UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 000-24391
TECHNISOURCE, INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 59-2786227
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1901 CYPRESS CREEK ROAD, SUITE 202,
FORT LAUDERDALE, FLORIDA 33309
--------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 493-8601
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 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 [ ].
Number of shares of common stock outstanding as of March 31, 1999 is
10,385,000.
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INDEX
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements PAGE
----
Condensed Consolidated Balance Sheets as of March 31,
1999 (Unaudited) and December 31, 1998............................ 1
Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 1999 and 1998 (Unaudited)............ 2
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1999 and 1998 (Unaudited)........ 3
Notes to Condensed Consolidated Financial Statements(Unaudited)... 4-7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 8-15
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.................................. 16
Signatures................................................................ 17
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TECHNISOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 DECEMBER 31, 1998
(UNAUDITED)
-------------- -----------------
ASSETS
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Current assets:
Cash and cash equivalents $15,307,482 $17,545,183
Trade accounts receivable, less allowance for doubtful
accounts of $358,933 at March 31, 1999
and December 31, 1998 19,897,326 15,772,435
Due from shareholders and employees 88,122 120,597
Prepaid expenses and other current assets 728,395 326,255
Deferred tax asset, current 258,643 258,643
----------- -----------
Total current assets 36,279,968 34,023,113
Property and equipment, net 2,628,968 2,559,790
Other assets 390,372 159,195
Deferred tax asset, noncurrent 87,991 87,991
----------- -----------
Total assets $39,387,299 $36,830,089
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,542,250 $ 723,643
Income tax payable 977,005 624,378
Accrued liabilities 1,803,937 1,879,194
Deferred tax liability, current 6,065 6,065
----------- -----------
Total current liabilities 4,329,257 3,233,280
Deferred tax liability, noncurrent 142,269 142,269
----------- -----------
Total liabilities 4,471,526 3,375,549
Shareholders' equity:
Common stock, $.01 par value, 50,000,000 shares authorized,
10,385,000 issued and outstanding as of
March 31, 1999 and December 31, 1998 103,850 103,850
Additional paid-in capital 30,090,145 30,057,853
Retained earnings 4,721,778 3,292,837
----------- -----------
Total shareholders' equity 34,915,773 33,454,540
----------- -----------
Total liabilities and shareholders' equity $39,387,299 $36,830,089
=========== ===========
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See notes to condensed consolidated financial statements.
1
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------------------
1999 1998
------------ ------------
Revenues $ 37,600,125 $ 22,780,380
Cost of revenues 29,732,586 17,210,443
------------ ------------
Gross profit 7,867,539 5,569,937
Selling, general and
administrative expenses 5,710,545 4,301,760
------------ ------------
Operating income 2,156,994 1,268,177
Other income (expense):
Interest and other income 224,574 --
Interest expense -- (37,785)
------------ ------------
Income before taxes 2,381,568 1,230,392
Provision for income taxes 952,627 59,106
------------ ------------
Net income $ 1,428,941 $ 1,171,286
============ ============
Pro forma information
Income before taxes, as
reported $ -- $ 1,230,392
Pro forma income tax
provision -- 471,106
------------ ------------
Pro forma net income $ -- $ 759,286
============ ============
Net income per share - basic $ 0.14 $ 0.11
============ ============
Net income per share - diluted $ 0.14 $ 0.09
============ ============
Weigted average common shares
outstanding - basic 10,385,000 7,200,000
============ ============
Weigted average common shares
outstanding - diluted 10,547,158 8,353,743
============ ============
See notes to condensed consolidated financial statements.
2
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TECHNISOURCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNDAUDITED)
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THREE MONTHS
ENDED MARCH 31,
-----------------------------
1999 1998
------------ ------------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,428,941 $ 1,171,286
Adjustment to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 323,553 67,763
Deferred Compensation 32,292 --
Changes in assets and liabilities:
Increase in accounts receivable (4,124,891) (2,963,763)
Decrease in due from shareholders and employees 32,475 15,246
Increase in prepaid expenses and other assets (633,317) (182,138)
Increase in accounts payable 818,607 502,427
(Decrease) increase in accrued liabilities (75,257) 639,541
Increase (decrease) increase in income taxes payable 352,627 (173,001)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (1,844,970) (922,639)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (392,731) (470,668)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (392,731) (470,668)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit -- 1,292,538
Distribution to shareholders -- (397,235)
Increase in bank overdraft -- 191,152
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- 1,086,455
NET DECREASE IN CASH (2,237,701) (306,852)
------------ ------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 17,545,183 469,973
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,307,482 $ 163,121
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
INTEREST PAID $ -- $ 37,785
============ ============
INCOME TAXES PAID $ 759,780 $ 232,107
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. General
ORGANIZATION AND DESCRIPTION OF BUSINESS
Technisource, Inc. was incorporated in Florida on March 25, 1987.
Technisource of Florida, Inc. and Technisource Midwest, Inc. were incorporated
in Florida on March 22, 1994, to offer information technology staffing services
("IT Services") and to administer payroll and human resources activities for the
Company. In connection with the initial public offering completed June 30, 1998,
all outstanding shares of capital stock of Technisource of Florida, Inc. were
contributed to Technisource, Inc. and Technisource Midwest, Inc. was dissolved.
The accompanying unaudited condensed consolidated financial statements
include Technisource, Inc. and Subsidiaries (the "Company"). The subsidiaries
include Technisource of Florida, Inc. and Technisource Midwest, Inc.
The Company is an information technology ("IT") staffing services firm,
providing IT professionals principally on a time and materials basis to
organizations with complex IT needs. As of March 31, 1999, the Company had 25
branch office locations.
INITIAL PUBLIC OFFERING
The Company completed an initial public offering ("IPO") of common stock
on June 30, 1998. The Company sold 3,100,000 shares of its common stock, par
value $0.01 per share. The Company realized $30.6 million from the offering, net
of expenses. The Company distributed approximately $10.7 million of accumulated
S corporation earnings to the former S corporation shareholders.
INTERIM FINANCIAL DATA
The interim financial data as of March 31, 1999 and for the three months
ended March 31, 1999 and 1998 is unaudited and has been prepared in accordance
with generally accepted accounting principles for interim financial reporting
purposes and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Certain information and footnote disclosure normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. The
information reflects all adjustments, consisting only of normal recurring
entries, that, in the opinion of management, are necessary to present fairly the
financial position and results of operations or cash flows of the Company for
the periods indicated. Results of operations and cash flows for the interim
periods are not necessarily indicative of the results of operations or cash
flows for
4
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TECHNISOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(UNAUDITED)
the full fiscal year. These condensed consolidated financial statements should
be read in conjunction with the Company's Financial Statements and the notes
thereto for the year ended December 31, 1998, included in the Company's annual
report on Form 10-K. The Company's management believes that the disclosures are
sufficient for interim financial reporting purposes.
2. Summary of Significant Accounting Policies
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents. Cash equivalents approximated $16,696,000
and $18,484,000 at March 31, 1999, and December 31, 1998, respectively and
consisted of a money market account.
BUSINESS RISKS AND CONCENTRATION
The Company's operations depend upon, among other things, the Company's
ability to attract, develop and retain a sufficient number of highly skilled
professional employees. The IT service industry is highly competitive and served
by numerous national, regional, and local firms, all of which are either
existing or potential competitors of the Company. Many of these competitors have
substantially greater financial, technical and marketing resources and greater
name recognition than the Company.
The Company provides IT professional services to customers located in the
United States and Canada. The Company's revenue is generated from a limited
number of clients in specific industries. Future operations may be affected by
the Company's ability to retain these clients and the cyclical and economic
factors that could have an impact on those industries. Financial instruments,
which potentially expose the Company to concentrations of credit risk, consist
primarily of accounts receivable. Additionally, the Company maintained
approximately $15.3 million at March 31, 1999 in one financial institution,
which is in excess of the FDIC insured limits.
3. Line of Credit
On March 9, 1999, the Company established a line of credit with
NationsBank, N.A. that provides for maximum borrowings of up to $25 million, $10
million of which may be used for acquisitions and $15 million of which may be
used for working capital. Interest is payable monthly at a variable rate of
LIBOR plus 1.4%. The line of credit expires April 9, 2002. There were no
borrowings outstanding at March 31, 1999.
5
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TECHNISOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(UNAUDITED)
4. S Corporation Distribution and Termination of S Corporation Election
The Company's S corporation status for federal income tax purposes
terminated on June 24, 1998 in connection with the IPO and the Company converted
to C corporation status and made a final distribution ("the Distribution") to
its existing shareholders in an aggregate amount representing substantially all
of the Company's undistributed earnings through the closing of the IPO of
approximately $10.7 million. Purchasers of the Company's Common Stock in the IPO
did not receive any portion of the Distribution.
5. Pro forma Earnings per Share
Basic earnings per share is computed by dividing net income attributable
to common shares by the weighted average number of common shares outstanding.
Diluted net income per share is computed by dividing net income attributable to
common shares by the weighted average number of common shares outstanding and
dilutive potential common shares.
Pro forma net income per share was computed based on the weighted average
number of common and common equivalent shares outstanding during the period.
Common equivalent shares are calculated using the treasury stock method and
represent incremental shares issuable upon the exercise of outstanding stock
options. In accordance with SEC Staff Accounting Bulletin No. 1.B.3, weighted
average shares for all periods prior to the IPO also include those shares which
would have had to have been issued (at the initial public offering price of $11
per share, less the underwriting discount) to generate sufficient cash to fund
the portion of the S corporation distribution that was in excess of the net
income for the period ended June 24, 1998.
THREE MONTHS ENDED
MARCH 31,
-------------------------
1999 1998
---------- ----------
Basic:
Weighted average common shares outstanding 10,385,000 7,200,000
========== ==========
Diluted:
Weighted average common shares outstanding 10,385,000 7,200,000
Dilutive effect of options 162,158 304,099
Effect of assumed IPO shares for distribution -- 849,644
========== ==========
10,547,158 8,353,743
========== ==========
Options to purchase 533,855 shares of common stock at a range of $9.88 to
$14.94 per share for the three months ended March 31, 1999, were excluded from
the diluted net income per share calculation for the period because the exercise
price of the
6
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TECHNISOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(UNAUDITED)
options was greater than the average market price of the common shares for the
periods. The stock options expire by the year 2009.
6. Income Taxes
Historically, the Company had elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code which provide that, in lieu of
corporate federal and some state income taxes, the shareholders are taxed on
their proportionate share of the Company's taxable income. In connection with
the IPO, the Company's election to be treated as an S corporation was
terminated. As a result of the Company's Subchapter S election, the accompanying
condensed consolidated statements of income do not include an income tax
provision for federal and most state income taxes during the periods of the S
Corporation election. The provision for income taxes for periods prior to the
conversion related to certain states that do not recognize S corporation status.
The provision for income taxes for the period following the conversion reflects
the estimated current provision for federal and state income taxes. Pro forma
net income is based on the assumption that the Company's S corporation status
was terminated at the beginning of each period and reflects a pro forma income
tax provision based on applicable tax rates as if the Company was a C
corporation taxpayer for all periods presented.
8. Subsequent Event
On April 22, 1999, the Company's Board of Directors approved a Stock
Repurchase Plan pursuant to which the Company can repurchase up to $1 million of
the Company's common stock on the open market. As of May 1, 1999, the Company
had not repurchased any shares of its common stock.
7
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TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE
FORWARD-LOOKING STATEMENTS INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES,
INCLUDING, WITHOUT LIMITATION, THE COMPANY'S ABILITY TO RECRUIT AND RETAIN
QUALIFIED TECHNICAL PROFESSIONALS; IDENTIFY, ACQUIRE AND INTEGRATE SUITABLE
ACQUISITION CANDIDATES; OBTAIN SUFFICIENT WORKING CAPITAL TO SUPPORT SUCH
GROWTH; COMPETE SUCCESSFULLY WITH EXISTING AND FUTURE COMPETITORS; AND OTHER
FACTORS DESCRIBED THROUGHOUT THIS FORM 10-Q. THE ACTUAL RESULTS THAT THE COMPANY
ACHIEVES MAY DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS DUE TO SUCH
RISKS AND UNCERTAINTIES. WORDS SUCH AS "BELIEVES," "ANTICIPATES," "EXPECTS,"
"INTENDS," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS, BUT ARE NOT THE EXCLUSIVE MEANS OF IDENTIFYING SUCH STATEMENTS. THE
COMPANY UNDERTAKES NO OBLIGATION TO REVISE ANY FORWARD-LOOKING STATEMENTS IN
ORDER TO REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE OF THIS
REPORT. READERS ARE URGED TO CAREFULLY REVIEW AND CONSIDER THE VARIOUS
DISCLOSURES MADE BY THE COMPANY IN THIS REPORT AND IN THE COMPANY'S OTHER
REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION THAT ATTEMPT TO ADVISE
INTERESTED PARTIES OF THE RISKS AND FACTORS THAT MAY AFFECT THE COMPANY'S
BUSINESS, INCLUDING THE RISK FACTORS SET FORTH IN THE COMPANY'S 10-K FILING
DATED MARCH 30, 1999.
OVERVIEW
Technisource is a national provider of IT staffing services through 25
offices in the United States and Canada, utilizing over 1,100 highly trained
professionals. The Company has achieved a compound annual revenue growth rate of
57% over the past five years. This growth rate has been generated internally,
without the benefit of acquisitions.
The Company's revenues grew from $29.1 million in 1995 to $105.7 million
in 1998. The Company's revenue growth is driven primarily by increases in the
number of professionals placed with existing and new clients. The number of
professionals utilized by the Company grew from 320 as of December 31, 1995 to
1,105 as of December 31, 1998, and to 1,134 as of March 31, 1999. For each of
1998, 1997, and 1996, clients from the previous year generated at least 80% of
the Company's revenues. The Company generates substantially all of its revenues
from fees for the provision of IT staffing services; most of which are billed at
contracted hourly rates. Clients are typically billed and professionals are paid
on a weekly basis. The Company recognizes revenues as services are performed.
The Company's most significant cost is its personnel expense, which
consists primarily of salaries, fees and benefits of the Company's
professionals. To date, the Company has generally been able to maintain its
gross profit margin by offsetting increases in professional salaries and fees
with increases in the hourly billing rates charged to clients. However, there
can be no assurance that the Company will continue to be able to offset
increases in the Company's cost of revenues by increasing the amounts
8
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TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
the Company bills to its clients. The Company attempts to control overhead and
indirect expenses, which are not passed through to its clients, by controlling
the rate of its branch office expansion and by maintaining centralized
operations and back-office infrastructure.
In anticipation of the Company's growth, the Company has made substantial
investments in its infrastructure, including: (i) the Company's proprietary
project and consultant TSRC Database; (ii) a national recruiting and training
center; (iii) the development and continued refinement of the Technisource
Growth Model and the process of replicating Development Triangles; and (iv) a
network of 25 branch offices in the United States and Canada. The Company's
substantial investment in a centralized infrastructure leaves the Company well
positioned to continue its expansion.
To support anticipated growth, the Company has invested in the expansion
of its proprietary TSRC Database of over 140,000 potential professionals and
their qualifications to ensure that IT professionals with the appropriate skill
sets are quickly deployed to respond to client needs and are placed on
assignments that utilize their technical skills and optimize their billing
rates. The Company has also established a formal two-week recruiting and
training program designed to train recruiting professionals in the Company's
culture and operating procedures and teach them the Company's proprietary
techniques and technical skills. The Company increased its administrative,
sales, recruiting and training professionals from 207 employees on December 31,
1997 to 275 employees on December 31, 1998, and 303 at March 31, 1999.
Over the last ten years, the Company has developed and refined the
Technisource Growth Model, which is focused on facilitating rapid internal
growth through the replication of Development Triangles. Each Development
Triangle is typically comprised of one Account Manager, two or three recruiting
professionals and a group of IT professionals. The Company has grown from 9
Development Triangles as of December 31, 1995 to 54 Development Triangles as of
December 31, 1998, and to 57 Development Triangles as of March 31, 1999.
Although the Company's operating margins may be adversely affected during
periods following relatively large increases in the number of the Company's
Development Triangles, the Company leverages its initial investment in
infrastructure as Development Triangles mature and the Company's sales and
recruiting personnel achieve greater levels of productivity.
The Company anticipates that each new branch office will require an
investment of approximately $100,000 to $150,000 in order to begin operations
and fund operating losses for an initial ten-to-twelve month period of
operations, which is the amount of time management believes should generally be
required for a new office to achieve profitability. The Company expenses the
costs of opening a new office as such expenses are incurred. The Company
anticipates continuing to leverage its current network of 25 branch offices, as
the start-up costs have already been expensed and additional start-up
9
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TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
branch office costs will constitute a smaller percentage of revenues as the
Company continues to increase its revenue base. There can be no assurance that
new Development Triangles or branch offices will be profitable within projected
time frames, or at all.
Technisource hardware sales grew to $7.7 million in the first quarter of
1999 from $479,000 in the first quarter of 1998. The Company believes that
approximately $4.4 million of its hardware sales during the first quarter were
"one time sales". The sale of hardware is at a substantially lower gross margin
than the IT staffing business.
The following tables set forth for the periods indicated the percentage of
revenues and the percentage change from the prior period of certain items
reflected in the Company's statements of income:
MARCH 31,
------------------
1998 1997
Revenues 100.0% 100.0%
Cost of revenues 79.1% 75.5%
------ ------
Gross profit 20.9% 24.5%
Selling, general and administrative expenses 15.2% 18.9%
------ ------
Operating income 5.7% 5.6%
Interest and other income 0.6% 0.0%
Interest expense 0.0% 0.2%
------ ------
Income before income taxes 6.3% 5.4%
Income taxes 2.5% 0.3%
------ ------
Net Income 3.8% 5.1%
Pro forma provision for income taxes -- % 2.1%
------ ------
Pro forma net income -- % 3.3%
====== ======
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
REVENUES. Revenues increased $14.8 million, or 65%, to $37.6 million for
the three months ended March 31, 1999 as compared to $22.8 million for the three
months ended March 31, 1998. This increase resulted primarily from increased
sales in existing offices, and to a lesser extent, the addition of five new
branch offices. Sales of hardware represent approximately 20% of the total sales
for the quarter. The hardware sales revenue increased 1509% to $7.7 million for
the period ended March 31, 1999, as compared to $478,516 for the three months
ended March 31, 1998. The total number of client divisions and business units
billed increased to 456 during the quarter ended March 31, 1999 from 323 during
the quarter ended March 31, 1998, and the number of IT professionals working for
the Company increased to 1,134 as of March 31, 1999 from 910 as of March 31,
1998.
GROSS PROFIT. Gross profit consists of revenues less cost of revenues. The
Company's cost of revenues consists primarily of compensation, benefits and
expenses for the Company's professionals and other direct costs associated with
providing services
10
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TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
to clients, and to a lesser extent, the profit from the
revenue generated from the hardware group. Gross profit increased $2.3 million,
or 41%, to $7.9 million, for the three months ended March 31, 1999 as compared
to $5.6 million for the three months ended March 31, 1998. Total gross margin
grew while the percent to sales dropped to 21% from 24.6% for the three months
ended March 31, 1998. Gross profit is impacted by the substantially lower margin
hardware sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased approximately $1.4 million, or 33%, to $5.7
million for the three months ended March 31, 1999, as compared to $4.3 million
for the three months ended March 31, 1998. The increase primarily resulted from
increases in corporate and administrative staff and the addition of 21
Development Triangles and investment in the expansion of the hardware group.
NET INTEREST EXPENSE (INCOME). Net interest expense (income) was
($224,574) for the three months ended March 31, 1999, as compared to $37,785 for
the three months ended March 31, 1998. This change is primarily due to reduced
interest expense resulting from the repayment of outstanding debt during the
second quarter of 1998 and interest earned from the investment on net proceeds
from the company's public offering of common stock in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have been cash flow from
operations and available borrowings under its line of credit. Cash and cash
equivalents and working capital approximated $15.3 million and $32.0 million, as
of March 31, 1999.
On March 9, 1999 the Company established a line of credit with NationsBank
N.A. that provides for maximum borrowings of up to $25 million, $10 million of
which may be used for acquisitions and $15 million of which may be used for
working capital. Under the NationsBank line of credit, interest is payable
monthly at LIBOR plus 1.4%. The line of credit expires April 9, 2002. There were
no borrowings outstanding under the line of credit at March 31, 1999.
Net cash used by operating activities was $1.8 million for the three
month period ended March 31, 1999 as compared to $0.9 million used during the
three month period ended March 31, 1998. The increase in cash used in operations
is primarily due to an increase in accounts receivable.
Net cash used in investing activities was comparable period to period and
represents purchases of property and equipment for office locations.
11
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
For the three month period ended March 31, 1998 net cash provided from
financing activities primarily related to net proceeds from the line of credit
offset by distributions to shareholders.
On April 22, 1999, the Company's Board of Directors approved a Stock
Repurchase Plan pursuant to which the Company can repurchase up to $1 million of
the Company's common stock on the open market. As of May 1, 1999, the Company
has not repurchased any shares of its common stock.
The Company anticipates that its primary uses of working capital in future
periods will be for the internal development of new offices, expansion of the
hardware group, investments in its management information systems, possible
acquisitions and the funding of increases in accounts receivable. The Company
continually reviews and evaluates acquisition candidates to complement and
expand its business The Company's ability to grow through acquisitions is
dependent on the availability of suitable acquisition candidates and the terms
on which such candidates may be acquired, which may be adversely affected by
competition for such acquisitions. The Company cannot predict to what extent new
offices will be added through acquisitions as compared to internal development.
The Company currently has no agreements, understandings or commitments with
respect to any potential acquisitions.
The Company believes that the existing cash and cash equivalents, cash
flow from operations and available borrowings under the Credit Facility will be
sufficient to meet the Company's presently anticipated working capital needs for
at least the next twelve months.
Inflation did not have a material impact on the Company's revenues or
income from operations in the first quarter of fiscal 1999. The Company cannot
predict what effect, if any, inflation may have on its future results of
operations.
YEAR 2000
The "Year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
use of computer programs which have been written using two digits, rather than
four, to define the applicable year of business transactions. In evaluating the
Company's state of readiness the Company is considering the following key areas:
(i) the Company's principal staffing and financial systems; (ii) software used
in the Company's internal computer network; (iii) third party vendors; (iv)
customers; and (v) telecommunications and other support systems. The Company is
addressing each of these areas in three separate phases. The first phase
identifies all systems in each area that may contain potential Year 2000 issues.
The second phase involves an investigation into whether a Year 2000 issue
actually exists for each system identified. The third phase involves actual
resolution of the issue and/or the development of a contingency plan.
12
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TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company has completed an evaluation of its principal staffing and
financial systems. These systems are licensed from and maintained by third-party
software development companies, which the Company believes are Year
2000-compliant. The Company has obtained representations from these companies
that indicate that the systems are Year 2000-compliant. In addition to those
representations, the Company will conduct its own tests, as considered
necessary, of these critical systems to ensure that they are Year
2000-compliant. The initial testing of these systems has been completed. In
addition, the Company believes its financial system is Year 2000 compliant and
has obtained such a representation from the software vendor. The Company does
not anticipate any significant disruptions of its business resulting from its
principal staffing and financial systems.
The Company has completed the first phase of an evaluation of the mission
critical software used on the Company's internal computer network. Substantially
all software used on the Company's internal computer network is licensed from
major software vendors that have represented that their products are compliant
or will be compliant by January 1, 2000. The Company is currently in the second
phase of the process, which involves investigating and documenting these facts
for each software product supported by the Company. The Company does not
anticipate any significant disruptions of the business resulting from such
software.
The Company is just beginning a review of its third-party vendors. The
Company, however, believes that its exposure with respect to third party vendors
is minimal. With the exception of basic utilities, any disruption to the
Company's other vendors are not likely to significantly disrupt the Company's
business. The Company is dependent on basic public infrastructure, such as
telecommunications and utilities, in order to function normally. Significant
long-term interruptions of this infrastructure could have an adverse effect on
the operations of the Company. As part of the second phase, the Company will be
contacting major telecommunications and utility companies to determine whether
any significant interruptions of service are probable. Notwithstanding the
Company's efforts in this area, there can be no assurance that the Company can
develop a contingency plan that effectively deals with a major failure of public
infrastructure.
The Company has begun an evaluation of the potential risks associated with
its customers' Year 2000 issues. The Company will attempt to evaluate whether a
potential disruption of revenue could result from a Year 2000 problem in a
customer's system. The first phase will involve polling of the Company's
customers. The second phase will be planned based on the results of the initial
evaluation. Although the Company has received some information from its
customers regarding their Year 2000 compliance efforts, there can be no
assurance that such customers will not experience disruption in their business
which would result in material adverse effects to the Company.
13
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TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company does not believe that it will need to acquire any significant
new software systems in response to Year 2000 issues. The Company has
participated in Year 2000 remediation projects for some of its customers.
Although the Company has no reason to believe that such work will result in
litigation against the Company, it is possible that the Company could be
materially adversely affected by litigation in connection with the Year 2000
remediation services provided by the Company.
The Company has not yet determined the extent of contingency planning that
may be required as this is dependent on completion of ongoing assessments of its
non-IT systems and third-party risks. Based on the status of the assessments
made and remediation work completed to date, total remediation costs, consisting
primarily of capital costs to remediate and replace non-IT systems, is not
expected to materially impact the Company's financial operations. All
remediation costs will be funded through operating cash flows.
The extent and magnitude of the Year 2000 problem as it will affect the
Company, both before, and for some period after, January 1, 2000, is difficult
to predict or quantify for a number of reasons. Among the most important are the
lack of control over systems that are used by the third-parties who are critical
to the Company's operation, the complexity of testing interconnected networks
and applications that depend on third-party networks and the uncertainty
surrounding how others will deal with the issues raised by Year 2000-related
failures. Moreover, the estimated costs to implement the Year 2000 Plan does not
take into account the costs, if any, that might be incurred as a result of Year
2000-related failures that occur despite the Company's implementation of the
Year 2000 Plan. As the Year 2000 project continues, additional Year 2000
problems may be discovered or the Company may find that the cost of these
activities exceed current expectations. In many cases the Company must rely on
assurances from suppliers that new and upgraded information systems as well as
key services will be Year 2000 compliant. While the Company plans to validate
supplier representations, it cannot be sure that its tests will be adequate, or
that, if problems are identified, they will be addressed in a timely and
satisfactory manner. Even if the Company, in a timely manner, completes all of
its assessments, implements and tests all remediation plans it believes to be
adequate, and develops contingency plans believed to be adequate, some problems
may not be identified or corrected in time to prevent material adverse
consequences or business interruptions to the Company. Furthermore, there may be
certain mission critical third parties such as utilities, telecommunications
companies, or vendors where alternative arrangements or sources are limited or
unavailable.
Although the Company is not currently aware of any material operational
issues associated with preparing its internal systems for the Year 2000, or
material issues with respect to the adequacy of mission-critical third-party
systems, there can be no assurance, due to the overall complexity of the Year
2000 issue, that the Company will not experience material unanticipated negative
consequences and/or material costs caused by undetected errors or defects in
such systems or by the Company's failure to adequately
14
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TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
prepare for the results of such errors or defects, including costs or related
litigation, if any. Such consequences could have a material adverse effect on
the Company's business, financial condition or results of operations.
15
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TECHNISOURCE, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Amended and Restated Articles of incorporation of the Company (1)
3.2 Amended and Restated Bylaws of the Company (1)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Articles of
Incorporation and Bylaws for the Company defining the rights of
holders of Common Stock of the Company
4.2 Specimen certificate for the Company's Common Stock (1)
10.1 Credit Agreement by and among the Company and NationsBank, N.A.
dated January 29, 1999.
10.2 Revolving Promissory Note issued by the Company in favor of
NationsBank, N.A. dated January 29, 1999.
10.3 First Amendment to Credit Agreement by and between the Company and
NationsBank, N.A. dated March 9, 1999.
27 Financial Data Schedule
----------------------
(1) Filed with the Company's Registration Statement on Form S-1 (File No.
333-50803) filed with the Securities and Exchange Commission on
April 23, 1998, as amended, and incorporated herein by reference.
(b) Current Reports on Form 8-K
None
16
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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.
TECHNISOURCE, INC.
Dated: May 15, 1999
By: /s/ JAMES F. ROBERTSON
-------------------------------
James F. Robertson
Executive Vice President, Chief
Operating Officer and Director
By: /s/ JOHN A. MORTON
-------------------------------
John A. Morton
Vice-President, Chief Financial
Officer and Director
17
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TECHNISOURCE, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
10.1 Credit Agreement by and among the Company and NationsBank, N.A.
dated January 29, 1999.
10.2 Revolving Promissory Note issued by the Company in favor of
NationsBank, N.A. dated January 29, 1999.
10.3 First Amendment to Credit Agreement by and between the Company and
NationsBank, N.A. dated March 9, 1999.
27 Financial Data Schedule
EXHIBIT 10.1
CREDIT AGREEMENT
BY AND AMONG
TECHNISOURCE, INC.,
A FLORIDA CORPORATION,
TECHNISOURCE OF FLORIDA, INC.,
A FLORIDA CORPORATION
AND
NATIONSBANK, N.A.,
A NATIONAL BANKING ASSOCIATION
DATED AS OF JANUARY 29, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - DEFINITIONS......................................................1
1.1 Definitions........................................................1
1.2 Accounting Terms...................................................6
1.3 Other Definitional Provisions......................................7
ARTICLE II - REVOLVING CREDIT COMMITMENT.....................................7
2.1 Revolving Credit Commitment........................................7
2.2 Notice and Manner of Borrowing.....................................7
2.3 Note...............................................................8
2.4 Interest...........................................................8
2.5 Payments...........................................................9
2.6 Collateral.........................................................9
2.7 Fees...............................................................9
ARTICLE III - AVAILABILITY...................................................9
3.1 Acquisition Advance Availability. [TO BE INSERTED]................9
3.2 Working Capital Advance Availability..............................10
ARTICLE IV - GUARANTY.......................................................10
ARTICLE V - COLLATERAL......................................................10
5.1 Collateral........................................................10
5.2 Cross-Collateralization...........................................10
ARTICLE VI - CONDITIONS PRECEDENT TO BORROWING..............................10
6.1 Each Loan.........................................................11
6.2 Initial Loan......................................................11
ARTICLE VII - CONDITIONS PRECEDENT TO ACQUISITIONS..........................12
7.1 Acquisitions......................................................12
ARTICLE VIII - REPRESENTATIONS AND WARRANTIES...............................13
8.1 Corporate Existence and Power.....................................13
8.2 Corporate Authority...............................................14
8.3 Financial Condition...............................................14
8.4 Full Disclosure...................................................14
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8.5 Litigation........................................................15
8.6 Payment of Taxes..................................................15
8.7 No Adverse Restrictions or Defaults...............................15
8.8 Investment Company Act............................................15
8.9 Authorizations....................................................15
8.10 Subsidiaries and Affiliates......................................16
8.11 Title to Properties..............................................16
8.12 Use of Loans.....................................................16
8.13 ERISA............................................................17
ARTICLE IX - AFFIRMATIVE COVENANTS..........................................17
9.1 Loan Proceeds.....................................................17
9.2 Corporate Existence...............................................17
9.3 Maintenance of Business and Properties............................18
9.4 Insurance.........................................................18
9.5 Payment of Indebtedness, Taxes, Etc...............................18
9.6 Compliance with Laws..............................................18
9.7 Notice of Default.................................................19
9.8 Financial Statements, Reports, Etc................................19
9.9 Visitation Rights.................................................20
9.10 Notice of Litigation and Other Proceedings.......................20
9.11 ERISA............................................................21
9.12 Interest Coverage Ratio..........................................21
9.13 Leverage Ratio...................................................21
9.14 Ratio of Liabilities to Net Worth................................21
9.15 Books and Records................................................22
9.16 Operating Accounts...............................................22
9.17 Management.......................................................22
ARTICLE X - NEGATIVE COVENANTS..............................................22
10.1 Limitation on Liens..............................................23
10.2 Limitation on Indebtedness.......................................23
10.3 Third-Party Guaranties...........................................23
10.4 Dividends........................................................24
10.5 Mergers, Consolidations and Acquisition of Assets................24
10.6 Sale, Lease, Etc.................................................24
10.7 Investments......................................................24
10.8 Transactions with Affiliates.....................................24
10.9 Sale and Leaseback...............................................25
10.10 Purchase of Own Shares..........................................25
10.11 Transfer of Shares..............................................25
10.12 Business Operations.............................................25
10.13 Ownership of Assets.............................................25
10.14 Loans and Advances..............................................25
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10.15 Capital Expenditures............................................25
ARTICLE XI - ENVIRONMENTAL..................................................25
11.1 Hazardous and Toxic Materials Generally..........................25
ARTICLE XII - EVENTS OF DEFAULT.............................................26
12.1 Events of Default................................................26
ARTICLE XIII - MISCELLANEOUS................................................29
13.1 No Waiver, Remedies Cumulative...................................29
13.2 Survival of Representations......................................29
13.3 Expenses.........................................................29
13.4 Notices..........................................................30
13.5 Construction.....................................................30
13.6 Successors and Assigns...........................................30
13.7 Jurisdiction, Service of Process.................................30
13.8 Limit on Interest................................................31
13.9 Payment on other than Business Day...............................31
13.10 Net Payments....................................................31
13.11 Indemnification of Lender.......................................32
13.12 Counterparts....................................................32
13.13 Headings........................................................32
13.14 Severability....................................................32
13.15 Course of Dealing; Amendment; Supplemental Agreements...........33
13.16 Right of Setoff.................................................33
13.17 MANDITORY ARBITRATION...........................................33
iv
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THIS CREDIT AGREEMENT, dated as of January 29, 1999 (the "Agreement"),
is made by and among TECHNISOURCE, INC., a Florida corporation, and TECHNISOURCE
OF FLORIDA, INC., a Florida corporation, a wholly-owned subsidiary of
Technisource, Inc. (collectively, the "Borrower"), and NATIONSBANK, N.A., a
national banking association (the "Lender").
R E C I T A L S
A. The Borrower has requested Lender to provide to the Borrower a
revolving credit facility as set forth herein.
B. The Lender is willing to provide a revolving credit facility to the
Borrower for the purposes, upon the terms, and subject to the conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, and for other good and valuable consideration, it is agreed as
follows:
ARTICLE I - DEFINITIONS
1.1 DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the following
terms have the meanings indicated which meanings shall be equally applicable to
both the singular and the plural forms of such terms:
"ACCOUNTS OR ACCOUNTS RECEIVABLE" shall have the meaning ascribed to
Account in Section 679.106 of the Florida Statutes and shall include all present
and future accounts, General Intangibles, Chattel Paper, Instruments, notes,
acceptances, Documents or other rights to payment and all forms of obligations
owing at any time to the Borrower or any of its Subsidiaries arising out of the
sale or lease of Inventory or rendition of services, all rights of the Borrower
or any of its Subsidiaries earned or yet to be earned under contracts to sell or
lease Inventory or render services and all documents of any kind in respect of
any of the foregoing, and all the proceeds thereof, of every kind and nature and
in whatsoever form.
"ACQUISITION" shall mean the acquisition by Borrower of an informational
technology consulting company.
"ACQUISITION ADVANCE" shall mean a Borrowing for the purpose of financing
an Acquisition.
"ADJUSTED EBITDA" shall mean the actual earnings before Interest Expense,
taxes, depreciation and amortization of Borrower.
"ADJUSTED EBITL" shall mean the actual earnings before Interest Expense,
taxes, and Rentals of Borrower.
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"AFFILIATE" shall mean any Person which directly or indirectly through one
or more intermediaries controls, or is controlled by or is under common control
with, the Borrower. The term "control" means the possession, directly or
indirectly, of the power to cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by contract or
otherwise.
"AGREEMENT" means this Credit Agreement, as the same may from time to time
be amended, modified, extended or renewed.
"BORROWER" has the meaning assigned to that term in the introduction to
this Agreement.
"BORROWING" shall mean the drawing down by the Borrower of a loan or loans
from the Lender on any given Borrowing Date.
"BORROWING DATE" shall mean the date as of which a Borrowing is
consummated.
"BUSINESS DAY" shall mean a day on which commercial banks are open for
business in Ft. Lauderdale, Florida.
"CAPITAL EXPENDITURES" shall mean any expenditure by a Person which is or
is required to be capitalized on its balance sheet for financial reporting
purposes in accordance with generally accepted accounting principles, including,
without limitation, the incurrence by such Person of any Capitalized Lease
Obligations, excluding any expenditures paid for with insurance proceeds.
"CAPITALIZED LEASE OBLIGATIONS" shall mean, as to any Person, the
obligations or such Person, as lessee or guarantor, to pay rent or other amounts
under a lease of (or other agreement conveying the right to use) real and/or
personal property, which obligations are required to be classified and accounted
for as a capital lease on a balance sheet of the Person under generally accepted
accounting principles.
"CHATTEL PAPER" shall have the meaning ascribed to said term in Section
679.105 of the Florida Statutes.
"CLOSING DATE" shall mean January ___, 1999.
"CODE" shall mean the Internal Revenue Code of 1986, as the same may be
from time to time hereafter modified or amended.
"COLLATERAL" has the meaning assigned to that term in Section 5.1 of this
Agreement.
"DEFAULT" shall mean any event which, with the lapse of time, the giving of
notice, or both, would become an Event of Default, provided such Default has not
been waived in writing by Lender.
"DEFAULT RATE" shall mean, for the period commencing on the date of the
occurrence of an Event of Default and terminating on the date the Event of
Default is cured, a rate equal to the maximum rate of interest permitted by law.
2
<PAGE>
"DOCUMENTS" shall have the meaning ascribed to said term in Section 679.105
of the Florida Statutes and shall include all bills of lading, airway bills,
dock warrants, dock receipts, warehouse receipts or orders for the delivery of
goods, and also any other document which in the regular course of business or
financing is treated as adequately evidencing that the person in possession of
it is entitled to receive, hold and dispose of the document and the goods it
covers.
"DOLLARS" or "$" shall mean dollars in lawful currency of the United States
of America.
"EQUIPMENT" shall have the meaning ascribed to said term in Section 679.109
of the Florida Statutes and shall include all of the Borrower's or any of its
Subsidiary's goods, machinery, equipment, fixed assets, rolling stock, fixtures,
furniture, office equipment, tools, parts and other items of personal property
of every kind and description, now owned or hereafter acquired by the Borrower
or any Subsidiary, wheresoever located, together with all additions,
attachments, accessions, parts, replacements and substitutions thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may from time to time be amended.
"EVENT OF DEFAULT" has the meaning assigned to that term in Section 12.1
hereof.
"FUNDED INDEBTEDNESS" Indebtedness on which interest is paid or payable in
accordance with the terms and conditions of such Indebtedness.
"GENERAL INTANGIBLES" shall have the meaning ascribed to said term in
Section 679.106 of the Florida Statutes and shall include, without limitation,
any personal property other than goods, Accounts, Inventory, Equipment, Chattel
Paper and Instruments, including, all franchises, licenses, leases and subleases
whereby Borrower or any Subsidiary leases to another any of Borrower's or any
Subsidiary's Inventory or Equipment, contracts, permits and authorizations of
governmental agencies and others, tradenames, trademarks, service marks,
patents, copyrights, intellectual property and all other intangible property of
the Borrower or any Subsidiary.
"INDEBTEDNESS" of any Person shall mean (a) all indebtedness for borrowed
money or for the deferred purchase price of any property or services (other than
accounts payable and accruals in the ordinary course of business) for which the
Person is liable as principal, (b) all indebtedness (excluding unaccrued finance
charges) secured by a Lien on property owned or being purchased by the Person,
whether or not such indebtedness shall have been assumed by the Person, (c) all
Capitalized Lease Obligations (excluding unaccrued finance charges) of the
Person, (d) any arrangement (commonly described as a sale-and-leaseback
transaction) with any financial institution or other lender or investor
providing for the leasing to the Person of property which at the time has been
or is to be sold or transferred by the Person to the lender or investor, or
which has been or is being acquired from another Person by the lender or
investor for the purpose of leasing the property to the Person, (e) any
contingent obligation or liability including those under Third-Party Guaranties
and letters of credit for borrowed money, and (f) all obligations of
partnerships or joint ventures in respect of which the Person is primarily or
secondarily liable as a partner or joint venturer or otherwise (provided that in
any event for purposes of determining the amount of the Indebtedness, the full
amount of such obligations, without giving effect to the
3
<PAGE>
contingent liability or contributions of other participants in the partnership
or joint venture, shall be included to the extent such Person is liable
therefor).
"INTERCOMPANY INDEBTEDNESS" shall mean Indebtedness by and between Borrower
and its Subsidiaries.
"INTEREST COVERAGE RATIO" shall mean (i) Borrower's adjusted EDITL; divided
by (ii) the sum of Interest Expense and Rentals for the Borrower.
"INTEREST EXPENSE" for any period shall mean the aggregate amount of
interest charges on all Indebtedness of the Borrower or any Subsidiary, as the
case may be (said amount not to include the netting or inclusion of Interest
Income).
"INTEREST INCOME" for any period shall mean the aggregate amount of
interest earned by Borrower or any Subsidiary, as the case may be (said amount
not to include the netting or inclusion of Interest Expense).
"INSTRUMENTS" shall have the meaning ascribed to said term in Section
679.105 of the Florida Statutes.
"INVENTORY" shall mean all goods, merchandise and other personal property
now owned or hereafter acquired by Borrower or any Subsidiary, wheresoever
located, which are held for sale or lease or are furnished under a contract of
service or are raw materials, work in process or materials used or consumed or
to be used or consumed in Borrower's or any Subsidiary's business, in all of its
forms, together with all Inventory in transit, repossessed or returned Inventory
and all Documents of title representing the Inventory, and all accessions
thereto and products thereof.
"INVESTMENTS" shall mean, with respect to any Person, all advances, loans
or extensions of credit to any other Person, all purchases or commitments to
purchase any stock, bonds, notes, debentures or other securities of any other
Person, and any investment in other Persons, including partnerships or joint
ventures.
"LENDER" has the meaning assigned to that term in the introduction to this
Agreement.
"LEVERAGE RATIO" shall mean the ratio derived by comparing Borrower's: (i)
aggregate outstanding of all Funded Indebtedness; to (ii) Adjusted EBITDA.
"LIABILITIES" shall mean, at the time any determination thereof is to be
made, the aggregate amount of all liabilities of the Borrower or any Subsidiary
determined in accordance with generally accepted accounting principles,
including, without limitation, the contingent obligation of the Borrower or any
Subsidiary to reimburse amounts outstanding under any letters of credit or under
other similar facilities.
"LIEN" shall mean a mortgage, pledge, lien, security interest, or other
charge or encumbrance or any segregation of assets or revenues or other
preferential arrangement (whether
4
<PAGE>
or not constituting a security interest) with respect to any present or future
assets, including fixtures, revenues, or rights to the receipt of income of the
Person referred to in the context in which the term is used.
"LIBOR RATE" shall mean the thirty (30) day rate of interest per annum at
which United States Dollar deposits are offered in the London Interbank Market,
fully adjusted for any reserve requirements or assessment rates established from
time to time by the Board of Governors of the Federal Reserve System and the
Federal Deposit Insurance Corporation.
"MATERIAL ADVERSE CHANGE" shall mean any material adverse change in or
material adverse effect upon the business, assets, liabilities (actual or
contingent), condition (financial or otherwise), operations, properties of
Borrower and its Subsidiaries taken as a whole.
"NET WORTH" shall mean, at the time any determination thereof is to be
made, (i) the aggregate amount of all assets of a Person, as may be properly
classified as such, under generally accepted accounting principles, less (ii)
the aggregate amount of all Liabilities of such Person, all as determined in
accordance with generally accepted accounting principles applied on a consistent
basis.
"NOTE" has the meaning assigned to that term in Section 2.3 of this
Agreement.
"PERMITTED LIENS" shall mean a mortgage, pledge, lien, security interest or
other charge or encumbrance or any segregation of assets or revenues or other
preferential arrangement (whether or not constituting a security interest and
including, without limitation, any conditional sale or other title retention
agreement, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction) with
respect to any present or future assets, including fixtures, revenues or rights
to the receipt of income of the Person referred to in the context in which the
term is used which are permitted to exist under this Agreement pursuant to
Section 10.1 of this Agreement.
"PERSON" shall mean any natural person, corporation, unincorporated
organization, trust, joint-stock company, joint venture, association, company,
partnership or government, or any agency or political subdivision of any
government.
"PLAN" shall mean any employee benefit plan which is subject to the
provisions of Title IV of ERISA and which is maintained in whole or in part for
employees of the Borrower or any of its Subsidiaries.
"RELATED DOCUMENTS" shall mean the Note, the Security Agreement, the
UCC-1's and any and all other documents statements, and opinions described in
the Closing Documents Index attached hereto as "Exhibit D".
"RENTALS" of any Person shall mean, as of any date, the aggregate amount of
the obligations and liabilities of such Person to make payments under all
leases, subleases and similar arrangements for the use of real, personal or
mixed property, other than Capitalized Lease Obligations.
5
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"REVOLVING CREDIT COMMITMENT" shall mean the obligation of the Lender to
make a Revolving Credit Loan or Revolving Credit Loans to the Borrower in an
aggregate principal amount not to exceed Twenty-five Million Dollars
($25,000,000.00) pursuant and subject to Section 2.1(a) hereof.
"REVOLVING CREDIT LOAN" OR "REVOLVING CREDIT LOANS" shall mean the
principal amount and the aggregate principal amount, respectively, advanced by
the Lender as a loan or loans to the Borrower under Article II, or, where the
context so requires, the amount thereof then outstanding or any portion thereof.
"REVOLVING CREDIT MATURITY DATE" shall mean the date the Revolving Credit
Commitment will mature, which for the purposes of this Agreement is April 30,
2000.
"SUBSIDIARY" shall mean any Person in which the Borrower may own, directly
or indirectly, an equity interest of more than fifty percent (50%), or which may
effectively be controlled by the Borrower, during the term of this Agreement, as
well as all Subsidiaries and other Persons from time to time included in the
consolidated financial statements of the Borrower.
"TERMINATION EVENT" shall mean a "reportable event" as defined in Section
4043(b) of ERISA or the filing of a notice of intent to terminate under Section
4041 of ERISA.
"THIRD PARTY GUARANTY" shall mean, as to any Person, all liabilities or
obligations of such Person in respect of any Indebtedness or other obligations
of others guaranteed, directly or indirectly, in any manner by such Person, or
in effect guaranteed, directly or indirectly, by such Person through an
agreement, contingent or otherwise, to purchase such Indebtedness or obligation,
or to purchase or sell property, or to purchase or sell services, primarily for
the purpose of enabling the debtor to make payment of the Indebtedness or
obligation or to assure the owner of such Indebtedness or obligation against
loss, or to supply funds to or in any manner invest in the debtor, or otherwise.
"WORKING CAPITAL ADVANCES" shall mean a Borrowing for the purpose of
financing Borrower's purchases of equipment, leasehold improvements and working
capital requirements.
1.2 ACCOUNTING TERMS.
Accounting terms not specifically defined in this Agreement shall have
the meaning given to them under accounting principles and practices generally
accepted in the United States, applied on a consistent basis with the financial
statements referred to in Section 9.8 hereof, and shall be determined both as to
classification of items and amounts in accordance therewith. All Subsidiaries
shall be consolidated to the fullest extent permitted by such principles and
practices, and any accounting terms, financial covenants, and financial
statements referred to herein shall be determined and prepared on the basis of
such consolidation.
6
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1.3 OTHER DEFINITIONAL PROVISIONS.
The words "hereof," "herein," and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement, and section, subsection, and exhibit
references refer to this Agreement unless otherwise specified.
ARTICLE II - REVOLVING CREDIT COMMITMENT
2.1 REVOLVING CREDIT COMMITMENT.
(a) The Lender agrees, subject to the terms and conditions of this
Agreement, to make Revolving Credit Loans in United States Dollars to the
Borrower for a period terminating on the earlier of the Revolving Credit
Maturity Date or the termination in full of the Revolving Credit Commitment of
the Lender pursuant to Article XII hereof, at such times and in such amounts as
the Borrower shall request in accordance with the provisions of this Agreement,
provided that the aggregate principal amount of the Revolving Credit Loans
outstanding at any one time shall not exceed the Revolving Credit Commitment.
Within the limits of the Revolving Credit Commitment, and subject to the
provisions of this Agreement, the Borrower may borrow, repay, and reborrow from
time to time for a period from the date hereof to and including the earlier of
the Revolving Credit Maturity Date or the termination in full of the Revolving
Credit Commitment of the Lender pursuant to Article XII hereof. The Revolving
Credit Commitment shall have a sublimit in the amount of Fifteen Million Dollars
($15,000,000.00) to finance working capital needs of the Borrower (the "Working
Capital Sublimit"), and a sublimit in the amount of Ten Million Dollars
($10,000,000.00) for Acquisition purposes (the "Acquisition Sublimit").
(b) Any Revolving Credit Loan made under this Article II and, to the
extent permitted by law, interest thereon which is not paid when due (whether at
stated maturity, by acceleration, or otherwise), after giving effect to any
applicable cure period, shall bear interest at the Default Rate (computed on the
actual number of days elapsed over a 360-day year). In addition, any judgment
obtained by Lender in connection with any amounts due under this Agreement or
the Note shall also bear interest at the Default Rate.
(c) Borrower shall arrange its borrowings under the Revolving Credit
Loan such that the aggregate outstanding principal balance of the Revolving
Credit Loans shall not exceed One Thousand Dollars ($1,000.00) for thirty (30)
consecutive days during the term of the Revolving Credit Loan.
2.2 NOTICE AND MANNER OF BORROWING.
(a) Borrower shall give written notice (or telephonic notice, promptly
confirmed in writing) to the Lender in substantially the form attached hereto as
Exhibit "E," prior to 2:00 p.m., Ft. Lauderdale time, on each proposed Borrowing
Date.
(b) Each Borrowing under this Article II shall be made at the office of
the Lender, at its address as set forth opposite its signature at the end of
this Agreement, by crediting
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the Borrower's general deposit account with the Lender in the amount thereof. No
advances of any Borrowing will be made to any party other than the Borrower.
2.3 NOTE.
(a) The Revolving Credit Loans made by the Lender under this Article II
shall be evidenced by, and repaid with interest in accordance with, a single
Master Revolving Promissory Note executed by the Borrower in favor of the Lender
in substantially the form of Exhibit "A" attached hereto and made a part hereof,
with appropriate insertions, in the amount of the Revolving Credit Commitment,
dated the initial Borrowing Date and payable to the order of the Lender ( as
amended, extended, renewed and or restated from time to time, the "Note").
(b) Each Revolving Credit Loan evidenced by the Note and all prepayments
of the principal thereof shall be evidenced by the records of the Lender.
(c) Although the stated amount of the Note shall be equal to the
Revolving Credit Commitment, the Note shall be enforceable, with respect to the
Borrower's obligation to pay the principal amount thereof, only to the extent of
the unpaid principal amount of the Revolving Credit Commitment at the time
evidenced thereby. Interest on the Note shall be payable on, and only for the
period during which, the principal amount of the Loan evidenced thereby is
outstanding.
2.4 INTEREST.
(a) The principal balance outstanding from time to time under the Note
shall bear interest at a fluctuating rate per annum equal to one hundred forty
(140) basis points in excess of the LIBOR Rate. The interest rate under the Note
shall change on the fifth (5th) day of each month (each an "Interest Rate Change
Date"), based upon the LIBOR Rate in effect on each Interest Rate Change Date,
and shall be the rate in effect until the next Interest Rate Change Date. The
Note shall initially bear interest from the Closing Date until the first
Interest Rate Change Date, at a rate equal to one hundred forty (140) basis
points in excess of the LIBOR Rate in effect on the Closing Date.
(b) Interest on the principal balance from time to time outstanding
under the Note shall be due and payable monthly on the fifth (5th) day of each
month commencing the fifth (5th) day of the first (1st) month following the
Borrowing of a Revolving Credit Loan. If such payment day is not a Business Day,
the Business Day immediately preceding such date shall be the date on which
interest shall be due and payable. Interest under the Note shall be charged only
on the Revolving Credit Loans advanced and shall be computed from the date of
such advance to the date of repayment.
(c) All interest under the Note shall be computed on a daily basis,
based on a 360-day year. In no event shall interest be due at a rate in excess
of the highest lawful rate in effect from time to time. It is not the intention
of the parties hereto to make any agreement which shall be violative of the laws
of the State of Florida or the United States of America relating to usury. In no
event shall Borrower pay or Lender accept or charge any interest which,
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together with any other charges upon the principal or any portion thereof,
howsoever computed, after taking into account any requirement for commitment and
facility fees, shall exceed the maximum lawful rate of interest allowable under
the laws of the State of Florida or the United States of America from time to
time. Should any provision of this Agreement or any existing or future notes,
loan agreements or any other agreements between the parties be construed to
require the payment of interest which,together with any other charges upon the
principal or any portion thereof, after taking into account any requirement for
commitment and facility fees, shall exceed such maximum lawful rate of interest,
then any such excess shall be applied against the remaining principal balance.
(d) Any principal and, to the extent permitted by law, interest which is
not paid when due under the Note (whether at stated maturity, by acceleration or
otherwise) and which constitutes an Event of Default shall bear interest at a
rate per annum (computed as aforesaid) equal to the Default Rate.
2.5 PAYMENTS.
All payments of principal and interest under the Note shall be to the
Lender at its address as set forth opposite its signature at the end of this
Agreement or as otherwise directed by Lender, in immediately available funds.
2.6 COLLATERAL.
All obligations of the Borrower under the Revolving Credit Commitment
shall be secured by the Collateral set forth in Article V of this Agreement.
2.7 FEES.
In connection with the Revolving Credit Commitment Borrower shall pay to
Lender the following fees:
(a) COMMITMENT FEE: A commitment fee equal to Sixty-two Thousand Five
Hundred Dollars ($62,500.00) due and payable on or before the Closing Date.
(b) UNUSED LINE FEE: An unused line fee computed at a rate equal to
fifteen (15) basis points multiplied by the average daily unused portion of the
Revolving Credit Commitment for the immediately preceding calendar quarter,
payable in arrears within fifteen (15) days of the end of each calendar quarter,
commencing on the first (1st) of such date to occur after the Closing Date.
ARTICLE III - AVAILABILITY
3.1 ACQUISITION ADVANCE AVAILABILITY.
Acquisition Advances under the Revolving Credit Commitment shall be
limited to, in the aggregate outstanding at any time, an amount equal to the
Acquisition Sublimit, and all
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Acquisition Advances shall be subject to the conditions precedent set forth in
Section 7.1 of this Agreement.
3.2 WORKING CAPITAL ADVANCE AVAILABILITY.
Working Capital Advances under the Revolving Credit Commitment shall be
limited to, in the aggregate outstanding at any time, an amount equal to the
Working Capital Sublimit.
ARTICLE IV - GUARANTY
None.
ARTICLE V - COLLATERAL
5.1 COLLATERAL.
In order to secure the full and timely payment of the Revolving Credit
Loans outstanding under the Revolving Credit Commitment, as well as any
renewals, extensions or modifications thereof, and to secure performance of all
obligations of Borrower to Lender, however and whenever created, Borrower agrees
that it will execute or cause to be executed and delivered to Lender a security
agreement in favor of Lender (the "Security Agreement") and a UCC-1 financing
statement in favor of Lender (the "UCC-1"), in form and substance acceptable to
Lender, granting to Lender a first priority perfected security interest subject
to no other liens or encumbrances except for Permitted Liens or as may be
otherwise set forth in the Security Agreement or this Agreement, in the
following, together with the proceeds and products thereof: (1) all Borrower's
and each Subsidiary's presently existing and hereafter created Accounts or
Accounts Receivable; (2) all Borrower's and each Subsidiary's presently owned
and hereafter acquired Inventory; (3) all Borrower's and each Subsidiary's
presently owned and hereafter acquired Equipment; and (4) all Borrower's and
each Subsidiary's presently owned and hereafter acquired Chattel Paper,
Documents, Instruments and General Intangibles.
All of the above-described collateral is hereafter referred to as "Collateral".
5.2 CROSS-COLLATERALIZATION.
The Collateral shall secure all Indebtedness, howsoever or whenever
incurred, whether direct or indirect, contingent or absolute, of Borrower or any
Subsidiary to Lender.
ARTICLE VI - CONDITIONS PRECEDENT TO BORROWING
The Lender shall not be obligated to make any Revolving Credit Loan to
the Borrower hereunder unless, except as specifically provided for herein, the
following conditions precedent shall have been satisfied in the sole opinion of
the Lender:
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6.1 EACH LOAN.
The obligation of the Lender to make each Revolving Credit Loan
pursuant to Article II herein is subject to the condition precedent that: (i)
the Borrower shall have delivered to the Lender the notice of Borrowing provided
for in Section 2.2 hereof; and (ii) all representations and warranties set forth
in Article XIII herein shall be true and correct in all material respects as of
the date thereof.
6.2 INITIAL LOAN.
The obligation of the Lender to enter into this Agreement and make the
initial Revolving Credit Loans pursuant to Article II herein is subject to the
following additional conditions precedent, each of which shall have been met,
performed or delivered to Lender by the initial Borrowing Date:
(a) NOTE. The Note, duly executed and completed in the form of Exhibit
"A " attached hereto and made a part hereof.
(b) OPINION OF COUNSEL. A legal opinion reasonably acceptable to the
Lender and its counsel.
(c) INSURANCE. Evidence that all of the Borrower's insurable
properties, are insured as required by Section 9.4 of this Agreement. All
insurance policies covering the Collateral shall name the Lender as "Loss Payee"
and shall grant the Lender at least thirty (30) days prior written notice of
intended policy cancellation, non-renewal or material modification.
(d) CORPORATE DOCUMENTS. Certified copies of the Articles of
Incorporation and Bylaws of each Borrower and all amendments thereto, together
with a Certificate of Good Standing of each Borrower and proof of qualification
of each to do business in each jurisdiction in which its business is conducted.
(e) CERTIFICATION OF NO ADVERSE CHANGE. Evidence or certification from
Borrower that, from the date of the latest financial information furnished to
Lender by Borrower there has been no Material Adverse Change.
(f) SUPPORTING DOCUMENTS. This Agreement, each of the Related
Documents and each of the certificates and any and all other documents described
in the Closing Documents Index attached hereto as Exhibit "D" and made a part
hereof.
(g) LIEN SEARCH. Completion and satisfaction of a lien search
conducted in each jurisdiction where each Borrower or its assets are located.
(h) DUE DILIGENCE. Completion and satisfaction of due diligence
analysis and review with respect to the assets, liabilities, businesses,
operations, conditions, and prospects of each Borrower, as applicable,
including, but not limited to: (i) a NationsBank Business Credit Audit; and (ii)
a review of Borrower's fiscal year 1999 financial projections.
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(i) GOVERNMENT REGULATIONS. The proceeds of advances under the
Revolving Credit Commitment will be expended in compliance with all applicable
governmental and regulatory laws, rules and regulations (including without
limitation Federal Reserve Regulation U).
(j) FEES. Lender shall have been paid all fees and expenses payable on
or prior to the due date thereof in accordance with the terms hereof.
(k) SOLVENCY. A certificate of Borrower's chief executive officer or
chief financial officer confirming the solvency of Borrower (after consummation
of the transactions contemplated hereby) and satisfaction of all other
conditions precedent to the initial borrowing.
(l) CONSENTS. All requisite third parties shall have approved or
consented to the transactions contemplated hereby to the extent required, and
there shall be no governmental or judicial action, actual or threatened, that
has or would have a reasonable likelihood of restraining, preventing or imposing
burdensome conditions on the transactions contemplated hereby.
(m) OTHER. All other documents, agreements or instruments required in
connection with this Agreement.
ARTICLE VII - CONDITIONS PRECEDENT TO ACQUISITIONS
7.1 ACQUISITIONS FUNDED WITH ACQUISITION ADVANCES.
Borrower acknowledges and agrees that Lender's approval shall be
required for all Acquisitions. Lender's approval of Acquisitions to be funded in
whole or in part with Acquisition Advances shall be based upon the following
conditions having been satisfied:
(a) Satisfactory review and approval by Lender of the purchase
documentation related to each proposed Acquisition, which documentation shall
include but not be limited to subordination of any seller's notes or
Indebtedness to any seller entered into with respect to such Acquisition.
(b) Delivery and satisfactory review and approval by Lender of a
minimum of two (2) years of compiled historical financial statements prepared on
an accrual basis of the proposed Acquisition to the extent such Acquisition was
in operation for two (2) fiscal years.
(c) Satisfactory review of Borrower's pro forma consolidated balance
sheet giving effect to the proposed Acquisition.
(d) Satisfactory review of Borrower's consolidated and consolidating
financial projections on a pro forma basis giving effect to the proposed
Acquisition.
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(e) Evidence satisfactory to Lender that the proposed Acquisition will
not cause a default under this Agreement including, without limitation, all
representations and warranties, covenants and Events of Default.
(f) Any other information, financial or otherwise, that may be
reasonably requested by Lender.
(g) Borrower shall have obtained all required third party consents and
approvals.
(h) Execution of definitive collateral documentation.
(i) Copy of Borrower's "due diligence" package with respect to each
proposed Acquisition provided to management and board of directors of Borrower.
(j) A litigation search of each proposed Acquisition acceptable to
Lender in its reasonable discretion.
In no event will Lender approve an Acquisition: (i) which is opposed by the
selling entity's board of directors or controlling shareholders; or (ii) which
is not in the business of informational technology consulting.
7.2 ACQUISITIONS WHICH ARE NOT FUNDED WITH ACQUISITION ADVANCES.
Borrower acknowledges and agrees that Lender's prior written approval
shall be required for all Acquisitions that are not funded with Acquisition
Advances. Lender's approval of such Acquisitions shall not be unreasonably
withheld; provided, however, that Lender shall not be required to approve any
such Acquisition: (i) which is opposed by the selling entity's board of
directors or controlling shareholders; (ii) which is not in the business of
informational technology consulting; (iii) for which the Borrower does not
deliver to the Lender pro forma financial statements which evidence that the
Borrower and its subsidiaries (including the company being acquired pursuant to
the Acquisition) will be in compliance with all financial covenants set forth in
Sections 9.12, 9.13 and 9.14 of this Agreement after giving effect to such
Acquisition; or (iv) when an Event of Default has occurred and is continuing
under this Agreement.
ARTICLE VIII - REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
the Revolving Credit Loans provided for herein, the Borrower and each
Subsidiary, as applicable, make the following representations and warranties to
the Lender, all of which shall survive the execution and delivery of this
Agreement and the Note:
8.1 CORPORATE EXISTENCE AND POWER.
Each Borrower and each Subsidiary is a corporation duly incorporated,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation and is duly
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qualified or licensed to transact business in all places where such
qualification or license is necessary. Each Borrower has the corporate power to
make and perform this Agreement, the Note and the applicable Related Documents,
and this Agreement, the Note and the applicable Related Documents, when duly
executed and delivered, will constitute the legal, valid, and binding
obligations of each Borrower, enforceable substantially in accordance with their
respective terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, or other laws affecting creditors' rights generally.
8.2 CORPORATE AUTHORITY.
The making and performance by each Borrower of this Agreement, the Note
and the applicable Related Documents, and any additional documents contemplated
to be executed in connection herewith have been duly authorized by all necessary
corporate action of each Borrower, and do not and will not violate any provision
of law or regulation, or any writ, order, or decree of any court, governmental
commission, bureau, or other administrative agency or public regulatory body or
regulatory authority or agency or any provision of the articles or certificate
of incorporation or Bylaws of either Borrower, and do not and will not, with the
passage of time or the giving of notice, result in a breach of, or constitute a
default or require any consent under, or result in the creation of any Lien,
charge or encumbrance upon any property or assets of the Borrower, pursuant to
any instrument or agreement to which either Borrower is a party or by which
either Borrower or any of its respective properties may be bound or affected.
8.3 FINANCIAL CONDITION.
The consolidated balance sheet of the Borrower as of September 30,
1998, and statement of shareholder's equity of the Borrower for the nine (9)
month period ending on that date were prepared in accordance with generally
accepted accounting principles consistently applied on a generally recognized
consistent basis of accounting, as applicable, are complete, correct and fairly
present the financial condition on a consolidated basis of the Borrower and each
of its Subsidiaries as of those dates and the results of Borrower's and each
Subsidiary's operations on a consolidated basis for the periods ending on those
dates. Other than as disclosed by those financial statements or as listed on
Schedule II hereto, the Borrower and each of its Subsidiaries did not have any
direct or contingent obligations or liabilities which would result in a Material
Adverse Change. Since September 30, 1998, there has been no Material Adverse
Change.
8.4 FULL DISCLOSURE.
The financial statements referred to in Section 8.3 do not, nor does
this Agreement, or any written statement furnished by the Borrower or any of its
Subsidiaries to the Lender in connection with the negotiation of this Agreement
and the Revolving Credit Loans, contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained therein or
herein not misleading.
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8.5 LITIGATION.
There are no suits or proceedings pending, or to the knowledge of the
Borrower, threatened before any court or by or before any governmental or
regulatory authority, commission, bureau, or agency or public regulatory body
against or affecting the Borrower or any of its Subsidiaries which, if adversely
determined, would result in a Material Adverse Change.
8.6 PAYMENT OF TAXES.
The Borrower has filed or caused to be filed, or has obtained
extensions to file, all federal, state, and local tax returns which are required
to be filed, and has paid or caused to be paid, or, with respect to the Borrower
and each of its Subsidiaries, have reserved on its books amounts sufficient for
the payment of, all taxes as shown on said returns or on any assessment received
by it, to the extent that the taxes have become due, except as otherwise
permitted by the provisions hereof. No tax liens have been filed and the
Borrower and each of the Subsidiaries have not been notified of, or otherwise
has knowledge of, any claim being asserted with respect to any such taxes, fees,
or other charges which are reasonably likely to result in a Material Adverse
Change.
8.7 NO ADVERSE RESTRICTIONS OR DEFAULTS.
Neither the Borrower nor any Subsidiary is a party to any agreement or
instrument or subject to any court order or judgment, governmental decree,
charter, or other corporate or other restriction which is materially adverse to
its ability to conduct its business as currently conducted. Neither the Borrower
nor any Subsidiary is in default in the performance, observance, or fulfillment
of any of the obligations, covenants, or conditions contained in any agreement
or instrument to which it is a party or by which the Borrower or any of its
Subsidiaries or their respective properties may be bound or affected, or under
any law, regulation, decree, order, or the like, which is materially adverse to
their respective ability to conduct their business(es) as currently conducted.
8.8 INVESTMENT COMPANY ACT.
The Borrower is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
8.9 AUTHORIZATIONS.
All authorizations, consents, approvals, and licenses required under
applicable law or regulation for the ownership or operation of the property
owned or operated by the Borrower or any of its Subsidiaries for the conduct of
business in which the Borrower nor any of its Subsidiaries is engaged, have been
duly issued and are in full force and effect, and neither the Borrower nor any
of its Subsidiaries is in default under any order, decree, ruling, regulation,
closing agreement, or other decision or instrument of any governmental
commission, bureau, or other administrative agency or public regulatory body
having jurisdiction over the Borrower or
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any of its Subsidiaries, which default would result in a Material Adverse
Change. No approval, consent, or authorization of or filing or registration with
any governmental commission, bureau, or other regulatory authority or agency is
required with respect to the execution, delivery, or performance of this
Agreement, the Note or the Related Documents.
8.10 SUBSIDIARIES AND AFFILIATES.
As of the date of execution of this Agreement, the Borrower has no
Subsidiaries and no Affiliates other than as disclosed in Schedule I hereto. All
the capital stock and evidence of the equity rights held by the Borrower or a
Subsidiary in each Subsidiary hereafter created or acquired will be owned by the
Borrower and/or another Subsidiary, beneficially and of record, free and clear
of all Liens.
8.11 TITLE TO PROPERTIES.
The Borrower and each of its Subsidiaries, as applicable, have good and
marketable fee title to all real property, and good title to all other property
and assets, reflected in the latest balance sheet of the Borrower referred to in
Section 8.3 or purported to have been acquired by the Borrower or any of its
Subsidiaries subsequent to such date, except property and assets sold or
otherwise disposed of subsequent to such date in the ordinary course of
business. All property and assets of any kind of the Borrower or any of its
Subsidiaries are free from any Liens except for Permitted Liens. The Borrower
and each of its Subsidiaries enjoys peaceful and undisturbed possession under
all of the leases under which it is operating, none of which contains any
unusual provisions that would result in a Material Adverse Change. All leases
pertaining to real property are valid, subsisting, and in full force and effect
and the Borrower and its Subsidiaries, as applicable, have not received notice
of default thereunder, and the Borrower and its Subsidiaries have no leases for
personal property except as disclosed to Lender on the Borrower's financial
statements. The Borrower and each of its Subsidiaries possess all patents,
patent rights or licenses, trademarks, trademark rights, trade names, trade name
rights, and copyrights which are required to conduct its business as now
conducted without known conflict with the rights of others.
8.12 USE OF LOANS.
The proceeds of the Revolving Line of Credit Commitment shall be used
by the Borrower exclusively for: (i) Acquisition Advances; and (ii) Working
Capital Advances. The Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of the Revolving Credit Loans hereunder will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock. If requested by the Lender the Borrower will furnish
to the Lender in connection with the Revolving Credit Loans hereunder a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in said Regulation.
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8.13 ERISA.
(a) None of the Plans or the trusts created thereunder has engaged in a
prohibited transaction which could subject any such Plan or trust to a material
tax or penalty on prohibited transactions imposed under Code Section 4975 or
ERISA.
(b) None of the Plans or the trusts created thereunder has been
terminated; nor has any such Plan incurred any liability to the Pension Benefit
Guaranty Corporation, other than for required insurance premiums which have been
paid when due, or incurred any accumulated funding deficiency; nor has there
been any reportable event, or other event or condition, which presents a risk of
termination of any such Plan by the Pension Benefit Guaranty Corporation.
(c) The present value of all accrued benefits under the Plans did not,
as of the most recent valuation date, exceed the then current value of the
assets of Plans allocable to such accrued benefits.
(d) Neither the Borrower nor any Subsidiary has been a party to or has
any employees who are covered by any multi-employer pension or benefit plan.
(e) As used in this Section 8.13, the terms "accumulated funding
deficiency," "reportable event" and accrued benefits" shall have the respective
meanings assigned to them in ERISA, and the term "prohibited transaction" shall
have the meaning assigned to it in Code Section 4975 and ERISA.
ARTICLE IX - AFFIRMATIVE COVENANTS
The Borrower and each Subsidiary, as applicable, covenants and agrees
that from the Closing Date and until payment in full of the principal of and
interest on the Note and the termination in full of the Revolving Credit
Commitment unless the Lender shall otherwise consent in writing, the Borrower
will and, to the extent that Borrower may from time to time have any
Subsidiaries, will cause each of its Subsidiaries to:
9.1 LOAN PROCEEDS.
Use the proceeds of the Revolving Credit Loans only for the purposes
set forth in Section 8.12 and furnish the Lender with all evidence that it may
reasonably require with respect to such use.
9.2 CORPORATE EXISTENCE.
Do or cause to be done all things necessary to maintain, preserve, and
keep in full force and effect its existence in the jurisdiction of its
incorporation, and qualify and remain qualified in each jurisdiction where
qualification is necessary in view of its business operations or the ownership
of its properties except for the discontinuation or cessation of any Subsidiary
in the ordinary course of business and which does not result in a Material
Adverse Change.
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9.3 MAINTENANCE OF BUSINESS AND PROPERTIES.
At all times maintain, preserve, and protect all rights, privileges,
patents, franchises, and trade names necessary in the conduct of its business
and preserve all the remainder of its property used or useful in the conduct of
its business and keep the same in good repair, working order, and condition, and
from time to time make, or cause to be made, all needful and proper repairs,
replacements, betterments, and improvements thereto so that the business carried
on in connection therewith may be conducted properly at all times.
9.4 INSURANCE.
Insure and keep insured with reputable insurance companies and in
amounts consistent with the coverages customarily maintained by other companies
in the same or similar business and location, all insurable property owned by it
against loss or damage from such hazards or risks, including fire; insure and
keep insured employers' and public liability risks in good and responsible
insurance companies of the types and in amounts consistent with the coverages
customarily maintained by other companies in the same or similar business and
location; and upon request of the Lender furnish a certificate setting forth in
summary form the nature and extent of the insurance maintained by the Borrower
pursuant to this Section 9.4. Each insurance policy maintained by the Borrower
pursuant to this Section 9.4 shall include a provision that the insurer will
provide the Lender with thirty (30) days notice prior to the termination or
expiration of such policy. With respect to all insurance policies maintained by
Borrower covering the Collateral, said policies shall name the Lender as "Loss
Payee" and shall grant Lender at least thirty (30) days notice of intended
policy cancellation, non-renewal or material modification.
9.5 PAYMENT OF INDEBTEDNESS, TAXES, ETC.
Pay all of its Indebtedness and obligations before the same shall
become in default and comply in all material respects with all other agreements,
indentures, mortgages, or documents binding on it; and pay and discharge or
cause to be paid and discharged promptly all taxes, assessments, and
governmental charges or levies imposed upon it or upon its property or upon any
part thereof, before the same shall become in default, as well as all lawful
claims for labor, materials, and supplies or otherwise which, if unpaid, might
become a Lien upon such properties or any part thereof; provided, however, that
neither the Borrower nor any of its Subsidiaries shall be required to pay and
discharge or to cause to be paid and discharged any tax, assessment, charge,
levy, or claim so long as the validity thereof shall be contested in good faith
by appropriate proceedings and the Borrower or Subsidiary , as the case may be,
shall have set aside on its books adequate reserves with respect to any tax,
assessment, charge, levy, or claim, so contested.
9.6 COMPLIANCE WITH LAWS.
Duly observe, conform and comply with all laws, decisions, judgments,
rules, regulations, and orders of all governmental authorities relative to the
conduct of Borrower's business, and to its properties and assets, except those
being contested in good faith by
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appropriate proceedings diligently pursued; and obtain, maintain, and keep in
full force and effect, all governmental licenses, authorizations, consents, and
permits necessary to the proper conduct of the business of the Borrower.
9.7 NOTICE OF DEFAULT.
Upon the occurrence of any Default or Event of Default which management
of the Borrower or any Subsidiary has knowledge of, promptly furnish written
notice thereof to the Lender specifying the nature and period of existence
thereof and the action which the Borrower is taking or proposes to take with
respect thereto.
9.8 FINANCIAL STATEMENTS, REPORTS, ETC.
In the case of the Borrower, furnish to the Lender:
(a) within ninety (90) days after the end of each fiscal year of the
Borrower (being December 31), audited consolidated and consolidating balance
sheet and statement of operations cash flows, and statement of shareholders
equity together with supporting schedules of the Borrower, all in reasonable
detail, setting forth in each case the corresponding figures for the preceding
fiscal year, prepared in accordance with generally accepted accounting
principles, consistently applied, by a firm of independent certified public
accountants of recognized standing selected by the Borrower and acceptable to
the Lender, showing the financial condition of the Borrower and its Subsidiaries
at the close of such year and the results of operations of the Borrower and its
Subsidiaries during such year ;
(b) within forty-five (45) days after the end of each of the first
three quarters of each fiscal year of the Borrower, similar financial statements
to those referred to in subparagraph (a) above, internally prepared by the
Borrower, said financial statements to be unaudited and without footnotes
thereto, and certified by the President or Chief Financial Officer of the
Borrower, such consolidated balance sheet to be as of the end of each quarter
and the statement of operations and statement of cash flows to be for the period
from the beginning of the fiscal year to the end of such quarter;
(c) within forty-five (45) days after the end of each quarter of each
fiscal year of the Borrower, an accounts receivable aging report, certified by
the President or Chief Financial Officer of the Borrower;
(d) concurrently with the delivery of the financial statements required
in Subsection (a) and each quarterly financial statement submitted in Subsection
(b) hereinabove, a Borrower's Certificate (substantially in the form attached
hereto as Exhibit "B") signed by the President or the Chief Financial Officer of
the Borrower stating that they have no knowledge of any event which constitutes
a Default or Event of Default, accompanied by a report setting forth
computations showing, in detail satisfactory to the Lender, whether the Borrower
was in compliance with its obligations under Sections 9.12, 9.13, and 9.14;
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(e) prior to any request for an Acquisition Advance, an Acquisition
Advance Certificate (substantially in the form attached hereto as Exhibit "C");
(f) as soon as available, but in no event later than ten (10) days
after the filing thereof with any securities exchange or regulatory agency,
including, without limitation, the Securities and Exchange Commission, copies of
all regular, periodic and special reports, and all registration statements which
Borrower files with said exchange or agency, and all other material reports and
other statements (other than routine reports and other statements prepared in
the ordinary course of business that would not result in a Material Adverse
Change) that the Borrower or any Subsidiary may render to or file with any
governmental authority;
(g) any management letter received by Borrower from its independent
certified public accountants; and
(h) promptly, from time to time, such other information regarding the
assets, operations, business, affairs, and financial condition of the Borrower
and any of its Subsidiaries as the Lender may reasonably request.
All financial statements required to be furnished to the Lender under
this Section 9.8 shall be prepared in accordance with generally accepted
accounting principles applied on a basis consistent with the accounting
practices of the Borrower reflected in its financial statements referred to in
Section 8.3 hereof, or to the extent such treatment has changed, with a
reconciliation thereof.
9.9 VISITATION RIGHTS.
Permit any authorized representative of the Lender from time to time,
upon reasonable notice to the Borrower and during normal business hours, to
examine and copy the records, books, papers and financial reports of, and visit
and inspect the properties of, the Borrower or any of its Subsidiaries, and to
discuss the affairs and finances of the Borrower or any of its Subsidiaries,
with any of their respective officers, directors, and independent public
accountants, and in each case at the expense of the Borrower; provided, however,
that the cost for such audits and examinations by Lender shall not exceed Five
Thousand Dollars ($5,000.00) in the aggregate in any fiscal year of Borrower
unless an Event of Default has occurred under this Agreement.
9.10 NOTICE OF LITIGATION AND OTHER PROCEEDINGS.
Give prompt notice in writing to the Lender of the commencement of (a)
all litigation which, if adversely determined, is reasonably likely to result in
a Material Adverse Change; (b) all other litigation involving a claim against
the Borrower or any of its Subsidiaries for Twenty-Five Thousand Dollars
($25,000.00), or more per occurrence or One Hundred Thousand Dollars
($100,000.00) or more in the aggregate, in excess of applicable insurance
coverage; and (c) any citation, order, decree, ruling, or decision issued by, or
any denial of any application or petition to, or any proceedings before any
governmental commission, bureau, or other administrative agency or public
regulatory body against or affecting the Borrower or any of
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its Subsidiaries or any property of the Borrower or any Subsidiary, which is
reasonably likely to result in a Material Adverse Change.
9.11 ERISA.
Furnish to the Lender:
(a) As soon as available and in any event within fifteen (15) days
after Borrower or any of its Subsidiaries knows or has reason to know that any
Termination Event has occurred, a statement of a senior officer of the Borrower
describing the Termination Event and the action which the Borrower or any of its
Subsidiaries proposes to take so that the Termination Event shall not be
continuing;
(b) Promptly after receipt of request therefor by the Lender, copies
of each annual report filed by the Borrower or any of its Subsidiaries pursuant
to Section 104 of ERISA with respect to each Plan (including, to the extent
required by Section 103 of ERISA, the related financial and actuarial statements
and opinions and other supporting statements, certifications, schedules and
information referred to in said Section 103) and each annual report, if any,
required to be filed with respect to each Plan under Section 4065 of ERISA;
(c) Promptly after receipt thereof by the Borrower or any of its
Subsidiaries from the Pension Benefit Guaranty Corporation, copies of each
notice received by such party of the Pension Benefit Guaranty Corporation's
intention to terminate any Plan or to have a Trustee appointed to administer any
Plan; and
(d) Promptly after such request, any other documents and information
relating to any Plan that the Lender may reasonably request from time to time.
9.12 INTEREST COVERAGE RATIO.
At all times, Borrower shall maintain an Interest Coverage Ratio equal
to or exceeding 2.0 to 1.0.
9.13 LEVERAGE RATIO.
At all times, Borrower shall maintain a Leverage Ratio not to exceed
3.0 to 1.0.
9.14 RATIO OF LIABILITIES TO NET WORTH.
At all times, Borrower shall maintain a ratio of total liabilities to
Tangible Net Worth not to exceed 1.5 to 1.0. For purposes of this Agreement,
"Tangible Net Worth" shall mean Net Worth less capitalized organization and
development costs, capitalized interest, debt discount and expense, goodwill,
patents, trademarks, copyrights, franchises, licenses and such other assets as
are properly classified as "intangible assets" under generally accepted
accounting principles.
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Each of the covenants set forth in Section 9.12 and 9.13 are to be
calculated on a rolling four quarter basis, utilizing the consolidated financial
statements of the Borrower and its Subsidiaries for the immediately preceding
four (4) fiscal quarters. The rolling four quarter calculation will include the
previous four quarters of financial performance for any acquired entity or
assets on an accrual basis. In no instance shall the Borrower be subject to
financial covenants in its other financing and leasing arrangements that are
more restrictive than those set forth above. The covenant contained in Section
9.14 shall be calculated and tested quarterly.
9.15 BOOKS AND RECORDS.
With respect to Borrower, keep and maintain full and accurate accounts
and records of its operations according to generally accepted accounting
principles consistently applied, and will permit Lender or any of their
designated officers, employees, agents and representatives, at Lender's expense
and upon reasonable notice, to have access thereto, and to make audits, and to
inspect and otherwise check its properties, real, personal and mixed, and to
arrange for verification of Accounts Receivable under reasonable procedures,
directly with accounts debtors or by other methods.
9.16 OPERATING ACCOUNTS.
With respect to Borrower, maintain its primary depository bank accounts
with Lender.
9.17 MANAGEMENT.
With respect to Borrower, maintain Joseph W. Collard and James F.
Robertson as active members of the day-to-day management team of Borrower.
9.18 YEAR 2000 COMPLIANCE.
Borrower and its Subsidiaries shall take all necessary and appropriate
steps to ascertain the extent of, and to quantify and successfully address,
business and financial risks facing the Borrower and its Subsidiaries as a
result of failure to become Year 2000 compliant (that is, that computer
applications, imbedded microchips and other systems will be able to perform
date-sensitive functions prior to and after December 31, 1999) including risks
resulting from the failure of key vendors and suppliers of the Borrower and its
Subsidiaries to become Year 2000 compliant, and Borrower's and its subsidiaries'
material computer applications and those of its key vendors and suppliers shall,
on a timely basis, adequately address the Year 2000 problem in all material
respects.
ARTICLE X - NEGATIVE COVENANTS
The Borrower and each Subsidiary covenants and agrees that from the
Closing Date and until payment in full of the principal of and interest on the
Note and the termination in full of the Revolving Credit Commitment, unless the
Lender shall otherwise consent in writing,
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the Borrower will not, nor will it, to the extent that it may from time to time
have any Subsidiaries, permit any Subsidiary to:
10.1 LIMITATION ON LIENS.
Create or suffer to exist any Lien upon, or transfer or assignment of,
any of its property or revenues or assets now owned or hereafter acquired to
secure any Indebtedness or obligations, or enter into any arrangement for the
acquisition of any property subject to conditional sale agreements or leases or
other title retention agreements; excluding, however, from the operation of this
covenant: (a) deposits or pledges to secure payment of workers' compensation,
unemployment insurance, old age pensions, or other social security; (b) deposits
or pledges to secure performance of bids, tenders, contracts (other than
contracts for the payment of money) or leases, public or statutory obligations,
surety or appeal bonds, or other deposits or pledges for purposes of like
general nature in the ordinary course of business; (c) Liens for property taxes
not delinquent and Liens for taxes which in good faith are being contested or
litigated; (d) mechanic's, carrier's, workmen's, repairmen's, landlord's or
other like liens arising in the ordinary course of business securing obligations
which are not overdue for a period of thirty (30) days or more or which are in
good faith being contested or litigated; and (e) existing Liens reflected in the
financial statements referred to in Section 8.3 hereof, including any notes
thereto, or additional existing Liens listed in Schedule II attached hereto and
made a part hereof.
10.2 LIMITATION ON INDEBTEDNESS.
Incur, create, assume, or permit to exist any Indebtedness, except:
(a) the Note and any other Indebtedness of the Borrower or any of its
Subsidiaries to the Lender;
(b) Existing Indebtedness reflected in the financial statements
referred to in Section 8.3 hereof , including any notes thereto, or additional
existing Indebtedness listed in Schedule II attached hereto and made a part
hereof; and
(c) Indebtedness in favor of parties other than Lender incurred in
connection with Acquisitions, but only if the holders and obligees of such
Indebtedness subordinate such Indebtedness to the Indebtedness of Borrower to
Lender, pursuant to subordination agreements in form and content acceptable to
Lender and its counsel.
10.3 THIRD-PARTY GUARANTIES.
Be or become liable in respect of any Third-Party Guaranty, except for:
(a) the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; (b) Third-Party
Guaranties by the Borrower of Indebtedness of its Subsidiaries in favor of the
Lender or otherwise permitted to the extent the Indebtedness is permitted in
Section 10.2 hereof; (c) performance bonds entered into by the Borrower or its
Subsidiaries to secure the obligations of itself or its Subsidiaries; and (d)
Third-Party Guaranties
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of the Borrower and its Subsidiaries existing as of the date of execution
hereof, as shown on Schedule II hereto.
10.4 DIVIDENDS.
Declare or pay any cash dividend or authorize or make any other cash
distribution on any stock of the Borrower, whether now or hereafter outstanding,
or make, or permit any Subsidiary to make, any payment on account of the
purchase, acquisition, redemption or other retirement of any shares of such
stock.
10.5 MERGERS, CONSOLIDATIONS AND ACQUISITION OF ASSETS.
Liquidate, dissolve, whether voluntary or involuntarily, merge or
consolidate with or acquire any corporation or all or substantially all of the
assets of any Person (except for Acquisitions as permitted herein), or dispose
of all or substantially all of the assets of any Person.
10.6 SALE, LEASE, ETC.
Sell, lease, assign, transfer or otherwise dispose of any of its assets
or revenues (other than obsolete or worn-out personal property, or personal
property or real estate not used or useful in its business) whether now owned or
hereafter acquired, other than in the ordinary course of business, including,
without limitation, the stock of any Subsidiary, or sell, assign or discount any
of its accounts receivable or any promissory note held by it, with or without
recourse, other than the discount of such notes or accounts receivable in the
ordinary course of business for collection.
10.7 INVESTMENTS.
Make or suffer to exist any Investments, except that this prohibition
shall not apply to (i) the purchase of direct obligations of the government of
the United States of America, or any agency thereof, or obligations
unconditionally guaranteed by the United States of America; (ii) certificates of
deposit of any bank organized or licensed to conduct a banking business under
the laws of the United States or any State thereof; (iii) Investments in
commercial paper which, at the time of acquisition by the Borrower or any
Subsidiary, is accorded the highest rating category by a nationally recognized
credit rating agency; and (iv) other Investments of the Borrower existing as of
the date of execution hereof as shown on Schedule II hereof.
10.8 TRANSACTIONS WITH AFFILIATES.
Enter into or be a party to, any transaction or arrangement with any
Affiliate (including, without limitation, the purchase from, sale to or exchange
of property with, or the rendering of any service by or for, any Affiliate),
except in the ordinary course of, and pursuant to the reasonable requirements of
the Borrower's or any Subsidiary's business, and in connection with Acquisitions
and upon fair and reasonable terms no less favorable to the Borrower or any
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Subsidiary than would be obtained in a comparable arm's length transaction with
a Person other than an Affiliate.
10.9 SALE AND LEASEBACK.
After the sale of any property or assets owned by the Borrower or any
Subsidiary, lease such property or substantially identical property.
10.10 PURCHASE OF OWN SHARES.
Other than redemptions in connection with indemnification claims
pursuant to any Acquisition, purchase, retire or redeem any shares of its own
stock. Notwithstanding the foregoing, provided that (i) no Event of Default has
occurred under this Agreement, and (ii) no default will occur under Sections
9.12, 9.13 or 9.14 of this Agreement as a result thereof, Borrower shall be
entitled to purchase, retire or redeem shares of its own stock in an aggregate
amount not to exceed One Million Dollars ($1,000,000.00).
10.11 TRANSFER OF SHARES.
Transfer or allow the transfer of any Subsidiary's shares of capital
stock.
10.12 BUSINESS OPERATIONS.
Change the nature of its business.
10.13 OWNERSHIP OF ASSETS.
With respect to Borrower, own any assets or conduct any business other
than: (i) existing lines of business; (ii) Acquisitions permitted herein; or
(iii) the ownership of Subsidiaries.
10.14 LOANS AND ADVANCES.
Make loans or advances to any insiders, or Affiliates (excluding
intercompany Indebtedness which nets to zero on Borrower's consolidated
financial statements).
10.15 CAPITAL EXPENDITURES.
Permit capital expenditures to exceed Four Million Dollars
($4,000,000.00) in the aggregate each fiscal year.
ARTICLE XI - ENVIRONMENTAL
11.1 HAZARDOUS AND TOXIC MATERIALS GENERALLY.
(a) The Borrower expressly represents to the Lender that to the best
of its knowledge, there has been no complaint, order, citation, or notice with
regard to air emissions,
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Hazardous Discharges (as hereinafter defined), or other environmental, health,
or safety matters affecting any of the premises owned or operated by the
Borrower or any of its Subsidiaries (the "Premises") or the businesses therein
conducted which have not been fully satisfied and discharged, and there has been
no spill, discharge, release, or cleanup of any hazardous or toxic waste or
substance or any petroleum product or pesticide ("Hazardous Substances") at any
of the Premises, including, without limitation, into or upon any of their
respective soils, surface water, ground water, or the improvements located
thereon (a "Hazardous Discharge"), and, accordingly, such properties are clean
of all such wastes and substances. The Borrower expressly covenants and agrees
that to the extent the Premises are used for the handling, storage,
transportation, or disposal of any Hazardous Substance, it shall (i) implement
and maintain a program or system to minimize the likelihood and effect of any
Hazardous Discharge, (ii) use its best efforts to ensure that such use will be
in accordance with all federal, state, and local environmental laws, rules, and
regulations which apply to the handling, storage, transportation, or disposal of
any Hazardous Substance and (iii) obtain any and all necessary permits,
licenses, and approvals with respect to such use.
(b) The Borrower agrees to indemnify and hold the Lender harmless from
and against any claims, losses, damages, liabilities (including, without
limitation, all foreseeable and unforeseeable consequential damages), penalties,
fines, charges, interest, judgments, administrative and judicial proceedings,
voluntary or involuntary, remedial actions of any kind, public or private,
incurred by the Lender as a result of any past, present, or future use,
handling, storage, transportation or disposal of any Hazardous Substance by the
Borrower or any of its Subsidiaries or any other user or operator of any of the
Premises; including, without limitation, all costs and expenses incurred in
connection therewith (including, without limitation, reasonable attorneys' fees
and expenses (including those for appellate proceedings and court costs). The
foregoing indemnity shall survive the repayment of the Revolving Credit Loans
and the termination of this Agreement; provided that the Borrower shall not be
liable to the Lender for its own gross negligence or willful misconduct nor
shall the Borrower be liable for any claims which are barred by any applicable
statute of limitations.
(c) Subject to the provisions of this Article XI, the Borrower and its
Subsidiaries shall comply with any and all federal, state, or local
environmental laws, rules, or regulations which apply to the Premises or to any
users or operators of any establishments at the Premises.
ARTICLE XII - EVENTS OF DEFAULT
12.1 EVENTS OF DEFAULT.
If any one of the following "EVENTS OF DEFAULT" shall occur and shall
not have been remedied:
(a) Any representation or warranty made by the Borrower in connection
with this Agreement, or any Revolving Credit Loan hereunder, or in any
certificate or report furnished by the Borrower hereunder shall prove to have
been incorrect in any material respect; or
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(b) The Borrower shall fail to pay, when due, any principal of or
interest on the Note, or to pay when due any other sum payable under this
Agreement; or
(c) The Borrower shall default in the performance of any agreement,
covenant or obligation contained herein; or
(d) Final judgment for the payment of money in an amount in excess of
applicable insurance coverage shall be rendered against the Borrower or any of
its Subsidiaries, and the same shall remain undischarged for a period of thirty
(30) days, during which period execution shall not effectively be stayed; or
(e) The Borrower shall voluntarily terminate operations or the Borrower
or any Subsidiary shall (1) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of the
Borrower or Subsidiary, as the case may be, or of all or of a substantial part
of the assets of the Borrower or Subsidiary, as the case may be, (2) admit in
writing its inability, or be generally unable, to pay its debts as the debts
become due, (3) make a general assignment for the benefit of its creditors, (4)
commence a voluntary case under the United States Bankruptcy Code (as now or
hereafter in effect), (5) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, (6) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code, or (7) take any corporate action
for the purpose of effecting any of the foregoing; or
(f) The Borrower shall fail to furnish to the Lender notice of default
in accordance with Section 9.7 hereof, within ten (10) days after any such
Default or Event of Default becomes known to the President or Chief Financial
Officer of the Borrower, whether or not notification to the Borrower is
furnished by the Lender, unless such Default or Event of Default shall be cured
prior to the expiration of such ten (10) day period; or
(g) Without its application, approval or consent, a proceeding shall be
commenced, in any court of competent jurisdiction, seeking in respect of the
Borrower or any Subsidiary, the liquidation, reorganization, dissolution,
winding-up, or composition or readjustment of debt, the appointment of a
trustee, receiver, liquidator or the like of the Borrower or Subsidiary, as the
case may be, or of all or any substantial part of the assets of the Borrower or
Subsidiary, as the case may be, or other like relief in respect of the Borrower
or Subsidiary, as the case may be, under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts
unless such proceeding is contested in good faith by the Borrower or Subsidiary;
and, if the proceeding is being contested in good faith by the Borrower or
Subsidiary, as the case may be, the same shall continue undismissed, or unstayed
and in effect, for any period of sixty (60) consecutive days, or an order for
relief against the Borrower or any Subsidiary shall be entered in any
involuntary case under the Bankruptcy Code; or
(h) The Borrower or any of its Subsidiaries shall (1) default in the
payment of principal or interest, on any Indebtedness to Lender (other than the
Notes) beyond the period of
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grace, if any, provided in the instrument or agreement under which such
Indebtedness was created; (2) default in the payment of principal or interest on
any Indebtedness to any other lender beyond the applicable period of grace
pertaining thereto, if any, provided in the instrument or agreement under which
such Indebtedness was created; or (3) default in the observance or performance
of any other agreement contained in any Indebtedness referred to in (1) or (2)
above or in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur, the effect of which default or other
event is to cause, or permit the holder or holders of such Indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due prior to its stated maturity; provided, however, that
no Event of Default shall occur under this Article XII so long as the Borrower
or any of its Subsidiaries shall contest in good faith its obligations under the
Indebtedness described in this Article XII by appropriate proceedings and the
Borrower or Subsidiary, as the case may be, shall have set aside on its books
adequate reserves with respect to any amount so contested; or
(i) A Termination Event has occurred; or a trustee shall be appointed to
administer any Plan or Plans under Section 4042 of ERISA; or the Pension Benefit
Guaranty Corporation shall institute proceedings to terminate, or to have a
trustee appointed to administer, any Plan or Plans, and the proceeding shall not
be dismissed within thirty (30) days; or a voluntary notice of intent to
terminate is filed under Section 4041 of ERISA which would, in the opinion of
the Lender, result in a Material Adverse Change; or, with respect to any Plan as
to which the Borrower or any Subsidiary may have any liability, there shall
exist a deficiency in the Plan assets available to satisfy the benefits
guaranteeable under ERISA with respect to the Plan which is material to the
financial condition of the Borrower and such Subsidiary taken as a whole, and
(1) steps are undertaken to terminate the Plan or (2) the Plan is terminated or
(3) any Reportable Event which presents a material risk of termination with
respect to the Plan shall occur; or
(j) Failure by Borrower or any of its Subsidiaries to conduct its
business in the ordinary course consistent with past practices and in accordance
with all local, state and Federal laws and regulations governing the conduct of
Borrower's or any of Subsidiary's businesses, which failure is reasonably likely
to result in a Material Adverse Change; or
(k) Dissolution of Borrower or failure of the Borrower to maintain its
corporate existence except for the discontinuation or cessation of any
Subsidiary's existence in the ordinary course of business and which does not
result in a Material Adverse Change; or
(l) Any Material Adverse Change shall occur; or
(m) This Agreement, the Note, the Related Documents or any other
security document in favor of Lender, or any provisions thereof, shall be
invalidated or deemed unenforceable in any material respect; or
(n) Any default shall occur under the Note, this Agreement or any of the
Related Documents which default continues beyond any applicable grace or cure
period contained therein;
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THEREUPON, in the case of any such event the Lender may at its option: (i)
immediately terminate the Revolving Credit Commitment of the Lender hereunder,
and/or (ii) immediately declare the principal of, and interest accrued on, the
Note forthwith due and payable, whereupon the same shall become forthwith due
and payable; and the principal of, and interest accrued on, the Note shall
become immediately due and payable, both as to principal and interest, without
presentment, demand, protest, or other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Note to the
contrary notwithstanding; and (iii) exercise any and all rights and remedies
available to Lender under this Agreement, the Note, the Related Documents, the
Uniform Commercial Code in effect in the State of Florida, or any other
document, instrument or agreement executed and delivered in connection with this
Agreement, and all rights and remedies available to Lender under any other
applicable law.
ARTICLE XIII - MISCELLANEOUS
13.1 NO WAIVER, REMEDIES CUMULATIVE.
No failure on the part of the Lender to exercise and no delay in
exercising any right granted hereunder or in the Notes shall operate as a waiver
thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and are not exclusive of any
remedies provided by law.
13.2 SURVIVAL OF REPRESENTATIONS.
All representations and warranties made herein shall survive the making
of the Revolving Credit Loans hereunder and the delivery of the Notes.
13.3 EXPENSES.
Whether or not any of the Revolving Credit Loans herein provided for
shall be made, the Borrower agrees to pay on demand all reasonable costs and
expenses of the Lender (as more fully set forth on the Expense and Disbursement
Statement of even date herewith executed by Borrower and Lender) in connection
with the preparation, printing, execution, and delivery of this Agreement, the
Related Documents, the Note, and the other instruments and documents to be
delivered hereunder and thereunder, including the reasonable fees and
out-of-pocket expenses of legal counsel for the Lender, with respect thereto,
and the reasonable fees of independent public accountants, and other outside
experts retained by the Lender in connection with the enforcement of this
Agreement, the Related Documents, the Note, and the other instruments and
documents to be delivered hereunder and thereunder. In addition, the Borrower
shall pay any and all stamp and other taxes payable or determined to be payable
in connection with the execution and delivery of this Agreement, the Notes and
the instruments and documents to be delivered hereunder and thereunder, and
agrees to save the Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omitting to pay such taxes.
All obligations provided for in this Section 13.3 shall survive any termination
of this Agreement.
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13.4 NOTICES.
Except as otherwise provided for in this Agreement, any notice or other
communication hereunder to any party hereto shall be delivered by hand,
registered or certified mail, postage prepaid return receipt requested, in the
United States mail or overnight delivery by a nationally recognized overnight
courier service ("Overnight Courier") and shall be deemed to have been given or
made on the third (3rd) Business Day after the deposit thereof in the mail, or
shall be deemed to have been given or made on the second (2nd) Business Day
after deposit thereof with an Overnight Courier, or when received if delivered
by hand, addressed to the party at its address specified next to its signature
hereto (or at any other address that the party may hereafter specify to the
other parties in writing), except that notices by the Borrower under Section 2.2
hereof shall not be effective until received.
13.5 CONSTRUCTION.
This Agreement, the Related Documents, and the Note shall be deemed
contracts made under the law of the State of Florida and shall be governed by
and construed in accordance with the law of said state.
13.6 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of
the Borrower and the Lender, and their respective successors and assigns;
provided, that the Borrower may not assign any of its rights hereunder without
the prior written consent of the Lender. The Lender may, without the consent of
the Borrower, or any other Person, assign, negotiate, hypothecate, or grant
participations in this Agreement or in any of its rights and security under this
Agreement and each of the other documents contemplated to be executed in
conjunction herewith; provided, however, the Lender agrees that in the event of
all such assignments, negotiations, hypothecations, or participations the Lender
shall remain as the holder of the majority amount of the Revolving Credit Loans
and as administrative agent hereunder and shall not assign its obligations to
administer the Revolving Credit Loans. The Borrower shall accord full
recognition to any such assignment, and all rights and remedies of the Lender in
connection with the interest so assigned shall be as fully enforceable by such
assignee as they were by the Lender before such assignment. In connection with
any proposed assignment, the Lender may disclose to the proposed assignee any
information that the Borrower is required to deliver to the Lender pursuant to
this Agreement.
13.7 JURISDICTION, SERVICE OF PROCESS.
(a) Any suit, action, or proceeding against the Borrower or any
Subsidiary with respect to this Agreement, the Note, the Related Documents or
any judgment entered by any court in respect of any thereof may be brought in
the courts of the State of Florida or in the U.S. District Court for the
Southern District of Florida as the Lender (in its sole discretion) may elect,
and the Borrower and each Subsidiary hereby accepts the nonexclusive
jurisdiction of those courts for the purpose of any suit, action, or proceeding.
30
<PAGE>
(b) In addition, the Borrower and each Subsidiary hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of venue of any suit, action, or proceeding
arising out of or relating to this Agreement, the Note, the Related Documents or
any judgment entered by any court in respect of any thereof brought in Broward
or Miami-Dade County, Florida, and hereby further irrevocably waives any claim
that any suit, action, or proceeding brought in Broward or Miami-Dade County,
Florida has been brought in an inconvenient forum. The Borrower and each
Subsidiary further agrees that if any such suit, action, or proceeding is
pending in more than one jurisdiction that the Lender's selection of the forum
shall be binding on the Borrower and each Subsidiary.
13.8 LIMIT ON INTEREST.
Anything herein, in the Related Documents, or in the Notes to the
contrary notwithstanding, the obligations of the Borrower under this Agreement,
the Related Documents, and the Note to the Lender shall be subject to the
limitation that payments of interest to the Lender shall not be required to the
extent that receipt of any such payment by the Lender would be contrary to
provisions of law applicable to the Lender (if any) which limit the maximum rate
of interest which may be charged or collected by the Lender; provided, however,
that nothing herein shall be construed to limit the Lender to presently existing
maximum rates of interest, if an increased interest rate is hereafter permitted
by reason of applicable federal or state legislation. If by the terms of this
Agreement, the Related Documents, or the Note, the Borrower is at any time
required or obligated to pay interest in excess of such maximum rate, the rate
of interest payable hereunder and thereunder shall be computed at such maximum
rate and the portion of all prior interest payments in excess of such maximum
rate shall be applied to and shall be deemed to have been payments in reduction
of the principal balance of this Agreement and the Note.
13.9 PAYMENT ON OTHER THAN BUSINESS DAY.
Except as otherwise provided for in this Agreement, should any payment
required by this Agreement become due and payable other than on a Business Day,
the maturity thereof shall be the immediately preceding Business Day.
13.10 NET PAYMENTS.
All payments by the Borrower under this Agreement and the Note shall be
made without setoff or counterclaim and in such amounts as may be necessary in
order that all payments, after deduction or withholding for or on account of any
present or future taxes, levies, imposts, duties, or other charges of whatsoever
nature imposed by any government or any political subdivision or taxing
authority thereof (collectively, the "Taxes"), shall not be less than the
amounts otherwise specified to be paid under this Agreement and the Note.
Notwithstanding anything to the contrary contained in this Section 13.10, the
Borrower shall not be liable for the payment of any tax on or measured by net
income imposed on the Lender pursuant to the income tax laws of the United
States or any of the United States or any political subdivision thereof. The
Borrower shall pay all Taxes when due (and indemnify the Lender against any
liability therefor) and shall promptly (and in any event not later than 30 days
thereafter) furnish to the Lender any
31
<PAGE>
certificates, receipts, and other documents which may be required (in the
judgment of the Lender) to establish any tax credit to which the Lender may be
entitled. The obligations of the Borrower under this Section 13.10 shall survive
the termination of this Agreement and the repayment of the Revolving Credit
Loans, but such obligations shall terminate as to any claim or liability for
Taxes for which the Borrower is responsible pursuant to this Section 13.10 on
the same date that any such claim or liability for Taxes is barred by any
applicable statute of limitations.
13.11 INDEMNIFICATION OF LENDER.
Borrower and each Subsidiary hereby jointly and severally indemnify and
hold harmless, release and forever discharge Lender, its agents, servants,
employees, officers, directors, affiliates, attorneys, successors and assigns
from all damages, losses, claims, demands, liabilities, obligations, actions and
causes of action whatsoever which may exist as of the date hereof or arise
hereafter or which may be presently known or unknown and which may be of any
nature and extent whatsoever which may be brought by third parties on account of
or in any way directly or indirectly related to, concerning, arising out of, or
founded upon this Agreement, the Related Documents and any agreement, document
or instrument executed or to be executed in conjunction therewith or in
connection with any and all transactions contemplated thereby. This indemnity
and release on the part of the Borrower and the Subsidiary is contractual and
not merely a recital. The foregoing indemnity shall survive the repayment of the
Revolving Credit Loans and the termination of this Agreement; provided that
neither the Borrower nor any Subsidiary shall indemnify or be liable to the
Lender for its own gross negligence or willful misconduct nor shall the Borrower
or any Subsidiary be liable for any claims which are barred by any applicable
statute of limitations.
13.12 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original and all of which when taken
together shall constitute but one and the same instrument.
13.13 HEADINGS.
The headings and the Table of Contents of this Agreement are for
convenience only and are not to affect the construction of or to be taken into
account in interpreting the substance of this Agreement.
13.14 SEVERABILITY.
In the event that any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.
32
<PAGE>
13.15 COURSE OF DEALING; AMENDMENT; SUPPLEMENTAL AGREEMENTS.
No course of dealing between the Lender and the Borrower shall be
effective to amend, modify, or change any provision of this Agreement. This
Agreement may not be amended, modified, or changed in any respect except by an
agreement in writing signed by the Lender and the Borrower. The Lender and the
Borrower may, subject to the provisions of this Section 13.15, from time to
time, enter into written agreements supplemental hereto for the purpose of
adding any provisions to this Agreement or changing in any manner the rights and
obligations of the Lender and the Borrower hereunder. Any such supplemental
agreement in writing shall be binding upon the Lender and the Borrower.
13.16 RIGHT OF SETOFF.
Upon the occurrence and during the continuance of any Event of Default,
the Lender is hereby authorized at any time and from time to time, without
notice to the Borrower (any such notice being expressly waived by the Borrower),
to set off and apply any and all deposits (general or special, time or demand,
professional or final) at any time held and any other indebtedness owing by the
Lender to or for the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this agreement or
the note, or any other instrument executed in connection with this agreement or
the notes or constituting security therefor, irrespective of whether or not the
Lender shall have made demand under this agreement or the note and although such
obligations may be unmatured. The Lender agrees promptly to notify the Borrower
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
of the Lender under this Section 13.16 are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which the
Lender may have.
13.17 CONFIDENTIALITY.
Lender agrees to keep any information delivered or made available by
Borrower to Lender confidential from anyone other than persons employed or
retained by Lender who are expected to become engaged in documenting,
negotiating, auditing, evaluating, approving, structuring or administering the
Revolving Credit Loan; provided, that nothing herein shall prevent the Lender
from disclosing such information (i) upon the order of, or to, any court or
administrative or regulatory agency or entity, (ii) which has been publicly
disclosed other than as a result of a disclosure by Lender, (iii) in connection
with any litigation to which the Lender or Borrower is a party, (iv) to the
extent required in connection with the exercise of any right or remedy
hereunder, (v) to Lender's legal counsel, accountants and independent auditors,
(vi) to Lender's affiliates, or (vii) to any participant in the Revolving Credit
Loan or any assignee of all or part of Lender's rights hereunder.
13.18 MANDITORY ARBITRATION.
ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING
BUT NOT LIMITED TO THOSE ARISING OUT OF
33
<PAGE>
OR RELATING TO THIS AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS,
INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE
DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT
(OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND
MEDIATION SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
(a) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF
THE BORROWER'S DOMICILE AT TIME OF THIS AGREEMENT'S EXECUTION AND ADMINISTERED
BY ENDISPUTE, INC. D/B/A J.A.M.S./ENDISPUTE WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S./ENDISPUTE IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN NINETY (90) DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL
SIXTY (60) DAYS.
(b) RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED
TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT ; OR (II) BE A
WAIVER BY LENDER OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF LENDER (A) TO
EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF OR THE APPOINTMENT OF A RECEIVER. LENDER MAY EXERCISE SUCH
SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. NEITHER THIS EXERCISE OF SELF
HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF
34
<PAGE>
THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE
THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
[BORROWER]:
TECHNISOURCE, INC.,
a Florida corporation
By: /s/ JOSEPH W. COLLARD
----------------------------
Joseph W. Collard, President
1901 W. Cypress Creek Road, Suite 202
Ft. Lauderdale, Florida 33309
Attention: Joseph W.Collard, President
TECHNISOURCE OF FLORIDA, INC.,
a Florida corporation
By: /s/ JOSEPH W. COLLARD
----------------------------
Joseph W. Collard, President
1901 W. Cypress Creek Road, Suite 202
Ft. Lauderdale, Florida 33309
Attention: Joseph W. Collard, President
35
<PAGE>
[LENDER]:
NATIONSBANK, N.A., A NATIONAL
BANKING ASSOCIATION
By: /s/ DOUGLAS E. ROBERTS
--------------------------
Douglas E. Roberts,
Senior Vice President
One Financial Plaza, 10th Floor
Ft. Lauderdale, Florida 33340
Attention: Douglas E. Roberts,
Senior Vice President
[ACKNOWLEDGMENTS APPEAR ON NEXT PAGE]
36
EXHIBIT 10.2
MASTER REVOLVING PROMISSORY NOTE
$25,000,000.00 Nassau, Bahamas
January 19, 1999
FOR VALUE RECEIVED, the undersigned, TECHNISOURCE, INC., a Florida
corporation, and TECHNISOURCE OF FLORIDA, INC., a Florida corporation,
hereinafter called "MAKER", jointly and severally promise to pay to the order of
NATIONSBANK, N.A., a national banking association, hereinafter called "BANK", or
its successors or assigns, at its office at 100 Southeast 3rd Avenue, 10th
Floor, Fort Lauderdale, Florida 33340, or at such other addresses as BANK or any
subsequent holder of this Note may designate in writing from time to time, in
the manner hereinafter set forth, in immediately available local, collected
funds, the principal sum of TWENTY-FIVE MILLION DOLLARS ($25,000,000.00), or so
much thereof as may be outstanding from time to time, together with interest
thereon from the dates of funding to maturity. All interest shall be computed on
a daily basis and calculated on the basis of a three hundred sixty (360) day
year.
This Note constitutes the "Note" described in that certain Credit Agreement
dated of even date herewith (as amended from time to time, the "Agreement") by
and between BANK and MAKER. The principal and interest due hereunder shall be
payable in accordance with those terms and provisions of the Agreement which are
applicable to the Note including, but not limited to, the provisions relating to
the rate of interest to be charged hereunder, the due dates for payment of
interest and the repayment of principal. This Note shall be deemed to evidence
the principal amount actually outstanding under the Revolving Credit Commitment
(defined in the Agreement), even though the face amount of this Note may be in
excess of such principal amount outstanding from time to time. Until the
Revolving Credit Maturity Date (defined in the Agreement), provided no Event of
Default exists under the Agreement, MAKER may borrow, repay and reborrow from
time to time hereunder, subject to the terms and conditions of the Agreement.
This Note is subject to all terms and provisions of the Agreement, which
are hereby incorporated by this reference as though set forth in full herein,
and any Event of Default under the Agreement shall constitute a default under
this Note. In the event of any conflict or inconsistency between the terms and
provisions of this Note and those of the Agreement, the Agreement shall in all
respects govern and control. This Note is secured by the Collateral described in
the Agreement.
In the event of any Event of Default under the Agreement, including a
failure to make any payment of principal or interest due hereunder on the due
date thereof, BANK may, at its option, accelerate maturity, and the unpaid
principal balance hereof and all unpaid accrued interest shall thereupon
immediately become due and payable without presentment, demand, notice or
protest, and BANK shall have the right to set off against this Note all money
owed by BANK in any capacity to MAKER and to set off against all other
liabilities of MAKER to BANK, all money owed by BANK in any capacity to MAKER.
Failure to exercise this option with respect to any failure or breach shall not
constitute a waiver of the right as to any subsequent failure or breach.
<PAGE>
MAKER, as well as any and all endorsers, guarantors, sureties and all other
parties liable for the payment of any sum or sums due or to become due under the
terms of this Note, waive presentment, protest and demand, and notice of
protest, demand and dishonor, and nonpayment of this Note, and consent that the
holder hereof shall have the right, without notice, to deal in any way at any
time with any party hereto, or to grant any extension or extensions of time for
payment of any of said indebtedness or any other indulgences or forbearances
whatsoever, or to release any of the security for this Note or any of the
guarantors of this Note without in any way affecting the liability of any other
party for the payment of this Note.
MAKER further agrees to pay all costs of collection, including reasonable
attorneys' fees (inclusive of any bankruptcy or appellate proceedings), in case
the principal of this Note or any interest thereon is not paid when due, whether
suit be brought or not.
No delay or omission on the part of the holder hereof in exercising any
right hereunder shall operate as a waiver of such right or any other right under
this Note, nor shall any waiver on one occasion be construed as a bar to or
waiver of any such right on any future occasion. No waiver under or modification
of this Note shall be effective unless in writing and signed by the holder of
this Note.
Interest hereunder shall be charged only on the sums advanced from the date
of advance to the date of repayment. MAKER does not intend or expect to pay, nor
does BANK intend or expect to charge, accept or collect any interest which when
added to any commitment fee or any other charge upon the principal, shall be in
excess of the highest lawful rate allowable under the laws of the State of
Florida or the United States of America, whichever is higher or unlimited.
Should acceleration, prepayment or any other charges upon the principal or any
portion thereof result in the computation or earning of interest in excess of
the highest lawful rate allowable under the laws of the State of Florida or the
United States of America, whichever is higher or unlimited, then any and all
such excess is hereby waived and shall be applied against the remaining
principal balance, if any, and thereafter refunded to MAKER.
Except as otherwise specifically provided with respect to the maximum rate
of interest hereunder, this Note shall be governed as to validity,
interpretation, construction, effect and all other respects by the laws and
decisions of the State of Florida.
The undersigned hereby waives any plea of jurisdiction or venue as not
having a place of business in Broward County, Florida, and hereby specifically
authorizes any action brought upon the enforcement of this Note by BANK to be
instituted and prosecuted in either the Circuit Court of Broward County,
Florida, or in the United States District Court for the Southern District of
Florida, at the election of BANK.
All payments made hereunder shall be credited first to accrued interest and
then to principal; however, in the event of any default hereunder, BANK may, in
its sole discretion, and in such order as it may choose, apply any payment to
interest, principal, and/or lawful charges and expenses then accrued.
-2-
<PAGE>
From and after the date of an Event of Default (as defined in the
Agreement), the principal balance under this Note shall bear interest, from such
date until paid, at a rate per annum not to exceed the Default Rate, as defined
in the Agreement. If any payment is not made when due, BANK shall charge, and
MAKER shall pay, BANK's standard late fee of five percent (5%) upon the payment
which is past due. MAKER agrees that said charge is a fair and reasonable charge
for the late payment and shall not be deemed a penalty. If the Default Rate is
in effect, the amount of any late fee paid or charged by BANK shall be deducted
from the amount of interest accrued at the Default Rate.
This Note is binding upon MAKER and its successors and assigns.
MANDATORY ARBITRATION. Any controversy or claim between or among the
parties hereto including but not limited to those arising out of or relating to
this Note or any related agreements or instruments, including any claim based on
or arising from an alleged tort, shall be determined by binding arbitration in
accordance with the Federal Arbitration Act (or if not applicable, the
applicable state law), the Rules of Practice and Procedure for the Arbitration
of Commercial Disputes of Judicial Arbitration and Mediation Services, Inc.
(J.A.M.S.), and the "Special Rules" set forth below. In the event of any
inconsistency, the Special Rules shall control. Judgment upon any arbitration
award may be entered in any court having jurisdiction. Any party to this Note
may bring an action, including a summary or expedited proceeding, to compel
arbitration of any controversy or claim to which this Note applies in any court
having jurisdiction over such action.
(a) SPECIAL RULES. The arbitration shall be conducted in the city of the
MAKER's domicile at time of this Note's execution and administered by Endispute,
Inc. d/b/a J.A.M.S./Endispute who will appoint an arbitrator; if
J.A.M.S./Endispute is unable or legally precluded from administering the
arbitration, then the American Arbitration Association will serve. All
arbitration hearings will be commenced within ninety (90) days of the demand for
arbitration; further, the arbitrator shall only, upon a showing of cause, be
permitted to extend the commencement of such hearing for up to an additional
sixty (60) days.
(b) RESERVATION OF RIGHTS. Nothing in this Note shall be deemed to (i)
limit the applicability of any otherwise applicable statutes of limitation or
repose and any waivers contained in this Note; or (ii) be a waiver by BANK of
the protection afforded to it by 12 U.S.C. ss.91 or any substantially equivalent
state law; or (iii) limit the right of BANK (A) to exercise self help remedies
such as (but not limited to) setoff, or (B) to foreclose against any real or
personal property collateral, or (C) to obtain from a court provisional or
ancillary remedies such as (but not limited to) injunctive relief or the
appointment of a receiver. BANK may exercise such self help rights, foreclose
upon such property, or obtain such provisional or ancillary remedies before,
during or after the pendency of any arbitration proceeding brought pursuant to
this Note. Neither this exercise of self help remedies nor the institution or
maintenance of an action for foreclosure or provisional or ancillary remedies
shall constitute a waiver of the right of any party, including the claimant in
any such action, to arbitrate the merits of the controversy or claim occasioning
resort to such remedies.
-3-
<PAGE>
TECHNISOURCE, INC.,
a Florida corporation
By: /s/ JOSEPH W. COLLARD
------------------------------
Joseph W. Collard, President
TECHNISOURCE OF FLORIDA, INC.,
a Florida corporation
By: /s/ JOSEPH W. COLLARD
------------------------------
Joseph W. Collard, President
COMMONWEALTH OF BAHAMAS )
NEW PROVIDENCE )
The foregoing instrument was executed and acknowledged before me in Nassau,
Bahamas, this day of January, 1999, by Joseph W. Collard, as President of each
of TECHNISOURCE, INC., a Florida corporation, and TECHNISOURCE OF FLORIDA, INC.,
a Florida corporation, on behalf of the corporations.
_____________________________________________________
Signature of Notary Public
Nassau, Bahamas
_____________________________________________________
Print, Type or Stamp Commissioned Name of
Notary Public
Personally Known ______ or Produced Identification _______
Type of Identification Produced: _____ Driver's License _____ Other ________
-4-
EXHIBIT 10.3
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT is made as of the 9 day of
March, 1999, by and between TECHNISOURCE, INC., a Florida corporation, and
TECHNISOURCE OF FLORIDA, INC., a Florida corporation, a wholly-owned subsidiary
of Technisource, Inc. (collectively, the "Borrower"), and NATIONSBANK, N.A., a
national banking association (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender previously entered into that certain
Credit Agreement dated as of January 29, 1999 (the "Credit Agreement");
WHEREAS, the Borrower has requested, and the Lender has agreed, to modify
and extend the Loan, subject to the terms and conditions contained herein and in
the Credit Agreement; and
WHEREAS, the parties hereto wish to amend the Credit Agreement as provided
herein.
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and in consideration of the loans or extensions of credit
heretofore now or hereafter made or to be made for the benefit of the Borrower
by the Lender, the parties do hereby agree as follows:
1. The Borrower and the Lender agree that the recitals set forth above are
true, correct, and complete, and are hereby incorporated herein.
2. All capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to them in the Credit Agreement.
3. The definition of "Interest Coverage Ratio" contained in Section 1.1 of the
Credit Agreement is hereby amended and restated so that, from and after the
date hereof, it shall read in its entirety as follows:
"INTEREST COVERAGE RATIO" shall mean (i) Borrower's Adjusted EBITL;
divided by (ii) the sum of Interest Expense and Rentals for the Borrower.
4. The definition of "Revolving Credit Maturity Date" contained in Section 1.1
of the Credit Agreement is hereby amended and restated so that, from and
after the date hereof, it shall read in its entirety as follows:
"REVOLVING CREDIT MATURITY DATE" shall mean the date the Revolving
Credit Commitment will mature, which for the purposes of this Agreement is
April 30, 2002.
<PAGE>
5. The following definition is hereby added to Section 1.1 of the Credit
Agreement effective from and after the date hereof:
"FIXED CHARGE COVERAGE RATIO" shall mean (i) Borrower's Adjusted EBITDA
plus Rentals less Capitalized Lease Obligations less dividends; divided by
(ii) the sum of Interest Expense, current maturities of long term debt,
Capitalized Lease Obligations and Rentals for the Borrower.
6. Subsection 2.1(c) of the Credit Agreement is hereby amended and restated so
that, from and after the date hereof, it shall read in its entirety as
follows:
(c) INTENTIONALLY DELETED.
7. Subsection 2.7(a) of the Credit Agreement is hereby amended and restated so
that, from and after the date hereof, it shall read in its entirety as
follows:
(a) COMMITMENT FEE: A commitment fee equal to Sixty-two Thousand
Five Hundred Dollars ($62,500.00) due and payable on or before the Closing
Date, and an additional One Hundred Twenty-five Thousand Dollars
($125,000.00) due and payable on or before March 9, 1999.
8. Section 9.17 of the Credit Agreement is hereby amended and restated so
that, from and after the date hereof, it shall read in its entirety as
follows:
9.17 MANAGEMENT.
With respect to Borrower, (a) maintain Joseph W. Collard and James F.
Robertson as active members of the day-to-day management team of Borrower,
or (b) maintain such other active members of the day-to-day management team
of Borrower as Borrower shall propose in a succession plan which must be
(i) submitted to Lender within sixty (60) days after Joseph W. Collard or
James F. Robertson ceases to be actively involved in the day-to-day
management of Borrower and (ii) acceptable to Lender in its reasonable
discretion.
9. The following Section 9.19 is hereby added to the Credit Agreement
effective from and after the date hereof:
9.19 FIXED CHARGE COVERAGE RATIO.
At all times, Borrower shall maintain a Fixed Charge Coverage Ratio
equal to or exceeding 1.2 to 1.0. The Fixed Charge Coverage Ratio shall be
tested annually, utilizing the consolidated year-end financial statements
of the Borrower and its Subsidiaries.
10. Section 10.7 of the Credit Agreement is hereby amended and restated so
that, from and after the date hereof, it shall read in its entirety as
follows:
2
<PAGE>
10.7 INVESTMENTS.
Make or suffer to exist any Investments, except that this prohibition
shall not apply to (i) the purchase of direct obligations of the government
of the United States of America, or any agency thereof, or obligations
unconditionally guaranteed by the United States of America; (ii)
certificates of deposit of any bank organized or licensed to conduct a
banking business under the laws of the United States or any State thereof;
(iii) Investments in commercial paper which, at the time of acquisition by
the Borrower or any Subsidiary, is accorded the highest rating category by
a nationally recognized credit rating agency; (iv) other Investments of the
Borrower existing as of the date of execution hereof as shown on Schedule
II hereof; and (v) Investments made in conformity with the Investment
Guidelines as shown on Exhibit "F" hereof.
11. Exhibit "F" attached to this Amendment is hereby added as Exhibit "F" to
the Credit Agreement effective from and after the date hereof.
12. Subsection 12.1(c) of the Credit Agreement is hereby amended and restated
so that, from and after the date hereof, it shall read in its entirety as
follows:
(c) The Borrower shall default in the performance of any other
agreement, covenant or obligation contained in this Agreement (other than
the defaults specifically enumerated in this Section 12.1), and any such
default shall not be cured within ten (10) days after notice thereof is
sent by the Lender to the Borrower; or
13. Borrower agrees to pay on demand all reasonable costs and expenses of the
Lender (as more fully set forth on the Expense and Disbursement Statement
of even date herewith executed by Borrower and Lender) in connection with
the preparation, printing, execution, and delivery of this Amendment and
the other instruments and documents to be delivered hereunder and
thereunder, including the reasonable fees and out-of-pocket expenses of
legal counsel for the Lender, with respect thereto, and the reasonable fees
of independent public accountants, and other outside experts retained by
the Lender in connection with the enforcement of this Amendment and the
other instruments and documents to be delivered hereunder. In addition, the
Borrower shall pay any and all stamp and other taxes payable or determined
to be payable in connection with the execution and delivery of this
Amendment and the instruments and documents to be delivered hereunder, and
agrees to save the Lender harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omitting to pay
such taxes. All obligations provided for in this paragraph shall survive
any termination of this Amendment or the Credit Agreement.
14. Lender acknowledges that the making and performance of the Credit Agreement
(as amended by this Amendment), the Note and applicable Related Documents
dated as of January 29, 1999, was approved and ratified by the Board of
Directors of each Borrower on February 3, 1999, and Lender agrees that the
representations, warranties and statements contained in Section 8.2 of the
Credit Agreement (and similar provisions in
3
<PAGE>
any of the Related Documents) to the contrary are hereby amended to the
extent necessary to reflect the date of such approval and ratification.
15. WAIVER AND RELEASE. AS A MATERIAL INDUCEMENT FOR THE LENDER TO EXECUTE THIS
AMENDMENT, THE BORROWER DOES HEREBY RELEASE, WAIVE, DISCHARGE, COVENANT NOT
TO SUE, ACQUIT, SATISFY AND FOREVER DISCHARGE THE LENDER, ITS OFFICERS,
DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS AND ITS AFFILIATES AND ASSIGNS
FROM ANY AND ALL LIABILITY, CLAIMS, COUNTERCLAIMS, DEFENSES, ACTIONS,
CAUSES OF ACTION, SUITS, CONTROVERSIES, AGREEMENTS, PROMISES AND DEMANDS
WHATSOEVER IN LAW OR IN EQUITY WHICH THE BORROWER EVER HAD, NOW HAS, OR
WHICH ANY PERSONAL REPRESENTATIVE, SUCCESSOR, HEIR OR ASSIGN OF THE
BORROWER HEREAFTER CAN, SHALL OR MAY HAVE AGAINST THE LENDER, ITS OFFICERS,
DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS, AND ITS AFFILIATES AND ASSIGNS,
FOR, UPON OR BY REASON OF ANY MATTER, CAUSE OR THING WHATSOEVER, THROUGH
THE DATE HEREOF. THE BORROWER FURTHER EXPRESSLY COVENANTS WITH AND WARRANTS
UNTO THE LENDER AND ITS AFFILIATES AND ASSIGNS, THAT THERE EXIST NO CLAIMS,
COUNTERCLAIMS, DEFENSES, OBJECTIONS, OFFSETS OR CLAIMS OF OFFSET AGAINST
THE LENDER OR THE OBLIGATION OF THE BORROWER TO PAY THE LENDER ALL AMOUNTS
OWING UNDER THE NOTE, THE CREDIT AGREEMENT AND ALL ASSOCIATED LOAN
DOCUMENTS AS AND WHEN THE SAME BECOME DUE AND PAYABLE.
16. REAFFIRMATION BY BORROWER. THE BORROWER ACKNOWLEDGES AND REAFFIRMS THAT ALL
WARRANTIES, REPRESENTATIONS AFFIRMATIVE COVENANTS AND NEGATIVE COVENANTS
SET FORTH IN THE CREDIT AGREEMENT REMAIN IN FULL FORCE AND EFFECT ON THE
DATE HEREOF AS IF MADE ON THE DATE HEREOF.
17. AMENDED AGREEMENT. THIS AGREEMENT AMENDS THE CREDIT AGREEMENT, AND THE
BORROWER ACKNOWLEDGES AND AGREES THAT THE SECURITY INTERESTS, RIGHTS,
DUTIES, AND OBLIGATIONS OF THE BORROWER AND THE LENDER CREATED BY THE
CREDIT AGREEMENT ARE NOT EXTINGUISHED, BUT ARE REAFFIRMED AND REMAIN IN
FULL FORCE AND EFFECT AS PROVIDED IN THE CREDIT AGREEMENT. IN THE EVENT OF
ANY CONFLICT BETWEEN THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT AND
THE TERMS AND PROVISIONS OF THIS AMENDMENT, THE TERMS AND PROVISIONS OF
THIS AMENDMENT SHALL CONTROL AND PREVAIL.
18. MANDATORY ARBITRATION. Any controversy or claim between or among the
parties hereto including but not limited to those arising out of or
relating to this Amendment or any related agreements or instruments,
including any claim based on or arising from an alleged tort,
4
<PAGE>
shall be determined by binding arbitration in accordance with the Federal
Arbitration Act (or if not applicable, the applicable state law), the Rules
of Practice and Procedure for the Arbitration of Commercial Disputes of
Judicial Arbitration and Mediation Services, Inc. (J.A.M.S.), and the
"Special Rules" set forth below. In the event of any inconsistency, the
Special Rules shall control. Judgment upon any arbitration award may be
entered in any court having jurisdiction. Any party to this Amendment may
bring an action, including a summary or expedited proceeding, to compel
arbitration of any controversy or claim to which this Amendment applies in
any court having jurisdiction over such action.
(a) SPECIAL RULES. The arbitration shall be conducted in the city of the
Borrower's domicile at time of this Amendment's execution and
administered by Endispute, Inc. d/b/a J.A.M.S./Endispute who will
appoint an arbitrator; if J.A.M.S./Endispute is unable or legally
precluded from administering the arbitration, then the American
Arbitration Association will serve. All arbitration hearings will be
commenced within ninety (90) days of the demand for arbitration;
further, the arbitrator shall only, upon a showing of cause, be
permitted to extend the commencement of such hearing for up to an
additional sixty (60) days.
(b) RESERVATION OF RIGHTS. Nothing in this Amendment shall be deemed to
(i) limit the applicability of any otherwise applicable statutes of
limitation or repose and any waivers contained in this Amendment; or
(ii) be a waiver by Lender of the protection afforded to it by 12
U.S.C. ss.91 or any substantially equivalent state law; oR (iii) limit
the right of Lender (A) to exercise self help remedies such as (but
not limited to) setoff, or (B) to foreclose against any real or
personal property collateral, or (C) to obtain from a court
provisional or ancillary remedies such as (but not limited to)
injunctive relief or the appointment of a receiver. Lender may
exercise such self help rights, foreclose upon such property, or
obtain such provisional or ancillary remedies before, during or after
the pendency of any arbitration proceeding brought pursuant to this
Amendment. Neither this exercise of self help remedies nor the
institution or maintenance of an action for foreclosure or provisional
or ancillary remedies shall constitute a waiver of the right of any
party, including the claimant in any such action, to arbitrate the
merits of the controversy or claim occasioning resort to such
remedies.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to Credit Agreement as of the day and year first above written.
[BORROWER]:
TECHNISOURCE, INC.,
a Florida corporation
By: /s/ JOSEPH W. COLLARD
----------------------------
Joseph W. Collard, President
TECHNISOURCE OF FLORIDA, INC.,
a Florida corporation
By: /s/ JOSEPH W. COLLARD
----------------------------
Joseph W. Collard, President
[LENDER]:
NATIONSBANK, N.A., a national banking
association
By: /s/ DOUGLAS E. ROBERTS
--------------------------
Douglas E. Roberts,
Senior Vice President
[ACKNOWLEDGMENTS APPEAR ON NEXT PAGE]
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TECHNISOURCE, INC.'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 15,307,482
<SECURITIES> 0
<RECEIVABLES> 20,256,259
<ALLOWANCES> 358,933
<INVENTORY> 0
<CURRENT-ASSETS> 36,523,915
<PP&E> 4,074,556
<DEPRECIATION> 1,445,588
<TOTAL-ASSETS> 39,387,299
<CURRENT-LIABILITIES> 4,329,257
<BONDS> 0
0
0
<COMMON> 103,850
<OTHER-SE> 34,811,923
<TOTAL-LIABILITY-AND-EQUITY> 39,387,299
<SALES> 37,600,125
<TOTAL-REVENUES> 37,600,125
<CGS> 29,732,586
<TOTAL-COSTS> 29,732,586
<OTHER-EXPENSES> 5,710,545
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,381,568
<INCOME-TAX> 952,627
<INCOME-CONTINUING> 1,428,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,428,941
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
