<PAGE> 1
As filed with the Securities and Exchange Commission on August 14, 1997
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED,
EFFECTIVE OCTOBER 7, 1996).
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM to
------------ ------------
COMMISSION FILE NUMBER 0-07477
THE ENSTAR GROUP, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 63-0590560
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
172 COMMERCE STREET - 3RD FLOOR
MONTGOMERY, ALABAMA 36104
(Address of principal executive offices)
(334) 834-5483
(Telephone number, including area code, of agent for service)
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 by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12,13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
--- ---
The number of shares of Registrant's Common Stock, $.01 par value per
share, outstanding at August 11, 1997 was 4,493,541.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE ENSTAR GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
--------- ---------
(dollars in thousands)
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 359 $ 4,749
Restricted cash 352 346
Certificates of deposit 3,813 1,238
Other 67 55
Investment in First Union 78,942 63,153
Property and equipment, net 42 31
--------- ---------
Total assets $ 83,575 $ 69,572
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities Not Subject to Compromise:
Note payable $ 18,100 $ 18,100
Reserve for litigation settlements 1,808 1,861
Accounts payable and accrued liabilities 364 881
Liabilities Subject to Compromise:
Class 10A claims -- 203
Accrued interest on all classes -- 39
Other 351 346
--------- ---------
Total liabilities 20,623 21,430
--------- ---------
Shareholders' equity:
Common stock ($.01 par value; 55,000,000 shares authorized, 4,487,040
shares issued and outstanding at June 30, 1997,
100 shares issued and outstanding at December 31, 1996) 45 --
Additional paid-in capital 167,890 167,935
Unrealized gain on investment in First Union 39,738 23,949
Accumulated deficit (144,721) (143,742)
--------- ---------
Total shareholders' equity 62,952 48,142
--------- ---------
Total liabilities and shareholders' equity $ 83,575 $ 69,572
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
1
<PAGE> 3
THE ENSTAR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment income $ 559 $ 445 $ 1,054 $ 878
Litigation income (expense), net (6) 312 (35) 251
General and administrative expenses (477) (227) (863) (414)
Reorganization items, net -- 129 (484) 302
Interest expense (333) (166) (651) (309)
----------- ----------- ----------- -----------
Net income (loss) $ (257) $ 493 $ (979) $ 708
=========== =========== =========== ===========
Net income (loss) per common share $ (0.06) $ 4,930.00 $ (0.42) $ 7,080.00
=========== =========== =========== ===========
Weighted average shares outstanding 4,448,720 100 2,345,079 100
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 4
THE ENSTAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------
JUNE 30, JUNE 30,
1997 1996
-------- -------
(dollars in thousands)
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (979) $ 708
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 5 5
Litigation income -- (1,004)
Changes in assets and liabilities:
Change in restricted cash (6) (168)
Accounts payable and accrued liabilities (566) 961
Liabilities subject to compromise (244) --
Other (9) 852
------- -------
Net cash provided by (used in) operating activities: (1,799) 1,354
------- -------
Cash flows from investing activities:
Reinvestment of First Union dividends -- (868)
Purchases of certificates of deposit (4,513) (9,228)
Maturities of certificates of deposit 1,938 8,800
Purchase of property and equipment (16) --
------- -------
Net cash used in investing activities: (2,591) (1,296)
------- -------
Increase (decrease) in cash and cash equivalents (4,390) 58
Cash and cash equivalents at the beginning of the period 4,749 1,814
------- -------
Cash and cash equivalents at the end of the period $ 359 $ 1,872
======= =======
Supplemental disclosures of cash flow information:
Interest paid $ 723 $ --
======= =======
Income tax refund $ -- $ (542)
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE> 5
THE ENSTAR GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: GENERAL
The consolidated financial statements of The Enstar Group, Inc. (the
"Company") are unaudited and, in the opinion of management, include all
adjustments consisting solely of normal recurring adjustments necessary to
fairly state the Company's financial condition and results of operations for the
interim period. The results of operations for the quarter and six months ended
June 30, 1997 are not necessarily indicative of the results to be expected for
the full year. These statements should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1996 included in
the Company's Form 10 as filed with the Securities and Exchange Commission on
March 27, 1997 under the Securities Exchange Act of 1934, as amended.
NOTE 2: DISTRIBUTION OF NEW COMMON STOCK
On March 27, 1997, the Company distributed a portion of its new common
stock to its former shareholders of record as of June 1, 1992. The Company's old
common stock was cancelled in 1992 pursuant to its bankruptcy plan of
reorganization. The Company has paid off all creditors from its bankruptcy case,
and in accordance with the terms of its bankruptcy plan, the Company issued new
common stock to qualified former shareholders. Shareholders received one new
share for every ten shares of old cancelled stock and cash in lieu of any
fractional shares. See Note 5.
NOTE 3: LITIGATION CONTINGENCIES
In February 1993, the Company obtained a $15 million judgement against
Richard Grassgreen, one of the Company's former officers, who subsequently filed
for bankruptcy. In connection with the settlement of the Company's claims
against the Grassgreen bankruptcy estate (the "Estate") and others, the Company
agreed to pay certain taxes of the Estate in the event the Estate did not have
sufficient funds. The IRS has appealed a determination by the bankruptcy court
that the IRS cannot seek payment of the taxes from the Estate. The Company has
accrued a liability of approximately $1,700,000 for the potential tax.
On February 11, 1997, fifteen former shareholders of the Company filed
a lawsuit against the Company. The complaint, which deals with actions occurring
prior to the Company's filing for bankruptcy in 1991, alleges that the Company
along with its then principal officers and others defrauded the plaintiffs in
violation of the Alabama Securities Act and other Alabama statutory provisions.
The plaintiffs seek compensatory damages in the amount of their alleged losses
of approximately $2 million and unspecified punitive damages. The Company filed
a motion to dismiss and/or for summary judgement on March 17, 1997. The motion
filed by the Company contends that the claims asserted are barred by the
applicable statutes of limitations. In the event the plaintiffs' claims are not
dismissed pursuant to the Company's motion, the Company intends to contest the
4
<PAGE> 6
plaintiffs' claims vigorously.
NOTE 4: NEWLY ISSUED ACCOUNTING STANDARD
In February 1997, SFAS No. 128, "Earnings Per Share," was issued and is
effective for both interim and annual periods ending after December 15, 1997.
This Statement simplifies the standards for computing earnings per share ("EPS")
previously found in APB Opinion 15, "Earnings Per Share," ("APB 15") by
replacing the presentation of primary EPS with basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. Basic EPS is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS is computed similarly to fully
diluted EPS under APB 15. The Company intends to adopt this Statement in the
fourth quarter of 1997. Application of this statement in each of the three and
six months ended June 30, 1997 and 1996 would have no impact on the EPS
calculation.
NOTE 5: SUBSEQUENT EVENTS
With respect to the distribution of the Company's new common stock
(Note 2), 4,487,040 shares were issued and outstanding at June 30, 1997. As of
July 30, 1997, 4,493,541 shares were issued and outstanding, leaving
approximately 256,000 shares remaining available for subsequent distribution.
In July 1997, the Company sold 186,300 shares of common stock of First
Union Corporation for net proceeds of $18.1 million which were used to repay
indebtedness owed to First Union National Bank of Georgia. The First Union
indebtedness was incurred by the Company in October 1996 in order to make final
distributions to creditors under the Company's bankruptcy plan. Following the
sale, the Company held 667,123 shares of common stock of First Union
Corporation. On June 17, 1997 First Union Corporation declared a 2-for-1 stock
split payable July 31, 1997 for shareholders of record on July 1, 1997 changing
the Company's holdings to 1,334,246 shares at July 31, 1997.
In July 1997, the Company announced a stock repurchase program under
which the Company would repurchase up to $5 million of its common stock in the
open market at prices per share deemed favorable from time to time by the
Company. In conjunction with the stock repurchase program, the Company executed
a new $5 million revolving credit note with First Union National Bank of
Georgia. The note matures on July 30, 1998 and bears interest, at the Company's
option, at either a fixed rate equal to the Adjusted Eurodollar Rate, as
defined, plus .6%, or at a variable rate equal to Prime. The note is secured by
shares of common stock of First Union Corporation as defined in a stock pledge
agreement. It is anticipated the Company will repay such indebtedness from
proceeds of sales of common stock of First Union Corporation.
5
<PAGE> 7
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Shareholders of
The Enstar Group, Inc.
Montgomery, Alabama
We have reviewed the accompanying consolidated balance sheet of The Enstar
Group, Inc. and subsidiary as of June 30, 1997 and the related consolidated
statements of operations and cash flows for the three-month and six-month
periods ended June 30, 1997 and 1996. These financial statements are the
responsibility of The Enstar Group, Inc. and subsidiary's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Enstar Group, Inc. and
subsidiary as of December 31, 1996 and the related consolidated statements of
operations, shareholder's equity, and cash flows for the year then ended (not
presented herein); and in our report dated January 3, 1997 (January 20, 1997 as
to Note 12 and March 19, 1997 as to Note 5), we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of December 31, 1996 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
August 7, 1997
6
<PAGE> 8
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Company's assets, aggregating approximately $83.6 million at June
30, 1997, consisted primarily of 853,423 shares of the common stock of First
Union Corporation (the "First Union Common Stock") (with a market value of
$78.9 million), cash, cash equivalents and certificates of deposit. Based on
the average daily trading volume of shares of First Union Common Stock, the
Company believes that its investment in First Union is readily marketable.
In October of 1996, the Company borrowed approximately $18.1 million
from a bank for the purpose of repaying certain of the Company's liabilities
subject to compromise. In July 1997, the Company sold 186,300 shares of First
Union Common Stock for net proceeds of $18.1 million which were used to repay
the Company's indebtedness owed to the aforementioned bank.
The Company is seeking to acquire one or more operating businesses.
Until such time as the Company uses its assets for an acquisition, the Company's
only liquidity needs are to fund operating expenses.
Financial Condition
The Company had total assets of $83.6 million at June 30, 1997 compared
to $69.6 million at December 31, 1996. The change in total assets was primarily
due to the increase in market value of the Company's First Union Common Stock.
The Company's total liabilities at June 30, 1997 were $20.6 million
compared to $21.4 million at December 31, 1996. The decrease in liabilities is
primarily due to repaying certain liabilities subject to compromise and a
reduction of accounts payable and accrued liabilities.
Approximately $45,000 was reclassified from Additional paid-in capital
to Common stock to reflect the distribution of 4,487,040 shares of its $.01 par
value common stock through June 30, 1997.
Results of Operations
Investment income increased by $114,000 and $176,000 in the second
quarter and first six months of 1997, respectively, over the same periods in
1996. These changes resulted from an increase in dividends received from the
Company's investment in First Union Common Stock and a reclassification of
interest income in the second quarter of 1997. Through March 1997 interest
income was classified as a reorganization item. After the distribution of New
Common Stock, the Company completed its reorganization and accordingly interest
income subsequent to March 1997 is included in investment income.
7
<PAGE> 9
The Company incurred litigation expense of $6,000 and $35,000 for the
second quarter and first six months of 1997, respectively, as opposed to
litigation income of $312,000 and $251,000 for the same periods in 1996. The
primary reason for this difference was attributed to the receipt of a partial
settlement from the bankruptcy estate of Richard Grassgreen in April 1996.
General and administrative expenses increased $250,000 and $449,000 in
the second quarter and first six months of 1997, respectively, over the same
periods in 1996. The increases in 1997 were primarily due to professional fees
incurred in connection with the preparation of the Company's registration
statement and complying with other reporting and legal requirements of a
publicly traded company. In addition, the Company incurred an increase in
franchise taxes in 1997. The Company's loss for the six-month period ended
June 30, 1997 was largely attributable to the foregoing expenses.
Reorganization items consist of interest income less expenses directly
related to the reorganization of the Company. The Company completed its
reorganization in March 1997 and therefore incurred no reorganization items in
the second quarter of 1997. Net reorganization expense for the six months ended
June 30, 1997 was $484,000 compared to net reorganization income of $302,000 for
the same period in 1996. The increase in net expenses for 1997 was a result of
expenses incurred in connection with the distribution of the Company's New
Common Stock.
Interest expense was $333,000 and $651,000 in the three and six months
ended June 30, 1997, respectively, compared to $166,000 and $309,000 for the
same periods in 1996. Interest expense for 1997 was comprised of $570,000
relating to the $18.1 million loan and $81,000 relating to the reserve for
litigation settlements and liabilities subject to compromise. Interest expense
for 1996 related only to liabilities subject to compromise.
The income tax benefit that would have been recordable for the three
and six months ended June 30, 1997 and the income tax expense that would have
been recordable for the three and six months ended June 30, 1996 were fully
offset by changes in the valuation allowance for deferred tax assets during the
respective periods.
8
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Since May 31, 1991, the Company has been involved in extensive
litigation relating to its bankruptcy case. The history of the Company's
bankruptcy case has been previously described by the Company in the Registration
Statement on Form 10, filed by the Company on March 27, 1997 (the "Form 10").
The Company's bankruptcy case was closed by final decree dated July 17, 1997.
Except as described below, the Company is not aware of any pending litigation
matters that could have a material adverse effect on the Company.
In connection with the settlement of the Company's claims against the
bankruptcy estate of Richard Grassgreen, a former chairman and chief executive
officer of the Company, and others, and the confirmed plan of reorganization in
Mr. Grassgreen's bankruptcy case (the "Grassgreen Bankruptcy Estate
Settlement"), the United States Internal Revenue Service (the "IRS") has
asserted a liability of the Company for taxes allegedly owed by the Grassgreen
bankruptcy estate. In 1996, the IRS appealed a determination by the United
States Bankruptcy Court for the Middle District of Florida that the IRS cannot
seek payment of the taxes. The alleged tax liability, for calendar year 1994,
is for sums paid to the Company in connection with the Grassgreen Bankruptcy
Estate Settlement by third parties to resolve the Company's claims against
those parties. In United States of America v. Richard J. Grassgreen and The
Enstar Group, Inc., Case No. 96-1099-CIV-J-10 (U.S.D.C. M.D. Fla.), the IRS
claims that it should be entitled to assess additional taxes in the approximate
amount of $1.6 million against the Grassgreen bankruptcy estate for 1994 and
that the IRS should be able to seek payment of those taxes from the Company by
virtue of the Company's agreement to pay certain taxes of the Grassgreen
bankruptcy estate. Although the Company has accrued a liability for the
potential tax, the Company intends to contest vigorously that any taxes are
owed by the Grassgreen bankruptcy estate. In the event a court determines that
additional taxes are owed, the Company will vigorously contest that it has any
obligation to pay such taxes.
On February 11, 1997, fifteen former shareholders of the Company filed
a lawsuit against the Company in the Circuit Court of Montgomery County, Alabama
styled Peter N. Zachary, et al. v. The Enstar Group, Inc., Case No.
CV-97-257-Gr. The complaint, which deals with actions occurring prior to the
Company's filing for bankruptcy in 1991, alleges that the Company along with its
then principal officers and others defrauded the plaintiffs in violation of the
Alabama Securities Act and other Alabama statutory provisions. The plaintiffs
seek compensatory damages in the amount of their alleged losses of approximately
$2 million and unspecified punitive damages. The complaint is virtually
identical to a complaint brought by these plaintiffs against the Company's
former chairman, former president and others in December, 1991, during the
pendency of the Company's bankruptcy case and prior to the confirmation of the
reorganization plan. The plaintiffs allege that the bankruptcy court issued an
order on January 15, 1997, allowing them to litigate their claims against the
Company. The bankruptcy court's order actually held that the plaintiffs could
not bring a late claim against the Company in its bankruptcy case and then went
on to state that because of facts relating to these particular plaintiffs, they
were not bound by the provisions of the reorganization plan and their claims
were not subject to discharge under the bankruptcy code. The Company filed a
motion to dismiss and/or for summary judgement on March 17, 1997. The motion
filed by the Company contends that the claims asserted are barred by the
applicable statutes of limitations. In the event the plaintiffs'
9
<PAGE> 11
claims are not dismissed pursuant to the Company's motion, the Company intends
to contest the plaintiffs' claims vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on June 30, 1997.
Matters voted upon at the meeting and the number of votes cast for, against or
withheld, are as follows:
(1) To consider and act upon a proposal to elect the following nominees
to be Directors:
<TABLE>
<CAPTION>
Votes
Nominee Votes For Withheld
------- --------- --------
<S> <C> <C>
* J. Christopher Flowers 4,065,375 44,250
* Jeffrey S. Halis 4,072,877 36,748
* Nimrod T. Frazer 4,061,742 47,783
* T. Whit Armstrong 4,065,822 43,803
* T. Wayne Davis 4,066,457 43,068
Donald R. Emery 100 3,795,889
Robert T. Layman 100 3,795,889
Susan H. MacDonald 5,100 3,795,889
</TABLE>
(*) Elected
(2) To appoint Deloitte & Touche LLP as independent auditors for the
year ended December 31, 1997. Votes cast were: 4,060,837 for, 26,980 against and
21,808 abstentions.
(3) To approve the adoption of the 1997 Amended CEO Stock Option Plan.
Votes cast were: 2,272,453 for, 332,394 against and 27,109 abstentions. Broker
non-votes were 1,786,003.
(4) To approve the adoption of the 1997 Outside Directors' Stock Option
Plan. Votes cast were: 2,298,650 for, 359,214 against and 32,116 abstentions.
Broker non-votes were 1,727,479.
(5) To approve the adoption of the 1997 Amended Omnibus Incentive Plan.
Votes cast were: 2,330,204 for, 321,941 against and 37,835 abstentions. Broker
non-votes were 1,727,479.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Reference
No. Description of Exhibit
--- ----------------------
<S> <C>
10.1 Revolving Credit Note dated July 31, 1997 made by the Company in favor of
First Union National Bank
10.2 Stock Pledge Agreement dated July 31, 1997 between the Company and First
</TABLE>
10
<PAGE> 12
<TABLE>
<S> <C>
Union National Bank
27.1 Financial Data Schedule (For SEC use only)
</TABLE>
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the three months ended June
30, 1997.
11
<PAGE> 13
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.
THE ENSTAR GROUP, INC.
Date: August 14, 1997 By: /s/ CHERYL D. DAVIS
-------------------------------------
Cheryl D. Davis
Chief Financial Officer, Vice President
of Corporate Taxes, Secretary
(Authorized Officer)
(Principal Financial Officer)
12
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EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
10.1 Revolving Credit Note dated July 31, 1997 made by the Company in
favor of First Union National Bank
10.2 Stock Pledge Agreement dated July 31, 1997 between the Company
and First Union National Bank
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
EXHIBIT 10.1
[FIRST UNION GRAPHIC]
ATLANTA, GEORGIA US $5,000,000.00
JULY 31, 1997
REVOLVING CREDIT NOTE
FOR VALUE RECEIVED, the undersigned, THE ENSTAR GROUP, INC., a Georgia
corporation ("Borrower"), promises to pay to the order of FIRST UNION NATIONAL
BANK, a national banking association, its successors and assigns (hereinafter,
together with all subsequent holders of this Note, called "Bank"), whose address
is 999 Peachtree Street, Atlanta, Georgia 30309, Attention: Portfolio
Management, on or before the Maturity Date (hereinafter defined), the principal
sum of FIVE MILLION AND NO/100 DOLLARS ($5,000,000), or so much thereof as may
actually be advanced hereunder, together with interest on the unpaid principal
balance from time to time outstanding at a rate per annum as set forth herein.
ARTICLE 1. DEFINED TERMS
For purposes hereof:
1.1 "ADJUSTED EURODOLLAR RATE" means shall mean, for any particular
Interest Period, the rate per annum (rounded upwards, if necessary, to the next
higher 1/100 of 1%) equal to the Eurodollar Rate for such Interest Period
divided by, for each day on which Bank is required to maintain reserves in
respect to Eurocurrency Liabilities, that percentage equal to 1 minus the
Eurodollar Reserve Percentage for such Interest Period.
1.2 "APPLICABLE RATE" means the interest rate in effect hereunder from
time to time. In the event that more than one interest rate is in effect at any
one time, each such rate shall be the Applicable Rate with respect to the amount
of this Note for which such rate is in effect.
1.3 "BUSINESS DAY" shall mean (a) a day on which banks are open for the
conduct of banking business in Atlanta, Georgia and (b) if such day relates to a
borrowing of, a payment or prepayment of principal or interest on, a conversion
of or into, or an Interest Period for, a Fixed Rate Portion, or a notice by
Borrower with respect to any such borrowing, payment, prepayment, conversion or
Interest Period, a day which is also a day on which dealings in United States
Dollars are carried out in the London interbank market.
<PAGE> 2
1.4 "DEFAULT" shall mean the occurrence of any event or condition that
with the passage of time or giving of notice, or both, would constitute an Event
of Default.
1.5 "EFFECTIVE DATE" shall mean, the date designated in any Fixed Rate
Request as the date that a Portion covered thereby shall begin to bear interest
at a rate set forth in Section 2.2(a)(i) hereof. The Effective Date specified in
such Fixed Rate Request shall be the first day of the Interest Period applicable
to the Fixed Rate Portion so requested.
1.6 "EVENT OF DEFAULT" shall have the meaning assigned to the term in
Section 4.1 hereof.
1.7 "EURODOLLAR RATE" shall mean, for any Interest Period for any
Fixed Rate Portion, the average rate per annum (determined solely by the Bank
and rounded upwards, if necessary, to the next higher 1/100 of 1%) at which
deposits in United States Dollars are offered to Bank by brokers in the London
interbank market at 11:00 a.m. (London time) two Business Days before the first
day of such Interest Period in an amount equal to the Fixed Rate Portion so
requested and for a period equal to such Interest Period.
1.8 "EURODOLLAR RESERVE PERCENTAGE" shall mean, for any Interest
Period, the maximum reserve requirement percentage (expressed as a decimal),
including any supplemental, marginal or emergency reserves as in effect from
time to time, imposed by the Board of Governors of the Federal Reserve System
(or any successor) on liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to the Interest Period selected,
and in an amount at least equal to the outstanding loan balance accruing
interest at the "Adjusted Eurodollar Rate," but subject to any changes in such
reserve requirement becoming effective during the Interest Period.
1.9 "EUROCURRENCY LIABILITIES" shall have the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System, as
such regulation may be in effect from time to time.
1.10 "FIXED RATE" shall mean the rate of interest applicable to a Fixed
Rate Portion.
1.11 "FIXED RATE PORTION" shall mean all or any portion of the Loan
designated by Borrower to bear interest at the rate set forth in Section
2.2(a)(i) hereof.
1.12 "FIXED RATE REQUEST" shall mean the request of Borrower made
pursuant to Section 2.3 hereof to have all or any portion of the outstanding
Loan bear interest at the rate set forth in Section 2.2(a)(i) hereof.
1.13 "INTEREST PERIOD" means a period of seven, thirty, sixty or ninety
days as selected by Borrower; provided however, in no event shall any Interest
Period extend beyond the Maturity Date.
2
<PAGE> 3
1.14 "LOAN" means the loan advanced under this Note and evidenced
hereby and by the other Loan Documents (hereinafter defined).
1.15 "LOAN DOCUMENTS" means the Stock Pledge Agreement, this Note, the
Financing Agreements (as defined in the Stock Pledge Agreement), and all other
documents, agreements and instruments executed or delivered in connection
herewith or therewith.
1.16 "MATURITY DATE" means July 30, 1998, or such earlier date on which
this Note shall become due by acceleration by Bank, by prepayment notice from
Borrower, or otherwise.
1.17 "OBLIGATIONS" shall mean the Loan and any and all other
indebtedness, liabilities and obligations of Borrower to Bank or its affiliates
of every kind and nature (including, without limitation, interest, charges,
expenses, attorneys' fees and other sums chargeable to Borrower by Bank or its
affiliates, all indemnification obligations and all future advances made to or
for the benefit of Borrower), whether arising under this Note, the other Loan
Documents, or under any other financing arrangement entered into by Borrower and
Bank or its affiliates prior to the date hereof or after the date hereof,
whether arising by reason of an extension of credit, opening of a letter of
credit, loan, lease, credit card arrangement, guaranty, indemnification or in
any other manner, direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter acquired.
1.18 "PERSON" shall mean and include any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated organization,
association, corporation, body corporate and politic, institution, entity, party
or government (whether national, federal, state, county, city, municipal, or
otherwise, including, without limitation, any instrumentality, public
corporation, division, agency, body or department thereof).
1.19 "PORTION" shall mean either a Fixed Rate Portion or a Prime Rate
Portion, as the context may require.
1.20 "PRIME RATE PORTION" shall mean all or any portion of the
outstanding Loan, which Borrower has not designated to bear interest at the rate
set forth in Section 2.2(a)(i) hereof.
1.21 "PRIME RATE" shall mean the rate announced from time to time by
Bank as the prime rate of Bank. The Prime Rate is one of several interest rate
bases used by Bank, and Bank makes loans both above and below the Prime Rate.
1.22 "REGULATORY CHANGE" shall mean the adoption on or after the date
hereof of any applicable federal, state, or foreign law, rule or regulation or
any change after such date in any such federal, state or foreign law, rule or
regulation (including, without limitation, Regulation D of the Board of
Governors of the Federal Reserve System), or any adoption or change in the
interpretation or administration thereof by any court, governmental authority,
central bank or comparable agency or monetary authority charged with the
interpretation or
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administration thereof, or compliance by Bank with any request or directive made
after such date (whether or not having the force of law) of any such court,
authority, central bank or comparable agency or monetary authority.
1.23 "STOCK PLEDGE AGREEMENT" means the Amended and Restated Stock
Pledge Agreement dated even date herewith between Borrower and Bank, as amended,
modified, supplemented or restated from time to time.
ARTICLE 2. INTEREST
2.1 CALCULATION OF INTEREST. Interest based on a 360-day year will be
accrued on the number of days that funds are actually outstanding, and shall be
calculated on a daily basis.
2.2 INTEREST RATE. (a) The outstanding principal amount of the Loan
shall bear interest, calculated daily on the basis of the 360-day year and
actual days elapsed, from the date thereof until paid in full at the following
rates:
(i) the outstanding principal amount of each Fixed Rate Portion
shall bear interest at a fixed rate of interest equal to the
Adjusted Eurodollar Rate, plus six tenths of one percentage point
(.60%);
(ii) the outstanding principal amount of each Prime Rate Portion
shall bear interest at a fluctuating rate per annum equal to the
Prime Rate; and
(iii) the principal amount of any payment which is not made when
due (whether at its stated maturity or by reason of acceleration)
shall bear interest at the Default Rate.
The Loan shall initially bear interest as a Fixed Rate Loan for an Interest
Period of 90 days and Borrower shall not be required to submit a Fixed Rate
Request for such initial Interest Period. The interest rate in effect on the
date hereof is ____________% per annum.
(b) Accrued interest shall be payable: (i) in the case of Prime
Rate Portions, monthly on the first day of each month hereafter for the previous
month, commencing September 1, 1997; (ii) in the case of a Fixed Rate Portion,
on the last day of the Interest Period therefor (provided, however, for any 60
day Interest Period, accrued and unpaid interest shall also be payable in full
on the 30th day of such Interest Period and, for any 90 day Interest Period,
accrued and unpaid interest shall also be payable in full on the 30th and 60th
days of such Interest Period); (iii) in the case of any Portion, upon the
payment or prepayment of all or any such Portion of the Loan included therein or
the conversion of such Portion to a Portion of another type (but only on the
principal amount so paid, prepaid or
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converted),and (iv) in the case of any Portion, interest payable at the Default
Rate shall be payable from time to time on demand.
2.3 FIXED RATE REQUESTS. Borrower may request that all or any portion
of the outstanding Loan bear interest at the rate set forth in Section 2.2(a)(i)
for a specified Interest Period by delivering to the Bank a Fixed Rate Request,
not later than 10:00 a.m. Atlanta, Georgia time, at least three (3) Business
Days prior to the Effective Date of the change to such rate. Each Fixed Rate
Request shall either be oral, with prompt written confirmation, or in writing,
with such written confirmation or writing to be substantially in the form of
Exhibit A attached hereto; shall be irrevocable; shall be effective upon receipt
by Bank; and shall specify: (a) the amount of such Fixed Rate Portion (which
shall be not less than $500,000 and shall be an integral multiple of $100,000);
(b) whether such Fixed Rate Request will effect a continuation of a Fixed Rate
Portion currently outstanding; (c) the Effective Date of the Interest Period
with respect to such Fixed Rate Portion (which shall be a Business Day and, if
such Fixed Rate Portion is a continuation of a Fixed Rate Portion then
outstanding, shall not be prior to the last day of the then-applicable Interest
Period for such outstanding Fixed Rate Portion); and (d) the length of the
Interest Period.
2.4 INTEREST PERIOD. The Interest Period for any Fixed Rate Portion
shall commence on the Effective Date of such Fixed Rate Portion as specified in
the Fixed Rate Request applicable thereto and shall continue for the applicable
Interest Period specified in such Fixed Rate Request. If any Interest Period
would otherwise end on a day which is not a Business Day, such Interest Period
shall be extended to the next Business Day, unless the result of such extension
would be to extend such Interest Period into the calendar month following the
calendar month in which it would otherwise terminate, in which event such
Interest Period shall end on the immediately preceding Business Day.
2.5 LIMITATION ON INTEREST PERIODS; PORTIONS. Borrower may not select
any Interest Period with respect to the Loan which begins before and ends after
Maturity Date. The Borrower shall not have outstanding at any one time more than
five (5) Fixed Rate Portions.
2.6 PREPAYMENT FEES. Borrower shall have the right to prepay any Fixed
Rate Portion or Prime Rate Portion at any time provided:
(i) Borrower has, at least 10 days prior to the date of such
prepayment, advised the Bank in writing of Borrower's intention to make such
prepayment. This advice of prepayment shall set forth the amount of the
prepayment and the date upon which such prepayment will be made; and
(ii) Borrower pays to Bank, at the time of such prepayment,
such amount as Bank has, prior to the prepayment date, advised Borrower, in
writing, is the amount of the "Bank's loss" due to such prepayment.
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As used in this Section 2.6, the term "Bank's loss" shall mean Bank's
continued interest costs on the amount of principal prepaid until the expiration
of the term of such prepaid Fixed Rate Portion, plus the unamortized portion of
any fees paid by Bank for the funds used in said Interest Period for such Fixed
Rate Portion, less the amount Bank could earn if the prepaid amount were to be
invested by Bank in United States Treasury Bills for a comparable period. The
determination of ""Bank's loss" and such other costs, fees and penalties due
Bank hereunder shall be made by Bank in good faith using such methodology as
Bank deems appropriate and customary under the circumstances and shall be
conclusive absent manifest error. The provisions of this paragraph shall apply
with respect to any Fixed Rate Portion prepaid by Borrower prior to the last day
of the applicable Interest Period as a result of the acceleration by Bank of the
outstanding principal balance hereof.
2.7 ILLEGALITY. Notwithstanding any other provision of this Agreement,
in the event that it shall become unlawful for Bank to obtain funds in the
London interbank market or for Bank to maintain a Fixed Rate Portion, then Bank
shall promptly notify Borrower whereupon (a) the right of Borrower to request a
Fixed Rate Portion shall thereupon terminate, and (b) any Fixed Rate Portion
then outstanding shall commence to bear interest at the rate applicable to Prime
Rate Portions or at such other rate as Bank and Borrower may agree upon on the
last day of the then-applicable Interest Period or at such earlier time as may
be required by law.
2.8 INDEMNITY. Borrower agrees to indemnify Bank and to hold it
harmless from any loss or expense which it may sustain or incur as a consequence
of failure by Borrower to consummate any Fixed Rate Request, including, without
limitation, any such loss or expense arising from interest or fees payable by
Bank to Banks of funds obtained by it in order to maintain any Fixed Rate
Portion. Bank shall promptly notify Borrower of any amount payable by Borrower
to Bank pursuant to this Section 2.8 hereof and a certificate of Bank, setting
forth in reasonable detail the computation of the amounts specified, shall be
conclusive, absent manifest error, as to the amounts owed.
2.9 INABILITY TO DETERMINE FIXED RATE. In the event that Bank
determines (which determination shall be conclusive) that, by reason of
circumstances affecting the London interbank market, quotation of interest rates
for the relevant deposits referred to in the definitions of the "Eurodollar
Rate" herein are not being provided in the relevant amounts or for the relevant
maturities for the purpose of determining a rate of interest for any Fixed Rate
Portion, then Bank shall promptly notify Borrower whereupon the right of
Borrower to request a Fixed Rate Portion shall thereupon be suspended until such
time as Bank again can determine a rate of interest for Fixed Rate Portions.
2.10 EXPIRATION OF INTEREST PERIOD. Upon the expiration of the Interest
Period for any Fixed Rate Portion, unless Bank has received from Borrower a new
Fixed Rate Request with respect thereto, such Fixed Rate Portion shall be
converted automatically to a Prime Rate Portion.
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2.11 INCREASED COSTS/CAPITAL ADEQUACY. The Borrower agrees that if: (a)
after the date hereof, Bank shall have determined that the adoption of any
applicable law, rule or reegulation or any change therein, or any change in the
interpretation or administration thereof by any court or any administrative or
governmental authority or central bank or comparable agency charged with
interpretation or administration thereof (or compliance by Bank with any request
or directive of any such court, authority or central bank (whether or not having
the force of law)), shall either impose, affect, modify or deem applicable any
reserve, special deposit, capital maintenance or similar requirement against the
Loan or the participation of Bank therein or impose on Bank any other condition
regarding the Loan, or (b) after the date, Bank shall have determined that the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any court or any administrative or governmental authority or central
bank or comparable agency charged with the interpretation or administration
thereof (or compliance by Bank with any request or directive regarding capital
adequacy (whether or not having the force of law)) of any such authority,
central bank or comparable agency, relating generically to loans of the category
applicable to the Loan, or (c) there shall occur any change after the date in
the basis of taxation of payments to Bank of any amount owing to the Bank
hereunder (except for a change in the rate of taxation on the overall net income
of Bank), and the result of any event referred to in subsection (a), (b) or (c)
above shall be to increase the cost to Bank of making or maintaining the Loan or
to reduce the rate of return on capital with respect to the Loan to a level
below that which the Loan could have achieved but for such adoption, change or
compliance (and, with respect to capital adequacy, taking into consideration
Bank's internal policies with respect thereto), then, within 30 days of demand
by Bank (which shall be made within 180 days of the occurrence of any such event
referred to in clause (a), (b) and (c) above), Borrower shall pay to Bank
additional amounts which shall be sufficient to compensate Bank for such
increased cost, tax or reduced rate of return, together with interest on such
amount from the date fifteen days after the date Borrower receives the
statement(s) referred to in the next sentence to the date Borrower pays such
increased cost, tax or reduced rate of return in full at the Prime Rate. At the
request of Borrower, Bank shall deliver to Borrower a statement setting forth
the basis for requesting such compensation and the method for determining the
amount thereof. Any such statement shall be conclusive as to the amounts of
increased cost in funding or maintaining the Loan absent manifest error.
2.12 LATE FEES.If any payment of principal or interest under the Loan
is made more than fifteen (15) days after the due date thereof, Borrower shall
pay to Bank a late payment fee of the lesser of (a) five percent (5%) of the
overdue amount or (b) $1,750; provided, however, that the acceptance of such a
fee by Bank shall not be construed as or deemed to be a waiver of any Default or
Event of Default under the Loan Agreement or any other Loan Document.
ARTICLE 3. REVOLVING LOANS, PAYMENT AND PREPAYMENT
3.1 REVOLVING LOANS. So long as no Default or Event of Default has
occurred and is continuing hereunder, and during the period from the date hereof
through the day prior to the Maturity Date, Bank, by its acceptance hereof, but
subject to the limitations set forth in the
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Stock Pledge Agreement, shall make advances to Borrower hereunder from time to
time, as requested by Borrower, in amounts up to $5,000,000 outstanding at any
one time. Subject to the limitations and conditions set forth herein, Bank
agrees, by its acceptance hereof, that Borrower may borrow, repay principal
borrowed and reborrow principal repaid under this Note up to such principal
amount. Borrower shall submit requests for advances hereunder in accordance with
Bank's reasonable and customary requirements from time to time.
3.2 PAYMENT.
(a) Interest shall be payable in amounts and on the dates set
forth in Article 2 hereof.
(b) The outstanding principal balance hereunder and all
accrued and unpaid interest hereunder shall be due and payable in full
on the Maturity Date.
(c) Whenever any payment due hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day (except as otherwise
provided in Section 2.4 hereof) and, with respect to payments of
principal, interest thereon shall continue to accrue and shall be
payable at the applicable rate during such extension.
3.3 PLACE OF PAYMENT. All payments hereunder shall be made to
Bank at Bank's address set forth in the first paragraph on page 1 of this Note,
or at such other address as Bank may from time to time designate in writing to
Borrower. All amounts payable hereunder are payable in lawful money of the
United States of America.
3.4 APPLICATION OF PAYMENTS. Prior to the occurrence of an Event
of Default, all payments on this Note shall be applied first to the payment of
accrued but unpaid interest, and any remainder shall be applied to reduction of
the principal balance hereof. Bank's books and records shall be presumed correct
as to the sums outstanding hereunder 45 days after Borrower has been provided
any statement of Loan balances and payments and has failed to object to the same
within such period, except in the case of manifest error. After the occurrence
of an Event of Default, payments on this Note shall be applied to interest,
principal, costs of collection and any other amounts payable hereunder or under
the Stock Pledge Agreement as Bank may in its sole and absolute discretion
direct.
3.5 COSTS OF COLLECTION. Borrower agrees to pay all costs of
collection hereof when incurred, including reasonable attorneys' fees actually
incurred, whether or not any legal action shall be instituted to enforce this
Note.
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3.6 PREPAYMENT.
(a) Subject to Section 2.6 hereof, Borrower shall have the
right to prepay this Note in whole at any time or in part from time to
time without premium or penalty.
(b) If any such prepayment is only a partial payment of the
then outstanding principal balance hereof, such prepayment shall be
accompanied by the payment of all accrued but unpaid interest on the
portion of the outstanding principal balance of the Note being so paid
through the date the prepayment is made. For same day credit all monies
shall be received by Bank at Bank's address as set forth in Section 3.2
hereof, at or before 2:00 p.m., Eastern Standard Time or Eastern
Daylight Time (as applicable); all monies received after such time
shall be deemed received on the following Business Day and the
outstanding principal shall continue to accrue interest at the
Applicable Rate to the date funds are deemed received. No partial
prepayment shall affect the obligation of Borrower to make any payment
of principal or interest due hereunder on the date set forth in this
Note, until this Note has been paid in full.
(c) Borrower shall have the right to prepay any Fixed Rate
Portion only upon payment to Bank, at the time of such prepayment, of
an amount equal to the "Bank's loss" (as determined pursuant to Section
2.6 hereof).
ARTICLE 4. DEFAULT AND REMEDIES
4.1 EVENTS OF DEFAULT. Each of the following events shall
constitute an "Event of Default":
(a) If Borrower shall fail, refuse or neglect to pay, in full,
any installment or portion of the indebtedness evidenced hereby within
5 days of the date the same shall become due and payable, whether at
the due date thereof stipulated herein, or at a date fixed for
prepayment, or by acceleration or otherwise.
(b) The occurrence of any "default" or "event of default"
under (and as defined in) any other Loan Document.
(c) If Borrower should default in the payment or performance
of any other Obligation and fail to cure the same within 15 days after
notice from Bank of such default.
(d) Borrower shall (i) make an assignment for the benefit of
its creditors; (ii) admit in writing its inability to pay its debts
when they become due; (iii) file or have filed against it a petition or
any other pleading instituting a case under any bankruptcy, insolvency,
reorganization, arrangement, or other debtor relief law, and, in the
case of any involuntary proceeding, the same is not discharged or
dismissed within 45 days of
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the filing thereof; (iv) appoint or consent to the appointment of a
receiver, conservator, liquidating agent, or committee; or (v) take any
action for the purpose of effecting any of the foregoing.
(e) Borrower shall provide any representation, warranty or
information to Bank (i) that is materially false when made or provided
or (ii) that becomes materially false as a continuing representation or
warranty or as continuing information.
(f) Borrower shall fail to comply with or perform any
covenant, provision, term or condition of any Loan Document and shall
fail to cure the same within any applicable cure period provided for
therein (or if no such cure period is so provided, within 15 days of
the occurrence thereof).
(g) Any judgment, writ of execution, attachment or garnishment
or any judgment lien, or any other legal process, be issued for an
amount in excess of $500,000 against Borrower or any of its property,
unless the same shall have been dismissed, bonded over or stayed within
30 days of the issuance of the same.
(h) Borrower shall (i) default (as principal of or guarantor
or other surety) in the payment of any principal of, or premium, if
any, or interest on, or other payment with respect to any indebtedness
or (ii) default with respect to any of the terms of any of such
indebtedness or of any agreement relating thereto, and such default or
event of default gives the holder of the obligation (x) the right to
accelerate such indebtedness (whether or not such holder has, in fact,
accelerated such indebtedness), or (y) the right to take action with
respect to any collateral therefor.
(i) A notice of lien, levy or assessment is filed of record
with respect to all or any of any Borrower's assets by the United
States, or any department, agency or instrumentality thereof, or by any
state, county, municipal or other governmental agency which adversely
affects the priority of the liens and security interests granted to
Bank under the Loan Documents.
(j) (i) If any Person (or two or more Persons acting in
concert), other than Nimrod T. Frazer, shall acquire "beneficial
ownership" within the meaning of Rule 13d-3 of the Securities and
Exchange Act of 1934, as amended, directly or indirectly, capital stock
or securities of Borrower representing 25% or more of the aggregate
voting power of all classes of capital stock and securities of Borrower
entitled to vote for the election of directors or (ii) during any
twelve-month period (commencing both before and after the date hereof),
individuals who at the beginning of such period were directors of
Borrower shall cease for any reason (other than death or mental or
physical disability) to constitute a majority of the board of directors
of Borrower.
4.2 DEFAULT RATE. Upon the occurrence and during the continuance
of an Event of Default, at Bank's option after written notice to Borrower, the
Applicable Rate shall become
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the Prime Rate plus two percent (2%) per annum (the "Default Rate"). This
Section shall not be deemed to be a waiver of Bank's right to accelerate payment
of this Note under the terms hereof.
4.3 ACCELERATION; OTHER REMEDIES. Upon the occurrence or
existence of any Event of Default, and during the continuation thereof, without
prejudice to the rights of Bank to enforce its claims against Borrower for
damages for failure by Borrower to fulfill any of the obligations hereunder,
Bank shall have the following rights and remedies, in addition to any other
rights and remedies available to Bank at law, in equity or otherwise:
(a) In the event of the occurrence of (i) an Event of Default
set forth in Section 4.1(d) hereof, the Loan shall automatically and immediately
terminate and the Obligations shall automatically and immediately become due and
payable; and (ii) any other Event of Default, Bank, at its option, may terminate
the Loan and declare all of the Obligations to be immediately due and payable,
whereupon all of the Obligations shall become immediately due and payable, in
either case without presentment, demand, protest, notice of non-payment or any
other notice required by law relative thereto, all of which are hereby expressly
waived by Borrower, anything contained herein to the contrary notwithstanding
and, in connection therewith, the Obligations shall, automatically and without
notice to Borrower, commence to bear interest, until paid in full, at the
Default Rate.
(b) The right to set-off, without notice to Borrower, any and
all deposits at any time credited by or due from Bank to Borrower, whether in a
general or special, time or demand, final or provisional account or any other
account or represented by a certificate of deposit and whether or not unmatured
or contingent. Bank shall promptly give Borrower notice of any such action.
(c) All of the rights and remedies of a secured party under
the Uniform Commercial Code as in effect in Georgia from time to time or under
other applicable law, all of which rights and remedies shall be cumulative, and
none of which shall be exclusive, to the extent permitted by law, in addition to
any other rights and remedies contained in this Note, and in any of the other
Loan Documents.
(d) The right to sell or to otherwise dispose of all or any of
the collateral for the Obligations in accordance with the Stock Pledge Agreement
and applicable law. The proceeds realized from the sale of any collateral shall
be applied first to the costs, expenses and attorneys' fees and expenses
incurred by Bank for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the collateral; second to interest due
upon any of the Obligations; and third to the principal of the Obligations. Any
surplus shall be paid to Borrower. If any deficiency shall arise, Borrower shall
remain liable to Bank therefor.
(f) Any notice required to be given by Bank of a sale, lease,
other disposition of any collateral for the Obligations or any other intended
action by Bank, given to Borrower
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in the manner set forth in Section 5.4 below, at least ten (10) days prior to
such proposed action, shall constitute commercially reasonable and fair notice
thereof to Borrower.
4.4 NO WAIVER. Failure to exercise any of the foregoing options
shall not constitute a waiver of the right to exercise the same or any other
option at any subsequent time in respect to any other event. The acceptance by
Bank of any payment hereunder that is less than payment in full of all amounts
due and payable at the time of such payment shall not constitute a waiver of the
right to exercise any of the foregoing options at that time or at any subsequent
time or nullify any prior exercise of any such option without the express
written consent of Bank.
ARTICLE 5. MISCELLANEOUS
5.1 WAIVERS.
(a) Except as otherwise specifically provided in the Loan
Documents, Borrower and any endorsers or guarantors hereof jointly and
severally waive presentment and demand for payment, notice of intent to
accelerate maturity, notice of acceleration of maturity, protest or
notice of protest and nonpayment, bringing of suit and diligence in
taking any action to collect any sums owing hereunder or in proceeding
against any of the rights and properties securing payment hereof.
Borrower and any endorsers or guarantors hereof agree that the time for
any payments hereunder may be extended from time to time without notice
and consent to the acceptance of further security or the release of any
existing security for this Note, all without in any manner affecting
their liability under or with respect to this Note. No extension of
time for the payment of this Note or any installment hereof shall
affect the liability of Borrower under this Note even though Borrower
is not a party to such agreement.
(b) Borrower hereby waives and renounces, to the extent same
may be waived and renounced, for itself, its legal representatives,
successors and assigns, all rights to the benefits of any moratorium,
reinstatement, marshaling, forbearance, valuation, stay, extension,
redemption, appraisement, exemption and homestead now provided or which
may hereafter be provided by the Constitution and the laws of the
United States and of any state, both as to itself and in and to all of
its property, real and personal, against the enforcement and collection
of the obligations evidenced by this Note.
5.2 LOAN DOCUMENTS. This Note is issued pursuant to the Loan
Documents and is secured, inter alia, by the Stock Pledge Agreement. All of the
agreements, conditions, covenants, warranties, representations, provisions and
stipulations made by or imposed upon Borrower under the other Loan Documents are
hereby made a part of this Note to the same extent and with the same force and
effect as if they were fully inserted herein, and Borrower
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covenants and agrees to keep and perform the same, or cause them to be kept and
performed, strictly in accordance with their terms.
5.3 BORROWER. The term "Borrower" as used in this Note shall mean and
have reference to, collectively, all parties and each of them directly or
indirectly obligated for the indebtedness evidenced by this Note, whether as
principal, maker, endorser, guarantor, or otherwise, together with the
respective heirs, administrators, executors, legal representatives, successors
and assigns of each of the foregoing.
5.4 NOTICE. All notices or other communications required or permitted
to be given pursuant to this Note shall be in writing and shall be considered
properly given if mailed by first-class United States mail, postage prepaid,
registered or certified with return receipt requested, or by delivering same in
person to the intended addressee, or by prepaid telegram, telex or facsimile
transmission. Notice so mailed shall be effective three (3) days after its
deposit. Notice may be given in any other manner, but such notice shall be
effective only if and when received by the addressee. For purposes of notice,
the address and facsimile number of Borrower shall be the address and facsimile
number listed on the final page of this Note, and Bank's address shall be 999
Peachtree Street, Atlanta, Georgia 30309, Attention: Portfolio Management (for
notice delivered by personal delivery or telegram), and P.O. Box 740074, Mail
Code 9030, Atlanta, Georgia 30374 (for notice delivered by registered or
certified mail), and Bank's facsimile number shall be (404) 827-7119; provided,
however, that either party shall have the right to change its address for notice
hereunder to any other location within the continental United States by the
giving of written notice to the other party in the manner set forth hereinabove.
5.5 GOVERNING LAW. This Note shall be governed by and construed
according to the laws of the State of Georgia, except that United States federal
law shall govern to the extent that it permits Bank to contract for, charge or
receive a greater amount of interest, and giving effect to all other United
States federal laws applicable to national banks. It is expressly stipulated and
agreed to be the intent of Borrower and Bank at all times to comply with the
applicable law now or hereafter governing the interest payable on this Note or
the Loan. If the applicable law is ever revised, repealed, or judicially
interpreted so as to render usurious any amount called for under this Note, or
under any of the other Loan Documents, or contracted for, charged, taken,
reserved or received with respect to the Loan, or if Bank's exercise of the
option herein contained to accelerate the maturity of this Note, or if any
prepayment by Borrower results in Borrower's having paid any interest in excess
of that permitted by applicable law, then it is Borrower's and Bank's express
intent that all excess amounts theretofore collected by Bank be credited on the
principal balance of this Note (or, if the Note has been paid in full, refunded
to Borrower), and the provisions of this Note and the other Loan Documents
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
documents, so as to comply with the then applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
All sums paid or agreed to be paid to Bank for the use, forbearance or detention
of the indebtedness evidenced hereby and
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by the other Loan Documents shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the usury ceiling from time to time
in effect and applicable to the Loan for so long as debt is outstanding under
the Loan.
5.6 SEVERABILITY. Whenever possible, each provision of this Note shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note shall be prohibited by or invalid under such
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note.
5.7 TIME OF THE ESSENCE. BORROWER AGREES THAT TIME IS OF THE ESSENCE IN
THE PERFORMANCE OF ALL OBLIGATIONS HEREUNDER.
5.8 CONSENT TO JURISDICTION. BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR GEORGIA STATE COURT
SITTING IN ATLANTA, GEORGIA OF ANY CLAIM, DEMAND, PROCEEDING, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS NOTE, ANY OTHER LOAN DOCUMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF BORROWER AND BANK WITH RESPECT TO THIS NOTE, ANY OTHER LOAN DOCUMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE. BORROWER ACKNOWLEDGES AND AGREES THAT THE WITHIN
CONSENT AND WAIVER ARE MATERIAL INDUCEMENTS TO BANK TO MAKE THE LOAN. BORROWER
HEREBY AGREES THAT SERVICE OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS
WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY COURT IN OR
OF THE STATE OF GEORGIA MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH
PROCESS TO BORROWER IN ACCORDANCE WITH SECTION 5.4 HEREOF.
5.9 USE OF PROCEEDS. The Borrower shall use the proceeds of the Loan
solely to repurchase shares of its outstanding capital stock and to pay
Borrower's costs incurred in connection with the transaction.
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<PAGE> 15
IN WITNESS WHEREOF, this Note has been duly executed under seal in
Atlanta, Georgia on the date first above written.
BORROWER:
THE ENSTAR GROUP, INC.
By: /s/ Nimrod T. Frazer
--------------------------------
Title: Chairman, Pres. & CEO
-----------------------------
[SEAL]
Borrower's Address:
172 Commerce Street - 3rd Floor
-----------------------------------
Montgomery, Alabama 36104
-----------------------------------
Borrower's Tax ID Number:
63-0590560
-----------------------------------
Borrower's facsimile number:
334/834-2530
-----------------------------------
15
<PAGE> 16
EXHIBIT A
Fixed Rate Request
First Union National Bank
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: _________________
Re: Promissory Note dated July __, 1997 (the "Note") from The
Enstar Group, Inc. (the "Borrower"), and First Union National
Bank ("Bank")
Gentlemen:
This Fixed Rate Request is delivered in accordance with Section 2.3 of
the Note. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Note.
Borrower hereby [irrevocably requests] [confirms its irrevocable oral
request] for the following Fixed Rate Portion:
1. Amount of Fixed Rate Portion of Loan: $
[$500,000 MINIMUM; $100,000 MULTIPLES]
2. Effective Date: , 19
3. Such Portion [check one] is is not a continuation of
----- -----
a previous Fixed Rate Portion.
4. The Interest Period is ___ [7, 30, 60 or 90] days.
The Borrower hereby confirms to the Bank that as of the date hereof, no Event of
Default has occurred and is continuing, nor has there occurred any event or
condition that with the passage of time or giving of notice, or both, would
constitute an Event of Default.
Very truly yours,
THE ENSTAR GROUP, INC.
By:
------------------------
Title:
---------------------
16
<PAGE> 1
EXHIBIT 10.2
STOCK PLEDGE AGREEMENT
July 31, 1997
The Enstar Group, Inc. ("Pledgor") and First Union National Bank
("Bank"), agree as follows:
1. DEFINITIONS. Whenever the following terms are used herein,
they shall be defined as follows:
"Agreement" or "this Agreement" shall mean and include all
amendments, modifications and supplements hereto and shall refer to this
Agreement as the same may be in effect at the time such reference becomes
operative.
"Broker" means First Union Brokerage Services, Inc., its
successors and assigns.
"Company" shall mean First Union Corporation, a North Carolina
corporation.
"Collateral" shall mean and include all of the Collateral
Account, all of the Pledged Securities (whether held in or credited to the
Collateral Account or otherwise), together with all proceeds thereof and all
cash, additional securities, all amounts (in whatever form) on deposit or
credited to the Collateral Account, and other property at any time and from time
to time receivable or otherwise distributed in respect of or in exchange for any
or all of such Pledged Securities.
"Collateral Account" shall mean the brokerage account number 5
GA-6713111 established by Pledgor with the Broker.
"Collateral Value" shall mean, as of any date of
determination, the value of the Collateral Account plus the Per Share Price
multiplied by the number of shares of Pledged Securities not held in or credited
to the Collateral Account in which Bank has a perfected first priority security
interest hereunder.
"Commission" shall mean the Securities and Exchange
Commission, or any other Federal agency then administering the Securities Act.
"Event of Default" shall mean any of the events listed in
Section 5(a) of this Agreement.
<PAGE> 2
"Financing Agreements" shall mean this Agreement, the Note and
the other documents, agreements and certificates executed or delivered in
connection herewith.
"Note" shall mean the revolving credit note, dated of even
date herewith, from Pledgor to Bank in the original principal amount of
$5,000,000, as amended, modified, supplemented, restated or renewed from time to
time.
"Per Share Price" shall mean as of any date of determination
(i) the per share closing price of the Company's common stock as of the close of
trading on the national stock exchange on which such stock is then traded on the
business day immediately preceding such determination date or (ii) if such stock
is not so listed for trading on such a national stock exchange, the per share
price of the Company's common stock as determined by Bank in its reasonable
discretion.
"Permitted Liens" shall mean those liens and encumbrances (a)
for taxes not yet due or being properly contested; (b) resulting from deposits
made in the ordinary course of Pledgor's business in connection with workman's
compensation, unemployment insurance, social security and other like laws, but
only if the payment thereof is not at the time required or such claims are being
properly contested; and (c) from attachments, judgments and other similar
non-tax liens arising in connection with court proceedings, but only if and for
so long as the execution or other enforcement of such liens is and continues to
be effectively stayed and bonded on appeal in a manner satisfactory to Bank for
the full amount thereof and the validity and amount of the claims secured
thereby are being properly contested.
"Person" shall mean any individual, corporation, partnership,
limited liability company, association, trust or unincorporated organization, or
a government or any agency or political subdivision thereof.
"Pledged Securities" shall mean and include (i)(a) all of the
shares of common stock of the Company owned by Pledgor and held in or credited
to the Collateral Account, and (b) any shares of common stock of the Company
issued in exchange therefor or constituting dividends thereon, and (ii) any and
all of the issued and outstanding shares of common stock of the Company (other
than those shares described in clause (i)(b) of this definition) hereafter
pledged by the Pledgor to the Bank and in which the Bank obtains a perfected
first priority security interest, including, without limitation, all shares of
common stock of the Company pledged and delivered by Pledgor to the Bank
pursuant to Section 3(M) hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same may from time to time be in effect.
"Securities Laws" shall mean the Securities Act, the
Securities Exchange Act of 1934, as amended, or any similar Federal statute, and
the rules and regulations of the
2
<PAGE> 3
Commission thereunder, together with any and all applicable state blue sky laws,
all as the same may from time to time be in effect.
"Solvent" shall mean, as to Pledgor, that Pledgor (a) has
capital sufficient to carry on its business and transactions and all business
and transactions in which it is about to engage, (b) is able to pay its debts as
they mature and (c) owns property whose fair saleable value is greater than the
amount required to pay its indebtedness and liabilities.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed thereto in the Note.
2. PLEDGE. To induce Bank to make the loan evidenced by the
Note, and in consideration thereof and of any loans, advances or financial
accommodations heretofore or hereafter granted by Bank to or for Pledgor's
account, whether pursuant to the Note or otherwise, all of which will inure to
Pledgor's direct benefit, Pledgor hereby pledges, conveys, hypothecates,
mortgages, assigns, sets over, delivers to Bank and grants to Bank a security
interest in all of the Collateral now or hereafter owned by Pledgor as security
for the payment and performance when due of the Obligations.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING
COLLATERAL. Pledgor hereby represents, warrants and covenants to and with Bank
that:
(A) DUE AUTHORIZATION, ETC. The execution, delivery and
performance of this Agreement, the creation of the liens and security interests
and the delivery to Bank of the certificates evidencing the Pledged Securities
provided for hereunder are within Pledgor's corporate power, have been duly
authorized by all necessary corporate action, are not in contravention of any
provision of Pledgor's articles of incorporation or bylaws or of any law or of
any agreement or indenture by which Pledgor is bound, and do not require the
consent or approval of any government body, agency, authority or other Person,
which has not been obtained and a copy thereof furnished to Bank;
(B) VALID AND BINDING OBLIGATION. This Agreement constitutes
Pledgor's valid and legally binding obligation, enforceable in accordance with
its terms, as such enforceability may be limited by bankruptcy, insolvency,
moratorium and other similar laws affecting creditors' rights generally and by
general principles of equity (whether applied at law or in equity);
(C) TITLE TO COLLATERAL. Pledgor is the legal and equitable
owner of, and has the complete and unconditional authority to pledge, the
Collateral, and holds the same free and clear of all liens, charges,
encumbrances and security interests except those in favor of Bank granted
hereunder and Permitted Liens, and will defend its title thereto against the
claims of all Persons whomsoever;
3
<PAGE> 4
(D) COLLATERAL; RESTRICTIONS ON SALE. None of the Pledged
Securities are subject to any restriction on trading or sale, whether pursuant
to any agreement to which Pledgor is a party, under Securities Laws or
otherwise;
(E) SOLVENCY. Giving effect to the execution and delivery of
the Loan Documents and the making of the Loan, Pledgor is Solvent;
(F) PLEDGE OF PLEDGED SECURITIES. Upon execution and delivery
of this Agreement, Pledgor shall deliver to Bank certificates, if any,
evidencing all Pledged Securities included in the Collateral, accompanied by
executed stock powers in blank and by irrevocable proxies with respect to the
Pledged Securities in favor of Bank, the rights of Bank under which shall be
exercisable only upon the occurrence of an Event of Default and in accordance
with the terms of this Agreement;
(G) PLEDGE OF ADDITIONAL SECURITIES AND PROPERTY. Except as
provided in Section 4(a) hereof, Pledgor will cause any additional Pledged
Securities or property issued to or received by it with respect to any of the
Collateral, and any certificates evidencing the Company's common stock issued in
exchange for such Pledged Securities, whether for value paid by it or otherwise,
to be forthwith deposited and pledged with Bank, in each case accompanied by
instruments of assignment duly executed in blank by Pledgor substantially the
same as those required by subsection (F);
(H) NO LIENS OR SECURITY INTERESTS. Pledgor will not permit
any lien, claim, charge, security interest or encumbrance to exist with respect
to the Collateral, other than those in favor of Bank with respect to the
Collateral and Permitted Liens;
(I) DISPOSITION OF COLLATERAL OR RETAINED SECURITIES. Pledgor
will not sell, exchange, hypothecate, pledge, assign, convey, mortgage or
abandon any Collateral;
(J) PAYMENT OF TAXES AND CHARGES. Pledgor will pay all taxes,
assessments and charges levied, assessed or imposed upon the Collateral before
the same become delinquent or become liens upon any of the Collateral except
where the same may be contested in good faith by appropriate proceedings and as
to which adequate reserves have been provided;
(K) BANK'S RIGHT TO TAKE ACTION. In the event that Pledgor
fails or refuses to perform any of its obligations set forth herein, Bank shall
have the right, without obligation, to discharge the same, and any sums paid by
Bank, or the cost thereof, including without limitation, reasonable attorneys'
fees actually incurred by Bank, shall constitute secured Obligations and bear
interest until paid;
(L) NO OBLIGATION BY BANK. Pledgor acknowledges and agrees
that nothing contained herein shall obligate Bank or impose a duty upon Bank to
assume any duties or obligations of Pledgor with respect to any of the
Collateral;
4
<PAGE> 5
(M) COLLATERAL VALUE; RELEASE OF PLEDGED STOCK. (i) Pledgor
covenants and agrees that the outstanding principal amount of the Loan shall at
no time be greater than 80% of the Collateral Value; and (ii) if at any time and
from time to time after the date hereof, the outstanding principal amount of the
Loan exceeds 80% of the Collateral Value, the Pledgor shall, within five (5)
days of such date, either repay the principal of the Loan in such amount, or
deliver to Bank additional shares of common stock of the Company constituting
Pledged Securities (whether in certificated form or deposited in or credited to
the Collateral Account) with such Value, so that the outstanding principal
balance of the Loan after such repayment or delivery of Pledged Securities does
not exceed 80% of the Collateral Value; nothing herein shall be construed as
limiting Pledgor's right to withdraw Collateral from the Collateral Account as
long as (i) no Default or Event of Default exists and (ii) immediately upon such
withdrawal, the outstanding principal balance of the Loan does not exceed 80% of
the Collateral Value.
(N) FINANCIAL STATEMENTS. Pledgor shall furnish or cause to
be furnished to Bank:
(i) As soon as available and in any event within 10 days of
the filing thereof, copies of any reports or filings (including Borrower's Form
10-Q and Form 10-K) required to be made with the Commission;
(ii) Together with the Form 10-Q and Form 10-K referred to in
clause (i) above, a certificate of the chief executive officer and chief
financial officer of Pledgor certifying that, to the best of their knowledge, no
Event of Default has occurred and is continuing or, if an Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
which is proposed to be taken with respect thereto;
(iii) As soon as available and in any event within 10 days of
incurring the same, notice of any borrowing of $1,000,000 or more or any
guaranty of any Person's borrowing of $1,000,000 or more, and promptly upon
request of the Bank for the same, the loan documents evidencing any such loan
(and guaranty, if applicable);
(iv) Promptly upon the request of Bank, such other
information respecting the business, property, assets, operations or condition,
financial or otherwise, of Pledgor as Bank may from time to time reasonably
request.
(O) REPORTS. Pledgor hereby instructs Broker, Bank and any
other person authorized to report income distributions, to issue IRS Form 1099
indicating Pledgor as the recipient of such income, earnings and profits.
(P) NO TRADING ON ACCOUNT. Pledgor may not sell, trade or
otherwise exercise rights with respect to the securities in the Collateral
Account or receive any other distributions from the Collateral Account (except
as permitted in Section 4 hereof) without the
5
<PAGE> 6
prior written consent of the Bank; nothing herein shall be construed as limiting
Pledgor's right to withdraw Collateral from the Collateral Account as long as
(i) no Default or Event of Default exists and (ii) immediately upon such
withdrawal, the outstanding principal balance of the Loan does not exceed 80% of
the Collateral Value. Such consent, if any, shall be in the Bank's sole
discretion.
(Q) ACKNOWLEDGMENT. Pledgor authorizes and directs the Broker
to comply with the terms of this Agreement, to mark its records with a notation
showing the security interest of the Bank in the Collateral Account and to
provide account statements to the Bank, in addition to Pledgor, to the address
provided herein.
4. DIVIDENDS; ETC.
(A) RIGHT TO RECEIVE DIVIDENDS, ETC. For so long as no Event
of Default exists hereunder, Pledgor shall have the right to receive cash
dividends declared and paid by the Company with respect to the Collateral. Any
and all stock or liquidating dividends, other distributions in property, returns
of capital or other distributions made on or in respect of Collateral, whether
resulting from a subdivision, combination or reclassification of the outstanding
capital stock of the Company, received in exchange for the Collateral or any
part thereof or received as a result of any merger, consolidation, acquisition
or other exchange of assets to which the Company may be a party or otherwise,
shall be and become part of the Collateral pledged hereunder and, if received by
Pledgor, shall forthwith be delivered to Bank, to be held subject to the terms
of this Agreement.
(B) POSSESSION OF THE COLLATERAL, ETC. Bank may hold any of
the Collateral, endorsed or assigned in blank, and may deliver any of the
Collateral to the Company or its stock transfer agent for the purpose of making
denominational exchanges or registrations or transfers in accordance with this
Agreement, including, without limitation, Section 3(N) hereof.
(C) TERMINATION OF RIGHT TO RECEIVE DIVIDENDS. Upon the
occurrence of any Event of Default, all of Pledgor's rights to receive any cash
dividends pursuant to Section 4(a) hereof shall cease, and all such rights shall
thereupon become vested in Bank, who shall have the sole and exclusive right to
receive and retain the dividends which Pledgor would otherwise be authorized to
receive and retain pursuant to Section 4(a) hereof. In such event, Pledgor shall
pay over to Bank any dividends received by Pledgor with respect to the
Collateral and any and all money and other property paid over to or received by
Bank, pursuant to the provisions of this Section 4(c) shall be retained by Bank
as Collateral hereunder and shall be applied in accordance with the provisions
hereof.
5. EVENTS OF DEFAULT; REMEDIES.
6
<PAGE> 7
(A) DEFAULT. Each of the following shall constitute an Event
of Default hereunder:
(i) if there shall occur any "Event of Default"
under the Note, as such term is defined therein; or
(ii) if any of the Collateral shall be attached or
levied upon or seized in any legal proceedings, or held by virtue
of any lien or distress (and notwithstanding anything in the Note
to the contrary, no cure period shall be applicable to such
default, but Permitted Liens that do not have priority over the
Bank's security interest in the Collateral shall not be deemed an
Event of Default hereunder).
(B) BANK'S RIGHTS AND REMEDIES. Upon the occurrence of an
Event of Default and during the continuance thereof:
(i) Bank shall thereupon have, in addition to all
other rights provided herein and in the Note and the other
Financing Agreements, the rights and remedies of a secured party
under the Uniform Commercial Code of the State of Georgia or other
applicable law and further, Bank may, without demand and without
advertisement, notice or legal process of any kind (except as may
be required by law), all of which Pledgor waives, at any time or
times (A) apply any cash dividends received by Bank pursuant to
Section 4(c) hereof to the Obligations and (B) if following such
application there remains outstanding any of the Obligations, sell
the remaining Collateral, or any part thereof, at public or
private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery as Bank
shall deem appropriate. Bank shall be authorized at any such sale
(if, on the advice of counsel, it deems it advisable to do so) to
restrict the prospective bidders, or purchasers to Persons who
will represent and agree that they are purchasing the Collateral
for their own account for investment and not with a view to the
distribution or resale thereof, and upon consummation of any such
sale Bank shall have the right to assign, transfer and deliver to
the purchaser or purchasers thereof the Collateral so sold. Each
such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on Pledgor's part, and
Pledgor hereby waives (to the extent permitted by law) all rights
of redemption, stay and/or appraisal which Pledgor now has or may
have at any time in the future under any rule of law or statute
now existing or hereafter enacted. Further, Bank shall have the
right to transfer the Pledged Securities to itself and to exercise
its rights to vote under the irrevocable proxies granted to it
pursuant to Section 3(F) hereof.
(ii) Bank agrees to give written notice to Pledgor
in the manner specified in Section 9(1) hereof not less than ten
(10) days prior to the
7
<PAGE> 8
date of the disposition of the Collateral subject to the security
interest created herein at any such public sale or sale at any broker's
board or on any such securities exchange, or prior to the date after
which private sale or any other disposition of said Collateral will be
made, and Pledgor agrees that (A) such notice, if given in such manner,
shall constitute reasonable notice, but notice given in any other
reasonable manner or at any other reasonable time shall be sufficient;
and (B) the proceeds of any such sale or disposition shall be applied
first to the satisfaction of Bank's reasonable attorneys' fees, legal
expenses, and other costs and expenses actually incurred in connection
with the taking, retaking, holding, preparing for sale, and selling of
the Collateral, and second to the payment (in whatever order Bank
elects) of the Obligations. After the application of all such proceeds,
Bank will return any excess to Pledgor and Pledgor shall remain liable
for any deficiency.
6. POWER OF ATTORNEY. Pledgor appoints Bank, or any other Person whom
Bank may designate, as Pledgor's attorney, with power to endorse Pledgor's name
on any checks, notes, acceptances, money orders, drafts or other form of payment
or security that may come into Bank's possession and to do all things necessary
to carry out this Agreement. Pledgor ratifies and approves all acts of such
attorney. Neither Bank nor any other Person designated by Bank as attorney
hereunder will be liable for any acts or omissions except in the case of wilful
misconduct or gross negligence on the part of Bank, nor for any errors of
judgment or mistakes of fact or law. This power, coupled with an interest, is
irrevocable until the payment in full of the Note pursuant to the terms thereof
and the satisfaction in full of the Obligations.
7. TERMINATION OF AGREEMENT. This Agreement shall continue in full
force and effect until the repayment in full of the Note pursuant to the terms
thereof and the satisfaction in full of the Obligations. Upon termination of
this Agreement, Bank shall surrender to Pledgor or other Person legally entitled
thereto, without recourse or warranty, all certificates evidencing and stock
powers in respect of the securities included in the Collateral which are in the
possession of Bank and have not been disposed of pursuant to Section 5(b)
hereof.
8. WAIVERS; AMENDMENTS; SUCCESSORS AND ASSIGNS.
(A) WAIVER OF PRESENTMENT AND NOTICE. Pledgor waives presentment and
protest of any instrument and notice thereof, notice of default and all other
notices to which Pledgor might otherwise be entitled, except as otherwise
specifically provided herein.
(B) WAIVER OF FAILURE OR DELAY. Failure by Bank to exercise any
right, remedy or option under this Agreement or in any other agreement between
the parties hereto, or delay by Bank in exercising the same, will not operate as
a waiver.
(C) WRITTEN WAIVERS, ETC. No waiver by Bank will be effective unless
it is in a writing signed by Bank, and then only to the extent specifically
stated, and no waiver by
8
<PAGE> 9
Bank on any occasion shall affect or diminish Bank's right thereafter to require
strict performance by Pledgor with any provision of this Agreement.
(D) REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement will be cumulative and not exclusive of any other right or remedy
which Bank may have.
(E) NO ORAL AMENDMENTS. This Agreement cannot be changed or
terminated orally.
(F) RIGHT TO ASSIGN. Bank shall have the right to assign this
Agreement and to transfer, assign or sell participations in its interests
hereunder from time to time in connection with any sale, assignment, transfer or
other disposition of the Note or any portion thereof, but Pledgor shall not be
permitted to assign this Agreement or any interest herein.
(G) SUCCESSORS AND ASSIGNS. All of the rights, privileges, remedies
and options given to Bank hereunder shall inure to the benefit of its successors
and assigns; and all the terms, conditions, promises, covenants, provisions and
warranties of this Agreement shall inure to the benefit of and shall bind the
representatives, successors and assigns of Bank and Pledgor.
9. GENERAL PROVISIONS.
(A) FURTHER ACTS, ETC. Pledgor agrees to do such further acts and
things, and to execute and deliver such additional conveyances, assignments,
agreements and instruments, as Bank may at any time request in connection with
the administration and enforcement of this Agreement or relative to the
Collateral or any part thereof or in order better to assure and confirm unto
Bank its rights and remedies hereunder, including, without limitation,
performing all acts and doing all things which Bank may request, now or
hereafter, to evidence, preserve or protect the creation, attachment or
perfection of the security interests herein granted to Bank.
(B) SECTION HEADINGS. Section headings used herein are for
convenience only and are not to affect the construction of or be taken into
consideration in interpreting this Agreement.
(C) SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(D) REIMBURSEMENT OF EXPENSES. Pledgor shall reimburse Bank for all
of Bank's expenses (other than Bank's normal overhead) incurred in connection
with the
9
<PAGE> 10
development, preparation, execution, delivery, modification, regular review and
continuing administration of this Agreement, including searches, filings, filing
fees and taxes (other than taxes on the Bank's income) and the fees and
disbursements of Bank's attorneys (including, without limitation, counsel who
are employees of Bank), and all costs and expenses incurred by Bank (including
reasonable attorney's fees and disbursements actually incurred) to: (i)
commence, defend or intervene in any court proceeding relating to the Collateral
or this Agreement; (ii) file a petition, complaint, answer, motion or other
pleadings, or to take any other action in or with respect to any suit or
proceeding (bankruptcy or otherwise) relating to the Collateral or this
Agreement; (iii) protect, collect, sell, take possession of or liquidate any of
the Collateral; (iv) attempt to enforce any security interest in any of the
Collateral or to seek any advice with respect to such enforcement; and (v)
enforce any of Bank's rights to collect any of the Obligations.
(E) PAYMENT OF TAXES. If Pledgor fails to pay any taxes,
assessments or governmental charges levied or assessed or imposed upon or with
respect to the Collateral, or otherwise fails to pay any amount necessary for
the protection and preservation of the Collateral securing the Obligations, Bank
may (unless Pledgor is properly contesting the same) pay the same at Bank's
option, together with interest and penalty, and the amounts so paid shall be
added to the Obligations, bearing interest until paid at the highest rate for
the Obligations specified in the Note, and be secured by the Collateral.
(F) CHOICE OF LAW. This Agreement shall be deemed to be a
contract made under the laws of the State of Georgia for all purposes, and the
validity of this Agreement and of all transactions provided for herein shall be
governed by, interpreted and construed under, and in accordance with, the
internal laws (and not the law of conflicts) of the State of Georgia.
(G) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Pledgor
covenants, warrants and represents to Bank that all of Pledgor's representations
and warranties contained in this Agreement shall be true at the time of
Pledgor's execution of this Agreement, shall survive the execution, delivery and
acceptance thereof by the parties hereto and the closing of the transactions
described herein or related hereto, and (except to the extent that they shall be
untrue solely as a result of transactions permitted by this Agreement or the
Note or otherwise consented to by Bank) shall be true from the time of Pledgor's
execution of this Agreement until the termination of this Agreement as provided
in Section 7 hereof.
(H) SURVIVAL OF RIGHTS, DUTIES, ETC. Pledgor's representations
and warranties and any indemnity, expense or fee reimbursement obligations
hereunder and under the other Loan Documents shall survive the repayment of the
Loan and the termination of this Agreement and the other Loan Documents;
provided, however, any claim by Bank for any breach of any such representation
or warranty or for payment under any such indemnity, expense or fee
reimbursement obligation must be brought within 180 days of the repayment of the
Loan and the termination of this Agreement and the other Loan Documents.
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<PAGE> 11
(I) BANK'S RIGHT TO TAKE ACTION WITH RESPECT TO COLLATERAL. As
between Bank and Pledgor, Bank may, in its sole discretion, (i) exchange,
enforce, waive or release any security or portion of the Collateral, (ii) apply
such Collateral or any proceeds of the Collateral and direct the order or manner
of sale thereof as Bank may, from time to time, determine, and (iii) settle,
compromise, collect or otherwise liquidate any such Collateral for the
Obligations in any manner following the occurrence of an Event of Default and
during the continuance thereof without affecting or impairing Bank's right to
take any other further action with respect to any security for the Obligations
or any part thereof.
(J) PAYMENTS. Bank shall have the continuing and exclusive
right to apply or reverse and reapply any and all payments to any portion of the
Obligations as provided in the Note. To the extent that Pledgor makes a payment
or payments to Bank or Bank receives any payment or proceeds of the Collateral
for Pledgor's account, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the Obligations or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by such Bank.
(K) LEGAL REMEDY INADEQUATE. Pledgor recognizes that, in the
event Pledgor fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy of law may prove to be inadequate
relief to Bank; therefore, Pledgor agrees that Bank, if Bank so requests, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
(L) NOTICES. All notices and other communications from either
party to the others hereunder shall be given in accordance with Section 5.4 of
the Note.
(M) INDEMNITY. Pledgor agrees to indemnify Bank from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (including, without limitation, reasonable fees and
disbursements of counsel actually incurred) which may be imposed on, incurred
by, or asserted against Bank in any litigation, proceeding or investigation,
including, without limitation, any of the foregoing brought under any federal or
state securities laws, which is threatened, instituted or conducted by any
government agency or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement, whether or not Bank is a party thereto except to the
extent that any of the foregoing arises out of the wilful misconduct or gross
negligence of the Bank.
(N) COLLATERAL AGENT. The parties acknowledge and agree that
the Broker shall act as Bank's agent for purposes of possession and perfection
of Bank's security interest in the Collateral Account and all Collateral
deposited in or credited to the Collateral Account.
11
<PAGE> 12
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE ENSTAR GROUP, INC.
By: /s/ Nimrod T. Frazer
-------------------------------------
Title: Chairman, Pres. & CEO
----------------------------------
Address: 172 Commerce Street - 3rd Floor
--------------------------------
Montgomery, Alabama 36104
--------------------------------
--------------------------------
FIRST UNION NATIONAL BANK
By: /s/ Richard Davis
-------------------------------------
Title: Vice President
----------------------------------
Address: 999 Peachtree Street, N.E.
Atlanta, Georgia 30309
12
<PAGE> 13
Acknowledged and agreed to this 31st day of July, 1997.
FIRST UNION BROKERAGE
SERVICES, INC.
By: /s/ Patrick Rice
----------------------------------------
Title: Vice President/Investment Counselor
-------------------------------------
Address: 999 Peachtree Street, N.E.
Atlanta, Georgia 30309
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED FINANCIAL STATEMENTS CONTAINED IN ITS REPORT ON FORM 10-Q
FOR THE PERIOD ENDING JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 711<F1>
<SECURITIES> 82,755
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 83,433
<PP&E> 94
<DEPRECIATION> 52
<TOTAL-ASSETS> 83,575
<CURRENT-LIABILITIES> 18,464
<BONDS> 0
0
0
<COMMON> 45
<OTHER-SE> 62,907
<TOTAL-LIABILITY-AND-EQUITY> 83,575
<SALES> 0
<TOTAL-REVENUES> 1,054
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,382
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 651
<INCOME-PRETAX> (979)
<INCOME-TAX> 0
<INCOME-CONTINUING> (979)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (979)
<EPS-PRIMARY> (0.42)
<EPS-DILUTED> (0.42)
<FN>
<F1>NOTE 1: INCLUDES CASH EQUIVALENTS
</FN>
</TABLE>
