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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to________
Commission file number 0-5423
DYCOM INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1277135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4440 PGA Boulevard, Suite 600
Palm Beach Gardens, Florida 33410
(Address of principal executive office) (Zip Code)
(561) 627-7171
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of June 5, 1998
_____ __________________________________
Common Stock, par value $0.33 1/3 14,703,826
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DYCOM INDUSTRIES, INC.
INDEX
Page No.
________
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
April 30, 1998 and July 31, 1997 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
April 30, 1998 and 1997 4
Condensed Consolidated Statements of
Operations for the Nine Months Ended
April 30, 1998 and 1997 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
April 30, 1998 and 1997 6-7
Notes to Condensed Consolidated
Financial Statements 8-16
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 17-22
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 23-24
SIGNATURES 25
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 30, July 31,
ASSETS 1998 1997
CURRENT ASSETS:
Cash and equivalents $ 29,025,332 $ 5,276,112
Accounts receivable, net 54,777,186 49,526,678
Costs and estimated earnings in
excess of billings 18,514,948 11,398,621
Deferred tax assets, net 2,133,612 2,168,763
Other current assets 2,213,242 1,966,538
Total current assets 106,664,320 70,336,712
PROPERTY AND EQUIPMENT, net 42,161,455 36,336,212
OTHER ASSETS:
Intangible assets, net 4,568,043 4,684,358
Deferred tax assets 424,205
Other 412,907 730,394
Total other assets 4,980,950 5,838,957
TOTAL $153,806,725 $112,511,881
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 13,585,504 $ 14,724,340
Notes payable 8,101,813 17,719,780
Billings in excess of costs and
estimated earnings 470,940
Accrued self-insured claims 1,777,803 2,011,622
Income taxes payable 1,665,331 1,228,648
Other accrued liabilities 13,798,734 13,278,712
Total current liabilities 38,929,185 49,434,042
NOTES PAYABLE 14,716,859 13,588,022
ACCRUED SELF-INSURED CLAIMS 6,550,569 6,418,400
OTHER LIABILITIES 2,477,931 644,625
Total liabilities 62,674,544 70,085,089
COMMITMENTS AND CONTINGENCIES, Note 10
STOCKHOLDERS' EQUITY:
Common stock, par value $.33 1/3 per share:
50,000,000 shares authorized; 14,688,516
and 12,667,877 shares issued and
outstanding, respectively 4,896,172 4,222,625
Additional paid-in capital 62,349,847 25,670,666
Retained earnings 23,886,162 12,533,501
Total stockholders' equity 91,132,181 42,426,792
TOTAL $153,806,725 $112,511,881
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
April 30, April 30,
1998 1997
REVENUES:
Contract revenues earned $95,928,640 $80,487,870
Other, net 944,186 321,514
Total 96,872,826 80,809,384
Expenses:
Costs of earned revenues
excluding depreciation 73,659,560 63,415,602
General and administrative 10,824,214 8,402,788
Depreciation and amortization 3,581,895 2,917,444
Total 88,065,669 74,735,834
INCOME BEFORE INCOME TAXES 8,807,157 6,073,550
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 3,178,535 2,122,848
Deferred 285,617 (240,843)
Total 3,464,152 1,882,005
NET INCOME $ 5,343,005 $ 4,191,545
EARNINGS PER COMMON SHARE:
Basic $0.36 $0.33
Diluted $0.36 $0.33
PRO FORMA NET INCOME AND EARNINGS
PER COMMON SHARE DATA:
Income before income taxes $ 8,807,157 $ 6,073,550
Pro forma provision for
income taxes 3,374,916 2,444,567
PRO FORMA NET INCOME $ 5,432,241 $ 3,628,983
PRO FORMA EARNINGS PER COMMON SHARE:
Basic $0.37 $0.29
Diluted $0.36 $0.28
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine Months Ended
April 30, April 30,
1998 1997
REVENUES:
Contract revenues earned $267,741,732 $224,080,990
Other, net 2,028,090 737,390
Total 269,769,822 224,818,380
Expenses:
Costs of earned revenues
excluding depreciation 208,616,434 179,110,073
General and administrative 26,785,971 22,012,855
Depreciation and amortization 9,905,266 8,530,528
Total 245,307,671 209,653,456
INCOME BEFORE INCOME TAXES 24,462,151 15,164,924
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 8,056,132 5,934,498
Deferred 459,356 (933,412)
Total 8,515,488 5,001,086
NET INCOME $ 15,946,663 $ 10,163,838
EARNINGS PER COMMON SHARE:
Basic $1.15 $0.81
Diluted $1.13 $0.80
PRO FORMA NET INCOME AND EARNINGS
PER COMMON SHARE DATA:
Income before income taxes $ 24,462,151 $ 15,164,924
Pro forma provision for
income taxes 9,889,748 6,153,002
PRO FORMA NET INCOME $ 14,572,403 $ 9,011,922
PRO FORMA EARNINGS PER COMMON SHARE:
Basic $1.05 $0.72
Diluted $1.03 $0.71
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
April 30, April 30,
1998 1997
Increase (Decrease) in Cash and Equivalents from:
OPERATING ACTIVITIES:
Net income $ 15,946,663 $ 10,163,838
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 9,905,266 8,530,528
(Gain) on disposal of assets (398,797) (325,018)
Deferred income taxes 459,356 (933,412)
Changes in assets and liabilities:
Accounts receivable, net (5,250,508) (16,047,502)
Unbilled revenues, net (7,587,267) (4,510,580)
Other current assets (246,704) (326,469)
Other assets 317,487 (140,599)
Accounts payable (1,138,836) 7,661,116
Accrued self-insured claims and
other liabilities 2,251,678 969,504
Accrued income taxes 631,166 1,427,971
Net cash inflow from operating activities 14,889,504 6,469,377
INVESTING ACTIVITIES:
Capital expenditures (16,751,282) (12,330,015)
Proceeds from sale of assets 1,535,885 1,638,858
Net cash outflow from investing activities (15,215,397) (10,691,157)
FINANCING ACTIVITIES:
Borrowings on notes payable
and bank lines-of-credit 14,398,865 22,665,472
Principal payments on notes payable
and bank lines-of-credit (22,887,995) (17,182,018)
Exercise of stock options 199,627 597,146
Distributions to shareholders of pooled
companies (4,594,002) (1,968,282)
Proceeds from stock offering 36,958,618
Net cash inflow from financing activities 24,075,113 4,112,318
NET CASH INFLOW (OUTFLOW) FROM ALL ACTIVITIES 23,749,220 (109,462)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 5,276,112 3,060,069
CASH AND EQUIVALENTS AT END OF PERIOD $ 29,025,332 $ 2,950,607
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
For the Nine Months Ended
April 30, April 30,
1998 1997
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest $ 1,645,539 $ 1,989,747
Income taxes 7,488,328 5,159,627
Property and equipment acquired and
financed with:
Capital lease obligation $ 601,024
Income tax benefit related to incentive
stock options exercised $ 194,483 $ 132,569
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Unaudited
1. The accompanying condensed consolidated balance sheets of Dycom
Industries, Inc. ("Dycom" or the "Company") as of April 30, 1998 and July 31,
1997, and the related condensed consolidated statements of operations for the
three and nine months ended April 30, 1998 and 1997 and the condensed
consolidated statements of cash flows for the nine months ended April 30,
1998 and 1997 reflect all normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of such statements.
The results of operations for the nine months ended April 30, 1998 are not
necessarily indicative of the results which may be expected for the entire
year.
Prior to the acquisition by Dycom, Cable Com Inc. ("CCI") and Installation
Technicians, Inc. ("ITI") elected under Subchapter S of the Internal Revenue
Code to have the stockholders recognize their proportionate share of CCI's
and ITI's taxable income on their personal tax returns in lieu of paying
corporate income tax. The pro forma net income and earnings per common share
reflected on the Condensed Consolidated Statements of Operations reflects a
provision for current and deferred income taxes for all periods presented as
if the corporations were included in Dycom's federal and state income tax
returns. At April 6, 1998, the consumation date of the acquisition, CCI and
ITI recorded deferred taxes on the temporary differences between the
financial reporting basis and the tax basis of their assets and liabilities.
See Note 4.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION-- The condensed consolidated financial statements
are unaudited. These statements include Dycom Industries, Inc. and its
subsidiaries, all of which are wholly owned. On July 29, 1997,
Communications Construction Group, Inc. ("CCG") was acquired by the Company
through an exchange of common stock. On April 6, 1998, CCI and ITI were
acquired by the Company through an exchange of common stock. These
acquisitions were accounted for as pooling of interests. Accordingly, the
Company's condensed consolidated financial statements include the results of
CCG, CCI and ITI for all periods presented. See Note 4.
The Company's operations consist primarily of engineering, construction and
maintenance services provided to the telecommunications industry as well as,
underground utility locating services and maintenance and construction services
provided to the electric utility industry. All material intercompany
accounts and transactions have been eliminated.
USE OF ESTIMATES-- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates and such differences may be material to the financial statements.
Estimates are used in the Company's revenue recognition of work-in-process,
allowance for doubtful accounts, self-insured claims liability, deferred tax
asset valuation allowance, depreciation and amortization, and in the
estimated lives of assets, including intangibles.
REVENUE-- Income on long-term contracts is recognized on the percentage-of-
completion method based primarily on the ratio of contract costs incurred to
date to total estimated contract costs. As some of these contracts extend
over one or more years,
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revisions in cost and profit estimates during the course of the work are
reflected in the accounting period as the facts that require the revision
become known. At the time a loss on a contract becomes known, the entire
amount of the estimated ultimate loss is accrued. Income on short-term unit
contracts is recognized as the related work is completed. Work-in-process on
unit contracts is based on management's estimate of work performed but not
billed.
"Costs and estimated earnings in excess of billings" represents the excess of
contract revenues recognized under the percentage-of-completion method of
accounting for long-term contracts and work-in-process on unit contracts over
billings to date. For those contracts in which billings exceed contract
revenues recognized to date, such excesses are included in the caption
"billings in excess of costs and estimated earnings".
CASH AND EQUIVALENTS-- Cash and equivalents include cash balances on deposit
in banks, overnight repurchase agreements, certificates of deposit,
commercial paper, and various other financial instruments having a maturity
of three months or less. For purposes of the condensed consolidated
statements of cash flows, the Company considers these amounts to be cash
equivalents. The carrying amount reported in the condensed consolidated
balance sheets for cash and equivalents approximates fair value.
PROPERTY AND EQUIPMENT-- Property and equipment is stated at cost, reduced
in certain cases by valuation reserves. Depreciation and amortization is
computed over the estimated useful life of the assets utilizing the
straight-line method. The estimated useful service lives of the assets are:
buildings--20-31 years; leasehold improvements--the term of the respective
lease or the estimated useful life of the improvements, whichever is shorter;
vehicles--3-7 years; equipment and machinery--2-10 years; and furniture and
fixtures--3-10 years. Maintenance and repairs are expensed as incurred;
expenditures that enhance the value of the property or extend its useful life
are capitalized. When assets are sold or retired, the cost and related
accumulated depreciation are removed from the accounts and the resulting
gain or loss is included in income.
INTANGIBLE ASSETS-- The excess of the purchase price over the fair market
value of the tangible net assets of acquired businesses (goodwill) is
amortized on a straight-line basis over 40 years. The appropriateness of the
carrying value of goodwill is reviewed periodically by the Company at the
subsidiary level. An impairment loss is recognized when the projected future
cash flows is less than the carrying value of goodwill. No impairment loss
has been recognized in the periods presented.
Amortization expense was $116,315 for each of the nine-month periods ended
April 30, 1998 and 1997. The intangible assets are net of accumulated
amortization of $1,267,673 at April 30, 1998 and $1,151,358 at July 31, 1997.
SELF-INSURED CLAIMS LIABILITY-- The Company is primarily self-insured, up to
certain limits, for automobile and general liability, workers' compensation,'
and employee group health claims. A liability for unpaid claims and the
associated claim expenses, including incurred but not reported losses, is
actuarially determined and reflected in the condensed consolidated financial
statements as an accrued liability. The self-insured claims liability
includes incurred but not reported losses of $4,836,000 and $4,429,000 at
April 30, 1998 and July 31, 1997, respectively. The determination of such
claims and expenses and the appropriateness of the related liability is
continually reviewed and updated.
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INCOME TAXES-- The Company and its subsidiaries, except for CCI and ITI,
file a consolidated federal income tax return. CCI and ITI will be included
in the Company's federal and state income tax returns effective April 6,
1998. Deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the Company's
assets and liabilities.
A valuation allowance is provided when it is more likely than not that some
portion of the Company's deferred tax assets will not be realized. The
valuation allowance recorded in the condensed consolidated financial
statements reduces deferred tax assets to an amount that represents
management's best estimate of the amount of deferred tax assets that more
likely than not will be realized. Management's estimate and conclusion is
based on the available evidence supporting the reversing deductible temporary
differences being offset by reversing taxable temporary differences and the
existence of sufficient taxable income within the current carryback periods.
Accordingly, at April 30, 1998 and July 31, 1997, deferred tax assets are net
of a valuation allowance of $239,644 and $475,185, respectively.
PER SHARE DATA--Earnings per common share-basic is computed using the weighted
average common shares outstanding during the period. Earnings per common
share-diluted is computed using the weighted average common shares
outstanding during the period and the dilutive effect of common stock
options, using the treasury stock method. See Note 3.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS--In June 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 130 "Reporting Comprehensive Income" which establishes
standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. This statement requires that an enterprise
classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position. This statement is
effective for fiscal years beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes the standards for related disclosures
about products and services, geographic areas, and major customers. This
statement requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. The
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. Operating segments are components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. This statement is effective for
financial statements for periods beginning after December 15, 1997.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pension and Other Postretirement Benefits", which revises certain disclosures
about pension and other postretirement benefit plans. This statement does
not change the measurement and recognition methods for pensions or
postretirement benefit costs reported in financial statements. This
statement is effective for fiscal years beginning after December 15, 1997.
<PAGE> 11
Management is currently evaluating the requirements and related disclosures
of SFAS No. 130, 131, and 132, respectively.
3. ACCOUNTING CHANGE
In February 1997, the FASB issued SFAS No. 128 "Earnings per Share" which
changes the method of calculating earnings per share and was effective for
the Company in the quarter ended January 31, 1998. All periods presented
have been restated in accordance with the provisions of SFAS No. 128.
The following is a reconciliation of the numerators and denominators of the
basic and diluted per share computation as required by SFAS No. 128. Pro
forma earnings per common share is presented as described in Note 1.
For the Three Months Ended For the Nine Months Ended
April 30, April 30, April 30, April 30,
1998 1997 1998 1997
Net income available
to common stockholders
(numerator) $ 5,343,005 $ 4,191,545 $15,946,663 $10,163,838
Weighted-average
number of common
shares (denominator) 14,686,164 12,601,243 13,914,942 12,550,644
Earnings per common
share - basic $0.36 $0.33 $1.15 $0.81
Weighted-average
number of common
shares 14,686,164 12,601,243 13,914,942 12,550,644
Potential common
stock arising from
stock options 210,340 144,170 195,824 191,094
Total shares
(denominator) 14,896,504 12,745,413 14,110,766 12,741,738
Earnings per common
share - diluted $0.36 $0.33 $1.13 $0.80
Pro forma net income
available to common
stockholders
(numerator) $ 5,432,241 $ 3,628,983 $14,572,403 $ 9,011,922
Pro Forma Earnings
Per Share Data:
Basic $0.37 $0.29 $1.05 $0.72
Diluted $0.36 $0.28 $1.03 $0.71
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4. ACQUISITIONS
On July 29, 1997, the Company consummated the CCG acquisition. The Company
issued 2,053,242 shares of common stock in exchange for all the outstanding
capital stock of CCG. Dycom has accounted for the acquisition as a pooling
of interests and, accordingly, the Company's historical condensed financial
statements include the results of CCG for all periods presented.
Prior to the acquisition, CCG used a fiscal year ending May 31 and as of July
31, 1997 adopted Dycom's fiscal year. The Company's three and nine months
condensed consolidated statements of operations and cash flows for the period
ended April 30, 1997 combines the three and nine months operations and cash
flows for the period ended February 28, 1997 of CCG.
On April 6, 1998, the Company consummated the CCI and ITI acquisitions. The
Company issued 1.2 million and 600,000 shares of common stock in exchange for
all the outstanding capital stock of CCI and ITI, respectively. Dycom has
accounted for these acquisitions as pooling of interests and, accordingly,
the Company's historical financial statements include the results of CCI and
ITI for all periods presented.
Prior to the acquisitions, CCI and ITI used a normal fiscal year consisting of a
52/53 week time period and as a result of the acquisitions have adopted Dycom's
fiscal year end of July 31. All periods presented reflect the adoption of such
fiscal year end as of the beginning of the period. The combined and separate
Company results of Dycom, CCI, and ITI for the three and nine month periods
ending April 30, 1998 and 1997 are as follows:
DYCOM CCI ITI COMBINED
Three month period ended
April 30, 1998:
Total revenues $ 73,342,964 $16,873,921 $ 6,655,941 $ 96,872,826
Net income $ 3,960,068 $ 1,120,122 $ 262,815 $ 5,343,005
April 30, 1997:
Total revenues $ 63,181,306 $12,666,453 $ 4,961,625 $ 80,809,384
Net income $ 2,818,373 $ 1,020,289 $ 352,883 $ 4,191,545
Nine month period ended
April 30, 1998:
Total revenues $206,759,008 $43,707,727 $19,303,087 $269,769,822
Net income $ 10,722,729 $ 3,831,816 $ 1,392,118 $ 15,946,663
April 30, 1997:
Total revenues $176,871,029 $30,735,189 $17,212,162 $224,818,380
Net income $ 7,368,580 $ 1,360,430 $ 1,434,828 $ 10,163,838
The direct transaction costs resulting from the merger of CCI and ITI were
approximately $0.6 million. These costs, which include filing fees with
regulatory agencies, legal, accounting and other professional costs, were
charged to the combined operations for the quarter ended April 30, 1998.
<PAGE> 13
5. ACCOUNTS RECEIVABLE
Accounts receivable, net consist of the following:
April 30, July 31,
1998 1997
Contract billings $51,390,440 $45,589,232
Retainage 3,975,703 3,652,358
Other receivables 1,428,949 1,314,181
Total 56,795,092 50,555,771
Less allowance for doubtful
accounts 2,017,906 1,029,093
Accounts receivable, net $54,777,186 $49,526,678
6. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
The accompanying condensed consolidated balance sheets include costs and
estimated earnings on contracts in progress, net of progress billings as
follows:
April 30, July 31,
1998 1997
Costs incurred on contracts
in progress $19,393,190 $17,715,762
Estimated earnings thereon 3,814,264 3,319,456
23,207,454 21,035,218
Less billings to date 4,692,506 10,107,537
$18,514,948 $10,927,681
Included in the accompanying
condensed consolidated balance
sheets under the captions:
Costs and estimated earnings
in excess of billings $18,514,948 $11,398,621
Billings in excess of costs
and estimated earnings (470,940)
$18,514,948 $10,927,681
<PAGE> 14
7. PROPERTY AND EQUIPMENT
The accompanying condensed consolidated balance sheets include the following
property and equipment:
April 30, July 31,
1998 1997
Land $ 1,579,028 $ 1,942,247
Buildings 2,352,867 2,346,993
Leasehold improvements 1,519,017 1,463,698
Vehicles 49,956,864 41,522,848
Equipment and machinery 33,687,591 30,721,638
Furniture and fixtures 6,136,457 5,289,975
Total 95,231,824 83,287,399
Less accumulated depreciation and
amortization 53,070,369 46,951,187
Property and equipment, net $42,161,455 $36,336,212
Certain subsidiaries of the Company entered into lease arrangements accounted
for as capitalized leases. The carrying value of capital leases at April 30,
1998 and July 31, 1997 was $842,982 and $1,291,733, respectively, net of
accumulated depreciation of $381,044 and $985,636, respectively. Capital
leases are included as a component of equipment and machinery.
8. NOTES PAYABLE
Notes payable are summarized by type of borrowings as follows:
April 30, July 31,
1998 1997
Bank Credit Agreements:
Revolving credit facility $ 6,365,000 $15,053,484
Term-loan 7,200,000 8,550,000
Equipment term-loans 5,409,226 4,559,937
Capital lease obligations 681,057 1,086,967
Equipment loans 3,163,389 2,057,414
Total 22,818,672 31,307,802
Less current portion 8,101,813 17,719,780
Notes payable--non-current $14,716,859 $13,588,022
On April 29, 1998, the Company signed an amendment to its bank credit agreement,
providing for a total facility of up to $85.0 million. The amended bank credit
facility provides for (i) a $30.0 million revolving working capital facility;
(ii) a $15.0 million standby letter of credit facility; (iii) a $25.0 million
revolving equipment acquisition and small business purchase facility; and
(iv) a $15.0 million five-year term-loan. The revolving working capital
facility, the standby letter of credit facility and the revolving equipment
acquisition and small business purchase facility are available for a two-year
period.
<PAGE> 15
The loans under the revolving working capital facility and the revolving
equipment acquisition and small business purchase facility bear interest, at
the option of the Company, at the prime interest rate minus 1.00% or LIBOR
plus 1.5% and at the prime interest rate minus 0.75% or LIBOR plus 1.75%,
respectively. At April 30, 1998, the interest rates on the outstanding
revolving equipment acquisition and small business purchase facility loans
were at LIBOR options ranging from 7.531% to 7.813%. On November 28, 1997,
the Company repaid the outstanding balance of its previous revolving working
capital facility with proceeds from the public offering of its common stock.
No amounts are outstanding under the amended revolving working capital
facility.
The outstanding principal under the term-loan bears interest at the prime
interest rate minus 0.50% (8.00% at April 30, 1998 and July 31, 1997).
Principal and interest is payable in quarterly installments through April
2003. At April 30, 1998, the outstanding amount under the term-loan was $7.2
million. In May 1998, the outstanding principal under the term-loan was
increased to $15.0 million, in accordance with the terms of the amended bank
credit agreement.
The advances under the revolving equipment acquisition and small business
purchase facility are converted to term-loans with maturities not to exceed
48 months. The outstanding principal on the equipment term-loans is payable
in monthly installments through February 2001. At April 30, 1998, the
outstanding amount owed under the revolving equipment acquisition and small
business purchase facility was $3.7 million.
At April 30, 1998, the Company had outstanding $9.1 million in standby
letters of credit issued to the Company's insurance administrators as part of
its self-insurance program.
The amended bank credit agreement contains restrictions which, among other
things, requires maintenance of certain financial ratios and covenants,
restricts encumbrances of assets and creation of indebtedness, and limits the
payment of cash dividends. Cash dividends are limited to 50% of each fiscal
year's after-tax profits. No cash dividends were paid during the nine-month
period ended April 30, 1998. The amended bank credit facility is secured by
the Company's assets and guaranteed by each of its subsidiaries.
At April 30, 1998, the Company was in compliance with all financial covenants
and conditions under the facility.
The Company's newly acquired subsidiaries, CCI and ITI, have credit facilities
entered into prior to their acquisition by Dycom. CCI has a $5.2 million
revolving credit facility for funding working capital and a $2.0 million term
note used to purchase equipment. The revolving credit facility bears
interest at the bank's prime interest rate and the interest rate on the term
loan is at 8.75%. ITI has a $2.0 million revolving credit facility for
funding working capital and a $0.5 million multiple advance term facility for
equipment acquisitions. The interest rate on the revolving credit facility
and the multiple advance term facility are at the bank's prime interest rate.
The obligations are collateralized by substantially all the companies'
assets. The facilities contain restrictions, which among other things,
require the maintenance of certain financial ratios and covenants and
restricts the payment of cash dividends. At April 30, 1998, CCI and ITI were
in compliance with all covenants and conditions under their respective
facilities.
<PAGE> 16
In addition to the borrowings under the amended bank credit agreement, certain
subsidiaries have outstanding obligations under capital leases and other
equipment financing arrangements. The obligations are payable in monthly
installments expiring at various dates through December 2001.
Interest costs incurred on notes payable, all of which were expensed for
three and nine month periods ended April 30, 1998 and 1997 were $456,513 and
$716,212, respectively and $1,554,358 and $1,817,771, respectively. Such
amounts are included in the general and administrative expenses in the
accompanying condensed consolidated financial statements.
9. STOCK OFFERING
The Company concluded the public offering of 2,700,000 shares of its common
stock on November 4, 1997. The Company offered 1,573,378 shares and selling
shareholders offered 1,126,622 shares at an offering price of $20.00 per
share. The Company received $29,736,844 on November 10, 1997 which is net of
an underwriting discount of $1.10 per share. Additionally, the underwriters
exercised their option to purchase 405,000 shares to cover over-allotments.
The Company received $7,654,500 on November 25, 1997 as payment for the
over-allotments. The total offering proceeds, net of offering expenses of
$432,726, are included in stockholders' equity at January 31, 1998.
On November 28, 1997, the Company repaid the outstanding balance of its
previous revolving working capital facility and will use the balance of the
proceeds to fund the Company's growth strategy, including acquisitions,
working capital and capital expenditures and for other general corporate
purposes.
10. COMMITMENTS AND CONTINGENCIES
In September 1995, the State of New York commenced a sales and use tax audit
of CCG for the years 1989 through 1995. As a result of the audit, certain
additional taxes were paid by CCG in fiscal 1996. In addition, the State of
New York concluded that cable television service providers are subject to New
York State sales taxes for the construction of cable television distribution
systems, and by a Notice dated January 1997, asserted amounts due from CCG
for sales taxes and interest for the periods through August 31, 1995,
aggregating approximately $1.3 million. Any sales taxes asserted against CCG
may be offset by use taxes already paid by the customers of CCG. The Company
intends to vigorously contest the assertion. The Company is unable to
assess the likelihood of any particular outcome at this time or to quantify
the effect a resolution of this matter may have on the Company's consolidated
financial statements.
In the normal course of business, certain subsidiaries of the Company have
pending and unasserted claims. Although the ultimate resolution and
liability of these claims cannot be determined, management believes the final
disposition of these claims will not have a material adverse impact on the
Company's consolidated financial statements.
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated financial condition and results of operations. The discussion
should be read in conjunction with the condensed consolidated financial
statements and notes thereto.
Results of Operations
In April 1998, Dycom completed the CCI and ITI acquisitions in transactions
accounted for as a pooling of interests. CCI provides construction services
to cable television multiple system operators, and ITI provides construction
and engineering services to local and long-distance telephone companies.
Dycom's financial statements and all financial and operating data derived
therefrom have been combined for all periods presented herein to include the
financial condition and results of operations of CCI and ITI.
The following table sets forth, as a percentage of contract revenues earned,
certain items in the Company's Statement of Operations for the periods
indicated:
For the Three Months Ended For the Nine Months Ended
April 30, April 30, April 30, April 30,
1998 1997 1998 1997
Revenues:
Contract revenues
earned 100.0% 100.0% 100.0% 100.0%
Other, net 1.0 0.4 0.8 0.3
Total revenues 101.0 100.4 100.8 100.3
Expenses:
Cost of earned revenues,
excluding depreciation 76.8 78.8 77.9 80.0
General and
administrative 11.3 10.4 10.0 9.8
Depreciation and
amortization 3.7 3.6 3.7 3.8
Total expenses 91.8 92.8 91.6 93.6
Income before income
taxes 9.2 7.6 9.2 6.7
Provision for income
taxes 3.6 2.4 3.2 2.2
Historical Net Income 5.6 5.2 6.0 4.5
Pro forma adjustments to
income tax provision -0.1 0.7 0.6 0.5
Pro Forma Net Income 5.7% 4.5% 5.4% 4.0%
Revenues. Contract revenues increased $15.4 million, or 19.2%, to $95.9
million in the quarter ending April 30, 1998 from $80.5 million in the
quarter ended April 30, 1997. Of this increase, $14.9 million was
attributable to the telecommunications services group and $0.5 million was
attributable to the underground utility locating services group, reflecting
an increased market demand for the Company's services.
<PAGE> 18
During the quarter ended April 30, 1998, the Company recognized $86.5 million of
contract revenues from the telecommunications services group as compared to
$71.6 million for the same period last year. The increase in the Company's
telecommunications services group contract revenues reflects increased volume of
projects and activities associated with cable television construction
services which increased by $13.3 million to $42.4 million in the quarter
ending April 30, 1998 from $29.1 million in the same period last year. Also,
the telecommunications services group experienced increased volume in its
telephone engineering, outside plant and telephony splicing services which
was offset by declines in contract revenues in premise wiring services and
the design and installation of broadband networks. Contract revenues
recognized from the electrical construction and maintenance services group
was $5.2 million for each of the quarters ending April 30, 1998 and
1997. The Company recognized contract revenues of $4.2 million from the
underground utility locating services group in the quarter ending April 30,
1998 as compared to $3.7 million in the same period last year.
Contract revenues from all long-term agreements which includes master service
agreements in all service groups, continues to be a significant source of the
Company's revenues, representing approximately 70.7% of total contract
revenues in the quarter ended April 30, 1998 compared to 67.5% for the same
period last year. Contract revenues from master service agreements
represented approximately 39.1% and 44.2% of total contract revenues in the
quarter ended April 30, 1998 and 1997, respectively.
For the nine-month period ended April 30, 1998, contract revenues increased
19.5% to $267.7 million as compared to $224.1 million for the corresponding
period last year. Of this increase, $39.6 million was attributable to the
telecommunications services group, $1.8 million was attributable to the
electrical construction and maintenance services group and $2.2 million wa
attributable to the underground utility locating services group, reflecting
an increased market demand for the Company's services.
During the nine-month period ended April 30, 1998, the Company recognized $239.9
million of contract revenues from the telecommunications services group as
compared to $200.3 million for the same period last year, an increase of
19.8%. The increase in the Company's telecommunications services group
contract revenues reflects increased volume of projects and activities
associated with cable television construction services which increased by
$34.0 million to $115.6 million in the nine-month period ended April 30, 1998
from $81.6 million in the same period last year. Also, the telecommunications
services group experienced increased volume in its telephone engineering
services, the design and installation of broadband networks, and telephony
splicing services which was partially offset by declines in contract
revenues from outside plant and premise wiring services. The Company recognized
contract revenues of $15.0 million from the electrical construction and
maintenance services group in the nine-month period ended April 30, 1998 as
compared to $13.2 million in the nine-month period ended April 30, 1997, an
increase of 13.6%. The Company recognized contract revenues of $12.8 million
from the underground utility locating services group in the nine-month period
ended April 30, 1998 as compared to $10.6 million in the same period last
year, an increase of 20.8%.
Contract revenues from all long-term agreements represented approximately 70.5%
of total contract revenues in the nine-month period ended April 30, 1998 as
compared to 68.8% for the same period last year. Contract revenues from
master service agreements represented approximately 38.2% and 44.1% of total
contract revenues in the nine month period ended April 30, 1998 and 1997,
respectively.
<PAGE> 19
Costs of Earned Revenues. Costs of earned revenues increased $10.3 million to
$73.7 million in the quarter ended April 30, 1998 from $63.4 million in the
quarter ended April 30, 1997, but decreased as a percentage of contract
revenues to 76.8% from 78.8%. For the nine-month period ended April 30,
1998, cost of earned revenues increased $29.5 million to $208.6 million as
compared to $179.1 for the same period last year, but decreased as a
percentage of contract revenues to 77.9% from 80.0%. The decrease in costs of
earned revenues as a percentage of contract revenues for the three and nine
month periods ended April 30, 1998 is the due to increased productivity and
the management of controllable costs.
General and Administrative Expenses. General and administrative expenses
increased $2.4 million to $10.8 million in the quarter ending April 30, 1998
from $8.4 million in the quarter ended April 30, 1997. The increase in
general and administrative expenses for the quarter ended April 30, 1998, as
compared to the same period last year, was primarily attributable to
increases in administrative salaries, employee benefits and payroll taxes of
$0.6 million, merger costs of $0.6 million, legal and professional fees of
$0.3 million, provision for doubtful accounts of $0.3 million, and other
general and administrative expenses of $0.6 million. For the nine-month
period ended April 30, 1998, general and administrative expenses increased $4.8
million to $26.8 million as compared to $22.0 million for the same period
last year. The increase in general and administrative expenses for the
nine-month period ended April 30, 1998, as compared to the same period last
year, was primarily attributable to increases in administrative salaries,
employee benefits and payroll taxes of $1.9 million, legal and professional
fees of $0.7 million, merger costs of $0.6 million, provision for doubtful
accounts of $0.5 million, and other general and administrative costs of $1.1
million.
Depreciation and Amortization. Depreciation and amortization increased $0.7
million to $3.6 million in the quarter ending April 30, 1998 as compared to
$2.9 million in the same period last year. Depreciation and amortization
increased $1.4 million to $9.9 million in the nine-month period ended
April 30, 1998 as compared to $8.5 million for the same period last year.
These increases in depreciation and amortization were due to the increase in
capital expenditures of $16.8 million in the nine-month period ended April
30, 1998 as compared to $12.3 million in the nine-month period ended April
30, 1997, an increase of $4.5 million. The increase represents capital
expenditures acquired in the ordinary course of business and the buy-out of
certain operating leases on terms favorable to the Company.
Income Taxes. The provision for income taxes was $8.5 million in the nine-month
period ended April 30, 1998 as compared to $5.0 million in the same period
last year. The Company's effective tax rate was 34.8% in the nine-month
period ended April 30, 1998 as compared to 33.0% in the same period last
year. The effective tax rate differs from the statutory rate due to the
taxable income of Subchapter S Corporations (CCI and ITI), state income
taxes, the amortization of intangible assets that do not provide a tax
benefit and other non-deductible expenses for tax purposes.
The pro forma provision for income taxes was $9.9 million in the nine-month
period ended April 30, 1998 as compared to $6.2 million for the corresponding
period last year. The pro forma effective tax rate was 40.4% in the nine
months ended April 30, 1998 as compared to 40.6% for the same period last
year.
<PAGE> 20
The provision for income taxes was $3.5 million in the quarter ended April
30, 1998 as compared to $1.9 million for the same period last year. The
effective tax rate was 39.3% for the quarter ended April 30, 1998 as compared
to 31.0% for the quarter ended April 30, 1997. As of the date of the
acquisition, CCI and ITI recognized a deferred tax (asset) liability of
$616,358 and ($11,035), respectively. The recording of deferred taxes
resulted in a higher effective tax rate in the quarter as compared to the
pro forma effective tax rate. The pro forma effective tax rate was
38.3% in the quarter ended April 30, 1998 as compared to 40.2% for the same
period last year. See Note 1.
Liquidity and Capital Resources
The Company's needs for capital are attributable primarily to its needs for
equipment to support its contractual commitments to customers and its needs
for working capital sufficient for general corporate purposes. Capital
expenditures have been financed by operating leases, capital leases and bank
borrowings. The Company's sources of cash have historically been from
operating activities, bank borrowings and proceeds arising from the sale of
idle and surplus equipment and real property.
For the nine-month period ended April 30, 1998, net cash provided by operating
activities was $14.9 million compared to $6.5 million for the nine-month
period ended April 30, 1997. An increase in net income and non-cash expenses
contributed to the increase in cash flow for the nine-month period ended
April 30, 1998.
In the nine-month period ended April 30, 1998, net cash used in investing
activities was $15.2 million as compared to $10.7 million for the same period
last year. For the nine-month period ended April 30, 1998, capital
expenditures of $16.8 million were for the normal replacement of equipment
and the buy-out of certain operating leases on terms favorable to the
Company. In addition to equipment purchases, the Company obtained
approximately $1.8 million of equipment under noncancellable operating leases
in the nine-month period ended April 30, 1998.
In the nine-month period ended April 30, 1998, net cash provided from financing
activities was $24.1 million as compared to $4.1 million for the same period
last year. The increase was primarily due to the proceeds on the sale of the
Company's common stock. On November 4, 1997, the Company concluded the
public offering of 2,700,000 shares of its common stock. The Company offered
1,573,378 shares and selling shareholders offered 1,126,622 shares at an
offering price of $20.00 per share. The Company received $29,736,844 on
November 10, 1997 which is net of an underwriting discount of $1.10 per
share. Additionally, the underwriters exercised their option to purchase
405,000 to cover over-allotments. The Company received $7,654,500 on
November 25, 1997 as payment for the over-allotments. The total proceeds,
net of offering expenses of $432,726, are included in stockholders' equity
at April 30, 1998. The Company invested the proceeds, after paying off
$9.1 million of its outstanding indebtedness, in various short-term
instruments having a maturity of three months or less.
Net cash from financing activities was also provided by borrowings on the
revolving equipment facility and the revolving working capital facility.
At July 31, 1997, the Company's subsidiary, CCG, had a $6.6 million working
capital bank credit facility. This facility was an arrangement made by CCG
prior to its acquisition by Dycom. During the first quarter of the current
fiscal year, the Company paid off the outstanding balance of $6.6 million by
borrowing $4.9 million under its revolving working capital facility and $1.7
million under its revolving equipment facility. During the second quarter of
the current fiscal year, the Company paid off the outstanding balance of the
revolving working capital facility of $9.1 million, including the new
borrowings of $4.9 million for CCG, with a portion of the stock
<PAGE> 21
offering proceeds. Also during the first quarter of the current fiscal year,
the Company borrowed $1.0 million under the revolving equipment facility to
buy-out certain existing operating leases on terms favorable to the Company.
On April 29, 1998, the Company signed an amendment to its bank credit agreement,
providing for a total facility of up to $85.0 million. The amended credit
facility provides for (i) a $30.0 million revolving working capital facility;
(ii) a $15.0 million standby letter of credit facility; (iii) a $25.0 million
revolving equipment acquisition and small business purchase facility; and
(iv) a $15.0 million five-year term-loan. The Company sought these increased
borrowing level to facilitate its ability to meet its working capital needs
in order to sustain its current level of internal growth.
The five-year term-loan facility bears interest at the bank's prime interest
rate minus 0.50% (8.00% at April 30, 1998). The term-loan principal and
interest is payable in quarterly installments through April 2003. During the
nine months ended April 30, 1998, the Company repaid $1.4 million on this
facility.
The revolving equipment acquisition and small business purchase facility is
available for a two-year period and bears interest, at the option of the
Company, at the bank's prime interest rate minus 0.75% or LIBOR plus 1.75%.
At April 30, 1998, the interest rate was at the LIBOR plus 1.75% option
(7.531% to 7.813%). During the nine-month period ended April 30, 1998, the
Company repaid $0.9 million and has available borrowing capacity of
$21.3 million under this facility.
The revolving working capital facility is available for a two-year period and
bears interest, at the option of the Company, at the bank's prime interest
rate minus 1.00% or LIBOR plus 1.50%. At April 30, 1998, there was no
outstanding balance on this facility resulting in an available borrowing
capacity of $30.0 million.
The standby letter of credit facility is available for a two-year period. At
April 30, 1998, the Company had $9.1 million in outstanding standby letters
of credit issued as security to the Company's insurance administrators as
part of its self-insurance program, leaving $5.9 million in available
borrowing capacity.
The amended bank credit agreement requires the Company to maintain certain
financial covenants and conditions, as well as restricting the encumbrances
of assets and the creation of additional indebtedness and limits the payment
of cash dividends. At April 30, 1998, the Company was in compliance with all
covenants and conditions under the credit agreement.
The Company's recently acquired subsidiaries, CCI and ITI, have credit
facilities made prior to the acquisition by Dycom. CCI has a $5.2 million
revolving credit facility for funding working capital and a $2.0 million
term note used to purchase equipment. The revolving credit facility bears
interest at the bank's prime interest rate and the interest rate on the term
loan is at 8.75%. At April 30, 1998, CCI has $4.7 million outstanding under
its revolving credit facility and $1.2 million outstanding under the term note.
ITI has a $2.0 million revolving credit facility for funding working capital
and a $0.5 million multiple advance term facility for equipment acquisitions.
The interest rate on the revolving credit facility and the multiple advance
term facility are at the bank's prime interest rate. At April 30, 1998, ITI
had $1.7 million outstanding under its revolving credit facility and no amounts
outstanding under its advance term facility. The obligations are
collateralized by substantially all the companies' assets. The facilities
contain restrictions, which among other things, require the maintenance of
certain financial ratios and covenants and restricts the payment of cash
dividends. At April 30, 1998, CCI and ITI were in compliance with all
covenants and conditions.
<PAGE> 22
The Company foresees its capital resources together with existing cash
balances to be sufficient to meet its financial obligations, including the
scheduled debt payments under the amended bank credit agreement and operating
lease commitments, and to support the Company's normal replacement of
equipment at its current level of business for at least the next twelve
months. The Company's future operating results and cash flows may be
affected by a number of factors including the Company's success in bidding on
future contracts and the Company's continued ability to effectively manage
controllable costs.
Special Note Concerning Forward Looking Statements
This Quarterly Report on Form 10Q, including the Notes to Condensed Financial
Statements and this Management's Discussion and Analysis of Financial Condition
and Results of Operations, contains forward looking statements. The words
"believe," "expect," "anticipate," "intends," "forecast," " project," and
similar expressions identify forward looking statements. Such statements may
include, but may not be limited to, the anticipated outcome of contingent
events, including litigation, projections of revenues, income or loss,
capital expenditures, plans for future operations, growth and aquisitions,
financial needs or plans and the availability of financing, and plans
relating to services of the Company, as well as assumptions relating to the
foregoing. Such forward looking statements are within the meaning of
that term in Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
<PAGE> 23
PART II. OTHER INFORMATION
__________________________
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits furnished pursuant to the requirements of Form 10-Q:
Number Description
______ ___________
(11) Statement re computation of per share earnings
All information required by Exhibit 11 is presented
within Note 3 of the Company's condensed consolidated
financial statements in accordance with the provisions
of SFAS No. 128.
(27) Financial Data Schedule
(99) Amended and Restated Credit Facility Agreement dated as of
April 29, 1998 between Dycom Industries, Inc. and
Dresdner Bank Lateinamerika Aktiengesellschaft; Bank
Leumi USA; Republic National Bank of Miami, N.A.;
SunTrust Bank South Florida, N.A.; and Israel Discount
Bank Limited.
Amended and Restated Security Agreement dated as of
April 29, 1998 between Dycom Industries, Inc. and
Dresdner Bank Lateinamerika Aktiengesellschaft; Bank
Leumi USA; Republic National Bank of Miami, N.A.;
SunTrust Bank South Florida, N.A.; and Israel Discount
Bank Limited. Similar agreements were executed by each
subsidiary of Dycom Industries, Inc.
Guaranty Agreement dated as of April 29, 1998 between
Ansco & Associates, Inc. and Dresdner Bank Lateinamerika
Aktiengesellschaft; Bank Leumi USA; Republic National
Bank of Miami, N.A.; SunTrust Bank South Florida, N.A.;
and Israel Discount Bank Limited. Similar agreements
were executed by each subsidiary of Dycom Industries,
Inc.
(b) Reports On Form 8-K
The following reports on Form 8-K were filed on behalf of the Registrant
during the quarter ended April 30, 1998:
(i) The acquisitions of Cable Com Inc. and Installation Technicians, Inc.
pursuant to agreements and plans of merger dated February 23, 1998.
Items Reported: 2, 7
Date Filed: April 21, 1998
Financial Statements Filed:
Audited financial statements of Cable Com Inc. for the periods ended
December 26, 1997 and December 27, 1996.
<PAGE> 24
Audited financial statements of Installation Technicians, Inc. for the
periods ended December 27, 1997 and December 28, 1996.
Unaudited pro forma combined balance sheet as of January 31, 1998.
Unaudited pro forma combined consolidated statements of operations for
the six months ended January 31, 1998 and 1997.
Unaudited pro forma combined consolidated statements of operations for
the fiscal years ended July 31, 1997, 1996 and 1995.
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DYCOM INDUSTRIES, INC.
Registrant
<TABLE>
<S> <C>
Date: June 15, 1998 /s/ Thomas R. Pledger
_________________ ____________________________
Thomas R. Pledger
Chairman and Chief Executive
Officer
Date: June 15, 1998 /s/ Steven Nielsen
_________________ ____________________________
Steven Nielsen
President and Chief Operating
Officer
Date: June 15, 1998 /s/ Douglas J. Betlach
_________________ ____________________________
Douglas J. Betlach
Vice President, Treasurer, and
Chief Financial Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DYCOM
INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEET AT APRIL 30, 1998 AND THE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTH PERIOD
ENDED APRIL 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000067215
<NAME> DYCOM INDUSTRIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> APR-30-1998
<EXCHANGE-RATE> 1
<CASH> 29,025,332
<SECURITIES> 0
<RECEIVABLES> 55,366,143
<ALLOWANCES> 2,017,906
<INVENTORY> 18,514,948
<CURRENT-ASSETS> 106,664,320
<PP&E> 95,231,824
<DEPRECIATION> 53,070,369
<TOTAL-ASSETS> 153,806,725
<CURRENT-LIABILITIES> 38,929,185
<BONDS> 22,818,672
0
0
<COMMON> 4,896,172
<OTHER-SE> 86,236,009
<TOTAL-LIABILITY-AND-EQUITY> 153,806,725
<SALES> 0
<TOTAL-REVENUES> 267,741,732
<CGS> 0
<TOTAL-COSTS> 208,616,434
<OTHER-EXPENSES> 9,905,266
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,600,127
<INCOME-PRETAX> 24,462,151
<INCOME-TAX> 8,515,488
<INCOME-CONTINUING> 15,946,663
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,946,663
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.13
</TABLE>
<PAGE> 1
AMENDED AND RESTATED CREDIT FACILITY AGREEMENT
THIS AGREEMENT, dated as of the 29th day of April, 1998, by and among
DRESDNER BANK LATEINAMERIKA AKTIENGESELLSCHAFT, Miami Agency, an
International Bank Agency licensed by the State of Florida, (as the context
requires, sometimes herein referred to as "Agent" and sometimes as a
"Lender"); BANK LEUMI USA, a New York Banking Corporation; REPUBLIC NATIONAL
BANK OF MIAMI, N.A., a National Banking Association; SUNTRUST BANK SOUTH
FLORIDA, N.A., a National Banking Association; and ISRAEL DISCOUNT BANK
LIMITED, Miami Agency, an International Bank Agency licensed by the State of
Florida (each, herein referred to as a "Lender" and collectively, the
"Lenders"), on the one part, and DYCOM INDUSTRIES, INC., a Florida
Corporation (the "Borrower"), ANSCO & ASSOCIATES, INC. , a Florida
Corporation; IVY H. SMITH COMPANY, a Florida Corporation; KOHLER
CONSTRUCTION COMPANY, INC., a Florida Corporation; SOUTHEASTERN ELECTRIC
CONSTRUCTION, INC., A Florida Corporation; S.T.S. INC., a Florida
Corporation; FIBER CABLE, INC., a Delaware Corporation; GLOBE COMMUNICATIONS,
INC., a North Carolina Corporation; STAR CONSTRUCTION, INC., a Tennessee
Corporation; TESINC, INC., an Arizona Corporation; COMMUNICATIONS
CONSTRUCTION GROUP, INC., A Pennsylvania Corporation; INSTALLATION
TECHNICIANS, INC., a Missouri Corporation; CABLECOM INC., a Delaware
Corporation (each, a "Guarantor" and collectively, "Guarantors") on the other
part;
WITNESSETH:
WHEREAS, Borrower and certain of the Lenders are parties to a certain
Credit Facility Agreement dated the 28th day of April, 1997, amended the 29th
day of October, 1997, extending credit to Borrower in a total amount not to
exceed THIRTY FIVE MILLION AND 00/100 DOLLARS ($35,000,000.00) (the
"Original Facility"); and
WHEREAS, Borrower has requested that the Lenders amend and restate the
Original Facility to extend additional credit to it in an amount of FIFTY
MILLION US DOLLARS ($50,000,000.00) for credit in a total amount not to
exceed EIGHTY FIVE MILLION AND 00/100 DOLLARS ($85,000,000.00) (the "Amended
Facility"), and the Lenders are willing to do so upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, the parties hereby agree
to amend and restate the Original Facility Agreement, adding additional
parties, and increasing the facility amount in and restate the Original
Facility Agreement as follows:
I. DEFINITIONS
1.01 "Banking Day" shall mean any day in which banks operating in the
City of Miami,
<PAGE> 2
City of New York, and the City of London are open for business or are not
required to be closed. A "London Banking Day" shall mean any day in which
Banks operating in the City of London are open for business or are not
required to close.
1.02 "Closing Date" shall mean April 29, 1998, and "Closing" shall mean
the acts scheduled to take place on the Closing Date in the State of Texas at
a place to be designated by the Agent.
1.03 "Collateral Documents" shall mean the documents granting the
security interest in the Collateral specified in Paragraph 4.01, below.
1.04 "Guarantor or Guarantors,-" where the context so requires, shall
mean, one or more of the following corporations, all of which are wholly
owned subsidiaries of Borrower:
ANSCO & ASSOCIATES, INC. , a Florida Corporation;
IVY H. SMITH COMPANY, a Florida Corporation;
KOHLER CONSTRUCTION COMPANY, INC., a Florida Corporation;
SOUTHEASTERN ELECTRIC CONSTRUCTION, INC., A Florida Corporation;
S.T.S. INC., a Florida Corporation;
FIBER CABLE, INC., a Delaware Corporation;
GLOBE COMMUNICATIONS, INC., a North Carolina Corporation;
STAR CONSTRUCTION, INC., a Tennessee Corporation;
TESINC, INC., an Arizona Corporation;
COMMUNICATIONS CONSTRUCTION GROUP, INC., A Pennsylvania Corporation
INSTALLATION TECHNICIANS, INC., a Missouri Corporation
CABLECOM INC., a Delaware Corporation
each of which shall execute a guarantee of the Indebtedness of the Borrower to
the Lenders (the "Guarantees").
1.05 "Financial Statements" shall mean the Borrower's or, where
appropriate, a Guarantor's, balance sheet, statements of income and related
earnings, and statement of cash flows of the Borrower or, where appropriate,
a Guarantor, heretofore delivered, or to be delivered, under the terms of
this Agreement, to Lenders.
1.06 "Indebtedness" shall mean all items of indebtedness, obligation or
liability, whether matured or unmatured, liquidated or unliquidated, direct
or contingent, joint or several, including, without limitation:
(A) all indebtedness guaranteed, directly or indirectly, in any
manner, or endorsed (other than for collection or deposit in the ordinary
course of business) or discounted with recourse;
(B) all indebtedness in effect guaranteed, directly or indirectly,
through agreements, contingent or otherwise: (1) to purchase such
indebtedness; or (2) to purchase, sell or lease (as lessee or lessor)
property, products, materials or supplies or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
indebtedness or to insure the owner of the indebtedness against loss; or (3)
to supply funds to or in any other manner invest in the debtor;
<PAGE> 3
(C) all indebtedness secured by (or for which the holder of such
indebtedness has a right, contingent or otherwise, to be secured by) any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance on property owned or acquired subject thereto, whether or not the
liabilities secured thereby have been assumed; and
(D) all indebtedness incurred as the lessee of goods or services
under leases that, in accordance with generally accepted accounting
principles, should not be reflected on the lessee's balance sheet.
1.07 "LIBOR" shall mean, in relation to any relevant sum and any
relevant period, the rate determined by Agent to be the arithmetic mean
(rounded up if necessary to the nearest integral multiple of 1/16%) of the
respective rates shown on the Reuters Monitor Screen as being the rate per
annum at which Dollar deposits are offered for a period equal or comparable
to such period or, if there is no period equal, the period which is closest
in length to such period at or about 11:00 a.m. (London time) on the second
London Banking Day before the first day of such period; for this purpose
"Reuters Monitor Screen" means the display designated as page "LIBO" on the
Reuters Monitor system or such other page as may replace page "LIBO" on that
system for the purpose of displaying offered rates for Dollar deposits.
If, due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) in either case made subsequent to
the date hereof, there shall be any increase in the cost to any Lender of
agreeing to make or of making, funding or maintaining LIBOR based advances,
then the Borrower shall from time to time, upon demand by any Lender (with a
copy of such demand to Agent), pay to such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate
as to the amount of such increased cost and calculating such amount in
reasonable detail, submitted to the Borrower by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
If any Lender determines that compliance with any law or regulation or any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) made subsequent to the date hereof
affects or would affect the amount of capital required or expected to be
maintained by such Lender or any corporation controlling such Lender and that
the amount of such capital is increased by or based upon the existence of
such Lender's commitment to lend or to issue Standby Letters of Credit
hereunder and other commitments of such type or the issuance or maintenance
of the Standby Letters of Credit (or similar contingent obligations), then, upon
demand by such Lender (with a copy of such demand to Agent), the Borrower
shall pay to such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender in the light of such
circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's
commitment to lend or to issue Standby Letters of Credit hereunder or to the
issuance or maintenance of any Standby Letters of Credit. A certificate as
to the amount of such increased cost and calculating such amount in
reasonable detail, submitted to the Borrower by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
Notwithstanding any other provision of this Credit Facility Agreement, if the
introduction of or any
<PAGE> 4
change in or in the interpretation of any law or regulation shall make it
unlawful, or any central bank or other governmental authority shall assert
that it is unlawful, for any Lender to perform its obligations hereunder to
make LIBOR based advances or to continue to fund or maintain LIBOR
advances hereunder, then, on notice thereof, and demand therefor by such
Lender to the Borrower, (i) each LIBOR based advance will automatically, upon
such demand by the Lender, convert into an advance based on the Prime Rate
such advance would have been charged under had it been a Prime Rate advance
originally, and (ii) the obligation of the Lenders to make additional LIBOR
based advances shall be suspended until the Lenders notify the Borrower that
they have determined that the circumstances causing such suspension no longer
exist.
1.08 "Loan" shall mean an advance in accordance with Paragraphs 2.01,
2.02, 2.03 and 2.04, below.
1.09 "Majority Lenders" shall mean Lenders whose aggregate
Participations in the outstanding Loans are at least Fifty One per cent (51%)
of the outstanding Loans from time to time or, if no Loan is outstanding, of
the commitments of such Participations.
1.10 "Material Adverse Effect" shall mean (a) a materially adverse
effect on the assets, business, operations, properties or condition
(financial or otherwise) of Borrower and the Guarantors, taken as a whole,
(b) an impairment of the ability of the Borrower or the Guarantors to perform
any of their respective obligations hereunder or under the Notes, the
Guaranties or the Security Agreements or (c) an impairment of the validity or
enforceability of, or an impairment of the rights, remedies or benefits
available to the Lenders under this Amended Facility or the Notes, Guaranties
or the Security Agreements or (d) any significant diminution of the amount
which the Lenders would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of any of the
Collateral.
1.11 "Note or Notes" shall mean one or all of the notes identified in
Paragraphs 2.01, 2.02, 2.03 or 2.04, below.
1.12 "Obligations" shall mean the obligations of the Borrower:
(A) to pay the principal of and interest on the Notes in
accordance with the terms thereof and to satisfy all of the other liabilities
to the Lenders, whether hereunder or otherwise, whether now existing or
hereafter incurred, matured or unmatured, direct or contingent, joint or
several, including any extensions, modifications, renewals thereof and
substitutions therefor;
(B) to repay to the Lenders all amounts advanced by the Lenders
hereunder or otherwise on behalf of the Borrower or any Guarantor including,
without limitation, advances for principal or interest payments to prior
secured parties, mortgagees, or lienors, or for taxes, levies, insurance,
rent, repairs to or maintenance or storage of any of the Collateral; and
(C) to reimburse the Lenders, on demand, for all of the Lenders'
expenses and costs, including the reasonable fees and expenses of their
respective counsel, in connection with the preparation, administration,
amendment, modification or enforcement of this Agreement and the documents
required hereunder including, without limitation, any proceedings brought or
threatened
<PAGE> 5
to enforce payment of any of the obligations referred to in the foregoing
sub-paragraphs (A) and (B).
1.13 "Participation" shall mean, in relation to each Lender, in respect
of any amount owing to the Lenders hereunder, the portion of that amount
which is owing to that Lender and, in respect of a proposed Loan, the portion
of that Loan which is to be made by that Lender.
1.14 "Permitted Liens" shall mean:
(A) Liens for taxes, assessments or similar charges incurred in
the ordinary course of business that are not yet due and payable;
(B) Liens of mechanics, materialmen, warehousemen, carriers or
other like liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable; or
(C) Liens in favor of the Lenders pursuant to this Agreement.
1.15 "Prime Rate" shall mean the rate published by The Wall Street
Journal as the "Prime Rate" from time to time, which is purely a benchmark, and
is not necessarily Lenders' best or lowest rate. The Prime Rate as applied
to the credit facilities under this Agreement shall fluctuate with each
and every change in the published Prime Rate.
1.16 "Standby Letter(s) of Credit" shall mean any letter or letters of
credit issued in favor of an insurance company, bonding company or customer
of the Borrower and/or one or more of the Guarantors to stand in lieu of a
retention or the posting of a bid, performance or completion bond in a
construction contract.
1.17 "Year 2000 Problem" shall mean any significant risk that computer
hardware, software or equipment containing embedded microchips essential to
the business or operations of the Borrower or any of the Guarantors will not,
in the case of dates or time periods occurring after December 31, 1999,
function at least as effectively and reliably as in the case of times or time
periods occurring before January 1, 2000, including the making of accurate
leap year calculations.
II. THE CREDIT FACILITIES
2.01 The "A" Line of Credit. So long as no uncured default under this
Agreement exists at the time a request for issuance is made, the "A" Line of
Credit Facility (the "A" Line of Credit') shall be available, for a period
of two (2) years from Closing up to a total aggregate of FIFTEEN
MILLION US DOLLARS ($15,000.000.00) for issuance of Standby Letters of Credit
for the account of Borrower and/or any Guarantor, as follows:
(A) General. Standby Letters of Credit requested under this
sub-paragraph shall be upon written request by Borrower to Lenders ("Request
for Standby"), stating the specific purpose of each such Standby Letter of
Credit and the specific entity (whether Borrower or one or more of
the Guarantors) for whose account said Standby Letter of Credit is to be
issued and shall provide all information required for issuance, including
names and addresses of all beneficiaries. Any such credits requested shall
carry an expiry of not more than one year, shall be in good commercial form,
<PAGE> 6
payable against presentation of documents only, and incorporate only clear
and concise terms and conditions for payment, without ambiguities. Any
Standby Letters of Credit or advances outstanding under the "A" Line of
Credit of the Original Facility at the closing of this Amended Facility
shall be treated as issued under this "A" Line of Credit, with no change,
however, in the expiry or terms of any such advances or Standby Letters of
Credit.
(B) Effect of Issuance. The issuance of any Standby Letters of
Credit under the "A" Line of Credit shall reduce the availability of further
credits by the face amount of same, unless and until the same expire.
(C) Payment Under Letters of Credit. Any payments which Lenders are
required to make under the terms of any Standby Letter of Credit shall be
treated as cash advances under the "A" Line of Credit which shall be repaid
to Lenders on or before the expiration date provided for under the relevant
Standby Letter of Credit. Such payments shall likewise reduce the
availability of the issuance of further Standby Letters of Credit in the
amount of the same until and to the extent that such payments shall be repaid.
Interest on the outstanding balance of such advances shall be payable
monthly, in arrears.
(D) Fees for Issuance of Standby Letters of Credit. Fees for issuance
of Standby Letters of Credit shall be determined at the time a Request for
Standby is submitted, according to Borrower's election, at either:
(1) ninety (90) basis points per annum of face amount of the
relevant Standby Letter of Credit, payable quarterly, in advance, at issuance
and at the beginning of each quarter thereafter for so long as the relevant
Standby Letter of Credit remains outstanding, together with any renewals
thereof; or
(2) seventy five (75) basis points per annum of the face
amount of the relevant Standby Letter of Credit, in advance, at issuance.
(E) Interest Rate on Payments Made Under Standby Letters of Credit.
Interest on all payments made by Agent or Lenders pursuant to such Standby
Letters of Credit shall be charged at the Prime Rate plus one per cent (1%)
per annum from the date of payment until the repayment thereof.
(F) Standby Letter of Credit Agreement. Borrower shall execute
Agent's standard Letter of Credit Application/Agreement with respect to each
Request for Standby under the "A" Line of Credit.
(G) Manner of Participation in Letters. Notwithstanding any other
term herein contained, Agent shall be the sole issuer of Standby Letters of
Credit under the "A" Line of Credit on behalf of all of the Lenders. Upon
notifications as provided for in Paragraphs 2.08 and 10.01, each Lender shall
set up appropriate reserves on their respective books for the contingent
liability to Agent represented by the issuance of any Standby Letter of
Credit, and (except for Agent as Lender) shall issue its own standby letter
of credit, in favor of Agent, in accordance with the
<PAGE> 7
respective Participations set forth in Paragraph 2.05. Once Agent has been
required to pay under the terms of a Standby Letter of Credit, each of the
Lenders shall be required to fund or reimburse such payment to Agent.
Lenders agree to adjust their respective Participations, among themselves, in
proportion to their interests, in advances and Standby Letters of Credit
outstanding under the "A" Line of Credit of the Original Facility.
(H) Note. The "A" Line of Credit shall be evidenced by a master
promissory note (Note "A"), substantially in the form attached hereto as
Exhibit "A".
2.02 The "B" Line of Credit. So long as no uncured default under this
Agreement exists at the time a request for borrowing is made hereunder, for a
period of two (2) years from Closing, the "B" Line of Credit Facility (the
"B" Line of Credit') will be available on a revolving basis. During said term,
the Borrower may borrow, pay, prepay and re-borrow, on a revolving basis, a
total amount of up to a maximum of THIRTY MILLION US DOLLARS ($30,000,000.00)
as follows:
(A) General. The initial advance under the "B" Line of Credit
shall be utilized for general working capital purposes of the Borrower and
the Guarantors, and shall be drawn upon at Closing for the purpose of paying
all the Borrower's and the Guarantors then existing Indebtedness under the
"B" Line of Credit of the Original Facility. At Closing, Borrower shall
elect the period of time for which the initial advance is requested, either
thirty (30), sixty (60), ninety (90) or one hundred eighty (180) days and the
rate of interest elected under the terms of Section 2.02 (C). From and after
such initial advance, further advances requested under this sub-paragraph
shall be upon written request made by Borrower (a "Request for Advance")
stating the specific purpose of each advance, the specific entity (whether
Borrower or one or more of the Guarantors) utilizing said advance, the period
of time for which the advance is requested, either thirty (30), sixty (60),
ninety (90) or one hundred eighty (180) days, and the rate of interest
elected under the terms of Section 2.02 (C). Each Request for Advance under
the "B" Line of Credit shall be for not less than Three Hundred Thousand US
Dollars ($300,000.00) or for amounts greater than said minimum only in
multiples of Fifty Thousand US Dollars ($50,000.00).
(B) Repayment. Each advance under the "B" Line of Credit shall be
repaid within the period of time specified in the relevant Request For Advance.
(C) Interest Rate. Interest with respect to each advance under the
"B" Line of Credit shall accrue and be paid on the unpaid principal balance
from time to time outstanding at one of the following rates elected by
Borrower in the relevant Request for Advance:
(1) the thirty (30), sixty (60), ninety (90) or one hundred
eighty (180) day LIBOR rate effective on the date of such advance, according
to the term for which the relevant advance is requested, plus one and
one-half per cent (1.5%) per annum; or
(2) the Prime Rate minus one per cent (1%) per annum, to
change with each change in the Prime Rate.
Interest at the foregoing rate(s) shall be computed on the basis of a 360-day
year for the actual
<PAGE> 8
number of days elapsed (i.e., 1/360 of a full year's interest shall accrue
for each day any Loan is outstanding) and shall be due quarterly (or, if
earlier, at maturity) and payable in arrears. Said interest rate shall never
exceed the maximum rate allowed, from time to time, by law. All principal
and any unpaid interest on all such advances shall be due and payable one
year from the date of this Agreement.
(D) Facility Fee. A facility fee of Thirty Thousand US Dollars
($30,000.00) shall be due and payable to the Lenders on the "B" Line of
Credit at Closing.
(E) Note. The "B" Line of Credit shall be evidenced by a master
promissory note (Note "B"), substantially in the form attached hereto as
Exhibit "B".
2.03 The "C" Term Loan. Upon delivery of this Agreement and
fulfillment of the conditions precedent as set forth herein, Lenders agree to
fund a term loan (the "C" Term Loan') for the amount of FIFTEEN MILLION US
DOLLARS ($15,000,000.00) as follows:
(A) General. The "C" Term Loan shall be funded at Closing of this
Agreement for the purpose of repaying all sums owing under the "C" Line of
Credit under the Original Facility and the balance for general corporate
purposes.
(B) Repayment. The "C" Term Loan shall be repaid in twenty (20)
equal consecutive quarterly principal installments of Seven Hundred Fifty
Thousand ($750,000.00) each, commencing ninety (90) days from the Closing
Date, with accrued interest to be paid with each installment of principal,
the intent hereof that all principal of and interest on the "C" Term Loan
shall be paid in full five (5) years from the Closing Date.
(C) Interest Rate. Interest on the "C" Term Loan shall accrue at
the Prime Rate in effect, from time to time, minus one-half per cent (.5%)
per annum, to change with each change in such Prime Rate, provided, however,
that such rate shall not exceed the maximum rate allowed, from time to time,
by law.
(D) Note. The "C" Term Loan shall be authenticated by a master
promissory note (Note "C"), substantially in the form attached hereto as
Exhibit "C".
2.04 The "D" Line of Credit. So long as no uncured default under this
Agreement exists at the time a request for borrowing is made hereunder, for a
period of two (2) years from Closing, the "D" Line of Credit Facility (the
"D" Line of Credit') will be available, on a revolving basis, for equipment
acquisitions and small business purchases by Borrower or any Guarantor.
During said term, the Borrower may borrow, pay, prepay and re-borrow, on a
revolving basis, a total amount of up to a maximum limit of TWENTY FIVE
MILLION US DOLLARS ($25,000,000.00), as follows:
(A) General. The initial advance(s) under the "D" Line of Credit
shall be for the purpose of paying any amounts outstanding under the "D" Line
of Credit of the Original Facility, provided, however, that such initial
advance(s) shall be repaid under the schedule(s) of remaining payments for
amounts outstanding under the Original Facility. At Closing, Borrower shall
elect the rate of interest elected under the terms of Section 2.04 (C). From
and after the date of said initial
<PAGE> 9
advance, further advances requested under this sub-paragraph shall be upon
written request made by Borrower (a "Request for Advance") stating the
specific purpose of each advance, the specific entity (whether Borrower or
one or more of the Guarantors) utilizing such advance, the specific
equipment or business acquisition to be financed with such advance and the
rate of interest elected under the terms of Section 2.04 (C). After the
initial advance, each Request for Advance under the "D" Line of Credit shall
be for not less than One Hundred Thousand US Dollars ($100,000.00) or
for amounts greater than said minimum only in multiples of Fifty Thousand US
Dollars ($50,000.00).
(B) Repayment. Each advance under the "D" Line of Credit shall be
repaid in the number of equal consecutive monthly installments elected by
Borrower in the relevant Request for Advance, but not in excess of forty
eight (48) such installments, beginning thirty (30) days from the
date the advance is made. with the balance of principal and interest being
due and payable on the date the last such installment is due, but, in the
case where Borrower elects to pay in forty eight installments, not later than
the twenty-seventh (27th) day after the due date for the forty-seventh
(47th) installment.
(C) Interest Rate. Interest with respect to each advance under the
"D" Line of Credit shall accrue and be paid on the unpaid principal balance
of each Loan from time to time outstanding at one of the following rates
elected by Borrower, in the relevant Request for Advance:
(1) the thirty (30), sixty (60), ninety (90) or one-hundred
eighty (180) day LIBOR Rate in effect from time to time, plus one and three
quarters per cent (1.75%) per annum, to change every thirty (30), sixty (60),
ninety (90) or one-hundred eighty (180) days, as appropriate, with
each change in such rate; or
(2) the Prime Rate in effect, from time to time, minus three
quarters of one per cent (.75%) per annum, to change with each change in the
Prime Rate.
Interest at the foregoing rate(s) shall be computed on the basis of a 360-day
year for the actual number of days elapsed (i.e., 1/360 of a full year's
interest shall accrue for each day any Loan is outstanding) and shall be due
monthly (or, if earlier, at maturity) and payable in arrears. Said interest
rate shall never exceed the maximum rate allowed, from time to time, by law.
(D) Note. The "D" Line of Credit shall be evidenced by a master
promissory note ("Note") substantially in the form attached hereto as Exhibit
"D."
(E) Additional Condition to Advance. Except for the initial advance
and for advances under Paragraph 2.04(F), advances under the "D" Line of
Credit shall not exceed 80% of verifiable cost for equipment financed
thereunder. All such Requests for Advance under the "D" Line of Credit shall
be accompanied by supplier's invoices and bills of lading for such equipment
and all such equipment shall be subject, at acquisition, to the lien of the
Collateral Documents.
(F) Availability of Line for Business Acquisitions. Upon approval
of Majority
<PAGE> 10
Lenders, which approval shall be in the sole discretion of said Majority
Lenders, the "D" Line of Credit shall also be available for acquisitions of
stock and/or assets of small businesses by the Borrower. Any Request for
Advance for such purpose shall be accompanied by all relevant financial and
other data concerning such acquisition and shall be submitted to all Lenders,
who shall have a period of thirty (30) days to consider such approval.
2.05 Participations. Each Lender will participate in each Loan or
advance in the proportion which its undrawn Commitment bears to the undrawn
amount of the Amended Facility before such Loan or advance is made. It is
understood and agreed that the initial Commitment hereunder with respect to
each Lender is as follows:
DRESDNER BANK LATEINAMERIKA
AKTIENGESELLSCHAFT, Miami Agency $30,000,000.00
BANK LEUMI USA 15,000,000.00
REPUBLIC NATIONAL BANK OF MIAMI, N.A 15,000,000.00
SUNTRUST BANK, SOUTH FLORIDA, N.A. 15,000,000.00
ISRAEL DISCOUNT BANK LIMITED, MIAMI AGENCY 10,000,000.00
2.06 Lenders' Several Liability. The rights and obligations of the
Lenders under this Agreement are several and accordingly:
(A) the amount at any time owing hereunder by the Borrower to each
Lender shall be a separate and independent debt and each Lender shall be
entitled to protect and enforce its respective rights arising out of this
Agreement;
(B) the failure of any Lender to perform its obligations hereunder
shall not relieve any other Lender, Agent, the Borrower or any Guarantor of
any of its respective obligations, nor shall any Lender or Agent be
responsible for the obligations of any other Lender or Agent.
2.07 Conditions of Advances. Except with respect to payments under
Standby Letters of Credit required to be made by Agent and funded or
reimbursed by the Lenders and except for the portions of the Loans to be
funded at Closing, the funding of each Loan under this Amended Facility
is subject to the following additional conditions:
(A) Any Request for Advance or Request for Standby shall be made,
in writing, delivered to Agent, with a copy to each Lender:
(1) with respect to any LIBOR based Loan or any Standby
Letter of Credit, on the third (3rd) Banking Day before the date on which
such Loan is to be funded or the Standby Letter of Credit is to be
issued; or
(2) with respect to a Prime Rate based Loan, not later than
12:00 noon, Miami time, on the second (2nd) Banking Day before the date on
which such Loan is to be funded;
<PAGE> 11
(B) No Event of Default or prospective Event of Default shall have
occurred or would, or would be likely to, occur as a result of the Loan being
made;
(C) All representations and warranties made by the Borrower in or
in connection with this Agreement shall be true and correct as at the date on
which the Loan is to be funded with reference to the facts and circumstances
then existing;
(D) not later than 10:30 A.M., Miami time, on the date on which
the Loan is to be funded, Agent shall have received and found satisfactory
such additional information, legal opinions and documents relating to the
Borrower or any Guarantor or this Agreement or any Collateral
Document, as Agent may reasonably require as a result of circumstances
arising or becoming known to Agent or the Lenders since the date of the
previous funding of a Loan or, if no funding has been made, the date of this
Agreement; and
(E) All Requests for Advance made under this Agreement shall
follow the form of Exhibit "E", attached hereto and made a part hereof.
2.08 Notice to Participants. Borrower shall promptly notify Agent of
each Request for Advance and each Request for Standby and shall forward a
duplicate original thereof to each Lender. Subject to the provisions of this
Agreement, each Lender shall make available its Participation in
the relevant Loan to Agent.
2.09 Request Irrevocable. A Request for Advance or a Request for
Standby, once delivered to Agent, shall be irrevocable and the Borrower shall
be bound to draw the Loan or accept the issuance of the Standby Letter of
Credit in accordance therewith, except as otherwise provided
in this Agreement. If, for any reason, a Loan is not drawn in accordance
with a Request for Advance or a Requested Standby Letter of Credit is not
issued, the Borrower shall, on demand, pay to Agent for the account of each
Lender such amount (if any) as such Lender may certify to be necessary
to compensate it for any loss or expense incurred in liquidating or
redeploying funds arranged for the purpose of the proposed Loan not having
been drawn or the proposed Standby Letter of Credit not having been issued in
accordance with the Request for Advance or Request for Standby.
2.10 Payment to the Lenders. All sums payable to the Lenders hereunder
shall be paid to Agent for the account of the Lenders in immediately
available funds, in lawful money of the United States of America. Agent
shall send the Borrower statements for all amounts due hereunder,
which statements shall be considered correct and conclusively binding on
Borrower, unless Borrower notifies Agent to the contrary within fifteen (15)
calendar days of its receipt of any statement which it deems to be incorrect.
Alternatively, at their sole discretion, each of the Lenders may charge
against any deposit account of Borrower, all or any part of any amounts due
hereunder.
2.11 Prepayment of Loans. Any Prime Rate based Loan may be pre-paid
without penalty. In the event that Borrower prepays all or any part of any
Loan with respect to which the LIBOR based rate of interest has been elected,
then the rate of interest applicable to such Loan shall become the Prime Rate
(to change with each change in such Prime Rate) and Borrower shall reimburse
Lenders for costs incurred by them as a result of having funded such Loan as
a LIBOR Rate based Loan, by paying Lenders the sum of $100.00 plus, in the
event the LIBOR Rate on the date of
<PAGE> 12
prepayment is less than the LIBOR Rate effective for such Loan, a sum equal to
the difference, on an annualized basis, between the LIBOR Rate effective for
such Loan and the LIBOR Rate effective on the date of such prepayment times
the amount of principal of such Loan for the remaining days between the date
of prepayment and original maturity.
III. CONDITIONS PRECEDENT
The obligation of the Lenders to make the Loans hereunder is subject to the
following conditions precedent:
3.01 Documents Required for the Closing. At Closing, the Borrower
shall have delivered the following executed documents to Agent, in such form
as may be required by Agent:
(A) All of the Notes, dated as of the Closing Date;
(B) Security agreements, financing statements, and such other
documents, acceptable to Agent and Lenders' counsel, as may be called for
under the applicable law to perfect or continue the perfection of, first and
prior lien of the Lenders against the Collateral (the "Collateral
Documents");
(C) Guarantees, acceptable in form and content as agreed to by Agent;
(D) Corporate Resolutions, and Incumbency Certificates from the Board
of Directors of the Borrower authorizing the execution of this Agreement, the
Notes, the Borrower's Collateral Documents and related documentation, in such
form and content as may be required by Agent or their respective counsel;
(E) Corporate Resolutions and Incumbency Certificates of the
Boards of Directors and Shareholders' Resolutions from each of the Guarantors
authorizing the execution of the Guarantees and each of the Guarantors'
Collateral Documents;
(F) Certificates of good standing and certified copies of the
respective Articles of Incorporation and Bylaws of the Borrower and each
Guarantor;
(G) A written Opinion Letter from Borrower's counsel, in form and
content acceptable to Agent and its respective counsel, containing legal
opinions with respect to the Representations and Warranties set forth below
and opining that:
(1) Borrower and each Guarantor are corporations duly organized,
validly existing and in good standing under the laws of their respective
states of incorporation, are qualified to transact business and are in good
standing in those states where the nature of their business or property owned
by them require qualification;
(2) The Borrower and each Guarantor has capacity (statutory and
<PAGE> 13
otherwise) and power to execute and deliver this Agreement, to borrow money
hereunder, to grant the Collateral required hereunder, to execute and deliver
the Notes, the Guarantees and the Collateral Documents, and to perform their
obligations hereunder and thereunder; and
(3) All corporate action by Borrower and each Guarantor and all
consents and approvals of any persons necessary to the validity of this
Agreement, the Notes, the Guarantees, the Collateral Documents, and each
other document to be delivered hereunder has been duly obtained; this
Agreement, the Notes, the Guarantees, the Collateral Documents, and such
other documents executed in connection herewith, are enforceable in
accordance with their respective terms and do not conflict with any provision
of the charter or by-laws of the Borrower or any Guarantor or of any
applicable laws or any other agreement binding the Borrower or any of the
Guarantors or its or their respective property;
(4) No legal or administrative proceedings exists or is
threatened against Borrower or any Guarantor, which substantially adversely
affect their respective conditions, financial or otherwise.
(H) With respect to any advance required at Closing for a Loan upon
which Borrower desires to elect a LIBOR based interest rate, Borrower shall
have delivered notice of its election with respect thereto, not later than
the second (2nd) Banking Day before Closing; and
(I) Such other documentation as may reasonably be required by Agent
or Lenders' counsel.
3.02 Legal Matters. At the time of the Closing and of each subsequent
disbursement, all legal matters incidental thereto shall be satisfactory to
Agent's counsel, Messrs. Baker & McKenzie.
IV. COLLATERAL SECURITY
4.01 Composition of the Collateral. Borrower and each Guarantor grants
or confirms the prior grant to Lenders under the Original Credit Facility, as
appropriate, security interests in the following property belonging to each
of them (the "Collateral"):
(A) All machinery, equipment, vehicles, vessels, aircraft,
fixtures, appliances, furniture and other tangible assets, now owned or
hereafter acquired and wherever located.
(B) All inventory now owned or hereafter acquired and products and
proceeds thereof.
(C) All accounts, contract rights and accounts receivable, now or
hereafter in
<PAGE> 14
existence and all proceeds thereof, and all returned or repossessed goods
arising from or relating to any of the said accounts or rights.
(D) All instruments, documents, chattel paper and general
intangibles, now owned or hereafter acquired or arising.
(E) All cash or non-cash proceeds of any of the foregoing,
including insurance proceeds.
(F) All ledger sheets, files, records, documents, and instruments
(including, but not limited to, computer programs, tapes and related
electronic data processing software) evidencing an interest or relating to
the above.
(G) All substitutes, and replacements for, accessions, attachments,
and other additions to, and tools, parts, and equipment used in connection
with any of the above.
Said security interest shall be evidenced by appropriate Security Agreements
or amendments to Security Agreements executed in connection with the Original
Facility in such form as may be required by law and shall be perfected, as
required by Agent, in all appropriate jurisdictions. The Collateral,
together with all of the Borrower's other property or the property of any
Guarantor of any kind held by any of the Lenders, shall stand as one general,
continuing collateral security for all Obligations, and such continuing
security interest may be retained by the Lenders until all Obligations have
been satisfied in full. All existing UCC-1 financing statements filed pursuant
to the Original Credit Facility shall be amended to identify all of the
Lenders under this Agreement and additional UCC-1 financing statements will
be filed to perfect the security interests granted by any Guarantor under
this Agreement who was not party to the Original Facility Agreement.
4.02 Rights in Property Held by the Lenders. As security for the prompt
satisfaction of all Obligations, the Borrower hereby assigns, transfers and
sets over to the Lenders all of its right, title and interest in and to, and
grants the Lenders a lien on and a security interest in, all amounts
that may be owing from time to time by the Lenders to the Borrower in any
capacity, including, but without limitation, any balance or share belonging
to Borrower of any deposit or other account with the Lenders, which lien and
security interest shall be independent of any right of set-off which
any of the Lenders may have. The security interest shall be shared among the
Lenders as agreed to by them.
4.03 Priority of Liens. The foregoing liens shall be first and prior
liens except for the Permitted Liens.
4.04 Financing Statements. The Borrower will:
(A) Join and cause each Guarantor to join with the Lenders in
executing such financing statements (including amendments thereto and
continuation statements thereof), in form and content, satisfactory to Agent,
as Agent may specify;
(B) Pay or reimburse Agent for all costs and taxes of filing or
recording the same in
<PAGE> 15
such public offices as the Agent may designate; and
(C) Take such other steps as the Agent may direct, including the
noting of the Lenders' lien on the Collateral and on any certificates of
title therefor.
A carbon, photographic, or other reproduction of this Agreement shall be
sufficient as a financing statement and may be filed, in Lenders' sole
discretion, in any appropriate office in lieu thereof.
However, to the extent lawful, the Borrower hereby appoints Agent and each
Lender as its attorney-in-fact (without requiring the Agent or any Lender to
act as such) to execute any financing statement in the name of the Borrower,
and to perform all other acts that the Agent or such Lender deems appropriate
to perfect and continue its security interest in, and to protect and
preserve, the Collateral.
4.05 Other Perfection of Security Interests. The Agent or the Lenders
may elect not to perfect the security interests in all of the Collateral,
including any such Collateral as may require perfection by registry upon
title certificates (as in the case, in certain jurisdictions, of motor vehicle
title certificates). The Agent and the Lenders, nevertheless, reserve the
right, in their sole discretion, to require the perfection of such security
interests in the future and Borrower agrees to cooperate with such perfection.
4.06 Reservation of Right to Require Additional Collateral. In the
event of the occurrence of an Event of Default under this Agreement, the
Agent and the Lenders further reserve the right, but shall not have the
obligation, to require that Borrower and any or all of the Guarantors grant
additional collateral security for repayment of the Amended Facility
including, but not limited to, mortgages, deeds of trust and other security
interests in any and all real estate or other assets, (not included in the
Collateral), owned or hereafter acquired by Borrower or any Guarantor.
V. REPRESENTATIONS AND WARRANTIES
Borrower will make the following representations and warranties as of the
Closing Date, and as of each month during the effectiveness of this Agreement
and prior to disbursement of each Loan or issuance of a Standby Letter of
Credit under this Agreement, and will provide Agent with a settlement sheet
and a non-default certificate, signed by an authorized officer of the Borrower,
stating that the same are true on the date of the Loan or issuance of a
Standby Letter of Credit and that no Event of Default, as defined in
Paragraph 7.01, below, has occurred as of such date:
5.01 Organization. The Borrower and each Guarantor is a duly organized
corporation validly existing under the laws of its respective state or
country of incorporation, and has the necessary capacity (statutory and
otherwise) and power to execute this Agreement and related loan documents.
5.02 No Violations. The execution and performance of this Agreement
does not violate any provisions of any existing indenture, contract or
agreement to which the Borrower or any Guarantor is a party, or any provision
of their respective certificates of incorporation or bylaws.
<PAGE> 16
5.03 Authorization. The execution, delivery and performance of this
Agreement, the Collateral Documents, the Loans, the Guarantees, and the
issuance of the Notes and other documents contemplated hereunder, have been
duly authorized by all necessary corporate action.
5.04 Financial Statements. The Financial Statements furnished to
Lenders were prepared in accordance with generally accepted principles and
practices of accounting consistently applied, and fairly reflect the
financial conditions of the Borrower and each Guarantor as of the date of
such statements, and no materially adverse change has occurred since that date.
5.05 Liens and Encumbrances. The properties and assets of the Borrower
and of each Guarantor are not subject to any lien or encumbrance which is not
permitted by this Agreement.
5.06 Legal Proceedings. No legal or administrative proceedings exist or
are threatened against the Borrower or any Guarantor, which will
substantially adversely affect their respective conditions, financial or
otherwise, and the Borrower and each Guarantor is in full compliance with the
respective state, federal or national regulatory agencies with regulatory
jurisdiction over its business.
5.07 Taxes. Borrower and each of the Guarantors has paid all income,
franchise and other taxes as they became due, and has established such
reserves as reasonably believed to be adequate for such purposes.
5.08 Adverse Contracts. Neither the Borrower nor any of the Guarantors
are parties to any instrument which adversely affects its respective
business, property or assets and none of them is in default under any
existing contract.
5.09 Intellectual Properties. Borrower and each Guarantor possesses
all necessary patents, trademarks, trade names, copyrights and licenses
necessary to conduct their respective businesses.
5.10 Year 2000 Covenant. The Borrower has reviewed , or will
expeditiously review its operations and those of the Guarantors with a view
to assessing whether its businesses, or the businesses of any of the
Guarantors, will be vulnerable to a Year 2000 Problem or will be vulnerable
to the effects of a Year 2000 Problem suffered by any of the Borrower's or
any of the Guarantor's major commercial counter-parties. The Borrower shall
take all actions necessary and commit adequate resources to assure that its
computer-based and other systems (and those of all Guarantors) are able to
effectively process data, including dates before, on and after
January 1, 2000, without experiencing any Year 2000 Problem that could cause
a Material Adverse Effect. At the request of the Lenders, the Borrower will
provide the Lenders with assurances and substantiations (including, but not
limited to, the results of internal or external audit reports prepared in the
ordinary course of business) reasonably acceptable to the Lenders as to the
capability of the Borrower and the Guarantors to conduct its and their
businesses and operations before, on and after January 1, 2000 without
experiencing a Year 2000 Problem causing a Material Adverse Effect.
The Borrower represents and warrants that it has a reasonable basis to
believe that no Year 2000 Problem will cause a Material Adverse Effect.
VI. THE BORROWER'S COVENANTS.
<PAGE> 17
The Borrower, and each of the Guarantors, either jointly or severally, hereby
covenants and agrees with the Lenders that, so long as any of the Obligations
remain unsatisfied, it will comply with the following covenants:
6.01 Affirmative Covenants. During the term of the Loan, Borrower (and,
if applicable, the Guarantors) will:
(A) Maintain and cause each of the Guarantors to maintain its
corporate existence, keep its properties and the Collateral in good repair
and maintain adequate insurance against fire and other such risks as is
customary in the trade or as required by law. Proof of such insurance must
be provided to Agent on the Closing Date and from time to time, as reasonably
requested by Agent.
(B) Promptly pay and cause each Guarantor to pay all taxes,
unless contested in good faith, as well as all lawful claims for labor,
materials and supplies which, if not paid, might become a lien or charge on
its properties.
(C) Furnish to Agent (in five duplicates):
(1) Within one hundred (100) days after the end of each
fiscal year, a true copy of a duly completed Form 10-K as required by the
Securities Exchange Act of 1934, as amended.
(2) Within forty-five (45) days after the end of each fiscal
quarter, a true copy of a duly completed Form 10-Q as required by the Securities
Exchange Act of 1934, as amended.
(3) Within forty-five (45) days from the end of each fiscal
quarter, a consolidating profit and loss statement (income statement) for
Borrower prepared by its management and certified by an officer of
Borrower, as follows: "We certify that these financial statements are
true and correct and subject to year-end audit adjustments."
(4) On an annual basis, individual balance sheets and profit
and loss statements (income statements) for the Borrower and each of the
Guarantors;
(5) Within thirty (30) days after the end of each fiscal
quarter, a certificate from Borrower stating that no Event of Default under this
Agreement has occurred and that all covenants are met, with the
actual covenant position listed as of the quarter's close. Said certificate
will be issued by the Chief Executive Officer, the Chief Financial Officer or
the Chief Operating Officer of the Borrower; and
(6) On an annual basis, Financial Statements and supplemental
consolidating information and independent auditor's report of Borrower and
each of the Guarantors.
<PAGE> 18
(D) Upon request, furnish to Agent copies (in five duplicates) of
all information furnished by Borrower or any Guarantor to the shareholders of
Borrower or of any Guarantor, or to any governmental authority or general
press release within 24 hours of release.
(E) Furnish to Agent, within seven (7) business days, reports (in
five duplicates) of any new contract of Borrower or any Guarantor in a state
or territory of the United States or province of Canada, where the security
interest in such contract rights has not been perfected in favor of Lenders.
Within forty five (45) days of the commencement of such contract(s), Borrower
is to provide the Lenders with an inventory list of all titled and non-titled
equipment transferred into such state territory or province. Should Borrower
or any Guarantor contemplate entering into a contract outside the United
States, its territories or Canada, Borrower must seek Lenders' prior written
approval before any assets of the Borrower or any Guarantor are removed from
such jurisdictions.
(F) Furnish to Agent such other information (in five duplicates)
with regard to the operations and affairs of Borrower or any Guarantor as
Agent may reasonably request.
(G) At Agent's request, make available for inspection by duly
authorized representatives of the Lenders any of its books and records, any
of the books and records of any Guarantor, any of the Collateral, and any
information regarding its business affairs and financial condition or that of
any Guarantor, within a reasonable time after written request therefor.
(H) Collect its Accounts and sell its services and permit the
Guarantors to sell their respective accounts or services only in the ordinary
course of business.
(I) Give immediate notice to Agent of: (1) any litigation or
proceeding in which it or any Guarantor is a party if an adverse decision
therein would require it or any Guarantor to pay over more than
US $250,000.00, or deliver assets the aggregate value of which exceeds such
sum (whether or not the claim is considered to be covered by insurance); and
(2) the institution of any other suit or proceeding involving it or any
Guarantor that might materially and adversely affect its operations,
financial condition, property or business or that of any Guarantor.
(J) Pay when due or, with respect to any Guarantor, cause to be
paid when due (or within applicable grace periods) all Indebtedness owed to
third persons, except when the amount thereof is being contested in good
faith by appropriate proceedings, and adequate reserves therefor
being set aside on the appropriate books of the Borrower or Guarantor. If
the Borrower or any Guarantor defaults in the payment of any principal (or
installment thereof) of, or interest on, any such indebtedness, the Lenders
shall have the right in their discretion, to pay such interest or principal
for the account of such Borrower or Guarantor and be reimbursed, on demand,
by the Borrower.
(K) Notify the Lenders immediately if it becomes aware of the
occurrence of any Event of Default, or of any fact, condition or event that,
only with the giving of notice or passage of time or both, could become an
Event of Default.
(L) Notify Agent thirty (30) days in advance of any change in its
or any Guarantor's address, or in the location of its principal place of
business.
<PAGE> 19
(M) Maintain a Debt to Net Worth Ratio of not more than 2.25:1.
Said ratio is to be calculated by dividing the Borrower's liabilities by
Borrower's Tangible Net Worth. "Tangible Net Worth" shall mean the
Borrower's shareholders' equity less the Borrower's intangible assets, net
of accumulated amortization.
(N) Maintain a Quick Ratio of not less than .75:1 and a current
ratio of not less than 1.4:1. The Quick Ratio shall be calculated by
dividing the sum of the Borrower's cash and net receivables by the Borrower's
current liabilities. The current ratio shall be calculated by dividing the
Borrower's current assets by the Borrower's current liabilities.
(O) Limit cash dividends to fifty per cent (50%) of each fiscal
year's after-tax profit. Such dividends shall only be paid after the close of
the corresponding fiscal year. Stock dividends shall not be restricted.
(P) Achieve Net Profits for the current fiscal year of not less
than Six Million US Dollars ($6,000,000.00) and thereafter, achieve net
profits of not less than Six Million US Dollars ($6,000,000.00) for each
subsequent fiscal year.
(R) Hold Harmless. Except as otherwise provided herein, agree to
indemnify and hold Lenders and their successors and assigns absolutely
harmless from and against all costs, expenses, liabilities, loss, damage or
obligations incurred by or imposed upon or alleged to be due by Lenders or
their successors and assigns arising out of or resulting from (i) the terms or
conditions of this Agreement or any other instrument executed in connection
with the Loans, and (ii) Borrower's, Guarantors' or Lenders' performance of
any and all such terms and conditions. Without intending to limit the
remedies available to Lenders with respect to the enforcement of their
indemnification rights as stated herein or as stated in any security
document, in the event any claim or demand is made or any other fact comes to
the attention of Lenders in connection with, relating or pertaining to, or
arising out of the transactions contemplated by this Agreement, which
Lenders believe might in any manner result in the liability of Lenders,
Borrower and Guarantors shall, immediately upon receipt of written
notification of any such claim or demand, assume in full the personal
responsibility for and the defense of any such claim or demand and pay in
connection therewith any loss damage, deficiency, liability or obligation,
including without limitation, legal fees and court costs incurred in
connection therewith prior to the institution of legal proceedings, at
all trial levels and levels of appeal. In the event of court action in
connection with any such claim or demand, the Borrower and the Guarantors
shall assume in full the responsibility for the defense of any such action
and shall immediately satisfy and discharge any final decree or judgment
rendered therein. The Lenders may, at their sole discretion, make any
payments sustained or incurred by reason of the foregoing, and the Borrower
and the Guarantors shall immediately repay to Lenders in cash the amount of
such payment, with interest thereon at the maximum lawful rate form the
date of such payment. The Lenders shall have the right to join the Borrower
and/or any Guarantor as a party defendant in any legal action brought against
them, and the Borrower and each Guarantor hereby consents to the entry of
any order making it a party defendant to any such action. The
indemnification and hold harmless obligations arising pursuant to this
paragraph, however, shall not apply to any costs, expenses, liabilities,
losses, damages or obligations asserted by Borrower or any Guarantor or an of
the Lenders and incurred by, imposed upon or alleged to be due by any Lender
as a result of any Lender's breach of its contractual duties and obligations
created hereunder or under
<PAGE> 20
any other instrument executed in connection with the Loans and owed to Borrower
and/or any other Lender, as the case may be or due to any Lender's gross
negligence or any Lender's willful misconduct.
(S) Compliance with Laws. Duly observe, conform and comply with all
laws, decisions, judgments, rules, regulations and orders of all governmental
authorities relative to the conduct of its businesses, its properties, and
Collateral, except those being contested in good faith by appropriate
proceedings diligently pursued; and obtain, maintain and keep in full force
and effect all governmental licenses, authorizations and permits necessary to
the proper conduct of its businesses.
6.02 Negative Covenants.
Borrower shall not, nor shall it permit any Guarantor directly or indirectly,
to:
(A) Incur, create, assume or permit to exist any Indebtedness for
borrowed money, or an account of deposit, advance or progress payments under
contracts, or evidenced by notes, bonds, debentures or similar obligations
except for:
(1) those contemplated by this Agreement;
(2) those, up to Two Million US Dollars ($2,000,000.00), for
the specific purpose of amortizing capital;
(3) those, up to Twelve Million US Dollars ($12,000,000.00)
per year, for the specific purpose of amortizing operating leases.; and
(4) those contracts which require that the Borrower perform
the work under a performance bond or provide a bid bond in order to bid for a
project.
(B) Incur, create or permit to exist any mortgage, pledge, lien,
charge or other encumbrance on any of its assets other than:
(1) Deposits under social security laws, or to secure the
performance of bids, tenders, contracts, or leases, statutory obligations and
surety or appeal bonds;
(2) Liens imposed by law arising in the ordinary course of
business and liens arising out of a judgment award not exceeding $100,000
when an appeal is in process, except where an insurance company, reasonably
acceptable to Lenders, acknowledges coverage in writing to Lenders; and
(3) Liens represented by capital leases referred to in
subsection 6.02 (A) in existence as of the Closing Date
<PAGE> 21
(4) Permitted Liens.
(C) Guarantee or otherwise in any way become or be responsible for
Indebtedness or obligations of any other person, except for the endorsement
of negotiable instruments for collection by Borrower or any of its
subsidiaries in the ordinary course of business.
(D) Sell, lease, transfer or otherwise dispose of all of or a
substantial part of its properties or assets, or consolidate with or merge
into any other corporation or allow any other corporation to merge with it or
acquire all or substantially all of the property or assets of any
other person. Sales of assets in the normal course of Borrower's or
Guarantor's business shall be permitted. If any transfer of assets among
Borrower and Guarantors, not in the normal course of business, is
contemplated, the Lenders must give prior written approval of same.
(E) Make any investment in, or purchase any stock or other
securities or evidence of indebtedness of any person, except that Borrower or
any Guarantor may purchase U.S. government obligations maturing within one
year and time deposit or similar investments from Lenders or nationally known
United States National Banks.
(F) Sell, discount or otherwise dispose of notes, accounts
receivable or other obligations owing to the Borrower or any Guarantor, with
or without recourse, other than for the purpose of collection in the ordinary
course of business.
(G) Change its name, enter into any merger, consolidation,
reorganization or recapitalization, reclassify or permit the transfer of its
capital stock.
(H) Prepay any Indebtedness, including Indebtedness for borrowed
money and Indebtedness secured by any of its assets (except the Obligations),
or enter into or modify any agreement as a result of which the terms of
payment of any of the foregoing Indebtedness are waived or modified,
provided, however, that Borrower and Guarantors, as a group, shall be
permitted to prepay Indebtedness existing as of April 30, 1998, up to a total
aggregate amount not to exceed $12,100,000.
(I) Furnish the Lenders any certificate or other document that
will contain any untrue statement of material fact or that will omit to state
a material fact necessary to make in not misleading in light of the
circumstances under which it was furnished.
(J) Permit any material adverse change that, within the reasonable
judgment of Lenders, makes the continuation of the Facility no longer
financially feasible, provided, however, that Lenders have provided written
notice to Borrower of their judgment that such a material adverse change has
occurred and Borrower, within thirty (30) days of such notice fails to cure the
material adverse change to Lenders' reasonable satisfaction.
<PAGE> 22
VII. DEFAULT
7.01 Events of Default. The occurrence of any one or more of the following
events shall constitute an Event of Default hereunder:
(A) Borrower or any Guarantor shall fail to pay, within ten (10) days
of the date when due, any installment of principal or interest, or, when due,
any other amount, payable hereunder or under any other Obligation due from
such Borrower or Guarantor to Lenders.
(B) Borrower or any Guarantor shall fail to observe or perform any
obligation or affirmative covenant required of it hereunder, or under any of
the Collateral Documents.
(C) Borrower or any Guarantor shall breach any negative covenant
hereunder, or under any of the Collateral Documents.
(D) Borrower or any Guarantor shall fail to pay any material
Indebtedness due any third person, and such failure shall continue beyond any
applicable grace period, or the Borrower shall allow any other event of
default under any material agreement binding the Borrower.
(E) Any financial statement, representation, warranty or
certificate made or furnished by Borrower or any Guarantor to the Lenders in
connection with this Agreement, or as inducement to the Lenders to enter into
this Agreement, or in any separate statement or document to be delivered
hereunder to the Lenders, shall be materially false, incorrect or incomplete
when made.
(F) Borrower or any Guarantor shall admit its inability to pay its
debts as they mature, or make an assignment thereof for the benefit of its
creditors.
(G) Proceedings in bankruptcy, or for reorganization of Borrower,
or any Guarantor or for the readjustment of any its debts, under the U.S.
Bankruptcy Act, as amended, or any part thereof, or under any other laws for
the relief of debtors, now or hereafter existing, shall be commenced by or
against the Borrower or any Guarantor and shall not be discharged within
thirty (30) days of commencement.
(H) A receiver or trustee shall be appointed for Borrower or any
Guarantor or for any substantial part of its assets, or any proceedings shall
be instituted for the dissolution or the full or partial liquidation of
Borrower or any Guarantor, and such receiver or trustee shall not be discharged
within thirty (30) days of his/her appointment, or such proceedings shall not
be discharged within thirty (30) days of commencement.
(I) Borrower or any Guarantor shall discontinue business or
materially change the nature of its business.
(J) Borrower or any Guarantor shall suffer final judgments for
payment of money aggregating in excess of $100,000 and shall not discharge
the same within a period of thirty (30) days, unless, pending further
proceedings, execution has not been commenced or has been stayed.
<PAGE> 23
(K) A judgment creditor of Borrower shall obtain possession of any
of the Collateral by any means, including but without limitation, levy,
distraint, replevin or self-help.
7.02 Acceleration. Immediately and without notice upon the occurrence
of any Event of Default specified in the foregoing Paragraphs, all
Obligations of Borrower to Lenders, whether hereunder or otherwise, shall, at
the option of Lenders, immediately become due and payable without further
action of any kind.
7.03 Remedies. After any acceleration, as provided for in Paragraph
7.02, the Lenders shall have, in addition to the rights and remedies given it
by this Agreement, the Notes and the collateral Documents, all those allowed
by all applicable laws including, but without limitation, the Uniform
Commercial Code or similar law as enacted in any jurisdiction in which any
Collateral may be located. Without limiting the generality of the foregoing,
the Lenders may immediately, without demand of performance and without other
notice (except as specifically required by this Agreement or the Collateral
Documents) or demand whatsoever to Borrower or any Guarantor, all of which
are hereby expressly waived, to the extent permitted by applicable law, by
Borrower, and without advertisement, sell at public or private sale or
otherwise realize upon, the whole or, from time to time, any part of the
Collateral, or any interest which Borrower or any Guarantor may have therein.
After deducting from the proceeds of sale or other disposition of the
Collateral all expenses (including all reasonable expenses for legal
services), the Lenders shall apply such proceeds toward the satisfaction of
the Borrower's Obligations under this Agreement. Any remainder of the
proceeds after satisfaction in full of the Obligations shall be distributed
as required by applicable laws. Notice of any sale or other disposition shall
be given to the Borrower at least five (5) days before the time of any
intended public sale or of the time after which any intended private sale or
other disposition of the Collateral is to be made, which the Borrower hereby
agrees shall be reasonable notice of such sale or other disposition. The
Borrower agrees to assemble and deliver, at its own expense, the Collateral
at such place or places as the Lenders shall designate. At any such sale or
other disposition, the Lenders may, to the extent permissible under
applicable laws, purchase the whole or any part of the Collateral, free from
any right of redemption on the part of the Borrower or any Guarantor.
VIII. FUNDING AND PAYMENTS
8.01 Advances. Amounts to be advanced by the Lenders to the Borrower
under this Agreement shall be made available by Agent to Borrower in
accordance with the provisions of Paragraph 2.07 or, with respect to payments
under the "A" Line of Credit, will be funded or reimbursed to Agent in
accordance with the provisions of Paragraph 2.01(G). The Borrower shall
be deemed to have borrowed the relevant amount when such advances are made by
the Agent.
8.02 Payments by Borrower. All payments by the Borrower under this
Agreement shall be made to the Lenders not later than 10:30 a.m. Miami time
on the relevant due date in immediately available funds, to such accounts as
such Lender shall have previously notified to the Borrower.
8.03 Banking Days. If any sum would otherwise become due for payment
hereunder on a non-Banking Day that sum shall become due on the next
following Banking Day, except that if
<PAGE> 24
any repayment would then become due in another calendar month such repayment
shall become due on the immediately preceding Banking Day. Interest shall be
adjusted accordingly.
8.04 Evidence of Debt. The Lenders shall each maintain on its books,
in accordance with its usual practice, a set of accounts recording the
amounts from time to time owing by the Borrower hereunder. In any legal
proceeding and otherwise for the purposes of this Agreement the entries
made in such accounts shall, in the absence of manifest error, be conclusive
and binding on the Borrower as to the existence and amounts of the
obligations of the Borrower recorded therein.
8.05 Certificate Conclusive and Binding. Where any provision of this
Agreement provides that Lenders may certify or determine an amount or rate
payable by the Borrower, a certificate by Lenders as to such amount or rate
shall be conclusive and binding on the Borrower in the absence of manifest
error.
IX. THE LENDERS AND THE AGENT
9.01 Appointment. Each Lender hereby irrevocably appoints the Agent to
act as its agent for the purposes set out in this Agreement and irrevocably
authorizes the Agent to take such action on its behalf and to exercise and
enforce such rights, powers and discretions as are expressly or by
implication delegated to the Agent by the terms hereof and such rights,
powers and discretions as are reasonably incidental thereto.
9.02 Nature of Duties. In respect of its duties and functions
hereunder the Agent shall be considered to be acting solely as an agent of
the Lenders in an administrative capacity only and shall not be deemed to be
a trustee of any Lender or an agent or trustee of the Borrower for any
purpose. The Agent shall have no duties or obligations except those provided
for in this Agreement.
9.03 No Liability to Borrower. The Agent shall have no liability or
obligation to the Borrower as a result of any failure or delay by any Lender
or any other party in performing its respective obligations under this
Agreement, provided, however, that nothing in this paragraph shall be
construed to relieve Agent of its liabilities and obligations to the Borrower
as provided in this Agreement and/or any other instrument executed in
connection with the Loans.
9.04 Liability. Neither Agent nor any of its directors, officers,
employees or agents shall be liable for any action taken or omitted to be
taken in connection with this Agreement, provided, however, that nothing in
this paragraph shall be construed to relieve Agent of its liabilities for
(A) the breach of any of its duties and obligations created hereunder or
pursuant to any instrument executed in connection with the Loans, and/or (B)
resulting directly from its gross negligence or willful misconduct.
X. INDEMNITIES, SET-OFF AND PRO RATA SHARING
10.01. Participations. The Agent shall promptly notify each of the
Lenders of each Request for Advance and Request for Standby. Subject to the
provisions of this Agreement, each Lender shall make available its
Participation in the relevant Loan or Standby Letter of Credit in accordance
<PAGE> 25
with Paragraphs 2.01, 2.07, 2.08 and 8.01.
10.02 General Indemnity. The Borrower and each Guarantor shall indemnify
Agent and each Lender against all losses, liabilities, damages, costs and
expenses which Agent or such Lender may incur as a consequence of any Event
of Default or any other breach by the Borrower or any Guarantor of any of
their obligations under this Agreement or otherwise in connection with this
Agreement, including any loss or expense incurred in liquidating or
redeploying funds acquired to maintain such Lender's Participation in any
Loans or arranged for the purpose of a proposed Loan as the case may be) and
any interest or fees incurred in funding any unpaid sum.
10.03 Set-Off. If an Event of Default has occurred, each Lender shall
have the right, without notice to the Borrower or any other person, to set
off and apply any credit balance on any account (whether subject to notice or
not and whether matured or not and in whatever currency) of the Borrower or
of any Guarantor with such Lender, and any other indebtedness owing by such
Lender to the Borrower or such Guarantor, against the liabilities of the
Borrower or such Guarantor under this Agreement. Each Lender shall forthwith
notify each other Lender of any exercise of its rights under this Clause.
This Clause shall not affect any general or banker's lien, right of set-off or
other right to which any Lender may be entitled.
10.04 Pro Rata Sharing. If at any time any Lender receives any amount
in respect of sums due from the Borrower under this Agreement whether by way
of voluntary or involuntary payment, set-off or otherwise, it will promptly
pay the amount so received to the other Lenders pro rata in accordance with
their respective Participations in such amount. Such Lender shall treat such
amount as if it were a payment by the Borrower directly to all Lenders on
account of sums due from the Borrower hereunder so that, as between the
Borrower and the Lender which originally received the amount, the amount
shall be treated as not having been paid and such Lender shall retain all its
rights against the Borrower or otherwise in respect of such amount (except to
the extent of any sum retained by it as its pro rata share). Notwithstanding
the foregoing provisions of this paragraph:
(A) a Lender shall not be required to share any amount which it
has received as a result of any legal proceedings commenced in order to
recover sums owing to it under this Agreement with any other Lender which has
a legal right to but does not join in such legal proceedings after having
been given reasonable opportunity so to do and which does not commence
and diligently pursue separate legal proceedings for that purpose; and
(B) if any Lender is required to repay to the Borrower any part of
an amount originally received by it and shared pursuant to this Clause, the
other Lenders shall make funds available on a pro rata basis to reimburse
such Lender for the amount required to be repaid (less the appropriate
portion of any sum retained by such Lender in respect of such amount).
XI. MISCELLANEOUS
11.01 Construction. The provisions of this Agreement shall be in addition
to those of any guaranty, pledge or security agreement, note or other
evidence of liability held by any of the Lenders, all of which shall be
construed as complementary to each other. Nothing herein contained
<PAGE> 26
shall prevent the Lenders from enforcing any or all other notes, guarantees,
pledges or security agreements in accordance with their respective terms.
11.02 Further Assurance. From time to time, the Borrower will execute
and deliver to the Lenders such additional documents and will provide such
additional information as the Lenders may reasonably require to carry out the
terms of this Agreement and be informed of the status and affairs of the
Borrower.
11.03 Enforcement and Waiver by the Lenders. The Lenders shall have the
right at all times to enforce the provisions of this Agreement and the
Collateral Documents in strict accordance with the terms hereof and thereof,
notwithstanding any conduct or custom on the part of the Lenders in
refraining from so doing at any time or times. The failure of the Lenders at
any time or times to enforce their respective rights under such provisions,
strictly in accordance with the same, shall not be construed as having
created a custom in any way or manner contrary to specific provisions of
this Agreement or as having in any way or manner modified or waived the same.
All rights and remedies of the Lenders are cumulative and concurrent and the
exercise of one right or remedy shall not be deemed a waiver or release of
any other right or remedy.
11.04 Agency Fee and Expenses of the Lenders. The Borrower shall pay
Agent, for its own account, an Agency Fee of EIGHTY FIVE THOUSAND US Dollars
($85,000.00) per annum, at Closing and, in advance, on each anniversary of
the Closing thereafter until this Agreement is terminated and all
Obligations hereafter have been satisfied in full. In addition, Borrower will,
on demand, reimburse Agent and the Lenders for all expenses, including the
reasonable fees and expenses of legal counsel for the Lenders, incurred by
the Lenders in connection with the preparation, administration, amendment,
modification, or enforcement of this Agreement and the Collateral Documents
and the collection or attempted collection of the Notes.
11.05 Notices. Any notices, reports, requests, consents or other
communications required or permitted by this Agreement shall be in writing
and shall be deemed delivered if delivered in person or if sent by certified
mail, postage prepaid, return receipt requested, or telegraph, as follows,
unless such address is changed by written notice hereunder:
<PAGE> 27
(A) If to Borrower:
DYCOM INDUSTRIES, INC.
Suite 600
4440 PGA Blvd
Palm Beach Gardens, FL 33410
Attention: Thomas R. Pledger,
Chairman and Chief Executive Officer
With Copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-6069
Telephone number (212) 848-4000
Fax number (212) 848-7179
Attention: Mark Kessel, Esq.
(B) If to the Lenders, in care of Agent:
Dresdner Bank Lateinamerika
Aktiengesellschaft, Miami Agency
P.O. Box 01-6039
801 Brickell Avenue
Miami, FL 33131
Attention: Carmen Alvarez, First Vice-President. and
Attention: Theodore R. Walters, Esq., Vice-President and
General Counsel
With Copy to:
Baker & McKenzie
Barnett Tower Suite 1600
701 Brickell Avenue
Miami, FL 33131-2827
Attention: Charles Lea Hume, Esq.
Attention: J. Mario Fontes. Jr., Esq.
11.06 Waiver and Release by Borrower. To the maximum extent permitted by
applicable laws, Borrower:
<PAGE> 28
(A) Waives:
(1) protest of all commercial paper at any time held by the
Lenders on which the Borrower is in any way liable; and
(2) notice and opportunity to be heard, after acceleration in
the manner provided in Paragraph 7.02, before exercise by the Lenders of the
remedies of self-help, set-off, or of other summary procedures permitted by
any applicable laws or by any agreement with Borrower, and, except where
required by this Agreement or by any applicable laws, notice of any other
action taken by the Lenders; and
(B) Releases the Lenders and their respective officers, attorneys,
agents and employees from all claims for loss or damage caused by any act or
omission on the part of any of them, provided, however, that nothing in this
paragraph shall be construed in any fashion, as a release of Lenders and
their respective officers, attorneys, agents and employees from (1) their
contractual obligations created hereunder and/or pursuant to any other
instrument executed in connection with the Loans, and/or (2) resulting
directly from its gross negligence or willful misconduct.
11.07 Participation. Notwithstanding any other provision of this
Agreement, Borrower understands that each of the Lenders may at any time
enter into participation agreements with one or more participating banks or
other financial institutions whereby each of the Lenders will allocate
certain percentages of its commitment under this Agreement. Borrower
acknowledges that, for the convenience of all parties, this Agreement is
being entered into with the Lenders only and that its obligations under this
Agreement are undertaken for the benefit of, and as an inducement to, any
such participating bank and other financial institutions as well as the
Lenders, and Borrower hereby grants to each participating bank and other
financial institutions, to the extent of its participation in the Loan, the
right to set off deposit accounts maintained by Borrower with such bank or other
financial institutions.
11.08 Applicable Law. The laws of the State of Florida, excluding its
choice-of-law rules, shall govern the validity, construction and
interpretation of this Agreement, and the rights and remedies of the parties
hereto.
11.09 Binding Effect. Assignment and Entire Agreement. This Agreement
shall inure to the benefit of, and shall be binding upon, the respective
successors and permitted assigns of the parties hereto. Borrower shall not
have the right to assign any of its rights or obligations hereunder without
the prior written consent of the Lenders. This Agreement, and the documents
executed and delivered pursuant hereto, constitute the entire Agreement
between the parties, and may be amended only by a writing signed on behalf of
each party.
11.10 Superseding Effect of Loan Agreement. The terms and conditions
of that certain Loan Commitment Letter dated March 9, 1998, from Agent to
Borrower, shall survive the Closing this Agreement, provided, however, that
this Agreement shall take precedence over and supersede any conflicting terms
or provisions contained in that Loan Commitment Letter.
<PAGE> 29
11.11 Severability. If any provision of this Agreement shall be held
invalid under any applicable laws, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the invalid
provision, and, to this end, the provisions hereof are severable.
11.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute but one and the same instrument.
11.13 Seal This Agreement is intended to take effect as an instrument
under seal.
11.14 Communications. Except as otherwise provided in this Agreement,
all communications between the Lenders and the Borrower in relation to this
Agreement shall be made through Agent provided, however, that any requests,
certificates, statements, reports or similar items required to be provided by
Borrower to Lenders shall be provided to each and every Lender.
11.15 Joinder by Guarantors. Guarantors join in the execution of this
Agreement to express their assent to the terms hereof and acknowledge that,
except for the execution and delivery of the Guarantees, the Facility would
not be offered by Lenders and that sufficient consideration exists for each
Guarantor to give its Guaranty to Lenders.
11.16 Waiver of Jury Trial. LENDERS, AND THE UNDERSIGNED BORROWER
AND GUARANTORS, HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT ANY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH, OR IN RESPECT OF ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDERS TO ENTER INTO THIS AGREEMENT.
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
AGENT / LENDER:
DRESDNER BANK LATEINAMERIKA
AKTIENGESELLSCHAFT, Miami Agency
an International Bank Agency licensed by the State of
Florida
By: /s/ Carmen Alvarez
LENDERS:
BANK LEUMI USA
an New York Banking Corporation
By: /s/ Paul Tine, VP
By: /s/ Richard Silverstein, VP
REPUBLIC NATIONAL BANK OF MIAMI, N.A.,
a National Banking Association
By: /s/ Carmen Alvarez
Attorney in Fact
SUNTRUST BANK SOUTH FLORIDA, N.A.,
a National Banking Association
By: /s/ Janet P. Sammons
<PAGE> 31
ISRAEL DISCOUNT BANK LIMITED, Miami Agency
an International Bank Agency licensed by the State of
Florida
By: /s/ Barry Shivak, VP
By: /s/ Theodore D. Itzkowitz
U.S. Resident Secretary
BORROWER:
DYCOM INDUSTRIES, INC.
A Florida corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger,
Chairman and Chief Executive Officer
JOINDER BY GUARANTORS:
ANSCO & ASSOCIATES, INC.
A Florida Corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President
IVY H. SMITH COMPANY
A Florida Corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President
<PAGE> 32
KOHLER CONSTRUCTION COMPANY, INC.
A Florida Corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President
SOUTHEASTERN ELECTRIC CONSTRUCTION, INC.
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President
S.T.S. INC.
A Florida Corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President
FIBER CABLE, INC.
A Delaware Corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President
GLOBE COMMUNICATIONS, INC.
A North Carolina Corporation;
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President<PAGE>
<PAGE> 33
STAR CONSTRUCTION, INC.
A Tennessee Corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President
TESINC, INC.
An Arizona Corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President
COMMUNICATIONS CONSTRUCTION GROUP, INC.
A Pennsylvania Corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President
INSTALLATION TECHNICIANS, INC.
A Missouri Corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President
CABLECOM INC.
A Delaware Corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger, Vice-President
<PAGE> 34
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT, made this 29th day
of April, 1998, by DYCOM INDUSTRIES, INC., a Florida corporation (hereinafter
called the "Debtor") who, for valuable consideration, the receipt and
sufficiency of which is, hereby, acknowledged, hereby grants to DRESDNER BANK
LATEINAMERIKA AKTIENGESELLSCHAFT, Miami Agency, an international bank agency
licensed by the State of Florida, BANK LEUMI USA, a New York Banking
Corporation, REPUBLIC NATIONAL BANK OF MIAMI, N.A., a National Banking
Association (collectively, the "Existing Secured Parties"), and SUNTRUST BANK
SOUTH FLORIDA, N.A., a National Banking Association and ISRAEL DISCOUNT BANK
LIMITED, Miami Agency, an International Bank Agency licensed by the State of
Florida (collectively the "New Secured Parties") (the Existing Secured
Parties and the New Secured Parties together, the "Secured Party"), and
renews and/or amends, a lien upon and security interest in the property and
any replacements thereof described in Exhibit "A" attached hereto and by this
reference made a part hereof as well as all proceeds therefrom and insurance
thereon (said property being hereinafter called the "Collateral").
This Security Agreement is entered into to secure payment of and
performance of any and all of Debtor's liabilities to the Secured Party
(hereinafter the "Obligations"), and has been amended and restated to provide
for the inclusion of the New Secured Parties as additional obligees and for
the continuation, amendment and renewal of the Security Agreement between
the Existing Secured Parties and Debtor dated as of April 28, 1997. Any
documents including, but not limited to any notes, mortgages, security
agreements, including this Amended and Restated Security Agreement, securing
or evidencing the Obligations are hereinafter collectively called the "Loan
Documents."
Incident thereto, Debtor agrees with Secured Party as follows:
1. Debtor warrants and represents that:
(a) Debtor is the lawful owner of such Collateral and has good right
to pledge, sell, assign, co-sign, transfer and create a security interest in
the same;
(b) Debtor will, at Secured Party's request, defend the Collateral
from all claims and demands of all persons;
(c) All tangible Collateral is to be kept at the business to be
maintained at Debtor's principal place of business, and will not be removed
therefrom, except in the ordinary course of business, without the prior
written consent of Secured Party, provided, however, that it may move
tangible Collateral to a location of an affiliate with respect to which
Secured Party also has a perfected security interest in like Collateral; and
(d) Debtor will, at its own cost and expense, keep the Collateral
in as good and substantial repair as the same is in at this date, or as the
same exists when acquired, reasonable wear and tear excepted, making
replacements when and where necessary and, in this connection,
<PAGE> 35
Secured Party hereby agrees that it will give its written consent to the
removal by Debtor of the same, or any part thereof, from the above described
property if and to the extent that such removal is necessary or advisable so
to do in connection with Debtor's fulfilling of its obligations under this
subparagraph 1', as long as such Collateral is replaced by Collateral which
is unencumbered and of equal value and if, in the opinion of Secured Party,
the priority of its security interest therein will not be jeopardized.
(e) The Collateral is not subject to any other liens except the
first priority liens in favor of Secured Party set forth herein.
2. Upon request and as instructed by Secured Party, Debtor agrees to
comply with the requirements of all applicable state and federal laws in
order to grant to Secured Party a valid lien upon, and a security interest
in, the Collateral described herein, or which may be described in any
amendment supplementary hereto.
3. Debtor will pay, when due, all taxes, assessments, and other charges
lawfully and validly levied or assessed upon the Collateral or any part
thereof, and Debtor will pay any and all fees, costs and expenses, of
whatever kind and nature, which Secured Party may incur in filing public
notices, and the reasonable charges of any attorneys whom Secured Party may
engage in preparing and filing such documents, making title examinations and
rendering opinion letters, as well as expenses incurred by Secured Party,
including reasonable attorney's fees, in protecting, maintaining, preserving,
enforcing or foreclosing the security interest granted to Secured Party
hereunder, whether through judicial proceedings or otherwise, or in defending
or prosecuting any actions or proceedings arising out of or relating to this
transaction, promptly after Debtor shall have been notified by Secured Party
of the amount of such fees, costs or expenses.
4. Debtor agrees that Secured Party, or its agents, may enter upon
Debtor's Property at any time, and from time to time, for the purpose of
inspecting the Collateral, and any and all records pertaining thereto.
Debtor agrees to promptly notify Secured Party of any change in its
mailing address or principal place of business, in order that a prompt
refiling of any outstanding notices may be made, if necessary. Debtor shall
also advise Secured Party, within thirty (30) days, of any new facts known to
Debtor which, under the applicable provisions of law, would affect the
priority of the security interest granted to Secured Party by this instrument.
5. Debtor will have and maintain insurance at all times with respect to
all Collateral in types, forms, amounts and in the manner as specified in the
Loan Documents, such insurance to be payable to Secured Party. All policies
of insurance shall provide for thirty (30) days written minimum cancellation
notice to Secured Party and Debtor shall furnish Secured Party with
certificates or other evidence satisfactory to Secured Party of compliance
with the foregoing insurance provisions as set forth herein and in the Loan
Documents.
6. At its option, Secured Party may discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the
Collateral, may pay for insurance on the Collateral and may pay for the
maintenance and preservation of the Collateral. All such sums, as well as
costs, advanced by Secured Party pursuant to this Security Agreement shall be
due immediately from Debtor to Secured Party, shall be secured hereby and
shall bear interest at the
<PAGE> 36
highest Default Rate specified in any note or other agreement evidencing the
Obligations and if no such instrument exists, then at the highest rate
allowed by law, from the date of payment by Secured Party until the date of
repayment by Debtor. Until default, Debtor may have possession of the
Collateral and use it in any lawful manner not inconsistent with this
Security Agreement and not inconsistent with any policy of insurance thereon.
7. Debtor shall be in default under this Security Agreement upon the
happening of any of the following events or conditions:
(a) Default in the payment or performance of any Obligations,
covenants or liabilities contained or referred to herein or if there should
occur an event of default under any Loan Documents or any other obligation
secured hereby; or
(b) If any written warranty, representation or statement pertaining
to Collateral set forth in this Agreement, made or furnished to Secured Party
by Debtor, or by any other party or agency clearly authorized by Debtor to
make such written warranty, representation or statement, proves to have been
false in any material respect when made or furnished.
8. (a) Upon the occurrence of any event of default, as described
above, and at any time thereafter, Secured Party may declare all obligations
secured hereby immediately due and payable, and shall have the remedies of a
secured party under the Uniform Commercial Code as adopted in Florida.
Secured Party may require Debtor to assemble and deliver the Collateral and
make it available to Secured Party at a place to be designated by Secured
Party which is reasonably convenient to both parties. Secured Party may
peaceably, by its own means or with judicial assistance, enter Debtor's
Property and Debtor will not resist or interfere with such action. Unless
the Collateral is perishable or threatens to decline speedily in value or is
a type customarily sold on a recognized market, Secured Party will give
Debtor reasonable notice of the time and place of any public sale thereof, or
of the time after which any private sale or any other intended disposition
thereof is to be made. The requirements of reasonable notice shall be met if
such notice is mailed, postage prepaid, to the address of Debtor shown at the
beginning of this Security Agreement at least five (5) days before the time
of the sale or disposition. Expenses of retaking, holding, preparing for
sale, selling or the like shall include the Secured Party's reasonable
attorney's fees and legal expenses.
(b) In case of the exercise of any of the rights of Secured Party
hereunder, all Collateral, and other property or security given to secure the
indebtedness secured hereby, may be offered for sale for one total price, and
the proceeds of such sale accounted for in one account without distinction
between items of security or without assigning to them any proportion of the
proceeds of such sale, Debtor insofar as it legally may so do hereby waiving
the application of any doctrine of marshalling, or the Collateral, or such
other property or security, may be offered for sale separately, and sales may
be held from time to time, and all powers of Secured Party shall not be fully
executed until all Collateral, and such other property or security, shall have
been sold.
9. No waiver by Secured Party of any default shall operate as a waiver
of any other default or of the same default on a future occasion. All rights of
Secured Party hereunder shall
<PAGE> 37
inure to the benefit of its successors and assigns; and all obligations of
Debtor shall bind its successors and assigns. If there be more than one
Debtor, their obligations hereunder shall be joint and several.
10. The covenants and agreements herein contained shall extend to,
inure to the benefit of, and be binding upon, the respective successors,
heirs, executors, administrators and assigns of the parties hereto, the same
as if they were in every case named and expressed.
11. Debtor covenants and agrees to execute such financing statements,
security agreements or other instruments with respect to the Collateral as
Secured Party may request, and hereby authorizes Secured Party to execute and
file, at any time, such financing statements without Debtor's signature.
Debtor agrees that Secured Party may file this Security Agreement in lieu of
any such financing statement.
THE PARTIES HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AMENDED AND RESTATED SECURITY AGREEMENT AND ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE SECURED PARTY ENTERING INTO THIS
AGREEMENT.
IN WITNESS WHEREOF, Debtor has caused this instrument to be duly
executed on its behalf as of the day and year first above written.
Signed, sealed and delivered
in the presence of:
/s/ Theodore R. Walters DYCOM INDUSTIES, INC.
A Florida Corporation
/s/ Carmen Alzarez By /s/ Thomas R. Pledger
Thomas R. Pledger,
Chairman and Chief Executive Officer
<PAGE> 38
STATE OF Texas )
: SS.
COUNTY OF Dallas )
The foregoing instrument was acknowledged before me this 29th day of
April 1998, by Thomas R. Pledger, as Chairman and Chief Executive Officer of
DYCOM INDUSTRIES, INC. A Florida Corporation, who produced the following as
identification Florida driver's license and who did not take an oath.
/s/ Kimberly Kile
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
March 3, 2002
EXHIBIT "A"
Description of the Collateral
All of the Debtor's right, title and interest in the following items of
personal property, wherever located, whether now owned or hereafter acquired,
together with all replacements and additions therefor and all cash and
non-cash proceeds (including insurance proceeds) thereof:
(A) All machinery, equipment, vehicles, vessels, aircraft,
fixtures, appliances, furniture and other tangible assets, now owned or
hereafter acquired and wherever located.
(B) All inventory now owned or hereafter acquired and products and
proceeds thereof.
(C) All accounts, contract rights and accounts receivable, now or
hereafter in existence and all proceeds thereof, and all returned or
repossessed goods arising from or relating to any of the said accounts or
rights.
(D) All instruments, documents, chattel paper and general intangibles,
now owned or hereafter acquired or arising.
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(E) All cash or non-cash proceeds of any of the foregoing,
including insurance proceeds.
(F) All ledger sheets, files, records, documents, and instruments
(including but not limited to, computer programs, tapes and related
electronic data processing software) evidencing an interest or relating to
the above.
(G) All substitutes and replacements for, accessions, attachments,
and other additions to, and tools, parts, and equipment used in connection
with any of the above.
Together with all instruments, documents, chattel papers and general
intangibles relating to or arising from the foregoing Collateral and all cash
and non-cash proceeds and products thereof.
THIS EXHIBIT "A" TO SECURITY AGREEMENT executed by Debtor this 29th day
of April, 1998.
DYCOM INDUSTRIES, INC.
A Florida corporation
By: /s/ Thomas R. Pledger
Thomas R. Pledger,
Chairman and Chief Executive Officer
<PAGE> 40
AMENDED AND RESTATED GUARANTY AGREEMENT
This continuing, absolute and unconditional amended and restated guaranty
given by the undersigned (the "Guarantor") to induce DRESDNER BANK LATEINAMERIKA
AKTIENGESELLSCHAFT, Miami Agency, an International Bank Agency licensed by
the State of Florida, BANK LEUMI USA, a New York Banking Corporation,
REPUBLIC NATIONAL BANK OF MIAMI, N.A., a National Banking Association,
(collectively, the "Existing Lenders") and SUNTRUST BANK SOUTH FLORIDA, N.A.,
a National Banking Association ,and ISRAEL DISCOUNT BANK LIMITED, Miami
Agency, an International Bank Agency licensed by the State of Florida
(collectively, the "New Lenders") (the Existing Lenders and the New Lenders
together, the "Lenders") having a business address of P.O. Box 01-6039,
801 Brickell Avenue, Miami, FL 33131 to extend credit to or otherwise become
or remain the creditor of DYCOM INDUSTRIES, INC., a Florida corporation, (the
"Borrower");
In consideration of the foregoing, the Guarantor does hereby agree with the
Lenders as follows:
1. GENERAL.
This Amended and Restated Guaranty Agreement provides for the inclusion
of the New Lenders as additional obligees of Borrower, and represents the
continuing, absolute and unconditional guaranty by the undersigned of all of
Borrower's existing and new obligations to the Existing Lenders and to the New
Lenders.
2. OBLIGATION OF GUARANTOR.
The Guarantor absolutely and unconditionally guarantees to the Lenders,
their successors and assigns (whether collateral assigns or otherwise), the
prompt and full payment in United States currency and performance to the
Lenders at the place of business of the Lenders set forth above or at such
other place and to such other person as the Lenders may designate at maturity
of any and every obligation, in connection with which either as maker,
drawer, guarantor, endorser or otherwise, whether directly, indirectly or
contingently, the Borrower is, either individually or jointly and severally
with any other person or persons, nor or shall become at any time in the
future liable to the Lenders, with interest thereon at the rate or rates
provided in the obligations guaranteed hereby or at the maximum rate allowed
from time to time by law in Florida, whichever is less, until payment in full
has been received by Lenders, together with all attorneys' fees, costs and
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expenses of collection whether suit be brought or not, including costs,
expenses and attorneys' fees on appeal if an appeal is taken from any suit,
incurred by the Lenders, in connection with any matter covered by this
Guaranty. The Guarantor also absolutely and unconditionally guarantees the
full and timely performance of all duties and obligations whatsoever of the
Borrower to Lenders, whether now existing or hereafter arising, and agrees in
the event the Borrower fails to fully and timely perform any of said duties and
obligations to fully and timely perform same.
3. TERM OF GUARANTY.
The liability of the Guarantor hereunder shall continue until the earlier
of (i) the 120th day after this Guaranty is marked "Cancelled" by the Lenders
and returned to the Guarantor or, (ii) until the Lenders shall receive
written notice, by registered mail signed by the Guarantor, cancelling this
Guaranty, but such cancellation shall not affect in any way the continuing
liability of the Guarantor on any transactions covered by this Guaranty up to
the time of the actual receipt by the Lenders of such notice of cancellation,
including any advance or other monies which may at any time thereafter be
made by the Lenders to the Borrower pursuant to any agreement, promissory
note or other instrument or document evidencing any indebtedness of the
Borrower to the Lenders, entered into prior to the receipt by the Lenders of
said notice by the Guarantor. Notwithstanding the receipt by the Lenders of
any notice of cancellation hereunder, the Lenders may in their discretion
amend, modify and renew in any way whatsoever any agreement, promissory note
or other instrument or document evidencing any indebtedness of the Borrower
to the Lenders and in existence at the time said notice of cancellation is
received by the Lenders, all without affecting in any way whatsoever the
continuing liability of the Guarantor hereunder, but the liability of the
Guarantor solely in regard to the principal amount owed the Lenders shall not
exceed the amount of principal owing to the Lenders at the time said
notice of cancellation is received by the Lenders together with such
additional amounts as may thereafter be advanced by the Lenders to or on
behalf of the Borrower pursuant to any such agreement, promissory note or
other instrument or document in existence at the time said notice is received
by the Lenders. In the event said notice of cancellation is given, the
liability of the Guarantor shall continue without limitation whatsoever for
all amounts other than principal (which is limited under the preceding
sentence) due the Lenders such as nterest, attorney's fees, costs, and other
such amounts.
4. BANKRUPTCY OF BORROWER.
Notwithstanding that the Guaranty may have been cancelled under
paragraph 3, and/or returned to the Guarantor, to the extent the Borrower has
made any payments to the Lenders within the one (1) year period following the
date this Guaranty was so cancelled, and the Guarantor was obligated under
this Guaranty for said payments, the liability of
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the Guarantor hereunder shall at all times continue for the amounts so paid
by the Borrower to the Lenders. If, for any reason, (e.g. bankruptcy, or
otherwise), the Lenders are not permitted to retain the payments so made by
the Borrower during said one (1) year period, the Guarantor shall be liable
under this Guaranty for the amount of such payments as if this Guaranty had
never been cancelled and the Lenders shall be entitled to recover said amount
so paid by the Borrower within said one (1) year period. Anything in this
Guaranty to the contrary notwithstanding, if at any time this Guaranty is to
be cancelled under the provisions of paragraph 3, the Lenders may retain this
Guaranty for a period of one hundred twenty (120) days after the date said
Guaranty is to be so cancelled and in the event no bankruptcy petition has
been filed by or against the Borrower for the one (1) year period following
the date the Guaranty is to be cancelled, then, in that event, the Guaranty
shall be returned to the Guarantor. If, however, a bankruptcy petition has been
filed by or against the Borrower during the one (1) year period, and the
Borrower has made payments to the Lenders during the one (1) year period,
this Guaranty shall not be cancelled and/or returned to the Guarantor unless
and until a decision by a court of competent jurisdiction, or other agreement
has been entered or reached, pursuant to which the Lenders shall be entitled
to retain all such monies paid during the one (1) year period. If, as set
forth above, the Lenders are obligated to return to the Borrower any monies so
paid during the one (1) year period, this Guaranty shall not be cancelled
(notwithstanding it being arked "Cancelled" and returned to the Guarantor)
and the Guarantor shall continue to be liable to the Lenders for all monies
paid during the one (1) year period. If the Lenders shall have marked this
Guaranty "Cancelled" and/or returned this Guaranty to the Guarantor, and
under the provisions of this paragraph 4 or paragraph 3, the Guarantor has
continuing liability to the Lenders for certain amounts which the Lenders
have or are obligated to return to the Borrower, then, in such case, the
Lenders may enforce their rights under this Guaranty upon any copy of this
Guaranty notwithstanding the fact that the original of this Guaranty may have
been marked "Cancelled" and/or returned to the Guarantor.
5. CONSENT TO LENDERS' ACTS.
The Guarantor consents, without affecting in any way the Guarantor's
liability to the Lenders hereunder, that the Lenders may, without notice to
or consent of the Guarantor and upon such terms as they may deem advisable
and with or without consideration and after notice of cancellation is
received by the Lenders under paragraph 3 hereof: (a) extend, in whole or in
part, by renewal or otherwise, and as often as the Lenders may wish, the time
of payment of any indebtedness owing by the Borrower, to the Lenders, or
held by the Lenders as security for any such obligation; (b) release,
surrender, exchange, modify, impair, or extend the period of duration, or the
time for performance of payment, of any collateral securing any obligation of
the Borrower to the Lenders; (c) settle or
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compromise any claim of the Lenders against the Borrower, or against any
other person, firm or corporation, whose obligation is held by the Lenders as
collateral security for any obligation of the Borrower to the Lenders; and
(d) release in whole or in part any person liable for the payment of any
obligation of the Borrower to the Lenders including, but not limited to, any
person liable as an endorser, guarantor or judgment debtor (if the Lenders
obtain a judgment on any obligation of the Borrower) of said obligation and,
in any event, any such release shall not affect the liability of the
Guarantor for the entire amount of any and every obligation of the Borrower
to the Lenders. Further, the Lenders shall not be under any obligation
whatsoever to obtain or perfect or to maintain the perfection of any security
interest or other lien on property to secure indebtedness of the Borrower to
the Lenders and the Lenders shall have no obligation to, and shall not have
any liability for failing to, obtain or perfect or to maintain the perfection
of any security interest or lien on property to secure indebtedness of the
Borrower. Any failure of the Lenders to obtain and perfect or to maintain
the perfection of any security interest or lien shall no affect in any way
whatsoever the obligation of the Guarantor to the Lenders under this
Guaranty. The Guarantor hereby ratifies and confirms any such extension,
renewal, release surrender, exchange, modification, impairment, settlement,
or compromise, and all such actions shall binding upon the Guarantor who
hereby waives all defenses, counterclaims, or offsets which the Guarantor
might have by reason thereof.
6. WAIVERS BY GUARANTOR.
The Guarantor waives: (a) notice of acceptance of this Guaranty by the
Lenders; (b) notice of presentment, demand for payment, notice of dishonor
or protest of any of the Borrower's obligations or the obligation of any
person, firm, or corporation held by the Lenders as collateral security for
the Borrower's obligation; (c) notice of the failure of any person, firm, or
corporation to pay to the Lenders any indebtedness held by the Lenders as
collateral security for any obligation of the Borrower; (d) failure of the
Lenders to obtain and perfect or maintain the perfection or priority of any
security interest or lien on property to secure any indebtedness of the
Borrower; and (e) all defenses, offsets and counterclaims which the Guarantor
may at any time have to any claim of the Lenders against the Borrower.
7. SUBROGATION.
Nothing herein contained is intended or shall be construed to give to
Guarantor any right of subrogation in or under any note, security document or
any other loan document evidencing in any way or relating to any obligation
of the Borrower to the Lenders which is or may be covered by this Guaranty,
any right to participate in any way therein, or in the right, title and
interest of the Lenders in or to any collateral covered by any loan or
security documents relating to any such obligations notwithstanding any
payments made
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by Guarantor under this Guaranty, all such rights of subrogation and
participation being hereby expressly waived and released.
8. SUBORDINATION.
In the event that for any reason whatsoever, the Borrower is now or
hereafter becomes indebted to the Guarantor, the Guarantor agrees that the
amount of such indebtedness and all interest thereon shall at all times be
subordinate as to lien, time of payment and in all other respects to all
obligations of the Borrower to the Lenders which are covered by this
Guaranty, and that the Guarantor shall not be entitled to enforce or receive
payment thereof until all sums then due and owing to the Lenders shall have
been paid in full. If any payment shall have been made to the Guarantor by
the Borrower on any said indebtedness during any time that there are
obligations outstanding from the Borrower to the Lenders which are covered by
this Guaranty, the Guarantor shall hold in trust all such payments for the
benefit of the Lenders and shall make said payments to the Lenders to
be credited and applied against obligations of the Borrower to the Lenders,
whether matured or unmatured, in accordance with the discretion of the Lenders.
9. REPRESENTATIONS BY GUARANTOR.
The Guarantor represents that, at the time of the execution and delivery
of this Guaranty, nothing exists to impair the effectiveness of the liability
of the Guarantor to the Lenders hereunder, or the immediate taking effect of
this Guaranty as the sole agreement between the Guarantor and the Lenders
with respect to guaranteeing the Borrower's obligation to the Lenders.
10. REMEDIES OF LENDERS.
The Lenders may at its option proceed in the first instance against the
Guarantor to collect any obligation covered by this Guaranty, without first
proceeding against the Borrower for said obligation, or any other person,
firm or corporation liable for said obligation, and without first resorting
to any property at any time held by the Lenders as collateral security for
said obligation and without any marshalling of assets whatsoever. The
Guarantor hereby grants to the Lenders a lien on, and a security interest in,
the deposit balances, funds, accounts, items, certificates of deposit,
securities, other property and the moneys of the Guarantor now or hereafter
in the possession or custody of any of the Lenders for any purpose (including
property left in safekeeping or custody) or on deposit with any of the
Lenders to secure, and as collateral for, the payment and performance of
this Guaranty as well as of any other obligation or liability (present or
future, absolute or contingent, due or not due) of Guarantor to any of the
Lenders. Any such Lender may at any time and from time to time, without
demand or notice, appropriate and set off against
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such deposit balances, funds, accounts, items, certificates of deposit,
securities, other property and moneys and apply the same to the obligations
of the Guarantor hereunder. Each of the Lenders shall further have any other
rights provided by law or under any other document, all of which rights are
cumulative.
11. CONSTRUCTION AND BENEFIT.
This Guaranty is delivered and made in, and shall be construed pursuant
to and governed by, the laws of the State of Florida, and is binding upon the
Guarantor and its legal representatives and successors, and shall inure to
the benefit of the Lenders, their respective successors and assigns.
12. MISCELLANEOUS.
In the event it becomes necessary for the Lenders to exercise their
rights under this Guaranty, whether suit be brought or not, the Guarantor
shall be liable for all costs and attorneys' fees incurred by the Lenders,
including costs and attorneys' fees incurred by the Lenders on appeal. To
the extent the Guarantor is obligated to make any payments to the Lenders
under this Guaranty, the Lenders may offset and retain in payment of said
amounts any and all monies of the Guarantor in the possession of any of the
Lenders at any time, including, but not limited to, any accounts of the
Guarantor at any of the Lenders. In the further event the Lenders obtain a
final judgment against the Guarantor upon this Guaranty, the judgment shall
bear interest not at the judgment rate but at the highest rate permitted by
applicable law from time to time in effect at the time of said judgment.
Further, the Guarantor agrees that the proper venue for any action which may
be brought under this Guaranty, in addition to any other venue permitted by
law, shall be in the county in which is located the Lenders' business office
as designated above or the office of an assignee of this Guaranty. The
liability of the Guarantor hereunder, if more than one, shall be joint and
several. The term "Lenders" shall be deemed to include the aforementioned
Lenders and all their respective departments and any individual, partnership
or corporation acting as their nominee or agent, and any of their respective
corporate subsidiaries or affiliates, the stock of which is owned or
controlled, directly or indirectly, by it or by any affiliate of any of the
Lenders. The term "Borrower" shall include the individual or individuals,
association, partnership, corporation or other entity named herein as
Borrower and (a) any successor individual or individuals, association,
partnership, corporation or other entity to which all or substantially all of
the business or assets of said Borrower shall have been transferred, (b) in
the case of a partnership Borrower, ny new partnership which shall have been
created by reason of the admission of any new partner or partners therein
and/or the dissolution of the existing partnership by the death, resignation or
other withdrawal of any partner, and (c) in the case of a corporate Borrower,
any other corporation into or with which said Borrower shall have
<PAGE> 46
been merged, consolidated, reorganized, purchased or absorbed.
13. FINANCIAL STATEMENTS.
At the request of the Lenders, the Guarantor shall, from time to time,
prepare and deliver to the Lenders a complete and current financial statement
of the Guarantor setting forth all the assets and liabilities of the
Guarantor (and to the extent any person other than the Guarantor has any
interest in said assets or any person other than the Guarantor is jointly
liable for any of said obligation, said matters shall be set forth in their
entirety in the financial statements) all signed by the Guarantor under oath
as being true and correct. To the extent any assets or liabilities set forth
on said financial statement are owned by the Guarantor with his or her spouse
or for which there is any such joint liability, all said assets shall be so
specified and set forth.
14. COMPLETE AGREEMENT.
The whole of this Guaranty is herein set forth and there is no verbal or
other written agreement, and no understanding or custom affecting the terms
hereof. This Guaranty can be modified only by a written instrument signed by
the party to be charged therewith.
THE PARTIES HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AMENDED AND RESTATED GUARANTY AGREEMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE LENDERS ENTERING INTO THIS AGREEMENT.
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IN WITNESS WHEREOF, The Guarantor has signed this agreement on the 29th
day of April, 1998.
Signed, sealed and delivered
in the presence of: ANSCO & ASSOCIATES, INC.
a Florida corporation
/s/ Theodore R. Walters
WITNESS
/s/ Carmen Alvarez By: /s/ Thomas R. Pledger
WITNESS Thomas R. Pledger, Vice-President
ADDRESS________________________ _______________________
STATE OF Texas
COUNTY OF Dallas
The foregoing instrument was acknowledged before me by Thomas R. Pledger, as
Vice-President of ANSCO & ASSOCIATES, INC., a Florida corporation, the 29th
day of April, 1998.
/s/ Kimberly Kile
(NOTARIAL SEAL) NOTARY PUBLIC
My commission expires: March 3, 2002
