SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- ---------- THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- ---------- OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from_________to_________
Commission File No. 0-19350
-------
ViroGroup, Inc.
(Exact name of registrant as specified in its charter)
Florida 59-1671036
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
428 Pine Island Road SW
Cape Coral, Florida 33991
- --------------------------------------- ----------
(Address of principle executive office) (zip code)
Registrant's telephone number including area code: (941) 574-1919
--------------
Indicated 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
----------- -----------
The number of shares outstanding of the registrant's common stock, $.01 Par
Value, as of May 31, 1997 was 795,011.
<PAGE>
VIROGROUP, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
QUARTER ENDED MAY 31, 1997
Page
----
Part I- Financial Information
Consolidated Balance Sheets
May 31, 1997 and August 31, 1996 3
Consolidated Statements of Operations
Three Months Ended May 31, 1997 and
May 31, 1996 4
Consolidated Statements of Operations
Nine Months Ended May 31, 1997 and
May 31, 1996 5
Consolidated Statements of Cash Flows
Nine Months Ended May 31, 1997 and
May 31, 1996 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Part II - Other Information 15
Signature Page 17
Page 2 of 18
<PAGE>
VIROGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1997 AND AUGUST 31, 1996
<TABLE>
<CAPTION>
May 31 August 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................... $ 81,479 $ 191,001
Accounts receivable, net of allowance for doubtful
accounts of $448,801, and $502,551, respectively........... 1,608,991 3,384,426
Unbilled accounts receivable................................. 553,577 717,946
Prepaid income taxes......................................... 18,371 26,840
Prepaid expenses and other................................... 719,791 204,313
----------- -----------
Total current assets................................... 2,982,209 4,524,526
AMOUNTS DUE FROM STATE AGENCY, net............................... 534,427 2,812,737
PROPERTY AND EQUIPMENT, net...................................... 394,599 543,746
OTHER ASSETS..................................................... 34,534 35,261
----------- -----------
Total assets........................................... $ 3,945,769 $ 7,916,270
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................. $ 341,933 $ 1,160,354
Accrued liabilities.......................................... 1,748,409 1,197,026
Current maturities of long-term debt......................... 493 9,447
Notes payable................................................ 542,768 2,491,429
----------- -----------
Total current liabilities.............................. 2,633,603 4,858,256
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 50,000,000 shares
authorized, 0 shares outstanding........................... --- ---
Common stock, $.01 par value, 50,000,000 shares
authorized, 795,011 issued and outstanding at
August 31, 1996 and 795,011 issued and outstanding
at May 31, 1997............................................ 7,950 7,950
Additional paid-in capital................................... 18,333,536 18,333,536
Accumulated deficit.......................................... (17,029,320) (15,283,472)
----------- -----------
Total shareholders' equity............................. 1,312,166 3,058,014
----------- -----------
$ 3,945,769 $ 7,916,270
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
Page 3 of 18
<PAGE>
VIROGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS Three Months
Ended May 31, 1997 and May 31, 1996
(Unaudited)
1997 1996
----------- -----------
GROSS REVENUES ................................. $ 1,512,789 $ 3,461,519
COST OF GROSS REVENUES ......................... 1,066,891 2,366,963
----------- -----------
Gross profit ............................... 445,898 1,094,556
SELLING, GENERAL & ADMINISTRATIVE EXPENSES,
including rentals to related party of
$46,500 in 1997 and 1996 ................... 1,045,136 1,638,065
----------- -----------
Loss from operations ....................... (599,238) (593,509)
OTHER INCOME (EXPENSE):
Net interest expense ....................... (42,971) (44,319)
Other, net ................................. 15,948 (884)
----------- -----------
Loss before income taxes ................... (626,261) (638,712)
PROVISION FOR INCOME TAXES ..................... (793) (86,062)
----------- -----------
Net loss ................................... $ (627,054) $ (724,774)
=========== ===========
NET LOSS PER SHARE COMMON SHARE ................ $ (.79) $ (.91)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ..... 795,011 795,011
=========== ===========
The accompanying notes to consolidated financial
statements are an integral part of these statements.
Page 4 of 18
<PAGE>
VIROGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended May 31, 1997 and May 31, 1996
(Unaudited)
1997 1996
------------ ------------
GROSS REVENUES ................................. $ 5,683,545 $ 11,022,003
COST OF GROSS REVENUES ......................... 4,105,204 7,481,766
------------ ------------
Gross profit ............................... 1,578,341 3,540,237
SELLING, GENERAL & ADMINISTRATIVE EXPENSES,
including rentals to related party of
$93,000 in 1997 and 1996 ................... 3,246,780 4,630,292
------------ ------------
Loss from operations ....................... (1,668,439) (1,090,055)
OTHER INCOME (EXPENSE):
Net interest expense ....................... (153,257) (136,929)
Other, net ................................. 76,648 7,123
------------ ------------
Loss before income taxes ................... (1,745,048) (1,219,861)
PROVISION FOR INCOME TAXES ..................... (802) (3,578)
------------ ------------
Net loss ................................... $ (1,745,850) $ (1,223,439)
============ ============
NET LOSS PER SHARE COMMON SHARE ................ $ (2.20) $ (1.53)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ..... 795,011 795,011
============ ============
The accompanying notes to consolidated financial
statements are an integral part of these statements.
Page 5 of 18
<PAGE>
VIROGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended May 31, 1997 and May 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................. $(1,745,850) $(1,223,439)
----------- -----------
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities
Depreciation and amortization ...................... 237,780 299,755
Provision for bad debts ............................ 56,420 29,864
(Gain) loss on disposition of property and equipment (22,415) 6,152
Restructuring charge ............................... (92,837) 17,093
Relocation charge .................................. 42,000 0
Changes in assets and liabilities:
Decrease (increase) in-
Accounts receivable ............................ 1,719,015 206,363
Unbilled accounts receivable ................... 164,368 522,104
Prepaid income taxes ........................... 8,469 128,960
Prepaid expenses and other assets .............. 1,721,830 104,729
Increase (decrease) in-
Accounts payable ............................... (818,419) (673,618)
Accrued liabilities ............................ 643,949 (225,965)
----------- -----------
Total adjustments .............................. 3,660,160 415,436
----------- -----------
Net cash provided by (used in) operating activities . 1,914,310 (808,002)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................... (98,603) (32,874)
Proceeds from sale of property and equipment .......... 32,385 28,992
----------- -----------
Net cash provided by (used in) investing activities . (66,218) (3,882)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable ........................... 4,591,790 7,286,493
Repayment of notes payable ............................ (6,540,449) (6,376,961)
Repayment of long-term debt ........................... 0 (109,365)
Repayment of capitalized lease obligations ............ (8,955) (22,061)
----------- -----------
Net cash provided by (used in) financing activities . (1,957,614) 778,105
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS ..................... (109,522) (33,779)
CASH AND CASH EQUIVALENTS, beginning of period ............ 191,001 104,793
----------- -----------
CASH AND CASH EQUIVALENTS, end of period .................. $ 81,479 $ 71,014
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest paid ......................................... $ 153,257 $ 136,929
=========== ===========
Income taxes paid ..................................... $ 8 $ 24,246
=========== ===========
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these statements.
Page 6 of 18
<PAGE>
VIROGROUP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997
(UNAUDITED)
(1) Basis of Presentation
The consolidated balance sheet as of August 31, 1996, which has been derived
from audited statements, and the unaudited interim consolidated financial
statements included herein, have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to those rules and regulations, although the Company believes
that the disclosures made are adequate to make the information presented not
misleading.
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of the Company as
of May 31, 1997 and the results of operations and cash flows for the three-month
and nine-month periods ended May 31, 1997 and May 31, 1996.
The accounting policies followed for quarterly financial reporting purposes are
the same as those disclosed in the Company's audited financial statements
contained in its Annual Report on Form 10-K for the year ended August 31, 1996,
as filed with the Securities and Exchange Commission.
(2) One-for-Eight Reverse Stock Split
On January 23, 1997, the Company implemented a one-for-eight reverse stock split
of the Company's common stock. The effect of the reverse split upon holders of
the Company's common stock, is that the total number of shares of the Company's
common stock held by each shareholder was automatically converted into that
number of whole shares of common stock equal to the number of shares of common
stock owned immediately prior to the reverse split divided by eight, adjusted
for any fractional shares.
The reverse split was effectuated to enable the Company to remain in compliance
with the listing criteria of the Nasdaq SmallCap Market. There can be no
assurance that the reverse split will result in the Company's continued
compliance with Nasdaq listing requirements.
Page 7 of 18
<PAGE>
The Company has an authorized capitalization of 50,000,000 shares of common
stock, par value $.01 per share. The authorized capital stock of the Company was
not reduced or otherwise affected by the reverse split. As of January 23, 1997,
the Company had 6,361,708 shares of common stock issued and outstanding. The
aggregate number of shares of common stock issued and outstanding following the
reverse split is 795,011. All common shares and per share amounts have been
adjusted to give retroactive effect of the reverse split.
(3) Loss Per Share
Loss per share is calculated by dividing net loss attributed to common
shareholders by the weighted average number of common shares and common share
equivalents outstanding during the periods. Common share equivalents are not
considered for periods in which there is a loss, as their impact would be
antidilutive. Primary and fully diluted loss per share are the same for all
periods presented.
(4) Amounts Due From State Agency
During fiscal 1994, the Company aggressively expanded its participation in the
State of Florida financed programs to provide environmental services to
evaluate, assess and remediate contaminated underground petroleum storage tank
sites. Through its Inland Protection Trust Fund, the State of Florida reimburses
certain costs to clean up eligible contaminated sites. Primarily due to an
estimated unfunded $450 million backlog and annual tax revenue allocation of
only $100 million, in March 1995 new legislation directed the Florida Department
of Environmental Protection to cease processing, with certain limited
exceptions, applications for reimbursement of costs to clean up UST sites
eligible for state funds.
In May, 1996 a new law (the "1996 Act") was passed which implemented significant
changes to the reimbursement program and addressed the estimated $450 million
backlog of unpaid claims. The 1996 Act provides for the elimination of the
reimbursement program effective August 1, 1996 and requires all reimbursement
applications to be submitted by December 31, 1996. Also, the 1996 Act creates a
non-profit public benefit corporation, which is expected to be operational by
the Summer of 1997, to finance the unpaid backlog. This non-profit corporation
is charged with financing the estimated unpaid $450 million backlog with
certificates of indebtedness. Payment of claims will be on a first-come,
first-served methodology based on application filing date and an assumed annual
allocation rate of $100 million. Claims paid will be subject to a 3.5% annual
discount in consideration of the anticipated accelerated payment as compared to
the previously expected period of 4 to 5 years. The Company estimates the State
will not make significant payments under the program until the fourth quarter of
fiscal 1997 and continue through the second quarter of fiscal 1998.
Page 8 of 18
<PAGE>
The Company in prior fiscal years recorded valuation allowances on the amounts
due to reflect the State mandated discount and potential denied costs. At August
31, 1996 these allowances totaled $931,665 with $889,937 applied as a valuation
allowance to the amounts due, resulting in a net amount of $2,812,737 shown as
the Amounts Due from State Agency, net, in the accompanying consolidated balance
sheet at August 31, 1996. The consolidated balance sheet at August 31, 1996
includes $41,728 as an accrued liability to reflect the Company's liability to
pay discounts and denied costs on receivables financed by third-parties.
At May 31, 1997 these allowances totaled $913,918 with $166,623 applied as a
valuation allowance to the amounts due, resulting in a net of $534,427 shown as
the Amounts Due From State Agency, net, in the consolidated balance sheet at May
31, 1997. The balance sheet also includes $747,295 which is included as an
accrued liability to reflect the Company's liability to pay discounts and denied
costs on receivables financed by third-parties.
All of the approximately $3.1 million in unfiled reimbursement applications at
August 31, 1996, have been sold to third party financing entities at May 31,
1997. The Company has no recourse on these transactions. The Company used
third-party financing to obtain the cash from the financing entity upon
application filing thus avoiding the estimated 13 months to be paid by the
State. The cost of borrowing from these third parties is less than the cost of
borrowing through the Company's revolving credit line. In addition the Company
filed approximately $703,050 directly with the State.
Specifically, the Company has entered into several arrangements to finance
substantially all the claims to be filed with the State for reimbursement.
Generally, these arrangements require the Company to pay a 3 - 4% prepaid
interest fee at the time the financing entity pays the Company. This is a
non-refundable fee to cover administrative costs and interest costs for up to
the first nine months. If the State has not paid the financing entity within the
first nine months, the interest costs are .6875% per month thereafter. In
addition, the Company has placed 13% of the amounts financed in an interest
bearing escrow account to provide for potential state denied costs and state
mandated interest discount. The interest earned on the escrowed amounts accrue
to the Company's benefit and is recorded as interest income in the period
earned.
The Company filed all amounts due from the State prior to the state mandated
filing deadline of December 31, 1996.
(5) Notes Payable
Notes payable at May 31, 1997 and August 31, 1996, consisted of advances against
a $3.0 million line of credit. Under this line of credit, the Company may borrow
Page 9 of 18
<PAGE>
up to $3.0 million at an interest rate of prime (8.50% at May 31, 1997) less
.25%. Laidlaw, Inc. in lieu of its commitment to provide up to $3.0 million in
debt financing to the Company pursuant to the terms of the preferred stock
conversion agreement of June 26, 1995, caused a letter of credit to be issued to
collateralize the $3.0 million note. Substantially all of the Company's assets
secure this obligation to Laidlaw in the event of a draw upon the letter of
credit. The line of credit expired January 20, 1997 and the letter of credit
expired February 20, 1997. The line of credit was renewed on January 20, 1997
for a one-year period under the same terms and conditions. On January 21, 1997,
the letter of credit was renewed for a one-year period, also with the same terms
and conditions.
(6) Restructuring Charge
Primarily due to the 1996 Act and a continued decline in forecasted landfill
design work, as well as general market conditions, the Company in fiscal 1996
implemented the third phase of its restructuring program. This action resulted
in a one-time restructuring charge to Operating Expenses in fiscal 1996 totaling
$326,428. The restructuring costs remaining to be paid at August 31, 1996 were
$174,072 and are included in accrued liabilities in the August 31, 1996
consolidated balance sheet. For the nine month period ending May 31, 1997,
$92,837 was charged against this accrual primarily for employee severance pay
and lease expenses on closed offices. The Company believes the balance of the
accrued restructuring charge of $81,235 which is included in accrued liabilities
in the accompanying consolidated balance sheet at May 31, 1997 is adequate to
absorb the remaining estimated restructuring charges.
On February 18, 1997, the Company announced plans to move its Corporate office
to Nashville, TN. The relocation is expected to be complete by the end of the
fourth quarter of fiscal 1997. The Company accrued a relocation charge of
$42,000 which represents employee severances. This relocation charge is included
in accrued liabilities in the accompanying consolidated balance sheet, at May
31, 1997.
(7) Significant Customer Disclosure
The Company operates in one industry segment, as contemplated by Financial
Accounting Standards Board Statement No. 14. During the nine months ended May
31, 1997, Inter-City Corp. "USA" accounted for approximately 10% of total
Company revenues. Laidlaw Environmental Services, Inc. and its affiliates,
Southern Wood Products, and the State of Tennessee accounted for 8%, 7% and 6%
of consolidated gross revenues, respectively. At May 31, 1997, amounts due from
these customers aggregated $319,463, and are included in "accounts receivable,
net" in the accompanying consolidated balance sheet.
Page 10 of 18
<PAGE>
(8) Legal
The Company has been notified by the Environmental Protection Agency, through a
General Notice Letter that the Company is a potentially liable party at the
Florida Petroleum Reprocessors Site in Davie, Florida. However, at this time, no
estimate of the potential liability can be calculated due to the limited amount
of information available. This type of liability is an insurable risk and the
Company's insurance carrier has been notified. The insurance policy has a
deductible of $250,000. Company management is of the opinion that Company
liability, if any, will be minimal.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
COMPARISON OF THREE MONTHS ENDED MAY 31, 1997 AND MAY 31, 1996. Gross revenues
decreased by 56% to $1,512,789 for the three months ended May 31, 1997, compared
to $3,461,519 for the same period of fiscal year 1996. This 56% decrease in
gross revenues results from changes in gross revenues in each of the Company's
divisions as follows:
Gross Revenues For the
Three Months Ended % Increase
Division May 31, 1997 May 31, 1996 (Decrease)
-------- ------------------------------- ----------
Enviro Florida $ 398,003 $ 942,009 (58)
Enviro South Carolina 445,765 1,104,056 (60)
Enviro Tenn 468,097 994,335 (53)
---------- ----------
TOTAL ENVIRO DIVISION $1,311,865 $3,040,400 (57)
HYDRO DIVISION 200,924 421,119 (53)
---------- ----------
TOTAL VIROGROUP, INC. $1,512,789 $3,461,519 (56)
========== ==========
Florida operations had a decrease in gross revenues of $544,006 (58%) from the
prior year, mainly due to the curtailment of the Florida UST program. The
majority of the decrease in the South Carolina operations of $658,291 (60%) was
due to a reduction in work assignment by the office's major client. The
Tennessee gross revenues decrease of $526,238 (53%) was primarily the result of
completing a single large remediation project during the third Quarter of 1996.
Due to the special nature of this project, those revenues have not been replaced
in the current year. The Hydro Division gross revenues decrease of $220,195
(53%) is mainly the result of a large injection well project which was completed
during the third Quarter of fiscal 1996, and there was no large project in the
third quarter of fiscal 1997 to replace that job.
Page 11 of 18
<PAGE>
Contracted backlog at May 31, 1997 is $3.4 million. The backlog is no assurance
as to future gross revenue levels.
Cost of gross revenues is 70.5% of revenues for the three months ended May 31,
1997, compared to 68.4% for the three months ended May 31, 1996. This increase
results primarily from a larger percentage of gross revenues being generated
through subcontractors which yields a smaller gross profit than revenue from
professional fees.
Selling, general and administrative expenses for the three months ended May 31,
1997 decreased by approximately $592,929 (36%) to $1,045,136 compared to
$1,638,065 for the same period of the prior year. The majority of the decrease
is due to staff downsizing and reductions in fixed expenses.
Net interest expense remained the same due to a flat demand in amounts borrowed.
The net loss for the three months ended May 31, 1997 was $627,054, or 41.4% of
gross revenues, compared to a net loss of $724,774, or 20.9% for the same period
of the prior year. This increase is primarily the result of the decrease in
gross revenues, coupled with the decrease in the gross profit percentage.
COMPARISON OF THE NINE MONTHS ENDED MAY 31, 1997 AND MAY 31, 1996. Gross
revenues decreased by 48% to $5,683,545 for the nine months ended May 31, 1997,
compared to $11,022,003 for the same period of fiscal year 1996. This 48%
decrease in gross revenues results from changes in gross revenues in each of the
Company's divisions as follows:
Gross Revenues For the
Nine Months Ended % Increase
Division May 31, 1997 May 31, 1996 (Decrease)
-------- ------------------------------- ----------
Enviro Florida $1,407,895 $3,758,561 (62)
Enviro South Carolina 1,629,676 3,310,961 (50)
Enviro Tenn 2,039,543 2,412,148 (15)
---------- ----------
TOTAL ENVIRO DIVISION $5,077,114 $9,481,670 (46)
HYDRO DIVISION 606,431 1,540,333 (60)
---------- ----------
TOTAL VIROGROUP, INC. $5,683,545 $11,022,003 (48)
========== ===========
Florida operations had a decrease in gross revenues of $2,350,666 (62%) from the
prior year, largely due to a reduction of work in the Florida UST program. The
majority of the decrease in South Carolina operations of $1,681,285 (50%) was
due to a general decline in repeat business as that office's major clients
decrease in their spending on environmental projects. The Tennessee gross
Page 12 of 18
<PAGE>
revenues were substantially the same for the nine month period. The Hydro
Division gross revenues decrease of $933,902 (60%) is mainly the result of a
large injection well project which finished in the third quarter of fiscal 1996.
Cost of gross revenues is 72.2% for the nine months ended May 31, 1997, compared
to 67.9% for the same period of the prior year. This increase in cost is the
result of a larger percentage of gross revenue being generated by subcontractors
than in prior years. Revenues from subcontractors carry a smaller gross profit
than revenues from professional fees.
Selling, general and administrative expenses for the nine months ended May 31,
1997 decreased by $1,383,512 or 29.9% to $3,246,780 compared to $4,630,292 for
the same period of fiscal 1996. The majority of the decrease is due to staff
downsizing and reductions in fixed expenses.
The Company has not provided a provision for Federal income taxes due to the
current year's net loss and has not recorded any tax benefit. It has provided a
100% valuation allowance of the deferred tax asset that results from federal and
state net operating loss carry forwards due to the lack of availability of
federal and state taxable income within the carryback period, available under
the federal and state tax laws as well as the inability to determine the timing
of the future federal and state taxable income which will be sufficient to
utilize the deferred tax asset.
The net loss for the nine months ended May 31, 1997 was $1,745,850, or 30.7% of
gross revenues compared to a net loss of $1,223,439 or 11.1% of gross revenues,
for the same period of the prior year. This increase is primarily the result of
decreases in gross revenue and increases in cost of sales, partially offset by
decreases in selling, general and administrative expenses.
Liquidity and Capital Resources
- -------------------------------
The Company's operating activities provided net cash of $1,914,310. The cash was
generated by the collection of accounts receivable and the third party funding
of the Florida UST program amounts. The payment of accounts payable and other
accrued liabilities totalling approximately $820,000 was necessitated by State
law to complete the Florida UST program projects in progress at year-end prior
to filing for reimbursement by the State, as well as other work in progress as
shown by the decrease in unbilled accounts receivable combined with the decrease
in accounts receivable.
The net cash provided by operating activities was mainly used to reduce the
Company's line of credit. As of May 31, 1997 the Company's line of credit
balance was $542,768.
Page 13 of 18
<PAGE>
Working capital on May 31, 1997 increased by $682,336 as compared to August 31,
1996. Accounts receivable, net, and unbilled accounts receivable decreased by a
combined amount of $1,939,804 as a result of the completion of work in progress
at August 31, 1996, as well as the result of a decline in gross revenues.
Accounts payable and accrued liabilities at May 31, 1997 decreased by a total of
$267,038, for the same period. This decrease results from the decrease in gross
revenues, as well as the payment of vendors as projects reach completion.
Inflation has not significantly affected the Company's financial position or
operations. Borrowings under the Company's $3.0 million line of credit bear
interest at the prime rate of the lender less .25%. The prime rate at May 31,
1997 was 8.50%. No assurance can be given that inflation or the prime rate will
not significantly fluctuate, either of which could adversely affect the Company.
Page 14 of 18
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting held on Thursday, January 23, 1997, seven
members were elected to the Board of Directors for a one year term. The slate
for the 1997 Board of Directors contained the following names: Ivan R. Cairns,
A. Denny Ellerman, Charles S. Higgins, Jr., Rick L. McEwen, Sylvester O. Ogden,
James L. Wareham, and Kenneth W. Winger.
Proxies were solicited pursuant to Regulation 14 under the Securities Exchange
Act of 1934 and there was no solicitation in opposition to the nominees of
management as listed in the proxy and all nominees were elected.
VOTES FOR VOTES AGAINST VOTES WITHHELD
------------- ------------- --------------
5,482,059 230,837 648,812
------------- ------------- --------------
Subsequent to the vote of the security holders at the annual meeting on January
23, 1997, Ivan R. Cairns resigned from the Board and has been replaced by James
J. Hattler. James L. Wareham has also resigned as of June 24, 1997 and has not
yet been replaced.
Effectuation of a one-for-eight reverse stock split.
VOTES FOR VOTES AGAINST VOTES WITHHELD
------------- ------------- --------------
5,113,779 589,517 658,412
------------- ------------- --------------
Appointment of Arthur Andersen LLP as the Company's independent accountants for
1997.
VOTES FOR VOTES AGAINST VOTES WITHHELD
------------- ------------- --------------
5,127,485 583,311 650,912
------------- ------------- --------------
Page 15 of 18
<PAGE>
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
10.0 Material Contracts
10.39 Loan Agreement, Line-of-Credit Note and Irrevocable Letter of Credit,
dated January 20, 1997.
27 Financial Data Schedule (Electronic filing only).
Reports on Form 8-K
None
Page 16 of 18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIROGROUP, INC.
Date: July 10, 1997 By: /s/ Charles S. Higgins, Jr.
-----------------------------------
Charles S. Higgins, Jr., President
and Chief Executive Officer
Date: July 10, 1997 By: /s/ DeWayne Baskette
-----------------------------------
DeWayne Baskette
Chief Financial Officer
Page 17 of 18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIROGROUP, INC.
Date: July 10, 1997 By:
-----------------------------------
Charles S. Higgins, Jr., President
and Chief Executive Officer
Date: July 10, 1997 By: -----------------------------------
DeWayne Baskette
Chief Financial Officer
Page 18 of 18
LOAN AGREEMENT
--------------
THIS AGREEMENT is made this 27th day of January, 1997, effective as of
January 20, 1997, by and between ViroGroup, Inc., a Florida corporation, having
its principal office at 428 Pine Island Road, S.W., Cape Coral, Florida 33991
(hereinafter called "Company") and Barnett Bank, N,A,, a national banking
association, successor by merger with Barnett Bank of Lee County, N,A,, with its
main offices at 2000 Main Street, Suite 200. Fort Myers.
Florida (the "Bank").
In consideration of the mutual benefits accruing to each of the parties, the
receipt and sufficiency of which are hereby acknowledged, and in further
consideration of the mutual performance of this Loan Agreement, the parties
hereto agree as follows:
ARTICLE I
AMOUNT AND TERMS OF THE LOANS
-----------------------------
Section 1.01. LINE OF CREDIT LOAN GENERALLY. During the "Commitment Period"
(hereinafter defined), the Bank agrees, on the terms and conditions hereafter
set forth, to make loan advances "Advances") to the Company from time to time
after the date hereof to finance working capital needs of the Company in an
aggregate amount not to exceed Three Million Dollars ($3,000,000.00), said sum
being the "Commitment." The aggregate of all Advances made by Bank hereunder,
from time to time. is herein referred to as the "Loan." Within said limits and
prior to the occurrence of an Event of Default (as defined in Section 5.01
hereof), the Company may borrow under this Agreement, each such borrowing being
referred to herein as an "Advance". Each Advance shall be in an amount equal to
the requested Advance documented in accordance with the provisions for Advances
hereinafter set forth. Upon fulfillment of the applicable conditions set forth
in Article II and subject to the provisions of this Agreement, Bank will make
such funds representing Advances available to the Company by deposit to
Company's account maintained with Bank. The "Commitment Period" means the period
from the effective date of this Agreement to January, 19, 1998 ("Final Advance
Date") or the date the Bank terminates its obligations to make further Advances
hereunder pursuant to Section 5.02 below. The Loan made pursuant to this
Agreement will be secured as hereinafter provided.
Section 1.02. LINE OF CREDIT NOTE. The Loan shall be evidenced by a renewal
line-of-credit promissory note in the form of Exhibit A attached hereto (the
"Line of Credit Note" or "Note"), dated as of the date hereof and effective
January 20, 1997, and maturing on January 20: 1998 (the "Final Maturity Date"),
representing the obligation of the Company to pay the amount of the Commitment
or the aggregate unpaid principal amount of all Advances, whichever is less,
together with interest on the principal amount outstanding from time to time as
provided in this Agreement.
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<PAGE>
Section 1.03. TYPES OF LOANS AND INTEREST RATES. The Loan shall bear an
interest rate of one quarter of one percent (.25%) under the Index. The "index"
as referred to herein is the Barnett Bank. Inc. prime rate as announced from
time to time. Such prime rate is a reference rate for the information and use of
the Bank in establishing the actual rates to be charged its borrowers.
All Advances shall be aggregated and considered as a single Loan evidenced
by the Line of Credit Note. and interest shall be calculated on the from time to
time outstanding principal amount.
Section 1.04. FURTHER LOAN TERMS.
(a) Loan Advances: Lockbox. Advances on the Loan will each be made based
on a request for an Advance made by a duly authorized officer of Company (the
"Authorized Person") in writing on forms acceptable to the Bank or in any other
manner acceptable to the Bank. If a request is made by telephone, the Company
shall promptly confirm such request in writing.
Notwithstanding the foregoing unless the Bank, in its sole
discretion otherwise agrees, Company and Bank agree as follows:
(1) Company shall cause to be deposited into a "lockbox" account
established with the Bank all of the Company's accounts receivable.
(2) On a daily basis, Bank will compare (i) the sum of the
Company's beginning cash deposit balance with Bank and that day's "lockbox"
deposits with (ii) that day's controlled disbursement activity to arrive at a
daily ending balance.
(3) If the daily ending balance represents an excess of funds, the
excess will be applied to reduce the principal balance of the Note. If the daily
ending balance is deficient, an Advance in the amount of the deficiency shall
automatically be processed and made by Bank and credited to Company's account
with the Bank to bring the next day's beginning cash balance up to zero.
(4) Bank shall on each interest pavement date under the Note
automatically debit Borrower's account for the interest due on that date under
the Note. If on that date the cash balance is deficient: then prior to Bank's
debiting Company's account an Advance in the amount of the deficiency shall
automatically be processed and made by Bank and credited to that account.
(b) PAYMENT TERMS.
(1) Commencing on February 20, 1997, and on the same day of each
calendar month thereafter (through December 20, 1997), Company shall pay Bank a
monthly payment on the Loan equal to accrued interest on the outstanding
principal balance of the Loan then advanced. Inerest shall be calculated on the
2
<PAGE>
outstanding (and unpaid) principal balance of the Loan on a daily basis at an
interest rate equal to one quarter of one percent (.25%) under the Index:
(2) On January 20, 1998, being the Final Maturity Date of the
Loan, the Company shall pay all principal and interest (with interest calculated
on the unpaid principal balance of the Loan at one quarter of one percentage
point under the Index) outstanding on the Loan and any other unpaid amounts owed
under the Loan in full.
(3) The interest rate will be adjusted to reflect a change in the
Index on the same day as the Index changes. The interest rate to be applied to
the unpaid balance of this Note will be at a per annum rate of one quarter of
one percent (.25%) under the Index. Bank will tell the Company the current Index
upon the Company's request. NOTICE: Under no circumstances will the effective
rate of interest on this Loan be more than the maximum rate allowed by
applicable law.
(c) This Loan is revolving line of credit loan. Advances under this
Loan, as well as directions for payment for Company's accounts, may be requested
orally or in writing by Company or by an Authorized Person. Bank may, but need
not, require that all oral requests be confirmed in writing. Company agrees to
be liable for all sums either: (a) advanced in accordance with the instructions
of an Authorized Person; or (b) credited to any of Company's accounts with Bank.
The unpaid principal balance owing on the Note at any time may be evidence by
endorsements on the Note or by Bank's internal records, including computer
print-outs and other records. Bank will have no obligation to advance funds
under this Agreement if: (a) Company is in default under the terms of this Loan
or any agreement that Company has with Bank, including any agreement made in
connection with the signing of this Agreement; (b) Company ceases doing business
or is insolvent; (c) Company has applied funds provided pursuant to this
Agreement for purposes other than those authorized by Bank; or (d) Bank in good
faith deems itself insecure under this Agreement or any other agreement between
Bank and Company.
Section 1.05. EFFECTS OF EVENT OF DEFAULT OR POTENTIAL DEFAULT.
Notwithstanding the foregoing and in addition to the remedies set forth in
Section 5.02 below, upon an Event of Default (as defined in Section 5.01 below)
and so long as such Event of Default shall continue or, if the Bank shall have
accelerated the maturity date of the Loan pursuant to Section 5.02 below until
the Loan is repaid in full, the principal amount of the Loan then outstanding,
together with all interest then accrued, shall thereafter bear interest at the
"Default Rate," with interest payable upon demand. The "Default Rate" shall be
the per annum rate equal to the "Default Interest Rate" as such term is defined
in the Note. During the continuance of an Event of Default, the Company shall
have no right to obtain any Advances under this Agreement.
A "Potential Default" is an event which but for the giving of a notice
called for in Section 5.01 below or the passage of a time period referred to in
Section 5.01 below, or both, would constitute an Event of Default. If a
Potential Default then exists and has not been waived by the Bank and does not
itself constitute or is not declared an Event of Default, the Company shall have
3
<PAGE>
no right to borrow any additional money beyond the principal amount of Loan then
outstanding; this provision shall not limit the Bank's rights hereunder if the
Potential Default thereafter becomes or is declared an Event of Default.
Section 1.06. MISCELLANEOUS PROVISIONS REGARDING LOAN PAYMENTS AND
INTEREST. All payments on the Loan shall be made to Bank at 2000 Main Street,
Fort Myers, Florida 33901, unless Bank notifies Company of a different place for
payments to be made. The Loan shall be due and payable in full on the Final
Maturity Date or such earlier date as the Loan has been declared due and payable
pursuant to Section 5.02 below. All interest rates respecting any Loan hereunder
are stated on a per annum basis with a year of 360 days, and interest is
calculated on the actual number of days elapsed. All outstanding principal of
the Loan outstanding after the Final Maturity Date or such earlier date as the
Loan has been declared due pursuant to Section 5.02 shall thereafter bear
interest at the Default Rate on all unpaid amounts until the Loan is fully paid.
Section 1.07. PREPAYMENTS. The Loan may be prepaid in whole or in part at
any time.
Section 1.08. CREDIT FACILITY FEE. On the date that this Agreement has
been executed by both parties, the Company agrees to pay to the Bank a credit
facility fee in the amount of Five Hundred Dollars ($500.00).
Section 1.09. TRANSFER OF LOAN PROCEEDS. Bank agrees to cooperate with
Company to wire or otherwise transfer funds from the account maintained by the
Company with Bank pursuant to Section 1.01 to such other accounts at other
banks, offices or otherwise as the Company may reasonably direct consistent with
the provisions of this Loan Agreement, but the Company agrees to reimburse the
Bank for all such wire and other transfer costs incurred by Bank, and the
Company shall bear all risks of delays or nondelivery or misdelivery of any such
funds so wired or otherwise transferred. Any Advance under this Agreement shall
be deemed made on the day that the Loan proceeds are transferred into the
account maintained by the Company with Bank pursuant to Section 1.01.
ARTICLE II
CONDITIONS OF LENDING
---------------------
Section 2.01. CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of
the Bank to make the initial Advance is subject to the condition precedent that
the Bank shall receive the following, each dated the date hereof or such other
date as may be specifically permitted, in form and substance satisfactory to
Bank:
(a) NOTE. The Line of Credit Note. duly executed by the Company.
4
<PAGE>
(b) LETTER OF CREDIT. An irrevocable standby letter of credit
issued by Royal Bank of Canada ("RBC") in the amount of Three Million Dollars
($3,000,000.00) (the "Letter of Credit") in the form attached hereto as Exhibit
B.
(c) OTHER APPROVALS. Such other approvals, resolutions, opinions
or documents, as the Bank may reasonably request.
Section 2.02. CONDITIONS PRECEDENT TO EACH ADVANCE. The obligation of the
Bank to make any Advance hereunder, including without limitation. the first
Advance, shall be subject to the further condition precedent that (i) on the day
of such Advance no event has occurred and is continuing, or would result from
such Advance, which constitutes an Event of Default or Potential Default; (ii)
the representations and warranties of the Company contained in this Agreement
are accurate and complete as of the proposed funding date; (iii) an Advance
request in proper form has been submitted or made to Bank by the Company; and
(iv) the Letter of Credit remains in full force and effect or has been replaced
with a new letter of credit in the same amount, in form satisfactory to the Bank
and issued by a financial institution reasonably satisfactory to Bank (a
"Replacement Letter of Credit").
The making of a request by Company for an Advance hereunder, whether in
writing. or by telephone confirmed in writing, or otherwise, shall constitute a
certification by Company that all representations recited in this Section 2.02
and Article III are true as of and as if made the date of such request and that
all required conditions to the making of such Advance have been met.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Bank as follows:
(a) DUE INCORPORATION OF COMPANY. The Company is a corporation
duly incorporated, validly existing, and in good standing under the laws of
Florida; it is in good standing in all jurisdictions in which it is required to
be qualified to do business as a foreign corporation; and it has obtained all
licenses and permits and has filed all registrations necessary to the operation
of its business.
(b) AUTHORIZATION BY COMPANY, ETC. The execution. delivery and
performance by the Company of this Agreement, the Line of Credit Note and the
other documents to be delivered hereunder are within the Company's corporate
powers, have been duly authorized by all necessary corporate action. and (i) do
not contravene the Company's Articles of incorporation or By-Laws or any law or
any; contractual restriction binding on or affecting the Company, and (ii) do
not result in or constitute a default under any lien, security interest or other
charge or encumbrance upon or with respect to any of its properties.
5
<PAGE>
(c) ENFORCEABILITY OF COMPANY'S OBLIGATIONS. This Agreement, the
Line of Credit Note and all other documents entered into pursuant to this
Agreement are the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
or similar laws affecting the enforceability of creditors' rights generally.
(d) FINANCIAL STATEMENTS. The financial statements of the Company,
as certified to Bank on the date hereof or otherwise in connection with the
Loan, fairly present the financial condition of the Company, all in accordance
with generally accepted accounting principles which have been applied on a basis
consistent with that of the preceding period; and as of the date of this
Agreement, there has been no material adverse change in such financial
condition.
(e) LITIGATION. Based upon information currently available to the
Company, it is the opinion of management of the Company that there is no pending
or threatened action or proceeding affecting the Company before any court,
governmental agency or arbitrator, which, if determined adverse to the Company
would have a material adverse effect on the financial condition of the Company.
(f) TAX RETURNS AND PAYMENT. The Company has timely filed all
required federal, foreign and Florida income tax returns and has filed all other
material tax returns which are required to be filed and the Company has paid all
taxes due pursuant to such returns or pursuant to any assessment received by the
Company, except for the filing of such returns, if any. in respect of which an
extension of time for filing is in effect and except for such taxes, if any, as
are being contested in good faith and as to which adequate reserves have been
provided. The charges, accruals and reserves on the books of the Company in
respect of any taxes or other governmental charges are, in the opinion of the
Company, adequate.
(g) STOCK. The capital stock of the Company has been validly
issued and is fully paid and non-assessable.
(h) OFFERING OF NOTE. The Company has not taken any action which
would subject the Note evidencing its indebtedness to the Bank to the provisions
of Section 5 of the Federal Securities Act of 1933.
(i) FOREIGN INVESTMENT. The proceeds of the Loan will not be used
to make an unauthorized foreign investment.
(j) ENVIRONMENTAL WARRANTIES AND INDEMNITIES:
(i) The Company has not received a citation, notice of
violation or formal complaint from any federal. state or local environmental
agency for noncompliance.
6
<PAGE>
(ii) The Company has no knowledge of any threatened
environmental enforcement actions.
(iii) The Company has no knowledge of any soil or groundwater
contamination or the release or discharge of toxic or hazardous substances,
petroleum or petroleum products, chemicals or other pollutants on any of its
properties.
(iv) The Company will covenant to comply with all present and
future environmental laws and take remedial action upon the discovery of
contamination.
(k) Survival of Representations. All representations and warranties
made in this Section 3.01 shall survive delivery of the Note and the making of
the Loan herein contemplated.
ARTICLE IV
COVENANTS OF THE COMPANY
------------------------
Section 4.01. AFFIRMATIVE COVENANTS. So long as the Note shall remain unpaid
or the Bank shall have any Commitment hereunder, the Company will, unless the
Bank shall otherwise consent in writing.
(a) COMPLIANCE WITH LAWS. Comply in all material respects with all
applicable laws, rules, regulations and orders.
(b) REPORTING REQUIREMENTS. Furnish to the Bank:
(i) As soon as available and in any event within 90 days
after the end of each fiscal year, one copy of its financial statements audited
by an independent public accountant acceptable to Bank. The financial statements
so provided shall include, but not be limited to, the balance sheet, income
statement and cash flow statement of Company. Such financial statements shall be
accompanied by a certification from the chief financial officer of the Company
stating that the financial statements present fairly the financial condition of
the Company and that no event has since occurred which would materially
adversely affect the financial condition of the Company from that represented on
the financial statements.
(ii) Promptly after the sending or filing thereof. copies of
all reports which the Company sends to any of its stock or security holders;
(iii) Promptly after the filing thereof, copies of all tax
returns of the Company;
(iv) 10 Q's are to be provided quarterly and 8 K's are to be
provided as appropriate, and
7
<PAGE>
(v) Such other information respecting the condition or
operations, financial or otherwise, of the Company as the Bank may from time to
time reasonably request.
(c) CONSULTATIONS AND INSPECTIONS. Solely for the purpose of
permitting Bank to determine compliance by the Company with this Agreement,
permit Bank (and any person appointed by Bank to whom the Company does not
reasonably object) to discuss the affairs, finances and accounts of the Company
with the officers of the Company and the independent public accountants who
review or audit the Company's financial statements, all at such reasonable times
and as often as may reasonably be requested. The Company will also permit
inspection of its properties, books and records by Bank during normal business
hours or at other reasonable times.
(d) NOTICE OF SUBSEQUENT EVENTS. Immediately upon the president or
a chief financial officer of the Company obtaining knowledge of (i) any material
adverse change in the condition or operation, financial or otherwise, of the
Company; (ii) any Event of Default or Potential Default under this Agreement;
(iii) any default by the Company under or with respect to any instrument,
contract or agreement to which the Company is a party or by which the Company is
bound which may materially adversely affect the Company's condition or
operation, financial or otherwise; (iv) any default by the Company under or with
respect to any order, writ, injunction, decision or decree of any court,
governmental authority or arbitral body to which the Company is a party or by
which the Company is bound which materially adversely affects the Company's
condition or operation, financial or otherwise; or (v) any action or proceeding
pending or, to the knowledge of the president or a chief financial officer of
the Company, threatened against the Company before any court, governmental
authority or arbitral body which, if decided adversely to the Company, would
result in any material adverse change in the condition or operation, financial
or otherwise, of the Company, the Company will deliver to Bank a written
certificate signed by such officer specifying the nature thereof, the period of
existence thereof and what action the Company has taken and proposes to take
with respect thereto.
(e) PRESERVATION OF BUSINESS AND CORPORATE EXISTENCE. As to the
Company, carry on and conduct its business affairs in substantially the same
manner as presently carried on and conducted, and maintain in good standing its
existence and its right to transact business in those states in which it is now
or ma~ hereafter be doing business; and maintain all licenses, permits and
registrations necessary to the conduct of its business.
(f) USE OF PROCEEDS. Use the proceeds of the Loan solely for
working capital purposes. Company intends to use the Loan proceeds solely for
business or commercial related purposes and will not purchase or carry margin
stock (with the meaning of Regulations G, T and U of the Board of Governors of
the Federal Reserve System).
(g) PAYMENT OF TAXES. Pay and discharge, before they become
delinquent, all taxes: assessments and other governmental charges imposed upon
the Company or any of its properties, or any part thereof, or upon the income or
profits therefrom and all claims for labor, materials or supplies which if
8
<PAGE>
unpaid might be or become a lien or charge upon any of its property, except such
items as it is in good faith appropriately contesting and as to which adequate
reserves have been provided.
(h) DEPOSIT ACCOUNTS. So long as the Loan is outstanding, maintain
its primary banking accounts with the Bank.
(i) FURTHER ASSURANCES. At all times furnish Bank with assurances
necessary to satisfy the Bank that the provisions in the Loan Documents are
being complied with.
(i) COMPLIANCE AGREEMENT. If requested by Bank or closing agent
for Bank, fully cooperate and adjust for clerical errors, any of all loan
documentation as Bank deems necessary.
(k) LIABILITIES. Pay when due, all liabilities including trade
accounts in accordance with regular terms.
Section 4.02. NEGATIVE COVENANTS. So long as the Loan shall remain unpaid
or the Bank shall have any Commitment hereunder, without the written consent of
the Bank, the Company:
(a) OPERATIONS. Will not engage in any business activities
substantially different than those in which Company is presently engaged.
(b) NON-DEFAULT UNDER OTHER AGREEMENTS. Will not default upon or
fail to pay any indebtedness for money borrowed as the same matures under any
agreement or permit to occur any other event which creates a default under such
or under any other agreement to which the Company is a party or by which it is
bound.
(c) CONFLICTING AGREEMENT. Will not enter into any agreement. any
term or condition of which conflicts with any term or condition of this
Agreement.
(d) LOANS, ADVANCES AND INVESTMENTS. Will not make any loans or
advances to, or investments to officers, directors or their relatives.
ARTICLE V
EVENTS OF DEFAULT
-----------------
Section 5.01. EVENTS OF DEFAULT. Any one or more of the following events
shall constitute an Event of Default under this Agreement, the Note and any
other document or instrument pertaining to or necessary to carry out the
purposes of this transaction (including without limitation any Related
Documents):
9
<PAGE>
(a) the Company shall fail to pay any principal or interest on any
Loan under this Agreement within ten (10) days after the date when due; or
(b) any representation or warranty made by the Company herein or
by the Company (or any of its officers) in connection with this Agreement shall
prove to have been false or incorrect in any material respect when made; or
(c) the Company shall fail to perform or observe any other term or
condition contained in this Agreement or other document executed in connection
with this Agreement, and such failure shall have not been remedied within ten
(10) days after written notice thereof shall have been given by Bank; or
(d) the Company shall default under any other loan from Bank to
the Company or under any other agreement; or
(e) (i) the Company shall fail to pay or shall admit in writing
its inability to pay its debts as they become due, shall become insolvent:
howsoever evidenced, or shall make a general assignment for the benefit of
creditors; (ii) any proceeding shall be instituted by or against the Company
under any law relating to bankruptcy, insolvency, reorganization or relief of
debtors or any similar law or seeking appointment of a receiver, trustee, or
other similar person for it or for any substantial part of its property and, if
such proceeding is not commenced by the Company, it is consented to or
acquiesced in by the Company or remains undismissed for sixty (60) days; (iii)
all or a substantial part of the Company's property is attached, seized, levied
upon or comes within the possession of any receiver, trustee or similar person
for the benefit of creditors; (iv) any action is taken or any proceeding is
filed or commenced with respect to the Company's liquidation: dissolution or
termination of existence; or (v) the Company shall take any corporate action to
authorize any of the actions described in this subsection (e); or
(f) a final judgment(s) or order(s) for the payment of money in
excess of $250,000.00 (in the aggregate) shall be rendered against the Company
and such judgment(s) or order(s) shall not have been vacated. discharged,
stayed, or bonded and shall continue unsatisfied and in effect for a period of
sixty (60) consecutive days; or
(g) RBC notifies Bank or Bank otherwise becomes aware of the
intention of RBC to dishonor the Letter of Credit or RBC dishonors the Letter of
Credit, or similar events occur with respect to a Replacement Letter of Credit.
Section 5.02. RIGHTS OF BANK. Upon the occurrence of an Event of Default
by Company Bank may, at its election, without notice of its election and without
demand, do any one or more of the following (all of which are authorized by
Company):
10
<PAGE>
(a) Cease advancing money or extending credit to or for the
benefit of the Company;
(b) Declare the obligation of the Bank to make Line of Credit Loan
and/or further Advances hereunder to be terminated, whereupon the same shall
forthwith terminate.
(c) Declare the Line of Credit Note, including all principal and
interest thereon, and all other amounts payable under this Agreement to be
forthwith due and payable, without presentment, protest or further notice of any
kind, all of which are hereby expressly waived by the Company;
(d) Enforce its rights and remedies under this Agreement, the
Note. the Letter of Credit (or a Replacement Letter of Credit) and any or all
other related documents.
Section 5.03. REMEDIES GENERALLY. All of Bank's rights and remedies
granted under this Agreement and the collateral agreements hereto are cumulative
and non-exclusive. In all cases of an Event of Default. Bank shall have all
remedies available to it at law or in equity.
ARTICLE VI
MISCELLANEOUS
-------------
Section 6.01. AMENDMENTS, ETC.. No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Company therefrom shall in
any event be effective unless the same shall be in writing and signed by the
Bank, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
Section 6.02. NOTICES, ETC.. All notices and other communications provided
for hereunder shall be in writing (including telegraphic communication) and
mailed or telegraphed or delivered, if to the Company, at its address at 428
Pine Island Road, S.W., Cape Coral, Florida 33991, Attention: Larry Ackerly,
Vice President; if to the Bank, at its address at 2000 Main Street: Suite 200,
Fort Myers. Florida 33901, Attention: John S. McQuagge, Vice president. or, as
to each party, at such other address as shall be designated by such party in a
written notice to the other party. All such notices and communications shall,
when mailed or telegraphed, be effective when deposited in the mail or delivered
to the telegraph company, respectively.
Section 6.03. NO WAIVER; REMEDIES. No failure on the part of the Bank to
exercise and no delay in exercising any right hereunder or under any Note shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder or under the Line of Credit Note preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law or in
equity.
11
<PAGE>
Section 6.04. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistently applied, except as otherwise stated herein.
Section 6.05. COSTS, EXPENSES AND TAXES. The Company agrees to pay on
demand all costs and expenses in connection with the preparation, execution and
delivery of this Agreement, the Line of Credit Note, the Letter of Credit and
the related documents: including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Bank with respect to the Loan,
documentary stamp taxes and intangible taxes, and all costs and expenses in
connection with the enforcement of this Agreement, the Line of Credit Note, the
Letter of Credit; and the Related Documents to be delivered hereunder.
Section 6.06. RIGHT OF SETOFF. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, without notice to the Company (any such notice being
expressly waived by the Company), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank to or for the credit or the
account of the Company against any and all of the obligations of the Company now
or hereafter existing under this Agreement and the Line of Credit Note,
irrespective of whether or not the Bank shall have made any demand under this
Agreement or the Line of Credit Note and although such obligations may be
unmatured. The rights of the Bank under this section are in addition to other
rights and remedies (including, without limitation, other rights of setoff)
which the Bank may have.
Section 6.07. BINDING EFFECT; GOVERNING LAW. This Agreement shall become
effective after execution by the Company when it is signed and accepted on
behalf of the Bank and thereafter shall be binding upon and inure to the benefit
of the Company, the Bank and their respective successors and assigns, except
that the Company shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Bank. This Agreement,
the Note and all Related Documents shall be deemed to have been made by the
Company and accepted by the Bank in Fort Myers, Florida and shall be governed by
and construed in accordance with the laws of the State of Florida.
Section 6.08. REINSTATEMENT OF INDEBTEDNESS. This Agreement shall continue
to be effective, or be reinstated, as the case may be, if at any time, payment,
or any part thereof, of any amount paid by or on behalf of the Company to the
Bank with regard to any note is rescinded or must otherwise be restored or
returned upon or in connection with the insolvency, bankruptcy, dissolution,
liquidation, or reorganization of the Company, or upon or as a result of the
appointment of a receiver, intervenor, or conservator of. or trustee, or similar
officer for the Company or any substantial part of the property of the Company,
all as though such payment has not been made.
12
<PAGE>
Section 6.09. AUTHORITY TO ACT. Bank shall be entitled to act on any
notices and instructions (telephonic or written) reasonably believed by Bank to
have been delivered by any Authorized Person, regardless of whether such notice
or instruction was in fact delivered by an Authorized Person, and Company hereby
agrees to indemnify and hold harmless Bank with respect to any losses or
expenses, if any, ensuing from any such action. The foregoing notwithstanding,
Bank acknowledges that the only Authorized Persons will be Lan); Ackerly and
Sylvester Ogden.
Section 6.10. HEADINGS; SEVERABILITY OF PROVISIONS. Article and Section
headings in this Agreement are included herein for the convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction be ineffective to the extent of such
prohibition or enforceability, without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provisions in any
other jurisdiction.
Section 6.11. ENTIRE AGREEMENT. This Agreement embodies the entire
Agreement and understanding between the parties hereto and supersedes all prior
agreements and understandings relating to the subject matter hereof.
Section 6.12. RENEWAL OF PRIOR LOAN. The Loan contemplated by this Loan
Agreement is a renewal of a prior line-of-credit loan ("Prior Loan") in the
amount of $3,000,000.00 made by the Bank to the Company pursuant to a certain
Loan Agreement, dated as of January 20, 1996, by and between Bank and Company,
which Prior Loan is evidenced by that certain $3,000,000 Line-of-Credit Note
("Prior Note"), dated as of February 20, 1996, and has matured. The Prior Loan
has or will have, on the effective date of this Loan Agreement, an outstanding
principal balance of $3,000,000 and no outstanding accrued but unpaid interest.
The Company acknowledges that the outstanding principal balance of the Prior
Loan is a valid and enforceable debt of the Company to the Bank and is owed
subject to no defenses, set-offs or counterclaims. On and as of the effective
date of this Loan Agreement the Line-of-Credit Note shall replace the Prior Note
and the loan evidenced thereby shall be governed by the Line-of-Credit Note and
this Loan Agreement.
(SIGNATURES ON FOLLOWING PAGE)
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written, effective January 20, 1997.
Witnesses: ViroGroup, Inc., a Florida corporation
/S/ LARRY ACKERLY By: /S/ CHARLES S. HIGGINS JR.
- --------------------------------- --------------------------------------
1st Witness
Print Name: CHARLES S. HIGGINS JR.
LARRY ACKERLY ---------------------------
- ---------------------------------
Print Name
Title: PRESIDENT
--------------------------------
/S/ MARILYN HEIDEL
- ---------------------------------
2nd Witness
MARILYN HEIDEL
- ---------------------------------
Print Name
Barnett Bank, N.A., a national banking
association, successor by merger with
Witnesses: Barnett of Lee County, N.A.
/S/ MELISSA J. STANFORD By: /S/ JEANNE MELHEIM
- ---------------------------------- --------------------------------------
1st Witness
Print Name: JEANNE MELHEIM
MELISSA J. STANFORD ---------------------------
- ----------------------------------
Print Name
Title: CLOSING OFFICER
--------------------------------
/S/ TONYA MAXWELL
- ----------------------------------
2nd Witness
TONYA MAXWELL
- ----------------------------------
Print Name
14
<PAGE>
EXHIBIT A
(Line-of-Credit Note)
RENEWAL LINE-OF-CREDIT NOTE
---------------------------
Executed: January 27, 1997 Effective: January 20, 1997
U.S. $3,000,000.00 Fort Myers, Florida
FOR VALUE RECEIVED, the undersigned (hereinafter sometimes called the
"Maker") promises to pay to the order of Barnett Bank, N.A., a national banking
association, successor by merger with Barnett Bank of Lee County, N.A.
(hereinafter together with any holder hereof, called "Holder"), at 2000 Main
Street, Fort Myers, Florida 33901, or at such other place as the Holder may from
time to time designate in writing, the principal sum of THREE MILLION AND
N0/100THS DOLLARS ($3,000,000.00), or so much as may be outstanding, together
with interest on the unpaid principal balance advanced from the date(s) of
disbursement, in accordance with the following provisions:
1. Commencing on February 20, 1997, and on the same day of each calendar
month thereafter (through December 20, 1997), Maker shall pay Holder a monthly
payment on this Note equal to accrued interest on the outstanding principal
balance of this Note then advanced. Interest shall be calculated on the
outstanding (and unpaid) principal balance of this Note on a daily basis at an
interest rate equal to one quarter of one percent (.25%) under the Index
(defined below).
2. On January 20, 1998, bring the Final Maturity Date of this Note, the
Maker shall pay all principal and interest outstanding on this Note and any
other unpaid amounts owed under this Note in full.
The interest rate on this Note is subject to change from time to time based
on changes in an index which is the Barnett Bank, Inc. prime rate as announced
from time to time (the "Index"). The interest rate will be adjusted to reflect a
change in the Index on the same day as the Index changes. The interest rate to
be applied to the unpaid balance of this Note will be at a per annum rate of one
quarter of one percent (.25%) under the Index. Holder will tell the Maker the
current Index rate upon the Maker's request. NOTICE: Under no circumstances will
the effective rate of interest on this Note be more than the maximum rate
allowed by applicable law. Upon demand for payment of this Note, the interest
rate on the Note to be applied to the unpaid balance of principal, unpaid
accrued interest, costs and fees, to be applicable until paid in full, will be
the Default Interest Rate (hereinafter defined).
15
<PAGE>
Interest shall be calculated on a per annum basis of an actual three hundred
sixty (360) day year for all purposes, based on the actual number of days
elapsed, including when determining the maximum legal contract rate of interest
allowed to be contracted for by applicable law, as changed from time to time.
This Note and the instruments securing it have been executed and delivered
in the State of Florida; and their terms and provisions are to be governed by
and construed under the laws of such state and, to the extent applicable, of the
United States of America, and the rules and regulations promulgated under the
authority thereof. It is the intent of this Note that such laws shall be
interpreted in such a manner that the maximum rate of interest allowed to be
contracted for by applicable law as changed from time to time which is
applicable to this Note be as great as possible.
The undersigned may prepay all or pan of the principal sum of the
indebtedness evidenced by this Note at any time without penalty. Such prepayment
of principal shall be accompanied by payment of any, unpaid interest accrued to
the time of such prepayment on the amount of the prepayment. If this Note
provides for installment or periodic payments of principal, then prepayment of
principal shall apply in the inverse order such installment of periodic payments
are due, applying first to the last principal installment or periodic payment
due hereunder.
The Maker authorizes the Holder from time to time to on any due date debit
any account that Maker may have with Holder, for any payment of principal or
interest due hereunder for the amount of such payment of principal or interest
and the Maker may ascertain such debited amount by inquiry to the Holder.
Exercise of this right shall be optional with the Holder and the provisions of
this paragraph shall not be construed as releasing the Maker from the obligation
to make payments of principal or interest due under the terms of this Note
according to the terms of this Note.
If applicable, partial prepayments shall not affect or vary the duty of the
undersigned to pay all obligations when due, and they shall not affect or impair
the right of the Holder to pursue all remedies available to it hereunder, under
the Letter of Credit (hereinafter defined) securing this indebtedness, or under
any other of the Related Documents (hereinafter defined).
The repayment of the indebtedness evidenced by this Note is secured by an
Irrevocable Letter of Credit (the "Letter of Credit") dated February 16, 1996,
and amended January 21, 1997, issued by Royal Bank of Canada, No. 1269/S13179,
in the face amount of this Note and naming the Holder as the beneficiary
thereof. Reference is hereby made to a certain Loan Agreement (the "Loan
Agreement"), dated of even date herewith, for additional provisions which may
govern or apply to this Note, including without limitation provisions which may
concern the acceleration of this Note and requirements for paying principal
prior to the Final Maturity Date. Certain terms used herein, e.g., "Related
Documents" are defined in the Loan Agreement.
16
<PAGE>
This Note evidences a revolving line of credit. Advances under this Noter as
well as directions for payment from Maker's accounts, may be requested orally or
in writing by Maker or by an "Authorized Person" (as defined in the Loan
Agreement). The Holder may, but need not, require that all oral requests be
confirmed in writing. Maker agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an Authorized Person, or (b)
credited to any of Maker's accounts with Holder. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this Note or
by Lender's internal records, including daily computer print-outs. Holder will
have no obligation to advance funds under this Note if: (i) Maker or any
guarantor is in default under the terms of this Note, the Loan Agreement or any
other agreement that Maker or any guarantor has with Holder; (ii) Maker or any
guarantor ceases doing business or is insolvent; (iii) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Holder; (iv) Maker has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (v) Holder in good faith deems itself insecure under this Note or any
other agreement between Holder and Maker.
Except in the case where Holder declares the total unpaid balance hereof
plus all accrued interest to be immediately due and payable as hereinafter
provided, any payment of principal or interest which is not made within ten (10)
days of the due date as herein provided (cure period), shall result in Maker
owing the Holder a late charge of five percent (5%) of the unpaid portion of the
payment or One Hundred Dollars ($100), whichever is greater, which shall be
immediately due and payable to the Holder. In no event shall any such late
charge result in the interest charged hereunder exceeding the maximum rate of
interest allowed to be contracted for by applicable law, as changed from time to
time.
In no event shall Holder have the right to charge or collect, nor shall
Maker be required or obligated to pay, interest or payments in the nature of
interest, which would result in interest being charged or collected at a rate in
excess of the maximum rate of interest allowed to be contracted for by
applicable law, as changed from time to time. In the event that any payment
which is interest or in the nature of interest is made by Maker or received by
Holder which would result in the rate of interest being charged or collected by
Holder being in excess of the maximum rate of interest allowed to be contracted
for by applicable law as changed from time to time, then the portion of any such
payment which causes the rate of interest being charged or collected by Holder
to exceed the maximum rate of interest allowed to be contracted for under any
applicable law as changed from time to time (hereinafter called the "excess
sum") shall be credited as a payment of principal. If Maker notifies Holder in
writing that Maker elects to have such excess sum returned to Maker, such excess
sum shall be returned to Maker. In the event that any such overcharge is
discovered after this Note has been paid in full, then the amount of such excess
sum shall be returned to Maker. In the event that an excess sum is returned to
Maker rather than being credited as a payment of principal, it shall be returned
together with interest thereon from the date such excess sum was paid or
collected at the same rate as was due Holder during such period under the terms
of this Note. All excess sums credited to principal shall be credited as of the
date paid to Holder. It is the intent of Holder to conform strictly to the
limitations of applicable laws governing the charging and collection of interest
as changed from time to time.
17
<PAGE>
The Holder shall have the optional right to declare the amount of the total
unpaid balance hereof (including principal, interest and all other amounts due
or owed hereunder) to be due and forthwith immediately payable in advance of the
maturity date of any sum due or installment, as fixed herein, upon the failure
of the undersigned to pay, within ten (10) days of the due date, any of the
installments of interest, or upon the occurrence of an event of default as
defined in or otherwise described in this Note or the Related Documents, or
failure to perform in accordance with any of the terms and conditions in the
Loan Agreement or in any other Related Document. For purposes of this Note,
"Default Interest Rate" shall mean the rate per annum which is equal to the
maximum rate ofinterest allowed to be contracted for by applicable law, as
changed from time to time; and from and after maturity of this Note (by
acceleration or otherwise), this Note shall bear interest at the Default
Interest Rate. Forbearance to exercise this option with respect to any failure
or breach of the undersigned shall not constitute a waiver of the right as to
any continuing failure or breach or any subsequent failure or breach. Exercise
of this option shall be without notice to the undersigned, notice of such
exercise being hereby waived.
Time is of the essence hereunder and, in case this Note is collected by law
or through an attorney at law, or under advice therefrom, the undersigned agrees
to pay all costs of collection, including reasonable attorney's fees.
Reasonable attorney's fees are defined to include: bur not be limited to,
all fees and costs incurred in all matters of collection and enforcement,
construction and interpretation. before. during and after suit, trial
proceedings and appeals, as well as appearances in and connected with any
bankruptcy proceedings or creditors' reorganization or similar proceedings.
The remedies of the Holder as provided herein or in the Loan Agreement or
any other Related Document shall be cumulative and concurrent, and map be
pursued singularly. successively or together, at the sole discretion of the
Holder, and may be exercised as often as occasion therefor shall arise. No act
of omission or commission of the Holder, including specifically any failure to
exercise any right, remedy or recourse, shall be deemed to be a waiver or
release of the same, such waiver or release to be effected only through a
written document executed by the Holder and then only to the extent specifically
recited therein. A waiver or release with reference to any one event shall not
be construed as continuing, as a bar to, or as a waiver or release of any
subsequent right, remedy or recourse as to a subsequent event.
Any notice to be given to or to be served upon any party hereto, in
connection with this Note, must be in writing, and may be given by certified or
registered mail and shall be deemed to have been given and received on the third
business day after a certified or registered letter containing such notice,
properly addressed. with postage prepaid, is deposited in the United States
mails; and if given otherwise than by certified or registered mail, it shall be
deemed to have been given when delivered to and received by the party to whom it
is addressed. Such notices shall be given to the parties hereto at the addresses
set forth herein. Any party hereto may, at any time by giving five (5) days'
written notice to the other party hereto, designate any other party or address
in substitution of any party or address to which such notice shall be given.
18
<PAGE>
All persons or entities now or at any time liable, whether primarily or
secondarily, for the payment of the indebtedness hereby evidenced, and all
persons or entities which now or at any time hereafter may pledge, hypothecate,
mortgage or otherwise grant the Holder any lien in their property to secure the
indebtedness hereby evidenced, for themselves, their heirs, legal
representatives, successors and assigns respectively, hereby: (a) expressly
waive presentment, demand for payment, notice of dishonor, protest, notice of
nonpayment or protest, and diligence in collection: (b) consent that the time of
all payments or any part thereof may be extended, rearranged. renewed or
postponed by the Holder hereof~om time to time as often as the Holder may desire
and further consent that the collateral security or any part thereof may. from
time to time: be released, exchanged, added to or substituted for by the Holder
hereof, without otherwise modifying, altering, releasing, affecting or limiting
their respective liability or the lien of any security or security instrument;
and (c) agree that the Holder, in order to enforce payment of this Note, shall
not be required first to institute any suit to exhaust any of its remedies
against the Maker or any person or part); to become liable hereunder.
If more than one party shall execute this Note, the term "undersigned", as
used herein, shall mean all parties signing this Note, who shall be jointly and
severally obligated hereunder.
In this Note, whenever the context so requires, the neuter gender includes
the feminine and/or masculine, as the case may be, and the singular number
includes the plural.
THIS PROMISSORY NOTE RENEWS A S3,000,000.00 LINE-OF-CREDIT NOTE DATED AS OF
FEBRUARY 20, 1996 ON WHICH DOCUMENTARY STAMP TAXES HAVE BEEN PAID AND NO
ADDITIONAL DOCUMENTARY STAMP TAXES ARE DUE HEREON.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the day and
year first above written.
ViroGroup, Inc., a Florida corporation
By: /S/ CHARLES S. HIGGINS JR.
-----------------------------------
Charles S. Higgins Jr., President
Maker's Address:
428 Pins Island Road, S.W.
Cape Coral, Florida 33991
19
<PAGE>
BARNETT
BANK
February 7, 1997
Mr. Larry C. Ackerly
ViroGroup, Inc.
428 Pine Island Road, S. W.
Cape Coral, FL 33991
RE: Renewal documents Loan #06300003826/00001
Dear Mr. Ackerly,
Per your request I have enclosed copies of the fully executed renewal documents
pertaining to the above referenced loan. I have also included the original
collateral receipt for the letter of credit amendment. It needs to be signed by
you, acknowledging that the original letter of credit amendment was provided to
the Bank. Please sign where I have highlighted and return it to me in the
enclosed envelope. Please let me know if you have any questions.
Sincerely,
/s/ Jeanne Melheim
Jeanne Melheim
Loan Closing Officer
<PAGE>
LOAN CLOSING STATEMENT
Attorney's Fees and Costs Estimated
(Peper, Martin, et al) $ 1,250.00
Corporate/UCC Searches $ 6.00
Accrued Interest thru 01/27/97 $ 535.83
Credit Facility Fee $ 500.00
TOTAL DUE FROM BORROWER: $ 2,291.83
========
The undersigned hereby agrees with the foregoing and consents to the
disbursements shown above. The undersigned further agrees to pay an and all
other costs incurred by Barnett Bank, N.A., in conjunction with the renewal of
the loan to the undersigned, including without limitation any additional
attorney's fees and costs.
Executed: January 27, 1997 ViroGroup, Inc., a Florida corporation
Effective: January 20, 1997 By: /S/ LARRY ACKERLY
-----------------------------------
Print Name: LARRY ACKERLY
---------------------------
Title: VICE PRESIDNET & CFO
--------------------------------
<PAGE>
SECRETARY'S CERTIFICATE
-----------------------
The undersigned, Larry D. Ackerly, being the duly elected secretary of the
corporation. hereby certifies that set forth below is a true and correct copy of
a Resolution adopted by the Board of Directors of ViroGroup, Inc. at a duly
convened meeting held on JANUARY 23, 1997, and that the same is in full force
and effect, having not been modified in any respect:
RESOLVED, that the Company enter into agreements with Barnett
Bank, N.A., which shall provide to the Company the right to borrow
up to $3 million under a one year Line-of-Credit, with amounts
borrowed pursuant to the Line-of-Credit to bear interest at the
Prime Rate of Barnett Bank. Inc., less 1/4 of one percent and to
be collateralized by a Letter of Credit posted by Laidlaw, Inc. Or
an affiliate from such issuer as shall be acceptable to Barnett
Bank, N.A.; and be it
FURTHER RESOLVED, that the Company reimburse Laidlaw, Inc. or its
affiliate for all costs incurred in connection with the issuance
and maintenance of the Letter of Credit; and be it
FURTHER RESOLVED, that the President or Chief Financial Officer of
the Company is hereby authorized and directed to enter into any
and all agreements which either of them, upon advice of counsel,
deem necessary or appropriate to accomplish the foregoing.
/S/ LARRY D. ACKERLY
------------------------------------
Larry D. Ackerly
Dated: January 27 , 1997
<PAGE>
PAYMENT DEBIT AUTHORIZATION
---------------------------
Commercial Loan Date: 01/2011997 Loan Amount: $3,000,000.00
The undersigned hereby authorize(s) Barnett Bank, N,A. ("Barnett") to initiate
debit entries (payments) to my checking or savings account indicated below
("Account") for the above stated Commercial Loan or any extension or renewal
thereof on the payment due date for any amount owed by me for each payment
period (as authorized below) and to initiate, if necessary, credit entries and
adjustments for any debit entries made in error to said Account. This authority
shall remain in full force and effect until Barnett has received written
notification from me of its termination in such time and in such manner as to
afford Barnett a reasonable opportunity to act upon such notice. The undersigned
hereby acknowledges receipt of a copy of this Authorization.
Borrower:
ViroGroup, Inc., a Florida corporation
By: /S/ CHARLES S. HIGGINS JR.
---------------------------------------
Charles S. Higgins Jr., President
Date to Begin Debit: 1-20-97 Date of Authorization: 1-27-97
Account No.: 1635506281
PAYMENT SPECIFICS:
1. If the calendar day falls on a weekend or holiday, the debit will be made on
the next business day. Payment(s) will be debited from Account (until final
payment. if any) in accordance with the payment schedule set forth in the
Loan.
2. If the full amount of the debit is not in the Account, the debit will be
returned with a non-sufficient funds designation and you will be assessed a
service charge by Barnett which may be debited to your Account.
3. If a change, waiver or adjustment to the payment schedule occurs, Barnett is
authorized to modify the debit instructions accordingly without your
approval.
4. Final Payment (complete only if applicable):
1
<PAGE>
If there is an outstanding balance on the maturity date, is final payment of
principal and/or interest to be:
X Billed
--------
Debited from the Account
--------
Other (explain):
--------
- --------------------------------------------------------------------------------
FOR BANK USE ONLY:
JEANNE MELHEIM /S/ JEANNE MELHEIM 1-5-97
- ------------------------------------ --------------------------- ------
Approving Office Name (Please Print) Approving Officer Signature Date
2
<PAGE>
WAIVER OF RIGHT TO JURY TRIAL
-----------------------------
THIS WAIVER AGREEMENT ("Waiver"), made on the 27th day of January, 1997:
effective as of January 20, 1997, between Barnett Bank, N.A., a national banking
association, successor by merger with Barnett Bank of Lee County, N.A.
("Lender") and ViroGroup, Inc., a Florida corporation ("Borrower").
In consideration of Lender's making a loan (the "Loan") to Borrower under an
Agreement dated the date of this Waiver, Lender and Borrower agree:
(1) If either party brings suit against the other, in tort or contract,
making any claim concerning the negotiation, interpretation, administration or
enforcement of the Loan or that the other parry has breached its contract,
violated a law, engaged in fraud, breached a fiduciary duty or acted in bad
faith, it must bring the suit in a court located in a county of the State of
Florida in which Lender has an office;
(2) Both parties waive the right to a jury trial in any such suit;
(3) At either party's request. the other party will join in asking the court
in which the suit is pending to try the case and decide all issues. including
issues of fact. without a jury.
The parties have specifically discussed this Waiver. They both agree that it
is an essential part of their agreement about the Loan. No officer of Lender has
authority to modify the terms of this Waiver.
As used in this document, the term "Loan" means the loan or loans from
Lender to Borrower, the note or notes evidencing the Loan, any loan agreement
under which the Loan was made, any future advances. modifications or extensions.
any mortgage or security agreement signed by the Borrower to secure the Loan,
any guaranty agreement. and any other documents, communications or
representations, oral or written, that either party makes to the other in
connection with the making, interpretation, administration or enforcement of the
Loan or any agreement securing the Loan.
Any Guarantor of the Loan is also bound by the provisions of this Waiver.
To evidence this Waiver. the parties have signed this agreement at the same
time as they signed the documents evidencing the Loan.
(SIGNATURES ON FOLLOWING PAGE)
1
<PAGE>
Lender: Borrower:
Barnett Bank, N.A., a national ViroGroup, Inc., a Florida corporation
banking association, successor by
merger with Barnett Bank of Lee
County, N.A.
By: /S/ JEANNE MELHEIM By: /S/ CHARLES HIGGINS JR.
-------------------------------- -------------------------------------
Print Name: JEANNE MELHEIM Print Name: CHARLES S. HIGGINS JR.
----------------------- ----------------------------
Title: CLOSING OFFICER Title: PRESIDENT
---------------------------- ----------------------------------
2
<PAGE>
RENEWAL LINE-OF-CREDIT NOTE
---------------------------
Executed: January 27, 1997 Effective: February 14, 1997
U.S. $3,000,000.00 Fort Myers, Florida
FOR VALUE RECEIVED, the undersigned (hereinafter sometimes called the
"Maker") promises to pay to the order of Barnett Bank, N.A., a national banking
association, successor by merger with Barnett Bank of Lee County, N.A.
(hereinafter together with any holder hereof, called "Holder"), at 2000 Main
Street, Fort Myers, Florida 33901, or at such other place as the Holder may from
time to time designate in writing, the principal sum of THREE MILLION AND
NO/100THS DOLLARS ($3,000,000.00), or so much as may be outstanding, together
with interest on the unpaid principal balance advanced from the date(s) of
disbursement, in accordance with the following provisions:
1. Commencing on February 20, 1997, and on the same day of each calendar
month thereafter (through December 20, 1997), Maker shall pay Holder a monthly
payment on this Note equal to accrued interest on the outstanding principal
balance of this Note then advanced. Interest shall be calculated on the
outstanding (and unpaid) principal balance of this Note on a daily basis at an
interest rate equal to one quarter of one percent (.25%) under the Index
(defined below).
2. On January 20, 1998, being the Final Maturity Date of this Note, the
Maker shall pay all principal and interest outstanding on this Note and any
other unpaid amounts owed under this Note in full.
The interest rate on this Note is subject to change from time to time based
on changes in an index which is the Barnett Bank, Inc. prime rate as announced
from time to time (the "Index"). The interest rate will be adjusted to reflect a
change in the Index on the same day as the Index changes. The interest rate to
be applied to the unpaid balance of this Note will be at a per annum rate of one
quarter of one percent (.25%) under the Index. Holder will tell the Maker the
current Index rate upon the Maker's request. NOTICE: Under no circumstances will
the effective rate of interest on this Note be more than the maximum rate
allowed by applicable law. Upon demand for payment of this Note,the interest
rate on the Note to be applied to the unpaid balance of principal, unpaid
accrued interest, costs and fees, to be applicable until paid in full, will be
the Default Interest Rate (hereinafter defined).
Interest shall be calculated on a per annum basis of an actual three hundred
sixty (360) day year for all purposes, based on the actual number of days
elapsed, including when determining the maximum legal contract rate of interest
allowed to be contracted for by applicable law, as changed from time to time.
3
<PAGE>
This Note and the instruments securing it have been executed and delivered
in the State of Florida, and their terms and provisions are to be governed by
and construed under the laws of such state and, to the extent applicable, of the
United States of America, and the rules and regulations promulgated under the
authority thereof. It is the intent of this Note that such laws shall be
interpreted in such a manner that the maximum rate of interest allowed to be
contracted for by applicable law as changed from time to time which is
applicable to this Note be as great as possible.
The undersigned may prepay all or part of the principal sum of the
indebtedness evidenced by this Note at any time without penalty. Such prepayment
of principal shall be accompanied by payment of any unpaid interest accrued to
the time of such prepayment on the amount of the prepayment. If this Note
provides for installment or periodic payments of principal, then prepayment of
principal shall apply in the inverse order such installment of periodic payments
are due, applying first to the last principal installment or periodic payment
due hereunder.
The Maker authorizes the Holder from time to time to on any due date debit
any account that Maker may have with Holder, for any payment of principal or
interest due hereunder for the amount of such payment of principal or interest
and the Maker may ascertain such debited amount by inquiry to the Holder.
Exercise of this right shall be optional with the Holder and the provisions of
this paragraph shall not be construed as releasing the Maker from the obligation
to make payments of principal or interest due under the terms of this Note
according to the terms of this Note.
If applicable, partial prepayments shall not affect or vary the duty of the
undersigned to pay all obligations when due, and they shall not affect or impair
the right of the Holder to pursue all remedies available to it hereunder, under
the Letter of Credit (hereinafter defined) securing this indebtedness, or under
any other of the Related Documents (hereinafter defined).
The repayment of the indebtedness evidenced by this Note is secured by an
Irrevocable Letter of Credit (the "Letter of Credit") dated February 16, 1996,
and amended January 21, 1997, issued by Royal Bank of Canada, No. 1269/S13179,
in the face amount of this Note and naming the Holder as the beneficiary
thereof. Reference is hereby made to a certain Loan Agreement (the "Loan
Agreement"), dated of even date herewith, for additional provisions which may
govern or apply to this Note, including without limitation provisions which may
concern the acceleration of this Note and requirements for paying principal
prior to the Final Maturity Date. Certain terms used herein, e.g., "Related
Documents" are defined in the Loan Agreement.
This Note evidences a revolving line of credit. Advances under this Note, as
well as directions for payment from Maker's accounts, may be requested orally or
in writing by Maker or by an "Authorized Person" (as defined in the Loan
Agreement). The Holder may, but need not, require that all oral requests be
confirmed in writing. Maker agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an Authorized Person, or (b)
credited to any of Maker's accounts with Holder. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this Note or
4
<PAGE>
by Lender's internal records, including daily computer print-outs. Holder will
have no obligation to advance funds under this Note if: (i) Maker or any
guarantor is in default under the terms of this Note, the Loan Agreement or any
other agreement that Maker or any guarantor has with Holder; (ii) Maker or any
guarantor ceases doing business or is insolvent; (iii) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Holder; (iv) Maker has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (v) Holder in good faith deems itself insecure under this Note or any
other agreement between Holder and Maker.
Except in the case where Holder declares the total unpaid balance hereof
plus all accrued interest to be immediately due and payable as hereinafter
provided, any payment of principal or interest which is not made within ten (10)
days of the due date as herein provided (cure period), shall result in Maker
owing the Holder a later charge of five percent (5%) of the unpaid portion of
the payment or One Hundred Dollars ($100), whichever is greater, which shall be
immediately due and payable to the Holder. In no event shall any late charge
result in the interest charged hereunder exceeding the maximum rate of interest
allowed to be contracted for by applicable law, as changed from time to time.
In no event shall Holder have the right to charge or collect, nor shall
Maker be required or obligated to pay, interest or payments in the nature of
interest, which would result in interest being charged or collected at a rate in
excess of the maximum rate of interest allowed to be contracted for by
applicable law, as changed from time to time. In the event that any payment
which is interest or in the nature of interest is made by Maker or received by
Holder which would result in the rate of interest being charged or collected by
Holder being in excess of the maximum rate of interest allowed to be contracted
for by applicable law as changed from time to time, then the portion of any such
payment which causes the rate of interest being charged or collected by Holder
to exceed the maximum rate of interest allowed to be contracted for under any
applicable law as changed from time to time (hereinafter called the "excess
sum") shall be credited as a payment of principal. If Maker notifies Holder in
writing that Maker elects to have such excess sum returned to Maker, such excess
sum shall be returned to Maker. In the event that any such overcharge is
discovered after this Note has been paid in full, then the amount of such excess
sum shall be returned to Maker. In the event that an excess sum is returned to
Maker rather than being credited as a payment of principal, it shall be returned
together with interest thereon from the date such excess sum was paid or
collected at the same rate as was due Holder during such period under the terms
of this Note. All excess sums credited to principal shall be credited as of the
date paid to Holder. It is the intent of Holder to conform strictly to the
limitations of applicable laws governing the charging and collection of interest
as changed from time to time.
The Holder shall have the optional right to declare the amount of the total
unpaid balance hereof (including principal, interest and all other amounts due
or owed hereunder) to be due and forthwith immediately payable in advance of the
maturity date of any sum due or installment, as fixed herein, upon the failure
of the undersigned to pay, within ten (10) days of the due date, any of the
installments of interest, or upon the occurrence of an event of default as
5
<PAGE>
defined in or otherwise described in this Note or the Related Documents, or
failure to perform in accordance with any of the terms and conditions in the
Loan Agreement or in any other Related Document. For purposes of this Note,
"Default Interest Rate" shall mean the rate per annum which is equal to the
maximum rate of interest allowed to be contracted for by applicable law, as
changed from time to time; and from and after maturity of this Note (by
acceleration or otherwise), this Note shall bear interest at the Default
Interest Rate. Forbearance to exercise this option with respect to any failure
or breach of the undersigned shall not constitute a waiver of the right as to
any continuing failure or breach or any subsequent failure or breach. Exercise
of this option shall be without notice to the undersigned, notice of such
exercise being hereby waived.
Time is of the essence hereunder and, in case this Note is collected by law
or through an attorney at law, or under advice therefrom, the undersigned agrees
to pay all costs of collection, including reasonable attorney's fees.
Reasonable attorney's fees are defined to include, but not be limited to,
all fees and costs incurred in all matters of collection and enforcement,
construction and interpretation, before, during and after suit, trail
proceedings and appeals, as well as appearances in the connected with any
bankruptcy proceedings or creditors' reorganization or similar proceedings.
The remedies of the Holder as provided herein or in the Loan Agreement or
any other Related Document shall be cumulative and concurrent, and may be
pursued singularly, successively or together, as the sole discretion of the
Holder, and may be exercised as often as occasion therefor shall arise. No act
of omission or commission of the Holder, including specifically any failure to
exercise any right, remedy or recourse, shall be deemed to be a waiver or
release of the same, such waiver or release to be effected only through a
written document executed by the Holder and then only to the extent specifically
recited therein. A waiver or release with reference to any one event shall not
be construed as continuing, as a bar to, or as a waiver ro release of any
subsequent right, remedy or recourse as to a subsequent event.
Any notice to be given to or to served upon any party hereto, in connection
with this Note, must be in writing, and may be given by certified or registered
mail and shall be deemed to have been given and received on the third business
day after a certified or registered letter containing such notice, properly
addressed, with postage prepaid, is deposited in the United States mails; and if
given otherwise than by certified or registered mail, it shall be deemed to have
been given when delivered to an received by the party to whom it is addressed.
Such notices shall be given to the parties hereto at the addresses set forth
herein. Any party hereto may, at any time by giving five (5) days' written
notice to the other party hereto, designate any other party or address in
substitution of any party or address to which such notice shall be given.
All persons or entities now or at any time liable, whether primarily or
secondarily, for the payment of the indebtedness hereby evidenced, and all
persons or entities which now or at any time hereafter may pledge, hypothecate,
mortgage or otherwise grant the Holder any lien in their property to secure the
indebtedness hereby evidenced, for themselves, their heirs, legal
representatives, successors and assigns respectively, hereby: (a) expressly
6
<PAGE>
waive presentment, demand for payment, notice of dishonor, protest, notice of
nonpayment or protest, and diligence in collection; (b) consent that the time of
all payments or any par thereof may be extended, rearranged, renewed or
postponed by the Holder hereof from time to time as often as the Holder may
desire and further consent that the collateral security or any part thereof may,
from time to time, be released, exchanged, added to or substituted for by the
Holder hereof, without otherwise modifying, altering, releasing, affecting or
limiting their respective liability or the lien of any security or security
instrument; and (c) agree that the Holder, in order to enforce payment of this
Note, shall not be required first to institute any suit to exhaust any of its
remedies against the Maker or any person or party to become liable hereunder.
If more than one party shall execute this Note, the term "undersigned", as
used herein, shall mean all parties signing this Note, who shall be jointly and
severally obligated hereunder.
In this Note, whenever the context so requires, the neuter gender includes
the feminine and/or masculine, as the case may be, and the singular number
includes the plural.
THIS PROMISSORY NOTE RENEWS A $3,000,000.00 LINE-OF-CREDIT NOTE DATED AS OF
FEBRUARY 20, 1996 ON WHICH DOCUMENTARY STAMP TAXES HAVE BEEN PAID AND NO
ADDITIONAL DOCUMENTARY STAMP TAXES ARE DUE HEREON.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the day and
year first above written.
ViroGroup, Inc., A Florida corporation
By: /S/ CHARLES S. HIGGINS
-----------------------------------
Print Name: CHARLES S. HIGGINS, JR.
--------------------------
Title: PRESIDENT
-------------------------------
Makers' Address:
428 Pine Island Road, S.W.
Cape Coral, Florida 33991
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VIROGROUP, INC. FOR THE NINE MONTHS ENDED MAY 31, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 81
<SECURITIES> 0
<RECEIVABLES> 2,058
<ALLOWANCES> 449
<INVENTORY> 0
<CURRENT-ASSETS> 2,982
<PP&E> 2,385
<DEPRECIATION> 1,990
<TOTAL-ASSETS> 3,946
<CURRENT-LIABILITIES> 2,634
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 1,304
<TOTAL-LIABILITY-AND-EQUITY> 3,946
<SALES> 5,684
<TOTAL-REVENUES> 5,684
<CGS> 4,105
<TOTAL-COSTS> 4,105
<OTHER-EXPENSES> 3,247
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153
<INCOME-PRETAX> (1,745)
<INCOME-TAX> (1)
<INCOME-CONTINUING> (1,746)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,746)
<EPS-PRIMARY> (2.20)
<EPS-DILUTED> (2.20)
</TABLE>
