<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
----------- -----------
COMMISSION FILE NUMBER 0-9385
-----------
BULL RUN CORPORATION
(Exact name of registrant as specified in its charter)
GEORGIA 91-1117599
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
4370 PEACHTREE ROAD, N.E., ATLANTA, GA 30319
(Address of principal executive offices) (Zip Code)
(404) 266-8333
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 22,432,267 shares of Common
Stock, par value $.01 per share, were outstanding as of April 30, 1999.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BULL RUN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 103,494 $ 57,579
Accounts receivable (includes $322,000 and $880,000
due from Gray Communications Systems, Inc. as of
March 31, 1999 and December 31, 1998, respectively) 5,268,302 5,980,351
Inventories 5,457,011 5,166,925
Other 179,692 231,508
------------- ------------
Total current assets 11,008,499 11,436,363
Property and equipment, net 2,598,167 2,622,903
Investment in affiliated companies 84,253,553 73,345,296
Goodwill 7,500,936 7,583,410
Other assets 384,482 183,559
------------- ------------
$ 105,745,637 $ 95,171,531
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt $ 14,000,000 $ 4,000,000
Accounts payable 2,772,228 2,780,640
Accrued and other liabilities:
Employee compensation and related taxes 544,292 571,560
Interest 579,037 395,926
Other 788,738 375,454
------------- ------------
Total current liabilities 18,684,295 8,123,580
Long-term debt 53,377,296 51,848,547
Deferred income taxes 4,891,661 5,408,661
Stockholders' equity:
Common stock, $.01 par value (authorized 100,000,000
shares; issued 22,824,271 and 22,785,271 shares as of
March 31, 1999 and December 31, 1998, respectively) 228,243 227,853
Additional paid-in capital 21,436,347 21,378,111
Treasury stock, at cost (542,004 shares) (1,392,430) (1,392,430)
Retained earnings 8,520,225 9,577,209
------------- ------------
Total stockholders' equity 28,792,385 29,790,743
------------- ------------
$ 105,745,637 $ 95,171,531
============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 3
BULL RUN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
<S> <C> <C>
Revenue from printer operations $ 7,532,940 $ 6,613,545
Cost of goods sold 5,374,925 4,969,556
------------ ------------
Gross profit 2,158,015 1,643,989
Consulting fee income 195,298 2,130
Operating expenses:
Research and development 705,641 554,535
Selling, general and administrative 1,774,801 1,574,055
------------ ------------
2,480,442 2,128,590
------------ ------------
Loss from operations (127,129) (482,471)
Other income (expense):
Equity in losses of affiliated companies (469,680) (270,131)
Interest and dividend income 226,365 286,917
Interest expense (1,205,033) (1,032,206)
Other expense (2,111) (6,293)
------------ ------------
Loss before income taxes (1,577,588) (1,504,184)
Income tax benefit 520,604 421,172
------------ ------------
Net loss (1,056,984) (1,083,012)
Retained earnings, beginning of period 9,577,209 7,217,650
------------ ------------
Retained earnings, end of period $ 8,520,225 $ 6,134,638
============ ============
Loss per share:
Basic $ (0.05) $ (0.05)
Diluted $ (0.05) $ (0.05)
Weighted average number of common shares outstanding:
Basic 22,263,634 22,028,667
Diluted 22,263,634 22,028,667
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
BULL RUN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,056,984) $ (1,083,012)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Provision for bad debts 3,511 5,349
Depreciation and amortization 267,230 340,174
Equity in losses of affiliated companies 469,680 270,131
Deferred income taxes (517,000) (412,000)
Accrued preferred stock dividend income (75,000)
Change in operating assets and liabilities:
Accounts receivable 708,538 296,629
Inventories (290,086) (783,275)
Other current assets 51,816 (48,794)
Accounts payable and accrued expenses 560,715 423,531
------------ ------------
Net cash provided by (used in) operating activities 197,420 (1,066,267)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (98,003) (116,977)
Investment in affiliated companies (11,377,937) (4,952,967)
Deferred acquisition costs (212,940)
Acquisition of printer manufacturer, net of cash
acquired (50,000) (1,902,613)
------------ ------------
Net cash used in investing activities (11,738,880) (6,972,557)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from notes payable 10,000,000
Borrowings from revolving lines of credit 5,269,499 4,062,000
Repayments on revolving lines of credit (4,667,000) (5,370,506)
Proceeds from long-term debt 1,176,250 10,014,722
Repayments on long-term debt (250,000) (530,844)
Issuance of common stock 58,626 7,875
------------ ------------
Net cash provided by financing activities 11,587,375 8,183,247
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 45,915 144,423
Cash and cash equivalents, beginning of period 57,579 142,097
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 103,494 $ 286,520
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 1,027,486 $ 785,495
Income taxes paid 3,000
Treasury stock issued in connection with acquisition
of printer manufacturer, a noncash investing and
financing activity 2,500,000
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
BULL RUN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In management's opinion, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting solely of normal,
recurring adjustments) necessary to present fairly the financial position and
results of operations for the interim periods reported. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements contained in the Annual Report on Form 10-K of
Bull Run Corporation for the year ended December 31, 1998.
The accompanying condensed consolidated financial statements include the
accounts of Bull Run Corporation and its wholly-owned subsidiary, Datasouth
Computer Corporation (collectively, unless the context otherwise requires, the
"Company"), after elimination of intercompany accounts and transactions.
2. PENDING TRANSACTION
On February 15, 1999, the Company entered into a merger agreement to acquire the
stock of Host Communications, Inc. ("Host"), Universal Sports America, Inc.
("Universal") and Capital Sports Properties, Inc. ("Capital") not currently
owned, directly or indirectly, by the Company, for approximately $95,000,000,
net of cash acquired (the "Host-Universal Acquisition"). Pursuant to the
agreement, a new holding company for the Company will be created immediately
prior to the Host-Universal Acquisition whereby each outstanding share of the
Company's common stock will be converted into one share of a newly formed
company. The new holding company, which will be a publicly held company, will be
owned by the stockholders of the Company immediately prior to such conversion
and the Company and its subsidiaries will become subsidiaries of such holding
company. Approximately $37,000,000 of the Host-Universal Acquisition purchase
price is expected to be paid to Host, Universal and Capital stockholders in cash
and the remainder is expected to be paid in common stock of the new holding
company. The Company is currently Host's largest stockholder, owning directly or
indirectly approximately 32.5% of Host's outstanding common stock and 51.5% of
Host's outstanding preferred stock. The Company's indirect ownership of Host's
common stock and Host's preferred stock is owned by Capital, in which the
Company owns 51.5% of the outstanding common stock. The Company and Host
together are the largest stockholders of Universal, with the Company owning
directly approximately 3% of Universal's outstanding capital stock and Host
owning approximately 33% of Universal's outstanding capital stock. For their
most recent fiscal year ended June 30, 1998, Host and Universal together had
revenues of approximately $109,000,000. This transaction is subject to the terms
and conditions of the merger agreement, including approval of the stockholders
of Host, Universal, Capital and the Company.
3. INVESTMENT IN AFFILIATED COMPANIES
The Company accounts for its investments in Gray Communications Systems, Inc.
("Gray"), Host, Capital and Rawlings Sporting Goods Company, Inc. ("Rawlings")
using the
<PAGE> 6
equity method. The excess of the Company's investments in Gray, Host, Capital
and Rawlings over the underlying equity thereof is being amortized over 20 to 40
years, with such amortization (totaling $275,000 and $194,000 in the three
months ended March 31, 1999 and 1998, respectively) reported as a reduction in
the Company's equity in earnings of affiliated companies (or, addition to the
equity in losses of affiliates).
The Company provides consulting services to Gray from time to time in connection
with Gray's acquisitions and dispositions. Income on a portion of such fees is
deferred and recognized over 40 years as a result of the Company's 17.0% equity
investment position in Gray as of March 31, 1999, with such position
representing a 27.5% voting interest in Gray.
The Company accounts for its investment in Host by the equity method on a
six-month lag basis, in order to align Host's fiscal year ending June 30 with
the Company's fiscal year. The Company accounts for its investment in Rawlings
by the equity method on a one month lag basis, in order to align Rawlings'
fiscal quarters ending November 30, February 28, May 31 and August 31 with the
Company's fiscal quarters.
Aggregate operating results of affiliated companies (reflecting, for 1999: (i)
Gray and Capital for the three months ended March 31, 1999; (ii) Host for the
three months ended September 30, 1998; and (iii) Rawlings for the three months
ended February 28, 1999; and reflecting, for 1998: (a) Gray and Capital for the
three months ended March 31, 1998; (b) Host for the three months ended September
30, 1998; and (c) Rawlings for the three months ended February 28, 1998) were as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
<S> <C> <C>
Operating revenue $96,645,000 $96,775,000
Income from operations 9,069,000 12,165,000
Net income 717,000 2,527,000
</TABLE>
4. INVENTORIES
Inventories related to the Company's printer operations consist of the
following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
<S> <C> <C>
Raw materials $3,415,926 $3,200,460
Work-in-process 743,265 728,663
Finished goods 1,297,820 1,237,802
---------- ----------
$5,457,011 $5,166,925
========== ==========
</TABLE>
<PAGE> 7
5. NOTES PAYABLE AND LONG-TERM DEBT
The Company amended its long-term debt agreements in February and March 1999,
providing for (a) four term notes payable to a bank, bearing interest at the
London Interbank Offered Rate ("LIBOR") plus 1.75%, requiring no principal
payments prior to maturity on January 1, 2003, under which $43,488,744 was
outstanding as of March 31, 1999; (b) a revolving credit facility for borrowings
of up to $3,500,000 expiring May 1, 2000, bearing interest at the bank's prime
rate, under which $3,208,552 was outstanding as of March 31, 1999; (c) a
$4,000,000 term note bearing interest at LIBOR plus 3%, payable in quarterly
installments of $250,000 through March 31, 2000, with the remainder due June 30,
2000, under which $3,750,000 was outstanding on March 31, 1999; and (d) a
revolving bank credit facility for borrowings of up to $5,000,000 until June
30,1999, and $4,000,000 thereafter until expiration on June 30, 2000, under
which $4,930,000 was outstanding as of March 31, 1999.
The Company also has (a) a bank note in the amount of $10,000,000 due May 28,
1999 with interest at the bank's prime rate, and (b) a demand bank note due June
30, 1999 for borrowings of up to $2,000,000 bearing interest at the bank's prime
rate, under which $2,000,000 was outstanding as of March 31, 1999. The
$10,000,000 note was issued to finance the Company's investment in Sarkes
Tarzian, Inc. on January 28, 1999, and is expected to be extended or refinanced
by the bank under terms similar to the existing note. The $2,000,000 demand note
is also expected to be extended or refinanced under terms similar to the
existing note.
The Company is a party to two interest rate swap agreements which effectively
modify the interest characteristics of $24,000,000 of its outstanding long-term
debt. The agreements involve the exchange of amounts based on a fixed interest
rate for amounts based on variable interest rates over the life of the
agreements, without an exchange of the notional amount upon which the payments
are based. The differential to be paid or received as interest rates change is
accrued and recognized as an adjustment of interest expense related to the debt.
Under the first agreement, $20,000,000 of long-term debt is subject to a
one-year forward swap agreement, whereby beginning January 1, 1999 and for the
following nine years, the Company will be subject to a fixed rate of 7.83%,
instead of LIBOR plus 1.75%. Under the second agreement, $4,000,000 of long-term
debt is subject to a fixed rate of 8.66% beginning September 30, 1998 through
December 31, 2004, instead of LIBOR plus 3%.
6. INCOME TAXES
The principal differences between the federal statutory tax rate of 34% and the
effective tax rates are nondeductible goodwill amortization and state income
taxes.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Bull Run Corporation (the "Company"), based in Atlanta, Georgia, sells computer
printers and provides service worldwide to distributors, value-added resellers
and large volume end users through its wholly-owned subsidiary, Datasouth
Computer Corporation ("Datasouth"). The Company also makes significant
investments in sports and media companies, including Gray Communications
Systems, Inc. ("Gray"), the owner and operator of, among other businesses, 10
television stations and four daily newspapers; Host Communications, Inc.
("Host"), a sports marketing and association management company; Rawlings
Sporting Goods Company, Inc. ("Rawlings"), a supplier of team sports equipment;
Universal Sports America, Inc. ("Universal"), a sports marketing company; Total
Sports, Inc. ("Total Sports"), a sports content Internet company; and Sarkes
Tarzian, Inc. ("Tarzian"), the owner and operator of two television stations and
four radio stations. The investment in Tarzian was acquired in January 1999.
In addition, the Company provides consulting services to Gray in connection with
Gray's acquisitions and dispositions.
PENDING HOST-UNIVERSAL ACQUISITION
On February 15, 1999, the Company entered into an agreement to acquire the stock
of Host, Universal and Capital Sports Properties, Inc. ("Capital") not currently
owned, directly or indirectly, by the Company, for approximately $95 million,
net of cash acquired (the "Host-Universal Acquisition"). Pursuant to the
agreement, a new holding company for the Company will be created immediately
prior to the Host-Universal Acquisition whereby each outstanding share of the
Company's common stock will be converted into one share of a newly formed
company. The new holding company, which will be a publicly held company, will be
owned by the stockholders of the Company immediately prior to such conversion
and the Company and its subsidiaries will become subsidiaries of such holding
company. Approximately $37 million of the Host-Universal Acquisition purchase
price is expected to be paid to Host, Universal and Capital stockholders in cash
and the remainder is expected to be paid in common stock of the new holding
company. The Company is currently Host's largest stockholder, owning directly or
indirectly approximately 32.5% of Host's outstanding common stock and 51.5% of
Host's outstanding preferred stock. The Company's indirect ownership of Host's
common stock and Host's preferred stock is owned by Capital, in which the
Company owns 51.5% of the outstanding common stock. The Company and Host
together are the largest stockholders of Universal, with the Company owning
directly approximately 3% of Universal's outstanding capital stock and Host
owning approximately 33% of Universal's outstanding capital stock. For their
most recent fiscal year ended June 30, 1998, Host and Universal together had
revenues of approximately $109 million. This transaction is subject to the terms
and conditions of the merger agreement, including approval of the stockholders
of Host, Universal, Capital and the Company.
<PAGE> 9
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1998
Total revenue for three months ended March 31, 1999, primarily from the printer
manufacturing operations of Datasouth, was $7,728,000 compared to $6,616,000 for
the same period in 1998. Revenue from printer operations was $7,533,000 for the
three months ended March 31, 1999, representing a 14% increase from such revenue
for the same period in 1998. Short term revenue trends in the Company's printer
business fluctuate due to variable ordering patterns of large customers. The
increase in 1999 first quarter revenue compared to 1998 was due in part to sales
of an airline ticket/boarding pass printer, the marketing rights for which
were acquired in September 1998, and an increase in consulting fee income in the
first quarter of 1999 compared to 1998. Printer sales to the Company's largest
customer were approximately $1.9 million for the first quarter of 1999, compared
to approximately $2.0 million for the first quarter of 1998.
Gross profit from printer operations of 28.6% for the first quarter of 1999
increased from the 24.9% realized for the same period in 1998, primarily due to
(a) a different mix of products sold; (b) initial production costs associated
with the introduction of a new printer line in 1998; and (c) costs incurred in
the first quarter of 1998 by the Company immediately following an acquisition of
a printer company, prior to the integration of manufacturing operations into the
Company's existing product manufacturing facility in the second quarter of 1998,
and (d) some manufacturing overhead efficiencies gained as a result of higher
unit volumes in 1999.
A portion of the income from consulting fees for services provided to Gray is
deferred and recognized over 40 years as a result of the Company's equity
investment position in Gray. As of March 31, 1999, consulting fees of $734,000
were deferred for future revenue recognition. Consulting fee income of $195,000
was recognized in the first quarter of 1999 compared to $2,000 in the same
period in 1998, primarily due to fees attributable to Gray's acquisition of a
newspaper operation in March 1999. There can be no assurance that the Company
will recognize any consulting fees in the future, other than recognition of
currently deferred fees.
Operating expenses of $2,480,000 for the three months ended March 31, 1999
represented a 17% increase from the same period in 1998, due primarily to (a) an
increase in research and development costs attributable to software development
activities for the airline ticket/boarding pass printer, the marketing rights
for which were acquired in September 1998; (b) an increase in advertising
expense in the first quarter of 1999 compared to the same period in 1998; and
(c) expenses associated with the Company's European sales office established in
October 1998. Operating expenses include non-cash goodwill amortization expense
of $132,000 for the three months ended March 31, 1999 and $120,000 for the same
period in 1998.
Equity in losses of affiliated companies, totaling $470,000 and $270,000 for the
three months ended March 31, 1999 and 1998, respectively, included the Company's
proportionate share of the earnings or losses of Gray, Host, Capital, and
Rawlings, net of goodwill amortization totaling $275,000 and $194,000,
respectively.
<PAGE> 10
Interest and dividend income of $226,000 and $287,000 for the three months ended
March 31, 1999 and 1998, respectively, was primarily derived from dividends
accrued on the Company's investment in Gray's series A and series B preferred
stock. Interest expense, totaling $1,205,000 and $1,032,000 for the three months
ended March 31, 1999 and 1998, respectively, was incurred primarily in
connection with bank term loans and notes payable, the proceeds of which were
used to finance (a) the Company's investments in Gray, Host, Capital, Universal
and Rawlings, and (b) the acquisition of a printer company in January 1998; and,
for the three months ended March 31, 1999, (x) the Company's investments in
Total Sports in August 1998 and January 1999, and (y) the Company's investment
in Tarzian in January 1999.
Nondeductible goodwill amortization reduced the Company's tax benefit for the
three month periods ended March 31, 1999 and 1998, resulting in an effective tax
rate of 33.0% for the first quarter of 1999 and 28.0% for the same period in
1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $197,000 for the three months ended
March 31, 1999, compared to cash used in operating activities of $1,066,000 for
the same period in 1998. In the first quarter of 1999, receivables decreased
$712,000, due in part to a reduction in the receivable from Gray of $558,000;
inventories increased by $290,000 due to an increase in finished goods; and
accounts payable and accrued expenses increased $561,000, due in part to
accruals of deferred acquisition costs attributable to the Host-Universal
Acquisition and an increase in accrued interest. In the first quarter of 1998,
receivables decreased by $302,000, whereas inventories increased by $783,000 due
to the stocking of raw materials associated with a newly-introduced airline
ticket/boarding pass printer.
Cash used in investing activities was $11,739,000 for the three months ended
March 31, 1999, compared to $6,973,000 for the same period in 1998. In the first
quarter of 1999, the Company acquired shares of Total Sports series C1 preferred
stock for $1,000,000 and acquired shares of the outstanding common stock of
Tarzian from the estate of Mary Tarzian for $10,000,000. In the first quarter of
1998, the Company acquired shares of Rawlings' common stock for $4,953,000 and
acquired a printer company for (a) cash of $1,903,000, net of cash acquired, and
(b) shares of the Company's common stock valued at $2,500,000.
The acquisition of Total Sports series C1 preferred shares increased the
Company's investment in Total Sports to 9.0% of Total Sports' total outstanding
capital stock. Like the shares of Total Sports series C preferred stock acquired
by the Company in August 1998, series C1 preferred shares are convertible into
Total Sports common stock. The Company will acquire Host's investment in an
additional 8.3% of Total Sports' total outstanding capital stock in connection
with the Host-Universal Acquisition.
The acquired Tarzian shares represent 33.5% of the total outstanding common
stock of Tarzian both in terms of the number of shares of common stock
outstanding and in terms of voting rights, but such investment represents 73% of
the equity of Tarzian for purposes of dividends, as well as distributions in the
event of any liquidation, dissolution or other termination of Tarzian. Tarzian
owns and operates two television stations and four radio
<PAGE> 11
stations: WRCB-TV Channel 3 in Chattanooga, Tennessee, an NBC affiliate; KTVN-TV
Channel 2 in Reno, Nevada, a CBS affiliate; WGCL-AM and WTTS-FM in Bloomington,
Indiana; and WAJI-FM and WLDE-FM in Fort Wayne, Indiana. On March 1, 1999, the
Company executed an option agreement with Gray, whereby Gray has the option
until May 31, 1999 to acquire the Tarzian investment from the Company for
$10,000,000 plus related costs. Gray has the ability to extend the option period
in 30 day increments at a fee of $66,700 per extension. The Company received
from Gray warrants to acquire 100,000 shares of Gray's class B common stock at
$13.625 per share, in connection with the option agreement. The warrants will
vest immediately upon Gray's exercise of the option.
Cash provided by financing activities was $11,587,000 and $8,183,000 for the
three months ended March 31, 1999 and 1998, respectively. In the first quarter
of 1999, the Company financed its investments in Total Sports and Tarzian with
bank debt. In the first quarter of 1998, the Company financed its investments in
Rawlings and its acquisition of the printer company with bank debt.
The Company amended its long-term debt agreements in February and March 1999,
providing for (a) four term notes payable to a bank, bearing interest at the
London Interbank Offered Rate ("LIBOR") plus 1.75%, requiring no principal
payments prior to maturity on January 1, 2003, under which $43,488,744 was
outstanding as of March 31, 1999; (b) a revolving credit facility for borrowings
of up to $3,500,000 expiring May 1, 2000, bearing interest at the bank's prime
rate, under which $3,208,552 was outstanding as of March 31, 1999; (c) a
$4,000,000 term note bearing interest at LIBOR plus 3%, payable in quarterly
installments of $250,000 through March 31, 2000, with the remainder due June 30,
2000, under which $3,750,000 was outstanding on March 31, 1999; and (d) a
revolving bank credit facility for borrowings of up to $5,000,000 until June
30,1999, and $4,000,000 thereafter until expiration on June 30, 2000, under
which $4,930,000 was outstanding as of March 31, 1999.
The Company also has (a) a bank note in the amount of $10,000,000 due May 28,
1999 with interest at the bank's prime rate, and (b) a demand bank note due June
30, 1999 for borrowings of up to $2,000,000 bearing interest at the bank's prime
rate, under which $2,000,000 was outstanding as of March 31, 1999. The
$10,000,000 note was issued in connection with the Company's investment in
Tarzian on January 28, 1999, and is expected to be extended or refinanced by the
bank under terms similar to the existing note. Likewise, the $2,000,000 demand
note is expected to be extended or refinanced under terms similar to the
existing note.
The Company is a party to two interest rate swap agreements, effectively
modifying the interest characteristics of $24,000,000 of the Company's
outstanding long-term debt. The agreements involve the exchange of amounts based
on a fixed interest rate for amounts based on variable interest rates over the
life of the agreements, without an exchange of the notional amount upon which
the payments are based. The differential to be paid or received as interest
rates change is accrued and recognized as an adjustment of interest expense
related to the debt. Under the first agreement, $20,000,000 of long-term debt is
subject to a one-year forward swap agreement, whereby beginning January 1, 1999
and for the following nine years, the Company will be subject to a fixed rate of
7.83%, instead of LIBOR plus 1.75%. Under the second agreement, $4,000,000 of
long-term debt is subject to a fixed rate of 8.66% beginning September 30, 1998
through December 31, 2004, instead of LIBOR plus 3%. In the aggregate, the
estimated cost of terminating the swap
<PAGE> 12
agreements, if the Company elected to do so, was approximately $384,000 as of
March 31, 1999.
Dividends on the series B preferred stock of Gray owned by the Company are
payable in cash at an annual rate of $600 per share or, at Gray's option,
payable in additional shares of series B preferred stock. The Company
anticipates that dividends on the series B preferred stock will be paid in cash
for the foreseeable future.
In order to obtain sufficient additional funds to complete the Host-Universal
Acquisition (approximately $38.6 million), refinance existing indebtedness of
the Company, Host and Universal (approximately $70 million) and provide for the
combined companies' cash needs after the Host-Universal Acquisition, the Company
expects to enter into a new credit agreement. The credit agreement is expected
to provide for total borrowings of up to $120 million and an interest rate based
upon either (1) LIBOR plus an applicable margin or (2) an alternate base rate,
defined as the higher of the bank's prime rate and the Federal funds rate, plus
an applicable margin. The facilities will likely mature and all amounts
outstanding thereunder will be due and payable in full within three to five
years of the closing date of the credit agreement. The Company expects to
collateralize the facilities with all present and future assets of the Company
and its subsidiaries, as well as a pledge of the shares in both public and
private companies owned by the Company. The Company also expects that the
facilities will contain normal and customary debt covenants, such as debt
service coverage ratios and minimum net worth requirements.
The Company anticipates that its current working capital, funds available under
its revolving credit facilities, quarterly cash dividends on the Gray preferred
stock and common stock, anticipated redemption of some amount of Gray preferred
stock, anticipated extension fees on the option agreement with Gray and cash
flow from operations will be sufficient to fund its debt service, working
capital requirements and capital spending requirements for at least the next
twelve months. Any capital required for potential business acquisitions, in
addition to the Host-Universal Acquisition, would have to be funded by issuing
additional securities or by entering into other financial arrangements.
INTEREST RATE RISK MANAGEMENT
The Company is exposed to changes in interest rates due to the Company's
financing of its acquisitions, investments and operations. Interest rate risk is
present with both fixed and floating rate debt. The Company uses interest rate
swap agreements (as detailed in "Liquidity and Capital Resources" above) to
manage its debt profile.
Interest rate swap agreements generally involve exchanges of underlying face
(notional) amounts of designated hedges. The Company continually evaluates the
credit quality of counterparties to interest rate swap agreements and does not
believe there is a significant risk of nonperformance by any of the
counterparties.
Based on the Company's debt profile at March 31, 1999 and 1998, a 1% increase in
market interest rates would increase interest expense and increase the loss
before income taxes by $107,000 and $132,000 for the three months ended March
31, 1999 and 1998, respectively. These amounts were determined by calculating
the effect of the hypothetical interest rate on the Company's floating rate
debt, after giving consideration to the
<PAGE> 13
Company's interest rate swap agreements. These amounts do not include the
effects of certain potential results of increased interest rates, such as a
reduced level of overall economic activity or other actions management may take
to mitigate the risk. Furthermore, this sensitivity analysis does not assume
changes in the Company's financial structure that could occur if interest rates
were higher.
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
During 1997, the Company completed an assessment and determined (a) that its
printer products did not contain time-sensitive software that make them
susceptible to the Year 2000 Issue; however, (b) there were portions of the
Company's internal systems software and some hardware that would have to be
modified or replaced so that its computer systems would function properly with
respect to dates in the year 2000 and thereafter. The most significant computer
systems, which pertain to the Company's manufacturing and financial accounting
systems, were upgraded in 1998 and are currently Year 2000 compliant. Expense
incurred in 1998 related to Year 2000 upgrades and modifications was
approximately $100,000, including equipment lease rent expense. Future equipment
rent expense will not differ materially from depreciation expense attributed to
the replaced equipment. Although management expects to replace some personal
computers and other computer hardware during 1999 which are not Year 2000
compliant, management does not expect the cost of these additional expenditures
to exceed $50,000, nor does it expect that any of the necessary modifications or
replacements will have a material impact on the results of any future financial
reporting period. The remaining modifications and replacements are expected to
be completed by mid-1999, prior to any anticipated impact on its operating
systems. The Company believes that with the completed and anticipated
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems.
The Company has had communications with most of its major vendors and sole
source suppliers to determine the extent to which the Company may be vulnerable
to those third parties' failure to remedy their own Year 2000 issues. These
communications include both oral communications, as well as the receipt of
written Year 2000 compliance statements, and focus on certain key vendors and
suppliers from whom the Company receives unique materials, products and
services. The Company expects to complete its assessment of its major vendors
and sole source suppliers by mid-1999. Most raw materials used in the
manufacture of the Company's computer printers are available from more than one
supplier; therefore, management's contingency plans include, but are not limited
to, evaluating alternative vendors who are Year 2000 compliant, as well as
evaluating the adequacy of inventory levels.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived
<PAGE> 14
utilizing numerous assumptions of future events, including the continued
availability of certain resources and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the availability of suitable replacement
hardware, the ability to locate and correct all relevant computer codes, and
similar uncertainties. Furthermore, it is too early to determine to what extent,
if any, contingency plans will have to be implemented. Although the Company
expects to be Year 2000 compliant by mid-1999 and does not expect to be
materially impacted by the external environment, such future events cannot be
known with certainty.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. When used
in this report, the words "believes," "expects," "anticipates," "estimates" and
similar words and expressions are generally intended to identify forward-looking
statements. Statements that describe the Company's future strategic plans, goals
or objectives are also forward-looking statements. Readers of this Report are
cautioned that any forward-looking statements, including those regarding the
intent, belief or current expectations of the Company or management, are not
guarantees of future performance, results or events, and involve risks and
uncertainties. Actual results and events may differ materially from those in the
forward-looking statements as a result of various factors including, but not
limited to, (i) general economic conditions in the markets in which the Company
and its affiliates operate, (ii) competitive pressures in the markets in which
the Company and its affiliates operate, (iii) the effect of future legislation
or regulatory changes on the Company's and its affiliates' operations and (iv)
other factors described from time to time in the Company's filings with the
Securities and Exchange Commission. The forward-looking statements included in
this report are made only as of the date hereof. The Company undertakes no
obligation to update such forward-looking statements to reflect subsequent
events or circumstances.
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.1 - Second Amendment of Amended and Restated Loan
Agreement between Bull Run Corporation and
NationsBank, N.A. dated as of March 22, 1999
Exhibit 10.2 - $675,754 Fourth Term Loan Note dated March 22,
1999
Exhibit 10.3 - Third Amendment of Amended and Restated Loan
Agreement between Bull Run Corporation and
NationsBank, N.A. dated as of March 24, 1999
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
Form 8-K dated January 28, 1999 filed to report the Company's
investment in the common stock of Sarkes Tarzian, Inc.
Form 8-K dated February 15, 1999 filed to report the Company's
agreement to acquire the stock of Host Communications,
Inc., Universal Sports America, Inc. and Capital Sports
Properties, Inc. not currently owned by the Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BULL RUN CORPORATION
Date: May 12, 1999 By: /s/ FREDERICK J. ERICKSON
---------------------------------------
Frederick J. Erickson
Vice President-Finance, Treasurer
and Assistant Secretary
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDMENT OF AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDMENT is made as of this 22nd day of March, 1999, by and
between BULL RUN CORPORATION, a Georgia corporation ("Borrower"), and
NATIONSBANK, N.A. ("Lender").
RECITALS
WHEREAS, Lender and Borrower are parties to that certain Amended and
Restated Loan Agreement, dated as of March 20, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Loan Agreement"), pursuant to which
Lender has agreed to make one or more loans from time to time to the Borrower in
accordance with the terms and conditions thereof; and
WHEREAS, Borrower has requested and Lender has agreed to provide an
additional term loan (the "Fourth Term Loan") to finance the acquisition of
additional shares of common stock of Rawlings, a Delaware corporation
("Rawlings"), and Lender and Borrower desire to modify the Loan Agreement in
order to provide for the Fourth Term Loan, and in certain other respects in
accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Borrower and Lender do
hereby agree that all capitalized terms used herein shall have the meanings
ascribed thereto in the Loan Agreement as amended hereby (except as otherwise
expressly defined or limited herein) and do hereby further agree as follows:
1. AMENDMENTS OF LOAN AGREEMENT. Subject to the
fulfillment of the conditions precedent to the effectiveness of this Amendment
which are set forth below, the Loan Agreement shall be amended as follows:
(a) Section 1.1 of the Loan Agreement is hereby amended
by adding to Section 1.1 the following new definitions in the
appropriate alphabetical order:
"Borrower Guaranty" shall mean any guaranty of any
obligation of Datasouth or any other Subsidiary of Borrower
executed by Borrower in favor of Lender.
"Fourth Term Loan" shall mean any and all advances
made by Lender to Borrower under the Fourth Term Loan
Facility.
"Fourth Term Loan Facility" shall mean the term loan
facility provided by Lender to Borrower under Section 3.2B
hereof.
"Fourth Term Loan Facility Expiration Date" shall
mean April 30, 1999 (as such date may be extended,
accelerated or amended from time to time pursuant to this
Agreement).
"Fourth Term Loan Maturity Date" shall mean August
23, 1999.
"Fourth Term Loan Maximum Availability" shall mean
$675,754.
<PAGE> 2
"Fourth Term Loan Note" shall mean the Fourth Term
Loan Note executed by the Borrower and payable to the order
of the Lender as evidence of the Fourth Term Loan, and any
extension, renewal, modification or replacement thereof or
therefor.
"Fourth Term Loan Obligations" shall mean,
collectively, any and all Obligations of Borrower to pay
Lender the principal of, interest or fees on, collection
costs for, or any other sums owing in respect of the Fourth
Term Loans or the Fourth Term Loan Notes.
"Second Amendment" shall mean that certain Second
Amendment of Loan Agreement dated as of March 22, 1999, by
and between Borrower and Lender.
(b) Section 1.1 of the Loan Agreement is hereby further
amended by deleting from Section 1.1 the terms "Obligations," "Term
Loan Facilities," "Term Loan Notes," "Term Loans" and "Third Term Loan
Facility Expiration Date" and by substituting in lieu thereof the
following new definitions of such terms:
"Obligations" shall mean, collectively, all amounts
now or hereafter owing to Lender by Borrower pursuant to the
terms of or as a result of this Agreement, any other Credit
Document or any Borrower Guaranty, including without
limitation, the unpaid principal balance of any and all Loans
and all interest, fees, expenses and other charges relating
thereto or accruing thereon, as well as any and all other
indebtedness, liabilities, and obligations of Borrower,
whether direct or indirect, absolute or contingent, or
liquidated or unliquidated, which may be now existing or may
hereafter arise under or as a result of any Borrower Guaranty
or any of the Credit Documents (including, without
limitation, obligations of Borrower under Interest Rate
Contracts with Lender), and together with any and all
renewals, extensions, modifications or refinancings of any of
the foregoing.
"Term Loan Facilities" shall mean, collectively, the
First Term Loan Facility, the Second Term Loan Facility, the
Third Term Loan Facility and the Fourth Term Loan Facility.
"Term Loan Notes" shall mean, collectively, the
First Term Loan Note, the Second Term Loan Note, the Third
Term Loan Note and the Fourth Term Loan Note.
"Term Loans" shall mean, collectively, the First
Term Loan, the Second Term Loan, the Third Term Loan and the
Fourth Term Loan.
"Third Term Loan Facility Expiration Date" shall
mean March 23, 1999.
(c) The Loan Agreement is hereby further amended by
adding the following new Section 3.2B after the existing Section 3.2A
and before the existing Section 3.3:
<PAGE> 3
"SECTION 3.2B. FOURTH TERM LOAN FACILITY.
(a) Subject to the terms and conditions of this
Agreement, including, without limitation, the conditions
precedent set forth in Section 5.3 hereof, the Lender agrees
to advance to the Borrower, from time to time on or prior to
the Fourth Term Loan Facility Expiration Date and upon the
Borrower's request therefor, a Fourth Term Loan in the
principal amount of the Fourth Term Loan Maximum
Availability. The Fourth Term Loan Facility may be disbursed
in one or more advances but the Lender's commitment under the
Fourth Term Loan Facility shall be reduced by each advance
thereunder and any sums advanced under the Fourth Term Loan
Facility may not be repaid and then re-borrowed thereunder.
(b) The proceeds of the Fourth Term Loan shall be
used to purchase shares of common stock of Rawlings."
(d) The Loan Agreement is hereby further amended by
adding a new Section 3.4(b-2) immediately following the existing
Section 3.4(b-1):
"(b-2) The Borrower's obligation to pay the Lender
the principal of and interest on the Fourth Term Loan
shall be evidenced by the records of the Lender
(subject to Section 4.5 hereof) and by the Fourth
Term Loan Note. The principal balance of the Fourth
Term Loan shall be payable on the Fourth Term Loan
Maturity Date in an amount equal to the entire
remaining unpaid balance of the Fourth Term Loan."
(e) The Loan Agreement is hereby further amended by
deleting Section 3.3(a) in its entirety and by substituting in lieu
thereof, the following new Section 3.3(a):
"(a) The unpaid principal balance of each of the
Term Loans shall bear interest from time to time at a rate
per annum equal to the Prime Rate plus the Applicable Term
Loan Margin therefor as then in effect; provided, however,
that Borrower may, by written notice (or by telephonic notice
promptly confirmed in writing) delivered to the Lender not
later than 10:00 a.m. (Atlanta time) on the second Business
day prior to any Interest Period designated by the Borrower
in such notice, direct that interest accrue on the unpaid
principal balance of any Term Loan other than the Third Term
Loan and the Fourth Term Loan (or any portion of any Term
Loan (other than the Third Term Loan and the Fourth Term
Loan) which when added to all other LIBOR Advances then
outstanding under any of the Loans and which have the same
Interest Period totals an amount of not less than $100,000 or
any greater integral multiple thereof) outstanding from time
to time during such Interest Period at a rate per annum equal
to the sum of the Adjusted LIBOR for such Interest Period
plus the Applicable Term Loan Margin therefor as then in
effect; provided, further, however, that (i) upon the
occurrence and during the continuation of any Event of
Default under Section 9.1(i), (ii) or (iii) hereof, the
Lender may, upon notice to the Borrower, suspend Borrower's
right to use the aforesaid Adjusted LIBOR option, (ii)
Borrower may not have more than six (6) Adjusted LIBOR-based
interest rates in effect under this Section at any one time,
and (iii) the interest rate applicable to the Term Loans
shall be subject to adjustment as provided in paragraph (b)
below."
<PAGE> 4
(f) The Loan Agreement is hereby further amended by
deleting Sections 4.4(a) and 4.4(b) in their entireties and by
substituting in lieu thereof the following new Sections 4.4(a) and
4.4(b):
"(a) The Obligations shall be secured by (i) the
Borrower's first priority and perfected pledge to
the Lender of (A) one hundred percent of the
outstanding shares of capital stock of Datasouth,
(B) 51.5 shares of common stock of Capital Sports
Properties, Inc., (C) the Host Shares (other than
4,682 shares of common stock of Host Communications
which secure the Second Term Loan Obligations and
the Fourth Term Loan Obligations), and (D) the Total
Sports Shares (other than 351,815 shares of Series C
Convertible Preferred Stock of Total Sports which
secure the Second Term Loan Obligations and the
Fourth Term Loan Obligations), all pursuant to the
Borrower Pledge Agreement, and (ii) the
Partnership's first priority and perfected pledge to
the Lender of 1,284,000 shares of common stock of
the Borrower pursuant to the Partnership Pledge
Agreement. The Obligations (other than the Third
Term Loan Obligations) shall also be secured by
Datasouth's first priority and perfected pledge to
the Lender of 457,944 shares of Class A Common Stock
of Gray pursuant to the Subsidiary Pledge Agreement.
(b) The Second Term Loan Obligations and the Fourth
Term Loan Obligations shall be secured by (i)
Datasouth's first-priority and perfected pledge to
the Lender 1,366,941 shares of Class A Common Stock
of Gray and 11,750 shares of Class B Common Stock of
Gray pursuant to the Purpose Credit Subsidiary
Pledge Agreement and (ii) the Borrower's
first-priority and perfected pledge to the Lender of
1,000 shares of Series A Preferred Stock of Gray,
175 shares of Series B Preferred Stock of Gray, the
Warrants, the Rawlings Warrant, the Rawlings Shares,
4,682 shares of common stock of Host Communications
and 351,815 shares of Series C Convertible Preferred
Stock of Total Sports, all pursuant to the Purpose
Credit Borrower Pledge Agreement."
2. NO OTHER AMENDMENTS. Except for the amendments expressly set
forth and referred to in Section 1 above, the Loan Agreement shall remain
unchanged and in full force and effect. Nothing in this Amendment or any of the
other Supplemental Credit Documents (as defined below) is intended, or shall be
construed, to constitute a novation or an accord and satisfaction of any of the
Obligations or to modify, affect or impair the perfection or continuity of
Lender's security interests in, security titles to or other Liens on any
Collateral for the Obligations.
3. REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into
this Amendment, the Borrower does hereby warrant, represent and covenant to
Lender that: (a) each representation or warranty of the Borrower set forth in
the Loan Agreement is hereby restated and reaffirmed as true and correct on and
as of the date hereof as if such representation or warranty were made on and as
of the date hereof (except to the extent that any such representation or
warranty expressly relates to a prior specific date or period), and no Default
or Event of Default has occurred and is continuing as of this date under the
Loan Agreement as amended by this Amendment; and (b) each of the Borrower,
Datasouth, the Partnership and the Purchaser has the power and is duly
authorized to enter into, deliver and perform the Supplemental Credit Documents
to which it is a party, and each of the Supplemental Credit Documents is the
legal, valid and binding obligation of each Credit Party enforceable against
such Credit Party in accordance with its terms.
<PAGE> 5
4. REIMBURSEMENT OF COSTS AND EXPENSES. The Borrower hereby
agrees to reimburse Lender on demand for all costs (including reasonable
attorneys' fees) incurred by Lender in negotiating, documenting and consummating
this Amendment, the other documents referred to herein, and the transactions
contemplated hereby and thereby.
5. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT. The
effectiveness of this Amendment and the amendments provided in Section 1 above
are subject to the truth and accuracy in all material respects of the
representations and warranties of the Borrower contained in Section 3 above and
to the fulfillment of the following additional conditions precedent (all
documents described below shall be in form and substance satisfactory to Lender,
and are herein collectively called the "Supplemental Credit Documents"):
(a) Lender shall have received one or more duly executed
counterparts of this Amendment, a Fourth Term Loan Note, the Second
Amendment of Borrower Pledge Agreement, the First Amendment of Purpose
Credit Borrower Stock Pledge Agreement, the Second Amendment of
Subsidiary Stock Pledge Agreement, and the Second Amendment of Purpose
Credit Subsidiary Stock Pledge Agreement;
(b) Lender shall have received stock certificates evidencing
all Rawlings Shares purchased with the proceeds of the Fourth Term
Loan, together with undated blank stock transfer powers for the same
duly executed by the appropriate Credit Parties;
(c) Lender shall have received a duly executed Datasouth
Reaffirmation and Consent to Second Amendment of Loan Agreement from
Datasouth and a duly executed Partnership Reaffirmation and Consent to
Second Amendment of Loan Agreement from the Partnership; and
(d) Lender shall have received a duly executed and completed
Federal Reserve Form U-1 relating to the Second Term Loan and Fourth
Term Loan.
6. REFERENCE TO AND EFFECT ON THE CREDIT DOCUMENTS. Upon the
effectiveness of this Amendment, each reference in the Loan Agreement to "this
Agreement," "hereunder," "hereof" or words of like import referring to the Loan
Agreement, and each reference in the other Credit Documents to "the Loan
Agreement," "thereunder," "thereof" or words of like import referring to the
Loan Agreement, shall mean and be a reference to the Loan Agreement as amended
hereby.
7. COUNTERPARTS. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which
when taken together shall constitute one and the same instrument.
8. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the internal laws of the State of Georgia
applicable to contracts made and performed in such state.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the day and year specified at the beginning
hereof.
BORROWER:
BULL RUN CORPORATION
By: /s/ FREDERICK J. ERICKSON
----------------------------
Name: Frederick J. Erickson
--------------------------
Title: VP-Finance
-------------------------
LENDER:
NATIONSBANK, N.A.
By: /s/ DAVID B. JACKSON
----------------------------
Name: David B. Jackson
--------------------------
Title: Senior Vice President
-------------------------
<PAGE> 1
EXHIBIT 10.2
FOURTH TERM LOAN NOTE
$675,754 MARCH 22, 1999
FOR VALUE RECEIVED, the undersigned, BULL RUN CORPORATION, a
Georgia corporation (the "Borrower"), hereby promises to pay to the order of
NATIONSBANK, N.A., (herein, together with any subsequent holder hereof, called
the "Lender"), the principal sum of SIX HUNDRED SEVENTY-FIVE THOUSAND SEVEN
HUNDRED FIFTY-FOUR AND NO/100 DOLLARS ($675,754), or the outstanding principal
amount of the Fourth Term Loan made to the Borrower by the Lender pursuant to
the Loan Agreement referred to below, which principal sum shall be payable (i)
in installments on the due dates and in the amounts set forth in the Loan
Agreement or (ii) on any earlier date on which all amounts outstanding under
this Fourth Term Loan Note (this "Note") have become due and payable pursuant to
the provisions of Section 9.2 of the Loan Agreement. The Borrower likewise
promises to pay interest on the outstanding principal balance of the Fourth Term
Loan made by the Lender to the Borrower, at such interest rates, payable at such
times, and computed in such manner, as are specified in the Loan Agreement in
strict accordance with the terms thereof.
This Note is issued pursuant to, and is the Fourth Term Loan Note
referred to in the Amended and Restated Loan Agreement dated as of March 20,
1998, between the Borrower and the Lender (as the same may be amended or
supplemented from time to time, the "Loan Agreement"), and the Lender is and
shall be entitled to all benefits thereof and of all the other Credit Documents
executed and delivered to the Lender in connection therewith. Terms defined in
the Loan Agreement are used herein with the same meaning. The Loan Agreement,
among other things, contains provisions for acceleration of the maturity hereof
upon the happening of certain Events of Default, provisions relating to
prepayments on account of principal hereof prior to the maturity hereof, and
provisions for post-default interest rates.
The Borrower agrees to make payments of principal and interest
hereon on the dates and in the amounts specified in the Loan Agreement in strict
accordance with the terms thereof.
In case an Event of Default shall occur and be continuing, the
principal and all accrued interest of this Note may automatically become, or may
be declared, immediately due and payable in the manner and with the effect
provided in the Loan Agreement. The Borrower agrees to pay, and save the Lender
harmless against any liability for the payment of, all costs and expenses,
including actual and reasonable attorneys' fees, arising in connection with the
enforcement by the Lender of any of its rights or remedies under this Note or
the Loan Agreement.
This Note has been delivered in Atlanta, Georgia, and the rights
and obligations of the Lender and the Borrower hereunder shall be construed in
accordance with and governed by the laws of the State of Georgia (without giving
effect to its conflicts of law rules).
The Borrower expressly waives any presentment, demand, protest or
notice in connection with this Note, whether now or hereafter required by
applicable law. This Note is intended to be an instrument under seal.
<PAGE> 2
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed, sealed and delivered by its duly authorized officer as of the date
first above written.
BULL RUN CORPORATION
(CORPORATE SEAL)
By: /s/ FREDERICK J. ERICKSON
--------------------------------
Name: Frederick J. Erickson
------------------------------
Title: VP - Finance
-----------------------------
<PAGE> 1
EXHIBIT 10.3
THIRD AMENDMENT OF AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDMENT is made as of this 24th day of March, 1999, by and
between BULL RUN CORPORATION, a Georgia corporation ("Borrower"), and
NATIONSBANK, N.A. ("Lender").
RECITALS
WHEREAS, Lender and Borrower are parties to that certain Amended and
Restated Loan Agreement, dated as of March 20, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Loan Agreement"), pursuant to which
Lender has agreed to make one or more loans from time to time to the Borrower in
accordance with the terms and conditions thereof; and
WHEREAS, the parties desire to modify the Loan Agreement in certain
respects in accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Borrower and Lender do
hereby agree that all capitalized terms used herein shall have the meanings
ascribed thereto in the Loan Agreement as amended hereby (except as otherwise
expressly defined or limited herein) and do hereby further agree as follows:
1. AMENDMENT OF LOAN AGREEMENT. Subject to the fulfillment of the
conditions precedent to the effectiveness of this Amendment which are set forth
below, Section 1.1 of the Loan Agreement is hereby amended by deleting from
Section 1.1 the term "Revolving Credit Facility Expiration Date" and by
substituting in lieu thereof the following new definition of such term:
"Revolving Credit Facility Expiration Date" shall mean May 1,
2000 (as such date may be extended, accelerated or amended
from time to time pursuant to this Agreement).
2. NO OTHER AMENDMENTS. Except for the amendments expressly set forth
and referred to in Section 1 above, the Loan Agreement shall remain unchanged
and in full force and effect. Nothing in this Amendment or any of the other
Supplemental Credit Documents (as defined below) is intended, or shall be
construed, to constitute a novation or an accord and satisfaction of any of the
Obligations or to modify, affect or impair the perfection or continuity of
Lender's security interests in, security titles to or other Liens on any
Collateral for the Obligations.
3. REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into this
Amendment, the Borrower does hereby warrant, represent and covenant to Lender
that: (a) each representation or warranty of the Borrower set forth in the Loan
Agreement is hereby restated and reaffirmed as true and correct on and as of the
date hereof as if such representation or warranty were made on and as of the
date hereof (except to the extent that any such representation or warranty
expressly relates to a prior specific date or period), and no Default or Event
of Default has occurred and is continuing as of this date under the Loan
Agreement as amended by this Amendment; and (b) each of the Borrower, Datasouth,
the Partnership and the Purchaser has the power and is duly authorized to enter
into, deliver and perform the Supplemental Credit Documents to which it is a
party, and each of the Supplemental Credit Documents is the legal, valid and
binding obligation of each Credit Party enforceable against such Credit Party in
accordance with its terms.
<PAGE> 2
4. REIMBURSEMENT OF COSTS AND EXPENSES. The Borrower hereby agrees to
reimburse Lender on demand for all costs (including reasonable attorneys' fees)
incurred by Lender in negotiating, documenting and consummating this Amendment,
the other documents referred to herein, and the transactions contemplated hereby
and thereby.
5. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT. The
effectiveness of this Amendment and the amendments provided in Section 1 above
are subject to the truth and accuracy in all material respects of the
representations and warranties of the Borrower contained in Section 3 above and
the receipt by Lender of one or more duly executed counterparts of this
Amendment.
6. REFERENCE TO AND EFFECT ON THE CREDIT DOCUMENTS. Upon the
effectiveness of this Amendment, each reference in the Loan Agreement to "this
Agreement," "hereunder," "hereof" or words of like import referring to the Loan
Agreement, and each reference in the other Credit Documents to "the Loan
Agreement," "thereunder," "thereof" or words of like import referring to the
Loan Agreement, shall mean and be a reference to the Loan Agreement as amended
hereby.
7. COUNTERPARTS. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which
when taken together shall constitute one and the same instrument.
8. GOVERNING LAW. This Amendment shall be governed by, and construed
in accordance with, the internal laws of the State of Georgia applicable to
contracts made and performed in such state.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the day and year specified at the beginning
hereof.
BORROWER:
BULL RUN CORPORATION
By: /s/ FREDERICK J. ERICKSON
-----------------------------
Name: Frederick J. Erickson
---------------------------
Title: VP - Finance
--------------------------
LENDER:
NATIONSBANK, N.A.
By: /s/ DAVID B. JACKSON
-----------------------------
Name: David B. Jackson
---------------------------
Title: Senior Vice President
--------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BULL RUN CORPORATION FOR THE THREE MONTHS
ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 103,494
<SECURITIES> 0
<RECEIVABLES> 5,348,302
<ALLOWANCES> 80,000
<INVENTORY> 5,457,011
<CURRENT-ASSETS> 11,008,499
<PP&E> 5,137,573
<DEPRECIATION> 2,539,406
<TOTAL-ASSETS> 105,745,637
<CURRENT-LIABILITIES> 18,684,295
<BONDS> 53,377,296
0
0
<COMMON> 228,243
<OTHER-SE> 28,564,142
<TOTAL-LIABILITY-AND-EQUITY> 105,745,637
<SALES> 7,532,940
<TOTAL-REVENUES> 7,728,238
<CGS> 5,374,925
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 705,641
<LOSS-PROVISION> 3,511
<INTEREST-EXPENSE> 1,205,033
<INCOME-PRETAX> (1,107,908)
<INCOME-TAX> 520,604
<INCOME-CONTINUING> (1,056,984)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,056,984)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
