UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-K
Travel Ports of America, Inc.
(Exact name of registrant as specified in its charter)
New York 16-1128554
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3495 Winton Place, Building C, Rochester, New York 14623 (Address
of principal executive offices)
Registrant's telephone number (716) 272-1810
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock (Par Value $.01 per share) NASDAQ
- --------------------------------------- ------
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
THIS REPORT CONSISTS OF 87 PAGES.
THE INDEX TO EXHIBITS APPEARS ON PAGE 41.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
Indicate by check mark if disclosures of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
acknowledgment to this Form 10-K.
[x]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant is $12,022,210.79. Market value is determined by reference to
the closing price of the Registrant's stock on July 2, 1998.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the close of business on July 2, 1998.
Class Number of shares outstanding
Common Stock, Par Value 6,534,767
$.01 Per Share
Documents incorporated by reference and the Part of the Form 10-K into
which they are listed here under.
PART OF FORM 10-K DOCUMENT INCORPORATED
Part III
Items 10, 11, 12 and 13 Registrant's Proxy Statement
Directors and Executive for the Annual Meeting of
Officers of the Registrant, Shareholders to be held on
Executive Compensation, October 27, 1998
Security Ownership of
Certain Beneficial Owners
and Management, and Certain
Relationships and Related
Transactions, respectively.
TRAVEL PORTS OF AMERICA, INC.
TABLE OF CONTENTS
Item Page
PART I 1 Business................................................. 4
2 Properties............................................... 14
3 Legal Proceedings........................................ 14
4 Submission of matters to a vote of Security Holders...... 15
PART II 5 Market for the Registrant's Common Equity and Related
Stockholder Matters...................................... 15
6 Selected Financial Data.................................. 16
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 17
8 Financial Statements and Supplementary Data.............. 22
9 Disagreements on Accounting and Financial Disclosure..... 40
PART III 10 Directors and Executive Officers of the Registrant....... 40
11 Executive Compensation................................... 40
12 Security Ownership of Certain Beneficial Owners and
Management............................................. 40
13 Certain Relationships and Related Transactions......... 40
PART IV 14 Exhibits, and Financial Statement Schedules............ 40
Signatures.............................................. 49
PART I
Item 1. Business
Travel Ports of America, Inc. (Company) operates sixteen (16) 24-hour
per day travel plazas and one (1) fuel terminal in New York, New Jersey, North
Carolina, New Hampshire, Indiana, Maryland and Pennsylvania.
During 1998, the Company organized wholly owned subsidiaries to
facilitate the franchising of the Travel Port operations. Travel Port Systems,
Inc. (TPS) is a Delaware company which owns the Travel Port trade name. Travel
Port Franchising, Inc. (TPF), also a Delaware company, was formed to enter into
and administer franchising agreements with third-party franchisees.
The travel plazas sell, both to the trucking industry and to others,
petroleum products (such as diesel fuel, gasoline and lubricants), and generally
include a truck service and repair shop, a tire and parts center, a truck wash,
scales for weighing trucks, parking facilities, motel rooms, a family-style
restaurant, a travel store, shower and laundry facilities, game rooms, telephone
facilities, money transfer facilities, a convenience store at the gasoline pump
area, and billing and accounting services for truck fleet operators. The Company
hopes to continue to attract both the trucking industry and the general
traveling public by maintaining clean, efficient travel plazas.
The Company's strategic plan calls for continued growth within its
current or surrounding market area through the acquisition and/or construction
of additional facilities if and when opportunities occur. Acquisitions, to the
extent feasible, will be facilities providing most or all of the services that
the Company believes are desirable. New facilities generally will be constructed
to provide all of such services.
The Company derives certain benefits from being the operator of
multiple travel plazas. The Company has the ability to acquire the products that
it sells on a volume discount basis. Since it buys petroleum products, food and
other merchandise for several facilities, the Company is often able to acquire
such products at discounted prices.
In addition to favorable purchasing, the Company's multi-unit structure
provides marketing opportunities that might not otherwise be available. In
addition to normal drive-in traffic, truck stop operators, including the
Company, often enter into arrangements with the operators of truck fleets in
which the fleet operator sends all of its drivers who use an applicable route to
a certain travel plaza, primarily to take advantage of a centralized billing and
accounting system such as that offered by the Company. By offering several
facilities, on different routes, the Company is in a better position to attract
and retain such arrangements. Also, the Company maintains a sales force that
seeks out and attempts to enter into such arrangements with fleet operators
whose home offices may not be near some of the Company's facilities.
The products and merchandise purchased and sold by the Company are not
unique and generally can be obtained readily from a variety of sources at
competitive prices. There are many sources of petroleum products, tires and
truck parts, restaurant food, supplies and merchandise for the Company's travel
and convenience stores. Most of the products purchased by the Company are
acquired on an as needed basis, through purchase orders. The Company currently
buys petroleum products from major oil companies and from Griffith Oil Co., Inc.
(Griffith Oil), which is owned by Sugar Creek Corporation. The principal
shareholder and Chief Executive Officer of the Company owns and operates Sugar
Creek Corporation. The Company buys its restaurant food primarily from a single
unrelated food distributor, and its other products and merchandise from various
suppliers. Except for the Company's fuel purchase agreements, including the one
with Griffith Oil, which expires December 31, 2005, all of these arrangements
can be terminated at will.
The Company has no customer accounting for more than four percent (4%)
of its sales. Therefore, the loss of any single customer would not have a
materially adverse effect on the Company's business.
Company Developments
On April 30, 1994, the Company acquired certain assets of Exit 3 Truck
Services, Inc. in Greenland, New Hampshire. The acquisition consisted of the
purchase of inventory and the leasehold interest in the real property on which
the truck stop is located. The Company has since signed a new 20 year lease on
the real property with two five year extensions. The Company has purchase
options throughout the term of the lease.
On June 30, 1994, the Company entered into a $2,500,000 term loan
agreement with its primary lender covering the acquisition and certain
improvements to the facility in Greenland, New Hampshire. Principal payments are
$20,833.33 per month plus interest at the fixed rate of 9.65%. The loan is
amortized over ten years with a balloon payment due on June 29, 1999.
On September 29, 1994, the Company entered into an eight year term loan
with its primary lender in the amount of $10,500,000. Proceeds from this loan
were used for payment of a term loan due in 1996 at prime plus 1.25%, payment of
$1.5 million due on the line of credit and capital expenditures. The loan has a
fixed rate of 10.12% with interest only for six months. From April 1, 1995 until
the loan matures a monthly payment of principal and interest in the amount of
$166,957.84 is payable with all remaining principal and interest due September
29, 2002.
The Company, through a private placement, issued $4,650,000 of
Convertible Senior Subordinated Debentures due January 15, 2005, together with
warrants to purchase additional shares of the Company's Common Stock. The
securities were sold under Regulation D of the Securities Act of 1933 (the
"Act") and in offshore transactions under Regulation S of the Act. The
debentures carry an annual interest rate of 8.5%, payable quarterly, and are
convertible into the Company's Common Stock at a price equal to $3.00 per share
at the option of the holder at any time. The debentures are callable at the
discretion of the Company after January 15, 1998, at a redemption price equal to
109% as of January 15, 1998, and gradually decreasing to 100% at maturity on
January 15, 2005. The warrants, which are exercisable at any time, entitled
warrant holders to purchase up to a total of 15,500 shares of the Company's
Common Stock at a price of $3.60 per share. The underwriter was issued warrants
for 77,500 shares of the Company's Common Stock at a price of $3.60 per share in
conjunction with this transaction. As a result of the stock dividend issued
April 29, 1997, the bond conversion price was adjusted to $2.83 and the warrant
price was adjusted to $3.40. The number of warrants was increased to 98,580. As
a result of the stock dividend issued April 23, 1998, the bond conversion price
was adjusted to $2.62 and the warrant price was adjusted to $3.15. The number of
warrants was increased to 106,467.
During fiscal 1998, $500,000 of the 8.5% debentures were converted into
178,092 shares of common stock, after adjusting for the 1998 and 1997 stock
dividends of 8% and 6%, respectively. At April 30, 1998, $4,150,000 of the 8.5%
convertible senior subordinated debentures and 106,467 of the warrants remain
outstanding.
On June 15, 1995, the Company sold its facility at Fairplay, South
Carolina to an unrelated third party. The transaction was for the net book value
and the Company received a mortgage on the property for a portion of the
purchase price.
On March 1, 1996, the Company took over the operation of the Baltimore
Port Truck Plaza. The Company signed a seven year lease on the property.
On October 4, 1996, the Company entered into a permanent financing
arrangement for its Harborcreek, Pennsylvania facility (which was opened in June
1996) with its primary lender in accordance with the Restated and Amended Credit
Agreement dated December 21, 1995 in the amount of $6,000,000. Interest is fixed
at 9.44% for ten years with level principal payments based upon a 15 year
amortization. A balloon payment is due on September 30, 2006.
On November 6, 1996, the Company entered into an agreement with its
secondary lender that (a) refinanced a mortgage loan due 2001 covering two
travel plazas in Pennsylvania, as well as a term loan due in 1997 and (b)
provided an additional $5,000,000 for 1996/97 capital expenditures. Interest is
fixed at 8.63% for five years with level principal payments based upon a 15 year
amortization. A balloon payment is due on April 10, 2002.
On December 4, 1997, the Company completed the sale of (1) $2,000,000
principal amount of 7.81% Convertible Subordinated Debentures due December 4,
2007, convertible at $4.30 per share and (2) Warrants to purchase 40,000 shares
of Common Stock, par value $.01 per share, of the Company at a price of $5.16
per share to Cephas Capital Partners, L.P. A value of $100,000 has been assigned
to the warrants in accordance with Accounting Principles Board Opinion No.
14(APB 14). The values of the subordinated debentures and additional paid in
capital were adjusted accordingly. As a result of the stock dividend issued
April 23, 1998, the bond conversion price was adjusted to $3.98 and the warrant
price was adjusted to $4.78. The number of warrants was increased to 43,200.
The Company renewed the agreement with its primary lender that (a)
provides a line of credit of $3,750,000 until September 28, 1999 and (b)
provides an additional $4,500,000 for a capital line of credit. The regular line
of credit is limited to the lesser of $3,750,000 or the sum of 80% of the
Company's accounts receivable under 90 days old, plus 45% of the Company's
inventory. As of April 30, 1998, the Company has utilized $200,000 of its
available line of credit as collateral for various letters of credit. The
capital line of credit calls for interest only at prime plus 1/4% until
September 28, 1999. At that time the line can be repaid or amortized over 42
months with interest at prime plus or LIBOR plus interest rate based upon funded
debt to EDITDA. No advances have been made against the capital line of credit.
The Company, through its subsidiary Travel Port Franchising, Inc., has
filed a franchise offering circular in 48 states. To date no franchise
agreements have been signed.
Information on major sales classifications is included in Item 7, page
18 of this report.
Capital Expenditures
For the fiscal year ended April 30, 1998, the Company's Capital
Expenditures for property, plant and equipment amounted to $6,171,272.
Products and Services
The Company provides the following products and services at its travel plazas
and mini-travel plazas.
1. Petroleum Products
The principal products sold by the Company at its travel plaza
locations are petroleum derivatives, primarily diesel fuel, gasoline and
lubricants. Each of the Company's travel plazas has diesel pump islands
accessible to all sizes of trucks and tractor-trailers, as well as gasoline pump
islands that are used primarily for automobiles at most locations. In addition,
a wide range of motor oils and other lubricants are available at all locations.
An agreement between the Company and Griffith Oil, that expires
December 31, 2005 requires the Company to purchase all of its petroleum products
for three of its facilities from Griffith Oil. The purchases for the three sites
for the year were approximately 12.4% of all petroleum purchases. In addition,
the Company purchased spot market pipeline tenders (bulk purchases) for its
Berwick, Pennsylvania (Beach Haven) terminal, from Griffith Oil. These pipeline
tenders accounted for approximately 5.1% of the petroleum products purchased by
the Company during the fiscal year ended April 30, 1998. Management believes
that the terms of the purchase agreement and the spot market purchases were fair
and competitive when compared with the purchasing opportunities for similar
products in like quantities from other vendors.
2. Parts and Service
Services and repairs are provided for trucks only, not for automobiles.
The Company provides services on an as needed basis, in the case of breakdowns
and unforeseen problems, and for regularly scheduled periodic maintenance for
truck fleets and other customers. In addition to providing services and repairs,
the Company also stocks tires and commonly needed parts at most of its
locations. Repair facilities are not available at Belmont, New York, Greenland,
New Hampshire, Baltimore, Maryland or Lake Station, Indiana. Truck washes, truck
scales and paved parking areas large enough to accommodate a number of
over-sized vehicles are also available at some or all of the Company's
facilities.
3. Restaurants
Each facility, with the exception of Mahwah, New Jersey, includes a
24-hour, family style restaurant where customers are served a variety of
"home-cooked" meals. The Company operates most of its restaurants under the name
"Buckhorn Family Restaurant". The Company purchases its food products in bulk
from unaffiliated sources and meals are prepared and cooked in on-site kitchens.
4. Motels
The Company's motel accommodations at travel plazas, which are
available to truck drivers and the general public, generally contain double
beds, basic furniture, a color television and a full bathroom. Rooms are
available at nightly rates ranging from $25-$49 per night. Public laundry
facilities are also available. Maybrook and Dansville, New York operate under a
franchise from Days Inn. Greencastle and Harborcreek, Pennsylvania and
Baltimore, Maryland operate under a franchise from the Rodeway Inn, Division of
Choice Hotels International.
5. Shopping
The Company operates both travel stores and convenience stores. Travel
stores carry a wide range of products often purchased by truck drivers including
health and beauty aids, snacks, tobacco products, western style clothing and
footwear, electronic products (CB radios, radar detectors, small televisions,
radios, stereos), gift items and many other items. Convenience stores, generally
located near the gasoline pump islands, and used more by the general traveling
public, offer bread, milk, beverages, snacks, food items and other products
usually found in such stores. The Company has an ATM machine at all of its
locations to provide cash services for its customers.
6. Billing and Accounting
The Company offers its own credit billing service to truck fleet
operators, permitting a driver to charge purchases of products and services.
This service provides the fleet operator with daily records of its drivers'
purchases through direct electronic transmission. The Company's electronic
billing system can accommodate customers who wish to pay on a cash basis to
avoid finance charges or the higher cost of credit billing.
Properties
The Company's principal office is located in approximately 7,567 square
feet of leased office space at 3495 Winton Place, Building C, Rochester, New
York 14623. The lease is through December 1999 at an average annual rent of
$60,168 plus common area charges with a three year extension until December 2002
and a five year extension until December 2007.
The Company attempts to locate its travel plazas at sites with a high
volume of truck and other traffic, as well as easy access for such highway
traffic. Sites are generally located just off interstate highways or on other
major highways. When and where possible, the Company seeks locations near
intersections of such major routes, so that facilities will be easily accessible
from more than one such route.
A description of the travel plazas, mini-travel plazas and other
facilities operated by the Company follows.
Travel Plazas
1. Dansville, New York. This eight acre site is located at the
Dansville interchange of Interstate Route 390, a major north-south highway in
western New York. The site, which is approximately forty miles south of the New
York State Thruway and thirty miles north of US Route 17, is leased from the
Livingston County Industrial Development Agency. The lease expires in March
2000, at which time the Company has both the right and the intention to buy all
of the land and improvements for $ 1.00. The travel plaza contains ten diesel
pumps with card readers, four gasoline fueling positions with pay at the pump
capability, a two-bay service area, a truck scale, six acres of paved parking,
showers, a game room, a one hundred thirty seat restaurant, a twenty room Days
Inn motel, a travel store and a small convenience store.
2. Maybrook, New York. This eighteen acre site is located at the
Maybrook interchange of Interstate Route 84, approximately ten miles east of US
Route 17 and eight miles west of the New York State Thruway. It is sub-leased
from a corporation owned by two people, one of whom is the principal shareholder
of the Company, under a lease that expires in March 2004 with three five year
renewal options available. The travel plaza contains eleven diesel pumps, four
gasoline fueling positions, a three-bay service area, a truck scale, showers,
game room, eight acres of paved parking, a one hundred thirty-eight seat
restaurant, a Pizza Hut Express, a thirty-six room Days Inn motel and a travel
store.
3. Binghamton, New York. The Company owns a ten acre site located in
suburban Binghamton at the intersection of US Route 17 and Interstate Route 81.
The travel plaza contains eight diesel pumps, a two-bay service area, a truck
scale, six acres of paved parking, a seventy-seven seat restaurant, snack bar,
showers, a travel store and a convenience store with two gasoline pumps.
4. Mahwah, New Jersey. This six acre site in northern New Jersey is
located on US Route 17, one interchange south of the New York State Thruway and
approximately ten miles north of Interstate Route 80. It is leased from an
unrelated landlord for a term expiring February 2002. The travel plaza contains
five diesel fueling positions, a one-bay service area, approximately four and
one-half acres of paved parking, truck scales, twelve motel rooms, a travel
store and showers.
5. Fultonville, New York. The Company owns a twenty acre site at Exit
28 of the New York State Thruway. The travel plaza contains eleven diesel pumps
with card readers, a two-bay service area, a truck scale, showers, seven acres
of paved parking, a one hundred twenty-seven seat restaurant, a fourteen room
motel, a travel store and a convenience store with four gasoline pumps.
6. Candler, North Carolina. The Company owns an eighteen acre site
located at Exit 37 of Interstate Route 40, less than ten miles west of
Interstate Route 26 and Asheville, North Carolina. The travel plaza contains ten
diesel pumps, four gasoline pumps, a two-bay service area, a truck scale,
showers, eight acres of paved parking, a one hundred forty seat restaurant and a
travel store.
7. Bloomsburg, Pennsylvania. The Company owns a sixteen acre site
located at Exit 34 on Interstate Route 80. The travel plaza contains twelve
diesel pumps with card readers, four pay at the pump gasoline pumps, a five-bay
service area, truck scales, game room, trucker lounge, snack bar, showers,
laundromat, travel store, a two hundred thirteen seat restaurant, a Subway and
convenience store and lighted paved parking.
8. Greenland, New Hampshire. This seven acre site is located at Exit 3
on Interstate Route 95. This facility is leased from an unrelated landlord for a
term expiring April 2014. The travel plaza contains eight diesel pumps with card
readers, four gasoline pumps, a truck scale, showers, game room, travel and
convenience store, a one hundred fifty-eight seat restaurant, a Pizza Hut
Express and lighted paved parking.
9. Milesburg, Pennsylvania. The Company owns an eleven and one half
acre site located at Exit 23 on Interstate Route 80. The travel plaza contains
eight diesel fueling lanes, four gasoline pumps, a three-bay service area,
showers, game room, travel store, a one hundred forty seat restaurant and
lighted paved parking.
10. Paulsboro, New Jersey. The Company owns a thirty-two acre site
located at the Mt. Royal Exit on Interstate Route 295. The travel plaza contains
twelve diesel pumps with card readers, eight gasoline pumps, a truck scale, a
thirteen room motel, laundromat, showers, a three-bay service area, game room,
travel store, a one hundred forty-two seat restaurant plus a banquet room and
lighted paved parking.
11. Porter, Indiana. The Company owns a thirty-six and one half acre
site located at 1600 US Highway 20 near Exit 22b on Interstate Route 94. This
travel plaza has a twenty-nine thousand square foot main building that contains
a travel store, a Subway, trucker lounge, showers, game room, broker's offices
and a one hundred sixty-two seat restaurant plus a banquet room. Additionally
there is a two-bay service area, truck wash, twelve diesel pumps with card
readers, eight gasoline fueling lanes with pay at the pump capability and
approximately nine acres of lighted paved parking.
12. Lake Station, Indiana. This twenty-four acre site is located on US
Highway 51, just north of Interstate Routes 80 and 90. This facility is leased
from an unrelated landlord until January 1999 with two ten year renewal options
available. This travel plaza has a thirty thousand square foot main building
that contains a travel store, convenience store, barber shop, a Subway,
truckers' lounge, game room, laundromat, showers, brokers' offices and a one
hundred sixty-six seat restaurant. There are seventeen diesel fuel islands with
card readers covered by a canopy, truck wash, truck scales and paved parking for
approximately two hundred and fifty trucks. In addition there are four gasoline
pumps with pay at the pump capability.
13. Greencastle, Pennsylvania. The Company owns a twenty-seven acre
site located at Exit 3 on Interstate Route 8 1, a few miles north of the
Maryland and Pennsylvania state border. The travel plaza consists of four
buildings, a convenience store with gasoline fuel islands, a thirty-six room
motel, a fuel building with a four-bay service area, truck scales, trucker's
store, snack bar, twelve diesel pumps with card readers and a main building with
a travel store, showers, a telephone room, a game room, trucker lounge and a one
hundred forty-nine seat restaurant.
14. Baltimore, Maryland. The Company leases a twenty-one acre travel
plaza and (across the street) a two and one fifth acre gasoline/convenience
store at Exit 57 on Interstate 95. The total facility consists of three
buildings. The gasoline and convenience store has 16 pumps for both gasoline and
diesel. The fuel building has a travel and convenience store and a Subway fast
food operation. The main building contains a super travel store, showers, a
telephone room, a game room, a Taco Bell Express, a sixty room motel and a
hundred thirty-eight seat restaurant. There are 16 diesel pumps with card
readers, truck scales and secured parking for 260 trucks.
15. Harborcreek, Pennsylvania. The Company owns a seventy-two acre site
of which twenty-four acres are used for the travel plaza at Exit 10 on
Interstate 90. The travel plaza consists of two buildings, a thirty-six room
motel and a main building. The main building has a travel and convenience store,
a two hundred twelve seat restaurant, a Pizza Hut Express, showers, a telephone
room, a game room, a trucker lounge and a three bay shop. There are ten diesel
pumps with satellites and card readers, a truck wash and truck scales. There are
four double sided gasoline pumps with pay at the pump capability. There is paved
parking for two hundred fifty trucks in addition to car and RV spaces.
16. Belmont, New York. The Company owns a nine acre site at the Belmont
interchange on US Route 17, in southwestern New York state. The mini-travel
plaza contains five diesel fueling lanes, four gasoline fueling positions, a
travel store, a convenience store, a fifty-two seat restaurant and three acres
of paved parking.
Other Facilities
1. Berwick, Pennsylvania (Beach Haven) The Company owns a five acre
site that is a pipeline terminal consisting of five above ground storage tanks
with a total capacity of 2,411,585 gallons. It is used to store diesel fuel and
home heating oil. An office building/warehouse is also located at the site.
Summary of Property Interest
The following table summarizes the Company's interests in real
property, as discussed above:
Date Approx. Leased or Rent Per Lease
Location Opened Acreage Owned Month (1) Expiration
- --------- ------ ------- -------- --------- ----------
Dansville, NY Mar 80 8 Leased (2) $ 4,000(3) Mar 2000
Maybrook, NY Mar 84 18 Leased (4) $37,500 Mar 2004
Binghamton, NY Mar 84 10 Owned N/A N/A
Mahwah, NJ Mar 84 6 Leased $ 8,788 Feb 2002
Fultonville, NY Mar 84 20 Owned N/A N/A
Belmont, NY May 86 9 Owned N/A N/A
Candler, NC Dec 86 18 Owned N/A N/A
Bloomsburg, PA Dec 86 13 Owned N/A N/A
Milesburg, PA Dec 86 12 Owned N/A N/A
Paulsboro, NJ Dec 86 32 Owned N/A N/A
Berwick, PA Dec 86 5 Owned N/A N/A
Porter, IN Jan 89 36 Owned N/A N/A
Lake Station, IN Jan 89 24 Leased (5) $29,583 Jan 1999
Greencastle, PA Dec 89 27 Owned N/A N/A
Rochester, NY Aug 91 Office Leased $ 5,014 Dec 1999
Greenland, NH Apr 94 7 Leased (6) $18,000 Apr 2014
Baltimore, MD Mar 96 23 Leased (7) $68,542 Feb 2003
Harborcreek, PA Jun 96 72 Owned N/A N/A
(1) In addition to the base rent listed in the above table, the Company is
required to pay, under its leases, all property taxes, maintenance expenses and
premiums for liability insurance on the respective properties. (2) The Company
has an option to purchase for $1.00 at the expiration of the lease term. (3)
Plus interest at 8.5% per annum on the declining principal balance of the
Industrial Development Loan for this facility. (4) Leased from Maybrook Realty,
Inc., a corporation owned by two people, one of whom is the principal
shareholder of the Company. The Company has the option to renew the lease for
three five year periods with monthly payments of $41,250, $45,375 and $49,913
respectively. The Company has the option to purchase the facility upon the
expiration of the lease or at the end of any extended term for $3,500,000. (5)
Leased from the previous owner of the Porter, Indiana facility. The Company has
an option to purchase the facility any time after January 1999 for $3,250,000.
If the Company does not purchase the facility, it also has the option to renew
the lease for two ten year periods with monthly payments of $31,050 and $35,707
respectively. (6) Leased from unrelated third party for 20 years with option to
renew for two five year periods. Purchase options of $2,400,000 from 5/l/99
through 4/30/04, $2,750,000 from 5/l/04 through 4/30/09 and the greater of fair
market value or $3,000,000 from 5/l/09 through 4/30/14. (7) Leased from
unrelated third party for 7 years. There are several purchase, sale, and
extension options affecting the property.
Competition
The truck stop business in general and the separate aspects that make
up such business are all highly competitive. There are many chain and single
operator truck stops throughout the Company's marketing area. The Company
attempts to satisfy its customers' needs by providing multiple services at one
location.
In addition to other truck stops, the Company faces competition from
major and independent oil companies and independent service station operators;
national and independent operators of motels and motel chains; national and
independent operators of restaurants, diners and other eating establishments;
and super markets, department stores, other convenience stores, drug stores and
other retail outlets.
Many of the Company's competitors, such as the major oil companies and
national and regional motel, restaurant and retail chains, are larger, better
established and have greater financial and other resources than the Company.
While the Company intends to attempt to offset these advantages by continuing to
offer all of its products and services in one, well chosen, highly visible and
easily accessible location, there can be no assurance that this marketing
strategy will be successful and profitable.
Regulation
The Company's fueling operations are subject to federal, state and
local laws and regulations concerning environmental matters. These laws and
regulations affect the storing, dispensing and discharge of petroleum and other
wastes and affect the Company both in the securing of permits for its fueling
operations and in the ongoing conduct of such operations. Facilities that engage
primarily in dispensing petroleum products have in the last ten years been the
subject of close scrutiny by regulators. Although the Company believes that it
maintains operating procedures satisfactory to comply with such regulations and
scrutiny, maintains environmental insurance on most of its facilities, and to
date has not had any material environmental claim or expense, there can be no
assurance that significant cleanup or compliance costs may not be incurred by
the Company and may affect the Company's earnings.
In addition, the Company's motel and restaurant operations are subject
to federal, state and local regulations concerning health standards, sanitation,
fire and general overall safety. In addition, truck stops must comply with the
requirements of local governmental bodies concerning zoning, land use and, as
discussed above, environmental factors. Difficulties in obtaining the required
licensing or approvals could result in delays or cancellations in the opening of
proposed new motor plazas. There have been no material problems with compliance
with regulations governing the Company's restaurant or motel operations.
Employees
As of April 30, 1998, the Company had a total of 1,447 employees, 1,170
full-time and 277 part-time. Of the full-time employees, 32 are involved in the
corporate office and administrative activities, 108 in travel plaza management,
4 in sales and marketing, 2 in design and construction management and the
balance in general operating duties, where all of the part-time employees are
involved.
The Company has never had a work stoppage and none of its employees are
represented by a labor organization. The Company believes that it provides
working conditions, wages and benefits that are competitive with other providers
of similar products and services, and considers its employee relations to be
excellent.
Item 2. Properties
A description of the Company's facilities is set forth under Item 1 of
this Report beginning on page 8 under the caption "Properties" and such
information is hereby incorporated by reference in this Item 2.
Item 3. Legal Proceedings
The Company is not presently a party to any litigation (i) that is not
covered by insurance or (ii) which singly or in the aggregate would have a
material adverse effect on the Company's financial condition and results of
operations, and management has no knowledge that any such litigation has been
threatened.
Item 4. Submission of matters to a vote of Security Holders.
Not Applicable
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock trades on the on the Nasdaq National Market
tier of The Nasdaq Stock Market under the Symbol: TPOA. The range of reported
high and low sale prices of the common stock during each quarter of the
Company's fiscal years ended April 30, 1998, and April 30, 1997, were as
follows:
1998 1997
---- ----
High Low High Low
1st Quarter 3 1/4 2 3/8 3 5/8 2
2nd Quarter 4 1/2 3 1/8 3 1/2 2 9/16
3rd Quarter 4 7/32 3 1/4 3 1/8 2 1/8
4th Quarter 4 1/4 3 23/64 3 1/16 2 1/4
As of April 30, 1998, the approximate number of holders of common stock of the
registrant was 1,900.
Sale prices are as reported by NASDAQ through April 30 of each year. All such
prices represent actual transaction prices versus bid quotations because of the
Company's inclusion on the NASDAQ National Market System.
The Company may not declare dividends without prior consent from its primary
lender. An 8% stock dividend was declared and issued on April 23, 1998 and a 6%
stock dividend was declared and issued on April 28, 1997.
Item 6. Selected Financial Data
Operations 1998 1997 1996 1995 1994
- ---------- ------------ ------------ ------------ ------------ ------------
Net Sales $211,508,861 $207,103,805 $165,164,391 $153,267,079 $137,575,675
Gross Profit
$ 48,734,292 $ 46,436,813 $ 39,142,697 $ 38,237,699 $ 34,610,393
Income before cumulative effect
of change in an accounting principle
$ 2,337,680 $ 1,700,205 $ 1,690,500 $ 1,890,032 $ 1,457,613
Cumulative effect of change in an
accounting principle
$ 0 $ 0 $ 0 $ 0 $ (99,735)
Net Income
$ 2,337,680 $ 1,700,205 $ 1,690,500 $ 1,890,032 $ 1,357,878
Earnings Per Share
Basic Income Per Share:
Income before cumulative effect
of change in an accounting principle
$ .38 $ .28 $ .28 $ .32 $ .25
Cumulative effect of change in an
accounting principle
$ .00 $ .00 $ .00 $ .00 $ (.02)
Net Income
$ .38 $ .28 $ .28 $ .32 $ .23
Basic Shares Outstanding
6,136,062 6,034,054 6,008,787 5,986,122 5,964,551
Diluted Income Per Share:
Income before cumulative effect
of change in an accounting principle
$ .30 $ .24 $ .24 $ .26 $ .14
Cumulative effect of change in an
accounting principle
$ .00 $ .00 $ .00 $ .00 $ (.02)
Net Income
$ .30 $ .24 $ .24 $ .14 $ .21
Diluted Shares
Outstanding
8,563,866 8,002,261 7,975,631 6,601,217 6,039,624
Financial Data
Total Assets
$ 64,812,728 $ 62,435,994 $ 55,278,604 $ 51,370,810 $ 41,847,897
Long Term Liabilities
$ 31,023,936 $ 32,082,537 $ 27,828,457 $ 25,726,157 $ 18,268,139
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Quarter ended April 30, 1998 compared to quarter ended April 30, 1997
Sales from operations were $49,741,000 for the fourth quarter of fiscal
1998, down $6,022,000, or 10.8% from the fourth quarter last year. Net income
was $368,000 ($.06 per share), down $56,000, or 13.2% from last year's net
income of $424,000 ($.07 per share). During fiscal 1998, the Company
discontinued its "T-Bucks" coupon program, and accordingly, related accruals of
$196,000 (after tax impact of $115,000) were reversed into income during the
fourth quarter.
Sales for the quarter were impacted by lower retail pricing on diesel
fuel that reduced sales by $7,135,000. The fiscal quarter also had six less days
than the prior year. There would have been a 4.2% sales increase if the retail
price of diesel fuel had remained constant with the prior year level and the
number of days were constant with last year.
Gross profits decreased $417,000, primarily from lower diesel margins
as a result of competitive pressures and to a lesser extent from the reduced
number of days. Operating expenses decreased $566,000, as a result of the
reduced number days, lower workers' compensation insurance and the elimination
of the grand opening expenses incurred last year.
General and administrative expense was $188,000 more than last year as
a result of increased travel and professional fees relating to potential
acquisition investigations. The Company also expensed the costs of setting up
the subsidiaries for the franchising of Travel Ports.
Year ended April 30, 1998 compared to year ended April 30, 1997
The Company had earnings of $3,960,000 before income taxes and
$2,338,000 in net income on net sales of $211,509,000 in fiscal 1998 compared to
earnings of $2,903,000 before income taxes and $1,700,000 in net income on net
sales of $207,104,000 in fiscal 1997. Due to reductions in pump prices stemming
from lower fuel costs compared to last year, diesel fuel revenues decreased by
$14,480,000. Actual diesel gallons increased 10.0% for the year. Revenues for
gasoline declined from the reduced pump prices also, but again, gallons
increased 5.3%. Non-fuel sales increased 6.3% for the year. There would have
been a 9.1% sales increase if the retail price of diesel fuel had remained
constant with the prior year level.
Retail diesel gallons sold during 1998 were 120 million, an increase of
11 million gallons over the prior year. Sales of retail gasoline gallons were
12.7 million for 1998, an increase of .6 million gallons from the prior year.
Gross profits increased $2,297,000 or 4.9% from the prior year.
Non-fuel gross profit increased $1,973,000 or 6.2%. Gasoline gross profit
decreased $183,000 primarily due to lower margins while diesel gross profit
increased $553,000. Retail margins per gallon of diesel fuel declined slightly
when compared to the prior year. The increase in gallons sold more than made up
for the reduced gross profit from the lower margins.
Listed below is the breakdown of revenue and gross profits by major
sales classification for the fiscal years ended April 30, 1998, and April 30,
1997.
Percent Percent Percent Percent
Sales of 1998 of 1998 of 1997 of 1997
Category Revenue Gross Profit Revenue Gross Profit
- ------------ ------- ------------ ------- ------------
Diesel Fuel 65 27 65 27
Gasoline 7 3 8 4
Restaurant 11 33 10 33
Store 8 14 8 13
Shop 5 11 5 11
Motel 1 4 1 3
Other 3 8 3 9
Operating expenses were $710,000 or 2.0% more than the prior year.
Wages increased $487,000 or 3.0%. Unemployment and workers' compensation
insurance declined $239,000. Equipment rental, depreciation and amortization
increased $431,000. Some of these increases are a result of the Harborcreek
facility being open the entire year versus only 46 weeks last year.
General and administrative expenses increased $527,000 or 11.6% as
compared to the prior year. Wages increased $185,000 as a result of additional
staff, salary increases and additional bonuses on the increased profits.
Professional fees increased $209,000 as a result of potential acquisition
investigations and new venture activity, public relations activity and the
startup expenses of the subsidiaries for franchising Travel Ports.
The Company has completed a review of its operational and financial
systems and believe all areas except one to be Year 2000 compliant. New
software is being acquired for its accounting systems. The new system is Year
2000 compliant and will be implemented prior to December 31, 1998.
Prior Year Quarter ended April 30, 1997 compared to quarter ended April 30, 1996
Sales from operations were $55,763,000 for the fourth quarter of fiscal
1997, up $8,514,000, or 18% from the fourth quarter last year. Net income was
$424,000 ($.07 per share), up $222,000, or 110% from last year's net income of
$202,000 ($.04 per share).
Sales from same units increased $1,139,000 or 2.5%. Sales from the new
travel plazas added $7,376,000 over last year's sales. Overall every sales
category increased, including diesel fuel, the retail selling price of which was
the same as last year.
Gross profits increased $1,663,000, primarily from the two new
locations while same unit gross profit was down slightly. Operating expenses
increased $1,153,000, all from the new locations as same unit operating expenses
were down $177,000 or 2.4%.
General and administrative expense was the same as last year while
interest expense increased due to higher levels of debt. Other income increased
as a result of higher interest income.
Prior year ended April 30, 1997 compared to year ended April 30, 1996
The Company had earnings of $2,903,000 before income taxes and
$1,700,000 in net income on net sales of $207,104,000. Net income is essentially
flat on an increase in net sales of $41,939,000 or 25.4%. Operating profits from
restaurant operations increased $483,000 or 22.3% over last year. On a same unit
basis, restaurant operating profits increased $303,000 or 13.9%. This offset the
decline in fuel operations income, primarily resulting from the absence of a one
time gain of $412,000 in January 1996 when the Company exercised its option to
cancel a fixed price contract for diesel fuel.
Sales increased by $28,870,000 primarily from the new travel plazas
more than offsetting the decrease resulting from the sale of the facility in
Fairplay, South Carolina in June 1995. On a same unit basis sales were up
$13,070,000. Higher retail selling prices of diesel fuel accounted for
approximately $10,650,000 of the overall sales increase.
Retail diesel gallons sold during 1997 were 109 million, an increase of
15 million gallons or 16% over the prior year. Same unit diesel gallons
increased 1.3 million or 1%. Sales of retail gasoline gallons were 12.1 million
for 1997, an increase of 3.0 million gallons or 33% from the prior year. Same
unit gasoline sales increased 0.2 million or 2%.
Gross profits increased $7,294,000 from the prior year. Most of this
increase came from the two new facilities. Non-fuel gross profit increased
$5,587,000 and gasoline gross profit increased $374,000 while diesel gross
profit increased $1,337,000. Retail diesel margins per gallon were flat when
compared to the prior year. Same unit gross profit increased $183,000 over last
year. Last year included a one time gain of $412,000 as noted above.
Listed below is the breakdown of revenue and gross profits by major
sales classification for the fiscal years ended April 30, 1997, and April 30,
1996.
Percent Percent Percent Percent
Sales of 1997 of 1997 of 1996 of 1996
Category Revenue Gross Profit Revenue Gross Profit
- ------------ ------- ------------ ------- ------------
Diesel Fuel 65 27 64 29
Gasoline 8 4 7 3
Restaurant 10 33 11 32
Store 8 13 8 13
Shop 5 11 6 12
Motel 1 3 1 3
Other 3 9 3 8
Operating expenses were $6,254,000 or 21% more than the prior year.
Same unit expenses increased $40,000 or about 0.1%.
General and administrative expenses increased $288,000 or 7% as
compared to the prior year. Wages increased $212,000 as a result of additional
staff and salary increases. Legal and professional fees increased $102,000 as a
result of acquisition and new venture activity. Advertising decreased $69,000
from changes in marketing programs.
Interest expense increased by $582,000 from the prior year as a result
of the increased levels of debt. Other income decreased from last year as a
result of lower interest income this year and the sale of two properties last
year.
Financial Condition, Liquidity and Capital Resources
Generally, the Company's capital resources are derived mainly from cash
provided by operating activities. In fiscal 1998 operating activities accounted
for the generation of cash in the amount of $7,658,000 compared to $5,038,000 in
fiscal 1997 and $3,208,000 in fiscal 1996.
Cash used in investing activities was $5,781,000 in fiscal 1998,
$7,295,000 in fiscal 1997 and $11,532,000 in fiscal 1996. The spending in 1998
was at a reduced level from 1997 reflecting the completion of some major
renovation projects. The Company also received $1,368,000 of cash related to the
Allentown mortgage that was paid in full in 1997. The change from 1997 to 1996
was a result of the completion of Harborcreek in June 1996 and the receipt of
$1,368,000 of cash noted above.
Financing activities used net cash of $930,000 in fiscal 1998 compared
to net cash provided of $3,725,000 in fiscal 1997 and $2,397,000 in fiscal 1996.
The change in 1998 was the result of increased borrowings in 1997 and 1996 that
funded the construction and renovation projects.
The overall result of the above activity was a net increase of cash in
the amount of $947,000 in fiscal 1998 and $1,468,000 in fiscal 1997 compared to
a net decline of cash in the amount of $5,927,000 in fiscal 1996.
The Company's working capital excluding current portion of long term
debt was $4,087,000 at April 30, 1998 and $4,462,000 at April 30, 1997.
On October 4, 1996, the Company entered into a permanent financing
arrangement for its Harborcreek, Pennsylvania facility (which was opened in June
1996) with its primary lender in accordance with the Restated and Amended Credit
Agreement dated December 21, 1995 in the amount of $6,000,000. Interest is fixed
at 9.44% for ten years with level principal payments based upon a 15 year
amortization. A balloon payment is due on September 30, 2006.
On November 6, 1996, the Company entered into an agreement with its
secondary lender that (a) refinanced a mortgage loan due 2001 covering two
travel plazas in Pennsylvania, as well as a term loan due in 1997 and (b)
provided an additional $5,000,000 for 1996/97 capital expenditures. Interest is
fixed at 8.63 % for five years with level principal payments based upon a 15
year amortization. A balloon payment is due on April 10, 2002.
On December 4, 1997, the Company completed the sale of (1) $2,000,000
principal amount of 7.81% Convertible Subordinated Debentures due December 4,
2007, convertible at $4.30 per share and (2) Warrants to purchase 40,000 shares
of Common Stock, par value $.01 per share, of the Company at a price of $5.16
per share to Cephas Capital Partners, L.P. A value of $100,000 has been assigned
to the warrants in accordance with Accounting Principles Board Opinion No.
14(APB 14). The values of the subordinated debentures and additional paid in
capital were adjusted accordingly. As a result of the stock dividend issued
April 23, 1998, the bond conversion price was adjusted to $3.98 and the warrant
price was adjusted to $4.78. The number of warrants was increased to 43,200.
The Company renewed the agreement with its primary lender that (a)
provides a line of credit of $3,750,000 until September 28, 1999 and (b)
provides an additional $4,500,000 for a capital line of credit. The regular line
of credit is limited to the lesser of $3,750,000 or the sum of 80% of the
Company's accounts receivable under 90 days old, plus 45% of the Company's
inventory. As of April 30, 1998, the Company has utilized $200,000 of its
available line of credit as collateral for various letters of credit. The
capital line of credit calls for interest only at prime plus 1/4% until
September 28, 1999. At that time the line can be repaid or amortized over 42
months with interest at prime plus or LIBOR plus interest rate based upon funded
debt to EDITDA. No advances have been made against the capital line of credit.
The Company now has a significant portion of its borrowings financed
through fixed interest rates.
Certain loan agreements require that the Company maintain specified
minimums with regard to net worth, current maturity coverage and the incurrence
of additional indebtedness. In addition, the Company cannot declare dividends
without the consent of its primary lender. The Company is in compliance with
such requirements and restrictions.
The cash requirements associated with the Company's expansion and
renovation programs will continue to be met through a combination of cash
generated from operations and bank financing.
Authorized, but unissued stock is available for financing needs;
however there are no current plans to use this source.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements and Supplementary Schedules
The Following information is presented in this report: Page
Report of Independent Accountants............................ 23
Consolidated Balance Sheets for the years ended
April 30, 1998 and 1997.................................... 24
Consolidated Statements of Income for the years ended
April 30, 1998, 1997 and 1996............................... 25
Consolidated Statements of Cash Flows for the years ended
April 30, 1998, 1997 and 1996............................... 26
Notes to Consolidated Financial Statements................... 27
All other schedules are omitted because they are not applicable or because the
required information is included in the financial statements or notes thereto.
Item 9. Disagreements on Accounting and Financial Disclosure
Not Applicable
Report of Independent Accountants
To the Board of Directors and
Shareholders of
Travel Ports of America, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and of cash flows present fairly, in all
material respects, the financial position of Travel Ports of America, Inc. and
its subsidiaries at April 30, 1998 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended April 30,
1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Rochester, New York
June 19, 1998
Consolidated Balance Sheets
April 30,
1998 1997
Assets
Current assets:
Cash and cash equivalents, including interest-bearing
accounts of $3,162,400 and $2,727,500 in 1998 and 1997,
respectively $4,082,203 3,134,871
Accounts receivable, less allowance for doubtful
accounts of $158,000 and $156,000 in 1998 and 1997,
respectively 4,167,966 4,357,665
Notes receivable 30,346 20,725
Inventories 5,726,512 5,763,023
Prepaid and other current assets 884,864 1,231,509
Income taxes receivable 214,676 491,941
Deferred taxes - current 532,000 791,100
------------ -----------
Total current assets 15,638,567 15,790,834
Notes receivable due after one year, less allowance of $65,000
in 1998 and 1997 575,548 738,997
Property, plant and equipment, net 44,597,242 41,686,254
Goodwill 1,840,116 1,904,306
Other assets 2,161,255 2,315,603
------------ -----------
$64,812,728 62,435,994
------------ -----------
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt and capital lease obligation
3,336,$65 3,207,254
Accounts payable 6,669,874 5,350,448
Accounts payable - affiliate 236,263 1,179,927
Accrued compensation 1,900,184 1,714,677
Accrued sales and fuel tax 1,806,814 1,925,570
Accrued expenses and other current liabilities 938,720 1,158,607
------------ -----------
Total current liabilities 14,888,120 14,536,483
Long-term debt and capital lease obligation 22,322,369 25,526,937
Convertible senior subordinated debentures 6,054,167 4,650,000
Deferred income taxes 2,647,400 1,905,600
------------ -----------
Total liabilities 45,912,056 46,619,020
------------ -----------
Shareholders' equity:
Common stock, $.01 par value
Authorized - 10,000,000 shares
Issued and outstanding - 6,302,596 shares in 1998 (including
464,983 shares issued on April 10, 1998 as a stock dividend,
Note 12) and 5,574,965 shares in 1997 63,026 55,749
Additional paid-in capital 7,337,021 4,649,414
Retained earnings 11,500,625 11,111,811
------------ -----------
Total shareholders' equity 18,900,672 15,816,974
------------ -----------
$64,812,728 62,435,994
------------ -----------
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statements of Income
Years Ended April 30,
1998 1997 1996
Net sales and operating revenues
(including consumer excise taxes
of $54,097,500 in 1998,$45,062,000
in 1997, and $36,258,000 in 1996) $1211,508,861 $ 207,103,805 $ 165,164,391
Cost of goods sold 162,774,569 160,666,992 126,021,694
------------ ------------ ------------
Gross profit 48,734,292 46,436,813 39,142,697
------------ ------------ ------------
Operating expenses 36,965,541 36,255,639 30,001,684
General and administrative expenses 5,087,839 4,560,796 4,273,191
Interest expense 3,155,072 3,103,045 2,520,728
Other income, net (434,640) (385,872) (537,406)
------------ ------------ ------------
Total expenses 44,773,812 43,533,608 36,258,197
------------ ------------ ------------
Income before income taxes 3,960,480 2,903,205 2,884,500
Provision for income taxes 1,622,800 1,203,000 1,194,000
------------ ------------ ------------
Net income $ 2,337,68$ 1,700,205 $ 1,690,500
------------ ------------ ------------
Earnings per share - basic $ .38 $ .28 $ .28
----- ----- -----
Earnings per share - diluted $ .30 $ .24 $ .24
----- ----- -----
The accompanying notes are an integral part of theses consolidated financial
statements.
Consolidated Statements of Cash Flows
Years Ended April 30,
1998 1997 1996
Operating activities:
Net income $ 2,337,6$0 1,700,2$5 1,690,500
Depreciation and amortization 3,393,177 3,266,330 2,724,604
Provision for deferred income taxes 1,000,900 592,100 157,100
Gain on sale of assets (150,457) (13,812) (213,881)
Changes in operating assets and liabilities -
Accounts receivable 189,699 (419) (674,011)
Inventories 36,511 (429,194) 456,994
Prepaid and other current assets 346,645 (309,480) (392,668)
Income taxes receivable 277,265 (361,344) (127,054)
Accounts payable and accounts payable - affiliate
375,762 (212,304) (751,744)
Accrued compensation 185,507 253,815 125,557
Accrued sales and fuel tax (118,756) 677,984 199,937
Accrued expenses and other current liabilities
(219,887) 1,751 99,176
Changes in other non-current assets 3,606 (127,290) (86,663)
--------- --------- ----------
Net cash provided by operating activities
7,657,652 5,038,342 3,207,847
--------- --------- ----------
Investing activities:
Expenditures for property, plant and equipment
(6,171,272)(8,723,016)(12,021,255)
Proceeds from sale of property, plant and
equipment 236,663 59,080 294,636
Net proceeds received from notes receivable 153,828 1,368,864 194,669
--------- --------- ----------
Net cash used in investing activities (5,780,781)(7,295,072)(11,531,950)
--------- --------- ----------
Financing activities:
Principal payments on long-term debt (3,075,557)(8,961,395)(2,409,613)
Proceeds from long-term borrowings 12,655,227 4,761,000
Proceeds from convertible senior subordinate
debentures 2,000,000
Exercise of stock options 146,018 30,707 45,980
--------- --------- ----------
Net cash (used in) provided by financing (929,539) 3,724,539 2,397,367
--------- --------- ----------
Net increase (decrease) in cash and equivalents 947,332 1,467,809 (5,926,736)
Cash and equivalents - beginning of year 3,134,871 1,667,062 7,593,798
--------- --------- ----------
Cash and equivalents - end of year $ 4,082,2$3 3,134,8$1 1,667,062
--------- --------- ----------
Supplemental Disclosure of Cash Flow Information
Cash paid during the year:
Interest paid $ 3,077,0$2 3,031,4$7 2,504,368
Income taxes paid, net $ 1,194,0$0 1,069,2$0 1,164,000
The accompanying notes are an integral part of these consolidated financial
statements.
Notes to Consolidated Financial Statements
Years Ended April 30, 1998 and 1997
1. The Company and Its Accounting Policies
The Company is primarily engaged in the operation of travel plazas and has
sixteen service plazas located in the states of New York, Pennsylvania, New
Jersey, Indiana, Maryland, North Carolina and New Hampshire. A significant
portion of the Company's sales and receivables are with companies in the
trucking and related industries.
During 1998, the Company organized wholly owned subsidiaries to facilitate
the franchising of the Travel Port operations. Travel Ports Systems, Inc.
(TPS) is a Delaware company which owns the Travel Port tradename. Travel
Port Franchising, Inc. (TPF), also a Delaware company, will enter into and
administer franchising agreements with third-party franchisees. Both
subsidiaries are consolidated into the Company's financial statements and
all intercompany transactions are eliminated. At April 30, 1998 the Company
had not yet entered into any franchising agreements with third parties.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with such principles requires the use of
estimates by management during the reporting period. Actual results could
differ from those estimates.
The Company's significant accounting policies follow.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined on
the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is provided on the straight-line
basis over the estimated useful lives of the related assets as follows: land
improvements - 15 years; buildings and improvements - 39 years; and
equipment and fixtures - 3 to 15 years. Leasehold improvements are amortized
over the remaining term of the applicable leases or their estimated useful
lives, whichever is shorter. Expenditures for maintenance and repairs are
charged to expense as incurred. Major improvements are capitalized.
Goodwill
The Company amortizes cost in excess of underlying net asset value of
companies acquired over 40 years. The amount presented on the balance sheet
is net of accumulated amortization of $727,488 and $663,298 at April 30,
1998 and 1997, respectively. Amortization expense for each of the years
ended April 30, 1998, 1997 and 1996 was $64,190. The recoverability of these
assets is periodically evaluated at the operating unit level by an analysis
of operating results and cash flows and consideration of other significant
events or changes in the business environment.
Cash Equivalents
For purposes of this Statement, the Company considers all highly liquid
instruments with an original maturity of three months or less to be cash
equivalents.
Commodity Contracts
In order to reduce price risk caused by market fluctuations, the Company
enters into futures contracts and options hedging the purchase price of bulk
fuel products. The changes in the market value of such contracts have a high
correlation to the price changes of the hedged commodity. Contract positions
are designed to ensure that the Company will pay a defined maximum price for
certain quantities of its inventory purchases. Gains and losses and the
related costs paid or premium received for contracts which hedge the
purchase prices of commodities are deferred and subsequently included in
income as part of the hedged transaction when the underlying product is
sold. At April 30, 1998, the Company has entered into hedging commitments
for a maximum of 9,240,000 gallons for delivery during the period May 1998
through August 1998. The current market value of these commitments is
measured based on daily commodity trading market prices. If these hedging
commitments had been terminated as of April 30, 1998, a loss of
approximately $55,000 would have been realized. Due to the constant
fluctuations within the commodity markets, these estimated results may or
may not be realized. The Company does not hold or issue derivative
instruments for trading or speculative purposes.
Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable and inventories are valued at
their carrying amounts, which are reasonable estimates of fair value. The
fair value of long-term debt and convertible debentures is estimated using
rates currently available to the Company for debt with similar terms and
maturities and is not materially different from the carrying amount. The
fair value of all other financial instruments approximates cost as stated.
Federal Income Taxes
Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax basis of assets and liabilities and
are measured using the enacted tax rates and laws that will be in effect
when those differences are expected to reverse.
2. Facility Additions and Disposals
On June 15, 1996, the Company opened a new full service travel plaza in
Harborcreek, Pennsylvania. Total construction costs of approximately $8.3
million were financed through a combination of cash generated from
operations and bank financing (Note 8).
On March 1, 1996, the Company entered into a lease agreement for a facility
in Baltimore, Maryland which is operated as a full service travel plaza. The
term of the lease is seven years and is recorded as an operating lease (Note
7).
On June 15, 1995, the Company sold its Fairplay, South Carolina facility.
The Company received, as consideration, a cash down payment and a $600,000
note receivable. This sale had no significant impact on operations.
3. Earnings Per Share
The Company has adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share" (EPS). Basic EPS excludes the
effect of common stock equivalents and is computed by dividing income
available to common shareholders by the weighted average of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could result if securities or other contracts to issue common stock were
exercised or converted into common stock. Historical earnings per share have
been restated to conform with the provisions of SFAS 128.
For the Years Ended
April 30,
1998 1997 1996
Basic earnings per share:
Income applicable to common stock $ 2,337,680 $ 1,700,205 $ 1,690,500
Weighted average common stock outstanding
6,136,062 6,034,054 6,008,787
Basic earnings per common share $ .38 $ .28 $ .28
---------- ---------- ----------
Diluted earnings per share:
Income applicable to common stock $ 2,337,680 $ 1,700,205 $ 1,690,500
Interest expense on convertible debentures
269,776 237,150 237,150
---------- ---------- ----------
$ 2,607,456 $ 1,937,355 $ 1,927,650
---------- ---------- ----------
Weighted average common stock outstanding 6,136,062 6,034,054 6,008,787
Options and warrants 341,323 193,648 192,285
Convertible debentures 2,086,481 1,774,559 1,774,559
---------- ---------- ----------
8,563,866 8,002,261 7,975,631
---------- ---------- ----------
Diluted earnings per common share $ .30 $ .24 $ .24
---------- --------- ---------
4. Inventories
Major classifications of inventories are as follows:
1998 1997
At FIFO cost:
Petroleum products $ 837,08 $ 1,047,017
Store merchandise 2,385,387 2,328,955
Parts for repairs and tires 1,823,610 1,803,705
Other 680,435 583,346
---------- -----------
$ 5,726,512 $ 5,763,023
---------- -----------
5. Property, Plant and Equipment
Major classifications of property, plant and equipment are as follows:
1998 1997
Land $ 6,418,08 $ 6,386,394
Land improvements 13,079,873 11,949,337
Buildings and improvements 26,132,301 24,031,725
Equipment and fixtures 18,796,826 16,085,837
Leasehold improvements 5,915,106 5,550,491
Construction in progress 358,361 679,442
----------- -----------
70,700,550 64,683,226
Less - Allowance for depreciation and
amortization 26,103,308 22,996,972
----------- -----------
$ 44,597,242 $ 41,686,254
----------- -----------
Interest costs capitalized aggregated $68,200 in 1997. No interest costs were
capitalized in 1998.
These amounts include property, plant and equipment under a capital lease as
follows:
1998 1997
Building $ 706,031 $ 706,031
Land improvements 243,969 243,969
---------- ----------
950,000 950,000
Less - Accumulated amortization 686,300 663,200
----
---------- ----------
$ 263,700 $ 286,800
---------- ----------
The leased assets relate to an agreement with the Livingston County
Industrial Development Agency under which the Agency's bond proceeds were
used to acquire, construct and equip an operating facility in Dansville, New
York. The Company has the option to buy the facility for $1 at the end of
the lease term, February 2000. Lease amortization amounted to $23,100 for
each of the years 1998, 1997, and 1996, and is included in depreciation and
amortization expense.
6. Other Assets
At April 30, 1998 and 1997, other assets include a leasehold interest in a
full service travel plaza in Greenland, New Hampshire with a carrying value
of $1,700,300 and $1,818,100, respectively. The leasehold interest
represents the amount paid by the Company for the rights to operate a full
service plaza under the terms of a twenty-year lease and is being amortized
over the life of the lease (Note 7).
Deferred financing costs included within other assets are being amortized on
a straight-line basis over the term of the related debt and have a carrying
value of $330,000 and $343,000 at April 30, 1998 and 1997, respectively.
Amortization expense for the leasehold interest and deferred financing for
the years ended 1998, 1997 and 1996 was $244,800, $233,800 and $244,300,
respectively.
7. Leases
The Company leases six of its operating facilities and its home office under
various terms from 3 to 20 years. Certain of the operating leases contain
renewal options for periods beyond their original terms at specified rates
of payment and five of the leases include purchase options exercisable at
future dates. The Company has also entered into various leases of equipment
and property used in operations and related office space with various lease
periods and renewal options.
During fiscal 1997, the Company entered into a $3 million lease line of
credit with Fleet Capital Leasing. At April 30, 1998, approximately $1.2
million of the line had been utilized to finance ten separate leases for
equipment and furniture and fixtures. Each lease qualifies as an operating
lease in accordance with SFAS 13 criteria, and annual payments are included
in the future minimum lease payment schedule below.
At April 30, 1998, future minimum payments required under non-cancelable
leases are as follows:
Operating Capital
1999 $ 2,494,94 $ 55,001
2000 2,125,164 50,965
2001 2,089,611 11,315
2002 1,918,231
2003 1,696,702
Future 4,913,026
----------- ----------
$ 15,237,674 117,281
-----------
Less - Amount representing interest 11,196
- ----
----------
Present value of net minimum lease payments $ 106,085
----------
Rental expense applicable to operating leases, net of sublease income of
$428,100, $356,900 and $333,900, amounted to $2,269,200, $2,501,100 and
$1,352,200, for 1998, 1997 and 1996, respectively.
8. Debt and Capital Lease Obligation
Debt and capital lease obligation consist of the following:
1998 1997
Mortgage loans:
Due 2002, LIBOR plus 2.25% and prime
plus 1.000%, in 1998 and 1997,
respectively $ 108,680 $ 128,125
Due 2003, LIBOR plus 2.25% and prime
plus .875%, in 1998 and 1997,
respectively 722,235 833,345
Due 2004, LIBOR plus 2.25% and prime
plus .875%, in 1998 and 1997,
respectively 1,932,975 2,205,153
Due 2005, LIBOR plus 2.25% and prime
plus .875%, in 1998 and 1997,
respectively 2,535,698 2,841,358
Due 2006, fixed rate of 9.44% 5,400,006 5,800,002
Term loans:
Due 1999, fixed rate of 9.650% 1,541,682 1,791,678
Due 2002, fixed rate of 10.120% 7,099,727 8,325,718
Due 2002, fixed rate of 8.630% 6,211,546 6,655,228
Obligation under capital lease, 8.50% 106,085 153,584
----------- -----------
25,658,634 28,734,191
Less - Portion due within one year,
including amounts for capital lease
of $47,500 in 1998 and 1997 (3,336,265) (3,207,254)
----------- -----------
$ 22,322,369 $ 25,526,937
----------- -----------
The LIBOR rate was 5.66% at April 30, 1998 and the prime interest rate was
8.50% at April 30, 1997.
The Company's primary lender has extended its commitment for the Company's
existing line of credit of $3,750,000 through September 28, 1999. In
addition, the Company also has a $4,500,000 capital line of credit. The
working line of credit is limited to the lesser of $3,750,000 or the sum of
80% of the Company's accounts receivable under 90 days old, plus 45% of the
Company's inventory. At April 30, 1998, the Company had utilized $200,000 of
its available line of credit as collateral for various letters of credit.
The remaining $3,550,000 is available. The capital line of credit calls for
interest only at prime plus .25% until September 28, 1999. At that time the
line can be repaid or amortized over 42 months with interest at prime plus
.50%. No advances are outstanding against the capital line of credit at
April 30, 1998 and 1997.
None of the debt agreements outstanding during 1998 require material
compensating balances or commitment fees. Substantially all assets of the
Company have been pledged to secure the outstanding borrowings.
Certain loan agreements require that the Company maintain specified minimums
with regard to net worth, current maturity coverage and the incurrence of
additional indebtedness. In addition, the Company cannot declare dividends
without the consent of its primary lender. The Company is in compliance with
such requirements and restrictions.
Long-term debt requirements excluding capital leases, over the next five
years are as follows: 1999 - $3,336,300; 2000 - $3,478,900; 2001 -
$3,600,200; 2002 - $8,200,400 and 2003 - $2,294,000.
9. Convertible Senior Subordinated Debentures
In December 1997, the Company issued $2,000,000 of 7.81% convertible senior
subordinated debentures due December 4, 2007, together with warrants to
purchase 40,000 additional shares of the Company's common stock, 43,200
after the 1998 stock dividend. No principal repayments are required until
December 2002 at which time $200,000 will be due and $400,000 a year
thereafter until 2006 and $200,000 in 2007. Interest is payable on a
quarterly basis. The debentures may be converted at the bondholders' option
into 502,512 shares of the Company's common stock at $3.98 per share. The
warrants are exercisable at any time through their expiration date of
December 2007 at an exercise price of $4.78 per share. A value of $100,000
was assigned to the warrants at issuance and has been credited to additional
paid-in capital.
In January 1995, the Company issued $4,650,000 of 8.5% convertible senior
subordinated debentures due January 15, 2005 together with warrants to
purchase 93,000 additional shares of the Company's common stock. Due to the
1998 and 1997 stock dividends (Note 12), the warrants available at April 30,
1998 and 1997 are 106,467. No principal repayments are required until
January 2001. Commencing in January 2001, the Company is required to redeem,
on an annual basis, 20% of the outstanding balance of debentures at par.
Interest is payable on a quarterly basis. The debentures are subordinate to
all other indebtedness and may be converted at the bondholders' option into
1,583,969 shares of the Company's common stock at $2.62 per share. The
debentures were callable at the discretion of the Company after January 15,
1998, at a redemption price equal to 109% of the principal amount
outstanding as of January 15, 1998, and gradually decreasing to 100% of the
principal amount outstanding at maturity on January 15, 2005. The warrants
are exercisable at any time through their expiration date of January 2005 at
an exercise price of $3.15 per share.
During fiscal 1998, $500,000 of the 8.5% debentures were converted into
178,092 shares of common stock, adjusted for the 1998 and 1997 stock
dividends of 8% and 6%, respectively (Note 12). At April 30, 1998,
$4,150,000 of the 8.5% convertible senior subordinated debentures remain
outstanding.
10. Income Taxes
The provision for income taxes consists of the following:
1998 1997 1996
Current provision:
Federal $ 435,800 $ 482,500 $ 810,300
State 186,100 128,400 226,600
---------- ---------- ----------
621,900 610,900 1,036,900
---------- ---------- ----------
Deferred provision:
Federal 842,200 467,900 130,900
State 158,700 124,200 26,200
---------- ---------- ----------
1,000,900 592,100 157,100
---------- ---------- ----------
$ 1,622,800 $ 1,203,000 $ 1,194,000
---------- ---------- ----------
The reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
1998 1997 1996
Statutory federal rate $ 1,346,60 $ 987,100 $ 980,700
State income taxes, net
of federal benefit 227,600 166,700 166,800
Amortization of goodwill 21,800 21,800 21,800
Meals and entertainment 25,700 24,800 22,000
Other 1,100 2,600 2,700
---------- --------- ---------
Effective tax rate $ 1,622,80 $1,203,000 $ 1,194,000
---------- --------- ---------
A summary of the deferred income tax assets and liabilities are as follows:
1998 1997
Assets
Bad debt reserve $ 86,700 $ 84,600
Vacation accrual 78,200 76,800
Inventory basis difference 106,000 102,000
Book accruals not currently deductible for tax 18,300 175,100
Alternative minimum tax 242,800 362,000
--------- ----------
Gross deferred tax assets $ 532,00 $ 800,500
--------- ----------
Liabilities
Depreciation $2,647,400 $ 1,915,000
--------- ----------
Gross deferred tax liabilities $2,647,400 $ 1,915,000
--------- ----------
Net deferred tax liabilities $2,115,400 $ 1,114,500
--------- ----------
11. Employee Benefit Plan
The Company sponsors a defined contribution employee benefit plan covering
substantially all employees who have completed one year of service. Matching
contributions are made at the discretion of the Board of Directors at the
rate of 50 per cent of employee contributions up to 6 per cent of gross
compensation. Total Company matching contributions were $145,000, $119,200
and $104,500 for 1998, 1997 and 1996, respectively.
12. Shareholders' Equity
Additional Total
Common paid-in Retained shareholders'
stock capital earnings equity
Balance at April 30, 1995 $ 52,099 $ 3,767,741 $ 8,529,742 $ 12,349,582
Net income 1,690,500 1,690,500
Exercise of options 292 45,688 45,980
-------- ---------- ----------- ------------
Balance at April 30, 1996 52,391 3,813,429 10,220,242 14,086,062
Net income 1,700,205 1,700,205
Exercise of options 203 30,504 30,707
Stock dividend 3,155 805,481 (808,636) -
-------- ---------- ----------- ------------
Balance at April 30, 1997 55,749 4,649,414 11,111,811 15,816,974
Net income 2,337,680 2,337,680
Exercise of options 846 146,689 147,535
Stock dividend 4,650 1,942,699 (1,948,866) (1,517)
Issuance of warrants on 7.81%
convertible subordinate debentures 100,000 100,000
Conversions of 8.5% convertible
subordinate debentures 1,781 498,219 500,000
-------- ---------- ----------- ------------
Balance at April 30, 1998 $ 63,026 $ 7,337,021 $ 11,500,625 $ 18,900,672
-------- ---------- ----------- ------------
On April 23, 1998, the Company declared an 8% stock dividend which was paid
to shareholders of record on April 10, 1998. The dividend was charged to
retained earnings in the amount of $1,947,349, which was based on the
closing price of $4.19 per share on the date of record. Average shares
outstanding and all per share amounts included in the accompanying financial
statements and notes are based on the increased number of shares giving
retroactive effect to the stock dividend.
On April 28, 1997, the Company declared a 6% stock dividend which was paid
to shareholders of record on April 17, 1997. The dividend was charged to
retained earnings in the amount of $808,636, which was based on the closing
price of $2.56 per share on the date of record. Average shares outstanding
and all per share amounts included in the accompanying financial statements
and notes are based on the increased number of shares giving retroactive
effect to the stock dividend.
13. Stock Option Plans
The Company has stock option plans for officers and other key employees.
Provisions of the plans are similar. Options may be granted at prices not
less than the fair market value at the date of grant and expire no later
than ten years after the date of grant. At April 30, 1998, a total of
173,560 options were available for future grant under the existing plans. A
summary of changes in outstanding stock options is as follows:
Weighted
Shares average
under exercise
option price
Outstanding at April 30, 1995 483,950 $1.63
Granted 114,480 $2.94
Exercised (33,428) $1.38
Canceled (5,712) $1.77
-------
Outstanding at April 30, 1996 559,290 $1.92
Granted 187,091 $2.35
Exercised (23,239) $1.33
Canceled (4,006) $1.60
-------
Outstanding at April 30, 1997 719,136 $2.05
Granted 313,740 $2.86
Exercised (91,334) $1.62
-------
Outstanding at April 30, 1998 941,542 $2.36
-------
Exercisable at April 30, 1998 820,582 $2.21
-------
During 1997, the Company adopted the disclosure requirements of SFAS 123,
"Accounting for Stock-Based Compensation." In accordance with SFAS 123, the
Company has elected not to recognize compensation cost related to stock
options with exercise prices equal to the market price at the date of
issuance. If the Company had elected to recognize compensation cost based on
the fair value of the options at grant date as prescribed by SFAS 123, net
income and earnings per share would have been reduced by $350,900 and
$319,300, or $.06 and $.06 per share, for the years ended April 30, 1998 and
1997, respectively. The weighted average fair value of options granted
during 1998 and 1997 were $2.04 and $1.84, respectively, determined by the
Black-Scholes option valuation model. The following assumptions were used in
the model: expected volatility of 63.3 per cent, expected dividend yield of
- 0 - per cent, and risk-free interest rate of 6.3 per cent. The expected
lives of the options are 8 years. Forfeitures are recognized as they occur.
Options outstanding
Weighted
average Weighted
remaining average
Range of Number contractual exercise
exercise outstanding life price
$1.31 - $2.02 335,533 5.2 $1.70
$2.18 - $3.35 606,009 8.7 $2.73
Options exercisable
Weighted
average Weighted
remaining average
Range of Number contractual exercise
exercise outstanding life price
$1.31 - $2.02 335,533 5.2 $1.70
$2.18 - $2.94 485,049 8.4 $2.57
14. Related Party Transactions
The Company has renewed its long-term contract with a petroleum distributor
owned by a shareholder director for the supply of diesel fuel to certain
motor plazas. The original contract expired on December 31, 1995. However,
the Company continued to operate under a verbal agreement with similar terms
throughout 1996. During 1997, a new ten-year contract was negotiated
retroactive to January 1, 1996. Purchases under the contract and other open
market purchases from this company were $29,937,400 in fiscal 1998,
$32,440,000 in fiscal 1997 and $23,710,000 in fiscal 1996. At April 30, 1998
and 1997, $236,755 and $1,179,900, respectively, were owed to this supplier
under contract terms calling for payment within fifteen days. During the
fourth quarter, this distributor signed a definitive agreement to be
purchased by an unrelated third party.
The Maybrook, New York motor plaza is leased from a realty company owned by
two individuals, one of whom is a shareholder director of the Company. The
lease covers a period through March 2004 at which time the Company has the
option to purchase the facility for $3,500,000. Annual rentals under the
lease are $450,000.
The Company pays a shareholder director, fees and bonuses for consulting,
management and other services rendered to the Company. These fees and
bonuses amounted to approximately $213,600, $203,600 and $203,400 for the
years 1998, 1997, and 1996, respectively.
15. Quarterly Data (Unaudited)
A capsule summary of the Company's audited quarterly net sales, gross
profit, net income and earnings per share for the years ended April 30, 1998
and 1997 is presented below:
First Second Third Fourth Year
1998
Net sales $ 56,397,785 $ 54,732,274 $ 50,637,375 $49,741,427 $211,508,861
Gross profit 13,360,963 12,485,980 11,518,613 11,368,736 48,734,292
Net income 901,241 732,770 336,081 367,588(1) 2,337,680
Net income per share:
Basic 0.15 0.13 0.05 0.06 0.39
Diluted 0.12 0.10 0.04 0.05 0.31
Share price:
High 3 1/4 4 1/2 4 7/32 4 1/4 4 7/32
Low 2 3/8 3 1/8 3 1/4 3 23/64 2 3/8
1997
Net sales $ 46,488,936 $ 52,698,998 $ 52,152,573 $55,763,298 $207,103,805
Gross profit 11,648,378 12,071,153 10,931,519 11,785,763 46,436,813
Net income 690,401 536,748 49,098 423,958 1,700,205
Net income per share:
Basic 0.11 0.09 0.01 0.07 0.28
Diluted 0.09 0.07 0.01 0.06 0.23
Share price:
High 3 5/8 3 1/2 3 1/3 3 1/16 3 5/8
Low 2 2 9/16 2 1/8 2 1/4 2
(1)During fiscal 1998, the Company discontinued its "T-Bucks" coupon
program, and accordingly, related accruals of $196,000 (after tax impact
of $115,600) were reversed into income during the fourth quarter.
The Company's common stock is traded on the NASDAQ National Market System
under the symbol TPOA. There were approximately 1,900 shareholders of record
at April 30, 1998.
Item 9. Disagreements on Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of Registrant
The information required by this item is incorporated herein by reference
to the Company's proxy statement, to be issued in connection with the Annual
Meeting of Shareholders of the Company to be held October 27, 1998, under
"Election of Directors".
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference
to the Company's proxy statement, to be issued in connection with the Annual
Meeting of Shareholders of the Company to be held October 27, 1998, under
"Compensation of the Directors and Executive Officers".
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference
to the Company's proxy statement, to be issued in connection with the Annual
Meeting of Shareholders of the Company to be held October 27, 1998, under
"Principal Holders of Voting Securities" and "Election of Directors".
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference
to the Company's proxy statement, to be issued in connection with the Annual
Meeting of Shareholders of the Company to be held October 27, 1998, under
"Certain Relationships and Related Transactions" or "Compensation of Directors
and Executive Officers" and "Election of Officers".
PART IV
Item 14. Exhibits, Financial Statement Schedules on Form 10-K
Item 14(a)(1), 14(a)(2) and 14(d):
The following financial statement and financial statement schedules are
filed as a part of Item 8 of this Report:
Report of Independent Accountants
Balance Sheets for the years ended April 30, 1998 and 1997
Statements of Income for the years ended April 30, 1998, 1997 and 1996
Statements of Cash Flows for the years ended April 30, 1998, 1997 and 1996
Notes to Financial Statements
Selected Quarterly Financial Information (Unaudited)
All other schedules are not submitted because they are not applicable or
not required under Regulation S-X or because the required information is
included in the financial statements or notes thereto.
Item 14(b):
Not Applicable
Item 14(a)(3) and 14(c):
See Index to Exhibits
INDEX TO EXHIBITS
(3) Articles of Incorporation and By-laws
Exhibit 3-a and exhibit 3-b to the Company's Registration Statement on
Form S- 18, File No. 0-14998 are incorporated herein by reference with respect
to the Restated Certificate of Incorporation and By-laws of the Company.
3-c Certificate of Amendment of Certificate of Incorporation changing the
name of the Corporation, is incorporated herein by reference to Exhibit 3-c of
the Company's report on Form 10-K dated July 27, 1993.
(4) Instruments defining the rights of security holders, including indentures
The Exhibits referenced under (3) of this Index to Exhibits are
incorporated herein by reference.
Exhibit 4-a, Form of Common Stock Certificate, to the Company's
Registration Statement on Form S- 1 8, File No. 0-14998 is incorporated herein
by reference with respect to instruments defining the rights of security
holders.
Exhibit 4-c, Form of Indenture dated as of January 24, 1995, between
Travel Ports of America, Inc. and American Stock Transfer and Trust Company, as
Trustee, with respect to up to $5,000,000 principal amount of 8.5% Convertible
Senior Subordinated Debentures due January 15, 2005 is incorporated by reference
to Exhibit 4-c to the Company's Current Report on Form 8-K dated February 15,
1995.
Exhibit 4-d, Form of Warrant to purchase Common Stock is incorporated by
reference to Exhibit 4-d to the Company's Current Report on Form 8-K dated
February 15, 1995.
Exhibit 4-e, Form of Indenture as of December 4, 1997, between Travel
Ports of America, Inc. and Cephas Capital Partners, L.P., with respect to
$2,000,000 principal amount of 7.81% Convertible Subordinated Debentures due
December 4, 2007, is incorporated by reference to Exhibit 4-e to the Company's
Form 10-Q dated December 12, 1997.
Exhibit 4-f, Form of Warrant to purchase Common Stock is incorporated by
reference to Exhibit 4-e to the Company's Form 10-Q dated December 12, 1997.
(9) Voting trust agreements
None
(10) Material contracts
10.1 The following material contracts are incorporated herein by reference
to the Company's Registration Statement on Form S-18, File No. 33-7870-NY:
10-a Employee Incentive Stock Option Plan
10-b Lease dated as of March l,1980, between the Company and
Livingston County Industrial Development Agency for the Dansville,
New York facility.
10-c Sublease dated as of March 30, 1984, between the Company and
Maybrook Realty for the Maybrook, New York facility.
10-d Sublease dated March l4,1984, between the Company and Ryder
Truckstops, Inc. ("Ryder") for part of the Mahwah, New Jersey
facility.
10-e Sublease dated March 14, 1984, between the Company and Ryder
for part of the Mahwah, New Jersey facility.
10-f Lease dated February 1, 1973, between Truckstop Corporation of
America, Inc. ("TCA") and E.Elwood Moore and Francis Moore,
together with Assignments to the Company, dated March 14, 1984 for
part of the Mahwah, New Jersey facility.
10-u Unbranded Distillate Sales Agreement dated January 2, 1986,
between the Company and W.W. Griffith Oil Co., Inc.
I 0-v Purchase and Sales Contract for the Belmont, New York facility
dated February 7, 1986, between the Company and W.W. Griffith Oil
Co., Inc.
10.2 Lease, dated December 1, 1988, amended January 10, 1989, between the
Company and Christ T. Panos is incorporated herein by reference to Exhibit
2 (b) and (c) to the Company's Current Report on Form 8-K dated January
20, 1989, as amended by Form 8-K dated March 21, 1989.
10.3 Real estate mortgage dated January 5, 1989, executed and delivered by
the Company as security for the Mortgage payable to Fleet Bank N.A. is
incorporated herein by reference to Exhibits 2(n), 2(p) and 2(q) to the
Company's Amended Current Report on Form 8-K dated March 21, 1989.
10.4 Mortgage Agreement dated December 1989 executed and delivered by the
Company as security for the Mortgage payable to Fleet Bank N.A. relating
to the construction of the Greencastle, Pennsylvania facility is
incorporated herein by reference to Exhibit 10 (e) of the Company's report
on Form I O-K dated August 10, 1990.
10.5 Credit Agreement dated June 1988 executed and delivered by the
Company as security for the Mortgage payable to Fleet Bank N.A. is
incorporated herein by reference to Exhibit 10(f) of the Company's report
on Form 10-K dated August 10, 1990.
10.6 Term Loan Note dated January 28, 1991, executed and delivered by the
Company as security for the Mortgage payable to Fleet Bank N.A. is
incorporated herein by reference to Exhibit 4 (c) of the Company's report
on Form 10-Q dated March 14, 1991.
10.7 1991 Employee Incentive Stock Option Plan is incorporated herein by
reference to Appendix "A" of the Proxy Statement issued for the October
29, 1991, Annual Meeting of Stockholders.
10.9 1993 Employee Incentive Stock Option Plan is incorporated herein by
reference to Appendix "A" of the Proxy Statement issued for the October
26, 1993, Annual Meeting of Stockholders.
10.10 Lease dated May 3l, 1991 and amended June l7, 1992, between the
Company and Townline Associates is incorporated herein by reference to
Exhibit 10.10, page 50 of the Company's report on Form I O-K dated July
27, 1994.
10.11 Lease dated November 20, 1987, amended April 21, 1993, and April 29,
1994, between the Company and Siegel Limited Partnership is incorporated
herein by reference to Exhibit 10.11, page 91 of the Company's report on
Form 10-K dated July 27, 1994.
10.12 Term Loan Note dated June 3O, l994, executed and delivered by the
Company as security for the Mortgage payable to Fleet Bank of New York is
incorporated herein by reference to Exhibit 10. 12, page 120 of the
Company's report on Form 10-K dated July 27, 1993.
10.13 Restated and Amended Credit Agreement, Revolving Line Note and Term
Loan Note, all dated September 29, 1994, executed and delivered by the
Company to Fleet Bank of New York is incorporated herein by reference to
Exhibit 10.13, page 14 of the Company's report on Form 10-Q dated November
28, 1994.
10.14 1995 Employee Incentive Stock Option Plan is incorporated herein by
reference to Appendix "A" of the Proxy Statement issued for the October
24, 1995, Annual Meeting of Stockholders.
10.15 Restated and Amended Credit Agreement, Revolving Line Note and Term
Loan Note, all dated December 21, 1995, executed and delivered by the
Company to Fleet Bank of New York is incorporated herein by reference to
Exhibit 10. 14, page 16 of the Company's report on Form 10-Q dated March
8, 1996.
10.16 Lease dated February 16, 1996 between the Company and Baltimore Port
Truck Plaza Limited Partnership, Truck Ex. Inc. and Travel Plaza I, Inc.
is incorporated herein by reference to Exhibits beginning on page 69 of
the Company's report on Form 10-Q dated March 8, 1996.
10.17 Loan Agreement dated November 6, 1996, executed and delivered to PNC
Bank is incorporated herein by reference to Exhibit 10.17, page 17 of the
Company's report on Form 10-Q dated December 13, 1996.
10.18 Restated and Amended Credit Agreement, Revolving Line Note and Term
Loan Note, all dated January 31, 1997, executed and delivered by the
Company to Fleet Bank of New York is incorporated herein by reference to
Exhibit 10.18, page 17 of the Company's report on Form 10-Q dated March I
1, 1997.
10.19 Distillate Sales Agreement dated January 1, 1996, between the
Company and Griffith Oil Co., Inc. is incorporated herein by reference to
Exhibit 10.19, page 46 of the Company's report on Form 10-K dated July 28,
1997.
10.20 Restated and Amended Credit Agreement dated October 27, 1997,
executed and delivered to Fleet Bank is incorporated by reference to
Exhibit 10.20, page 17 of the Company's report on Form 10-Q dated December
12, 1997.
10.21 Consulting Agreement with E. Philip Saunders is incorporated by
reference to Exhibit 10.21, page 18 of the Company's report on Form 10-Q
dated March 13, 1998.
(11) Statement re computation of per share earnings
Computation of Per Share Earnings is set forth in Exhibit (11) on
page xx of this report.
(12) Statement re computation of ratios
Not applicable
(13) Annual report to security holders
Not applicable
(16) Letter re change in certifying accountant
Not applicable
(18) Letter re change in accounting principles
Not applicable
(19) Previously unfiled documents
None
(21) Subsidiaries of Registrant
Exhibit (21) on page xx of this report.
(22) Published report regarding matters submitted to vote of security holders
None
(23) Consents of experts and counsel
Exhibit (23) on page xx of this report.
(24) Power of Attorney
Not applicable
(27) Financial Data Schedule
Exhibit (27) on page xx of this report.
(28) Information from reports furnished to state insurance regulatory agencies
None
(99) Additional exhibits
None
Exhibit 11
Computation of Basic Per Share Earnings
Net income per share was computed by dividing net income by the weighted
average number of common shares outstanding.
Shares outstanding at the end of May through July 1997 6,047,778
Shares outstanding at the end of August 1997 6,053,318
Shares outstanding at the end of September 1997 6,059,088
Shares outstanding at the end of October and November 1997 6,077,608
Shares outstanding at the end of December 1997 6,089,668
Shares outstanding at the end of January 1998 6,271,237
Shares outstanding at the end of February 1998 6,276,496
Shares outstanding at the end of March 1998 6,281,796
Shares outstanding at the end of April 1998 6,302,596
Average shares outstanding for year ended April 30, 1998 6,136,062
==========
Net income for year ended April 30, 1998 $2,337,680
==========
Net income per basic share for year ended April 30, 1998 $.38
====
Computation of Diluted Per Share Earnings
Net income per share was computed by dividing net income, adjusted for
debenture interest, by the weighted average number of common shares outstanding
and common stock equivalents.
Total Options
and Warrants Average Average
Quarter Ended Below Market Exercise Price Market Price Shares
- ------------- ------------ -------------- ------------ ------
7/31/97 786,150 $2.05 $2.83 216,727
10/31/97 1,097,558 $2.41 $3.90 419,114
1/31/98 1,060,169 $2.44 $3.73 366,818
4/30/98 1,047,009 $2.44 $3.74 362,626
Average common stock equivalents 341,323
Average number of shares outstanding 6,136,062
8.5% convertible debenture 1,583,969
7.81% convertible debenture 502,512
---------
8,563,866
=========
Net Income for year ended 4/30/98 $2,337,680
Interest on convertible debentures, after tax 237,150
----------
$2,607,456
==========
Net income per diluted share $.30
====
Exhibit 21
Subsidiaries of the Registrant for the year ended April 30, 1998
The Company has no parent. During the year the Company organized two
wholly owned subsidiaries whose results have been consolidated into the
Company's financial statements and all inter-company transactions are eliminated
for the year ended April 30, 1998.
Exhibit 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 0-14998) of
Travel Ports of America, Inc. of our report dated June 19, 1998, appearing on
page xx of this Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Rochester, New York
July 30, 1998
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Travel Ports of America, Inc., has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
TRAVEL PORTS OF AMERICA, INC.
By: /s/ John M. Holahan
July 30, 1998 John M. Holahan, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
date indicated below.
Signature Title Date
/s/ E. Philip Saunders Chairman of the Board and
E. Philip Saunders Chief Executive Officer July 30, 1998
/s/ John M. Holahan President and Chief July 30, 1998
- -------------------
John M. Holahan Operating Officer
/s/ William Burslem III Vice President, Treasurer, Secretary
William Burslem III and Chief Financial Officer July 30, 1998
/s/ William A. DeNight Director July 30, 1998
- ----------------------
William A. DeNight
/s/ W. Patrick Marchbanks Director July 30, 1998
- -------------------------
W. Patrick Marchbanks
/s/ Dante Gullace Director July 30, 1998
Dante Gullace
/s/ John H. Cline Director July 30, 1998
- -----------------
John H. Cline
RESTATED AND AMENDED CREDIT AGREEMENT
THIS RESTATED AND AMENDED CREDIT AGREEMENT is dated as of July
24, 1998 by and between FLEET NATIONAL BANK, a national banking association and
successor by merger to Norstar Bank, N.A., Fleet Bank of New York, and Fleet
Bank, with offices at One East Avenue, Rochester, New York 14638 (called the
"Bank") and TRAVEL PORTS OF AMERICA, INC., formerly known as Roadway Motor
Plazas, Inc., a New York corporation with offices now at 3495 Winton Place,
Building C, Rochester, New York 14623 (the "Borrower").
WHEREAS, the Bank and the Borrower entered into a Credit
Agreement dated June, 1988, which Credit Agreement was amended and restated in a
Restated and Amended Credit Agreement dated January 28, 1991, which Restated and
Amended Credit Agreement was also been further amended, and which Credit
Agreement was further amended and restated in a Restated and Amended Credit
Agreement dated June 30, 1994, which Credit Agreement was further amended and
restated in a Restated and Amended Credit Agreement dated September 29, 1994,
and which Credit Agreement was further amended by Credit Agreement Amendment
Number 1 dated September 7, 1995, and which Credit Agreement was further amended
by Restated and Amended Credit Agreement dated December 21, 1995, which Credit
Agreement was further amended by Restated and Amended Credit Agreement Amendment
Number 1 dated as of January 31, 1997, and which Credit Agreement was further
amended by Restated and Amended Credit Agreement effective November 1, 1997
(collectively, the "1988 Agreement"), and
WHEREAS, the parties desire to further amend the 1988
Agreement, and deem it in their respective best interest to restate and amend
the 1988 Agreement in its entirety for ease of reference,
NOW THEREFORE, the Bank and the Borrower agree to amend and
restate the 1988 Agreement in its entirety as follows, and further agree that
(a) except as expressly changed herein this Agreement shall cover the same
rights and obligations as are covered by the 1988 Agreement, (b) all references
in mortgages, security agreements, notes, and other documents, instruments, and
agreements related to this Agreement or to the 1988 Agreement which refer to the
1988 Agreement shall be deemed to refer to this Restated and Amended Credit
Agreement as the same may be modified, extended, or replaced from time to time.
ARTICLE I - LOANS
A. Term Loans. The Bank previously consolidated existing loans
to the Borrower in an aggregate amount of, and the Borrower borrowed an
aggregate amount of, $10,500,000 (the "Term Loan"). The Term Loan is evidenced
by an amended, consolidated, and restated Term Loan Note in the new principal
amount of $10,500,000, the form of which is attached hereto as Exhibit A (the
"Term Loan Note").
The amount outstanding on the date of closing under the Term
Loan referenced in the 1988 Agreement remains outstanding as a part of the Term
Loan hereunder and the terms thereof shall be modified to the terms of the Term
Loan hereunder. The remaining principal portion of the Term Loan was available
to the Borrower first to repay $1,500,000 in existing Bank line of credit
obligations on the date of closing. The remaining proceeds shall be advanced
into an escrow account to be held by the Bank for the benefit of the Borrower.
The Bank will invest the funds held in the escrow account in
income producing accounts at the Bank or an Affiliate of the Bank mutually
satisfactory to the Bank and the Borrower. Advances will be made from the escrow
account as requested by Borrower for capital expenditures in Borrower's fiscal
year 1995, improvements to Borrower's property commonly known as Exit 3
Truckstop in Greenland, New Hampshire, and infrastructure improvements to
Borrower's property in Harborcreek, Erie, Pennsylvania. Advance requests must be
accompanied by invoices for expenses incurred reasonably satisfactory to the
Bank.
Outstanding principal balances under the Term Loan shall bear
interest at ten and twelve/hundredths percent (10.12%) per annum, calculated
based on actual days elapsed in a year of 360 days. For purposes of this
Agreement, the "Prime Rate" is the Bank's rate of interest stated by the Bank
from time to time to be its prime rate (irrespective of any rate charged to any
customer in any actual transaction).
The Borrower shall pay all interest accrued on the Term Loan
on the first day of each month commencing on November 1, 1994 and continuing
through March 1, 1995. On the first day of each month commencing on April 1,
1995, the Borrower shall make a combined principal and interest payment of
$166,957.84. Payments shall be applied first to accrued interest and then to
principal. In the event that any payment is insufficient to pay all accrued
interest, all such accrued interest shall be immediately payable and the Bank
reserves the right to adjust the monthly payment amount to an amount deemed
reasonably sufficient to fully amortize the principal and interest of the Term
Loan by the maturity date. All remaining principal and interest shall be due and
payable in full on September 29, 2002.
The Borrower may prepay, in whole or in part, the Term Loan
Note at any time. The prepayment shall be accompanied by a prepayment charge
computed as follows:
The latest available yield preceding the date of prepayment,
as available through active market trading or published in the
Wall Street Journal, for United States Treasury Notes or Bills
(with Bills on a discounted basis converted to a bond
equivalent) with a maturity date closest to September 29, 2002
shall be subtracted from 7.62%. If the result is zero or a
negative number, there shall be no prepayment charge. If the
result is a positive number, then the resulting percentage
shall (i) be multiplied by the principal amount prepaid, then
(ii) divided by 360, then (iii) multiplied by the number of
days remaining prior to September 29, 2002, and then (iv)
reduced to a present value calculated using the above
referenced Treasury Note or Bill yield. The resulting amount
shall be the amount of the prepayment charge due to the Bank.
Principal prepayments shall be applied first to interest
accrued on the amount prepaid, and then to principal in inverse order of
maturity.
B. Revolving Line of Credit. The Bank hereby establishes a
revolving line of credit (the "Revolving Line") in the maximum principal amount
of Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000). The
Revolving Line replaces and supersedes existing revolving lines established by
the Bank for Borrower.
A Revolving Line Note (the "Revolving Line Note") in
substantially the form of Exhibit B hereto will evidence the Revolving Line.
All outstanding principal amounts under the Revolving Line
shall bear interest until paid at a rate per annum equal to the Prime Rate plus
the Applicable Prime Margin calculated based on actual days elapsed in a year of
360 days, but never exceeding the maximum rate allowed by law. All changes in
the interest rate due to a change in the Prime Rate shall take place
automatically and without notice to Borrower as of the effective date of the
change in the Prime Rate.
The Borrower shall make a payment of all interest accrued
under the Revolving Line Note on the first day of each month.
The Borrower shall make principal payments sufficient to
assure that the aggregate principal amount outstanding under the Revolving Line
never exceeds the amount then available under the Borrowing Formula described
below, and also sufficient to assure that there is no outstanding principal
under the Revolving Line for at least thirty (30) consecutive days between each
September 1 and the next succeeding August 31. All remaining principal and
interest shall be due and payable in full on the date of expiration of the
Revolving Line.
The Revolving Line shall terminate on September 28, 1999 (or
the date of an Event of Default if earlier) unless extended in writing in the
sole discretion of and on such terms as are acceptable to the Bank, and no
further advances shall be made thereafter.
The Borrower may borrow, repay, and reborrow under the
Revolving Line so long as no Event of Default hereunder has occurred and the
aggregate principal amount outstanding at any one time does not exceed the
lesser of $3,750,000 or the sum then available according to the following
formula (the "Borrowing Formula"): (a) eighty percent (80%) of all Borrower
eligible accounts receivable as defined below ("Eligible Accounts") plus (b)
forty-five percent (45%) of all Borrower eligible inventories as defined below
("Eligible Inventories").
Eligible accounts receivable are defined as: (i) all trade
accounts receivable less than 90 days beyond date of invoice plus (ii) the less
than 90 days beyond date of invoice portion of receivables from one customer of
which at least 50% of the outstanding amount is less than 90 days beyond date of
invoice, minus all (iii) marginal accounts receivable, contra accounts
receivable, affiliate company accounts receivable, foreign accounts receivable,
employee accounts receivable, bill and hold accounts receivable (i.e. accounts
relating to goods not yet shipped but invoiced), uncollectible accounts
receivable, accounts receivable arising from progressive billings (ie. accounts
receivable from billings for work performed on a partially completed contract),
accounts receivable arising from guaranteed sales with buy-back provisions (ie.
accounts receivable arising from sales in which the Borrower is obligated to
repurchase inventory or merchandise sold to customers), and accounts receivable
of companies or businesses actually known to the Bank to be deteriorating. In
the event that total accounts receivable from any payor represent more than 20%
of the Borrower's total accounts receivable, the Bank reserves the right in its
sole discretion to delete those accounts receivable in excess of 20% of total
accounts from eligible accounts receivable unless the Borrower has provided to
the Bank sufficient information regarding the obligor on the accounts for the
Bank to make a determination as to the creditworthiness of that obligor.
Eligible inventories are defined as all inventories owned by
the Borrower valued at cost minus all perishable or non-saleable inventories.
Eligible accounts receivable and eligible inventories must
arise from the Borrower's ordinary course of business as it exists on the date
hereof. The Bank reserves the right in its sole discretion to modify the
borrowing formula or make changes in the definitions of eligible accounts or
eligible inventories, or to delete certain accounts or inventories from the
borrowing formula, all in the event of a material adverse change in the
collateral or its collectibility.
The amount available under the Revolving Line shall be reduced
by the aggregate amount of outstanding Letters of Credit issued by the Bank for
the account of the Borrower. Letters of Credit will be issued at the request of
the Borrower in the discretion of, and upon terms acceptable to, the Bank up to
an aggregate maximum outstanding face amount at any one time of $500,000. The
Borrower shall pay to the Bank a non-refundable commission of one and one-half
percent (1.5%) per annum with respect to the face amount of each respective
letter of credit on the date such letter of credit is issued. Letters of credit
shall have maturity dates no longer than one year following the termination date
of the Revolving Line described above.
Borrower agrees to allow the Bank complete access to all books
and records of the Borrower upon reasonable request. Borrower agrees to submit
information which the Bank may reasonably request from time to time in
connection with the Revolving Line. The Borrower will provide to the Bank such
borrowing reconciliation reports, agings, listings, and other reports and
information as the Bank requests in connection with the Revolving Line including
without limitation accounts agings and inventory reports as requested.
C. Mortgage Loans. The Borrower and the Bank hereby
reaffirm the Borrower's (and its predecessor's) existing mortgage secured
obligations to the Bank (the "Mortgage Loans"), as follows:
1. 1980 Livingston County Industrial Development
Agency Industrial Development Revenue Bonds (Interstate Travel Plaza,
Inc. Facility) in the original principal amount $950,000 secured by
Mortgages on property in Livingston County (Dansville), New York,
2. obligations covered by a Consolidation and Extension
Agreement in the original aggregate principal amount of $350,000 dated
October 23, 1987 and secured by a Mortgage on property in the Town of
Amity (Belmont), New York,
3. obligations covered by a Deed of Trust Note in the original
principal amount of $2,000,000 dated July 5, 1988 and secured by a Deed
of Trust on property in Buncombe County (Asheville), North Carolina,
4. obligations covered by a Note in the original principal
amount of $4,400,000 dated January 5, 1989 and secured by a Mortgage on
property in Porter County (Porter), Indiana,
5. obligations covered by a Note in the original principal
amount of $500,000 dated January 5, 1989 secured by a Mortgage covering
leasehold interests in Lake County (Lake Station), Indiana, and
6. obligations covered by a Note in the original principal
amount of $5,500,000 dated January 4, 1990 secured by a Mortgage
covering property in Franklin County (Greencastle), Pennsylvania.
The interest rate and payment terms related to the obligations described in 2,
3, 4, 5, and 6 above were amended as provided in Exhibits H, I, J, K, and L,
respectively, attached to and made part of this Agreement. The remaining terms
of the Mortgage Loans shall remain in full force and effect, but such loans also
shall be covered by the terms of this Agreement.
D. 1992 Loan. [Intentionally omitted: On April
30, 1992 the Bank made an additional term loan to the Borrower in the aggregate
principal amount of $1,966,685 (the "1992 Loan"). The 1992 Loan has been paid
in full.]
E. 1994 Loan. The Bank made, on or about June 30, 1994, an
additional term loan to the Borrower in the aggregate principal amount of
$2,500,000 (the "1994 Loan"). The 1994 Loan shall be repaid according to the
terms of the 1994 Loan Note, the form of which is attached hereto as Exhibit C
(the "1994 Loan Note"). The Borrower was required to use the proceeds of the
1994 Loan Note for the purchase of assets which constitute the Exit 3 Truckstop
in Greenland, New Hampshire. The terms of the 1994 Loan shall remain in full
force and effect, and also shall be covered by the terms of this Agreement.
F. Assumption of Interstate Travellers Debt. The Borrower has
previously assumed and hereby reaffirms its assumption of all of the obligations
of any kind or nature of Interstate Traveller Services, Inc. to the Bank,
including without limitation obligations related to the Mortgage Loans and to
the mortgages given to the Bank in 1988 covering properties located in Centre,
Luzerne, Columbia, and Franklin Counties, Pennsylvania. The Borrower shall be
deemed to be a party to, and shall be bound by all documents and agreements
relating to obligations of Interstate Traveller Services, Inc. to the Bank in
the same manner as if the Borrower had executed such documents and agreements in
the first instance. The Borrower shall provide such further instruments and
assurances regarding the aforesaid assumption as the Bank may reasonably request
from time to time.
G. Erie Term Loan. The Bank has made a term loan (the "Erie
Loan") in the original principal amount of Six Million Dollars ($6,000,000), the
proceeds of which were used to fund capital expenditures and construction costs
relating to construction of a truck stop/travel center located in Harborcreek
(Erie), Pennsylvania.
An Erie Loan Note (the "Erie Loan Note") in substantially the
form of Exhibit E hereto evidences the Erie Loan.
All outstanding principal amounts under the Erie Loan Note
shall bear interest until paid in full, at nine and forty-four hundredths
percent (9.44%) per annum. Interest shall be calculated based on actual days
elapsed divided by a year of 360 days.
Payments of all accrued interest, plus payments of principal
of $33,333 each, shall be due on the first day of every month. All remaining
principal and interest under the Erie Loan Note shall be due and payable on the
date ten (10) years after the date of the Erie Loan Note.
In the event that the Borrower chooses to prepay, in whole or
in part, the Erie Loan Note, the prepayment shall be accompanied by a premium as
follows:
The latest available yield preceding the date of prepayment,
as available through active market trading or published in the
Wall Street Journal, for United States Treasury Notes or Bills
(with Bills on a discounted basis converted to a bond
equivalent) with a maturity date closest to the maturity date
of the Erie Loan Note shall be subtracted from the cost of
funds used in establishing the initial fixed rate. If the
result is zero or a negative number, there shall be no
prepayment charge. If the result is a positive number, then
the resulting percentage shall (i) be multiplied by the
principal amount prepaid, then (ii) divided by 360, then (iii)
multiplied by the number of days remaining prior to the
maturity date of the Erie Loan Note, and then (iv) reduced to
a present value calculated using the above referenced Treasury
Note or Bill yield. The resulting amount shall be the amount
of the prepayment charge due to the Bank.
Principal prepayments shall be applied first to principal in inverse order of
maturity.
H. Capital Expenditure Line. The Bank hereby establishes a
line of credit for the purpose of funding capital expenditures and construction
costs not funded by other sources (the "Capital Line") in the maximum principal
amount of Four Million Five Hundred Thousand Dollars ($4,500,000).
A Capital Line Note (the "Capital Line Note") in substantially
the form of Exhibit F hereto will evidence the Capital Line.
Except to the extent that the LIBOR Rate option described
below has been exercised, all outstanding principal amounts under the Capital
Line shall bear interest until paid at a rate per annum equal to the Prime Rate
plus the Applicable Prime Rate Margin calculated based on actual days elapsed in
a year of 360 days, but never exceeding the maximum rate allowed by law. All
changes in the interest rate due to a change in the Prime Rate shall take place
automatically and without notice to Borrower as of the effective date of the
change in the Prime Rate. At the option of the Borrower, however, exercised by
giving the Bank notice at least two London Banking Days prior to the first day
of any month, the Borrower may elect to have the principal amount outstanding
under the Capital Line Note (which must not be less than $500,000) bear interest
for a LIBOR Interest Period, designated in the notice and commencing on the
first day of a month, at a fixed rate equal to the LIBOR Rate plus the
Applicable LIBOR Margin as of the date two London Banking Days prior to the
LIBOR Interest Period selected. The LIBOR Interest Period shall be either
one-month, two months, or three months, as elected by the Borrower. The Borrower
may make a maximum of six LIBOR Rate elections per year related to the Capital
Line Note.
The Borrower shall make a payment of all interest accrued
under the Capital Line Note with respect to principal which bears interest based
upon the Prime Rate on the first day of each month, and a payment of all
interest accrued with respect to principal for which a LIBOR Interest Period has
been elected on the last day of each such respective LIBOR Interest Period.
The Borrower may prepay principal under the Capital Line at
any time. Any prepayment of principal covered by a rate of interest based upon
the LIBOR Rate on a date other than the last day of the applicable LIBOR
Interest Period must be accompanied by a payment of Break Costs.
All remaining principal and interest shall be due and payable
in full on the date of expiration of the Capital Line, provided, however, if no
Event of Default has occurred the outstanding principal under the Capital Line
may be refinanced by the Capital Loan (described below in Article I. I.) at the
option of the Borrower on the Termination Date of the Capital Line .
The Capital Line shall terminate on September 28, 1999 (or if
earlier, the date of an Event of Default or the date of termination of the
Revolving Line unless such Revolving Line has been extended), and no further
advances shall be made thereafter.
The Borrower may borrow, repay, and reborrow under the Capital
Line so long as no Event of Default hereunder has occurred and the aggregate
principal amount outstanding at any one time does not exceed the lesser of (i)
$4,500,000 or (ii) eighty percent (80%) of the cost of the capital expenditures
of the Borrower funded under the Capital Line. Any advance made other than on
the first day of a month shall bear interest based upon the Prime Rate as
described above; provided, however, that the Borrower may elect a rate based
upon the LIBOR Rate for such advance on the first day of the next succeeding
month in the manner described above and subject to the restriction of six LIBOR
Rate elections in any one year.
I. Capital Expenditure Loan. At the request of the Borrower
and provided that no Event of Default or termination date of the Revolving Line
has occurred, upon termination of the Capital Line the Bank will make a Capital
Loan to the Borrower in the amount of the then outstanding principal balance of
the Capital Line.
A Capital Loan Note (the "Capital Loan Note") in substantially
the form of Exhibit G hereto will evidence the Capital Loan.
Except to the extent that the LIBOR Rate option described
below has been exercised, all outstanding principal amounts under the Capital
Loan shall bear interest until paid at a rate per annum equal to the Prime Rate
plus the Applicable Prime Margin calculated based on actual days elapsed in a
year of 360 days, but never exceeding the maximum rate allowed by law. All
changes in the interest rate due to a change in the Prime Rate shall take place
automatically and without notice to Borrower as of the effective date of the
change in the Prime Rate. At the option of the Borrower, however, exercised by
giving the Bank notice at least two London Banking Days prior to the first day
of any month, the Borrower may elect to have the principal amount outstanding
under the Capital Loan Note (which must not be less than $500,000) bear interest
for a LIBOR Interest Period, designated in the notice and commencing on the
first day of a month, at a fixed rate equal to the LIBOR Rate plus the
Applicable LIBOR Margin as of the date two London Banking Days prior to the
LIBOR Interest Period selected. The LIBOR Interest Period shall be either
one-month, two months, or three months, as elected by the Borrower. The Borrower
may make a maximum of six LIBOR Rate elections per year related to the Capital
Loan Note.
The Borrower shall make a payment of all interest accrued
under the Capital Loan Note with respect to principal which bears interest based
upon the Prime Rate on the first day of each month, and a payment of all
interest accrued with respect to principal for which a LIBOR Interest Period has
been elected on the last day of each such respective LIBOR Interest Period.
In addition, on the first day of each November 1, February 1,
May 1, and August 1 respectively a principal payment equal to 1/14th of the
original principal amount of the Capital Loan Note shall be due. All remaining
principal and interest shall be due and payable in full on March 27, 2003.
The Borrower may prepay principal under the Capital Loan Note
at any time. Any prepayment of principal covered by a rate of interest based
upon the LIBOR Rate on a date other than the last day of the applicable LIBOR
Interest Period must be accompanied by a payment of Break Costs. All principal
prepayments shall be applied in inverse order of maturity.
ARTICLE II
For purposes of this Agreement, the following terms shall have
the following definitions:
"Applicable LIBOR Margin" shall mean the following amounts
related to the following obligations determined according to the ratio
of Funded Debt to EBITDA shown on the most recent quarterly or annual
financial statement submitted by the Borrower to the Bank:
Funded Debt/EBITDA Funded
Debt/EBITDA
Obligation greater than or equal 3.0 less than 3.0
---------- ------------------------- -------------
Capital Line 187.5 basis points (1.875%) 162.5 basis points
(1.625%)
Capital Loan 225 basis points (2.25%) 200 basis points
(2.00%)
Mortgage Loans 225 basis points (2.25%) 200 basis points
(2.00%)
If the most recent financial statement was not received by the Bank
more than ten days prior to the date on which the Applicable LIBOR
Margin is being determined, the ratio of Funded Debt to EBITDA shall be
based upon the immediately prior quarterly or annual financial
statement submitted by the Borrower.
"Applicable Prime Margin" shall mean the following amounts
related to the following obligations determined according to the ratio
of Funded Debt to EBITDA shown on the most recent quarterly or annual
financial statement submitted by the Borrower to the Bank:
Funded Debt/EBITDA Funded
Debt/EBITDA
Obligation greater than or equal 3.0 less than 3.0
---------- ------------------------- --------------
Revolving Line 0 basis points (0%) minus 25 basis points
(-.25%)
Capital Line 25 basis points (.25%) 0 basis points (0%)
Capital Loan 50 basis points (.50%) 25 basis points
(.25%)
Mortgage Loans 50 basis points (.50%) 25 basis points
(.25%)
If the most recent financial statement was not received by the Bank
more than ten days prior to the date on which the Applicable Prime
Margin is being determined, the ratio of Funded Debt to EBITDA shall be
based upon the immediately prior quarterly or annual financial
statement submitted by the Borrower.
"Break Costs" shall mean an amount equal to the amount (if
any) required to compensate the Bank for any additional losses
(including without limitation any loss, cost, or expense incurred by
reason of the liquidation or reemployment of deposits or funds acquired
by the Bank to fund or maintain the applicable obligation), costs, and
expenses (including without limitation penalties) it may reasonably
incur as a result of or in connection with a prepayment.
"Business Day" shall mean, in respect of any date that is
specified in this Agreement to be subject to adjustment in accordance
with the Modified Following Business Day Convention, a New York Banking
Day or London Banking Day respectively.
"EBITDA" shall mean net income before interest expense, taxes,
depreciation, and amortization, calculated for the quarter ending on
the measurement date plus the last three preceding quarters, as shown
on the Borrower's quarterly and annual financial statements delivered
to the Bank.
"Funded Debt" shall mean shall mean all indebtedness of the
Borrower for borrowed money and the like including without limitation
obligations to the Bank and other financial institutions and lenders,
obligations related to subordinated debt, obligations related to
capitalized leases, obligations related to letters of credit, and
guarantees of all of such obligations.
"Increased Cost" means any additional amounts sufficient to
compensate the Bank for any increased costs of funding or maintaining
the applicable obligations hereunder as a result of any law or
guideline adopted pursuant to or arising out of the July 1988 report of
the Basle Committee on Banking Regulations and Supervisory Practices
entitled "International Convergence of Capital Measurement and Capital
Standards", or the adoption after the date of this Agreement of any law
or guideline regarding capital adequacy, or any change in any of the
foregoing or in the interpretation or administration of any of the
foregoing by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or
compliance by the Bank or the Bank's holding company, if any, with any
request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable
agency, which has or would have the effect of reducing the rate of
return on the Bank's capital or on the capital of the Bank's holding
company, if any, as a consequence of the transactions contemplated by
this Note, to a level below that which the Bank or the Bank's holding
company could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's policies on capital adequacy).
LIBOR" is the rate equal to the rate of interest per annum
(rounded upward if necessary, to the nearest 1/32 of one percent) as
determined on the basis of the offered rates for deposits in United
States Dollars, for the respective one-month, two-month, or three-month
period which appears on the Telerate Page 3750 as of 11:00 a.m., London
time on the day that is two London Banking Days preceding the day of
the applicable LIBOR Interest Period (the "Interest Setting Date");
provided, however, if the rate described above does not appear on the
Telerate System on any applicable Interest Setting Date, the LIBOR rate
shall be the rate (rounded upwards as described above, if necessary)
for deposits in United States Dollars for the respective one-month,
two-month, or three-month period on the Reuters Page "LIBO" (or such
other page as may replace the LIBO Page on that service for the purpose
of displaying such rates, as of 11:00 a.m. London Time on the day that
is two London Banking Days prior to the beginning of such LIBOR
Interest Period). If both the Telerate and Reuters system are
unavailable, then the rate for that date will be determined on the
basis of the offered rates for deposits in United States Dollars for
the respective one-month, two-month, or three-month period which are
offered by four major banks in the London interbank market at
approximately 11:00 a.m. London Time, on the date that is two London
Banking Days preceding the beginning of such LIBOR Interest Period. In
the event that the Bank is unable to obtain any such quotation as
provided above, or there is any change in any law or application
thereof that makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for the Bank to
hold obligations if the rate is determined with reference to the LIBOR
(collectively, a "LIBOR End Date"), the Borrower shall not be entitled
to elect an interest rate based upon the LIBOR Rate until LIBOR can
again be determined.
"LIBOR Interest Period" shall mean any particular one-month,
two-month, or three-month period during which an applicable LIBOR Rate
shall be in effect.
"LIBOR Rate" shall mean, with respect to any applicable
interest rate period, the rate per anum equal to the quotient obtained
by dividing (and rounding to the nearest 1/100 of 1%) (i) LIBOR as
defined below by (ii) a percentage equal to 100% minus the then stated
maximum rate of all reserve requirements, if any, imposed by the
Federal Reserve Board with respect to LIBOR deposits of the Bank. The
LIBOR Rate shall be further adjusted to reflect any Increased Cost.
"Loan Documents" means all notes, mortgages, security
agreements, and other instruments, documents, and agreements of any
kind related to this Agreement and the Obligations.
"London Banking Day" shall mean any date on which commercial
banks are generally open for business and upon which commercial banks
settle payments in London.
"Modified Following Business Day Convention" shall mean the
convention for adjusting any relevant date if it would otherwise fall
on a day that is not a Business Day. Terms, when used in conjunction
with the term, "Modified Following Business Day Convention", and a
date, shall mean that an adjustment will be made if that date would
otherwise fall on a day that is not a Business Day so that the date
will be the first following day that is a Business Day.
"New York Banking Day" shall mean any date on which commercial
banks are generally open for business and upon which commercial banks
settle payments in New York.
"Obligations" shall mean all indebtedness or obligations of
any kind or nature of the Borrower to the Bank including without
limitation the obligations of Borrower under the Revolving Line, the
Capital Line, the Capital Loan, the Term Loan, the Mortgage Loans, the
1994 Loan, and the Erie Loan.
"Prime Rate" shall mean the variable per annum rate of
interest so designated from time to time by the Bank as its prime rate.
The Prime Rate is a reference rate and does not necessarily represent
the lowest or best rate being charged to any customer.
"Rate Change Date" shall mean the date on which any rate of
interest based upon the LIBOR Rate shall become effective.
ARTICLE III - FEES AND EXPENSES
A. Placement and Administration Expense. The Borrower shall
pay any reasonable fees, expenses, and disbursements, including legal fees, of
the Bank related to preparation and execution of this Agreement and any loans
made hereunder. The Borrower shall pay the Bank's customary and reasonable fees,
expenses, and disbursements in connection with administration of this Agreement
including costs of periodic appraisals of the collateral and monitoring of the
Revolving Line.
B. Collection Costs. At the request of the Bank, the Borrower
shall promptly pay any expenses, reasonable attorney's fees, costs, or
disbursements in connection with collection of any of the obligations covered
hereby or enforcement of any of the Bank's rights hereunder or under any note,
security agreement, guarantee, or other agreement given to the Bank in
connection herewith. This obligation shall survive the payment of any notes
executed hereunder. The Bank may apply any payments of any nature received by it
first to the payment of obligations under this section, notwithstanding any
conflicting provision contained in any other agreement related hereto.
C. Origination Fees. The Borrower paid origination fees in
connection with (i) the consolidated Term Loan and (ii) the Bank's purchase of
the LaBar loans which were repaid with the proceeds of the 1992 Loan.
The Borrower paid an origination fee of $25,000 in connection
with the making of the 1994 Loan.
The Borrower paid an origination fee of Thirty Thousand
Dollars ($30,000) in connection with the making of the Term Loan.
The Borrower paid an origination fee equal to one-half percent
(.5%) of the original principal amount of the Erie Loan Note on the date of
closing of the Erie Loan.
The Borrower paid a facility fee to the Bank of $8750 in
connection with the Capital Line.
The Borrower will pay a Capital Line facility fee of $11,250
on the date of this Agreement.
On the date the Capital Loan is made, the Borrower shall pay a
conversion fee to the Bank equal to one-fourth percent (.25%) of the original
principal amount of the Capital Loan.
D. Default Interest Rate. Upon the failure of the Borrower to
comply with any covenant contained in Article VII, Sections A, J, or K, or
Article VIII, Sections H and J of this Agreement, the rate of interest on each
of the obligations covered hereby shall be increased to a rate at all times
equal to two percent (2%) above the rate of interest which would be in effect
absent such failure of compliance, such increased rate to remain in effect
through and including the end of the month in which such failure of compliance
is remedied. Upon the occurrence of an Event of Default, however, the provisions
of this paragraph shall be superseded by the provisions of the next paragraph of
this Section D.
Upon the occurrence of an Event of Default, Borrower's right
to select pricing options shall cease and the rate of interest on each of the
Obligations shall be increased to a rate at all times equal to two percent (2%)
above the rate of interest which would be in effect absent such failure of
compliance, such increased rate to remain in effect through and including
payment in full of all of the obligations covered by this Agreement and
cancellation of further commitments to lend under this Agreement, or written
waiver of such Event of Default by the Bank.
E. Late Payment Fees. Payments of principal and/or interest
not made in full before the date ten (10) days after the date due shall be
subject to a processing charge of five percent (5%) of the payment due.
ARTICLE IV - COLLATERAL
The Term Loan, the Mortgage Loans, and the Erie Loan shall be
secured by mortgage liens and assignments of mortgage liens on Borrower's
interests in real properties located in (i) Gloucester County, New Jersey, (ii)
Montgomery, Livingston, and Broome Counties, New York, (iii) Anderson and Oconee
Counties, South Carolina, (iv) Buncombe County, North Carolina, (v) Centre,
Lehigh, Luzerne, Columbia, Clinton, Franklin, and Erie Counties, Pennsylvania,
(vi) Rockingham County, New Hampshire, and (vii) Porter and Lake Counties,
Indiana.
The 1992 Loan was secured by mortgage liens on Borrower's
interests in real properties in Gloucester County, New Jersey, Columbia County,
Pennsylvania, and Lehigh County, Pennsylvania.
The 1994 Loan shall be secured by mortgage liens on Borrower's
interests in real properties in Rockingham County, New Hampshire as well as by
interests in Borrower's other properties including without limitation properties
in Gloucester County, New Jersey and Franklin County, Pennsylvania.
All of the aforesaid mortgages shall be documented and
perfected in a manner satisfactory to the Bank and its legal counsel.
The Revolving Line, the Capital Line and the Capital Loan
shall be secured by the collateral for the Term Loan and the 1994 Loan as well
as a sole first lien in all assets of every kind and nature, now owned or
hereafter acquired, of Borrower, including without limitation goods, equipment,
machinery, furniture, fixtures, supplies, tools, parts, accounts, inventory,
documents, chattel paper, instruments, and general intangibles of Borrower,
together with additions, accessions, replacements, substitutions, and proceeds.
The Capital Loan shall be secured by a mortgage covering any
of the Borrower's property acquired with proceeds of the Capital Loan. The
mortgage shall be documented and perfected in a manner satisfactory to the Bank
and its legal counsel.
The Erie Term Loan shall be secured by all assets of every
kind and nature, now owned or hereafter acquired, of Borrower, including without
limitation goods, equipment, machinery, furniture, fixtures, supplies, tools,
parts, accounts, inventory, documents, chattel paper, instruments, and general
intangibles of Borrower, together with additions, accessions, replacements,
substitutions, and proceeds. In addition, the Erie Term Loan shall be secured by
a mortgage covering the Borrower's property in Erie County, Pennsylvania.
The existing collateral for the Mortgage Loans shall continue
to secure such Mortgage Loans.
The Borrower shall execute such documentation and deliver such
items as the Bank deems necessary from time to time to perfect its interests in
all collateral provided hereunder, and authorizes the Bank to file financing
statements without its signature from time to time.
ARTICLE V - REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
A. Organization and Power. The Borrower is duly formed,
validly existing and in good standing under the laws of New York, and is duly
qualified to transact business and is in good standing in all states and
countries in which it owns properties or in which it conducts intrastate or
international business. The Borrower has full power and authority to own its
properties, to carry on its business as now being conducted, to execute and
perform this Agreement, and to borrow hereunder.
B. Proceedings of Borrower. All necessary action on the part
of the Borrower and any other required persons or entities relating to
authorization of the execution and delivery of this Agreement and the
performance of other obligations hereunder including, but not limited to, the
delivery of any notes, security agreements, and guarantees contemplated
hereunder, has been taken. All of the same are valid and enforceable in
accordance with their respective terms except as may be limited by bankruptcy,
insolvency, or other laws of general application relating to enforcement of
creditor's rights, and except as remedies may be limited by the application of
equitable principles. Said action will not violate any provision of law or the
Borrower's or any other required person's or entity's Certificate of
Incorporation or By-laws. Such action will not violate, be in conflict with,
result in a breach of, or constitute a default under any agreement to which the
Borrower or any other required person or entity is party or by which any of
their properties are bound, or any order, writ, injunction, or decree of any
court or governmental instrumentality, and will not result in the creation or
imposition of any lien, charge or encumbrance upon any of their properties with
the sole exception of those in favor of the Bank contemplated hereby.
C. Litigation. At the date of this Agreement, there is no
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency pending or, to their knowledge, threatened
against or affecting the Borrower which, if adversely determined, would have a
material adverse effect on its financial condition or business.
D. Financial Statements. All financial statements furnished by
the Borrower to the Bank are complete and correct, have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the period indicated, and fairly present the financial condition of
the Borrower as of the respective dates thereof and the results of its
operations for the respective periods covered thereby; provided that interim
financial statements are subject to normal recurring year end adjustments and
matters that customarily would be set forth in the notes to audited financial
statements.
E. Adverse Changes. Since the latest financial statements
described in Article V.D., there have been no material adverse changes in the
condition, financial or otherwise, of the Borrower.
F. Taxes. The Borrower have obtained extensions or have filed
or caused to be filed all tax returns which, to the knowledge of the officers of
the Borrower are required to be filed, and have paid or caused to be paid all
taxes or any assessments to the extent that such taxes have become due.
G. Properties. The Borrower has good and marketable title to
all its material property interests and assets, including without limitation,
the property and assets set forth in the financial statements referred to in
Article V.D. hereof, except as previously disclosed to the Bank. The Borrower
has undisturbed peaceable possession under all leases under which it is
operating, none of which contain unusual or burdensome provisions which may
materially affect the operations of the Borrower and all such leases are in full
force and effect.
H. Indebtedness. The Borrower has no outstanding indebtedness
other than indebtedness described in the financial statements referred to in
Article V.D. hereof, trade payables not yet due incurred in the ordinary course
of Borrower's business, and indebtedness to the Bank.
I. Franchises, Permits. The Borrower has all material
franchises, permits, licenses, and other authority as are necessary to enable it
to conduct its business as now being conducted, and is not in default under such
franchises, permits, licenses, and authority.
J. ERISA. No action, event, or transaction has occurred which
could give rise to a lien or encumbrance on Borrower's assets as a result of the
application of relevant provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA").
ARTICLE VI - CONDITIONS OF LENDING
The following conditions must be satisfied by Borrower before
the Bank shall have any obligation to make any advance or loan under this
Agreement:
A. Representations and Warranties. The representations and
warranties of the Borrower contained in Article V shall be true and correct in
all material respects as of the time of the making of each such loan or advance
with the same effect as if made on and as of such date.
B. No Defaults. There shall exist no condition or event
constituting an Event of Default under Article IX hereof at the time of making
of each loan or advance hereunder.
C. Performance. The Borrower shall have performed and complied
in all material respects with all agreements and conditions required to be
performed or complied with by it prior to or at the time of making each loan or
advance hereunder.
D. Documents to be Delivered. The Borrower shall have
delivered to the Bank security agreements, guarantees, and other related
documents as more particularly described in Article IV hereof.
E. Certified Resolutions. The Borrower shall have delivered
the certificate of its Secretary, certifying as of the date of this Agreement,
resolutions of its Board of Directors authorizing execution and delivery of this
Agreement and of the notes, security agreements and other agreements to be
delivered hereunder.
F. Fees and Taxes. The Borrower shall have paid all filing
fees, taxes, and assessments related to the borrowings and the perfection of any
collateral security required hereunder.
G. Insurance. The Borrowers shall have delivered evidence
satisfactory to the Bank of the existence of insurance required hereby.
H. Opinion of Counsel. The Borrower shall have caused to be
delivered the opinion of its legal counsel as to such matters and in such form
as may be required by legal counsel to the Bank, including as to the existence
of the Borrower, its power and authority to take the actions contemplated
hereby, and the enforceability of the agreements and obligations contemplated
hereby.
ARTICLE VII - AFFIRMATIVE COVENANTS OF BORROWER
So long as the Revolving Line commitment, the Capital Line
commitment, the Capital Loan, the Term Loan, the Mortgage Loans, the 1994 Loan,
the Erie Loan, or any loans hereunder or any other obligations of Borrower to
the Bank under or related to this Agreement shall be outstanding, unless the
Bank shall otherwise consent in writing, the Borrower shall:
A. Financial Statements. Furnish to the Bank as soon as
available, but in no event more than one hundred twenty (120) days after the
close of each fiscal year of Borrower, copies of annual financial statements of
Borrower in reasonable detail satisfactory to the Bank prepared in accordance
with generally accepted accounting principles, certified without qualification
by an independent certified public accountant satisfactory to the Bank. Said
financial statements shall include all financial disclosures required by
generally accepted accounting principles and shall include at least a balance
sheet and a statement of profit and loss.
Borrower also shall furnish to the Bank unaudited financial
statements not more than forty-five (45) days after the close of each fiscal
month. Said statements shall be in reasonable detail satisfactory to the Bank
including at least a balance sheet and statement of profit and loss, and shall
be prepared in accordance with generally accepted accounting principles. Said
financial statements shall be certified to be complete and correct by officers
of Borrower.
The Borrower also shall promptly provide to the Bank any
interim financial statements reviewed or certified by its independent
accountants, as well as copies of any of its filings with the Securities and
Exchange Commission including its Form 10K within 120 days after its fiscal year
end and its Form 10Q within 60 days after the end of each of its fiscal
quarters.
At the time of submission of annual financial statements the
Borrower shall submit to the Bank a signed certificate of its chief executive or
financial officer to the effect that no Events of Default have occurred, exist,
or to the knowledge of Borrower will exist in the future under Article IX of
this Agreement or any other agreements contemplated hereunder.
Borrower shall furnish to the Bank, quarterly at the time its
Report 10Q is required to be furnished, a report showing its capital
expenditures during the quarter and on a cumulative basis since the date of
commitment of the Capital Line, as well as sources of funding for the same, in
form and with detail reasonably satisfactory to the Bank.
B. Other Reports and Inspections. Furnish to the Bank such
additional information, reports or financial statements as the Bank may, from
time to time, reasonably request. Borrower shall permit any person designated by
the Bank to inspect its property, assets, and books and the Bank's collateral at
reasonable times, and shall discuss its affairs, finances and accounts at
reasonable times with the Bank from time to time as often as may be reasonably
requested.
C. Taxes. Pay and discharge all taxes, assessments, levies,
and governmental charges upon it, its income and property, prior to the date on
which penalties are attached thereto, provided that they shall not be required
to pay any such tax, assessment, levy or charge which is being contested in good
faith and by appropriate legal proceedings so long as no lien or similar
encumbrance is placed by taxing authorities on any of their property.
D. Insurance. Maintain or cause to be maintained insurance, of
kinds and in amounts satisfactory to the Bank, with responsible insurance
companies on all of its properties in such amounts and against such risks as are
prudent including but not limited to hazard insurance, worker's compensation
insurance, and liability insurance. All such hazard insurance policies shall
name the Bank as mortgagee/loss payee as its interest may appear and shall
provide for thirty days prior written notice of cancellation to the Bank.
Borrower shall provide to Bank, upon its request, a detailed list of its
insurance carriers and coverage and shall obtain such additional insurance as
the Bank may reasonably request from time to time.
E. Payments. Make all payments promptly and as the same become
due under this Agreement and the notes related hereto.
F. Existence. Cause to be done all things necessary to
preserve and to keep in full force and effect its existence, rights, and
franchises and to comply in all material respects with all valid laws and
regulations now in effect or hereafter promulgated by any properly constituted
governmental authority having jurisdiction.
G. Maintenance of Properties. At all times maintain, preserve,
protect, and keep its property used or useful in conducting its business in good
repair, working order, and condition and from time to time, and make all needful
and proper repairs, renewals, replacements, betterments and improvements
thereto, so that the business carried on may be properly and advantageously
conducted at all times.
H. Material Changes, Judgments. Notify the Bank immediately of
any Event of Default or material adverse business development or change in its
financial condition. Borrower shall notify the Bank of any change in its name,
identity, or corporate or organizational structure.
I. ERISA. Comply with all requirements of the Employee
Retirement Income Security Act, as amended ("ERISA") on a timely basis.
J. Minimum Net Worth. Maintain at all times net worth
calculated by generally accepted accounting principles ("GAAP") of at least
$13,850,000.
K. Current Maturity Coverage Ratio. Maintain a current
maturity coverage ratio (net income plus depreciation plus amortization less
dividends and distributions divided by currently maturing long term debt)
calculated by GAAP. Such ratio shall be (a) reported on or before each December
15 commencing December 15, 1993 and measured as of the preceding October 31 and
shall not be lower than 1.2 to 1 on an annualized basis of six months results
for the period between the preceding May 1 and such preceding October 31, and
(b) shall be reported on or before each July 31 and measured as of the preceding
April 30 and shall not be lower than 1.2 to 1 for the twelve month period ending
on such April 30.
L. Proceeds of Sales. Cause the proceeds, after payment of
expenses related thereto, of any sales of properties covered by the mortgages,
or sales of other collateral, referenced in Article IV hereof to be delivered to
the Bank to be used to retire obligations first under the Term Loan, second
under the Mortgage Loans, third under the 1994 Loan, and fourth under the
Capital Loan; provided, however, that to the extent proceeds specifically relate
to a property covered by one of the Mortgage Loans, or the Erie Loan, the 1994
Loan, or the Capital Loan, to the extent applicable, such proceeds shall be used
to reduce the respective Mortgage Loan, the Erie Loan, or the Capital Loan
respectively; and further provided, however, that if any mortgaged property is
the subject of a sale-leaseback, the Bank will not unreasonably withhold its
approval of the same on such terms and conditions as may be mutually agreeable
between the Bank and the Borrower.
M. Interest Exposure Coverage. Cause at all times to be
subject to fixed rates or interest rate caps or other interest rate protection
satisfactory to the Bank, at least fifty percent (50%) of the outstanding
principal amount of the aggregate of (i) its obligations to the Bank of any kind
or nature and (ii) its obligations with respect to the 8.5% Convertible Senior
Subordinated Debentures described in Article VIII.A. of this Agreement.
ARTICLE VIII - NEGATIVE COVENANTS OF BORROWER
So long as the Revolving Line commitment, the Term Loan, the
Mortgage Loans, the 1994 Loan, the Erie Loan, the Capital Line commitment, the
Capital Loan, or any loans hereunder or any other obligations of Borrower to the
Bank under or related to this Agreement shall be outstanding, unless the Bank
otherwise consents in writing, Borrower shall not, directly or indirectly:
A. Indebtedness, Mortgages and Liens. Create, incur, assume,
or allow to exist, voluntarily or involuntarily, any obligation for borrowed
money, lease, pledge, lien or other encumbrance of any kind (including the
charge upon property purchased under conditional sales or other title retention
agreements) upon, or any security interest in, any of their assets, whether now
owned or hereafter acquired, excluding only (i) interests or borrowings held by
the Bank, (ii) interests or borrowings in existence on the date hereof and fully
disclosed on the financial statements referred to in Article VI D hereof, (iii)
involuntary liens of any kind being contested in good faith by appropriate legal
proceedings with respect to which enforcement has been stayed, (iv) purchase
money liens, (v) obligations under the Indenture dated January 24, 1995 between
the Borrower and American Stock Transfer and Trust Company, as Trustee, with
respect to up to $5,000,000 principal amount of 8.5% Convertible Senior
Subordinated Debentures due January 15, 2005 so long as such obligations are not
modified and so long as such obligations remain expressly subordinated to the
obligations of the Borrower to the Bank in form satisfactory to the Bank, and
(vi) indebtedness to other financial institutions provided that the opportunity
to finance such indebtedness on similar terms has been given to the Bank and the
Bank has refused to provide such financing.
B. Contingent Liabilities. Assume, guarantee, endorse,
contingently agree to purchase, or otherwise become liable in any manner upon
any obligation, contingent or otherwise, whether funded or current, or guarantee
the dividends of any person, firm, corporation, or other entity, except for
endorsement of negotiable instruments for deposit or collection, or similar
transactions (including customary indemnity agreements with distributors) in the
ordinary course of business, and except in connection with asset purchases.
C. Loans. Make loans or advances to any person or entity, or
investments of any kind in any person or entity; provided however, that Borrower
may make (i) loans or advances to, or investments in, wholly owned subsidiary
corporations which are guarantors of its obligations hereunder and (ii) short
term loans or advances in reasonable amounts to officers and employees in the
ordinary course of business for relocation or similar purposes.
D. Mergers, Sales and Acquisitions. Enter into any merger or
consolidation with or among any person or entity, or sell, lease, transfer, or
otherwise dispose of substantially all of its assets, or allow a transfer of any
controlling interest in the Borrower.
E. Amendments. Amend or modify its Certificates of
Incorporation, By-laws, or other governing instruments in any manner that would
be materially adverse to the interests of the Bank hereunder.
F. Judgments. Allow any liens other than those expressly
permitted by this Agreement or final judgments to exist against it other than
liens or judgments which are bonded or covered by insurance or for which an
appeal or other proceeding for the review thereof shall have been taken and for
which a stay of execution pending such appeal shall have been obtained.
G. Material Changes. Permit any material adverse change to be
made in the basic character of its business or in the nature of its operations
as carried on at the date of execution of this Agreement.
H. Funded Debt/EBITDA. Permit its ratio of Funded Debt to
EBITDA to exceed 3.75 to 1.00 prior to July 31, 1998 and to exceed 3.50 to 1.00
on July 31, 1998 and thereafter.
I. Dividends. Declare any cash, property, or other dividends
with respect to their capital stock, apply any of their property or assets to
the purchase, redemption, or other retirement of their capital stock, or make
any other distribution of any kind with respect to any of their capital stock.
ARTICLE IX - DEFAULTS
A. Defaults. The following events (hereinafter called "Events
of Default") shall constitute defaults under this Agreement and under any notes
or agreements executed in connection herewith. Such Events of Default also shall
be deemed to be events of default with respect to Borrower's pre-existing loans
from the Bank.
1. Nonpayment. Failure of Borrower to make any payments of any
type under the terms of this Agreement, or of any of the
agreements contemplated hereunder, or under the terms of any
notes hereunder, within fifteen days after the same become due
and payable.
2. Performance. Failure of Borrower to observe or perform any
other condition, covenant, or term of this Agreement or of any
other agreement with the Bank, after 30 days prior notice and
opportunity to cure.
3. Reports. Failure of Borrower to provide any report or
financial statement or certificate of no default, or to allow
any inspection for which this Agreement provides after 30 days
prior notice and opportunity to cure.
4. Representations. Failure of any representation or warranty
made by Borrower in connection with the execution and
performance of this Agreement, or any certificate of officers
pursuant hereto, to be truthful, accurate or correct in any
material respect.
5. Financial Difficulties. Financial difficulties of Borrower
as evidenced by:
a. any admission in writing of inability to pay debts as
they become due; or
b. the filing of a voluntary or involuntary petition in
bankruptcy, or under any chapters of the
Bankruptcy Code, or under any Federal or state
statute providing for the relief of debtors; or
c. making an assignment for the benefit of creditors; or
d. consenting to the appointment of a trustee or
receiver for all or a material part of any of its
property; or
e. the entry of a court order appointing a receiver
or a trustee for all or a material part of any of
its property; or
f. the occurrence of any event, action, or transaction
which could give rise to a lien or encumbrance on
Borrower's assets as a result of application of
relevant provisions of ERISA; or
g. entry of any judgment against Borrower not fully
covered by insurance and not discharged or bonded
for 60 days and for which a stay pending appeal has
not been obtained; or
h. default by the Borrower under any other material
obligation for borrowed money or its equivalent.
6. Cross-Default. Default by Borrower under any other
material obligation to the Bank outstanding at any time.
7. Mortgage Options. Failure by Borrower to provide a
marketable first mortgage lien to Bank on properties mortgaged
in Columbia County, Pennsylvania (Buckhorn) and Livingston
County, New York (Dansville - lien on ground leasehold
interest) at such time as Borrower's option to purchase the
premises must be exercised or is exercisable in the ordinary
course.
B. Remedies. If any one or more Events of Default listed in
Section A.5., subsections b, c, d, and e occur, the Bank shall have no further
commitments or obligations and all obligations of Borrower to the Bank shall be
automatically accelerated such that the same become forthwith due and payable
without presentment, demand, protest, or other notice of any kind, all of which
are hereby expressly waived. If any other Event of Default listed in Section
A.5. occurs, the Bank may, at its option, take either or both of the following
actions at the same or different times: (i) terminate any further commitments or
obligations of the Bank, and (ii) accelerate all obligations of Borrower to the
Bank such that the same become forthwith due and payable without presentment,
demand, protest, or other notice of any kind, all of which are hereby expressly
waived.
In case any such Events of Default shall occur, the Bank shall
be entitled to use any legal remedy, and the Bank shall be entitled to recover
judgment against the Borrower for all obligations of Borrower to the Bank either
before, or after, or during the pendency of any proceedings for the enforcement
of any security interests, mortgages or guarantees and, in the event of
realization of any funds from any security or guarantee and application thereof
to the payment of the obligations due, the Bank shall be entitled to enforce
payment of and recover judgment for all amounts remaining due and unpaid upon
such obligations. The Bank may proceed to protect and enforce its rights by any
other appropriate proceedings, including action for the specific performance of
any covenant or agreement contained in this Agreement and other agreements
contemplated hereunder held by the Bank.
ARTICLE X - MISCELLANEOUS
A. Waiver. No delay or failure of the Bank to exercise any
right, remedy, power or privilege hereunder shall impair the same or be
construed to be a waiver of the same or of any Event of Default or acquiescence
therein. No single or partial exercise of any right, remedy, power or privilege
shall preclude other or further exercise thereof by the Bank. All rights,
remedies, powers, and privileges herein conferred upon the Bank shall be deemed
cumulative and not exclusive of any others available.
B. Survival of Representations. All representations and
warranties contained herein shall survive the execution and delivery of this
Agreement and the execution and delivery of other agreements hereunder, and
shall continue in full force and effect so long as any obligation of the
Borrower to the Bank is outstanding.
C. Additional Security/Setoff. The Borrower hereby grants to
the Bank a lien, security interest, and right of set off as security for the
Obligations upon and against all deposits, credits, collateral and property, now
or hereafter in the possession, custody, safekeeping or control of Bank or any
entity under the control of Fleet Financial Group, Inc., or in transit to any of
them. After an Event of Default, without demand or notice the Bank may set off
the same or any part thereof and apply the same to any liability or obligation
of Borrower even though unmatured and regardless of the adequacy of any other
collateral securing the Obligations. Any and all rights to require Bank to
exercise its rights or remedies with respect to any other collateral which
secures the Obligations, prior to exercising its right of set off with respect
to such deposits, credits, or other property of the Borrower are hereby
knowingly, voluntarily, and irrevocably waived.
D. Notices. Any notice or demand upon the Borrower shall be
deemed to have been sufficiently given or served for all purposes thereof when
delivered by courier or mailed, first class, postage prepaid, addressed to the
Borrower at the address shown in this Agreement, or to such other address as may
be furnished in writing to the Bank for such purpose by the Borrower.
Any notice or demand to the Bank shall be deemed to have been
sufficiently given or served for all purposes hereof when delivered by courier
or mailed, first class, postage prepaid, to the Bank at the address shown in
this Agreement, or to such other address as may be furnished in writing to the
Borrower for such purpose by the Bank.
E. Business Days. All Loan Documents shall be governed by the
Modified Following Business Day Convention, but any extension of time shall, in
each such case, be included in the computation of any interest or fees.
F. Entire Agreement. This Agreement embodies the entire
agreement and understanding between the Bank and the Borrower and supersedes all
prior agreements and understandings relating to the subject matter hereof. This
Agreement shall not be changed or amended without the written agreement of both
the Borrower and the Bank.
G. Parties in Interest. All the terms and provisions of this
Agreement shall inure to the benefit of and be binding upon and be enforceable
by the respective successors and assigns of the parties hereto and, in
particular, shall inure to the benefit of and be enforceable by any holder of
notes executed hereunder.
H. Governing Law. This Agreement and the notes and agreements
related hereto, together with all of the rights and obligations of the parties
hereto, shall be construed, governed, and enforced in accordance with the laws
of the State of New York.
I. Agreement Covers All Indebtedness. This Agreement is
intended to cover all indebtedness of the Borrower to the Bank existing now or
in the future, whether or not portions of the indebtedness are from time to time
repaid or new indebtedness is created, unless otherwise expressly agreed in
writing by the Bank.
J. Assignment/Participation. All the terms and provisions of
this Agreement shall inure to the benefit of and be binding upon and be
enforceable by the parties and their respective successors and assigns and shall
inure to the benefit of and be enforceable by any holder of notes executed
hereunder.
Bank may at any time pledge all or any portion of its rights
under the Loan Documents, including any portion of any note evidencing the
Obligations, to any of the twelve (12) Federal Reserve Banks.
The Bank shall have the unrestricted right at any time or from
time to time, and without Borrower's consent, to assign all or any portion of
its rights and obligations hereunder to one or more banks or other financial
institutions (each an "Assignee"), and Borrower agrees that it shall execute, or
cause to be executed, such documents, including without limitation, amendments
to this Agreement and to any other Loan Documents, as the Bank shall deem
necessary to effect the foregoing. In addition, at the request of the Bank and
any such Assignee, Borrower shall issue one or more new promissory notes, as
applicable, to any such Assignee and, if Bank has retained any of its rights and
obligations hereunder following such assignment, to Bank, which new promissory
notes shall be issued in replacement of, but not in discharge of, the liability
evidenced by the promissory note held by Bank prior to such assignment and shall
reflect the amount of the respective commitments and loans held by such Assignee
and Bank after giving effect to such assignment. Upon the execution and delivery
of appropriate assignment documentation, amendments, and any other documentation
required by Bank in connection with such assignment, and the payment by Assignee
of the purchase price agreed to by Bank and such Assignee, such Assignee shall
be a party to this Agreement and shall have all of the rights and obligations of
the Bank hereunder (and under any and all other Loan Documents) to the extent
that such rights and obligations have been assigned by the Bank pursuant to the
assignment documentation between the Bank and such Assignee, and Bank shall be
released from its obligations hereunder and thereunder to a corresponding
extent.
The Bank shall have the unrestricted right at any time and
from time to time, and without the consent of or notice to Borrower, to grant to
one or more banks or other financial institutions (each a "Participant")
participating interests in Bank's obligation to lend hereunder and/or any or all
of the Obligations. In the event of any such grant by Bank of a participating
interest to Participant, whether or not upon notice to Borrower, Bank shall
remain responsible for the performance of its obligations hereunder and Borrower
shall continue to deal solely and directly with Bank in connection with Bank's
rights and obligations hereunder.
The Bank may furnish any information concerning Borrower in
its possession from time to time to prospective Assignees and Participants,
provided that the Bank shall require any such prospective Assignee or
Participant to agree in writing to maintain the confidentiality of such
information.
K. Loss or Mutilation. Upon receipt of an affidavit of an
officer of Bank as to the loss, theft, destruction, or mutilation of any note
evidencing any Obligation or any other Loan Document which is not of public
record, and, in the case of any such loss, theft, destruction or mutilation,
upon surrender and cancellation of such note or other Loan Document, Borrower
will issue, in lieu thereof, a replacement note or other Loan Document in the
same principal amount thereof and otherwise of like tenor.
L. Usury. All agreements between Borrower and Bank are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration or maturity of the indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to Bank for the use or the
forbearance of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. As used herein, the term "applicable law" shall mean the
law in effect as of the date hereof, provided, however that in the event there
is a change in the law which results in a higher permissible rate of interest,
then the Loan Documents shall be governed by such new law as of its effective
date. In this regard, it is expressly agreed that it is the intent of Borrower
and Bank in the execution, delivery and acceptance of this Agreement to contract
in strict compliance with the laws of the State of New York from time to time in
effect. If, under or from any circumstances whatsoever, fulfillment of any
provision hereof or of any of the Loan Documents at the time performance of such
provision shall be due, shall involve transcending the limit of such validity
prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
any circumstances whatsoever Bank should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between Borrower and Bank.
M. Jurisdiction/TRIAL BY JURY. Borrower consents to
jurisdiction and service of process in the courts of the State of New York and
in the courts of the United States having jurisdiction hereof. BORROWER AND BANK
MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR BANK TO ACCEPT
THIS AGREEMENT AND MAKE THE LOANS CONTEMPLATED HEREUNDER.
N. Measurement of Financial Information. All financial covenant
compliance and related Applicable Prime Rate Margin and Applicable LIBOR Margin
computations shall be measured based upon quarterly and annual financial
statements as filed by the Borrower with the Securities and Exchange Commission.
ARTICLE XI - ENVIRONMENTAL MATTERS
A. Definitions. For purposes of this Article XI, the
following capitalized terms shall have the meanings indicated:
"Environment" means any water including but not limited to
surface water and ground water or water vapor; any land
including land surface or subsurface; stream sediments; air;
fish; wildlife; plants; and all other natural resources or
environmental media.
"Environmental Laws" means all federal, state and local
environmental, land use, zoning, health, chemical use, safety
and sanitation laws, statutes, ordinances, regulations, codes
and rules relating to the protection of the Environment and/or
governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal
of Hazardous Substances and the regulations, rules,
ordinances, bylaws, policies, guidelines, procedures,
interpretations, decisions, orders and directives of federal,
state and local governmental agencies and authorities with
respect thereto.
"Environmental Permits" means all licenses, permits,
approvals, authorizations, consents or registrations required
by any applicable Environmental Laws and all applicable
judicial and administrative orders in connection with
ownership, lease, purchase, transfer, closure, use and/or
operation of the Mortgaged Property and/or as may be required
for the storage, treatment, generation, transportation,
processing, handling, production or disposal of Hazardous
Substances.
"Environmental Report" means a written report prepared for the
Mortgagor or the Mortgagee by an environmental consulting or
environmental engineering firm.
"Hazardous Substances" means, without limitation, any
explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances and
any other material defined as a hazardous substance in the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Sections 9601,
et. seq.; the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Sections 1801, et. seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Sections
6901, et. seq.; Articles 15 and 27 of the New York State
Environmental Conservation Law or any other federal, state, or
local law, regulation, rule, ordinance, bylaw, policy,
guideline, procedure, interpretation, decision, order, or
directive, whether existing as of the date hereof, previously
enforced or subsequently enacted.
"Mortgagee" means the Bank.
"Mortgagor" means the Borrower, and to the extent that the
mortgagor of the Mortgaged Property is different from the
Borrower, the Borrower will cause the mortgagor to be bound by
the representation, terms and conditions of this Article XI.
"Mortgaged Property" means the properties covered by the
mortgages referenced in Article IV of this Agreement as well
as any other properties owned or occupied or used by
Mortgagor.
"Release" has the same meaning as given to that term in
Section 101(22) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601(22), and the regulations promulgated thereunder.
B. Representations. The Mortgagor represents and warrants
that, to the best of Mortgagor's knowledge, except as indicated in any Report
provided to Mortgagee prior to the date hereof and except with respect to
properties located in Fultonville (Montgomery County, New York), Paulsboro
(Gloucester County, New Jersey), Binghamton (Broome County, New York), Porter
(Porter County, Indiana), Bloomsburg (Columbia County, Pennsylvania), and
Milesburg (Luzerne County, Pennsylvania) which have been the subject of
disclosures by the Borrower to the Bank regarding environmental matters:
(1) Neither the Mortgaged Property nor any property
adjacent to the Mortgaged Property is being or has been used
for the storage, treatment, generation, transportation,
processing, handling, production or disposal of any Hazardous
Substance or as a landfill or other waste disposal site or for
military, manufacturing or industrial purposes or for the
storage of petroleum or petroleum based products except in
compliance with all Environmental Laws.
(2) Underground storage tanks are not and have not
been located on the Mortgaged Property except in compliance
with all Environmental Laws.
(3) The soil, subsoil, bedrock, surface water and
groundwater of the Mortgaged Property are free of any
Hazardous Substances.
(4) There has been no Release nor is there the threat
of a Release of any Hazardous Substance on, at or from the
Mortgaged Property or any property adjacent to or within the
immediate vicinity of the Mortgaged Property which through
soil, subsoil, bedrock, surface water or groundwater migration
could come to be located on the Mortgaged Property, and
Mortgagor has not received any form of notice or inquiry from
any federal, state or local governmental agency or authority,
any operator, tenant, subtenant, licensee or occupant of the
Mortgaged Property or any property adjacent to or within the
immediate vicinity of the Mortgaged Property or any other
person with regard to a Release or the threat of a Release of
any Hazardous Substance on, at or from the Mortgaged Property
or any property adjacent to the Mortgaged Property.
(5) All Environmental Permits have been obtained and
are in full force and effect.
(6) No event has occurred with respect to the
Mortgaged Property which would constitute a violation of any
applicable Environmental Law or non-compliance with any
Environmental Permit.
(7) There are no agreements, consent orders, decrees,
judgments, license or permit conditions or other orders or
directives of any federal, state or local court, governmental
agency or authority relating to the past, present or future
ownership, use, operation, sale, transfer or conveyance of the
Mortgaged Property which require any change in the present
condition of the Mortgaged Property or any work, repairs,
construction, containment, clean up, investigations, studies,
removal or other remedial action or capital expenditures with
respect to the Mortgaged Property.
(8) There are no actions, suits, claims or
proceedings, pending or threatened, which could cause the
incurrence of expenses or costs of any name or description or
which seek money damages, injunctive relief, remedial action
or any other remedy that arise out of, relate to or result
from (a) a violation or alleged violation of any applicable
Environmental Law or non-compliance or alleged non-compliance
with any Environmental Permit, (b) the presence of any
Hazardous Substance or a Release or the threat of a Release of
any Hazardous Substance on, at or from the Mortgaged Property
or any property adjacent to or within the immediate vicinity
of the Mortgaged Property or (c) human exposure to any
Hazardous Substance, noises, vibrations or nuisances of
whatever kind to the extent the same arise from the condition
of the Mortgaged Property or the ownership, use, operation,
sale, transfer or conveyance thereof.
C. Covenants. The Mortgagor covenants and agrees
with the Mortgagee that so long as the Mortgagee holds liens on the Mortgaged
Property or any of it, that the Mortgagor shall:
(1) Keep, and shall cause all operators, tenants,
subtenants, licensees and occupants of the Mortgaged Property
to keep, the Mortgaged Property free of all Hazardous
Substances except in compliance with all Environmental Laws,
and shall not cause or permit the Mortgaged Property or any
part thereof to be used for the storage, treatment,
generation, transportation, processing, handling, production
or disposal of any Hazardous Substances except in compliance
with all Environmental Laws.
(2) Comply with, and shall cause all operators,
tenants, subtenants, licensees and occupants of the Mortgaged
Property to comply with all applicable Environmental Laws and
shall obtain and comply with, and shall cause all operators,
tenants, subtenants, licensees and occupants of the Mortgaged
Property to obtain and comply with, all Environmental Permits.
(3) Not cause or permit any change to be made in the
present or intended use of the Mortgaged Property which would
(a) involve the storage, treatment, generation,
transportation, processing, handling, production or disposal
of any Hazardous Substance or the use of the Mortgaged
Property as a landfill or other waste disposal site or for
military, manufacturing or industrial purposes or for the
storage of petroleum or petroleum based products, except in
compliance with all Environmental Laws, (b) violate any
applicable Environmental Law, (c) constitute non-compliance
with any Environmental Permit or (d) increase the risk of a
Release of any Hazardous Substance.
(4) Promptly provide Mortgagee with a copy of all
notifications which it gives or receives with respect to any
past or present Release or the threat of a Release of any
Hazardous Substance on, at or from the Mortgaged Property or
any property adjacent to the Mortgaged Property.
(5) Undertake and complete all investigations,
studies, sampling and testing and all removal and other
remedial actions required by law to contain, remove and clean
up all Hazardous Substances that are determined to be present
at the Mortgaged Property in accordance with all applicable
Environmental Laws and all Environmental Permits.
(6) At all times allow Mortgagee and its officers,
employees, agents, representatives, contractors and
subcontractors reasonable access after reasonable prior notice
to the Mortgaged Property for the purposes of ascertaining
site conditions, including, but not limited to, subsurface
conditions.
(7) Deliver promptly to the Mortgagee: (a) copies of
any documents received from the Untied States Environmental
Protection Agency, or any state, county or municipal
environmental or health agency concerning the Mortgagor's
operations at the Mortgaged Property; and (b) copies of any
documents submitted by the Mortgagor to the United States
Environmental Protection Agency or any state, county or
municipal environmental or health agency concerning its
operations at the Mortgaged Property.
(8) If at any time Mortgagee obtains any reasonable
evidence or information which suggests that a material
potential environmental problem may exist at the Mortgaged
Property, Mortgagee may require that a full or supplemental
environmental inspection and audit report with respect to the
Mortgaged Property of a scope and level of detail satisfactory
to Mortgagee be prepared by an environmental engineer or other
qualified person acceptable to Mortgagee at Mortgagor's
expense. Such audit may include a physical inspection of the
Mortgaged Property, a visual inspection of any property
adjacent to or within the immediate vicinity of the Mortgaged
Property, personnel interviews and a review of all
Environmental Permits. If Mortgagee requires, such inspection
shall also include a records search and/or subsurface testing
for the presence of Hazardous Substances in the soil, subsoil,
bedrock, surface water and/or groundwater. If such audit
report indicates the presence of any Hazardous Substance or a
Release or the threat of a Release of any Hazardous Substance
on, at or from the Mortgaged Property, Mortgagor shall
promptly undertake and diligently pursue to completion all
necessary, appropriate and legally authorized investigative,
containment, removal, clean up and other remedial actions,
using methods recommended by the engineer or other person who
prepared said audit report and acceptable to the appropriate
federal, state and local agencies or authorities.
D. Indemnity. The Mortgagor agrees to indemnify, defend, and
hold harmless the Mortgagee from and against any and all liabilities, claims,
damages, penalties, expenditures, losses, or charges, including, but not limited
to, all costs of investigation, monitoring, legal representation, remedial
response, removal, restoration or permit acquisition of any kind whatsoever,
which may now or in the future be undertaken, suffered, paid, awarded, assessed,
or otherwise incurred by the Mortgagee or any other person or entity relating
to, resulting from or arising out of (1) the use of the Mortgaged Property for
the storage, treatment, generation, transportation, processing, handling,
production or disposal of any Hazardous Substance or as a landfill or other
waste disposal site or for military, manufacturing or industrial purposes or for
the storage of petroleum or petroleum based products, (2) the presence of any
Hazardous Substance or a Release or the threat of a Release of any Hazardous
Substance on, at or from the Mortgaged Property, (3) the failure to promptly
undertake and diligently pursue to completion all necessary, appropriate and
legally authorized investigative, containment, removal, clean up and other
remedial actions with respect to a Release or the threat of a Release of any
Hazardous Substance on, at or from the Mortgaged Property, (4) human exposure to
any Hazardous Substance, noises, vibrations or nuisances of whatever kind to the
extent the same arise from the condition of the Mortgaged Property or the
ownership, use, operation, sale, transfer or conveyance thereof, (5) a violation
of any applicable Environmental Law, (6) non-compliance with any Environmental
Permit or (7) a material misrepresentation or inaccuracy in any representation
or warranty or a material breach of or failure to perform any covenant made by
Mortgagor in this Mortgage. Such costs or other liabilities incurred by the
Mortgagee or any other person or entity shall be deemed to include, without
limitation, any sums which the Mortgagee deems it necessary or desirable to
expend to protects its security interest in the Mortgaged Property.
The liability of Mortgagor hereunder shall in no way be
limited, abridged, impaired or otherwise affected by (1) any amendment or
modification of this Mortgage or any other document relating to the obligations
covered by this Agreement by or for the benefit of Mortgagor or any subsequent
owner of the Mortgaged Property, (2) any extensions of time for payment or
performance required by any of this Mortgage or any other document relating to
the obligations covered by this Agreement, (3) the release of Mortgagor, any
guarantor or any other person from the performance or observance of any of the
agreements, covenants, terms or conditions contained in this Agreement or any
other document relating to the obligations covered hereby by operation of law,
Mortgagee's voluntary act or otherwise, (4) the invalidity or unenforceability
of any of the terms of provisions of this Agreement or any other mortgage or
document relating to the obligations covered by this Agreement, (5) any
exculpatory provision contained in this Agreement or any other mortgage or
document relating to the obligations covered by this Agreement limiting
Mortgagee's recourse to the Mortgaged Property or to any other security or
limiting Mortgagee's rights to a deficiency judgment against Mortgagor, (6) any
applicable statute of limitations, (7) any investigation or inquiry conducted by
or on the behalf of Mortgagee or any information which Mortgagee may have or
obtain with respect to the environmental or ecological condition of the
Mortgaged Property, (8) the sale, assignment or foreclosure of any mortgage
covering the Mortgaged Property, (9) the sale, transfer or conveyance of all or
part of the Mortgaged Property, (10) the dissolution and liquidation of
Mortgagor, (11) the release or discharge, in whole or in part, of Mortgagor in
any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or similar proceeding or (12) any other circumstances
which might otherwise constitute a legal or equitable release or discharge of
Mortgagor, in whole or in part.
E. Survival. Notwithstanding anything to the
contrary contained herein, the Mortgagor's liability shall survive the
discharge, satisfaction or assignment of this Agreement and any mortgages
covered hereby by the Mortgagee until all of the following conditions are
satisfied in full:
(1) all principal, interest and other sums evidenced
or covered by this Agreement and the documents, notes,
mortgages and other agreements related hereto and any other
costs and expenses incurred by Mortgagee in connection with
this Agreement and the obligations covered hereby are paid in
full by Mortgagor or by any guarantor;
(2) neither Mortgagee nor any affiliate of Mortgagee
has at any time or in any manner participated in the
management or control of, taken possession of or title to the
Mortgaged Property or any portion thereof, whether by
foreclosure, deed in lieu of foreclosure or otherwise, or had
the capacity or ability to participate in the decisions or
actions of the Mortgagor as the same relate to Hazardous
Substances;
(3) between the date of this Agreement and the date
on which all obligations covered hereby are paid in full, as
provided in clause (1) above, there has been no change in any
applicable Environmental Law which would make a lender or
mortgagee liable in respect of any of the indemnified matters
contained in this Article XI notwithstanding the fact that no
event, circumstance or condition of the nature described in
clause (2) above ever occurred; and
(4) there exist no indemnified matters which are
then pending.
F. Default. If the Mortgagor defaults on any of its
obligations pursuant to this Agreement or any other document, mortgage, note, or
agreement related hereto, the Mortgagee or its designee shall have the right,
upon reasonable notice to the Mortgagor, to enter upon the Mortgaged Property
and conduct such tests, investigation and sampling, including but not limited to
installation of monitoring wells, as shall be reasonably necessary for the
Mortgagee to determine whether any disposal of Hazardous Substances has occurred
on, at or near the Mortgaged Property. The costs of all such tests,
investigations and samplings shall be considered as additional indebtedness
secured hereby and shall become immediately due and payable without notice and
with interest thereon at the rate provided in the Term Loan Note.
G. No Reliance On Information. The Mortgagor agrees that the
Mortgagee shall not be liable in any way for the completeness or accuracy of any
Environmental Report or the information contained therein. The Mortgagor further
agrees that the Mortgagee has no duty to warn the Mortgagor or any other person
or entity about any actual or potential environmental contamination or other
problem that may have become apparent or will become apparent to Mortgagee.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized, respective officers as of the date first
above written.
FLEET NATIONAL BANK
By: _________________________
Title: _________________________
TRAVEL PORTS OF AMERICA, INC.
By: _________________________
Title: _________________________
EXHIBIT F
REPLACEMENT CAPITAL LINE NOTE
$4,500,000 July 24, 1998
THIS CAPITAL LINE NOTE RESTATES, AMENDS, AND REPLACES IN ITS
ENTIRETY THE CAPITAL LINE NOTE DATED AS OF JANUARY 31, 1997 IN THE MAXIMUM
PRINCIPAL AMOUNT OF $3,500,000 GIVEN BY THE BORROWER IN FAVOR OF THE BANK, AS
REPLACED BY THE CAPITAL LINE NOTE DATED AS OF NOVEMBER 1, 1997 IN THE MAXIMUM
PRINCIPAL AMOUNT OF $3,500,000 GIVEN BY THE BORROWER IN FAVOR OF THE BANK.
Capitalized terms not otherwise defined herein shall have the
meanings given to them in the Restated and Amended Credit Agreement between the
Borrower and the Bank dated as of July 24, 1998, as the same has been and may be
modified, extended, or replaced from time to time (the "Credit Agreement").
FOR VALUE RECEIVED, TRAVEL PORTS OF AMERICA, INC. ("Borrower")
hereby promises to pay to the order of FLEET NATIONAL BANK ("Bank"), the
principal sum of Four Million Five Hundred Thousand Dollars ($4,500,000) or if
less, the aggregate unpaid principal amount of all advances made by Bank of
Borrower. The Bank shall maintain a record of amounts of principal and interest
payable by Borrower from time to time, and the records of the Bank maintained in
the ordinary course of business shall be prima facie evidence of the existence
and amounts of Borrower's obligations recorded therein. In the event of transfer
of this Capital Line Note, or if the Bank shall otherwise deem it appropriate,
the Borrower hereby authorizes the Bank to endorse on this Capital Line Note the
amount of advances and payments to reflect the principal balance outstanding
from time to time. The Bank may send written confirmation of advances to
Borrower but any failure to do so shall not relieve the Borrower of the
obligation to repay any advance.
Except to the extent that the LIBOR Rate option described
below has been exercised, all outstanding principal amounts under this Capital
Line Note shall bear interest until paid at a rate per annum equal to the Prime
Rate plus the Applicable Prime Rate Margin calculated based on actual days
elapsed in a year of 360 days, but never exceeding the maximum rate allowed by
law. All changes in the interest rate due to a change in the Prime Rate shall
take place automatically and without notice to Borrower as of the effective date
of the change in the Prime Rate. At the option of the Borrower, however,
exercised by giving the Bank notice at least two London Banking Days prior to
the first day of any month, the Borrower may elect to have the principal amount
outstanding under this Capital Line Note (which must not be less than $500,000)
bear interest for a LIBOR Interest Period, designated in the notice and
commencing on the first day of a month, at a fixed rate equal to the LIBOR Rate
plus the Applicable LIBOR Margin as of the date two London Banking Days prior to
the LIBOR Interest Period selected. The LIBOR Interest Period shall be either
one-month, two months, or three months, as elected by the Borrower. The Borrower
may make a maximum of six LIBOR Rate elections per year related to this Capital
Line Note.
A payment of all interest accrued under this Capital Line Note
with respect to principal which bears interest based upon the Prime Rate shall
be due on the first day of each month, and a payment of all interest accrued
with respect to principal for which a LIBOR Interest Period has been elected
shall be due on the last day of each such respective LIBOR Interest Period. All
payments shall be in lawful money of the United States in immediately available
funds.
The Borrower may prepay principal under this Capital Line Note
at any time. Any prepayment of principal covered by a rate of interest based
upon the LIBOR Rate on a date other than the last day of the applicable LIBOR
Interest Period must be accompanied by a payment of Break Costs.
All remaining principal and interest shall be due and payable
in full on the date of expiration of the Capital Line as provided in the Credit
Agreement.
Interest shall continue to accrue after maturity at the rate
required by this Capital Line Note until this Capital Line Note is paid in full.
The rate of interest on this Capital Line Note may be increased under the
circumstances provided in the Credit Agreement. The right of Bank to receive
such increased rate of interest shall not constitute a waiver of any other right
or remedy of Bank.
Any payment not received within ten days of when due may be
subject to an additional late charge equal to 5% of the payment due.
If this Capital Line Note or any payment hereunder becomes due
on a Saturday, Sunday or other holiday on which the Bank is authorized to close,
the due date for the Capital Line Note or payment shall be extended to the next
succeeding business day, but any interest or fees shall be calculated based upon
the actual time of payment.
This Capital Line Note shall, at the Bank's option, become
immediately due and payable without presentment, demand, protest, or other
notice of any kind, all of which are hereby expressly waived, upon the happening
of any Event of Default under the Credit Agreement.
This Capital Line Note is subject to the express condition
that at no time shall Borrower be obligated or required to pay interest on the
principal balance of this Capital Line Note at a rate which could subject Bank
to either civil or criminal liability as a result of being in excess of the
maximum rate which Borrower is permitted by law to contract or agree to pay. If
by the terms of this Capital Line Note, Borrower is at any time required or
obligated to pay interest on the principal balance of this Capital Line Note at
a rate in excess of such maximum rate, the rate of interest under this Capital
Line Note shall be deemed to be immediately reduced to such maximum rate and
interest payable hereunder shall be computed at such maximum rate and the
portion of all prior interest payments in excess of such maximum rate shall be
applied and shall be deemed to have been payments in reduction of the principal
balance of this Capital Line Note.
The terms of this Capital Line Note cannot be changed, nor may
this Capital Line Note be discharged in whole or in part, except by a writing
executed by the holder. In the event that holder demands or accepts partial
payments of this Capital Line Note, such demand or acceptance shall not be
deemed to constitute a waiver of the right to demand the entire unpaid balance
of this Capital Line Note at any time in accordance with the terms hereof. Any
delay by holder in exercising any rights hereunder shall not operate as a waiver
of such rights.
Bank may set off toward payment of any obligations under this
Capital Line Note any indebtedness due or to become due from Bank to Borrower
and any moneys or other property of Borrower in possession of Bank at any time.
Borrower on demand shall pay all expenses of Bank, including
without limitation reasonable attorneys' fees, in connection with enforcement
and collection of this Capital Line Note.
This Capital Line Note shall be governed by the laws of the
State of New York. Whenever used, the singular number shall
include the plural, the plural the singular,
and the words "Bank" and "Borrower" shall include their respective successors
and assigns.
TRAVEL PORTS OF AMERICA, INC.
By:__________________________
Title:_______________________
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000798935
<NAME> TRAVEL PORTS OF AMERICA, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-1-1998
<PERIOD-END> APR-30-1998
<CASH> 4,082,203
<SECURITIES> 0
<RECEIVABLES> 4,325,966
<ALLOWANCES> 158,000
<INVENTORY> 5,726,512
<CURRENT-ASSETS> 15,638,567
<PP&E> 70,700,550
<DEPRECIATION> 26,103,308
<TOTAL-ASSETS> 64,812,728
<CURRENT-LIABILITIES> 14,888,120
<BONDS> 28,376,536
0
0
<COMMON> 63,026
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<TOTAL-LIABILITY-AND-EQUITY> 64,812,728
<SALES> 211,508,861
<TOTAL-REVENUES> 211,508,861
<CGS> 162,774,569
<TOTAL-COSTS> 162,774,569
<OTHER-EXPENSES> 41,568,789
<LOSS-PROVISION> 49,003,429
<INTEREST-EXPENSE> 3,155,072
<INCOME-PRETAX> 3,960,480
<INCOME-TAX> 1,622,800
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<NET-INCOME> 2,337,680
<EPS-PRIMARY> .38
<EPS-DILUTED> .30
</TABLE>
