required Lenders have elected so to extend the Revolving Credit
Termination Date for one (1) additional year. If the Required Lenders elect to
make any such extension of the Revolving Credit Termination Date, and assuming
Borrower elects to accept such extension, Borrower shall, at its expense,
execute such amendments to this Agreement
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and other documents as shall be reasonably required by Agent on behalf of the
Lenders in connection with any such extension. Nothing contained herein shall
obligate the Lenders to make any such extension of the Revolving Credit
Termination Date, or obligate Borrower to accept any such extension.
2.8 FEES
(a) As further consideration for making the Revolving Credit
Facility available, Borrower shall pay to Agent, for the ratable account of the
Lenders, a fee (the "Unused Fee") from the date of this Agreement to the
Revolving Credit Termination Date equal to Twenty-Five One Hundredths of One
Percent (.25%) of the unused portion of the Lenders' Revolving Credit
Commitments. Such Unused Fee shall be computed on the basis of the average daily
unused portions of the Lenders' Revolving Credit Commitments. The Unused Fee
shall be payable quarterly in arrears three (3) Business Days after the last day
of each March, June, September, and December of each year, and on the Revolving
Credit Termination Date, and shall be payable to and including the last days of
such months and on the Revolving Credit Termination Date.
(b) Borrower shall also pay to Agent such commitment, agency and
other fees as Agent and Borrower shall separately agree from time to time.
2.9 PAYMENTS AND COMPUTATIONS
(a) Borrower shall make each payment hereunder not later than
1:00 p.m. (Eastern Time) on the day when due to Agent at its Lending Office in
immediately available funds, free and clear of any defenses, set-offs,
counterclaims, or withholdings or deductions for taxes. Agent will promptly
thereafter cause to be distributed like funds ratably to the Lenders, in each
case to be applied in accordance with the terms of this Agreement. Agent shall
use its best efforts, in accordance with Agent's normal business practices, to
provide to Borrower a written notice of payments due hereunder, stating the due
date and amount of such payment due; PROVIDED THAT, the provision of such notice
is a courtesy only and shall not affect the rights or obligations of the parties
hereunder or under the Loan Documents, and any failure of Agent to provide any
such notice, failure to provide such notice prior to the due date of any payment
or lateness of any such notice, or any error or omission contained in any such
notice, shall in no way affect the due date of any payment or the amount due, or
otherwise affect the obligations of the Borrower or any Guarantor, or the rights
or obligations of any party under this Agreement or under any of the Loan
Documents. Any and all payments of interest not received from Borrower within
ten (10) days after the interest payment is due under this Agreement, and any
payments of principal not received within five (5) days after such principal is
due, by acceleration or otherwise, shall be paid by immediate debits to
Borrower's principal depositary account which shall be maintained at all times
at the Lending Office of the Agent (the "Loan Payment Account"). Borrower hereby
authorizes Agent to debit the Loan Payment Account on the tenth (10th) day
following the due date of any interest payment due hereunder and not received by
such day, and on the fifth (5th) day following the due date of any principal
payment due hereunder and not received by such day, in each case in the full
amount of the principal and accrued interest due on such date, and further to
debit the Loan Payment Account at any time for any other amounts due under this
Agreement as and when due. Failure of Borrower to maintain sufficient funds in
the Loan Payment Account at all times to cover any debit made or authorized to
be made by
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the Agent hereunder, shall constitute an immediate Event of Default under this
Agreement. Agent shall use its best efforts to provide to Borrower a written
debit advice within a reasonable period of time, in accordance with Agent's
normal business practices, after each debit to the Loan Payment Account
hereunder, stating the date and amount of such debit. PROVIDED THAT, the
provision of such debit advice is a courtesy only and shall not affect the
rights or obligations of the parties hereunder or under the Loan Documents; any
failure of Agent to provide any such debit advice, failure to provide such debit
advice within the stated time period after a debit, or any error or omission
contained in any such debit advice provided, shall in no way affect the
obligations of the Borrower or any Guarantor, or the rights or obligations of
any party, hereunder or under any of the Loan Documents.
(b) Unless Agent shall have received notice from Borrower prior
to the date on which any payment is due to the Lenders hereunder that Borrower
will not make such payment in full, Agent may assume that Borrower has made such
payment in full to Agent on such date. Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on the Business Day following
the date when due an amount equal to the amount then due to such Lender. If and
to the extent Borrower shall not have made such payment in full to Agent, each
such Lender shall repay to Agent forthwith on demand such amount distributed to
such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to Agent, at the Federal Funds Rate.
(c) Unless otherwise specified herein, or unless otherwise
determined by the Required Lenders in their sole discretion, all payments shall
be applied by the Lenders first to interest and other charges then accrued under
this Agreement (to be allocated pro rata among the Advances according to amount
accrued), and then to principal of the Advances. If Agent receives funds for
application to the Advances under circumstances for which the Loan Documents or
Borrower (to the extent permitted by the Loan Documents) do not specify the
Advances to which such funds are to be applied, Agent may elect to distribute
such funds for application to the Advances to each Lender ratably in accordance
with such Lender's Pro Rata Portion of all outstanding Advances, in repayment or
prepayment of such of the outstanding Advances of such Lender, as Agent shall
determine in its discretion.
(d) Borrower hereby authorizes Agent and each Lender, if and to
the extent that any payments owed hereunder are not made when due, to charge
such payments from time to time against any or all of Borrower's accounts with
the Agent or the Lender, in which event the Agent or the Lender will give prompt
notice to Borrower of such charge; provided, however, that the failure to give
such notice shall not affect the validity of such charge.Any such Lender will
give notice to Agent thereof.
(e) Interest and any fees hereunder shall be computed on the
basis of a year of 360 days, but charged for the actual number of days elapsed.
Each determination by Agent of an interest rate hereunder shall be conclusive
and binding for all purposes, absent manifest error.
(f) Notwithstanding anything contained herein to the contrary,
in no event shall any interest rate provided for herein exceed the maximum rate
of interest allowed by applicable law, as amended from time to time. Neither the
Lenders nor Agent intend to charge any amount of
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interest or other fees or charges in the nature of interest that exceeds the
maximum amount allowed by applicable law. If any payment of interest or in the
nature of interest, together with all other payments of interest or in the
nature of interest, would cause the foregoing interest rate limitation to be
exceeded, then such excess payment shall be credited as a payment of principal,
unless Borrower notifies Agent in writing that the excess payment must be
returned to Borrower, together with interest at the rate specified in Section
687.04(2), Florida Statutes, or any successor statute.
(g) Each payment and prepayment by Borrower of principal or
interest shall be made in such coin or currency of the United States of America
as at the time of payment is legal tender for the payment of public and private
debts. If any installment of principal or interest becomes due and payable on a
day other than a Business Day, the due date thereof shall be extended to the
next succeeding Business Day, and, in the case of principal, interest shall be
payable on such principal during the extension at the annual rate then in effect
for such principal before maturity or default.
2.10 PREPAYMENTS UNDER REVOLVING CREDIT FACILITY
(a) Borrower shall be entitled to prepay Advances in whole or in
part, at any time, without premium or penalty, upon at least two (2) Business
Days prior notice to Agent, each notice stating the proposed date, Advances to
be prepaid, and aggregate principal amount of the prepayment.
(b) Any payment or prepayment of Advances shall be in the
minimum principal amount of $100,000.00 or an integral multiple of $100,000.00
in excess thereof.
2.11 SHARING OF PAYMENTS, ETC.
(a) If any Lender shall obtain from Borrower payment of any
principal of or interest on any Advance owing to it or payment of any other
amount under this Agreement or any other Loan Document through the exercise of
any right of set-off, banker's lien, counterclaim, similar right, or otherwise
(other than from Agent as provided herein), and, as a result of such payment,
such Lender shall have received a greater percentage of the principal of or
interest on the Advances or other amounts then due hereunder by Borrower to such
Lender than its ratable percentage of such amounts pursuant to its Revolving
Credit Commitment, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Advances or such other amounts, respectively, owing to such
other Lenders (or in interest due thereon, as the case may be) in such amounts,
and make such other adjustments from time to time as shall be equitable, to the
end that all the Lenders shall share the benefit of such excess payment (net of
any expenses which may be incurred by such Lender in obtaining or preserving
such excess payment) pro rata in accordance with the unpaid principal of and
interest on the Advances or such other amounts, respectively, owing to each of
the Lenders. To such end all the Lenders shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored.
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(b) Nothing contained herein shall require any Lender to
exercise any set-off, banker's lien, or other right or shall affect the right of
any Lender to exercise, and retain the benefits of exercising, any such right
with respect to any other indebtedness or obligation of Borrower. If, under any
applicable bankruptcy, insolvency, or other similar law, any Lender receives a
secured claim in lieu of a set-off to which this Subsection applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such secured
claim in a matter consistent with the rights of the Lenders entitled under this
Subsection to share in the benefits of any recovery on such secured claim.
2.12 INCREASED COSTS, CAPITAL ADEQUACY, ILLEGALITY, ETC.
(a) If either (i) the introduction, after the date hereof, of or
any change, after the date hereof, in any law or regulation or in the
interpretation or administration of any law or regulation by any court or
administrative or governmental authority charged with the interpretation of
administration thereof or (ii) the compliance with any guideline issued from or
request made by any such governmental authority, after the date hereof,
including, without limitation, any central bank (whether or not having the force
of law), (x) subjects any Lender or any corporation controlling a Lender to any
tax of any kind whatsoever with respect to this Agreement or any Advance, or
changes the basis of taxation of payments to such Lender or corporation of
principal, commissions, fees, interest, or any other amount payable hereunder
(except for (A) taxes on or measured by the overall net income of such Lender or
branch, office, or agency through which such Lender is acting for purposes of
this Agreement, (B) changes in the rate of such taxes, or (C) taxes for which
such Lender is indemnified under Subsection 12.2; (y) imposes, modifies, or
holds applicable any reserve, special deposit, compulsory loan, or similar
requirement against assets held by, or deposits or other liabilities in or for
the account of, advances or loans by, or other credit or commitment therefor
extended by, or any other acquisition of funds by, any office of any Lender
which are not otherwise included in any determination of the Prime Rate or
interest payable hereunder; or (z) imposes on any Lender or any corporation
controlling a Lender any other condition, and as a result there shall be any
increase in the cost to such Lender or corporation of agreeing to make or
making, funding, or maintaining Advances by an amount deemed by such Lender to
be material, then Borrower shall from time to time, upon notice from such
Lender, pay to such Lender additional amounts sufficient to compensate such
Lender for such increased cost.
(b) If any Lender determines that compliance with any law or
regulation or with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) concerning
capital adequacy or otherwise has or would have the effect of reducing the rate
of return on the capital of such Lender or the corporation controlling the
Lender as a consequence of, or with reference to, such Lender's commitment
hereunder or its making or funding or maintaining Advances below the rate which
such Lender or corporation could have achieved but for such compliance (taking
into account the policies of such Lender or such corporation with regard to
capital) by an amount deemed by such Lender material, Borrower shall from time
to time, upon notice from such Lender, pay to such Lender additional amounts
sufficient to compensate such Lender or corporation for such reduction,
PROVIDED, however, that such additional amounts shall be determined on a
reasonable basis and be similarly charged to corporations or other entities
similar to Borrower who are then borrowers from such Lender pursuant to
agreements having provisions similar to this Subsection 2.12(b), to the extent
permitted by such provisions. Each Lender agrees
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promptly to notify Borrower and Agent of any circumstances that would cause
Borrower to pay additional amounts pursuant to this paragraph, provided that the
failure to give such notice shall not affect Borrower's obligation to pay such
additional amounts hereunder.
SECTION 3. LETTERS OF CREDIT
3.1 LETTER OF CREDIT FACILITY; ISSUANCE OF LETTERS OF CREDIT. The
Borrower shall give the Agent not less than five (5) Business Days prior written
notice of a request for the issuance of a Letter of Credit, and the Agent shall
promptly notify each Lender of such request. Upon receipt of the Borrower's
properly completed and duly executed Applications, and subject to the terms of
such Applications and to the terms of this Agreement, the Agent agrees to issue
Letters of Credit on behalf of the Borrower in an aggregate face amount not in
excess of the lesser of (a) the Letter of Credit Sublimit or (b) the aggregate
amount of all of the Lenders' Revolving Credit Commitments minus the sum of (i)
all outstanding Advances plus (ii) the aggregate face amount of all outstanding
Letters of Credit plus (iii) (without duplication) all outstanding reimbursement
obligations related to Letters of Credit hereunder. No Letter of Credit shall
have a maturity extending beyond the earliest of (i) the Revolving Credit
Termination Date or (ii) one year from the date of its issuance. Subject to such
maturity limitations and so long as no Event of Default has occurred and is
continuing or would result from the renewal of a Letter of Credit, the Letters
of Credit may be renewed by the Agent in its discretion. The Lenders shall
participate ratably in any liability under the Letters of Credit and in any
unpaid reimbursement obligations of the Borrower with respect to any Letter of
Credit in their Pro Rata Portions. The amount of the Letters of Credit issued
and outstanding and the unpaid reimbursement obligations of the Borrower for
such Letters of Credit shall reduce the amount of the aggregate Revolving Credit
Commitments available, so that at no time shall the sum of (i) all outstanding
Advances in the aggregate, plus (ii) the aggregate face amount of all
outstanding Letters of Credit, plus (iii) (without duplication) all outstanding
reimbursement obligations related to Letters of Credit, exceed the aggregate
Revolving Credit Commitments, and at no time shall the sum of all Advances made
by any Lender plus its ratable share of amounts available to be drawn under the
Letters of Credit and the unpaid reimbursement obligations of the Borrower in
respect of such Letters of Credit exceed its Pro Rata Portion of the aggregate
Revolving Credit Commitments.
3.2 LETTER OF CREDIT FEES. In consideration for the issuance of each
Letter of Credit, the Borrower shall pay:
(a) to the Agent for its own account, an application, processing
and facing fee in the amount of 0.10% of the face amount on each Letter of
Credit issued, which fee shall be due and payable on the date of issuance of
each Letter of Credit; and
(b) to the Agent for the account of the Agent and the Lenders in
accordance with their Pro Rata Portions of the face amount of such Letter of
Credit, a per annum fee, payable upon each issuance, and at each annual renewal
or extension of a Letter of Credit, in the amount of 0.25% of the face amount of
the Letter of Credit then issued, renewed or extended.
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3.3 REIMBURSEMENT OBLIGATIONS
(a) The Borrower hereby agrees to reimburse Agent immediately
upon demand by Agent, and in immediately available funds, for any payment or
disbursement made by Agent under any Letter of Credit. Payment shall be made by
the Borrower with interest on the amount so paid or disbursed by Agent from and
including the date payment is made under any Letter of Credit to and including
the date of payment, at the lesser of (i) the highest lawful rate, and (ii) the
Prime Rate in effect from time to time; PROVIDED, HOWEVER, that if the Borrower
would be permitted under the terms of Section 2, to borrow Advances in amounts
at least equal to the reimbursement obligation for a drawing under any Letter of
Credit, an Advance by each Lender, in an amount equal to such Lender's Pro Rata
Portion, shall automatically be deemed made on the date of any such payment or
disbursement made by Agent in the amount of such obligation and subject to the
terms of this Agreement.
(b) Upon an Event of Default hereunder, the Borrower hereby also
agrees to pay to Agent immediately upon demand by Agent and in immediate
available funds, as security for its reimbursement obligations in respect of the
Letters of Credit under Section 3.3(a) hereof and any other amounts payable
hereunder and under the Revolving Credit Notes, an amount equal to the aggregate
amount available to be drawn under Letters of Credit then outstanding,
irrespective of whether the Letters of Credit have been drawn upon. Any such
payments shall be deposited in a separate account designated "Golden Bear Letter
of Credit Account" or such other designation as Agent shall elect. All such
amounts deposited with Agent shall be and shall remain funds of the Borrower on
deposit with Agent and may be invested by Agent as Agent shall determine. Such
amounts may not be used by Agent to pay the drawings under the Letters of
Credit; however, such amounts may be used by Agent as reimbursement of Letter of
Credit drawings which Agent has paid. If any amounts in the Golden Bear Letter
of Credit Account shall have been deposited upon the occurrence of an Event of
Default, and such Event of Default shall have been subsequently cured or waived
and no other Event of Default exists, the Borrower shall be relieved of its
obligations under this Section 3.3(b) until an Event of Default once again
occurs. During the existence of an Event of Default but after the expiration of
any Letter of Credit that was not drawn upon, the Borrower may direct the Agent
to use any cash collateral for any such expired Letter of Credit, if any, to
reduce the amount of the Obligations. Any amounts remaining in the Golden Bear
Letter of Credit Account, after the Revolving Credit Termination Date and after
the expiration of all Letters of Credit and after all Obligations have been paid
in full, shall be repaid to the Borrower promptly after such expiration and such
payment in full.
(c) The obligations of the Borrower under this Section 3.3 will
continue until all Letters of Credit have expired and all reimbursement
obligations with respect thereto have been paid in full by the Borrower and
until all other Obligations shall have been paid in full.
(d) The Borrower shall be obligated to reimburse Agent upon
demand for all amounts paid under the Letters of Credit as set forth in Section
3.3(a) hereof; provided, however, if the Borrower for any reason fails to
reimburse Agent in full upon demand, whether by borrowing Advances to pay such
reimbursement obligations or otherwise, the Lenders shall reimburse Agent in
accordance with each Lender's Pro Rata Portions for amounts due and unpaid from
the Borrower as
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set forth in Section 3.4 hereof; provided, however, that no such reimbursement
made by the Lenders shall discharge the Borrower's obligations to reimburse
Agent.
(e) The Borrower shall indemnify and hold Agent or any Lender,
its officers, directors, representatives and employees harmless from loss of any
claim, demand or liability which may be asserted against Agent or such
indemnified party in connection with actions taken under the Letters of Credit
or in connection therewith, and shall pay Agent for reasonable fees of attorneys
(who may be employees of Agent) and legal costs paid or incurred by Agent in
connection with any matter related to the Letters of Credit, except only for
losses and liabilities incurred as a direct result of the gross negligence of
wilful misconduct of Agent or such indemnified party. If the Borrower for any
reason fails to indemnify or pay Agent or such indemnified party as set forth
herein in full, the Lenders shall indemnify and pay Agent upon demand, in
accordance with each Lender's Pro Rata Portion of such amounts due and unpaid
from Borrower. The provisions of this Section 3.3(e) shall survive the
termination of this Agreement.
3.4 LENDERS' OBLIGATIONS. Each Lender agrees, unconditionally and
irrevocable to reimburse Agent (to the extent Agent is not otherwise reimbursed
by the Borrower in accordance with Section 3.3(a) hereof) on demand for such
Lender's Pro Rata Portion of each draw paid by Agent under any Letter of Credit.
All amounts payable by any Lender under this subsection shall include interest
thereon at the Federal Funds Rate, from the date of the applicable draw to the
date of reimbursement by such Lender. No Lender shall be liable for the
performance or nonperformance of the obligations of any other Lender under this
Section. The obligations of the Lenders under this Section shall continue after
the Revolving Credit Termination Date and shall survive termination of any Loan
Documents.
3.5 AGENT'S OBLIGATIONS
(a) Agent makes no representation or warranty, and assumes no
responsibility with respect to the validity, legality, sufficiency or
enforceability of any Application or any document relative thereto or to the
collectibility thereunder. Agent assumes no responsibility for the financial
condition of the Borrower and its Subsidiaries or for the performance of any
obligation of the Borrower. Agent may use its discretion with respect to
exercising or refraining from exercising any rights, or taking or refraining
from taking any action which may be vested in it or which it may be entitled to
take or assert with respect to any Letter of Credit or any Application.
(b) Except as set forth in subsection (c) below, Agent shall be
under no liability to any Lender, with respect to anything the Agent may do or
refrain from doing in the exercise of its judgment, the sole liability and
responsibility of Agent being to handle each Lender's share on as favorable a
basis as Agent handles its own share and to promptly remit to each Lender its
share of any sums received by Agent under any Application. Agent shall have no
duties or responsibilities except those expressly set forth herein and those
duties and liabilities shall be subject to the limitations and qualifications
set forth herein.
(c) Neither Agent nor any of its directors, officers, or
employees shall be liable for any action taken or omitted (whether or not such
action taken or omitted is expressly set forth herein) under or in connection
herewith or any other instrument or document in connection herewith,
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except for gross negligence or willful misconduct, and no Lender waives its
right to institute legal action against Agent for wrongful payment of any Letter
of Credit due to Agent's gross negligence or willful misconduct. Agent shall
incur no liability to any Lender, the Borrower or any Affiliate of the Borrower
or Lender in acting upon any notice, document, order, consent, certificate,
warrant or other instrument reasonably believed by Agent to be genuine or
authentic and to be signed by the proper party.
SECTION 4. COLLATERAL, GUARANTIES AND SUBORDINATION
Payment of the Advances hereunder shall be secured, guaranteed, and
subordinated as provided in this Section 4.
4.1 LIEN AND SECURITY INTEREST IN ALL ASSETS OF THE BORROWER. Payment of
the Advances, any and all other obligations under the Loan Documents, and any
other obligations of Borrower to Lenders, presently existing or hereafter
arising (collectively, the "Obligations"), shall be secured by a first priority
perfected lien and security interest in all assets of Borrower, now owned or
hereafter acquired, including but not limited to all personal property,
furniture, fixtures, equipment, machinery, motor vehicles, inventory, accounts,
documents, contract rights, leases, chattel paper, instruments, trademarks,
copyrights, licenses, royalties, other intellectual property, and general
intangibles now owned or hereafter acquired or arising, and all proceeds
thereof; together with first priority mortgages upon any and all real property
owned by Borrower; together with an assignment of rents and leases as to any
real property leases held by Borrower (all of the foregoing, collectively, the
"Borrower's Collateral"). Borrower shall execute and deliver to Agent for the
benefit of the Lenders such security agreements, mortgages, assignments of rents
and leases, and other security documents as Agent shall request, covering said
Borrower's Collateral, all in form and substance satisfactory to Agent
(collectively, the "Borrower Security Agreements"). The Borrower Security
Agreements shall be sufficient, when notice thereof is properly filed or
recorded in the appropriate jurisdictions, to grant to Agent for the benefit of
the Lenders a first perfected lien and security interest in the property
described therein, subject to no prior liens or encumbrances except in favor of
Agent for the benefit of the Lenders or as Agent permits in writing. Borrower
agrees to execute or otherwise provide to Agent for the benefit of the Lenders
any and all modifications, financing statements, and other agreements, consents,
and documents required by Agent now or in the future in connection therewith.
4.2 GUARANTIES. Payment of all of the Obligations presently existing or
hereafter arising shall be guaranteed, jointly and severally by each of the
Guarantors, which guarantees shall be evidenced by the execution and delivery by
Guarantors to the Agent for the benefit of the Lenders of absolute, continuing
and unconditional guaranties in form and substance satisfactory to Agent
(individually, a "Guaranty" and collectively, the "Guaranties").
4.3 LIEN AND SECURITY INTEREST IN ALL ASSETS OF THE GUARANTORS. Payment
of all obligations of each Guarantor under its Guaranty, and all Obligations
hereunder shall be secured by a first priority perfected lien and security
interest in all assets of each Guarantor, now owned or hereafter acquired,
including but not limited to all personal property, furniture, fixtures,
equipment, machinery, motor vehicles, inventory, accounts, documents, contract
rights, leases, chattel paper,
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instruments, trademarks, copyrights, licenses, royalties, other intellectual
property, and general intangibles now owned or hereafter acquired or arising,
and all proceeds thereof; together with first priority mortgages upon any and
all real property owned by such Guarantor; together with an assignment of rents
and leases as to any real property leases held by such Guarantor (collectively,
the "Subsidiary's Collateral"). Borrower shall cause each Guarantor to execute
and deliver to Agent for the benefit of the Lenders such security agreements,
mortgages, assignments of rents and leases, and other security documents as
Agent shall request, covering said Subsidiary's Collateral, all in form and
substance satisfactory to Agent (collectively, "Subsidiary Security
Agreements"). The Subsidiary Security Agreements shall be sufficient, when
notice thereof is properly filed or recorded in the appropriate jurisdictions,
to grant to Agent for the benefit of the Lenders a first perfected lien and
security interest in the property described therein, subject to no prior liens
or encumbrances except in favor of Agent for the benefit of the Lenders or as
Agent permits in writing. Borrower shall cause each Guarantor to execute or
otherwise provide to Agent for the benefit of the Lenders any and all
modifications, financing statements, and other agreements, consents, and
documents required by Agent now or in the future in connection therewith.
4.4 SUBORDINATION; PERMITTED PRIOR LIENS AND PERMITTED SUBORDINATE
LIENS. The liens and security interests granted to Agent for the benefit of the
Lenders pursuant to the Borrower Security Agreements and the Subsidiary Security
Agreements shall be subordinate only to (a) those liens listed in Schedule 4.4
attached to this Agreement, to which Permitted Prior Liens the Agent hereby
consents in writing, and (b) any liens in the nature of purchase money security
interests in equipment acquired in the ordinary course of business of the
Borrower and its Subsidiaries that are Guarantors, to which Agent may hereafter
consent in writing, which purchase money security interests shall at no time
exceed an aggregate of U.S. $3,500,000.00 in total purchase money indebtedness
secured thereby, including both proceeds of any Advances hereunder used for
equipment purchases or equipment leases and any such purchase money indebtedness
to any other Person ((a) and (b) collectively, the "Permitted Prior Liens"). All
of the Borrower's Collateral and all of the Subsidiary's Collateral of each
Guarantor shall be free and clear of all liens, claims, or Encumbrances of any
kind, except only for (i) the Permitted Prior Liens and (ii) any other liens
permitted pursuant to Section 8.2 ("Permitted Subordinate Liens"), which
Permitted Subordinate Liens shall be subordinate in priority to all liens and
security interests granted to Agent for the benefit of the Lenders pursuant to
the Borrower Security Agreements and the Subsidiary Security Agreements.
4.5 CROSS-COLLATERAL; CROSS DEFAULT. The Obligations and any other
obligations under the Loan Documents or the Guaranties shall be and constitute
secured "Liabilities" or "Obligations" as defined in, and secured pursuant to,
any other security agreement now existing or hereafter entered into between
Borrower and the Agent for the benefit of the Lenders. The occurrence of any
event of default under any other credit or loan agreement or agreement
evidencing obligations for borrowed money, or under any other such security
agreement, entered into between the Borrower and the Agent for the benefit of
the Lenders, shall constitute an Event of Default hereunder.
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SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Agent and the Lenders to enter into this Agreement and to make
the Advances hereunder, Borrower represents and warrants to Agent and the
Lenders (which representations and warranties shall survive the delivery of the
documents mentioned herein and the making of the Loan or Loans contemplated
hereby) as follows:
5.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW; NAME HISTORY. Each of
Borrower and its Subsidiaries is a corporation duly incorporated and organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of Borrower and its Subsidiaries has all requisite power
(corporate and otherwise) to own and operate its properties and to carry on its
business as now being conducted, is duly qualified as a foreign corporation to
do business in every jurisdiction in which the nature of its business or the
ownership of its properties makes such qualification necessary and is in good
standing in such jurisdictions, has all licenses and permits necessary to carry
on and conduct its business in all states and localities wherein it now
operates. Each of Borrower and its Subsidiaries is, and for so long as this
Agreement remains in effect will remain, in compliance with all other
requirements of law, rule, or regulation applicable to it or to its business,
including without limitation any and all city, county, state, or federal legal
or regulatory requirements, requirements of any governmental protective
agencies, Office of Safety and Health Administration, Federal and State land
sales statutes, regulations governing Developments of Regional Impact (DRI's),
any and all equal opportunity laws or regulations, and any and all court or
regulatory orders, or other legal, judicial, or regulatory requirements
applicable to it or its business, except in each case where the lack of such
circumstance would not have a Material Adverse Effect. Borrower does not have
any direct or indirect Subsidiaries, except for those described on Schedule 5.1
hereto. Except as set forth in Schedule 5.1 hereto, neither Borrower nor any of
its Subsidiaries has merged, changed its name, or done business under a
fictitious name during the past five years.
5.2 CORPORATE POWER AND AUTHORIZATION TO EXECUTE LOAN DOCUMENTS; NO
CONFLICT; NO CONSENT. Each of Borrower and the Guarantors has the corporate
power and authority to execute and deliver the Loan Documents to be executed by
it and to perform its obligations thereunder and has taken all corporate action
necessary to authorize the execution, delivery, and performance of such Loan
Documents and to authorize the transactions contemplated thereby. The execution,
delivery, and performance by each of Borrower and each Guarantor of the Loan
Documents to be executed by it does not: (a) contravene, conflict with, result
in the breach of, or constitute a violation of or default under (i) the
certificate of incorporation or bylaws of Borrower or such Guarantor, (ii) any
applicable law, rule, regulation, judgment, order, writ, injunction, or decree
of any court or governmental authority, except where the lack of such
circumstance would not have a Material Adverse Effect, or (iii) any agreement or
instrument to which Borrower or any Guarantor is a party or by which Borrower or
any Guarantor or any of its property may be bound or affected, except where the
lack of such circumstance would not have a Material Adverse Effect; or (b)
result in the creation of any lien, charge, or encumbrance upon any property or
assets of Borrower or any Guarantor pursuant to any of the foregoing. No
consent, license, or authorization of, or filing with, or notice to, any Person
or entity (including, without limitation, any governmental authority), is
necessary or required in connection with the execution, delivery, performance,
validity, or enforceability of the Loan Documents and the transactions as
contemplated thereunder, except for consents, licenses,
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authorizations, filings, and notices which have already been obtained or
performed and of which Agent has been provided written notice, which are
referred to or disclosed in the Loan Documents, or except which the failure to
have would not have a Material Adverse Effect. Any consents, licenses,
authorizations, filings, or notices which have been obtained remain in full
force and effect.
5.3 ENFORCEABLE OBLIGATIONS. The Loan Documents constitute legal, valid,
and binding agreements of Borrower and each Guarantor, enforceable against
Borrower and each Guarantor in accordance with their respective terms.
5.4 FINANCIAL CONDITION
(a) The consolidated financial statements (including the notes
thereto) as of June 30, 1997, of Borrower and its Subsidiaries, copies of which
have been furnished to Agent and Lenders, are correct, complete, and fairly
present the financial condition of Borrower and its Consolidated Subsidiaries as
of the date of the financial statements and fairly present the results of the
operations of Borrower and its Consolidated Subsidiaries, taken as a whole, for
the period covered thereby.
(b) The financial statements described above have been prepared
in accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis maintained throughout the period involved. There has been no
material adverse change in the business, operations, properties, or financial
condition of Borrower and its Consolidated Subsidiaries, taken as a whole, since
the date of such financial statements.
(c) Borrower and its Consolidated Subsidiaries, when taken as a
whole, do not have any material direct or contingent liabilities, liabilities
for taxes, long-term leases, or unusual forward or long-term commitments as of
the date of this Agreement which are not disclosed by, provided for, or reserved
against in the foregoing financial statements or referred to in notes thereto,
and at the date of this Agreement there are no material unrealized or
anticipated losses of Borrower and its Subsidiaries, when taken as a whole.
5.5 NO LITIGATION. Except as set forth in Schedule 5.5 hereto, there is
no suit or proceeding at law or in equity or other proceeding or investigation
(including proceedings by or before any court, arbitrator, governmental or
administrative commission, board, bureau, or other administrative agency)
pending, or to the knowledge of Borrower threatened, against Borrower, against
any of its Subsidiaries, or against any of its or their properties, existence,
or revenues which, individually or in the aggregate, if adversely determined, is
reasonably likely to have a Material Adverse Effect, or, regardless of outcome,
which would be required to be disclosed in notes to any consolidated balance
sheets as of the date hereof of Borrower and its Consolidated Subsidiaries
prepared in reasonable detail in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis.
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5.6 INVESTMENT COMPANY ACT; REGULATION
(a) Neither Borrower nor any of its Subsidiaries is an
"investment company," an "affiliated person" of, or "promoter" or "principal
underwriter" for, any "investment company," or a company "controlled" by an
"investment company," and Borrower is not an "investment advisor" or an
"affiliated person" of an "investment advisor" (as each of the quoted terms is
defined or used in the Investment Company Act of 1940, as amended). Neither the
making of the Advances or Loans, nor the establishment of the credits hereunder,
nor the application of the proceeds or repayment thereof by Borrower, nor the
consummation of the other transactions contemplated hereby, will violate the
provisions of the foregoing Act or any rule, regulation, or order promulgated
thereunder.
(b) Neither Borrower nor any of its Subsidiaries is subject to
regulation under any state or local public utilities code or federal, state, or
local statute or regulation limiting the ability of Borrower or any Subsidiary
to incur indebtedness for money borrowed.
5.7 DISCLOSURE AND NO UNTRUE STATEMENTS. No representation or warranty
or statement made by Borrower or by any Guarantor in the Loan Documents or in
any schedule or exhibit thereto, or in any certificate, report, statement, or
other document or information furnished to the Agent in connection with or prior
to the Loan Documents, or which will be made or furnished by Borrower or any
Guarantor from time to time in connection with the Loan Documents, contains or
will contain any misrepresentation or untrue statement of any material fact or
omits to state a material fact or any fact necessary to make the statements
contained herein or therein not misleading. There is no fact known to Borrower
which would have a Material Adverse Effect, which has not been set forth or
referred to in the Loan Documents or otherwise disclosed in writing to Agent.
5.8 TITLE TO ASSETS; LEASES IN GOOD STANDING. Borrower has good and
marketable title in fee to such of its fixed assets as are real property and
good and marketable title to its other properties and assets, including the
properties and assets reflected in the financial statements and notes thereto
described in Subsection 5.4 hereof, except where the failure to have such title
would not have a Material Adverse Effect, and except for such assets as have
been disposed of in the ordinary course of business. All such properties and
assets are free and clear of all liens, mortgages, pledges, security interests,
charges, title retention agreements, or other Encumbrances of any kind, except
those permitted under Subsection 8.2, if any. Each of Borrower and its
Subsidiaries enjoys peaceful and undisturbed possession under all leases under
which it is now operating, the termination of which could be reasonably expected
to have a Material Adverse Effect, and all such leases are valid, subsisting,
and in full force and effect and neither Borrower nor any Subsidiary is in
violation of any material term of any such lease.
5.9 PAMENT OF TAXES. Each of Borrower and, to the extent required, its
Subsidiaries, has filed or caused to be filed all federal, state, and local tax
returns which are required to be filed by it and has paid or caused to be paid
all taxes as shown on said returns or on any assessment received by it, to the
extent that such taxes have become due, other than taxes being contested in good
faith by appropriate proceedings diligently conducted and for which adequate
reserves have been established in accordance with Generally Accepted Accounting
Principles, and no controversy in respect of additional taxes of Borrower is
pending, or, to the knowledge of Borrower, threatened.
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5.10 NO DEFAULT UNDER AGREEMENT OR INSTRUMENTS. Each of Borrower and its
Subsidiaries is in full compliance with and is not in default in the
performance, observance, or fulfillment of any obligations, covenants, or
conditions contained in any agreement or instrument to which it is a party,
except where such failure would not have a Material Adverse Effect.
5.11 PATENTS, TRADEMARKS, LICENSES, ETC.. Each of Borrower and each of
its Subsidiaries owns, possesses, or has the right to use, and holds free from
burdensome restrictions or known conflicts with the rights of others, all
patents, patent rights, licenses, trademarks and service marks, trademark and
service mark rights, trade names, trade name rights, and copyrights, and all
rights with respect to the foregoing, necessary to conduct its business as now
conducted, and is in full compliance with the terms and conditions, if any, of
all such patents, patent rights, licenses, trademarks and service marks,
trademark and service mark rights, trade names, trade name rights, or copyrights
and the terms and conditions of any agreements relating thereto, except where
such failure would not have a Material Adverse Effect.
5.12 GOVERNMENT CONTRACT. Neither Borrower nor any Subsidiary of
Borrower is subject to the renegotiation of any government contract in any
material amount.
5.13 ERISA REQUIREMENT. Except as previously disclosed to Agent in
writing, neither Borrower nor any Subsidiary has in force any pension plan
subject to Title IV of ERISA. Neither Borrower nor any Subsidiary has ever
terminated a pension plan subject to Title IV of ERISA. In addition, neither
Borrower nor any predecessor of Borrower, nor any Subsidiary or any predecessor
of such Subsidiary, is now or was formerly during the five year period
immediately preceding the effective date of this Agreement a participating
employer in any multi-employer plan within the meaning of 001(1)(a)(3) of ERISA.
Each employee benefit plan maintained by Borrower or any Subsidiary which is
subject to the requirements of ERISA substantially complies with all of the
requirements of ERISA and those plans which are subject to being "qualified"
under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as
amended from time to time, have since their adoption been "qualified" and have
received favorable determination letters from the Internal Revenue Service so
holding. To the best knowledge of Borrower, there is no matter which would
adversely affect the qualified tax exempt status of any such trust or plan, and
except as previously disclosed to Agent, there are no deficiencies for any such
plan or trust. To the best knowledge of Borrower, no employee benefit plan
sponsored by Borrower or any Subsidiary has engaged in a non-exempt "prohibited
transaction" as defined in ERISA.
5.14 SOLVENCY. Borrower is, and on and after the consummation of the
transactions contemplated herein will be, Solvent. Each Subsidiary of Borrower
is, and on and after the consummation of the transactions contemplated herein
will be, Solvent.
5.15 LOCATION OF OFFICES. The chief executive office, the principal
place of business, and the office where all books and records of Borrower and
each Subsidiary of Borrower are kept is at the location described on the
signature pages hereof for Borrower.
5.16 SUBSIDIARIES. The matters described above at Subsections 5.1, 5.2,
5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.11, 5.12, 5.13, 5.14, and 5.15 with
respect to Borrower, its business, and its assets, are true with respect to each
Subsidiary, its business, and its assets, to the extent applicable.
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SECTION 6. CONDITIONS OF LENDING
The obligation of Agent and the Lenders to establish the credit and to
permit any Borrowings hereunder is conditioned upon the performance of all
agreements by Borrower contained herein that are required to be performed at or
prior to the time of such Borrowings, as well as satisfaction or waiver by the
Required Lenders of the following conditions precedent:
6.1 CONTINUING ACCURACY OF REPRESENTATIONS AND WARRANTIES. At the time
of each Borrowing hereunder, the representations and warranties set forth in
Section 5 hereof, as supplemented by written disclosures given by Borrower to
Agent and the Lenders (including subsequent financial statements provided to
Agent and the Lenders) of changes affecting such representations and warranties
(but which changes would not create an Event of Default under this Agreement
except as may have been waived by the Required Lenders in writing or for which
consent has been given by the Required Lenders in writing in their sole
discretion) shall be true, correct, and complete on and as of the date of the
Borrowing with the same effect as though the representations and warranties had
been made on and as of the date of the Borrowing, except to the extent that such
representations and warranties may expressly relate to an earlier date, in which
case they shall continue to be true as of such date.
6.2 NO DEFAULT. At the time of each Borrowing hereunder, no Event of
Default, nor any event which upon notice or lapse of time or both would
constitute an Event of Default, shall have occurred and be continuing at the
time of such Borrowing.
6.3 BORROWING CERTIFICATE At the time of each Borrowing hereunder,
Borrower will deliver to Agent a certificate substantially in the form of
Exhibit B attached to this Agreement ("Borrowing Certificate"), executed by
Borrower's chief executive officer certifying the matters contained in
Subsections 6.1 and 6.2 hereof, and including without limitation a specific
certification of compliance with all covenants including all financial covenants
of the Borrower, as of such date (or specifying all exceptions thereto and what
actions Borrower is taking or proposes to take with respect thereto), which
Borrowing Certificate shall be in form and substance satisfactory to Agent.
6.4 OPINION OF BORROWER'S COUNSEL. On or prior to the date of this
Agreement, Agent and the Lenders shall have received the favorable opinion of
counsel for Borrower, in form and substance satisfactory to Agent and the
Lenders.
6.5 APPROVAL OF AGENT'S COUNSEL. On or prior to the date of this
Agreement, all legal matters in connection with the Loan Documents and the
transactions herein and therein contemplated and all documents and proceedings
shall be satisfactory in form and substance to Holland & Knight, counsel for
Agent.
6.6 LOAN DOCUMENTS. On or prior to the date of this Agreement, Agent
shall have received, on behalf of the Lenders, duly executed, this Agreement and
the other Loan Documents, all in form and substance satisfactory to Agent,
counsel for Agent, and the Lenders.
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6.7 INSURANCE.At least ten (10) days prior to the Closing under this
Agreement, Agent shall have received, on behalf of the Lenders, evidence of
insurance coverage of Borrower and all of its Subsidiaries, and their business
and properties, satisfactory in form, substance and amount, to the Agent, in its
reasonable discretion, including such insurance coverage for liability,
casualty, property damage, hazards, workmen's compensation and any other special
coverages as the Agent may reasonably require.
6.8 SUPPORTING DOCUMENTS. On or prior to the date of this Agreement,
Agent shall have received, on behalf of the Lenders, all other documents and
instruments required hereunder or otherwise reasonably required by Agent or any
Lender to be executed and delivered or otherwise provided in form and substance
satisfactory to Agent, counsel for Agent, and the Lenders, including without
limitation certified copies of organizational documents, including bylaws,
authorizing resolutions of the Board of Directors, incumbency certificates, and
good standing certificates for the Borrower and each Guarantor; certified copies
of all consents, approvals, authorizations, registrations, or filings required
to be made or obtained by the Borrower or any Guarantor in connection with this
Agreement or the credit extended hereunder; executed, recorded and filed Uniform
Commercial Code financing statements perfecting first lien security interests in
all of the Borrower's Collateral and all of the Subsidiary's Collateral of each
Subsidiary; and any and all other agreements, documents or instruments
reasonably required by Agent to obtain the Guaranties and the security interests
to be granted pursuant to Section 4 of this Agreement.
SECTION 7. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that from the date of this Agreement until
payment in full of all present or future indebtedness hereunder and termination
of all present or future credit facilities established hereunder, unless the
Required Lenders shall otherwise consent in writing, Borrower will fully comply
with the following provisions:
7.1 FINANVIAL REPORTS AND OTHER INFORMATION. Borrower will deliver or
cause to be delivered to Agent and the Lenders the following:
(a) As soon as practicable and in any event within sixty (60)
days after the end of each fiscal quarter, then current financial statements of
the Borrower and its Consolidated Subsidiaries for such fiscal quarter,
including without limitation a balance sheet as of the last day of such quarter,
a statement of income for such quarter and cumulative year-to-date, and related
statement of cash flows for such fiscal quarter for Borrower and its
Consolidated Subsidiaries, all in reasonable detail and satisfactory in scope to
Required Lenders and certified by the chief financial officer of Borrower as to
the fairness, completeness and accuracy of such financial statements and that
the same have been prepared in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis, subject to changes resulting from
normal, recurring year-end adjustments;
(b) As soon as practicable and in any event within one hundred
twenty (120) days after the end of each fiscal year, the then current audited
financial statements of the Borrower and its Consolidated Subsidiaries for such
fiscal year, including the balance sheet as of the end of such fiscal
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year, and related statements of income, retained earnings, and cash flows for
such fiscal year for Borrower and its Consolidated Subsidiaries, setting forth
in each case in comparative form figures for the corresponding period in the
preceding fiscal year, all in reasonable detail and satisfactory in scope to
Required Lenders and, with respect to consolidated financial statements for
Borrower, certified by and containing an unqualified opinion of Arthur Anderson
LLP, or other independent certified public accountants of recognized national
standing, which accountants shall be selected by Borrower and satisfactory to
the Required Lenders, and with respect to the other financial statements,
certified by the chief financial officer of Borrower as to the fairness,
completeness and accuracy of such financial statements and that the same have
been prepared in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis, subject to changes resulting from normal,
recurring year-end adjustments;
(c) Together with delivery of the items required in clause (b),
a detailed report of the Borrower's projections of its revenues, expenses,
results of operations, cash flows and financial position for the next fiscal
year, broken down by month, in such degree of specificity as may be reasonably
requested by Agent, and including without limitation projected income
statements, balance sheets and cash flow statements for each quarter of the next
fiscal year for the Borrower and its Consolidated Subsidiaries;
(d) Within ten (10) days after receipt thereof, copies of any
management audit letters provided to Borrower by the independent certified
public accountant who prepared Borrower's financial statements;
(e) As soon as practicable and in any event within sixty (60)
days after the end of each fiscal quarter, a copy of any quarterly 10-Q report
or any other report filed by Borrower with the United States Securities and
Exchange Commission during or for such quarter, if any;
(f) As soon as practicable and in any event within one hundred
twenty (120) days after the end of each fiscal year, a copy of the annual 10-K
report filed by Borrower with the United States Securities and Exchange
Commission if any;
(g) Together with each delivery of the items required by clauses
(a) and (b) above, a certificate in the form attached hereto as Exhibit C (the
"Compliance Certificate") executed by the chief financial officer of Borrower,
(i) containing computations in reasonable detail indicating compliance with
Subsections 7.15(a), (b), (c), (d), (e) and (f) hereof, and (ii) certifying the
matters contained in Subsections 6.1 and 6.2 hereof as of such date (or
specifying all exceptions thereto and what actions Borrower is taking or
proposes to take with respect thereto);
(h) As soon as practicable and in any event within twenty-five
(25) days after the end of each calendar month, then current consolidating
(breaking out each Subsidiary separately) and consolidated financial statements
of the Borrower and its Consolidated Subsidiaries for such month, including
without limitation a balance sheet as of the last day of such month, statement
of income for such month and cumulative year-to-date, and related statement of
cash flows, in each case for Borrower and its Consolidated Subsidiaries, and for
each Subsidiary separately, all in reasonable detail and satisfactory in scope
to Required Lenders and certified by the chief financial officer of Borrower as
to the fairness, completeness and accuracy of such financial statements and that
the same
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have been prepared in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis, subject to changes resulting from normal,
recurring year-end adjustments;
(i) With reasonable promptness, such additional financial or
other data relating to Borrower or any of its Subsidiaries as Agent or any
Lender may from time to time reasonably request.
Agent and the Lenders are hereby authorized to deliver upon request a
copy of any financial statements or any other information relating to the
business, properties, or financial condition of Borrower or any of its
Subsidiaries which may be furnished to them or come to their attention pursuant
to the Loan Documents or otherwise, to any regulatory body or agency having
jurisdiction over Agent or the Lenders or to any Person which shall, or shall
have the right or obligation to, succeed to all or any part of Agent's or the
Lenders' interest in the Loan Documents, subject to the provisions of Subsection
12.18 hereof.
7.2 PAYMENT OF INDEBTEDNESS TO AGENT; PERFORMANCE OF OTHER COVENANTS;
PAYMENT OF OTHER OBLIGATIONS. (a) Borrower will make full and timely payment of
the principal of and interest on the indebtedness owed hereunder, subject to the
grace periods set forth in Subsection 9.1, if any; (b) Borrower will duly comply
with all the terms and covenants contained in the Loan Documents; and (c)
Borrower will make full and timely payment of all other Indebtedness of Borrower
to Agent, whether now existing or hereafter arising, subject to any applicable
grace periods.
7.3 CONDUCT OF BUSINESS; MAINTENANCE OF PROPERTY. Borrower will do or
cause to be done all things necessary to preserve and to keep in full force and
effect its corporate existence and rights and privileges as a corporation and
its franchises, licenses, trade names, patents, trademarks, and permits which
are necessary for the continuance of its business, and continue to engage
principally in the business currently operated by Borrower.
7.4 MAINTENANCE OF PROPERTY. Borrower will maintain its property in good
condition and repair and, from time to time, make all necessary and proper
repairs, renewals, replacements, additions, and improvements thereto, so that
the business carried on may be properly and advantageously conducted at all
times in accordance with prudent business management; provided, however, that
nothing contained herein shall prevent Borrower from selling or abandoning items
of property in the ordinary course of business or, with concurrent written
notice to Agent, from terminating, in the discretion of the officers or
directors of Borrower, any joint venture or any non-material operation.
7.5 RIGHT OF INSPECTION; DISCUSSIONS. Borrower will permit any Person
designated by Agent or the Required Lenders to visit and inspect any of the
properties, corporate books, records, papers, and financial reports of Borrower,
including the making of any copies thereof and abstracts therefrom, and to
discuss its affairs, finances, and accounts with its principal officers, all at
such reasonable times during normal business hours and with prior notice and as
often as Agent or the Required Lenders may reasonably request. Borrower will
also permit Agent or the Required Lenders, or their designated representatives,
to audit or appraise, at Agent's or such Required Lenders' expense, any of its
assets or financial and business records, provided that upon the
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occurrence and continuance of an Event of Default, such audit or appraisal shall
be at Borrower's expense. Any designated representative of Agent or Required
Lenders shall agree to be bound by the provisions of Subsection 12.18 hereof.
7.6 NOTICES. Borrower will reasonably promptly give notice in writing to
Agent of:
(a) The occurrence of any Event of Default (or event which would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both) hereunder in which case such notice shall specify the
nature thereof, the period of existence thereof, and the action that Borrower
proposes to take with respect thereto;
(b) the occurrence of any casualty to any facility of Borrower
or any of its Subsidiaries or any other force majeure (including, without
limitation, any strike or other labor disturbance) affecting the operation or
value of any such facility, and whether or not such casualty or force majeure is
covered by insurance, which casualty, facility, or force majeure could
reasonably be expected to give rise to a Material Adverse Effect;
(c) the commencement or any material change in the nature or
status of any litigation, dispute, or proceeding, or the instituting of any
attachment, levy, execution, or other process by or against any assets of
Borrower or any of its Subsidiaries, which could reasonably be expected to have
a Material Adverse Effect; and
(d) the occurrence of a change in, modification to, cancellation
or early termination of, or default in (or event which would constitute a
default but for the requirement that notice be given or time elapse or both) any
obligation, contract, or agreement of Borrower or any of its Subsidiaries with
any other Person, which could reasonably be expected to give rise to a Material
Adverse Effect.
7.7 PAYMENT OF TAXES; LIENS. Borrower will pay or cause to be paid when
due, subject to any permitted extensions, all taxes, assessments, and other
governmental charges which may lawfully be levied or assessed (a) upon the
income or profits of Borrower; (b) upon any property, real, personal or mixed,
belonging to Borrower, or upon any part thereof; or (c) by reason of employee
benefit plans sponsored by Borrower, and will also pay or cause to be paid when
due, subject to any permitted extensions, any lawful claims for labor, material,
or supplies which, if unpaid, might become a lien or charge against any property
of Borrower; provided, however, Borrower shall not be required to pay any such
tax, assessment, charge, levy, or claim that is past due so long as the validity
thereof shall be actively contested in good faith by appropriate proceedings and
Borrower shall have set aside on its books adequate reserves (determined in
accordance with Generally Accepted Accounting Principles) with respect to any
such tax, assessment, charge, levy, or claim so contested; but provided further
that any such tax, assessment, charge, levy, or claim shall be paid forthwith
upon the commencement of proceedings to foreclose any lien securing the same.
7.8 INSURANCE OF PROPERTIES. Borrower will keep its business and
properties insured at all times by insurance companies selected by it and
acceptable to Agent against the risks for which provision for such insurance is
usually made by other Persons engaged in a similar business similarly
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situated (including without limitation insurance for fire and other hazards and
insurance against liability on account of damage to persons or property and
insurance under all applicable workman's compensation laws) and to the same
extent thereto and carry such other types and amounts of insurance as are
usually carried by Persons engaged in the same or a similar business similarly
situated, and upon request deliver to Agent a certificate from the insurer
setting forth the nature of the risks covered by such insurance, the amount
carried with respect to each risk, and the name of the insurer.
7.9 TRUE BOOKS. Borrower will keep proper and true books of record and
account, satisfactory to Agent, in which full, true, and correct entries will be
made of all of its dealings and transactions customarily recorded in the books
of businesses of types substantially similar to that of Borrower, and establish
on its books such reserves as may be required by Generally Accepted Accounting
Principles with respect to all taxes, assessments, charges, levies, and claims
referred to in Subsection 7.7 hereof, and with respect to its business in
general, and will, to the extent required by Generally Accepted Accounting
Principles, include such reserves in any interim as well as year-end financial
statements.
7.10 OBSERVANCE OF LAWS. Borrower will conform to and duly observe in
all material respects, all laws, regulations, and other valid requirements of
any governmental authority with respect to the conduct of its business,
including without limitation all laws, rules and regulations referenced in
Subsection 5.1 above.
7.11 FURTHER ASSURANCES. At its cost and expense, upon request of Agent,
Borrower will duly execute and deliver or cause to be duly executed and
delivered to Agent such further instruments or documents and do and cause to be
done such further acts as may be reasonably necessary or proper in the opinion
of Agent to carry out more effectively the provisions and purposes of this
Agreement.
7.12 ERISA BENEFIT PLANS. Borrower will substantially comply with all
requirements of ERISA applicable to it. Borrower will furnish to Agent as soon
as possible and in any event within 10 days after Borrower or a duly appointed
administrator of a plan (as defined in ERISA) knows or has reason to know that
any reportable event, funding deficiency, or prohibited transaction (as defined
in ERISA) with respect to any plan has occurred, a statement of the chief
financial officer of Borrower describing in reasonable detail such reportable
event, funding deficiency, or prohibited transaction and any action which
Borrower proposes to take with respect thereto, together with a copy of the
notice of such event given to the Pension Benefit Guaranty Corporation or the
Internal Revenue Service or a statement that said notice will be filed with the
annual report of the United States Department of Labor with respect to such plan
if such filing has been authorized.
7.13 WITHHOLDING TAXES. Borrower will pay, as and when due, all employee
withholding, FICA, and other tax payments required by federal, state, and local
governments with respect to wages paid to employees.
7.14 CHANGE OF NAME, PRINCIPAL PLACE OF BUSINESS, OFFICE, OR AGENT.
Borrower will notify Agent in writing of any change in the name of Borrower or
any of its Subsidiaries, the principal place of business of Borrower or any of
its Subsidiaries, the office where the books and
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records of Borrower or any of its Subsidiaries are kept, or any change in the
registered agent of Borrower or any of its Subsidiaries for the purposes of
service of process, in each case within [ten (10) days] before any such change
made.
7.15 FINANCIAL CONVENANTS. Borrower will at all times hereunder, in
accordance with Generally Accepted Accounting Principles applied on a Consistent
Basis, maintain with respect to Borrower and its Consolidated Subsidiaries, on a
consolidated basis:
(a) Tangible Net Worth at all times greater than or equal to the
sum of (i) Twenty-Eight Million Dollars ($28,000,000.00) plus (ii) the amount
equal to Sixty Percent (60%) of consolidated net income, or One Hundred Percent
(100%) of the consolidated net loss, of the Borrower and its Consolidated
Subsidiaries for the most recently ended fiscal quarter.
(b) A ratio of EBITDA to the sum of interest expense plus
current maturities of Funded Debt, greater than or equal to 2.00 to 1.00, at the
end of each fiscal quarter, with interest expense plus current maturities of
Funded Debt calculated as of such quarter end (provided that "current
maturities" for the quarter ended June 30, 1997 shall exclude debt paid off with
proceeds of Advances under the Revolving Credit Facility), and with EBITDA for
this purpose calculated in the manner set forth below:
(i) For the quarter ended June 30, 1997, EBITDA for
such quarter multiplied by four (4);
(ii) For the quarter ended September 30, 1997, the
product of Two (2) multiplied by the sum of (A)
EBITDA for the quarter ended June 30, 1997 and (B)
EBITDA for the quarter ended September 30, 1997;
(iii) For the quarter ended December 31, 1997, the
product of One and Thirty-Three One Hundredths
(1.33) multiplied by the sum of (A) EBITDA for the
quarter ended June 30, 1997 and (B) EBITDA for the
quarter ended September 30, 1997 and (C) EBITDA for
the quarter ended December 31, 1997;
(iv) For all quarters ended after December 31, 1997,
EBITDA calculated at the end of such quarter for
the four quarters then ending.
(c) A ratio of Current Assets to Current Liabilities of greater
than or equal to 1.40 to 1.00 at the end of each fiscal quarter, with both of
Current Assets and Current Liabilities calculated as of such quarter end;
(d) A ratio of Senior Revolving Debt to EBITDA of less than or
equal to (A) 2.00 to 1.00, for the quarter ended June 30, 1997, (B) 3.00 to
1.00, for the quarter ended September 30, 1997, and (C) 4.00 to 1.00, for all
quarters ending after December 31, 1997, with Senior Revolving Debt calculated
as of each such quarter end and with EBITDA calculated for this purpose as set
forth below:
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(i) For the quarter ended June 30, 1997, EBITDA for
such quarter multiplied by four (4);
(ii) For the quarter ended September 30, 1997, the
product of Two (2) multiplied by the sum of (A)
EBITDA for the quarter ended June 30, 1997 and (B)
EBITDA for the quarter ended September 30, 1997;
(iii) For the quarter ended December 31, 1997, the
product of One and Thirty-Three One Hundredths
(1.33) multiplied by the sum of (A) EBITDA for the
quarter ended June 30, 1997 and (B) EBITDA for the
quarter ended September 30, 1997 and (C) EBITDA for
the quarter ended December 31, 1997;
(iv) For all quarters ended after December 31, 1997,
EBITDA calculated at the end of such quarter for
the four quarters then ending.
(e) A ratio of Total Funded Debt to Capital of less than or
equal to 0.60 to 1.00 at the end of each fiscal quarter, with both of Total
Funded Debt and Capital calculated as of such quarter end; and
(f) A ratio of Senior Funded Debt to Capital of less than or
equal to 0.40 to 1.00 at the end of each fiscal quarter, with both of Senior
Funded Debt and Capital calculated as of such quarter end.
7.16 OPERATING ACCOUNTS. Borrower shall have established and shall
maintain, at all times hereunder, all primary depositary accounts used by the
Borrower or any Subsidiary, or in the business of the Borrower or any of its
Subsidiaries, at the Lending Office of the Agent.
7.17 HEDING REQUIREMENTS. At all times on and after [the Closing Date
hereunder], Borrower shall maintain one or more Interest Rate Agreements with
respect to the Loans covering an aggregate combined notional principal amount of
not less than $2,500,000. Such Interest Rate Agreements shall each (a) have a
term of not less than two (2) years from the Closing Date, (b) be with Agent or
financial institutions satisfactory to Agent, and (c) be in form and substance
satisfactory to Agent.
7.18 AFFIRMATIVE COVENANTS RELATING TO SUBSIDIARIES. Borrower will cause
each Subsidiary to do, with respect to itself, its business, and its assets, all
of the things required of Borrower in Subsections 7.2, 7.3, 7.4, 7.5, 7.6, 7.7,
7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15 and 7.16.
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SECTION 8. NEGATIVE COVENANTS
Borrower covenants and agrees that from the date of this Agreement until
payment in full of all present or future indebtedness hereunder and termination
of all present or future credit facilities established hereunder, unless the
Required Lenders shall otherwise consent in writing, Borrower will fully comply
with the following provisions:
8.1 OTHER INDEBTEDNESS. Borrower will not, directly or indirectly,
create, incur, assume, or permit to exist any Indebtedness, except: (a)
Indebtedness under this Agreement; (b) indebtedness outstanding as of the date
of this Agreement with respect to and secured by the Permitted Prior Liens, but
not including any future advances, extensions, renewals, modifications or
increases of any such indebtedness; (c) capital lease obligations incurred in
the ordinary course of business to finance Capital Expenditures (other than
expenditures for equipment purchases or equipment leases permitted under Section
8.1(d)), provided that such indebtedness shall be incurred within 90 days after
the making of the Capital Expenditures financed thereby, and provided further
that such indebtedness shall not exceed $1,000,000.00 in the aggregate at any
time; (d) indebtedness incurred in the ordinary course of business of the
Borrower and its Subsidiaries which are Guarantors in connection with the
purchase or lease of equipment or vehicles, whether or not secured by purchase
money security interests therein, provided that such indebtedness shall not
exceed $3,500,000.00 in the aggregate at any time, including both the proceeds
of any Advances hereunder used for such purposes and any Indebtedness to any
other Person for such purposes; and (e) Interest Rate Agreements and currency
hedging arrangements.
8.2 LIMITATIONS ON MORTGAGES, LIENS, ETC. Borrower will not, directly or
indirectly, create, incur, assume, or suffer or permit to exist any mortgage,
pledge, lien, security interest, or other charge or encumbrance (including the
lien or retained security title of a conditional vendor or lessor, but excluding
liens, if any, evidenced by operating leases) upon or with respect to any of its
assets, or assign or otherwise convey any right to receive income, except: (a)
capital leases described in Subsection 8.1(b) hereof; (b) purchase money
security interests described in Subsection 8.1(c) hereof; (c) liens on assets
acquired after the date hereof if such liens were in place at the time of
acquisition; (d) non-consensual liens which are removed within ten (10) days
after the incurrence thereof; (e) deposits or pledges in connection with
worker's compensation, unemployment insurance, or other social security
obligations incurred in the ordinary course of business; (f) liens securing the
performance of bids, tenders, contracts (other than for the repayment of
borrowed money), leases, statutory obligations, surety and appeal bonds; (g)
mechanics', workmen's, materialmen's, or other like liens arising in the
ordinary course of business in respect of obligations which are not due or which
are being contested in good faith; (h) liens for taxes not yet due or being
contested in good faith by appropriate proceedings, and in the case of those
being contested, as to which Borrower shall have set aside on its books adequate
reserves; (i) liens imposed by operation of law, unless the amount of the claim
or the value of the affected property is in excess of $100,000.00 and the lien
is not discharged within sixty (60) days after it has attached; and (j)
easements, rights-of-way, restrictions, and other similar encumbrances incurred
in the ordinary course of business and not interfering with the ordinary course
of the business.
8.3 GUARANTIES. Borrower will not, directly or indirectly, guarantee,
assume, endorse, become a surety or accommodation party for, or otherwise in any
way extend credit or become
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responsible for or remain liable or contingently liable in connection with any
Indebtedness or other obligations of any other Person or entity except (i)
guaranties and endorsements made in connection with the deposit of negotiable
instruments and other items for collection or credit in the ordinary course of
business or (ii) guaranties by the Borrower of Indebtedness of a Subsidiary of
Borrower that is a Guarantor which Indebtedness is permitted pursuant to Section
8.1(c).
8.4 MERGER, ACQUISITION, SALE OF ASSETS, DISSOLUTION, ETC. Borrower will
not, directly or indirectly: (a) enter into any transaction of merger or
consolidation or any acquisition having a total purchase price in excess of Five
Million United States Dollars (U.S. $5,000,000.00), any divestiture having a
sale price in excess of One Million United States Dollars (U.S. $1,000,000.00),
or any joint venture or other alliance or contractual arrangement with another
Person having combined capital contributions or a total contract value in excess
of Five Million United States Dollars (U.S.$5,000,000.00), without Agent's prior
written consent to such transaction; provided that the foregoing shall not be
construed as prohibiting construction contracts entered into by the Borrower's
Subsidiary, Paragon Construction International, Inc., in the ordinary course of
its business; (b) transfer, sell, assign, lease, or otherwise dispose of all or
a substantial part of its properties or assets; (c) transfer, sell, assign,
discount, lease, or otherwise dispose of any of its notes or other instruments,
accounts receivable, or contract rights with or without recourse, except for
collection in the ordinary course of business, or any assets or properties
necessary for the proper conduct of its business; (d) change the scope or nature
of its business except that Borrower may expand its business, by internal growth
and not by acquisitions (without Agent's prior written consent), into
substantially similar or related types of businesses; (e) enter into any
arrangement, directly or indirectly, with any Person whereby Borrower shall sell
or transfer any property, real or personal, used or useful in its business,
whether now owned or hereafter acquired, and thereafter rent or lease such
property for a term of more than three (3) years which Borrower intends to use
for substantially the same purpose or purposes as the property being sold or
transferred, provided that the foregoing shall not be construed as prohibiting
equipment leases to the extent permitted pursuant to Section 8.1(c); (f) wind
up, liquidate, or dissolve itself or its business; or (g) agree to any of the
foregoing.
8.5 FEDERAL RESERVE REGULATIONS. Borrower will not and will not permit
any Subsidiary to take any action, or permit any part of the proceeds of the
Advances or Loans made pursuant to this Agreement to be used in any manner,
which will violate or result in non-compliance of the Advances made hereunder
with Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System. Borrower represents that neither it nor any of its Subsidiaries is
engaged, and covenants that neither it nor any of its Subsidiaries will become
engaged, as one of its principal or important activities in extending credit for
the purpose of purchasing or carrying margin stock. If requested by Agent,
Borrower will furnish to Agent in connection with any Advance or Loans
hereunder, a statement in conformity with the requirements of Federal Reserve
Form U-1 or other forms referred to in said regulations. In addition, Borrower
covenants that no part of the proceeds of the Advances or Loans hereunder will
be used for the purchase of commodity future contracts (or margins therefor for
short sales) for any commodity not required for the normal raw material
inventory of Borrower.
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8.6 CHANGES IN GOVERNING DOCUMENTS, ACCOUNTING METHODS, FISCAL YEAR.
Borrower will not (a) amend, in a manner that could reasonably be expected to
give rise to a Material Adverse Effect, its certificate of incorporation or
bylaws from that in existence on the date of this Agreement, or (b) (i) change
in any material respect (A) its accounting methods or practices, or (B) its
depreciation or amortization policy or rates, or (ii) change its fiscal year end
from that in existence as of the date of the financial statements provided to
Agent pursuant to Subsection 5.4 hereof, except in each case as required to
comply with law or with Generally Accepted Accounting Principles. Borrower shall
give notice to Agent of any such amendment or change permitted hereunder.
8.7 CAPITAL EXPENDITURES. Borrower will not make or be committed to
make, or permit any of its Subsidiaries to make or be committed to make, any
Capital Expenditure (by purchase or capitalized lease) other than Capital
Expenditures (including obligations under capitalized leases) which would not
cause the aggregate amount of all such Capital Expenditures to exceed One
Million Dollars ($1,000,000.00) in any calendar year; provided that this Section
8.7 shall not be construed as prohibiting Indebtedness or expenditures for
equipment purchases or equipment leases in the ordinary course of business of
the Borrower and its Subsidiaries which are Guarantors to the extent permitted
pursuant to Section 8.1(c).
8.8 DIVIDENDS, ETC. Borrower will not declare or pay any dividends,
purchase or otherwise acquire for value any of its capital stock now or
hereafter outstanding, return any capital to its stockholders as such, or make
any other payment or distribution of assets to its stockholders as such, or
permit any of its Subsidiaries to do any of the foregoing or to purchase or
otherwise acquire for value any stock of the Borrower or its Subsidiaries or
make any payment or prepayment of principal of, premium, if any, or interest on,
or redeem, defease or otherwise retire, any Indebtedness before its scheduled
due date.
8.9 CHANGE IN CONTROL. Borrower shall not permit a Change in Control
with respect to the Borrower to occur without the prior written consent thereto
of the Agent.
8.10 NEGATIVE COVENANTS RELATING TO SUBSIDIARIES. Borrower will not
permit any of its Subsidiaries to do, with respect to itself, its business, or
its assets, any of the things prohibited to Borrower in Subsection 8.1, 8.2,
8.3, 8.4, 8.5, 8.6, 8.7 or 8.8.
SECTION 9. EVENTS OF DEFAULT
The following events shall constitute "Events of Default" hereunder.
9.1 PAYMENT OF INDEBTEDNESS UNDER LOAN DOCUMENTS. Borrower fails to make
payment of any principal, interest, or other amount due on any indebtedness owed
to Agent or Lenders under the Loan Documents, or fails to make any other payment
to Agent or Lenders as contemplated thereunder either by the terms hereof or
otherwise, and, in the case of interest, such failure continues for ten (10)
days after the interest payment is due. Or, Borrower fails at any time to
maintain sufficient funds in the Loan Payment Account to cover in full any debit
made or authorized to be made thereto by Agent pursuant to Section 2.9(a).
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9.2 REPRESENTATIN OR WARRANTY. Any representation or warranty made or
deemed, pursuant to Subsection 6.1 hereof, made by Borrower or any executive
officer of Borrower herein or in any writing furnished in connection with or
pursuant to the Loan Documents, or any report, certificate, financial statement,
or other information provided by Borrower or any executive officer of Borrower
to Agent or a Lender in connection with or pursuant to the Loan Documents, shall
be false or misleading in any material respect on the date when made or when
deemed made.
9.3 COVENANTS UNDER THE LOAD DOCUMENTS. Borrower fails to fully and
promptly perform when due any agreement, covenant, term, or condition binding on
it, other than as described in Subsection 9.1 hereof, contained in this
Agreement or any other Loan Document, or otherwise a part of the transactions
covered hereby, upon such failure with respect to covenants and agreements
contained in Subsection 7.15 and Section 8 hereof, and with respect to other
covenants and agreements, if such failure continues for thirty (30) days after
written notice thereof has been provided to Borrower by Agent or the Required
Lenders.
9.4 CROSS-DEFAULT. A default or event of default occurs under any
present or future Indebtedness of Borrower to Agent or any Lender not evidenced
by the Loan Documents or a default or event of default occurs under any guaranty
or security document executed by any Person in connection therewith, and any
such default or event of default continues beyond the expiration of any
applicable grace or cure period.
9.5 PAYMENT, PERFORMANCE, OR DEFALT OF OTHER INDEBTEDNESS. Borrower
fails to make payment on any Indebtedness other than as described in Subsections
9.1 and 9.4 above, if such failure, default, or event of default continues
beyond the expiration of any applicable grace or cure period, or Borrower fails
to fully and promptly perform any other obligation, agreement, term, or
condition contained in any agreement under which any such other Indebtedness is
created, or there is otherwise a default or event of default thereunder if such
failure, default, or event of default results in the acceleration of or entitles
the obligee to accelerate the maturity of the Indebtedness thereunder, in each
case if such failure, default, or event of default could reasonably be expected
to give rise to a Material Adverse Effect.
9.6 LIQUIDATION; DISSOLUTION; BANKRUPTCY; ETC. Borrower liquidates or
dissolves, the entire business of Borrower is suspended; Borrower files or
commences a voluntary petition, case, proceeding, or other action seeking
reorganization, arrangement, readjustment of its debts, or any other relief
under any existing or future law of any jurisdiction, domestic or foreign, state
or federal, relating to bankruptcy, insolvency, reorganization, or relief of
debtors, or Borrower takes any other action indicating its consent to, approval
of, or acquiescence in, any such petition, case, proceeding, or other action
seeking to have an order for relief entered with respect to it or its debts;
Borrower applies for, or consents to or acquiesces in, the appointment of a
receiver, trustee, custodian, or other similar official for Borrower or for all
or a substantial part of its property; Borrower makes an assignment for the
benefit of creditors; or Borrower is unable to pay its debts as they mature or
admits in writing its inability to pay its debts as they mature.
9.7 INVOLUNTARY BAKRUPTCY, ETC.. An involuntary petition, case,
proceeding, or other action is commenced against Borrower under the Bankruptcy
Code or seeking reorganization, arrangement, readjustment of its debts, or any
other relief under any existing or future law of any
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jurisdiction, domestic or foreign, state or federal, relating to bankruptcy,
insolvency, reorganization, or relief of debtors; a receiver, trustee,
custodian, or other similar official is involuntarily appointed for Borrower or
for all or a substantial part of Borrower's property or assets; or any case,
proceeding, or other action seeking issuance of a warrant of attachment,
execution, distraint, or similar process against all or a substantial part of
Borrower's assets or property results in the entry of an order for such relief;
and any of the foregoing continues for sixty (60) days without being vacated,
discharged, stayed, bonded, or dismissed.
9.8 CHANGE IN CONTROL. The occurrence of any Change in Control with
respect to the Borrower, without the prior written consent thereto of the Agent.
9.9 JUDGMENTS. A judgment is entered against Borrower for the payment of
damages or money in excess of One Million Dollars ($1,000,000.00), if the same
is not discharged or if a writ of execution or similar process is issued with
respect thereto and is not bonded or stayed within the time allowed by law for
filing notice of appeal of the final judgment.
9.10 ATTACHMENT, GARNISHMENT, LIENS IMPOSED BY LAW. A writ of attachment
or garnishment is issued against, or a lien is imposed by operation of law on,
any property of Borrower, if the lesser of the amount of the claim or the value
of the affected property is in excess of $500,000.00, and if the lien is not
discharged within sixty (60) days after it has attached.
9.11 CORPORATE EXISTENCE, TRANSFER OF PROPERTY. Any act or omission
(formal or informal) of Borrower or its officers, directors, or shareholders
leading to, or resulting in, the termination, invalidation (partial or total),
revocation, suspension, interruption, or unenforceability of its corporate
existence, rights, licenses, franchises, or permits, or the transfer or
disposition (whether by sale, lease, or otherwise) to any Person of all or a
substantial part of its property.
9.12 SUBSIDIARIES. Any of the matters described at Subsections 9.2, 9.3,
9.4, 9.5, 9.6, 9.7, 9.8, 9.9, 9.10 or 9.11 hereof occurs with respect to any
Subsidiary, its business, or its assets.
SECTION 10. RIGHTS AND REMEDIES
10.1 REMEDIES AVAILABLE UNDER LOAN DOCUMENTS AND OTHERWISE. Agent and
the Lenders shall have, in addition to the rights and remedies contained in this
Agreement and the other Loan Documents, all of the rights and remedies of
creditors now or hereafter available at law or in equity. Agent may, at its
option, and shall, at the direction of the Required Lenders, exercise any one or
more of such rights and remedies individually, partially, or in any combination
from time to time, after the occurrence of an Event of Default. No right, power,
or remedy conferred upon Agent or the Lenders by the Loan Documents shall be
exclusive of any other right, power, or remedy referred to therein or now or
hereafter available at law or in equity.
10.2 REMEDIES UPON EVENT OF DEFAULT. If any one or more of the Events of
Default described in Subsections 9.6 or 9.7 shall occur with respect to
Borrower, the unpaid principal amount and accrued interest under the Revolving
Credit Facility and all other obligations under the Loan
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Documents shall automatically become immediately due and payable, without
presentment, demand, protest, or other requirement of any kind, all of which are
expressly waived by Borrower and the commitments of each Lender to make Advances
hereunder shall thereupon terminate; and if any one or more of any other Event
of Default shall occur (including under Subsections 9.6 or 9.7 with respect to
any Subsidiary), Agent shall, upon the written request or with the written
consent of the Required Lenders, take any one or more of the following actions:
(a) declare all or any portion of the unpaid principal amount and accrued
interest under the Revolving Credit Facility and all other obligations under the
Revolving Credit Facility to be, and the same shall forthwith become,
immediately due and payable, without presentment, demand, protest, or other
requirement of any kind, all of which are expressly waived by Borrower, and (b)
declare all commitments to make Advances hereunder to be terminated. Agent may
immediately proceed to do all other things provided for, or pursue any and all
remedies available, under any applicable law or the Loan Documents to enforce
the rights of Agent and the Lenders hereunder and to collect all amounts owing
to the Agent and the Lenders by Borrower.
SECTION 11. THE AGENT.
11.1 APPOINTMENT, AUTHORIZATION, AND ACTION.
(a) Each Lender hereby irrevocably appoints and authorizes Agent
to act as its agent hereunder and take such action on its behalf and to exercise
such powers and discretion under this Agreement and the other Loan Documents as
are delegated to Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. The relationship between Agent and each Lender is
and shall be that of agent and principal only and nothing herein shall be
construed to constitute Agent a trustee for any Lender or to establish a
fiduciary relationship with any Lender or impose on Agent any duties,
responsibilities, or obligations other than those expressly set forth in this
Agreement or the other Loan Documents.
(b) Agent shall be entitled to use its discretion with respect
to exercising or refraining from exercising any rights or taking any actions
which may be vested in it or which it may be able to take under or in respect of
this Agreement and the other Loan Documents, unless this Agreement expressly
otherwise provides or unless Agent shall have been instructed by the Required
Lenders to exercise or refrain from exercising such rights or taking such
actions (in which case it shall be required to so act or refrain from acting
pursuant to the directions of the Required Lenders); provided, however, that
Agent shall not be required to take any action or refrain from acting in any
manner which in its judgment exposes Agent to personal liability or which is
contrary to this Agreement or applicable law. Agent agrees to give to each
Lender prompt notice of each notice given to it by Borrower pursuant to the
terms of this Agreement.
11.2 EXCULPATION; RELIANCE BY THE AGENT. Agent (which term as used in
this Subsection, Subsection 11.6, and Subsection 12.2, shall include reference
to its affiliates and its own and its affiliates' directors, officers, agents,
and employees) shall not be liable for any action taken or omitted to be taken
by it or them, under or in connection with the Loan Documents, except for its or
their own gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, Agent: (i) may treat the Lender that made any
Advance as the holder of the indebtedness
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resulting therefrom until Agent receives and accepts an assignment and
acceptance instrument entered into by such Lender, as assignor, and an assignee,
as provided in Subsection 12.17; (ii) may consult with legal counsel (including
counsel for Borrower), independent public accountants, and other experts
selected by it, and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants, or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties, or
representations made in or in connection with the Loan Documents; (iv) shall not
have any duty to any Lender to ascertain or to inquire as to the performance or
observance of any of the terms, covenants, or conditions of any Loan Document on
the part of Borrower or to inspect the property (including the books and
records) of Borrower, and may assume that no Event of Default has occurred or is
continuing unless it has actual knowledge, has been notified by Borrower of such
fact, or has been notified in writing by a Lender that such Lender considers
that an Event of Default has occurred and is continuing and such Lender
specifies in detail the nature thereof in writing; (v) shall not be responsible
to any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency, or value of any Loan Document or any other instrument
or document furnished pursuant hereto; and (vi) shall incur no liability to any
Lender under or in respect of any Loan Document by acting upon any notice,
consent, certificate, or other instrument or writing (which may be by telegram,
telecopy, cable or telex) believed by it to be genuine and signed or sent by the
proper party or parties. Agent shall not be liable to the Lenders or to any
Lender in acting or refraining from acting under this Agreement or any other
Loan Document in accordance with the instructions of the Required Lenders (or of
all the Lenders if the consent or direction of all the Lenders is required
hereunder), and any action taken or failure to act pursuant to such instructions
shall be binding on all the Lenders.
11.3 AGENT AND AFFILIATES. With respect to its Revolving Credit
Commitment and the Advances made by it, Agent, in its capacity as a Lender (and
any successor acting as agent) shall have the same rights and powers under the
Loan Documents as any other Lender and may exercise the same as though it were
not Agent; and the term "Lender" or "Lenders" shall, unless otherwise indicated,
include Agent (and any successor acting as Agent) in its capacity as a Lender.
Agent and its affiliates may (without having to account therefor to any Lender)
accept deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from, and generally engage in any kind of
business with, Borrower, any of its Subsidiaries, and any Person who may do
business with or own securities of Borrower or any such Subsidiary, all as if it
were not Agent. Agent and its affiliates may accept fees and other consideration
from Borrower for services in connection with this Agreement or otherwise
without having to account for the same to the Lenders.
11.4 LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender, and based on
the financial statements of Borrower and such other documents and information as
it has deemed appropriate, made its own credit analysis of Borrower and its own
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently, and without reliance upon Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement or the other Loan Documents. Except for any notices,
reports, and other documents expressly required to be furnished to the Lenders
by Agent hereunder, or as otherwise required by law or regulation, Agent shall
not have any duty or
39
<PAGE>
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition, business, or property of Borrower
which may come into the possession of Agent or any of its affiliates.
11.5 ENFORCEMENT BY AGENT. All rights of action under this Agreement and
the other Loan Documents may be enforced by Agent and any suit or proceeding
instituted by Agent in furtherance of such enforcement may be brought in its
name as Agent without the necessity of joining any Lenders as plaintiffs or
defendants, and the recovery of any judgment shall be for the benefit of
Lenders, subject to the expenses of Agent. No Lender (other than Agent) shall
attempt to enforce any rights of action under this Agreement and the other Loan
Documents, except as permitted pursuant to Subsection 12.1 hereof.
11.6 INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent
not promptly reimbursed by Borrower and without limiting the obligations of
Borrower to do so) ratably according to the respective principal amounts of the
Advances then owing to each of them (or if no Advances are at the time
outstanding, ratably according to the respective amounts of their Revolving
Credit Commitments), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements or any kind or nature whatsoever that may be imposed on, incurred
by, or asserted against Agent in any way relating to or arising out of this
Agreement or any other Loan Documents or the transactions contemplated thereby,
or any action taken or omitted by Agent in connection therewith (including,
without limitation, the costs and expenses payable by Borrower under Subsection
12.2); provided, however, that no Lender shall be liable for any of the
foregoing to the extent they arise from Agent's gross negligence or willful
misconduct. Without limiting the foregoing, each Lender agrees to reimburse
Agent promptly upon demand for such Lender's ratable share of any costs and
expenses payable by Borrower under Subsection 12.2, to the extent that Agent is
not promptly reimbursed for such costs and expenses by Borrower. The agreements
contained in this Subsection shall survive the repayment of the Advances and
termination of the facilities hereunder.
11.7 FAILURE TO ACT. Except for actions expressly required of Agent
hereunder and under the other Loan Documents, Agent shall in all cases be fully
justified in failing or refusing to act hereunder and thereunder unless it shall
receive further assurances to its satisfaction from the Lenders of their
indemnification obligations hereunder against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action.
11.8 SUCCESSO AGENT. Agent may resign at any time by giving written
notice thereof to the Lenders and Borrower, and may be removed at any time with
or without cause by the Required Lenders. Upon any such resignation or removal,
and after consultation with and, provided that no Event of Default has occurred
and is continuing, consent of (which shall not be unreasonably withheld)
Borrower, the Required Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Lenders and shall have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, and after consultation with and, provided that no Event of Default has
occurred and is continuing, consent of (which shall not be unreasonably
withheld) Borrower, appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States of America or of any State thereof
40
<PAGE>
and having a combined capital and surplus of at least $100,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges, and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations under the
Loan Documents. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Section shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 12. MISCELLANEOUS.
12.1 LIEN ON DEPOSITS; SET-OFF. Borrower hereby grants to Agent and each
of the Lenders a continuing lien to secure all indebtedness of Borrower to Agent
and the Lenders, whether created hereunder, pursuant hereto, or otherwise, upon
any and all deposits and credits of Borrower, if any, at Agent or such Lender,
at any time existing (other than trust accounts or other special accounts). Upon
the occurrence of any Event of Default, each of Agent and the Lenders is hereby
authorized at any time and from time to time, with prompt notice to Borrower, to
set off, appropriate, and apply any or all items hereinabove referred to against
all indebtedness of Borrower owed to such Person, whether under the Loan
Documents or otherwise, whether now existing or hereafter arising. Any such
Person exercising the right of set-off shall be deemed to have exercised such
right and to have made a charge against such items immediately upon the
occurrence of such Event of Default although made or entered on its books
subsequent thereof.
12.2 PAYMENT OF EXPENSES, INCLUDING ATTORNEYS' FEES AND TAXES. Borrower
agrees: (a) to pay or reimburse Agent for all its reasonable and customary
out-of-pocket costs and expenses incurred in connection with the preparation,
negotiation, execution, and delivery of, and any amendment, supplement, or
modification to, or waiver or consent under, the Loan Documents, and the
consummation of the transactions contemplated thereby, including, without
limitation, the reasonable and customary fees and disbursements of counsel for
Agent, transaction taxes, and all recording or filing fees, if any, but
excluding any costs or expenses associated with any assignment or participation
pursuant to Subsection 12.17 hereof; (b) to pay or reimburse Agent and the
Lenders for all of their reasonable and customary out-of-pocket costs and
expenses incurred in connection with the collection or enforcement of, or the
preservation of any rights under, the Loan Documents, including, without
limitation, the reasonable and customary fees and disbursements of counsel for
each of Agent and the Lenders, including reasonable and customary attorneys'
fees out of court, in trial, on appeal, in bankruptcy proceedings, or otherwise;
(c) without limiting the generality of provision (a) hereof, to pay or reimburse
Agent and the Lenders for, and indemnify and hold Agent and the Lenders harmless
against liability for, any and all documentary stamp taxes or non-recurring
intangible taxes, together with any interest, penalties, or other liabilities in
connection therewith, that Agent or any Lender now or hereafter determines are
payable with respect to the Loan Documents, the obligations evidenced by the
Loan Documents, and any advances under the Loan Documents; and (d) to pay,
indemnify, and hold Agent and the Lenders harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance, and administration
of the Loan Documents. The agreements in this Subsection shall survive repayment
of all other amounts payable hereunder or pursuant hereto, now or in the future.
41
<PAGE>
12.3 NOTICES. Unless otherwise expressly agreed herein, and
notwithstanding any provisions to the contrary contained in the other Loan
Documents, all notices, requests, and demands to or upon the parties hereto
pursuant to any Loan Document shall be deemed to have been given or made when
delivered by hand or by courier service, when provided to a nationally
recognized overnight delivery service for overnight delivery, when transmitted
to a receiving facsimile transmission machine, or three days after deposit in
the mail, postage prepaid by registered or certified mail, return receipt
requested, addressed as shown on the signature pages hereof or any assignment
documents pursuant to Subsection 12.17 hereof.
12.4 GOVERNING LAW. The validity, interpretation, and enforcement of the
Loan Documents and the rights and obligations of the parties thereto, shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of Florida excluding those laws relating to the resolution of conflicts
between laws of different jurisdictions.
12.5 VENUE; PERSONAL JURISDICTION. In any litigation in connection with
or to enforce any of the Loan Documents, Borrower irrevocably consents to and
confers personal jurisdiction on the courts of the State of Florida or the
United States courts located within Palm Beach County in the State of Florida,
expressly waives any objections as to venue in any of such courts, and agrees
that service of process may be made on Borrower by mailing a copy of the summons
and complaint by registered or certified mail, return receipt requested, to the
address set forth herein (or otherwise expressly provided in writing). Nothing
contained herein shall, however, prevent Agent from bringing any action or
exercising any rights within any other state or jurisdiction or from obtaining
personal jurisdiction by any other means available by applicable law.
12.6 SEVERABILITY AND ENFORCEABILITY OF PROVISIONS. In the event that
any one or more of the provisions of the Loan Documents is determined to be
invalid, illegal, or unenforceable in any respect as to one or more of the
parties, all remaining provisions nevertheless shall remain effective and
binding on the parties thereto and the validity, legality, and enforceability
thereof shall not be affected or impaired thereby. If any such provision is held
to be illegal, invalid, or unenforceable, there will be deemed added in lieu
thereof a provision as similar in terms to such provision as is possible, that
is legal, valid, and enforceable. To the extent permitted by applicable law, the
parties hereby waive any law that renders any such provision invalid, illegal,
or unenforceable in any respect.
12.7 COUNTERPARTS; FACSIMILE SIGNATURES; EFFECTIVE DATE. The Loan
Documents and any amendments, waivers, consents, or supplements hereto may be
signed in original counterparts and by facsimile transmission of signed
counterparts, in any number, each of which shall be deemed an original, no one
of which need contain all of the signatures of the parties, and as many of such
counterparts as shall together contain all of the signatures of the parties
shall be deemed to constitute one and the same instrument. A set of the
counterparts of this Agreement signed by all parties hereto shall be lodged with
Agent. This Agreement shall become effective upon the receipt by Agent of
original signed counterparts or facsimile confirmation of signed counterparts of
this Agreement, each of which shall be deemed an original, from each of the
parties hereto.
12.8 NO WAIVER. No omission or failure of Agent or the Lenders to
exercise and no delay in exercising by Agent or the Lenders of any right, power,
or privilege under any of the Loan
42
<PAGE>
Documents shall impair such right, power, or privilege, shall operate as a
waiver thereof or be construed to be a waiver thereof; nor shall any single or
partial exercise of any right, power, or privilege preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege.
12.9 CUMULATIVE REMEDIES. The rights and remedies provided in the Loan
Documents are cumulative, and not exclusive of any rights or remedies provided
by law or in equity, and may be pursued singularly, successively, or together,
and may be exercised as often as the occasion therefor shall arise. The
warranties, representations, covenants, and agreements made herein and therein
shall be cumulative, except in the case of irreconcilable inconsistency, in
which case the provisions of this Agreement shall control.
12.10 COURSE OF DEALING; AMENDMENTS; WAIVER. No course of dealing
between the parties hereto shall be effective to amend, modify, or change any
provision of this Agreement or any other Loan Document. No amendment or waiver
of any provision of this Agreement or any other Loan Document, nor consent to
any departure by Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Required Lenders, and each such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given (and in the case of amendments, by Borrower);
provided, however, that (a) no amendment, waiver, or consent shall, unless in
writing and signed by all of the Lenders, do any of the following: (i) change
the percentage of the Revolving Credit Commitments, the aggregate unpaid
principal amount of Advances, or the number of Lenders, that are required for
the Lenders or any of them to take action hereunder; (ii) extend the Revolving
Credit Termination Date; or (iii) amend this Subsection; and (b) no amendment,
waiver, or consent shall, unless in writing and signed by the Required Lenders
and each affected Lender: (i) increase the Revolving Credit Commitment of such
Lender or subject such Lender to any additional obligations (other than pursuant
to assignments permitted under Subsection 12.17 hereof); (ii) reduce the
principal of, or interest on, the Advances payable to such Lender or any fees or
other amounts payable hereunder to the Lender; or (iii) postpone any date for
any payment of principal of, or interest on, the Advances payable to such Lender
or any fees or other amounts payable hereunder to such Lender; and provided
further, that no amendment, waiver, or consent shall, unless in writing and
signed by Agent in addition to the Lenders required to take such action, affect
the rights or duties of the Agent under this Agreement.
12.11 WAIVER OF DEFAULT. The Required Lenders may, in accordance with
the provisions of Subsection 12.10 hereof, by written notice to Borrower, at any
time and from time to time, waive any Event of Default or default and its
consequences, or any default in the performance or observance of any condition,
covenant, or other term of the Loan Documents and its consequences. Any such
waiver shall be for such period and subject to such conditions as shall be
specified in any such notice. In the case of any such waiver, the parties shall
be restored to their former positions prior to such Event of Default or default
and shall have the same rights as they had prior thereto, and any Event of
Default or default so waived shall be deemed to be cured and not continuing; but
no such waiver shall extend to any subsequent or other Event of Default or
default, or impair any right consequent thereto.
TABLE O CONTENTS; HEADINGS. The Table of Contents and the headings
preceding the text of this Agreement or any of the Loan Documents have been
included solely for convenience of
43
<PAGE>
reference and shall neither constitute a part of this Agreement or the other
Loan Documents nor affect their meaning, interpretation, or effect.
12.13 RELIANCE UPON, SURVIVAL OF AND MATERIALITY OF REPRESENTATIONS AND
WARRANTIES, AGREEMENTS, AND COVENANTS. All representations and warranties,
agreements, and covenants made in the Loan Documents shall be deemed to have
been relied upon by Agent and the Lenders, shall survive the execution and
delivery of the Loan Documents and the making of the loan or loans herein
contemplated, and shall continue in full force and effect so long as any
indebtedness is owed to Agent and the Lenders pursuant hereto or so long as
there shall be any commitment by Lenders to make loans hereunder. All
representations and warranties by or on behalf of Borrower contained in any
certificate or other paper delivered to Agent at any time pursuant to the Loan
Documents shall constitute representations and warranties under the Loan
Documents.
12.14 COMPLETE AGREEMENT; NO OTHER CONSIDERATION. The Loan Documents
contain the final, complete, and exclusive expression of the understanding of
the parties thereto with respect to the transactions contemplated by the Loan
Documents and supersede any prior or contemporaneous agreement or
representation, oral or written, by or between the parties related to the
subject matter hereof. Without limiting the generality of the foregoing, there
does not exist any consideration or inducement other than as stated herein for
the execution, delivery, and performance by Borrower of the Loan Documents.
12.15 LEGAL OR GOVERNMENTAL LIMITATIONS. Anything contained in the Loan
Documents to the contrary notwithstanding, the Lenders shall not be obligated to
extend credit or make loans to Borrower in an amount in violation of any
limitations or prohibitions provided by any applicable statute or regulation.
12.16 BINDING OBLIGATION ON SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon the parties hereto and their respective successors and assigns,
and shall inure to the benefit of the parties hereto and their permitted
successors and assigns.
12.17 ASSIGNMENTS AND PARTICIPATIONS
(a) Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Lenders and Agent.
(b) For so long as the total aggregate Revolving Credit
Commitment under this Agreement does not exceed Ten Million United States
Dollars (U.S. $10,000,000), SunTrust Bank South Florida N.A. shall remain the
sole Lender hereunder, and shall not assign in whole or in part its rights and
obligations under this Agreement to any other Person (other than any affiliated
entity of SunTrust Bank South Florida N.A.) without the prior written consent of
the Borrower. Subject to the foregoing, each Lender may assign to one or more
banks or other entities all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its Revolving
Credit Commitment and the Advances owing to it); provided, however, that (i) the
assignment shall be of a uniform, and not a varying, percentage of all of the
assigning Lender's rights and obligations under and in respect of the facility
being assigned; (ii) the amount of the Revolving Credit Commitment being
assigned pursuant to the assignment (determined as of the date of the
assignment)
44
<PAGE>
shall be in the amount of $5,000,000.00 or an integral multiple of $1,000,000.00
in excess thereof; (iii) Borrower and Agent shall consent to the assignment,
which consent, in either case, shall not be unreasonably withheld, and if
withheld by Borrower, shall be supported by a written statement of reasons for
such nonconsent provided to Agent, except that no consent by Borrower or Agent
shall be required in the case of any assignment to another Lender, and no
consent by Borrower shall be required after an Event of Default shall have
occurred and be continuing if the proposed assignee is a financial institution
or other institutional lender; and (iv) the parties to the assignment shall
execute and deliver to the Agent an assignment and acceptance instrument
satisfactory in form and substance to Agent (the "Assignment and Acceptance
Agreement"), together with a processing and recordation fee of $3,500.00. Upon
such execution and delivery, the assignee shall be a party hereto, shall be
deemed a "Lender," and shall have, to the extent of such assignment (unless
otherwise provided in such assignment with the consent of Borrower and Agent),
the obligations, rights, and benefits of a Lender hereunder, and the assigning
Lender shall, to the extent of such assignment, relinquish its rights and be
released from obligations under this Agreement so assigned.
(c) By executing and delivering an Assignment and Acceptance
Agreement, the assigning Lender thereunder and the assignee thereunder shall
thereby confirm to and agree with each other and the other parties hereto as
follows:
(i) other than the representation and warranty that it is
the legal and beneficial owner of the interest being assigned thereby free and
clear of any adverse claim, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties, or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency, or
value of this Agreement or any other instrument or document furnished pursuant
hereto;
(ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrower or the performance or observance by Borrower of any of its
obligations or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy
of this Agreement, together with copies of the financial statements referred to
Subsection 6.1 and such other documents and information as it has deemed
in appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance Agreement;
(iv) such assignee will, independently and without
reliance upon Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement;
(v) such assignee appoints and authorizes Agent to take
such action as Agent on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto; and
45
<PAGE>
(vi) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) Each Lender may sell participations to one or more banks or
other entities in all or a portion of its rights and obligations under this
Revolving Credit Agreement (including, without limitation, all or a portion of
its Revolving Credit Commitment and the Advances owing to it); provided,
however, that (i) the Lender's obligations under this Agreement (including,
without limitation, its Revolving Credit Commitment) shall remain unchanged;
(ii) the Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations; (iii) Borrower, Agent, and the other
Lenders shall continue to deal solely and directly with the Lender in connection
with the Lender's rights and obligations under this Agreement; and (iv) the
Lender may not agree with the participant to require the participant's consent
or permit the participant to vote on whether to take or refrain from taking any
action or to approve any amendment or waiver of any provision of any Loan
Document, or any consent or any departure by any party therefrom, except that
the Lender may agree with the participant that the Lender will not, without the
consent or vote of the participant, agree to (1) increase the Revolving Credit
Commitment of such Lender or subject such Lender to any additional obligations;
(2) extend the Revolving Credit Termination Date affecting the Lender; (3)
reduce the principal of, or interest on, the Advances payable to the Lender or
any fees or other amounts payable to the Lender; or (4) postpone any date for
any payment of principal of, or interest on, the Advances payable to the Lender
or any fees or other amounts payable to the Lender, in each case if the rights
of the participant are or would be affected thereby.
(e) In the case of an assignment or participation no information
shall be distributed to a potential assignee or participant unless Agent shall
have approved the potential assignee or participant, and in any event, such
information shall be distributed in accordance with Subsection 12.18 hereof.
(f) Notwithstanding any of the foregoing to the contrary, nothing
herein is intended to prohibit the assigning, discounting, or pledging of all or
any portion of a Lender's interest in the Advances or its Revolving Credit Note
to any Federal Reserve Bank as collateral security pursuant to regulations of
the Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank, and such Advances or a Revolving Credit
Note shall be fully transferrable as provided therein. No such assignment shall
release the assigning Lender from its obligations hereunder.
(g) Borrower agrees that any participants shall have the same
rights of set-off against Borrower as granted the Lenders in Subsection 12.1
hereof. Upon the written request of Borrower, the Lenders will advise Borrower
of the names of any participants and the extent of their interest herein.
12.18 CONFIDENTIAL INFORMATION
(a) Agent and the Lenders shall exercise their best efforts not
to make any public disclosure of confidential information obtained pursuant to
the Loan Documents; PROVIDED, that the foregoing shall not be construed to, now
or in the future, apply to any information reflected in any
46
<PAGE>
publicly recorded document, information obtained from sources other than
Borrower, its officers, directors, employees, representatives, or agents, or
otherwise in the public domain nor shall it be construed to prevent Agent or any
Lender from (i) making any disclosure of any information (A) if required to do
so by any applicable law or regulation or if normally engaged in pursuant to
accepted banking practice and not contrary to confidentiality and privacy
requirements of applicable statutory and case law, (B) to any governmental
agency or regulatory body having authority to regulate or oversee any aspect of
Agent's or such Lender's business or any of its subsidiaries or affiliates in
connection with the exercise of such authority, (C) pursuant to subpoena, (D) to
the extent Agent or such Lender or their respective counsel deems necessary or
appropriate to do so to enforce any remedy provided for in the Loan Documents or
otherwise available by law, (ii) subject to the immediately succeeding sentence,
making such disclosures as such Lender reasonably deems necessary or appropriate
to any bank or financial institution (and/or counsel thereto) which is a
prospective assignee or participant under Subsection 12.17 (each such bank or
financial institution, a "Prospective Lender") or (iii) making, on a
confidential basis, such disclosures as Agent or such Lender deems necessary or
appropriate to Agent's or such Lender's counsel or accountants (including
outside auditors).
(b) Each Lender agrees that prior to (a) disclosing to any
Prospective Lender any information which the Lenders have agreed hereunder to
hold as confidential or (b) entering into an agreement granting to a Prospective
Lender an interest in the Advances, the Prospective Lender shall execute an
agreement in form and substance similar to the provisions of this Subsection for
the benefit of Borrower and shall deliver the same to Borrower; PROVIDED, that
in no event shall such Lender or the Agent be liable for any breach of such
agreement by the Prospective Lender.
12.19 WAIVER OF TRIAL BY JURY. BORROWER, AGENT, AND EACH LENDER HEREBY
KNOWINGLY, IRREVOCABLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT,
THE OTHER LOAN DOCUMENTS, OR ANY OTHER DOCUMENT EXECUTED IN CONJUNCTION WITH THE
TRANSACTIONS CONTEMPLATED THEREUNDER, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENT (WHETHER ORAL OR WRITTEN), OR ACTION OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR AGENT, BORROWER, AND EACH LENDER TO ENTER
INTO THE TRANSACTIONS EVIDENCED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.
47
<PAGE>
SIGNATURE PAGE
Credit Agreement Among Golden Bear Golf, Inc., SunTrust Bank, South
Florida, N.A., as Agent, and the Lenders party thereto.
Witnesses: GOLDEN BEAR GOLF, INC.,
a Florida corporation
___________________________ By:____________________________
Name: Richard P. Bellinger
___________________________ Title: President
(SEAL)
Address:
Golden Bear Golf, Inc.
11780 U.S. Highway One
North Palm Beach, Florida 33408
Attn: Mr. Richard P. Bellinger
Fax No. ________________________
Confirming Tel. No. ______________
With a copy to:
Fleming, Haile & Shaw, P.A.
Park Centre, Suite 100
440 Royal Palm Way
Palm Beach, Florida 33480
Fax No. (561) 833-5604
Confirming Tel. No. (561) 833-5600
Attn: David M. Shaw, Esq.
48
<PAGE>
SIGNATURE PAGE
Credit Agreement Among Golden Bear Golf, Inc., SunTrust Bank, South
Florida, N.A., as Agent, and the Lenders party thereto.
Witnesses: SUNTRUST BANK, SOUTH FLORIDA, N.A.,
a National Banking Association,
as Agent
___________________________ By:____________________________
Name: Jeffrey S. Wolfe
___________________________ Title: Vice President
Address of Lending Office for Notice:
222 Lakeview Avenue
Suite 300
West Palm Beach, Florida 33401
Attn: Jeffrey S. Wolfe
Vice President
Corporate Banking Division
Fax No. (561) 835-2640
Confirming Tel. No. (561) 835-2644
49
<PAGE>
SIGNATURE PAGE
Credit Agreement Among Golden Bear Golf, Inc., SunTrust Bank, South
Florida, N.A., as Agent, and the Lenders party thereto.
Witnesses: SUNTRUST BANK, SOUTH FLORIDA, N.A.,
a National Banking Association,
as Agent
___________________________ By:____________________________
Name: Jeffrey S. Wolfe
___________________________ Title: Vice President
Address of Lending Office for Notice:
222 Lakeview Avenue
Suite 300
West Palm Beach, Florida 33401
Attn: Jeffrey S. Wolfe
Vice President
Corporate Banking Division
Fax No. (561) 835-2640
Confirming Tel. No. (561) 835-2644
Revolving Credit Commitment: $10,000,000.00
50
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
GOLDEN BEAR GOLF, INC.'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,606,416
<SECURITIES> 0
<RECEIVABLES> 9,108,215
<ALLOWANCES> 436,743
<INVENTORY> 2,728,710
<CURRENT-ASSETS> 20,958,829
<PP&E> 31,567,483
<DEPRECIATION> 3,055,233
<TOTAL-ASSETS> 58,139,398
<CURRENT-LIABILITIES> 9,146,196
<BONDS> 11,969,020
0
0
<COMMON> 55,050
<OTHER-SE> 36,969,132
<TOTAL-LIABILITY-AND-EQUITY> 58,139,398
<SALES> 23,922,613
<TOTAL-REVENUES> 46,771,333
<CGS> 20,573,791
<TOTAL-COSTS> 42,703,615
<OTHER-EXPENSES> 5,292,775
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</TABLE>
