<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1998
REGISTRATION NO. 333-61551
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
KOALA CORPORATION
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
<TABLE>
<C> <S> <C>
COLORADO 3089 84-1238908
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
MARK A. BETKER
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
5031 SOUTH ULSTER STREET, SUITE 300 5031 SOUTH ULSTER STREET, SUITE 300
DENVER, COLORADO 80237 DENVER, COLORADO 80237
(303) 770-3500 (303) 770-3500
(ADDRESS AND TELEPHONE NUMBER (NAME, ADDRESS AND TELEPHONE
OF PRINCIPAL EXECUTIVE OFFICE) NUMBER OF AGENT FOR SERVICE)
COPIES TO:
DOUGLAS R. WRIGHT, ESQ. RICHARD M. RUSSO, ESQ.
JEFFREY A. SHERMAN, ESQ. GIBSON, DUNN & CRUTCHER LLP
OTTEN, JOHNSON, ROBINSON, NEFF & RAGONETTI, P.C. 1801 CALIFORNIA STREET, SUITE 4100
950 SEVENTEENTH STREET, SUITE 1600 DENVER, COLORADO 80202
DENVER, COLORADO 80202 (303) 298-5715
(303) 825-8400
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
* * *
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Underwriting Agreement
3.1 Articles of Incorporation of Koala Corporation
3.2 Bylaws of Koala Corporation
4.1 Specimen Common Stock Certificate(1)
5.1 Opinion of Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
10.1 Incentive Stock Option Plan dated August 19, 1993(1)
10.2 Koala Corporation 1995 Stock Option Plan, as amended
10.3 Industrial Lease dated August 1, 1996 between Buckhead Industrial
Properties, Inc. and Koala Corporation(2)
10.4 Credit Agreement with U.S. Bank National Association(4)
10.5 Agreement for Sale and Purchase of Assets dated June 23, 1997
between Delta Play, Ltd., et al. and Koala Corporation(3)
10.6 Registration Rights Agreement dated June 23, 1997 between Delta
Play, Ltd., and Koala Corporation(4)
10.7 Agreement for Sale and Purchase of Assets dated August 14, 1998
between Park Structures, Inc. et al and Koala Corporation
10.8 Indenture dated March 31, 1998 among Vanal Development Corp., Delta
Play Company and Koala Corporation
10.9* Form of Revolving Credit Agreement, dated December 16, 1998, between
Koala Corporation and U.S. Bank National Association
21.1 Subsidiaries
23.1 Consent of Ernst & Young LLP
23.2 Consent of Blanski Peter Kronlage & Zoch, P.A.
23.3 Consent of Goldstein Lewin & Co.
23.4 Consent of Ernst & Young Chartered Accountants
23.5 Consent of Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
(contained in Exhibit 5.1)
24.1 Power of Attorney (on page II-4)
27.1 Financial Data Schedule
</TABLE>
- --------
* Filed herewith.
(1) Incorporated by reference to the exhibits included in the Company's
Registration Statement on Form SB-2, Registration No. 33-68482C.
(2) Incorporated by reference to Exhibit 10.11 of the Company's Form 10-KSB
for the year ended December 31, 1996.
(3) Incorporated by reference to Exhibit 2.1 of the Company's Form 8-K/A filed
on September 8, 1997.
(4) Incorporated by reference to Exhibit 4.1 of the Company's Form 8-K/A filed
on September 8, 1997.
* * *
II-1
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has authorized this amendment to the registration
statement to be signed on its behalf by the undersigned in Denver, Colorado,
on December 16, 1998.
KOALA CORPORATION
/s/ Mark A. Betker
By: _________________________________
Name: Mark A. Betker
Title: Chairman of the Board,
President and Chief
Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed by the following
persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Mark A. Betker Chairman of the Board, December 16, 1998
____________________________________ President and Chief
Mark A. Betker Executive Officer
/s/ Jeffrey L. Vigil Vice President of December 16, 1998
____________________________________ Finance and
Jeffrey L. Vigil Administration
(Principal Financial
and Accounting
Officer)
/s/ Michael C. Franson Director December 16, 1998
____________________________________
Michael C. Franson
/s/ Thomas W. Gamel* Director December 16, 1998
____________________________________
Thomas W. Gamel
/s/ John T. Pfannenstein* Director December 16, 1998
____________________________________
John T. Pfannenstein
/s/ Ellen S. Robinson* Director December 16, 1998
____________________________________
Ellen S. Robinson
*By: /s/ Jeffrey L. Vigil
----------------------------------------------
Jeffrey L. Vigil, Attorney-in-
Fact
</TABLE>
II-2
<PAGE>
Exhibit 10.9
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement (the "Agreement") is made as of December 16,
1998, between KOALA CORPORATION, a Colorado corporation ("Borrower") and U.S.
BANK NATIONAL ASSOCIATION, fka COLORADO NATIONAL BANK, a national banking
association ("Bank").
RECITALS:
i. Borrower and Bank entered into (a) a Revolving Credit Agreement dated as
of June 24, 1997 pursuant to which Bank made available to Borrower a
Revolving Credit Line of $2,000,000 and (b) a First Amendment to Revolving
Credit Agreement dated June 24, 1998 which extended Bank's commitment to
make loans under Revolving Credit Line to June 24, 1999 (the "Prior
Agreement");
ii. Borrower is proposing to acquire the assets of Park Structures, Inc. and
Park Structures Sales, Inc. (the "Acquisition") and to issue additional
equity securities in the public markets (the "Offering") in connection
therewith;
iii. Borrower has requested that Bank increase its commitment to $15,000,000
and to extend the Termination Date to December 16, 2001 in connection with
such Acquisition; and
iv. Bank is willing to take such action upon and subject to the terms and
conditions set forth in this Agreement which upon execution shall
supercede the Prior Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
contained in this Agreement, Borrower and Bank agree as follows:
1. TERMS OF BORROWING
------------------
1.01 Revolving Credit Line. Subject to the following terms and conditions, Bank
---------------------
agrees to make a line of credit available to Borrower (the "Revolving
Credit Line") in the maximum amount of $15,000,000 (the "Maximum Line")
or, if less, the amount of the Cash Flow Limit (defined below), pursuant
to which Bank will make loans to Borrower (each an "Advance") in such
amounts as Borrower may request from time to time, the proceeds of which
shall be used for working capital, the proposed Acquisition and future
acquisitions and to purchase equipment, including computer equipment. The
aggregate outstanding principal balance of all Advances made hereunder may
not exceed the Maximum Line. Amounts borrowed under the Revolving Credit
Line may be repaid prior to the Termination Date (defined below) without
penalty, except as set forth in Exhibit A to the Note (defined below), and
may be reborrowed subject to the terms hereof.
Bank's commitment to make Advances hereunder is subject to the conditions
in Section 4 below and the following limitations:
a. Bank's commitment to lend hereunder terminates on December 16, 2001
(the "Termination Date"), if not sooner terminated under Section 8
below;
b. Bank shall not be obligated to make any Advance which would cause
the outstanding principal balance of the Revolving Credit Line (the
"Line Balance") to exceed the Maximum Line or, if less, the Cash Flow
Limit; and
c. Bank shall not be obligated to make any Advance if an Event of
Default, as defined in Section 7 below, or an event which, with the
giving of notice or lapse of time, or both, would become an Event of
Default (a "Potential Default"), has occurred and has not been cured by
Borrower or waived by Bank.
1
<PAGE>
1.02 Line Note. Borrower's indebtedness to Bank for amounts borrowed under the
---------
Revolving Credit Line and for interest accrued thereon shall be evidenced
by Borrower's promissory note to Bank, on Bank's standard form for
commercial promissory notes and otherwise satisfactory to Bank, in the
principal amount of the Maximum Line (as amended or extended from time to
time, the "Line Note").
1.03 Interest. Borrower agrees to pay interest on the Line Balance from time to
--------
time as provided herein. Interest will accrue on the daily outstanding
balance of each Advance at a fluctuating rate per annum equal to the
applicable "Reserve Adjusted LIBOR Rate" plus the applicable margin as set
forth below for the selected Interest Period (see the attached Exhibit A
which will be attached to and incorporated into the Line Note for terms
and definitions which will apply to the interest rates based on a Reserve
Adjusted LIBOR Rate). Borrower shall have the option to select fixed
Interest Periods or a reset daily one-month Interest Period basis for each
Advance. The interest rate for any new Advance made on or after the date
of determination of Borrower's ratio of Debt to Annualized Cash Flow for
each fiscal quarter or for any Advance outstanding on a reset daily basis
on such determination date, will be subject to further adjustment, as of
the date of such determination each fiscal quarter, as follows: When
Borrower's ratio of Debt (as defined in Section 6.02) to Annualized Cash
Flow (as defined in Section 1.04) is within one of the ranges set forth
below, then the "margin" or "spread" to be added to the applicable Reserve
Adjusted LIBOR Rate shall be the rate per annum set forth below opposite
such range:
Debt/Annualized
Cash Flow Ratio Margin
--------------- ------
Less than 1.00:1 2.15%
1.00:1 less than or equal to 2.50:1 2.35%
Greater than 2.50:1 2.60%
Accrued interest on each Advance shall be due and payable (i) at the end
of each fixed Interest Period but not less than at the end of each 3
months, (ii) on the first day of each month for interest on a reset daily
one-month Interest Period basis, (iii) at maturity of the Line Note and
(iv) on demand after such maturity. After the occurrence of an Event of
Default or after maturity or any acceleration of maturity of the Line
Note, at Bank's option, the interest rate applicable to any Advance or the
Line Balance may be increased as provided in the Line Note and Borrower
agrees to pay any such increased interest. Interest shall be computed
using the actual number of days in the period for which such computation
is made and a per diem rate equal to 1/360 of the fluctuating rate per
annum.
1.04 Cash Flow Limit. The "Cash Flow Limit" means from time to time an amount
---------------
equal to the result of multiplying Borrower's Annualized Cash Flow by 3.5
through September 30, 1999 and by 3.0 as of December 31, 1999 and
thereafter. "Annualized Cash Flow" means Borrower's earnings before
interest, taxes, depreciation and amortization calculated at the end of
each quarter for the previous four quarters (i.e. on a four-quarter
trailing basis).
1.05 Repayment of Principal. Borrower agrees to repay all Advances made
----------------------
hereunder. The Line Balance will be due and payable in full at the
maturity of the Line Note, which will be December 16, 2001 subject to
acceleration upon the occurrence of an Event of Default. In the event
Borrower issues any additional debt or equity securities for cash after
the date hereof (excluding the Offering and any Debt to Bank or Bank's
affiliates), Borrower agrees to repay outstanding Advances hereunder from
and to the extent of the net proceeds received from any such issue of
securities.
1.06 Method of Borrowing. Requests for Advances may be submitted by Borrower in
-------------------
writing or by telephone. Bank shall be entitled to honor any such request
it reasonably believes to be genuine, whether or not the person making the
request is named as an authorized person in any corporate resolution or
instruction furnished Bank by Borrower. Advances shall be disbursed only
by deposit to a demand deposit account maintained by Borrower at Bank.
Proceeds of an Advance shall be disbursed on the Banking Day (as
2
<PAGE>
defined in the Colorado Uniform Commercial Code) Bank receives Borrower's
request if such request is received by 2:00 p.m. Denver time on such day,
and on the next Banking Day if received after 2:00 p.m. on such day, and
in either case the conditions of Section 4 are met.
1.07 Letters of Credit. In the event and to the extent Bank issues a letter of
-----------------
credit (an "L/C") on behalf of Borrower under the Revolving Credit Line in
lieu of an advance, the Maximum Line shall be considered utilized by the
amount of such L/C. Borrower shall pay fees for any such L/C at the time
of issuance according to Bank's schedule of fees relating to letters of
credit in effect from time to time; and Borrower shall execute Bank's then
current standard form application and agreement for such L/C. Amounts
drawn under any such L/C and honored by Bank but not immediately
reimbursed by Borrower to Bank shall become an Advance hereunder in such
amount at such time evidenced by the Line Note and subject to all the
terms of this Agreement, whether or not any Event of Default or Potential
Default has occurred. No such L/C shall expire later than the Termination
Date.
1.08 Loan Fee. Borrower agrees to pay Bank a fee of $35,000.00, payable in
--------
advance on the date of execution hereof by Borrower.
1.09 Commitment Fee. As additional consideration for the commitment to lend
--------------
hereunder, Borrower agrees to pay Bank a commitment fee on the average
daily unused portion of the Maximum Line from the date hereof until the
Termination Date at a rate of one quarter of one percent (.25%) per annum,
payable quarterly in arrears on the first day of each calendar quarter
during the term of the Revolving Credit Line commencing April 1, 1999 and
on the Termination Date.
2. COLLATERAL AND OTHER CREDIT SUPPORT
-----------------------------------
2.01 Collateral. The repayment of all of Borrower's indebtedness to Bank shall
----------
be secured by first priority security interests (the "Security Interests")
in all accounts, general intangibles, inventory and equipment (all such
terms having the meanings given them in the Colorado Uniform Commercial
Code) now owned or hereafter acquired by Borrower and in all proceeds
thereof (the "Collateral"). The Security Interests shall be created and
perfected by security agreements, UCC financing statements, and any other
collateral documents deemed necessary or advisable by Bank in its sole
discretion, each in form satisfactory to Bank, duly executed by Borrower
(the "Collateral Documents"). Hereafter, Borrower shall from time to time
execute and deliver to Bank such other documents in form and substance
satisfactory to Bank, and perform such other acts, as Bank may reasonably
request, to perfect and maintain valid Security Interests in the
Collateral. In addition Borrower hereby grants to Bank a security interest
in all Borrower's deposit accounts at Bank to secure all obligations of
Borrower to Bank now or hereafter arising.
2.02 Subordinated Debt. Any and all loans or advances made to Borrower by any
-----------------
of Borrower's shareholders or any other affiliates of Borrower shall be
subordinated to all indebtedness of Borrower to Bank now or hereafter
existing and such subordination shall be evidenced by agreements in form
and substance satisfactory to Bank in Bank's sole discretion, duly
executed by each such other creditor (the "Subordinated Debt").
3. REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Bank to enter into this Agreement, Borrower represents and
warrants as follows:
3.01 Incorporation. Borrower is a corporation duly organized, validly existing,
-------------
and in good standing under the laws of the State indicated at the
beginning of this Agreement, and Borrower is duly qualified or licensed
and in good standing to do business as a foreign corporation in all
jurisdictions in which the nature of Borrower's business requires
qualification.
3
<PAGE>
3.02 Borrower's Authorization. The execution, delivery and performance by
------------------------
Borrower of this Agreement, the Line Note and the Collateral Documents are
within Borrower's corporate powers, have been authorized by all necessary
corporate action and do not and will not contravene Borrower's Articles of
Incorporation or Bylaws, violate any provision of law or result in a
breach of or default under any other agreement to which Borrower is a
party.
3.03 Litigation. There is no pending or threatened action, claim,
----------
investigation, lawsuit or proceeding against or affecting Borrower before
any court, governmental agency, arbitrator or arbitration panel, which if
decided adversely to Borrower would have a material adverse affect on the
financial condition or operations of Borrower or in any event which claims
or involves an amount exceeding $100,000 ("Material Litigation").
3.04 Financial Condition. The audited balance sheet of Borrower as at December
-------------------
31, 1997, and the related statements of income and retained earnings for
the fiscal year then ended, and the unaudited balance sheet of Borrower as
at September 30, 1998, and the related statements of income and retained
earnings for the period then ended, copies of which have been furnished to
Bank, fairly present the financial condition of Borrower as at such dates
and the results of the operations of Borrower for the periods ended on
such dates, all in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis, subject to year-end
audit adjustments for the unaudited September 30, 1998 financial
statements, and since September 30, 1998 there has been no material
adverse change in such condition or operations.
3.05 Valid Obligations. This Agreement constitutes, and each of the Line Note
-----------------
and the Collateral Documents when delivered hereunder will be, a legal,
valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its respective terms.
3.06 Taxes. Borrower (i) has filed all tax reports and returns required to be
-----
filed, including but not limited to reports and returns concerning income,
franchise, employment, sales and use, and property taxes; (ii) has paid
all of its tax liabilities which were due on or prior to the date hereof;
and (iii) is not aware of any pending investigation by any taxing
authority or of any pending assessments or adjustments which would
materially increase its tax liability.
3.07 Regulation U. Borrower is not engaged in the business of extending credit
------------
for the purpose of purchasing or carrying margin stock (within the meaning
of Regulation U issued by the Board of Governors of the Federal Reserve
System), and no proceeds of any Advance will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
3.08 Disclosure. No information, exhibit or report furnished by Borrower to
----------
Bank in connection with the negotiation of this Agreement contains any
material misstatement of fact or omitted to state a material fact
necessary to make the statement contained therein not misleading.
3.09 Environmental Compliance. The ownership and operation of Borrower's
------------------------
properties have been and are in compliance with all applicable federal,
state, and local environmental protection and hazardous waste disposal
statutes and regulations. Borrower has not received any notice of claim
under or violation of any such laws affecting Borrower's properties.
3.10 Liens. Borrower is the legal and beneficial owner of the property granted
-----
as collateral hereunder, free from any lien, encumbrance, or restriction
whatsoever except the Bank's Security Interests and liens for taxes not
yet due and payable, and Borrower has full power and authority to grant
liens and the security interests in such property as collateral for its
indebtedness.
4
<PAGE>
4. CONDITIONS PRECEDENT
--------------------
4.01 Conditions Precedent to Initial Advance. The obligation of Bank to make its
---------------------------------------
initial Advance hereunder is subject to the condition precedent that Bank
shall have received on or before the day of such Advance the following,
each in form and substance satisfactory to Bank:
i. the Line Note and such Collateral Documents as may be specified by
Bank, each duly executed by Borrower, and any fees specified above;
ii. if not already in possession of Bank, copies of the Articles of
Incorporation and By-laws of Borrower, each certified by the Secretary of
Borrower to be a true and correct copy thereof, including all amendments
thereto, if any;
iii. certified copies of the resolutions of the Board of Directors of
Borrower approving this Agreement, the Line Note and the Collateral
Documents, and of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to this Agreement, the
Line Note and the Collateral Documents;
iv. a certificate of the Secretary of Borrower certifying the names and
true signatures of the officers of Borrower authorized to sign this
Agreement, the Line Note and the Collateral Documents;
v. a certificate of the Secretary of State of Colorado certifying that
Borrower is a corporation duly organized and in good standing under the
laws of Colorado or such other evidence thereof as may be satisfactory to
Bank;
vi. a year 2000 compliance representation letter on Bank's form; and
vii. evidence that both the Acquisition and the Offering have closed and
been completed substantially as contemplated on the date hereof.
4.02 Conditions Precedent to All Advances. The obligation of Bank to make each
-----------------------------------
Advance (including the initial Advance) shall be subject to the further
conditions precedent that on the date of such Advance:
i. the following statements shall be true:
(a) the representations and warranties contained in Section 3 are
correct on and as of the date of such Advance as though made on and
as of such date; and
(b) no event has occurred and is continuing, or would result from
such Advance, which constitutes an Event of Default or Potential
Default;
and Bank may request a certificate of an officer of Borrower stating
the foregoing;
ii. Bank shall have received such other approvals, opinions or documents
as Bank may reasonably request; and
iii. Bank's legal counsel is reasonably satisfied as to all legal matters
incident to the making of such Advance.
5
<PAGE>
5. AFFIRMATIVE COVENANTS
---------------------
So long as the Line Note or any indebtedness of Borrower to Bank remains
unpaid
5.01 Accounting Records. Maintain adequate books and accounting records in
------------------
accordance with GAAP, consistently applied, reflecting all financial
transactions of Borrower.
5.02 Inspections. At any reasonable time and from time to time, permit any
-----------
agents or representatives of Bank to examine and make copies of and
abstracts from records and books of account of Borrower, to visit and
inspect the properties of Borrower and to discuss the affairs, finances
and accounts of Borrower with any of its officers or directors.
5.03 Maintenance of Property. Maintain and preserve all of its properties and
-----------------------
assets necessary or useful in the performance of its business in good
working order, repair and condition, ordinary wear and tear excepted.
5.04 Insurance. Maintain insurance with responsible and reputable insurance
---------
companies in such amounts and covering such risks as is usually and
customarily carried by companies engaged in similar businesses and owning
similar properties, including, but not limited to, public liability,
property damage and worker's compensation, and deliver to Bank, at Bank's
request, schedules setting forth all insurance then in effect and copies
of such policies or certificates of insurance on property granted or
pledged as collateral; cause Bank to be named loss payee and as additional
insured on any insurance covering property granted or pledged as
collateral, and furnish to Bank certificates indicating such status.
5.05 Payment of Taxes, Liens. Pay and discharge, before the same become
-----------------------
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon Borrower or upon its property, and (ii) all lawful claims
which, if unpaid, might by law become a lien upon its property, except any
thereof which is being contested in good faith and by appropriate
proceedings.
5.06 Compliance with Laws. Comply in all material respects with all applicable
--------------------
laws, rules, regulations and orders of any government authority, non-
compliance with which would materially adversely affect its business or
credit.
5.07 Corporate Existence. Preserve and maintain its corporate existence and
-------------------
rights and franchises in its State of incorporation, and all licenses
necessary to do business; and qualify and remain qualified and in good
standing as a foreign corporation in each jurisdiction in which such
qualification is necessary in view of its operation or ownership of its
properties.
5.08 Reporting. Furnish Bank the following as soon as available and in any
---------
event:
i. Within ninety (90) days after the end of each fiscal year of
Borrower, a copy of the annual audited financial statements of Borrower as
at the end of such fiscal year, including a balance sheet and income
statement, audited by an independent Certified Public Accountant ("CPA")
reasonably acceptable to Bank, with an unqualified opinion thereon by said
CPA;
ii. Within forty-five (45) days after the end of each fiscal quarter, (a)
Borrower's internally prepared statement of financial condition as at the
end of such quarter, including a balance sheet and income statement
prepared substantially in accordance with GAAP and (b) a certificate as to
compliance with Borrower's financial covenants in the form of Exhibit B
---------
hereto or in such other form as may be acceptable to Bank;
iii. Prior to the end of each fiscal year of Borrower, a copy of
Borrower's projected financial statements for the next fiscal year; and
6
<PAGE>
iv. From time to time such other information as Bank may reasonably
request.
5.09 Financial Condition. Maintain the financial condition of Borrower,
-------------------
determined in accordance with GAAP, so that it meets the following
requirements measured on a quarterly basis for the preceding four fiscal
quarters, i.e. on a 4-quarter trailing basis:
i. Borrower's ratio of (a) Debt to (b) Annualized Cash Flow will be not
more than 3.50:1 through the quarter ending 9/30/99 and not more than
3.00:1 thereafter; and
ii. Borrower's ratio of (a) Annualized Cash Flow to (b) Interest Expense
will be not less than 4.00:1.
5.10 Deposit Accounts. Maintain all material deposit accounts at Bank.
----------------
5.11 Notice of Significant Events. Promptly notify Bank in writing of 1) the
----------------------------
occurrence of any Event of Default or Potential Default; 2) any change in
its name, address, form of entity, or organizational or capital structure;
or 3) the threat of or commencement of any Material Litigation.
6. NEGATIVE COVENANTS
------------------
So long as the Line Note or any indebtedness of Borrower to Bank remains
unpaid or Bank has any commitment to lend hereunder, without the prior
written consent of Bank, Borrower will not:
6.01 Use of Funds. Use any of the amounts loaned to it by Bank pursuant to
------------
this Agreement for any purpose except as specified in Section 1.01;
6.02 Debt. Create, incur, assume or permit to exist any Debt except 1) Debt to
----
Bank or to affiliates of Bank; 2) Debt which is trade debt incurred by
Borrower in the ordinary course of business on a short term basis for the
acquisition of supplies or services; and 3) other Debt up to an aggregate
amount of $150,000 at any one time outstanding. "Debt" means (i)
indebtedness for borrowed money or for the deferred purchase price of
property or services, (ii) obligations as lessee under leases which shall
have been or should be, in accordance with GAAP, recorded as capital
leases, (iii) obligations under direct or indirect guaranties in respect
of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clause
(i) or (ii) above, and (iv) liabilities in respect of unfunded vested
benefits under plans covered by Title IV of ERISA;
6.03 Liens. Create, incur, assume, or permit to exist any mortgage, deed of
-----
trust, pledge, lien, security interest or other charge or encumbrance or
any other type of preferential arrangement, upon or with respect to any of
its properties, whether now owned or hereafter acquired, or assign any
right to receive any income, other than (i) purchase money security
interests or liens in or upon any property acquired or held by Borrower in
the ordinary course of business to secure the purchase price of such
property or to secure indebtedness incurred solely for the purpose of
financing the acquisition of such property, (ii) security interests or
liens existing in or on such property at the time of its acquisition,
(iii) liens for taxes not yet due and payable, deposits or pledges in
connection with or to secure payment of workmen's compensation,
unemployment insurance or other social security or in connection with the
good faith context of any tax lien, and (iv) the Security Interests and
any other liens in favor of Bank, provided that the aggregate principal
--------
amount of the indebtedness secured by the security interests or liens
referred to in clauses (i) and (ii) above shall not exceed $50,000 any
time outstanding;
6.04 Loans and Investments. Make any loans or advances to any person or entity
---------------------
or purchase or otherwise acquire the capital stock, assets, or obligations
of, or any other interest in, any person or entity or make any other
investments, except (i) readily marketable direct obligations of the
United States of America or a money market mutual fund investing solely
therein; (ii) certificates of deposit issued by commercial banks
7
<PAGE>
of recognized standing operating in the United States of America; (iii)
other loans or investments in an aggregate amount in any one fiscal year
not exceeding $1,000,000 excluding the Acquisition; or (iv) loans or
advances to wholly-owned or controlled subsidiary corporations or similar
limited liability entities ("Subsidiaries");
6.05 Guaranty. Guarantee or become liable in any way as surety for any
--------
liability or obligation of any other person or entity except by
endorsement of instruments for deposit or collection in the ordinary
course of business and except for guarantees of Subsidiaries up to an
aggregate amount of $150,000 at any one time outstanding;
6.06 Merger or Sale. Merge into or consolidate with any corporation or other
--------------
entity; or sell, lease, assign or otherwise transfer or dispose of all or
any material portion of its assets except for sales of inventory in the
ordinary course of business;
6.07 Nature of Business. Materially change the scope or nature of its
------------------
business; or
6.08 Distribution to Shareholders. Pay or declare any dividends, or purchase,
----------------------------
redeem or otherwise acquire any of its capital stock, or make any other
distributions of any property to any of its shareholders as such.
7. DEFAULT
-------
If any of the following events shall occur, it shall be an event of
default ("Event of Default"):
7.01 Non-Payment. Borrower fails to pay any principal of the Line Note or any
-----------
other sums payable by Borrower to Bank pursuant to this Agreement when
due, or Borrower fails to pay any interest on the Line Note within ten
(10) days after any such interest is due;
7.02 Representations. Any representation or warranty made by Borrower herein or
---------------
in connection herewith proves to have been incorrect in any material
respect when made;
7.03 Breach of Negative Covenants. Borrower fails to observe or comply with any
----------------------------
of the covenants in Section 6 of this Agreement;
7.04 Breach of Covenants. Borrower fails to perform or observe any other term,
-------------------
covenant or agreement contained in this Agreement (other than those
referred to in Section 7.01 and 7.03) or in any Collateral Document and
such failure has not been cured within ten (10) days after Bank has
notified Borrower of such failure;
7.05 Default on Other Debt. Borrower shall fail to pay any Debt of Borrower
---------------------
(other than Debt evidenced by the Line Note) or any interest or premium
thereon when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after
the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other default or event under any
agreement or instrument relating to any such Debt shall occur and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration of, the maturity of such Debt;
or any such Debt shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment),
prior to the stated maturity thereof;
7.06 Insolvency. Borrower shall generally not pay its debts as such debts
----------
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against Borrower
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief,
or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, or other
8
<PAGE>
similar official for it or for any substantial part of its property and,
if instituted against Borrower, shall remain undismissed for a period of
thirty days; or Borrower shall take any corporate action to authorize any
of the actions set forth above in this subsection;
7.07 Judgments. Any judgment or order for the payment of money in excess of
---------
$500,000 which is not covered by insurance shall be rendered against
Borrower and either (i) enforcement proceedings shall have been commenced
by any creditor upon such judgment or order or (ii) there shall be any
period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect;
7.08 Change in Control. Any person, entity or group of persons acting together
-----------------
(not including the current principal shareholder(s) of Borrower) acquires
a sufficient number of the shares of Borrower's voting common stock to
enable such acquiring person, entity or group to elect a majority of
Borrower's Board of Directors.
8. REMEDIES
--------
Upon the occurrence of any Event of Default, Bank shall have the right by
notice to Borrower:
8.01 Further Loans. To terminate its commitment to make Advances;
-------------
8.02 Acceleration. To declare the Line Balance and all interest accrued thereon
------------
and all other amounts payable under this Agreement to be immediately due
and payable whereupon all such indebtedness of Borrower to Bank shall
become and be immediately due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly
waived by Borrower; and
8.03 Other Rights. To exercise any other rights or remedies available to it
------------
whether under the Collateral Documents, or at law or in equity.
9. MISCELLANEOUS
-------------
9.01 Waiver Amendments. No waiver by Bank or any amendment of any provision of
-----------------
this Agreement, nor any consent of Bank to any failure to comply with the
terms hereof by Borrower, shall be effective unless made in writing and
signed by Bank. No waiver by Bank of any default or of any right to
enforce this Agreement shall operate as a waiver of any other default, or
of the same default on a future occasion, or of the right to enforce this
Agreement on any future occasion. No delay in or discontinuance of the
enforcement of this Agreement, nor the acceptance by Bank of installments
of principal or interest after the occurrence of any Event of Default,
shall operate as a waiver of any default.
9.02 Rights Cumulative. The rights and remedies herein provided are cumulative
-----------------
and not exclusive of any rights or remedies afforded by any promissory
note or other agreement executed in connection herewith, or provided by
law. Bank's remedies may be exercised concurrently or separately, in any
order, and the election of one remedy shall not be deemed a waiver of any
other remedy.
9.03 Expenses. Borrower will pay to Bank on demand all expenses, including
--------
reasonable fees and expenses of attorneys, paid or incurred by Bank in
connection with the creation and perfection of Bank's security interest in
collateral, the making or collection of Advances made pursuant to this
Agreement, or the protection, preservation or enforcement of Bank's rights
hereunder and in property pledged or granted as collateral.
9.04 Successors and Assigns. This Agreement shall be binding upon and inure to
----------------------
the benefit of Borrower, Bank and their respective successors and assigns.
However, Borrower shall not have the right to assign or otherwise transfer
any rights in or under this Agreement without Bank's prior written
consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in the Advances provided for
9
<PAGE>
herein. In connection therewith Bank may disclose all documents and
information which Bank now has or may hereafter acquire relating to the
Advances, Borrower or Borrower's business or any of the Collateral.
9.05 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Colorado.
9.06 Notices. All notices, requests and demands given to or made upon either
-------
party must be in writing and shall be deemed to have been given or made
when personally delivered or two (2) days after having been deposited in
the United States Mail, first class postage prepaid, addressed as follows:
If to Borrower: Koala Corporation
Attn: Mark A. Betker
President and CEO
5031 South Ulster St. Suite 300
Denver, CO 80237
If to Bank U.S. Bank National Association
Attn: Joni Fish, Vice President
918 17th Street
Denver, CO 80202
9.07 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.
9.08 Recitals. The recitals to this Agreement and any definitions set forth
--------
therein are made a part hereof and incorporated in this Agreement.
9.09 Entire Agreement. The following documents contain the entire agreement
----------------
between the parties concerning the subject matter hereof: this Agreement,
the Line Note and the Collateral Documents (collectively, the "Relevant
Documents"). Any representation, understanding or promise concerning the
subject matter hereof, which is not expressly set forth in any of the
Relevant Documents, shall not be enforceable by any party hereto or its
successors or assigns. In the event of any conflict or inconsistency
between the terms of this Agreement and the terms of any other Relevant
Document, the terms of this Agreement shall govern.
9.10 Severability. The unenforceability of any provision of this Agreement
------------
shall not affect the enforceability or validity of any other provision
hereof.
9.11 JURY TRIAL WAIVER. BANK AND BORROWER EACH IRREVOCABLY WAIVES ITS RIGHT TO
-----------------
A JURY TRIAL IN ANY ACTION OR PROCEEDING OF ANY ISSUE, CLAIM, COUNTERCLAIM
OR OTHER CAUSE OF ACTION, WHETHER IN CONTRACT OR TORT, BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE CREDIT EXTENDED HEREUNDER, ANY
COLLATERAL PROPERTY SECURING SUCH CREDIT, OR ANY OTHER AGREEMENT OR
DEALINGS RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement the date first
stated above for the purposes set forth herein.
KOALA CORPORATION U.S. BANK NATIONAL ASSOCIATION
By:_____________________________ By:_____________________________
Title:__________________________ Title:__________________________
10
<PAGE>
EXHIBIT A
TO PROMISSORY NOTE ("NOTE")
OF KOALA CORPORATION
("BORROWER")
DATED DECEMBER 16, 1998
AND PAYABLE TO THE ORDER OF
U.S. BANK NATIONAL ASSOCIATON ("BANK")
This Exhibit A contains provisions expressly incorporated into the Note to which
it is attached and to which the Note is expressly made subject. In the event of
any inconsistency between the provisions of this Exhibit A and the terms of the
Note, the terms of this Exhibit A shall control.
- --------------------------------------------------------------------------------
1. Definitions. Unless otherwise defined in the Note, capitalized terms shall
-----------
have the following meanings:
"Advance": Each amount borrowed by the Borrower under the credit facility
-------
between the Borrower and the Bank and evidenced by the Note to which this
Exhibit A is attached. Advances may be either LIBOR Rate Advances or
Reference Rate Advances.
"Business Day": Any day of the year on which the Bank's main Denver office
------------
is open for carrying on substantially all of its business and on which the
interbank Eurodollar market is open for business.
"Eurocurrency Reserve Rate": A percentage equal to the daily average during
-------------------------
the applicable Interest Period of the aggregate maximum reserve
requirements (including all basic, supplemental, marginal and other
reserves), as specified under Regulation D of the Federal Reserve Board, or
any other applicable regulation that prescribes reserve requirements
applicable to Eurocurrency liabilities (as presently defined in Regulation
D) or applicable to extensions of credit by member banks the rate of
interest on which is determined with regard to rates applicable to
Eurocurrency liabilities. Without limiting the generality of the foregoing,
the Eurocurrency Reserve Rate shall reflect any reserves required to be
maintained by the Bank against (i) any category of liabilities that
includes deposits by reference to which the LIBOR Rate is to be determined,
or (ii) any category of extensions of credit or other assets that includes
loans or advances having an interest rate based upon the LIBOR Rate. Any
LIBOR Rate Advance shall be deemed to be "Eurocurrency liability" as
defined in Regulation D.
"Interest Period": as to any LIBOR Rate Advance, a period commencing on
---------------
(and including) the date the funds of such LIBOR Rate Advance are advanced
or the date the immediately preceding Interest Period ends, and ending on
the last day of the Interest Period specified in the Borrower's Interest
Period Election, provided, however, that (i) if any Interest Period would
otherwise end on a day which is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day unless such next
succeeding Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day; (ii) any
Interest Period which begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period;
(iii) interest shall accrue from and including the first day of the
Interest Period to but excluding the last day of such Interest Period, and
(iv) no Interest Period applicable to any LIBOR Rate Advance may end after
the maturity date of the Note.
"Interest Period Election": The number of months in any Interest Period as
------------------------
selected by the Borrower or as otherwise determined in accordance with this
Exhibit A.
"LIBOR Rate": The offered rate for deposits in United States Dollars for
----------
delivery of such deposits on the first day of an Interest Period, for the
number of days comprised therein, which appears on the Reuters Screen LIBO
Page as of 11:00 a.m., London time, on the day that is two Business Days
preceding the first day of the Interest Period. If at least two rates
appear on the Reuters Screen LIBO page, the rate for such
11
<PAGE>
Interest Period shall be the arithmetic mean of such rates (rounded to the
nearest 1/100th). If fewer than two rates appear, the rate for such
Interest Period shall be determined by the Bank based on rates offered to
banks for United States Dollar deposits in the interbank Eurodollar market.
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO Page on that service for the purpose of displaying London
interbank offered rates of major banks for United States Dollar deposits).
"LIBOR Rate Advance": Any Advance as to which the Borrower elects an
------------------
interest rate per annum based upon the LIBOR Rate.
"Reserve Adjusted LIBOR Rate": With respect to each LIBOR Rate Advance, the
---------------------------
rate per annum (rounded to the nearest 1/100th) equal to the rate obtained
by dividing (a) the LIBOR Rate for the first day of the applicable Interest
Period, by (b) a percentage equal to 1.00 minus the Eurocurrency Reserve
Rate. The Reserve Adjusted LIBOR Rate as to any LIBOR Rate Advance then
outstanding shall be adjusted automatically on and after the date as to
which any change in the reserve requirement percentage referred to above is
published by the Board of Governors of the Federal Reserve System (or any
successor thereto), regardless of whether such change falls within an
existing Interest Period.
"Reference Rate": The per annum interest rate publicly announced from time
--------------
to time as such by or on behalf of the Bank, which is not necessarily the
lowest rate charged by the Bank; and the Bank may lend to its customers at
per annum rates that are at, above or below the Reference Rate. The
Reference Rate shall be adjusted automatically from time to time
simultaneously with any change in the Reference Rate.
"Reference Rate Advance": Any Advance as to which the interest rate per
----------------------
annum is based upon the Reference Rate.
2. Interest Period Elections. The Borrower shall make Interest Period Elections,
-------------------------
from time to time, and the Borrower shall be entitled to select a one-month
Interest Period reset daily or a fixed Interest Period of 1, 2, 3 or 6 months in
duration.
3. Determination of Rates. When the Borrower has chosen to make periodic
----------------------
Interest Period Elections, then not later than 12:00 noon (Denver time) two
Business Days prior to the Business Day on which any LIBOR Rate Advance is made
or is to be made or which is the first day of the selected Interest Period
therefor, the Borrower shall give notice to the Bank specifying the duration of
the fixed Interest Period as specified above. If, upon the expiration of any
fixed Interest Period, the Borrower has failed to elect the duration of a new
fixed Interest Period, the Advance shall automatically bear interest on the
one-month Interest Period reset daily rate basis. The Bank's records shall be
rebuttably presumptive evidence of the dates for each Interest Period and the
interest rate for each such period as well as the dates and amounts of payments
of principal and interest on the Note.
4. Interest Rate Not Ascertainable/Prepayments. The following provisions apply
-------------------------------------------
to all Advances:
(a) If it becomes unlawful for the Bank to make any LIBOR Rate Advance,
or the Bank determines (which will be binding on the Borrower) that: (i)
adequate and reasonable means do not exist for determining the interest
rate applicable for any LIBOR Rate Advance; or (ii) the Bank cannot obtain
funds in the amount or for the maturity in the market relating to any LIBOR
Rate Advance, the Bank will not be required to make or continue to maintain
any such LIBOR Rate Advance and all such LIBOR Rate Advances then existing
shall automatically convert to Reference Rate Advances bearing interest at
the Reference Rate, with the Borrower being required to pay the Make-Whole
Fee described in sub-section (b) (ii) below upon such conversion. In
addition, if there is a change in law or regulation as a result of which
the Bank determines that the interest rate applicable to any LIBOR Rate
Advance no longer represents the effective cost to the Bank for funding
such LIBOR Rate Advance, the Borrower will pay to the Bank an amount
sufficient to cause the Bank to receive interest at the rate that reflects
the increase in effective rate caused by the change.
12
<PAGE>
(b) (i) The Borrower understands that upon the making by the Bank of any
LIBOR Rate Advance, the Bank intends to enter into funding arrangements
with third parties (based in whole or in part on such LIBOR Rate Advance)
on terms and conditions which could result in losses to the Bank if the
LIBOR Rate Advance is not made or does not remain outstanding for the
entire Interest Period. Therefore, if either (A) after the Borrower
requests an LIBOR Rate Advance, the LIBOR Rate Advance is not made on the
first day of the specified Interest Period for any reason (including, but
not limited to, the failure of the Borrower to comply with one or more of
the conditions precedent to any Advance) other than a wrongful failure by
the Bank to make the LIBOR Rate Advance, or (B) such LIBOR Rate Advance is
prepaid in whole or in part prior to the last day of the applicable
Interest Period, whether as a result of acceleration of or demand under the
Note, voluntary prepayment, mandatory prepayment, termination of this
arrangement, operation of law or otherwise (the full amount of the Advance
requested in the case of clause (i)(A) above and the full amount of the
Advance prepaid in the case of clause (i)(B) above (each being referred to
as an "Affected Amount")), the Borrower agrees to pay on demand to the
Bank, as liquidated damages and not as a penalty and in addition to any
other payments required hereunder, the Make-Whole Fee applicable to the
Affected Amount.
(ii) The Make-Whole Fee applicable to each Affected Amount shall be
the sum of (A) the present value of the excess, if any, of (1) the amount
of interest that would have accrued on the Affected Amount during the
remaining portion of the applicable Interest Period, calculated at the
interest rate that otherwise would have been applicable to the Affected
Amount, over (2) the amount of interest that would accrue on the Affected
Amount during the remaining portion of the applicable Interest Period,
calculated using the Reserve Adjusted LIBOR Rate that would be applicable
to a loan in the Affected Amount having a maturity corresponding with the
last day of the applicable Interest Period, plus (B) all out-of-pocket
costs and expenses (including, without limitation, any interest paid by the
Bank to lenders of funds borrowed by it to make or carry any LIBOR Rate
Advance and, to the extent not capable of being determined in accordance
with clause (A)(2) above, any loss sustained by the Bank in connection with
the re-deployment of funds with respect to any such LIBOR Rate Advance)
incurred by the Bank. Present value, as used above, will be determined in
accordance with standard financial practice, using the Reserve Adjusted
LIBOR Rate applicable under clause (A)(2) above as the discount factor.
(iii) The Make-Whole Fee will be determined (A) in the case of
situations falling within clause (i)(A) above, on the first day of the
Interest Period that would have applied to the Affected Amount, and (B) in
the case of situations falling within clause (i)(B) above, the date on
which the Affected Amount is prepaid.
5. Bank's Funding. The Bank shall be entitled to fund and maintain its funding
--------------
of all or any part of the Advances in any manner it elects; it being understood,
however, that for purposes of this Exhibit A, all determinations hereunder shall
be made as if the Bank had actually funded and maintained each LIBOR Rate
Advance during the Interest Period for such Advance through the purchase of
deposits having a term corresponding to such Interest Period and bearing an
interest rate equal to the Reserve Adjusted LIBOR Rate for such Interest Period.
13
<PAGE>
EXHIBIT B
CERTIFICATE OF COMPLIANCE
of
KOALA CORPORATION
"Borrower"
As Of The Period Ending ___________________________
This Certificate is submitted to U.S. Bank National Association ("Bank") in
connection with the Revolving Credit Agreement dated as of December 16, 1998, as
it may be amended from time to time (the "Agreement") between Bank and Borrower.
Capitalized terms used herein are defined in the Agreement.
The undersigned hereby certifies to Bank that the undersigned is familiar with
the following financial information which has been taken from Borrower's books
and records which are complete and accurate and that the following calculations
of the financial covenants specified in the Agreement are true and correct:
FINANCIAL COVENANT COMPLIANCE
-----------------------------
as of the Quarter Period ending _______________________
<TABLE>
<CAPTION>
In compliance
-------------
Covenant Required Actual Yes/No
-------- -------- ------ ------
<S> <C> <C> <C>
Debt/Annualized Cash Flow Less than or equal to 3.50:1 thru 9/30/99 ________________ __________
3.00:1 thereafter
Annualized Cash Flow/Interest Expense Greater than or equal to 4.00:1 ________________ __________
</TABLE>
The undersigned further certifies that (a) Borrower is in compliance with all of
the covenants contained in the Agreement, and (b) there has been no Event of
Default under the Agreement which has not been cured or waived, and no Potential
Default has occurred.
By:__________________________
Title:_______________________
Date:________________________
14
