Credit Agreement - Bank of Hawaii Corp. and Cheap Tickets Inc.
CREDIT AGREEMENT
Intending to be legally bound by this Credit Agreement ("Agreement"), dated
November 26, 1997, BANK OF HAWAII, a Hawaii corporation, whose address is 130
Merchant Street, Honolulu, Hawaii 96813 (the "Bank") and CHEAP TICKETS, INC., a
Hawaii corporation, whose mailing address is 1440 Kapioiani Boulevard, Suite
800, Honolulu, Hawaii 96814 (the "Borrower") agree as follows:
I. REVOLVING CREDIT AND TERM LOAN OPTION
1.1 In General. Subject to the terms of this Agreement, the Bank hereby
establishes a credit facility in favor of the Borrower (the "Credit Facility")
under which the Bank will extend credit to the Borrower, from time to time until
December 5, 1999 (the "Credit Termination Date"), by way of (i) Loans pursuant
to Section 1.2 hereof and (ii) issuance of standby letters of credit for the
account of the Borrower pursuant to Section 1.2 hereof. Each extension of
credit shall be in such amount as the Borrower may request, but the aggregate
principal amount of all extensions of credit at any one time outstanding shall
not exceed $3,000,000.00 (the "Commitment"). The Borrower may obtain credit,
repay without penalty and obtain further credit as provided for under this
Agreement, from the date hereof until the Credit Termination Date, in either the
full amount of the Commitment or any lesser sum. Upon the Borrower's execution
of this Agreement, the Borrower's existing credit facilities under the Revolving
Line of Credit Agreement and Term Loan Agreement, both dated April 8, 1997,
shall be terminated.
1.2 Drawings. The Borrower may draw on the Commitment in the following
manner(s):
(A) By obtaining a cash advance (each such cash advance herein
referred to as a "Loan").
(B) By obtaining the issuance of standby letters of credit.
1.3 Purpose. The proceeds of the Loans, other extensions of credit under
this Credit Facility and the Term Loan shall be used exclusively for short-term
working capital and to finance various fixed asset acquisitions and investments.
1.4 Security. The Credit Facility, Loans and Term Loan shall be secured
by liens on or security interests in the following collateral ("Collateral"),
which liens or security interests shall be of first priority unless otherwise
approved by the Bank: all of Borrower's right, title and interest in and to
Borrower's Bank of Hawaii deposit accounts, accounts receivable, inventory,
furniture, fixtures and equipment, general intangibles, trade names, licenses
and proceeds of the foregoing.
1.5 Guarantors. Repayment of all Loans, the Term Loan and other
extensions of credit under this Agreement shall be jointly, severally,
unconditionally and absolutely guaranteed by the following persons and/or
entities: None.
1.6 Requests for Loans or Credit. Subject to the provisions of Articles
II and III, Section 7.2 and other terms and conditions of this Agreement, the
Borrower shall have the option on any Business Day to obtain new Loans by
delivering to the Bank a written and completed "Notice of Loan/Conversion" in
the form of Exhibit A attached hereto. A Notice of Loan/Conversion must arrive
no later than noon (Hawaii Standard Time) on the date either one or three
Business Days prior to the proposed disbursement date in the case of a Base Rate
Loan or a LIBOR Loan, respectively.
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If the Borrower fails to timely notify the Bank of the Borrower's selection
of a new Interest Period prior to the expiration of any current Interest Period,
such Loan will automatically be converted to a Base Rate Loan upon expiration of
the current Interest Period.
Unless otherwise directed in writing by the Borrower, all proceeds of Loans
shall be credited to the Borrower's Deposit Account No. 01-042327, maintained
with the Bank.
1.7 Limitation on Loans. LIBOR Loan amounts shall be in minimums of
$100,000 and in multiples of $50,000, with at most six (6) LIBOR Loans
outstanding at any one time.
1.8 Conversions of Base Rate Loans to LIBOR Loans. Subject to the
provisions of Article II and other terms and conditions in this Agreement, the
Borrower shall have the option on any Business Day (the "Conversion Date") to
convert all of the outstanding principal amount of one or more Base Rate Loans
to a LIBOR Loan by giving the Bank a Notice of Loan/Conversion at the Payment
Office no later than noon (Hawaii Standard Time) on the date three (3) Business
Days prior to the proposed Conversion Date; provided that if an Event of Default
is then in existence or if the Pricing Ratio is greater than 3.00, the Borrower
may not convert a Base Rate Loan to a LIBOR Loan. Although no repayment shall
actually be required upon any conversion, the proceeds thereof shall, for
bookkeeping purposes, be deemed to be applied directly to repay the outstanding
principal amount of the Base Rate Loans being converted.
1.9 Interest; Repayment of Loans and Credit.
(A) Interest Rate. The Borrower agrees to pay interest on the
outstanding principal balance of the Loans pursuant to the following interest
rate options that the Borrower may select in accordance with the provisions of
this Agreement:
(1) a floating rate equal to the Base Rate in effect from time to
time; or
(2) LIBOR plus the Applicable Margin determined as follows:
The Applicable Margin shall be determined quarterly in advance and shall
apply to each LIBOR Loan, based on the most recent quarterly financial statement
available, on the basis of the following pricing grid:
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If the Pricing Ratio is Applicable Margin
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greater than 2.25%
or equal to
2.00 but is not
more than 3.00
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greater than 2.00%
or equal to
1.00 but is not
more than 1.99
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less than or equal to 0.99 1.25%
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The Borrower may not select the LIBOR interest rate option if the Pricing
Ratio is greater than 3.00 or if an Event of Default is in existence.
The Base Rate will increase or decrease during the term of this Agreement
if there is an increase or decrease in such rate. If the Base Rate or the LIBOR
Rate is no longer available, the Bank will choose a new rate that is based on
comparable information.
Interest hereunder shall be computed, but not compounded, daily on the
basis of the rate of interest then in effect. A change in the Base Rate shall
take effect on the date upon which a change in the Base Rate is announced and
made effective by the Bank, with or without notice to the Borrower. With
respect to any LIBOR Loan, interest will be calculated at a fixed rate for the
applicable Interest Period. Interest hereunder shall be computed on the basis of
the actual number of days elapsed between payments and a 365-day year (or a 366-
day year in leap years) in respect of any Base Rate Loan or a 360-day year in
respect of any LIBOR Loan.
In no event shall the Borrower be obligated to pay any amount under this
Agreement that exceeds the maximum amount allowable by law. If any sum is
collected in excess of the applicable maximum amount allowable by law, the
excess collected shall, at the Bank's discretion, be applied to reduce the
principal balance of the Loans, the Term Loan or returned to the Borrower.
(B) Repayment of Loans.
(1) Payment Schedule.
(a) The Borrower agrees to make monthly payments to the Bank
of all accrued interest on the outstanding principal balance of each Base Rate
Loan on the first day of each month until all amounts owing under the Credit
Facility and the Term Loan are paid in full.
(b) The Borrower agrees to pay interest on the unpaid
principal amount of each LIBOR Loan on the earliest of (i) the last day of the
Interest Period, (ii) the last day of each three month interval occurring during
the Interest Period, or (iii) prepayment of the LIBOR Loan.
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(c) All principal and accrued interest then outstanding
under the Credit Facility shall be due and payable on the Credit Termination
Date, provided, however, that subject to the conditions set forth in Subsection
1.9(B)(1)(d) below, the Borrower shall have the option (the "Term Loan Option")
to convert the aggregate outstanding principal balance of the Loans on the
Credit Termination Date into a term loan (the "Term Loan") payable as follows:
(i) Interest on the principal amount shall be payable
as set forth in Subsections 1.9(B)(1)(a) and 1.9(B)(1)(b).
(ii) Principal payments shall be payable quarterly
beginning ninety (90) days following the Credit Termination Date. The amount of
the principal payments shall be determined on the Credit Termination Date and
shall be calculated as the amount sufficient to fully amortize the aggregate
outstanding principal balance of the Term Loan on the Credit Termination Date in
equal principal payments over a period of three years.
(iii) From time to time the Borrower may convert all or
a portion of the outstanding principal balance under the Term Loan then subject
to the Base Rate to a LIBOR Loan, as provided and subject to the terms and
conditions of Section 1.8, and may continue LIBOR Loans at the end of the
Interest Period relating thereto.
(d) The Borrower's Term Loan Option is expressly conditioned
upon the following:
(i) no Event of Default shall have occurred and be
continuing;
(ii) no earlier than thirty (30) days and no later than
ten (10) days prior to the Credit Termination Date, the Borrower shall provide
to the Bank written notice of the Borrower's election to exercise the Term Loan
Option. Such notice shall set forth the Borrower's interest rate selection(s)
pursuant to Section 1.9(A) and shall include a pro forma compliance certificate,
signed by the Borrower's chief financial officer, in the form attached hereto as
Schedule 1.9 and made a part hereof. Such pro forma compliance certificate shall
be calculated using the financial results from the most recent compliance
certificate submitted to the Bank and shall certify to the Bank that the
Borrower's financial condition at that time meets the following standards, in
each case determined in accordance with GAAP:
Pro Forma Current Ratio of not less than 1.50 to one;
Tangible Net Worth of not less than the amount equal to: $4,800,000, plus
100% of net proceeds of all Equity Offerings after the date hereof, plus 50% of
Borrower's consolidated net earnings, excluding losses, for each quarter
commencing January 1, 1997, to and including the fiscal quarter immediately
preceding the date of determination;
Pro Forma Debt Service Coverage Ratio of not less than 1.50 to one; and
Pro Forma Funded Debt to Cash Flow Ratio of not more than 3.00 to one.
If no interest rate option is set forth in the notice of exercise, the Base
Rate shall apply; and
(iii) satisfaction of the conditions for subsequent
extensions of credit as set forth in Section 3.2.
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(e) The Borrower agrees to pay in full on or before the
Maturity Date all principal and accrued interest then outstanding under the
Credit Facility or the Term Loan, as applicable.
(2) Currency, Place and Dates of Payments. Payments shall be made
in United States money at the Bank's address stated above, or at such other
place as the Bank shall have designated by written notice to the Borrower. Any
payment due on a day that is not a Business Day shall be made on the next
succeeding Business Day and the extension of time shall be included in the
computation of interest.
(3) Evidence of Making and Repayment of Loans. The Bank's records
evidencing the date of disbursement and principal amount of each Loan and the
Term Loan and the amounts of all repayments of principal and payments of
interest on each Loan and the Term Loan shall constitute prima facie evidence of
the making and repayment of such Loans and the Term Loan and of the payment of
such interest. However, the Bank's making of erroneous notations in its records
shall not affect the Borrower's obligation to repay the outstanding balance of
principal under a Loan or the Term Loan, and accrued interest thereon, as
provided in this Agreement.
(4) Late Charges. If any payment under this Agreement is not made
within five (5) days after notice that payment is due, the Borrower will pay to
the Bank a late charge in respect of that payment, in the amount of 5% of the
overdue payment.
(5) Application of Payments. Payments under this Agreement may be
applied by the Bank to the indebtedness evidenced by this Agreement in any
manner the Bank deems appropriate; provided, however, that if no Event of
Default exists, payments applied to the principal amount of the Loans or the
Term Loan outstanding shall be applied first to Base Rate Loans and next to
LIBOR Loans to minimize funding losses payable pursuant to Section 2.1, as
determined by the Bank. The priority of application elected by the Bank on any
one occasion shall not determine any such election in the future.
(C) Repayment of Drawings on Letter of Credit. If the Bank pays a
draft pursuant to a letter of credit issued under the Credit Facility, the
Borrower will automatically repay such draft by way of a Loan made under the
Credit Facility.
1.10 Evidence of Indebtedness; Loan Documents. The Credit Facility and
the Term Loan are or are to be evidenced and/or secured by this Agreement, a
Master Note in the form attached hereto as Exhibit B and all such other
documents as the Bank may reasonably require from time to time to effectuate the
intent of this Agreement, together with all renewals, extensions and
modifications thereto (collectively the "Loan Documents").
1.11 The Borrower's Obligations. The Borrower's obligations to pay,
observe and perform all indebtedness, liabilities, covenants and other
obligations on the part of the Borrower to be paid, observed and performed under
this Agreement and the remainder of the Loan Documents are herein collectively
called the "Obligations".
1.12 Fees. In respect to the Credit Facility and the Term Loan, the
Borrower shall pay:
(A) a facility fee of $7,500.00, of which the Bank acknowledges
receipt of payment in full;
(B) an annual administration fee of $1,200 during the term of the
revolving loan, payable in arrears on the first anniversary of the Closing Date
and on the Credit Termination Date;
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(C) the Bank's standard issuance and documentation fees for letters of
credit;
(D) in quarterly installments in arrears, a 1.25% per annum fee on the
amount of each outstanding standby letter of credit issued pursuant to this
Agreement; and
(E) if the Borrower exercises the Term Loan Option, a fee equal to the
greater of (i) $2,500 or (ii) 0.25% of the indebtedness under the Term Loan.
Such fee shall be paid by the Borrower upon the Bank's receipt and acceptance of
the Borrower's request to exercise the Term Loan Option pursuant to Subsection
1.9(B)(1)(d).
II. FUNDING LOSS AND YIELD PROTECTION PROVISIONS
2.1 Funding Loss Indemnification. If the Borrower shall (a) pay or
convert any LIBOR Loan on any day other than the last day of the applicable
Interest Period (whether on account of a scheduled payment, an optional
prepayment or conversion, a mandatory prepayment or conversion, a payment upon
acceleration or otherwise, but excluding any such payment or conversion made by
the Borrower pursuant to Section 2.4; or (b) fail to borrow any LIBOR Loan after
giving due notice thereof to the Bank; or (c) fail to convert any Base Rate Loan
into a LIBOR Loan after giving due notice thereof to the Bank, the Borrower
shall reimburse the Bank and hold the Bank harmless for all costs, net losses or
administrative overhead incurred as a result of such repayment, prepayment or
failure, except those resulting from the willful misconduct or gross negligence
of the Bank. The Bank may use any reasonable method in calculating such actual
loss, costs and overhead under this Section, which calculation shall be binding
and conclusive on the Borrower absent manifest error.
2.2 Lack of Availability or Profitability of Eurodollar Deposits. With
respect to any LIBOR Loan or conversion requested, if the Bank shall have
determined (a) that dollar deposits in the principal amount of the respective
LIBOR Loan are not generally available in the interbank market; (b) that
reasonable means do not exist for ascertaining LIBOR; or (c) that the rates at
which such dollar deposits are being offered will not adequately and fairly
reflect the Bank's cost of making or maintaining such LIBOR Loan, the Bank
shall, as soon as practicable thereafter, give written or telecopy notice of
such determination to the Borrower. In that event, such Notice of
Loan/Conversion shall be of no force and effect. The Borrower may submit a new
Notice of Loan/Conversion electing a different option. Each determination by the
Bank hereunder shall be conclusive absent manifest error.
2.3 Change in Legality; Additional Costs to the Bank. If after the date
of this Agreement any change in applicable law or regulation or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law) shall change the basis of taxation of payments to the Bank or the
principal or interest on any Loans under this Credit Facility or the Term Loan;
impose, modify or hold applicable any fees, reserve requirements, special
deposits or any costs to the Bank in respect of any Loans; or cause a reduction
in the amount of any sum received or receivable by the Bank hereunder; the
Borrower will promptly pay to the Bank such additional amounts as will
compensate the Bank on an after-tax basis for such cost or reduction incurred.
The Bank may use any reasonable method in calculating its additional costs under
this Section, which calculation shall be conclusive absent manifest error. The
Bank shall have no right to recover any compensation pursuant to this Section
2.3 with respect to amounts incurred or accrued more than 180 days prior to the
giving of notice to the Borrower by the Bank thereof.
2.4 Illegality. Notwithstanding anything to the contrary contained in
this Agreement, if any change in any present or future applicable law, rule or
regulation, or in the interpretation or administration thereof by any
governmental authority charged with the administration thereof, or compliance
with any request, guideline, policy or directive (whether or not having the
force of
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law) of any such governmental authority; shall make it unlawful or impracticable
in the sole judgment of the Bank to make, fund or maintain any LIBOR Loan, or
any part of its commitment hereunder, then by notice to the Borrower the
obligation of the Bank to permit interest to be calculated on the basis of LIBOR
or to convert any other types of Loans to LIBOR Loans shall forthwith be
suspended until such time as the Bank shall notify the Borrower that the
circumstances causing such suspension no longer exist. Interest on any such
LIBOR Loans shall automatically convert to an interest rate calculated the basis
of the Base Rate in accordance with the terms governing Base Rate Loans.
2.5 Capital Requirements. If the Bank determines that the introduction of
or change to any law, regulation or any guideline or request from any central
bank or other governmental authority (whether or not having the force of law)
will result in an increase in the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank, and that such
increase is based upon the existence of the Bank's Commitment hereunder and
other commitments of this type, then upon demand the Borrower shall pay the Bank
compensation. A certificate as to the amount of compensation, submitted to the
Borrower by the Bank, shall be conclusive and binding for all purposes absent
manifest error. The Bank shall have no right to recover any compensation
pursuant to this Section 2.5 with respect to amounts incurred or accrued more
than 180 days prior to the giving of notice to the Borrower by the Bank thereof.
III. CONDITIONS PRECEDENT
3.1 First Loan or Other Extension of Credit. The obligation of the Bank
to make the first Loan or other extension of credit under this Agreement is
subject to the satisfaction of all of the following conditions on or before
December 1, 1997:
(A) Documents Required for Closing. The Bank shall have received, in
each case in form and substance satisfactory to the Bank, such fully executed
originals or certified copies as the Bank may have requested of each of the
following, in each case as amended through the Closing Date:
(1) Loan Documents. All of the Loan Documents.
(2) Consents. Evidence that all parties to the Loan Documents
(except the Bank) have obtained all necessary and appropriate authority,
approvals and consents to execute and deliver the Loan Documents.
(3) Organizational Documents. If any party to the Loan Documents
(except the Bank) is a corporation, partnership, trust, association or other
recognized legal entity other than a natural person (a "Legal Entity"), all
instruments pursuant to which such Legal Entity and each Legal Entity comprising
such Legal Entity was organized and by which its internal affairs are governed
and, if requested by the Bank, a Certificate of Good Standing, evidencing such
Legal Entity's good standing and authority to conduct its business in the
jurisdiction(s) in which it conducts its business.
(4) Opinion(s) of Counsel. An opinion or opinions of counsel for
the Borrower, addressed to the Bank, covering to the Bank's satisfaction (i) the
due authorization, execution and delivery of the Loan Documents, (ii) the
existence of any litigation affecting the Borrower or the Collateral, (iii) any
required consents or approvals, (iv) no conflicts with any agreement or laws,
and (v) such other matters as the Bank may require.
(5) Evidence of Priority. Evidence acceptable to the Bank that
the Bank's liens on and/or security interests in the Collateral have the
priority required by the Bank.
(6) Insurance. Evidence of the Borrower's compliance with the
provisions stated below in Section 5.6.
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(B) Certain Other Events. On the Closing Date:
(1) The Borrower shall have paid to the Bank all fees and other
charges required to have been paid in accordance with the terms of the Loan
Documents, including, without limitation, any fees then payable pursuant to
Section 1.12 above.
(2) The representations and warranties contained in Section IV
shall be true.
(3) To event shall have occurred and be continuing that (i)
constitutes an Event of Default, or (ii) with the giving of notice or passage of
time, or both, would constitute an Event of Default.
(4) No material adverse change shall have occurred in the
financial condition of the Borrower since the date of the most recent of the
Borrower's financial statements submitted to the Bank.
(5) No material adverse change shall have occurred in the
physical condition of the Borrower's assets since the date of this Agreement.
(6) All legal matters incidental to the Closing shall be
satisfactory to legal counsel for the Bank.
3.2 Subsequent Loans or Extensions of Credit. The obligation of the Bank
to make the second or any subsequent Loan or other extension of credit is
subject to (i) the prior satisfaction of all conditions stated above in Section
3.1(A), and (ii) the satisfaction as of the date of such subsequent Loan or
other extension of credit of the conditions stated above in Sections 3.1(B) of
this Agreement, and (iii) the delivery to the Bank of such additional Loan
Documents as may have been reasonably requested by the Bank with respect to such
subsequent Loan or other extension of credit .
IV. REPRESENTATIONS AND WARRANTIES
To induce the Bank to make the Commitment available to the Borrower, the
Borrower makes the following representations and warranties to the Bank, which
representations and warranties shall survive the execution of this Agreement and
continue so long as the Borrower is indebted to the Bank under the Loan
Documents, and until payment in full of the Credit Facility and the Term Loan:
4.1 Organization. The Borrower, if it is a Legal Entity, as well as each
Legal Entity comprising the Borrower, is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, and has
the lawful power to own its properties and to engage in the business it
conducts.
4.2 No Breach. The execution and performance of the Loan Documents will
not immediately, or with the passage of time or the giving of notice, or both:
(A) Violate any law or result in a default under any contract,
agreement, or instrument to which the Borrower is a party or by which the
Borrower or its property is bound; or
(B) Result in the creation or imposition of any security interest in,
or lien or encumbrance on, any of the assets of the Borrower, except in favor of
the Bank.
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4.3 Authorization. The Borrower has the power and authority to incur and
perform the Obligations, and, if the Borrower is a Legal Entity, the Borrower
has taken all corporate, partnership, or other action necessary to authorize the
execution and delivery of the Loan Documents and its incurring of the
Obligations.
4.4 Validity. This Agreement is, and the remainder of the Loan Documents
when delivered will be, legal, valid, binding, and enforceable in accordance
with their respective terms, except as enforcement may be limited by insolvency,
liquidation, reorganization, moratorium, or other laws affecting the enforcement
of creditors' rights in general.
4.5 Financial Statements. All financial statements heretofore given by
the Borrower to the Bank in connection with this Agreement, including any
schedules and notes pertaining thereto, were prepared in accordance with
generally accepted accounting principles, consistently applied ("GAAP"), and
fully and fairly present the financial condition of the Borrower at the dates
thereof and the results of operations for the periods covered thereby, and as of
the date of this Agreement there have been no material adverse changes in the
financial condition or business of the Borrower from the date of the most recent
financial statements given to the Bank.
4.6 Taxes. Except as otherwise permitted by this Agreement, the Borrower
has filed all tax returns it was required by law to have filed prior to the date
of this Agreement, has paid or caused to be paid all taxes, assessments, and
other governmental charges that were due and payable prior to the date of this
Agreement, except those contested in good faith by appropriate action diligently
pursued and for which Borrower has set aside on its books (segregated to the
extent required by sound accounting principles) adequate reserves with respect
thereto, and has made adequate provision for the payment of such taxes,
assessments, or other charges accruing but not yet payable, and the Borrower has
no knowledge of any deficiency or additional assessment in a materially
important amount in connection with any taxes, assessments, or charges not
provided for on its books.
4.7 Compliance With Law. Except to the extent that the failure to comply
would not materially interfere with the conduct of the business of the Borrower,
the Borrower has complied with all applicable laws in respect of: (1)
restrictions, specifications, or other requirements pertaining to products that
the Borrower sells or to the services it performs; (2) the conduct of its
business; and (3) the use, maintenance, and operation of its properties.
4.8 Statements and Omissions. No representation or warranty by the
Borrower contained in this Agreement or in any certificate or other document
furnished by the Borrower pursuant to this Agreement contains any untrue
statement of material fact or omits to state a material fact necessary to make
such representation or warranty not misleading in light of the circumstances
under which it was made.
4.9 No Pending Actions. There is no pending or threatened litigation
affecting the Borrower or any Collateral that is reasonably expected to have a
material adverse effect on the business of the Borrower or the Collateral.
4.10 Equity Offerings. All Equity Offerings were and will continue to be
conducted in full compliance in all material respects with all applicable
federal and state securities laws, rules and regulations.
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V. AFFIRMATIVE COVENANTS
For so long as the Commitment or any of the Obligations remains
outstanding, the Borrower will, unless otherwise permitted by the Bank in
writing:
5.1 Payments. Punctually pay when due all sums which may be due under the
Loan Documents.
5.2 Accounting Records. Maintain accurate and proper accounting records
and books in accordance with GAAP, and provide the Bank with access to such
books and accounting records at the Bank's request during the Bank's normal
business hours.
5.3 Financial Reporting. Furnish the Bank with financial reports,
certified as true and correct by the Borrower's chief financial officer, in
reasonable detail and form approved by the Bank, as follows:
(A) Not later than 120 days after and as of the end of each fiscal
year a financial statement of the Borrower, audited by a firm of independent
certified public accountants acceptable to the Bank, which financial statements
shall include a balance sheet and statements of income and cash flow for such
year, all prepared in accordance with GAAP;
(B) Not later than 60 days after and as of the end of each quarter a
financial statement prepared by the Borrower and satisfactory to the Bank,
including a balance sheet and income statement;
(C) The financial statements required pursuant to clauses (a) and (b)
shall be accompanied by a compliance certificate signed by the Borrower's chief
financial officer in the form attached as Schedule 5.3 certifying (i) the
financial ratios and other requirements referred to in Section 5.10, (ii) the
representations and warranties set forth in Article IV as being true and correct
on and as of such date except as otherwise disclosed, and (iii) that no Event of
Default has occurred or is continuing; and
(D) From time to time such other information as the Bank may
reasonably request.
5.4 Existence. If the Borrower is a Legal Entity, preserve and maintain
the Borrower's legal existence and timely file all necessary and appropriate
documents and exhibits and pay all appropriate fees and charges in connection
therewith.
5.5 Observance of Laws. Conduct the Borrower's business activities in an
orderly, efficient and regular manner and comply with all requirements of all
applicable state, federal and local laws, rules and regulations.
5.6 Insurance. Maintain and keep in force insurance of the types and in
such amounts as are satisfactory to the Bank, and in no event less than amounts
customarily carried in lines of business similar to the Borrower's, including
but not limited to, property and casualty, commercial general liability and
workers' compensation insurance, and provide the Bank with a schedule or
schedules or certificates of insurance from time to time setting forth all
insurance then in effect along with copies of all such policies.
If real or personal properties are given to secure the Obligations or any
guaranty given in support of the Obligations, such properties shall be covered
by property and casualty insurance acceptable to the Bank, and such policies
shall contain a mortgagee's clause and/or lender's loss payable endorsements and
shall require 30 days' prior written notice to the Bank of any cancellation or
material change in coverage.
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If an "insurance binder" is issued as temporary evidence of insurance
coverage, the Borrower must provide to the Bank the original insurance policy at
the earlier of (i) the expiration of the binder, or (ii) thirty (30) days from
the date the insurance binder is issued.
5.7 Facilities. Keep all of the Borrower's property and business premises
in a good state of repair and condition, make all necessary repairs, renewals
and replacements thereto from time to time so that such property and business
premises shall be fully and efficiently preserved and maintained, keep such
property and business premises free and clear of all liens, charges or
encumbrances except those consented to by the Bank in writing and permit the
Bank's authorized representatives to make reasonable inspections of the
Borrower's property and business premises.
5.8 Taxes and Other Liabilities. Pay and discharge when due all of the
Borrower's indebtedness, obligations, assessments and taxes, except such as the
Borrower may in good faith contest or as to which a bona fide dispute may exist,
provided that the Borrower has provided evidence satisfactory to the Bank
regarding the Borrower's ability to pay the disputed items in the event they are
determined to be justly due.
5.9 Notice to the Bank. Promptly give notice to the Bank of (a) the
occurrence of any Event of Default, (b) any change in the name or organizational
structure of the Borrower, (c) any uninsured loss through fire, theft, liability
or property damage exceeding $100,000.00, (d) any pending or threatened
litigation affecting the Borrower or any of the Collateral involving an amount
exceeding $100,000.00, (e) any event which is reasonably expected to have a
material adverse effect on the ability of the Borrower to continue its business
operations in the ordinary course, (f) any change in the Borrower's principal
place of business, and (g) any change in the location of any of the Collateral.
5.10 Financial Condition. Maintain the Borrower's financial condition
according to the following standards, in each such case determined in accordance
with GAAP as of the end of each fiscal quarter:
(A) Current Ratio of not less than 1.15 to one, and increasing to 1.50
to one commencing with the Borrower's financial reporting period ending
September 30, 1997;
(B) Tangible Net Worth of not less than the amount equal to:
$4,800,000, plus 100% of net proceeds of all Equity Offerings after the date
hereof, plus 50% of Borrower's consolidated net earnings, excluding losses, for
each quarter commencing January 1, 1997, to and including the fiscal quarter
immediately preceding the date of determination;
(C) Debt Service Coverage Ratio of not less than 1.25 to one
commencing with the financial reporting period ending March 31, 1998, and
increasing to 1.50 to one commencing with the financial reporting period ending
December 31, 1998; and
(D) Funded Debt to Cash Flow Ratio of not more than 3.00 to one.
5.11 Hazardous Materials. Abide at all times by all applicable hazardous
material laws, rules and regulations and immediately notify the Bank of any
claim or threatened claim affecting any property owned, leased or occupied by
the Borrower.
<PAGE>
VI. NEGATIVE COVENANTS
For so long as the Commitment or any Obligation remains outstanding, the
Borrower will not, without the prior written consent of the Bank:
6.1 Use of Funds. Use any of the proceeds of the Commitment for any
purpose except as set forth in Section 1.3 of this Agreement.
6.2 Merger, Consolidation, Pledge of Stock, Sale of Assets. Merge into or
consolidate with any Legal Entity, acquire or establish any operating
subsidiaries or acquire all or substantially all of the capital stock or assets
of any other legal entity; or sell, assign, transfer, pledge, mortgage, or
otherwise dispose of all or substantially all of the major assets of the
Borrower, except in the ordinary course of its business.
6.3 Business. Materially change the character of the Borrower's current
business, or engage in any type of business other than the Borrower's current
business.
VII. THE BANK'S RIGHTS UPON DEFAULT
7.1 Events of Default. Each of the following events is an "Event of
Default" under this Agreement:
(A) The Borrower's failure to pay within three (3) Business Days after
it is due any sum payable to the Bank under the Loan Documents or under any
other agreement or note between the Bank and the Borrower, whether now existing
or hereafter executed;
(B) The dissolution or insolvency of the Borrower;
(C) The commencement of any proceeding or the taking of any act by or
against the Borrower for any relief under bankruptcy, insolvency or similar laws
for the protection of debtors, or for the appointment of a receiver of the
business or assets of the Borrower or the Borrower's inability (or admission of
inability) to pay its debts as they become due; provided that any such
proceeding or action for relief filed or instigated without the consent of the
Borrower has not been dismissed or undischarged within sixty (60) days;
(D) Any governmental authority having jurisdiction over the Borrower
revokes any authorization or permit materially affecting the Borrower's ability
to do business;
(E) The Borrower defaults in the payment of any indebtedness for
borrowed money owed by the Borrower in an amount in excess of $300,000 to any
person or entity other than the Bank, if such failure results in the
acceleration of such debt;
(F) Any representation, warranty, or other information made or
furnished by the Borrower in respect of the Credit Facility or the Term Loan is
or shall be untrue in any material respect or materially misleading;
(G) The Bank reasonably believes that there has been a material
impairment of or decrease in either the Borrower's ability to pay or perform the
Obligations or the value of the Collateral or any guaranty given to secure
payment of the Obligations, and Borrower has not remedied such impairment or
decrease to the reasonable satisfaction of Bank within 30 days after notice by
Bank;
(H) A final judgment (which alone or with other outstanding final
judgments, but excluding amounts covered by insurance) is rendered against the
Borrower in an aggregate amount of $300,000 or more, and each such judgment is
not discharged or stayed pending appeal within 60 days after entry of such
judgment or is not discharged within 60 days after the expiration of any such
stay;
<PAGE>
(I) Any third party obtains a court order enjoining or prohibiting the
Borrower, or the Bank from performing any of its respective obligations under
the Loan Documents and such order is not discharged within 60 days after its
issuance;
(J) The Borrower fails to pay when due (or prior to delinquency) any
amount relating to any plan governed by the Employee Retirement Income Security
Act of 1974, as amended;
(K) Borrower shall default in its obligations under Sections 5.4, 5.9,
6.1 through 6.3 hereof; or
(L) Borrower shall fail to perform or observe any other term,
covenant, agreement or obligation under this Agreement or any of the other Loan
Documents on the part of the Borrower to be performed or observed, and such
failure does not constitute an Event of Default under Section 7.1 (A) through
(K), above, and any such failure shall remain unremedied after any applicable
grace period provided therefor in this Agreement or in the other Loan Documents,
or if no such grace period is provided, for a period of thirty (30) days after
the earlier of (i) the date written notice thereof shall have been given by the
Bank to the Borrower, or (ii) the date the Borrower should have delivered to the
Bank a written notice of such default or Event of Default pursuant to Section
5.9 hereof.
7.2 The Bank's Rights. If an Event of Default shall occur, the Bank shall
have, in addition to any and all other rights and remedies, legal or equitable,
available to the Bank under any and all of the Loan Documents or at law, the
following additional rights and remedies:
(A) The absolute right to deny to the Borrower any further Loan or
extension of credit (the Bank's obligation to extend any further credit to the
Borrower shall immediately terminate);
(B) The right, at the option of the Bank, to declare, without notice,
the entire principal amount and accrued interest for any Loan, the Term Loan or
extension of credit outstanding under this Agreement, plus any fees and charges
reasonably incurred by the Bank under any of the Loan Documents, immediately due
and payable;
(C) The right, at the option of the Bank, to charge interest on any
principal amount outstanding under this Agreement at the rate equal to the
greater of (i) Base Rate plus 3% or (ii) three percentage points above the
otherwise applicable interest rate; and
(D) The right to the ex parte appointment without bond of a receiver,
without regard to the value of any Collateral or solvency of any party liable
for payment, observance or performance of the Obligations and regardless of
whether the Bank has an adequate remedy at law.
VIII. MISCELLANEOUS
8.1 Further Assurance. From time to time within five Business Days after
the Bank's demand, the Borrower will execute and deliver such additional
documents and provide such additional information as may be reasonably requested
by the Bank to carry out the intent of this Agreement.
<PAGE>
8.2 Enforcement and Waiver by the Bank. The Bank shall have the right at
all times to enforce the provisions of the Loan Documents, as they may be
amended from time to time, in strict accordance with their terms,
notwithstanding any conduct or custom on the part of the Bank in refraining from
so doing at any time or times. The failure of the Bank at any time or times to
enforce its rights under such provisions, strictly in accordance with the same,
shall not be construed as having created a custom in any way or manner contrary
to specific provisions of the Loan Documents or as having in any way or manner
modified or waived the same. All rights and remedies of the Bank are cumulative
and concurrent and the exercise of one right or remedy shall not be deemed a
waiver or release of any other right or remedy.
8.3 Expenses of the Bank. The Borrower will, on demand, reimburse to the
Bank all reasonable expenses, including reasonable attorneys' fees (including
allocated costs of the Bank's in-house counsel), incurred by the Bank in
connection with the amendment, modification, workout, or enforcement of the Loan
Documents and the collection or attempted collection of the indebtedness
evidenced by the Loan Documents, whether or not legal proceedings are commenced.
8.4 Notices. Any notices or consents required or permitted by this
Agreement or the remainder of the Loan Documents shall be in writing and shall
be deemed delivered if delivered in person or if sent by certified mail, postage
prepaid, return receipt requested, or by FAX, at the following addresses or FAX
numbers, unless such address or FAX number is changed by written notice
hereunder:
BORROWER BANK
Paul Ouyang, Peter S. Ho, Vice President
Executive Vice President and BANK OF HAWAII
Chief Financial Officer Corporate Hawaii Division
CHEAP TICKETS, INC. P.O. Box 2900
6151 West Century Boulevard Honolulu, Hawaii 96846
Suite 1200 PHONE: (808) 537-8870
Los Angeles, California 90045 FAX: (808) 537-8943
PHONE: (310) 641-1262
FAX: (310) 342-9995
8.5 Waiver and Release by the Borrower. To the maximum extent permitted by
applicable law, the Borrower (and each of them, if more than one):
(A) Waives notice and opportunity to be heard, after acceleration of
the indebtedness evidenced by the Loan Documents, before exercise by the Bank of
the remedy of setoff or of any other remedy or procedure permitted by any
applicable law or by any prior agreement with the Borrower, and, except where
specifically required by this Agreement or by any applicable law, notice of any
other action taken by the Bank;
(B) Waives presentment, demand for payment, notice of dishonor, and
any and all other notices or demands in connection with the delivery,
acceptance, performance, or enforcement of this Agreement, and consents to any
extension of time (and even multiple extensions of time for longer than the
original term), renewals, releases of any person or organization liable for the
payment of the Obligations under this Agreement, and waivers or modifications or
other indulgences that may be granted or consented to by the Bank in respect of
the Loans, the Term Loan and other extensions of credit evidenced by this
Agreement; and
(C) Releases the Bank and its officers, agents, and employees from all
claims for loss or damage caused by any act or omission on the part of any of
them except gross negligence or willful misconduct.
<PAGE>
8.6 Sales and Participations. The Borrower consents to the Bank's
negotiation, offer, and sale to third parties ("Participants") of the Credit
Facility or the Term Loan or participating interests in the Credit Facility or
the Term Loan, to any and all discussions and agreements heretofore or hereafter
made between the Bank and any Participant or prospective Participant regarding
the interest rate, fees, and other terms and provisions applicable to the Credit
Facility or the Term Loan (as between any such Participant and the Bank). The
Bank shall obtain the Borrower's written consent, which consent shall not be
unreasonably withheld prior to the Bank's disclosure to any Participant or
prospective Participant other than any competitor of the Borrower, from time to
time, of such financial and other information pertaining to the Borrower, the
Credit Facility and the Term Loan as the Bank and such Participant or
prospective Participant may deem appropriate (whether public or non-public,
confidential or non-confidential, and including information relating to any
insurance required to be carried by the Borrower and any financial or other
information bearing on the Borrower's creditworthiness and the value of any
Collateral). The Borrower acknowledges that the Bank's disclosure of such
information to any Participant or prospective Participant constitutes an
ordinary and necessary part of the process of effectuating and servicing the
Credit Facility and the Term Loan. No Participant shall have any right to
approve any amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document except to the extent such amendment,
consent or waiver would: (A) increase or extend the Commitment of the Bank, (B)
postpone or delay any date fixed for any payment of principal specified herein,
(C) reduce the principal of, or the rate of interest specified herein (other
than interest payable after a default), under the Credit Facility or the Term
Loan or (D) release a substantial portion of the Collateral.
8.7 Applicable Law. The substantive laws of the State of Hawaii shall
govern the construction of this Agreement and the rights and remedies of the
parties hereto.
8.8 Binding Effect. This Agreement shall inure to the benefit of the
parties hereto and their respective heirs, personal representatives, successors
and permitted assigns, and shall be binding on the parties hereto and their
respective heirs, personal representatives, successors and assigns.
8.9 Merger. This Agreement and the remainder of the Loan Documents
constitute the full and complete agreement between the Bank and the Borrower
with respect to the Credit Facility and the Term Loan, and all prior oral and
written agreements, commitments, and undertakings shall be deemed to have been
merged into the Loan Documents and such prior oral and written agreements,
commitments, and undertakings shall have no further force or effect except to
the extent expressly incorporated in the Loan Documents.
8.10 Amendments; Consents. No amendment, modification, supplement,
termination, or waiver of any provision of this Agreement or the other Loan
Documents, and no consent to any departure by the Borrower therefrom, may in any
event be effective unless in writing signed by the Bank, and then only in the
specific instance and for the specific purpose given.
8.11 Assignments.
(A) The Borrower shall have no right to assign any of its rights or
obligations under the Loan Documents without the prior written consent of the
Bank.
<PAGE>
(B) The Bank may sell participations in the Credit Facility or the
Term Loan, as contemplated by Section 8.6 above, and the Bank may assign the
Loan Documents (or the receivables evidenced thereby) to a Federal Reserve Bank
or to any other agency or instrumentality of the United States of America to
support borrowings of Federal Funds.
8.12 Severability. If any provision of any of the Loan Documents shall be
held invalid under any applicable law, such invalidity shall not affect any
other provision of the Loan Documents that can be given effect without the
invalid provision, and, to this end, the provisions of the Loan Documents are
severable.
8.13 The Bank's Right of Setoff; Security Interest in Accounts. After the
occurrence and during the continuance of an Event of Default, the Bank may set
off obligations owed by the Bank to the Borrower (such as balances in checking
and savings accounts) against the Obligations, without first resorting to other
Collateral. To secure the Obligations, the Borrower grants to the Bank a
security interest in all checking, savings, and other deposit accounts now or
hereafter maintained by the Borrower with the Bank.
8.14 Time is of the Essence. Time is of the essence under and in respect
of this Agreement.
8.15 Joint and Several Liability. If more than one Borrower has signed
this Agreement, all Borrowers shall be liable under this Agreement jointly, and
each of them severally, for the payment, observance, and performance of all of
the Obligations.
8.16 Headings. The headings of the various provisions of this Agreement
are inserted for convenience of reference only and shall not affect the meaning
or construction of any provision.
8.17 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original instrument and all of which shall together constitute
one and the same agreement.
8.18 Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement or any of the other Loan Documents shall, at the
request of either party, be decided by binding arbitration conducted in the
State of Hawaii without a judge or jury, under the auspices of the American
Arbitration Association or Dispute Prevention and Resolution, Inc. in accordance
with Chapter 658 of the Hawaii Revised Statutes and the respective and
applicable rules of the aforementioned organizations. The arbitrator will apply
any applicable statute of limitations and will determine any controversy
concerning whether an issue is arbitrable. Judgment upon the arbitration award
may be entered in any court having jurisdiction. The prevailing party will be
entitled to recover its reasonable attorneys' fees and costs as determined by
the arbitrator. This agreement to arbitrate shall not limit or restrict the
right, if any, of any party to exercise before, during or following any
arbitration proceeding, with respect to any claim or controversy, self-help
remedies such as setoff, to foreclose a mortgage or lien or other security
interest in any Collateral judicially or by power of sale, or to obtain
provisional or ancillary remedies such as injunctive relief from a court having
jurisdiction. Either party may seek those remedies without waiving its right to
submit the controversy or claim in question to arbitration.
<PAGE>
IX. DEFINITIONS
9.1 Applicable Margin shall have the meaning given in Section 1.9.
9.2 Base Rate means the primary index rate established from time to time
in good faith by the Bank in the ordinary course of its business and with due
consideration of the money market, and published by intrabank circular letters
or memoranda for the guidance of its loan officers in pricing all of its loans
which float with the Base Rate.
9.3 Base Rate Loan means any Loan or any portion of the Term Loan for
which interest is calculated on the basis of the Base Rate.
9.4 Business Day means any day on which the Bank is open for business and,
with respect to any LIBOR Loan, a day on which the Bank and commercial banks in
New York City are open for business.
9.5 Closing Date means the date on which the Bank disburses the first
Loan.
9.6 Collateral shall have the meaning given in Section 1.4.
9.7 Commitment shall have the meaning given in Section 1.1.
9.8 Conversion Date shall have the meaning given in Section 1.6.
9.9 Credit Facility shall have the meaning given in Section 1.1.
9.10 Credit Termination Date shall have the meaning given in Section 1.1.
9.11 Current Assets means all assets of the Borrower, on a consolidated
basis, that should, in accordance with GAAP, be classified as current assets on
the Borrower's financial statements.
9.12 Current Liabilities means all liabilities of the Borrower, on a
consolidated basis, that should, in accordance with GAAP, be classified as
current liabilities on the Borrower's financial statements.
9.13 Current Ratio means the number, rounded to the nearest hundredth,
obtained by dividing Current Assets by Current Liabilities.
9.14 Debt Service means, for the four (4) fiscal quarter period immediately
preceding the date of determination, the sum of all scheduled and of all
required payments during such period in respect of all Funded Debt.
9.15 Debt Service Coverage Ratio means the number, rounded to the nearest
hundredth, obtained by dividing Net Cash Flow by Borrower's Debt Service.
9.16 Equity Offering means the offering or sales of ownership interests in
Borrower, excluding any such offerings made pursuant to an employee benefit
plan.
9.17 Event of Default shall have the meaning given in Section 7.1.
9.18 Funded Debt means, on and as of the date of calculation thereof, the
aggregate principal amount, determined in accordance with GAAP, of all
obligations for borrowed money, including, without limitation, obligations under
guaranties, all recourse obligations on investments, all obligations evidenced
by bonds, debentures, notes or other similar instruments, standby letters of
credit, and all obligations under leases which shall have been or should be, in
accordance with GAAP, recorded as capital leases.
<PAGE>
9.19 Funded Debt to Cash Flow Ratio means the number, rounded to the
nearest hundredth, obtained by dividing (i) Borrower's Funded Debt, less
Borrower's cash balances, as of the date of calculation thereof, in excess of
$1,500,000, divided by (ii) Net Cash Flow.
9.20 GAAP shall have the meaning given in Section 4.5.
9.21 Interest Period means the period commencing on the Business Day on
which a LIBOR Loan is disbursed, rolled over or converted from another pricing
option, and ending on the date 30, 60, 90 or 180 days thereafter, as selected by
the Borrower in its Notice of Loan/Conversion in respect of LIBOR Loans;
provided that if such ending date is not a Business Day, such ending date shall
be deemed to be the next succeeding Business Day unless such next succeeding
Business Day falls in a new calendar month, in which case the ending date shall
be the next preceding Business Day. No Interest Period shall extend beyond the
Maturity Date.
9.22 Legal Entity shall have the meaning given in Section 3.1(A)(3).
9.23 LIBOR means the reserve-adjusted rate of interest per annum, rounded
upward if necessary, to the nearest four decimal places, at which U.S. dollar
deposits in immediately available funds are offered to major banks in the
interbank market at 11:00 a.m. New York time three Business Days prior to the
commencement of an Interest Period. The Bank shall establish LIBOR for each
Interest Period based on offered rates as reported by reporting services
generally used by the Bank. Rates are quoted based on both the Interest Period
and the amount of Loan requested by the Borrower. Such rate shall incorporate
the following adjustment for any reserve requirements relative to dollar
deposits, placed on the Bank by any regulatory body:
LIBOR (Unadjusted)
LIBOR (Reserve Adjusted) = (100% - LIBOR Reserve Requirement)
-------------------------------------------------------------
The Bank's determination of LIBOR shall be binding and conclusive upon the
Borrower absent manifest error.
9.24 LIBOR Loan means any Loan or any portion of the Term Loan for which
interest is calculated on the basis of LIBOR.
9.25 LIBOR Reserve Requirement means the then maximum effective rate per
annum (expressed as a percentage), as determined solely by the Bank, of reserve
requirements imposed by any regulatory body (such as those pursuant to
Regulation D of the Board of Governors of the Federal Reserve System) on
eurocurrency liabilities of U.S. banks having a term to maturity equal to the
applicable Interest Period; and as adjusted by the Bank for changes or scheduled
changes in such percentage during the applicable Interest Period.
9.26 Loan shall have the meaning given in Section 1.2.
9.27 Loan Documents shall have the meaning given in Section 1.10.
9.28 Maturity Date means the Credit Termination Date, or if the Borrower
exercises the Term Loan Option in accordance with Subsection 1.9(B)(1)(d), the
third (3rd) anniversary of the Credit Termination Date.
9.29 Net Cash Flow means, for the twelve (12) month period immediately
preceding the date of determination, Borrower's net income after taxes, net of
extraordinary gains, plus depreciation, non-cash amortization and interest
expense, all determined in accordance with GAAP.
<PAGE>
9.30 Notice of Loan/Conversion shall mean a written notice in the form
attached as Exhibit A.
9.31 Obligations shall have the meaning given in Section 1.11.
9.32 Participant shall have the meaning given in Section 8.6.
9.33 Payment Office shall mean Bank of Hawaii, Corporate Hawaii Division,
130 Merchant Street, Honolulu Hl 96813.
9.34 Pricing Ratio means the number, rounded to the nearest hundredth,
obtained by dividing (i) Borrower's Funded Debt divided by (ii) Net Cash Flow.
9.35 Pro Forma Current Liabilities means Current Liabilities, less the
amounts attributable to principal under the Credit Facility, plus the aggregate
amount of indebtedness under the Term Loan divided by three (3).
9.36 Pro Forma Debt Service means Debt Service, less the amounts
attributable to principal and interest under the Credit Facility, plus Pro Forma
Principal and Pro Forma Interest.
9.37 Pro Forma Debt Service Coverage Ratio means the number, rounded to the
nearest hundredth, obtained by dividing Net Cash Flow by the Borrower's Pro
Forma Debt Service.
9.38 Pro Forma Funded Debt means Funded Debt, less the amounts attributable
to principal under the Credit Facility, plus the aggregate amount of
indebtedness under the Term Loan.
9.39 Pro Forma Interest means, for the twelve month period following the
Credit Termination Date, the amount of interest to accrue on the aggregate
amount of indebtedness under the Term Loan determined using, at the Borrower's
option, either the Base Rate or LIBOR (based upon the rate for a 30-day LIBOR
Loan) plus Applicable Margin, as set forth in Section 1.9(A).
9.40 Pro Forma Principal means the aggregate amount of indebtedness under
the Term Loan divided by three (3).
9.41 Tangible Net Worth means that amount, determined on a consolidated
basis in accordance with GAAP, that is equal to the Borrower's total assets less
intangible assets, minus total liabilities.
9.42 Term Loan shall have the meaning given in Subsection 1.9(B)(1)(c).
9.43 Term Loan Option shall have the meaning given in Subsection
1.9(B)(1)(c).
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Bank have duly executed this
Agreement.
CHEAP TICKETS, INC. BANK OF HAWAII
By: /s/ Michael J. Hartley By: /s/
---------------------------- ---------------------------
Michael J. Hartley Its Vice President
Its President and Chief
Operating Officer
Borrower Bank
<PAGE>
Schedule 1.9
------------
Pro Forma Compliance Certificate
DATE: ____________, 199__
TO: Bank of Hawaii
Attn: Peter S. Ho, Vice President
P.O. Box 2900
Honolulu, Hawaii 96846
Telecopier No.: (808) 537-8943
SUBJECT: Credit Agreement (the "Agreement") dated __________, 1997, between the
BANK OF HAWAII (the "Bank") and CHEAP TICKETS, INC. (the "Borrower").
Pursuant to Section 1.9 of the Agreement, the Borrower hereby certifies as
follows (capitalized terms not defined herein shall have the respective meanings
assigned in the Agreement):
1. The information furnished in Attachment A hereto is true and correct as the
last day of the fiscal quarter preceding the date of this Compliance
Certificate.
2. The representations and warranties set forth in Section IV of the Agreement
are true and correct on and as of the date hereto, provided that the
representations and warranties set forth in the first sentence of Section 4.5
of the Agreement shall be deemed to be made with respect to the financial
statements delivered to the Bank concurrently herewith pursuant to the
Agreement.
3. As of the date hereof, no event has occurred and is continuing that (a)
constitutes an Event of Default under the Agreement, or (b) with the giving
of notice or passage of time, or both, would constitute an Event of Default.
The Borrower has observed and performed all of the Borrower's covenants and
other agreements, and satisfied every condition, contained in the Agreement
and in the other Loan Documents, to be observed, performed or satisfied by
the Borrower.
CHEAP TICKETS, INC.
By:
---------------------------
Michael J. Hartley
Its President and Chief
Operating Officer
Authorized Signatory
Borrower
<PAGE>
Attachment A
To Pro Forma Compliance Certificate
Dated _________
PRO FORMA CURRENT RATIO (attach calculation)
Required minimum: 1.50 to one _________________
TANGIBLE NET WORTH (attach calculation)
Required minimum: $4,800,000,
plus 100% of net proceeds from all
Equity Offerings after the date hereof,
plus 50% of Borrower's consolidated
net earnings, excluding losses, for each quarter
commencing January 1, 1997, to and including
the fiscal quarter immediately preceding
the date of determination. $_________________
PRO FORMA DEBT SERVICE COVERAGE RATIO (attach calculation
indicating interest rate)
Required minimum: 1.50 to one _________________
PRO FORMA FUNDED DEBT TO CASH FLOW RATIO (attach calculation)
Permitted maximum: 3.00 to one _________________
PRICING RATIO (attach calculation) _________________
<PAGE>
Master Note
$3,000,000.00 Honolulu, Hawaii
_______________, 1997
The undersigned ("Borrower") promises to pay to the order of BANK OF HAWAII
("Bank") the principal amount of $3,000,000.00 or so much thereof as shall have
been disbursed by Bank and may remain outstanding, together with interest on
outstanding balances of principal in accordance with and under the terms of that
certain Credit Agreement of even date, between Bank and Borrower.
CHEAP TICKETS, INC.
By:
----------------------------
Michael J. Hartley
Its President and Chief
Operating Officer
Authorized Signatory
Borrower
<PAGE>
SECURITY AGREEMENT
1. Parties; Grant of Security Interest. CHEAP TICKETS, INC., a Hawaii
corporation, ("Borrower"), whose address is 1440 Kapiolani Boulevard, Suite 800,
Honolulu, Hawaii 96814, hereby grants to BANK OF HAWAII, a Hawaii corporation
("Bank"), whose mailing address is P.O. Box 2900, Honolulu, Hawaii 96846, a
security interest in the collateral described in Schedule A attached to this
Agreement ("Collateral").
2. Obligations Secured. Borrower has granted the security interest in the
Collateral to Bank for the purpose of securing the payment of all indebtedness
evidenced by or arising out of or in connection with that certain Credit
Agreement of even date by and between Borrower and Bank, as it may be modified
or amended from time to time (the "Loan Agreement"), and the observance and
performance of all obligations to be observed or performed by Borrower under
this Agreement and the Loan Documents, as defined in the Loan Agreement,
together with all modifications thereto. All obligations referred to in this
Section 2 are herein called "Obligations".
3. Representations and Warranties. Borrower represents and warrants as
follows:
(a) Priority. Unless otherwise consented to by Bank in writing, the
security interests granted to Bank by this Agreement now do and hereafter will
constitute security interests of first priority.
(b) Ownership. Borrower is, and, as to Collateral acquired by it from
time to time after the date hereof, Borrower will be, except as may otherwise be
permitted by Bank in writing and so long as any Obligations remain outstanding,
the owner of all Collateral free from any encumbrances other than Bank's
security interest therein, and Borrower shall defend the Collateral against any
and all claims and demands of all persons at any time claiming any interest
therein in any manner materially adverse to Bank.
(c) Office. Borrower's chief executive office is located at the address
stated in Section 1, above. Borrower shall not move its chief executive office
without having given Bank 45 days' prior written notice. Evidence of all
Collateral and the only original books of account and records of Borrower
relating thereto are, and will continue to be, kept at Borrower's chief
executive office.
(d) Location of Collateral. All Inventory and Equipment included in the
Collateral, held on the date hereof by Borrower, is located in the State of
Hawaii or at such other locations described in any Schedule A, attached hereto,
except for Inventory and Equipment in transit in the ordinary course of business
to or from one or more of such locations. All Inventory and Equipment now held
or subsequently acquired shall be kept at locations previously provided to Bank,
which locations Borrower will certify and update from time to time at Bank's
request (except for Inventory and Equipment which may at any one time be in
transit in the ordinary course of business), or such new location as Borrower
may establish if (1) it shall have given at least 45 days' prior written notice
to Bank of its intention so to do, describing such new location and providing
such other information in connection therewith as Bank may reasonably request,
and (2) with respect to such new location Borrower shall take all action
reasonably requested by Bank to maintain the perfection of the security interest
in the Collateral intended to be granted hereby.
(e) Power. Borrower has full power and authority and legal right to grant
to Bank a security interest in the Collateral pursuant to this Agreement.
<PAGE>
(f) Consents. No consent of any other party (including, without
limitation, creditors of Borrower) and no consent, authorization, approval, or
other action by, and no notice to or filing with, any governmental authority is
required either (1) for the grant to Bank of a security interest in the
Collateral pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by Borrower or (2) for the exercise by Bank of the
rights provided for in this Agreement.
4. Supplements; Further Assurances. Borrower agrees that at any time and from
time to time at its expense, Borrower will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or that Bank deems appropriate or advisable, in order to initially
perfect and thereafter preserve and protect any security interest granted or
purported to be granted hereby or to enable Bank to exercise and enforce its
rights and remedies hereunder.
5. Special Provisions Regarding Receivables Collateral. If Receivables are
included in the Collateral:
(a) Location of Records. All records pertaining to the Receivables
(including computer records) and all returns of Inventory are or will be kept at
the chief executive office of Borrower, and Borrower will give Bank 45 days'
prior written notice of any change in address of the chief executive office of
Borrower or of the change of the location where records pertaining to
Receivables or returns of Inventory are kept.
(b) Accuracy of Records. All books, records and documents relating to the
Receivables (including computer records) are and will be genuine and in all
respects what they purport to be; and the amount of each Receivable shown on the
books and records of Borrower is and will be the correct amount actually owing
or to be owing at maturity of such Receivable.
(c) Collection of Receivables. Until Bank directs otherwise, Borrower
shall use reasonable efforts in good faith to collect all the Receivables as and
when they become due. Following Bank's demand for remittance of the Receivables
to Bank, proceeds of Receivables collected by Borrower shall not be commingled
with other funds of Borrower and shall be immediately delivered to Bank in the
form received except for necessary endorsements to permit collection.
(d) Government Contracts. Borrower shall notify Bank if any Receivables
arise out of contracts with the United States government or any department or
agency thereof, and Borrower shall execute any instruments and take any steps to
perfect the assignment of the rights of Borrower to Bank as required by the
Federal Assignment of Claims Act, Hawaii Revised Statutes, as amended, or any
other similar law or regulation.
(e) Analysis of Receivables. Borrower shall, upon Bank's request, furnish
Bank within 10 days after the end of each calendar month, an aged analysis of
all outstanding Receivables, in form and substance satisfactory to Bank.
(f) Further Documents. Borrower shall provide to Bank, at Bank's request,
from time to time: confirmatory assignment schedules; copies of all invoices
relating to the Receivables; evidence of shipment or delivery of Inventory; and
further information and/or schedules as Bank may reasonably require, all in form
satisfactory to Bank.
<PAGE>
6. Protection and Insurance of Collateral. Borrower will take reasonable
efforts in good faith, at all times, to protect the Collateral against damage or
loss. Borrower will also insure all insurable Collateral against such hazards
and in such amounts as Bank may require, under policies containing endorsements
naming Bank as loss payee and prohibiting any cancellation or material revision
in such policies without 30 days' prior written notice to Bank.
7. Tax and Other Liens. Borrower shall pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good faith.
8. Bank Appointed Attorney-in-Fact. Borrower hereby appoints Bank Borrower's
attorney-in-fact, with full power of substitution, and with full authority in
the name, place and stead of Borrower, or otherwise, from time to time, after an
Event of Default has occurred and is continuing, in Bank's discretion to take
any action and to execute any instrument which Bank may reasonably deem
necessary or advisable to accomplish the purposes of this Agreement. Such action
includes, without limitation, withdrawal from a time deposit account before
maturity, even if a forfeiture of accrued interest results. Said power of
attorney is irrevocable, being coupled with an interest, and shall not be
affected by the disability or incapacity of Borrower.
9. Reasonable Care. Bank shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equivalent to that which Bank, in
its individual capacity, accords its own property. Bank shall have no
responsibility for taking any necessary steps to preserve rights against any
other persons with respect to any Collateral.
10. Events of Default.
(a) Definition. As used in this Agreement, the term "Event of Default"
has the meaning given to it in the Loan Agreement.
(b) Remedies; Obtaining the Collateral Upon Event of Default. If any Event
of Default shall have occurred and be continuing, then and in every such case,
Bank may, at any time or from time to time during such Event of Default:
(1) Personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, with or without notice or
process of law, and for that purpose may enter upon the premises where any
of the Collateral is located and remove the same;
(2) Instruct the obligor or obligors on any agreement, instrument or
other obligation constituting Collateral to make any payment required by
the terms of such instrument or agreement directly to Bank;
(3) Withdraw all monies, securities and instruments included in the
Collateral, for application to the Obligations;
(4) Sell or otherwise liquidate, or direct Borrower to sell or
otherwise liquidate, any or all investments made in whole or in part with
the Collateral or any part thereof, and take possession of the proceeds of
any such sale or liquidation; and
<PAGE>
(5) Take possession of the Collateral or any part thereof, by
directing Borrower in writing to deliver it to Bank at any place or places
designated by Bank, in which event Borrower shall at its own expense:
(i) cause the same to be moved to the place or places so
designated by Bank;
(ii) store and keep any Collateral so delivered to Bank at such
place or places pending further action by Bank as provided in Section
10.(c) below; and
(iii) while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to protect
the same and to preserve and maintain them in good condition.
(c) Remedies; Disposition of the Collateral. Bank may from time to time
exercise in respect of the Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies of
a secured party under the Uniform Commercial Code in effect in the State of
Hawaii at the time of an Event of Default. Bank may also, without notice except
as specified below, sell the Collateral or any part thereof at public or private
sale, at any exchange, broker's board or at any of Bank's offices or elsewhere,
for cash, on credit or for future delivery, and at such price or prices and upon
such other terms as Bank may deem commercially reasonable. Bank may be the
purchaser of any or all of the Collateral at any such sale to the extent
permitted by law and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at such sale, to use and apply any of the Obligations as a
credit on account of the purchase price. Each purchaser at any such sale shall
acquire the property sold absolutely free from any claim or right on the part of
Borrower, and Borrower hereby waives (to the fullest extent permitted by law)
all rights of redemption, stay or appraisal under any rule of law or statute now
existing or hereafter enacted. To the extent notice of sale shall be required by
law, at least ten days' notice to Borrower of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. Bank shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Bank may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and any such sale may, without further notice, be made at the
time and place at and to which it was so adjourned. Borrower waives (to the
fullest extent permitted by law) any claims against Bank arising by reason of
the fact that the price at which any Collateral may have been sold at a private
sale was less than the price which might have been obtained at a public sale,
even if Bank accepts the first offer received and does not offer such Collateral
to more than one offeree.
11. Application of Proceeds. After and during the continuance of an Event of
Default, any cash held by Bank as Collateral and all cash proceeds received by
Bank in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied from time to time:
(a) First, to the payment of the costs and expenses of such sale,
collection or other realization, including compensation to Bank's agents and
attorneys, and all expenses, liabilities and advances made or incurred by Bank
in connection therewith;
(b) Second, to the payment of the Obligations then due; and
(c) Third, after payment in full of all Obligations then due, to Borrower,
or to whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, any surplus then remaining from such
proceeds.
<PAGE>
12. No Waiver. No failure on the part of Bank to exercise, and no course of
dealing with respect to, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by Bank of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided (are to the fullest extent permitted by law)
cumulative and are not exclusive of any remedies provided by law.
13. Notices. Any notices or consents required or permitted by this Agreement
shall be in writing and shall be deemed delivered if delivered in person or if
sent by certified mail, postage prepaid, return receipt requested, or by FAX, to
Borrower or Bank at the addresses set forth in Section 1, above, unless such
address is changed by written notice hereunder.
14. Applicable Law. The laws of the State of Hawaii shall govern the
construction of this Agreement and the rights and remedies of the parties
hereto.
15. Binding Effect and Entire Agreement. This Agreement shall inure to the
benefit of, and shall be binding on, Bank and its successors and assigns and
Borrower and its successors and assigns. This Agreement, together with all other
documents evidencing or securing the Obligations, constitutes the entire
agreement between Bank and Borrower.
16. Amendments; Consents. No amendment, modification, supplement, termination,
or waiver of any provision of this Agreement, and no consent to any material
departure by Borrower therefrom, may in any event be effective unless in writing
signed by Bank, and then only in the specific instance and for the specific
purpose given.
17. Severability. If any provision of this Agreement shall be held invalid
under any applicable law, such invalidity shall not affect any other provision
of this Agreement that can be given effect without the invalid provision, and,
to this end, the provisions of this Agreement are severable.
IN WITNESS WHEREOF, Borrower and Bank have duly executed this Agreement
this 26th day of November, 1997.
CHEAP TICKETS, INC. BANK OF HAWAII
By /s/ Michael J. Hartley By /s/
------------------------- -------------------------
Michael J. Hartley Its Vice President
Its
Borrower Bank
<PAGE>
SCHEDULE A
For purposes of this Schedule A, CHEAP TICKETS, INC. is called "Debtor".
Debtor has granted to BANK OF HAWAII a security interest in the following
Collateral:
1. Bankoh Deposit Accounts. All demand, time, savings and other deposit
accounts now or hereafter maintained by Debtor with Bank of Hawaii.
2. Equipment. All of Debtor's equipment, whether now existing or hereafter
acquired, including, in each case, all modifications, alterations, repairs,
substitutions, additions and accessions thereto, all replacements thereof, and
all substitutions therefor.
3. Fixtures. All of Debtor's fixtures, now owned or hereafter acquired,
including without limitation, fixtures located at 1440 Kapiolani Boulevard,
Suite 800, Honolulu, Hawaii 96814, the owner of record of which is Tosei
Properties, Inc., or at 6151 West Century Boulevard, Suite 1200, Los Angeles,
California 90045, the owner of record of which is General Electric Credit
Equities, Inc., or at the real property described in Exhibit A attached hereto,
the owner of record of which is Debtor, or at such other location as hereafter
located and all replacements thereof and substitutions therefor.
4. Furniture and Furnishings. All of Debtor's furniture and furnishings, now
owned or hereafter acquired, and all replacements thereof and substitutions
therefor.
5. General Intangibles. All of Debtor's "general intangibles", as that term is
defined in Section 490:9-106 of the Hawaii Revised Statutes.
6. Inventory. All of Debtor's inventory, whether now existing or hereafter
acquired, including, without limitation, raw materials, supplies, work in
process, returned goods, samples and consigned goods to the extent of the
consignee's interest therein.
7. Receivables. All of Debtor's rights to payment for goods sold or leased or
services performed by Debtor or any other party, whether now in existence or
arising from time to time hereafter, including, without limitation, rights
evidenced by accounts, notes, contracts, security agreements, chattel paper or
other evidences of indebtedness, together with (a) all security granted to
Debtor to secure the foregoing, (b) general intangibles arising out of Debtor's
rights in any goods, the sale of which gave rise thereto, and (c) all
guaranties, endorsements and indemnifications on or of any of the foregoing.
8. Tradenames and Licenses. All of Debtor's tradenames and license agreements
with respect to any patents, trademarks, service marks or copyrights, whether
Debtor is a licensor or licensee under such license agreements, together with
all (a) renewals, extensions, supplements and continuations thereof, and (b)
income, royalties, damages, claims and payments, now or hereafter due or payable
to Debtor in respect thereof.
9. Proceeds. All Proceeds of the Collateral, including, without limitation,
all proceeds of the conversion, voluntary or involuntary, of the Collateral,
into cash or liquidated claims, including proceeds of insurance thereon.
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF REAL PROPERTY
The following land situated in the City of Lakeport, County of Lake, State
of California, described as follows:
Parcel A as shown on a map filed in the office of the County Recorder of
said Lake County on January 30, 1984, in Book 24 of Parcel Maps at Page 42.
<PAGE>
FIRST LOAN MODIFICATION AGREEMENT
This Agreement is dated June 15, 1998 between CHEAP TICKETS, INC., a Hawaii
corporation ("Borrower"), and BANK OF HAWAII, a Hawaii corporation ("Bank").
Recitals
A. Bank established a Credit Facility in the principal amount of
$3,000,000.00 in favor of Borrower under a Credit Agreement and Master Note both
dated November 26, 1997, including any renewals, extensions, or modifications
thereof ("Loan Agreement" and "Note" respectively). The documents which
evidence, secure or guaranty the Credit Facility are called the "Loan
Documents."
B. The performance of Borrower's obligations under the Loan Documents is
secured by the following ("Security Instrument"): Security Agreement dated
November 26, 1997, made by Borrower, as the same may from time to time be
amended.
C. Borrower has requested a modification of the Loan Documents and Bank is
willing to accommodate this modification under the terms of this Agreement.
Agreement
Therefore, Bank and Borrower agree as follows:
1. The Loan Documents are amended to conform to the following:
a. Section 1.9(B)(1)(d)(ii) of the Loan Agreement is amended to read
as follows:
(ii) no earlier than thirty (30) days and no later than ten (10)
days prior to the Credit Termination Date, the Borrower shall provide to the
Bank written notice of the Borrower's election to exercise the Term Loan Option.
Such notice shall set forth the Borrower's interest rate selection(s) pursuant
to Section 1.9(A) and shall include a pro forma compliance certificate, signed
by the Borrower's chief financial officer, in the form attached hereto as
Schedule 1.9 and made a part hereof. Such pro forma compliance certificate shall
be calculated using the financial results from the most recent compliance
certificate submitted to the Bank and shall certify to the Bank that the
Borrower's financial condition at that time meets the following standards, in
each case determined in accordance with GAAP:
Pro Forma Current Ratio of not less than 1.10 to one;
Tangible Net Worth of not less than the amount equal to:
$4,300,000, plus 100% of net proceeds of all Equity Offerings after the date
hereof, plus 50% of Borrower's consolidated net earnings, excluding losses, for
each quarter commencing January 1, 1998, to and including the fiscal quarter
immediately preceding the date of determination;
Pro Forma Debt Service Coverage Ratio of not less than 1.50
to one; and
Pro Forma Funded Debt to Cash Flow Ratio of not more than
3.00 to one.
If no interest rate option is set forth in the notice of exercise, the
Base Rate shall apply; and
<PAGE>
b. Section 5.10 of the Loan Agreement is amended to read as follows:
5.10 Financial Condition. Maintain the Borrower's financial
condition according to the following standards, in each such case determined in
accordance with GAAP as of the end of each fiscal quarter:
(A) Current Ratio of not less than: 1.15 to one, increasing to
1.50 to one commencing with the Borrower's financial reporting period ending
September 30, 1997; 1.00 to one for fiscal quarters ending March 31, 1998, and
June 30, 1998, increasing 1.10 to one commencing with fiscal quarter ending
September 30, 1998;
(B) Commencing with fiscal quarter ending March 31, 1998, Tangible
Net Worth of not less than the amount equal to: $4,300,000, plus 100% of net
proceeds of all Equity Offerings after November 26, 1997, plus 50% of Borrower's
consolidated net earnings, excluding losses, for each quarter commencing January
1, 1998, to and including the fiscal quarter immediately preceding the date of
determination;
(C) Debt Service Coverage Ratio of not less than: 1.10 to one for
the calendar year to and including the fiscal quarter ending March 31, 1998;
1.25 to one for the calendar year to and including, the fiscal quarters ending
June 30, 1998, and September 30, 1998; and increasing to 1.50 to one commencing
with the financial reporting period ending December 31, 1998; and
(D) Funded Debt to Cash Flow Ratio of not more than 3.00 to one.
2. Upon execution of this Agreement and in consideration of these
amendments, Borrower shall pay Bank a fee of $2,500.00.
3. Capitalized terms used, but not defined, in this Agreement, shall have
the definitions stated in the Loan Agreement.
4. Borrower agrees that there are no claims, defenses, or offsets that may
be asserted by Borrower to the enforcement of the Loan Documents arising prior
to the date of this Agreement, and that Borrower agrees that all such claims,
defenses, and offsets are hereby released.
5. In all other respects, the Loan Documents, as amended, remain in full
force and effect and the provisions of the Loan Documents including, without
limitation, all promises, representations, warranties, covenants, and
conditions, are ratified and confirmed as of the date of this Agreement by the
parties hereto. Borrower acknowledges that the Security Instrument shall
continue to apply to the remaining Loan Documents.
6. This Agreement is binding upon, and shall inure to the benefit of, the
parties hereto and their respective successors and assigns.
<PAGE>
To signify their agreement, the parties have executed this Agreement as of
the date first written above.
CHEAP TICKETS, INC.
By /s/ Michael J. Hartley
-----------------------------------------
Michael J. Hartley
Its President and Chief Operating Officer
Borrower
BANK OF HAWAII
By /s/
-----------------------------------------
Its Vice President
Bank
<PAGE>
Attachment A
To Pro Forma Compliance Certificate
Dated ________________
PRO FORMA CURRENT RATIO (attach calculation)
Required minimum: 1.15 to one, increasing to 1.50
to one commencing with the Borrower's financial
reporting period ending September 30, 1997; 1.00
to one for fiscal quarters ending March 31, 1998,
and June 30, 1998, increasing 1.10 to one commencing
with fiscal quarter ending September 30, 1998 ______________
TANGIBLE NET WORTH (attach calculation)
Required minimum: $4,300,000, plus 100% of net proceeds
of all Equity Offerings after November 26, 1997, plus
50% of Borrower's consolidated net earnings, excluding
losses, for each quarter commencing January 1, 1998, to
and including the fiscal quarter Immediately preceding
the date of determination ______________
PRO FORMA DEBT SERVICE COVERAGE RATIO (attach calculation
indicating interest rate)
Required minimum: 1.10 to one for the calendar year to
and including the fiscal quarter ending March 31, 1998;
1.25 to one for the calendar year to and including, the
fiscal quarters ending June 30, 1998, and September 30,
1998; and increasing to 1.50 to one commencing with the
financial reporting period ending December 31, 1998 ______________
PRO FORMA FUNDED DEBT TO CASH FLOW RATIO (attach calculation)
Permitted maximum: 3.00 to one ______________
PRICING RATIO (attach calculation) ______________