-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SJoh608tYWQKZBS3MALQ6t7W0fZiUXVYT0oolSS0V8czKlQ8tJAKWVWd/Q/EMYV1 b2rt3KdOUsXW2WI4EGgPIQ== /in/edgar/work/20000810/0000898430-00-002305/0000898430-00-002305.txt : 20000921 0000898430-00-002305.hdr.sgml : 20000921 ACCESSION NUMBER: 0000898430-00-002305 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000702 FILED AS OF DATE: 20000810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLACIER WATER SERVICES INC CENTRAL INDEX KEY: 0000883505 STANDARD INDUSTRIAL CLASSIFICATION: [5960 ] IRS NUMBER: 330493559 STATE OF INCORPORATION: DE FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11012 FILM NUMBER: 691981 BUSINESS ADDRESS: STREET 1: 2261 COSMOS CT CITY: CARLSBAD STATE: CA ZIP: 92009 BUSINESS PHONE: 6199302420 MAIL ADDRESS: STREET 1: 2261 COSMOS CT CITY: CARLSBAD STATE: CA ZIP: 92009 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: July 2, 2000 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to _________________ Commission File Number: 1-11012 ------- Glacier Water Services, Inc. ---------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 33-0493559 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2261 Cosmos Court, Carlsbad, California 92009 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (760) 930-2420 --------------- (Registrant's telephone number, including area code) N/A --- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] Indicate the number of shares outstanding of each of issuer's class of common stock as of the latest practicable date: 2,840,174 shares of common stock, $.01 par value, outstanding at July 28, 2000. 1 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS GLACIER WATER SERVICES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
July 2, January 2, 2000 2000 * ------ --------- Assets (unaudited) ------ Current assets: Cash and cash equivalents...................................................... $ 1,560 $ 4,205 Investments, available for sale................................................ 7,372 9,826 Accounts receivable............................................................ 825 589 Inventories.................................................................... 2,801 3,249 Prepaid expenses and other..................................................... 1,652 1,779 -------- -------- Total current assets........................................................ 14,210 19,648 Property and equipment, net of accumulated depreciation........................... 55,718 58,936 Other assets...................................................................... 15,267 10,825 -------- -------- Total assets...................................................................... $ 85,195 $ 89,409 ======== ======== Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Accounts payable............................................................... $ 562 $ 1,272 Accrued commissions............................................................ 2,562 2,238 Accrued liabilities............................................................ 1,470 1,478 Line of credit................................................................. 13 3,300 -------- -------- Total current liabilities................................................... 4,607 8,288 Line of credit.................................................................... 6,560 -- Long-term debt.................................................................... 71,792 76,448 Stockholders' equity: Preferred stock, $.01 par value; 100,000 shares authorized, no shares issued or outstanding............................................. -- -- Common stock, $.01 par value; 10,000,000 shares authorized, 2,840,174 and 2,834,174 respectively, shares issued and outstanding......... 35 34 Additional paid-in capital..................................................... 16,188 16,119 Retained earnings.............................................................. 2,676 4,771 Treasury stock, at cost, 598,026 shares........................................ (14,795) (14,795) Accumulated other comprehensive loss........................................... (1,868) (1,456) -------- -------- Total stockholders' equity.................................................. 2,236 4,673 -------- -------- Total liabilities and stockholders' equity........................................ $ 85,195 $ 89,409 ======== ========
*Amounts derived from audited information The accompanying notes are an integral part of these consolidated financial statements. 2 GLACIER WATER SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except shares and per share data) (unaudited)
Three Months Ended Six Months Ended ------------------------------ ------------------------------ July 2, July 4, July 2, July 4, 2000 1999 2000 1999 ---- ---- ----- ---- Revenues................................................... $ 15,939 $ 14,232 $ 28,724 $ 26,855 Operating costs and expenses: Operating expenses.................................... 10,349 9,306 18,936 17,541 Selling, general and administrative expenses.......... 2,282 2,567 4,279 4,756 Depreciation and amortization......................... 3,077 2,582 6,110 5,182 ---------- ---------- ---------- ---------- Total operating costs and expenses............... 15,708 14,455 29,325 27,479 ---------- ---------- ---------- ---------- Income (loss) from operations.............................. 231 (223) (601) (624) Other (income) expenses: Interest expense...................................... 1,785 2,011 3,568 3,991 Investment (income) loss.............................. (302) 247 (541) 1,750 ---------- ---------- ---------- ---------- Total other expenses....................................... 1,483 2,258 3,027 5,741 ---------- ---------- ---------- ---------- Loss before income taxes and extraordinary item............ (1,252) (2,481) (3,628) (6,365) Income tax benefit......................................... -- (768) -- (2,059) ---------- ---------- ---------- ---------- Loss before extraordinary gain............................. (1,252) (1,713) (3,628) (4,306) Extraordinary gain on early retirement of debt, net of tax. 460 -- 1,533 -- ---------- ---------- ---------- ---------- Net loss................................................... $ (792) $ (1,713) $ (2,095) $ (4,306) ========== ========== ========== ========== Basic and diluted loss per share: Loss before extraordinary item............................. $ (0.44) $(0.61) $ (1.28) $(1.50) Extraordinary gain......................................... .16 -- .54 -- ---------- ---------- ---------- ---------- Net loss................................................... $ (0.28) $(0.61) $ (0.74) $(1.50) ========== ========== ========== ========== Shares used in calculation................................. 2,843,965 2,827,301 2,834,570 2,866,820
The accompanying notes are an integral part of these consolidated financial statements. 3 Glacier Water Services, Inc. Consolidated Statements of Comprehensive Income (Loss) (in thousands)
Three Months Ended Six Months Ended ------------------ ---------------- July 2, July 4, July 2, July 4, 2000 1999 2000 1999 ---- ---- ---- ---- Net loss $ (792) $(1,713) $(2,095) $(4,306) ------ ------- ------- ------- Unrealized (loss) on securities: Unrealized holding gain (loss) arising during the period 89 869 (382) 480 Less: reclassification adjustment for losses (gains) included in net gain (loss) 21 (716) 30 (2,702) ------ ------- ------- ------- Net unrealized gain (loss) 68 1,585 (412) 3,182 ------ ------- ------- ------- Comprehensive loss $ (724) $ (128) $(2,507) $(1,124) ====== ======= ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 4 GLACIER WATER SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Six Months Ended ---------------- July 2, July 4, 2000 1999 ---- ---- Cash flow from operating activities: Net loss $ (2,095) $ (4,306) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 6,110 5,182 Loss on disposal of assets 10 -- Extraordinary gain on early retirement of debt (1,533) -- Realized (gain) loss on sales of investments (30) 2,702 Change in operating assets and liabilities: Accounts receivable (236) 164 Inventories 448 (225) Prepaid expenses and other 127 (403) Payments for prepaid marketing incentives (2,289) (4,325) Deferred income taxes -- (2,060) Other assets 111 664 Accounts payable, accrued liabilities and accrued commissions (394) 458 -------- --------- Total adjustments 2,324 2,157 -------- --------- Net cash provided by (used in) operating activities 229 (2,149) -------- --------- Cash flows from investing activities: Net investment in vending equipment (4,965) (6,196) Purchase of property and equipment (364) (158) Purchase of investments (799) (15,574) Proceeds from sale and maturities of investments 2,812 23,692 -------- --------- Net cash (used in) provided by investing activities (3,316) 1,764 -------- --------- Cash flows from financing activities: Early retirement of debt (2,900) -- Proceeds from borrowings on line of credit 10,976 11,065 Principal payments on line of credit (7,703) (6,440) Proceeds from issuance of stock 69 -- Purchase of treasury stock -- (3,246) -------- --------- Net cash provided by financing activities 442 1,379 -------- --------- Net increase (decrease) in cash and cash equivalents (2,645) 994 Cash and cash equivalents, beginning of period 4,205 109 -------- --------- Cash and cash equivalents, end of period $ 1,560 $ 1,103 ======== =========
See accompanying notes 5 GLACIER WATER SERVICES, INC. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (in thousands) (unaudited)
Six Months Ended ---------------- July 2, July 4, 2000 1999 ---- ---- Cash paid for interest................................................ $ 3,384 $ 3,955 ======== ======== Cash paid for income taxes............................................ $ -- $ 5 ======== ========
See accompanying notes 6 GLACIER WATER SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 2, 2000 (unaudited) 1. Summary of Significant Accounting Policies Basis of Presentation In the opinion of the Company's management, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the consolidated financial position of the Company and the consolidated results of its operations and its cash flows for the three- and six-month periods ended July 2, 2000 and July 4, 1999. Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information, including footnote information, normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Results of operations for the three- and six-month period ended July 2, 2000 are not necessarily indicative of results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended January 2, 2000. Reclassification Certain prior year amounts have been reclassified to conform to the current presentation. 2. Investments Investments are accounted for in accordance with FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, which requires that the Company determine the appropriate classification of investments at the time of purchase and reevaluate such designation as of each balance sheet date. At July 2, 2000 and January 2, 2000, the Company considered all investments as available for use in its current operations, and therefore classified them short-term, available-for-sale investments. Available-for-sale investments are stated at fair value, with unrealized gains and losses, if any, reported as a separate component of stockholders' equity. Realized gains or losses from the sale of investments, write-downs associated with investments deemed to be permanently impaired, interest income, and dividends are included as investment income or loss in the accompanying statements of operations. Management reviews the carrying values of its investments and writes such investments down to estimated fair value by a charge to operations when such review results in management's determination that an investment impairment is considered to be other than temporary. As of July 2, 2000, management believes its unrealized losses aggregating $2,257,000 to be temporary in nature. The cost of securities sold is based on the specific identification method. 7 At July 2, 2000, short-term investments consisted of the following (in thousands):
Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- Corporate securities $ 5,992 $ 117 $ (2,250) $ 3,859 Mortgage backed securities 650 66 -- 716 ------- ------ -------- ------- Total debt securities 6,642 183 (2,250) 4,575 Equity securities 2,598 206 (7) 2,797 ------- ------ -------- ------- Total marketable securities $ 9,240 $ 389 $ (2,257) $ 7,372 ======= ====== ======== =======
The Company's primary market risk exposures are interest rate risk and equity price risk. At July 2, 2000, the Company held a portfolio of marketable securities with an estimated fair value equal to $7,372,000. Of that amount, the estimated fair value of the Company's total debt investments available for sale was $4,575,000, which included no convertible debt securities, and the estimated fair value of the Company's total equity securities available for sale was $2,797,000, including $1,795,000 in convertible preferred securities. The Company's exposure to interest rate risk relates primarily to the opportunity cost of fixed rate obligations. The Company's exposure to equity price risk relates primarily to the risk that the market price of a security may fluctuate or drop over time. Proceeds from sales or maturities of marketable securities for the three- and six-month periods ended July 2, 2000 were $1,527,000 and $2,812,000, respectively. Gross realized gains on such sales or maturities for the three- and six-month periods were $57,000 and $91,000, respectively. Gross realized losses for the three- and six-month periods were $36,000 and $61,000, respectively. Corporate securities have maturity dates from January 2001 to February 2009. Corporate debt securities have maturity dates from February 2001 to May 2008. Mortgage backed securities have maturity dates of December 2021. The Company's investment portfolio is managed by Kayne Anderson Investment Management, a related party. At January 2, 2000, investments available for sale consisted of the following (in thousands):
Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- Corporate securities $ 7,196 $ 117 $ (1,336) $ 5,977 Convertible securities 318 -- (11) 307 Mortgage backed securities 721 56 -- 777 ------- ------- ---------- -------- Total debt securities 8,235 173 (1,347) 7,061 Equity securities 3,047 248 (530) 2,765 ------- ------- ---------- -------- Total investments available for sale $11,282 $ 421 $ (1,877) $ 9,826 ======= ======= ========== ========
During the quarters ended April 4, 1999 and July 4, 1999, the Company recognized a write-down of approximately $1.6 million and $0.5 million, respectively, on investments it considered to be permanently impaired. The Company subsequently sold these securities. 8 3. Extraordinary Item As of July 2, 2000, the Company's Board of Directors had authorized the Company to purchase up to 750,000, or approximately 22% of the 3,400,000 shares, of the Glacier Water Trust Preferred Securities (AMES: HOO_pa) issued by Glacier Water Trust I, a wholly owned subsidiary of the Company, in the open market as part of the Company's stock repurchase plan. During the quarter ended July 2, 2000, the Company repurchased 59,500 shares of the Trust Preferred Securities at an average price of $16.07 per share. This resulted in a net extraordinary gain of $460,000, which was the result of a gain of $531,000, less the write-off of $71,000 of related deferred debt costs. For the six-month period ended July 2, 2000, the Company repurchased 186,200 shares at an average price of $15.57, which resulted in a net extraordinary gain of $1,533,000. The net extraordinary gain of $1,533,000 was the result of a gain of $1,755,000 less the write-off of $222,000 of related deferred debt costs. 4. New Credit Facility On June 23, 2000, the Company entered into a new $10.0 million credit facility with Tokai Bank of California with a maturity date of November 1, 2001. The credit facility requires quarterly interest payments at the Bank's prime rate (9.5% per annum at June 23, 2000) or LIBOR plus 1.90% (8.62% per annum at June 23, 2000). As of July 2, 2000, the Company had approximately $3.5 million of funds available under the agreement. 9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Overview - -------- As of July 2, 2000, the Company operated 13,817 machines in the United States and Mexico compared to 13,129 machines in service last year. As of July 2, 2000, the Company had 11,510 outside machines and 2,307 in-store machines compared to 11,764 outside machines and 1,441 in-store machines in service at the same time last year. Revenues - -------- For the quarter ended July 2, 2000, revenues increased $1,707,000 or 12.0% to $15,939,000 from $14,232,000 for the second quarter a year ago. For the six- month period ended July 2, 2000, revenues increased $1,869,000 or 7.0% to $28,724,000 from $26,855,000 for the same period in the prior year. The increase in revenues for the quarter and the six-month period ended July 2, 2000 was due to the increase in the average number of machines in operation during the six- month period and the increase in the average revenue per machine compared to the same period last year. Costs and Expenses - ------------------ Operating expenses for the quarter ended July 2, 2000 increased $1,043,000 to $10,349,000, or 64.9% of revenues, compared to $9,306,000, or 65.4% of revenues in the same period last year. Operating expenses for the six-month period ended July 2, 2000 increased to $18,936,000, or 65.9% of revenues, compared to $17,541,000, or 65.3% of revenues in the same period last year. The increase in total operating expenses for the quarter and the six-month period ended July 2, 2000 was the result of increased commissions due to higher revenues and increased servicing costs resulting from the Company's expansion into new market areas since last year. Selling, general and administrative ("SG&A") expenses for the quarter ended July 2, 2000 decreased $285,000 to $2,282,000, or 14.3% of revenues, compared to $2,567,000, or 18.0% of revenues in the same period last year. SG&A expenses for the six-month period decreased $477,000 to $4,279,000, or 14.9% of revenues, compared to $4,756,000, or 17.7% of revenues in the same period last year. The decrease in total SG&A expenses for both the quarter and six-month period ended July 2, 2000 was primarily due to a decrease in legal expenses incurred in connection with the alleged patent infringement and anti-trust claims made against the Company by a competitor that have since been dismissed. Depreciation and amortization expense was $3,077,000 for the quarter ended July 2, 2000, compared to $2,582,000 in the same period last year. Depreciation and amortization expense was $6,110,000 for the six-month period ended July 2, 2000, compared to $5,182,000 for the same period last year. The increase in total depreciation and amortization expense was due to the increased number of machines placed in service since last year. Interest expense decreased to $1,785,000, for the quarter ended July 2, 2000, compared to $2,011,000 in the same period last year. Interest expense for the six-month period ended July 2, 2000 decreased to $3,568,000, compared to $3,991,000 in the same period last year. The decrease in interest expense for both the quarter and the six-month period was the result of lower debt levels this year compared to last year. The lower debt levels were associated by the Company's repurchase of the Trust Preferred Securities. The Company had $302,000 of investment income in the quarter ended July 2, 2000 compared to investment losses of $247,000 for the same quarter last year. The Company 10 had $541,000 of investment income in the six-month period ended July 2, 2000 compared to $1,750,000 of investment losses in the same period last year. The losses last year were associated with the write-down of $2.1 million for investments of the Company deemed to be permanently impaired. For the quarter ended July 2, 2000, the Company reported a net extraordinary gain of $460,000 resulting from the early retirement of debt. During the quarter ended July 2, 2000, the Company repurchased 59,500 shares of the Trust Preferred Securities at an average price of $16.07 per share. The net extraordinary gain of $460,000 was the result of a gain of $531,000 less the write-off of $71,000 of related deferred debt costs. For the six-month period ended July 2, 2000, the Company repurchased 186,200 shares at an average price of 15.57, which resulted in a net extraordinary gain of $1,533,000. The net extraordinary gain of $1,533,000 was the result of a gain of $1,755,000 less the write-off of $222,000 of related deferred debt costs. As a result of the foregoing, the Company incurred a loss before extraordinary gain on the early retirement of debt of $1,252,000, or $.44 per basic and diluted share for the quarter ended July 2, 2000 compared to a loss of $1,713,000, or $0.61 per basic and diluted share for the quarter ended July 4, 1999. After giving effect to the extraordinary gain, the net loss was $792,000, or $0.28 per basic and diluted share for the quarter ended July 2, 2000, compared with a loss of $1,713,000, or $0.61 per share for the same quarter last year. For the six-months ended July 2, 2000, the Company incurred a loss before extraordinary gain on the early retirement of debt of $3,628,000, or $1.28 per basic and diluted share compared to a loss before extraordinary gain of $4,306,000, or $1.50 per basic and diluted share for the same period last year. After giving effect to the extraordinary gain, the net loss for the six-month period was $2,095,000, or $0.74 per basic and diluted share compared to a net loss of $4,306,000, or $1.50 per share for the same six-month period last year. Liquidity and Capital Resources - ------------------------------- The Company's primary sources of liquidity and capital resources were cash and investments, cash flows from operations and funds available under the Company's Credit Facility. On June 23, 2000, the Company entered into a new credit facility with Tokai Bank of California which provides for borrowings of up to $10.0 million. The credit facility which has a current maturity date of November 1, 2001 requires quarterly interest payments at the Bank's prime rate (9.5% per annum at June 23, 2000) or LIBOR plus 1.90% (8.62% per annum at July 2, 2000). The new credit facility requires the Company to maintain certain financial covenants throughout the term of the facility. As of July 2, 2000, the Company had approximately $3.5 million of funds available under the credit facility. At July 2, 2000, the Company had cash and cash equivalents and marketable securities of $8.9 million and working capital of $9.6 million. Net cash provided by operating activities was $0.2 million; net cash used in investing activities was $3.3 million; and net cash provided by financing activities was $0.4 million for the six-month period ended July 2, 2000. The Company's stockholders' equity as of July 2, 2000 was $2,236,000, which amount is below the American Stock Exchange's minimum stockholders' equity requirement of $4.0 million. The Company believes that its cash and investments on hand, cash flow from operations and availability under its Credit Facility, will be sufficient to meet its anticipated operating and capital requirements, including its investment in vending machines, as well as distributions related to the Trust Preferred Securities, for at least the next twelve months. Through July 2, 2000, the Company had repurchased 528,000 shares of Trust Preferred Securities at an average price of $15.95. On April 12, 2000, the Company announced that the Company's Board of Directors authorized an increase in the maximum number of Trust Preferred 11 Securities authorized to be repurchased in the open market as part of the Company's stock repurchase plan from 500,000 shares to 750,000 shares. ITEM 3 - QUANTITATIVE AND QUALITIVE DISCLOSURE ABOUT MARKET RISK The Company's primary market risk exposures are interest rate risk and equity price risk. At July 2, 2000, the Company held a portfolio of marketable securities with an estimated fair value equal to $7,372,000. Of that amount, the estimated fair value of the Company's total debt investments available for sale was $4,575,000, which included no convertible debt securities, and the estimated fair value of the Company's total equity securities available for sale was $2,797,000, including $1,795,000 in convertible preferred securities. The Company's exposure to interest rate risk relates primarily to the opportunity cost of fixed rate obligations. The Company's exposure to equity price risk relates primarily to the risk that the market price of a security may fluctuate or drop over time. The Company's investment portfolio is managed by Kayne Anderson Investment Management, a related party, primarily in fixed rate corporate bonds and mortgage backed securities. The table below presents principal cash flows and related weighted average interest rates by expected maturity dates for the Company's convertible investments:
Cash Flow (in thousands) ----------------------------------------------------------------------------------------- 2000 2001 2002 2003 2004 Thereafter Total ---- ---- ---- ---- ---- ---------- ----- Security - -------- Convertible Preferred Stock Principal $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Interest/(1)/ 76 152 152 152 152 /(2)/ /(2)/ Weighted average Interest rate 9.5% 9.5% 9.5% 9.5% 9.5% 9.5%
/(1)/ Dividends paid-in-kind have been included (based on their cash value) in the calculations for the convertible preferred stock. /(2)/ Beyond 2004, interest payments on convertible preferred stock generally continue so long as the Company continues to hold the security. 12 Statements in this report that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements with respect to the financial condition and results of operations of the Company involve risks and uncertainties including, but not limited to, trade relations, dependence on certain locations and competition. Further information on potential factors which could affect the financial condition and results of operations of the Company is included in the filings of the Company with the Securities and Exchange Commission, including, but not limited to, the Company's Registration Statement on Form S- 2, as amended, (File No. 333-40335) and its Annual Report on Form 10-K for the year ended January 2, 2000. PART II - OTHER INFORMATION 13 PART II - OTHER INFORMATION (continued) Item 6. Exhibits and Reports on Form 8-K a. Exhibits -------- Exhibits 10.7 Credit Facility dated June 23, 2000 with Tokai Bank of California Exhibit 27.1 Financial Data Schedule. b. Reports on Form 8-K ------------------- None EXHIBITS -------- 10.7 Credit Facility dated June 23, 2000 with Tokai Bank of California 27.1 Financial Data Schedule SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GLACIER WATER SERVICES, INC. Date: August 8, 2000 By: /s/ Jerry A. Gordon ------------------- Jerry A. Gordon President and Chief Executive Officer Date: August 8, 2000 By: /s/ W. David Walters -------------------- W. David Walters Senior Vice President and Chief Financial Officer 14 EX-10.7 2 0002.txt CREDIT FACILITY WITH TOKAI BANK OF CALIFORNIA [LOGO OF TOKAI BANK] EXHIBIT 10.7 REVOLVING LOAN AGREEMENT THIS REVOLVING LOAN AGREEMENT ("Agreement") is made as of June 23, 2000 by and between GW SERVICES, INC., a California corporation ("GW") and GLACIER WATER SERVICES, INC., a Delaware corporation ("Glacier"), (collectively "Borrower"), and TOKAI BANK OF CALIFORNIA, a California banking corporation ("Lender"). A. Borrower has applied to Lender for a loan in the principal amount of TEN MILLION AND 00/100THS DOLLARS ($10,000,000.00). B. Lender has agreed to make the loan to Borrower upon the terms and conditions hereof. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: DEFINITIONS AND INTERPRETATIONS. For purposes of this Agreement, the following terms shall have the following meanings: 1.1 Definitions. The definitions set forth in the Recitals are incorporated ----------- herein by reference. "Advance" shall mean any advance of Loan Proceeds by the Lender under the Revolving Loan. "Agreement" shall mean this Revolving Loan Agreement, either as originally executed or as it may from time to time be supplemented, modified, or amended. "Affiliate" shall mean any person or business entity, directly or indirectly, related to, in control of, controlled by or under the common control of Borrower, or of a successor thereof, whether through merger, consolidation, transfer of assets or otherwise. "Assets" shall have the meaning usually given that term in accordance with GAAP, but shall exclude sums due to Borrower from Affiliates (other than subsidiaries). "Business Day" shall mean a day of the year on which banks are not required or authorized to close in California. "Compensating Balances" shall mean the average balances in the Borrower's non-interest bearing account with Lender during the applicable period less the sum of float, reserves and balances required to cover service charges to maintain the account. These amounts will be computed in accordance with customary Lender practices which may change from time to time. "Contingent Liabilities" shall mean all contingent liabilities as determined and computed in accordance with GAAP. "Cross Default" shall mean as described in the Note(s). "Current Assets" shall mean all current assets as determined and computed in accordance with GAAP (excluding loans to officers and employees). "Current Liabilities" shall mean all current liabilities as determined and computed in accordance with GAAP. Page 1 of 16 "ERISA" shall mean the Employee Retirement Income Security Act of 1974 as the same may be amended from time to time, and, unless the context otherwise requires, the regulations thereunder. "Event of Default" shall mean any of those events specified in Section 5 hereof. "Financial Statements" means balance sheets, income statements, reconciliation of capital structure, statements of sources and applications of funds together with appropriate notes and footnotes in accordance with GAAP. Financial Statements provided Lender in accordance with this Agreement shall be reviewed. "Financing Statement" shall mean a financing statement (Form UCC-1) given by Borrower to Lender covering the FF&E and all other personal property and/or fixtures owned by Borrower. "GAAP" shall mean generally accepted accounting principles consistently applied and maintained throughout the period indicated and consistent with the prior financial practice of Borrower except for changes mandated by the Financial Accounting Standards Board or any similar accounting authority of comparable standing. "Government Agency" or "Government Agency" shall mean any federal, state or local governmental or quasi-governmental agency, authority, board, bureau, commission department, instrumentality or public body, court administrative tribunal, or public utility. "Insurance Policies" shall mean any of the policies of insurance specified in Section 4.1 hereof. "Laws" shall mean, collectively, all federal, state and local laws, rules, regulations, ordinances, and codes. "Liabilities" shall have the meaning usually given that term in accordance with GAAP. "Loan" shall mean the loan described in Section 3 of this Agreement in the principal amount of TEN MILLION AND 00/100THS DOLLARS ($10,000,000.00). "Loan Documents" shall mean the Note, Security Agreement, Financing Statement, this Agreement, and such other documents as Lender may require Borrower to give to Lender as evidence of and/or security for the Loan. "Loan Proceeds" shall mean all funds advanced by Lender as a Loan to Borrower under this Agreement. "Maturity Date" shall mean November 1, 2001. "Net Profit" shall have the meaning usually given that term in accordance with GAAP. "Note" shall mean the Revolving Promissory Note(s) of Borrower payable to the order of Lender, evidencing the Loan. "Organizational Documents" shall mean: (a) Borrower's Articles of Incorporation. (b) An affidavit of Borrower signed by an officer of Borrower, where applicable, in form and substance satisfactory to Lender affirming the authority of Borrower to borrow the Page 2 of 16 Loan and enter into the Loan Documents, and affirming the names and signatures of all officers of Borrower authorized to execute documents in connection with the Loans. "PBGC" means the Pension Benefit Guaranty Corporation or any successor established under ERISA. "Person" shall mean an individual, corporation, partnership, joint venture, trust or unincorporated organization or a Government Agency. "Plan" means an employee benefit plan or other plan maintained for employees of Borrower and covered by Title IV of ERISA. "Prime Rate" shall mean Lender's Prime Rate which is the rate announced from time to time by Lender to be the Prime Rate as reflected in the books and records of Lender. The Prime Rate may vary from time to time and the interest rate shall automatically change on the same day the Prime Rate changes. "Property" shall mean the property or properties on which the Borrower maintains its offices and conducts its business. "Security Agreement" shall mean Commercial Security Agreement of even date herewith executed by Borrower in favor of Lender. "Tangible Net Worth" shall mean the excess of Assets over Liabilities, excluding, however, from the determination of Assets: (i) all assets that would be classified as intangible assets under GAAP, including without limitation, goodwill (whether representing the excess of cost over book value of assets acquired or otherwise), negative goodwill, patents, trademarks, trade names, copyrights, franchises and deferred charges (including, without limitation, unamortized debt discount and expense, organization costs and research and development costs); and (ii) subordinated debt. "Working Capital" shall mean the existence of Current Assets, excluding LIFO reserves, over Current Liabilities as those terms are understood in accordance with GAAP. 1.2 Accounting Terms. All accounting terms not specifically defined herein ---------------- shall be construed in accordance with GAAP consistent with those applied in the preparation of the Financial Statements referred to in Section 4.14 and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles. 1.3 Use of Defined Terms. Any defined terms used in the plural shall include -------------------- the singular and such terms shall encompass all members of the relevant class. 1.4 Schedules And Exhibits. All schedules and exhibits to this Agreement, ---------------------- either as originally existing or as the same may from time to time be supplemented, modified or amended, are incorporated herein by reference. 1.5 References. Any reference to this Agreement or any other document ---------- shall include such document both as originally executed and as it may from time to time be supplemented and modified. References herein to Paragraphs, Sections and Exhibits shall be construed as references to this Agreement unless a different document is named. 1.6 Other Terms. The term "document" is used in its broadest sense and ----------- encompasses agreements, certificates, opinions, consents, instruments and other written material of every kind. The terms "including" and "include" shall mean "including (include), without limitation." Page 3 of 16 2. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. ---------------------------------------------- Borrower hereby represents and warrants to Lender as of the date of this Agreement, the date the Loan Proceeds are disbursed to Borrower, and each and every date during the existence of the Loan, or any portion thereof, as the context admits or requires, that: 2.1 Borrower's Capacity. GW is, and shall continue to be a corporation duly -------------------- organized and existing under the Laws of the State of California, and Glacier is and shall continue to be a corporation duly organized and existing under the Laws of the State of Delaware and Borrower is duly qualified to do business in any state in which the nature of its business requires it to be so qualified. 2.2 Validity Of Loan Documents. The Loan Documents are and shall continue --------------------------- to be in all respects valid and binding upon Borrower according to their terms, subject to all Laws, including equitable principles, insolvency laws, and other matters applying to creditors generally; provided, however, that the implementation of such Laws do not and will not affect the ultimate realization of the security afforded thereby. The execution and delivery by Borrower of and the performance by Borrower of all its obligations under the Loan Documents have been duly authorized by all necessary action and do not and will not: (a) Require any consent or approval not heretofore obtained or any other person holding any interest or entitled to receive any interest issued or to be issued by Borrower or otherwise; (b) Violate any provision of the Organizational Documents or other agreements to which Borrower is bound; (c) Result in or require the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest, claim, charge, right of others or other encumbrance of any nature (other than under the Loan Documents) upon or with respect to any property now owned or leased or hereafter acquired by Borrower; (d) Violate any provision of any Laws, or of any order, writ judgment, injunction, decree, determination, or award; (e) Result in a breach of or constitute a default under, cause or permit the acceleration of any obligation owed under, or require any consent under any indenture or loan or credit agreement or any other agreement lease, or instrument to which Borrower is a party or by which Borrower or any property of Borrower is bound or affected. 2.3 Borrower Not in Default Or Violation. Borrower is not in default under ------------------------------------- or in violation of any Laws, order writ, judgment, injunction, decree, determination or award. Borrower is not in default under any obligation, agreement, instrument loan, or indenture, whether to Lender or otherwise, or any lease. No event has occurred and is continuing, or would result from the making of the Loans or an Advance, which constitutes an Event of Default, or would constitute an Event of Default but for the requirement that notice be given or time elapse or both. 2.4 No Governmental Approvals Required. Borrower does not require any ----------------------------------- authorization, consent, approval, order, license, exemption from, or filing, registration, or qualification with, any Governmental Agency in connection with the execution and delivery by Borrower, and the performance by Borrower, of all or any of its obligations under, the Loan Documents, except that filing and/or recording with Governmental Agencies may be required to perfect liens, security interest, or other charges or encumbrances granted Lender by Borrower. Page 4 of 16 2.5 Tax Liability. Borrower has filed and shall file all tax returns (federal, -------------- state, and local) required to be filed and has paid and shall pay all taxes shown thereon to be due and all property taxes due, including interest and penalties, if any. 2.6 Financial Statements. All financial statements, information and other data --------------------- which have been and which may hereafter be submitted by Borrower to Lender are true, accurate and correct and have been and will be prepared in accordance with generally accepted accounting principles consistently applied and accurately represent the financial condition of Borrower and, as applicable, the other information disclosed therein. Since the most recent submission of any such financial statement, information or other data to Lender, the Borrower represents and warrants that no material adverse change in the financial condition or operations of the Borrower has occurred which has not been fully disclosed to Lender in writing. 2.7 Pending Litigation. There are no actions, suits, or proceedings pending, ------------------- or to the knowledge of Borrower threatened, against or affecting the Borrower, or involving the validity or enforceability of any of the Loan Documents or the priority of the lien thereof, at Law or in equity, or before or by any Governmental Agency, except actions, suits and proceedings that are fully covered by insurance or which, if adversely determined, would not substantially impair the ability of Borrower to perform each and every one of its obligations under and by virtue of the Loan Documents; and Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or any Governmental Agency. 2.8 Violation Of Laws. Borrower has no knowledge of any violations or ----------------- notices of violations of any Laws relating to the Property. 2.9 Compliance With Zoning Ordinances And Environmental Laws. Borrower does -------------------------------------------------------- not presently, and will not in the future, use, store, manufacture, generate, transport to or from, or dispose of any toxic substances, hazardous materials, hazardous wastes, radioactive materials, flammable explosives or related material on or in connection with the Property or the business of Borrower on the Property. Borrower does not presently, and will not in the future, permit any lessee on the Property to use, store, manufacture, generate, transport to or from, or dispose of any toxic substances, hazardous materials, hazardous waste, radioactive materials, flammable explosives, related material on or in connection with the Property or the business on the Property. ("Toxic substances," "hazardous materials" and "hazardous waste" shall include, but not be limited to, such substances, materials and wastes which are or become regulated under applicable Laws or which are classified as hazardous or toxic under applicable Laws.) Borrower shall not seek, make or consent to any change in the zoning, conditions of use, or any other applicable land use permits, approvals or regulations pertaining to the Property, or any portion thereof, which would constitute a violation of the warranties and representations herein contained, or would otherwise impair the ability of Borrower to complete construction of any improvements now underway constituting the Property, or would change the nature of the use or occupancy of the Property. 2.10 Compliance With ERISA. Borrower does not and shall not maintain any --------------------- employee benefit plan or other plan maintained for employees of Borrower which is or might be deemed to be covered by Title IV or ERISA, except plans that are or shall be in compliance with all applicable provisions of ERISA. No Reportable Event has occurred or is continuing with respect to any Plan. 2.11 Solvency. Borrower is and shall continue to be able to pay its debts as --------- they mature and the realizable value of its Assets is, and at all times that it may have obligations hereunder shall continue to be, sufficient to satisfy any and all obligations hereunder. Page 5 of 16 2.12 Principal Place of Business. The principal place of business of --------------------------- Borrower is, and will continue to be as set forth under Section 7.11 of this Agreement. In the event that Borrower hereafter intends to move its principal place of business, it shall first give at least thirty (30) days prior written notice to Lender of its intention so to move, the date that such move is anticipated, and its new address. No later than ten (10) days after commencement of the move by Borrower, Borrower will deliver such new Financing Statements (on Form UCC-1), Continuation Statements (on Form UCC-2) or other instruments as Lender may require. 2.13 Permits. Borrower possesses all licenses, permits, franchises, ------- patents, copyrights, trademarks, and trade names, or rights thereto, that are necessary to conduct its business substantially as now conducted and as presently proposed to be conducted, and Borrower is not in material violation of any valid rights of others with respect to any of the foregoing. 3. THE LOAN. -------- 3.1 The Loan. Lender agrees, on the terms and conditions hereinafter set -------- forth, to make Advances to Borrower in aggregate principal amounts outstanding at any time not to exceed TEN MILLION AND 00/100 DOLLARS (10,000,000.00). Borrower may borrow, reborrow, repay, or prepay pursuant to this Section. 3.2 Note. The Loan(s) shall be evidence by the Note. Each Advance made by ---- Lender and all payments under the Loans shall be evidenced and recorded by Lender upon Loan Records, which recordation shall be prima facie evidence of such Advance and payment; provided, however, that the failure by Lender to make any such recordation shall not limit or otherwise affect the obligation of Borrower hereunder or under the Note. 3.3 Interest. Interest on the outstanding principal balance under the -------- Note shall accrue at the rate provided for in the Note and shall be paid as provided for in the Note. 3.4 Use of Proceeds. The Loan Proceeds shall be used by Borrower for --------------- working capital and capital expenditures. 3.5 Conditions Precendent to Loan. The obligation of Lender to make the ----------------------------- Loan is subject to and expressly conditioned upon the following: (a) Borrower, at its sole expense, shall deliver to Lender, at its office in Los Angeles, California, on or before the date of the first Advance the following, in form and substance satisfactory to the Lender, in Lender's sole opinion and judgement: (i) The Note; (ii) The Security Agreement; (iii) The Financing Statement; (iv) This Agreement; (v) The Loan Disbursement Instructions; (vi) The Agreement to Furnish Insurance; (vii) The Corporate Resolution to Borrow; (viii) The Insurance Policies; (ix) Such additional assignments, agreements, certificates, reports, approvals, instruments, documents, financing statements, consents, and opinions as lender may reasonably request. (b) Review and approval by Lender, its counsel, or both, of true and correct copies of Borrower's Organizational Documents, matters affecting the Property, and all other Loan Documents: Page 6 of 16 (c) Review and approval by Lender of true and correct copies of Financial Statements of Borrower: (d) No suit, action, or other proceeding of material consequence shall be pending or threatened which seeks to restrain or prohibit the consummation of the transactions contemplated by this Agreement, or to obtain damages or other relief in connection therewith. 3.6 Limitations On Advances And Payments ------------------------------------ (a) The Loan Proceeds shall be disbursed in accordance with the provisions of Section 3.4 above: (b) The Note may be prepaid as provided for in the Note; (c) Payments shall be as provided for in the Note: (d) Borrower hereby authorizes Lender, if and to the extent any payment of principal or interest or sum otherwise due hereunder is not promptly made pursuant to the Note, and to the extent of any obligation of Borrower to Lender under this Agreement or any other agreement, to charge against any account of Borrower with Lender an amount equal to part or all of the principal costs and expenses, and accrued interest from time to time due and payable to Lender under the Note or otherwise. Lender is under no obligation to charge such past due payments against any account of Borrower, but may elect to do so in Lender's sole and absolute opinion and judgement: (e) If, with respect to the Loan there is, due to either (i) the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in any Law or regulation or in the interpretation thereof, or (ii) the compliance by Lender with any guidelines or request from any central bank or other governmental authority (whether or not having the force of Law), any increase in the cost of Lender of agreeing to make or making, funding or maintaining such Loan, then Borrower shall from time to time, upon demand by Lender, pay to Lender additional amounts sufficient to indemnify Lender against such increased costs. A certificate as to the amount of such increased costs submitted to Borrower by Lender shall be prima facie evidence of the increased costs, and shall be immediately due and payable upon demand. 3.7 Security. The Loan shall be secured by the following, in each -------- case, subject only to the Permitted Encumbrances (a) The Security Agreement. 4 BORROWER'S COVENANTS -------------------- In addition to anything else herein stated, Borrower agrees: 4.1 Insurance. To obtain and at all times maintain hazard and --------- liability insurance in amount, form and issued by a company or companies satisfactory to Lender. The insurance is to include business interruption, boiler and machinery and glass insurance. Lender is to be a loss payable payee under the hazard insurance and an additional insured under said liability insurance. Said liability insurance is to include, but not be limited to workman's compensation and employers liability insurance. All policies or a certificate acceptable to Lender shall be delivered to Lender together with evidence of payment of premium thereon and an agreement to give Lender at least thirty (30) Business Days prior notice of any material changes, termination, or expiration of the policies. All insurance policies provided Page 7 of 16 under any lease with tenants of the Property shall be assigned to Lender as additional security. 4.2 Right Of Entry. Lender and lender's employees or agents shall have the right -------------- at all times to enter upon Borrowers premises for whatever purpose Lender deems appropriate, including, without limitation inspection of the premises and the posting of such notices and other written or printed material thereon as Lender may deem appropriate or desirable. 4.3 Lender May Examine Books and Records. Lender shall have the right, from ------------------------------------ time to time, acting by and through its employees or agents, to examine the books, records, and accounting data of Borrower, and to make extracts therefrom or copies thereof. Borrower shall promptly make such books, records, and accounting data available to Lender, as stated above, upon written request and upon like request shall promptly advise Lender in writing, of the location of such books, records, and accounting data. 4.4 No Automatic Set-Off. The existence of any deposit account with Lender -------------------- and/or the fact of any sum or sums being on deposit in said account shall in no way constitute as set-off against or be deemed to compensate the obligation of the Loan or any payment or performance due under this Agreement or any of the other Loan Documents, unless and until the Lender, by affirmative action shall so apply said account or any portion thereof and then only to the extent thereof so designated by Lender. 4.5 Payment Of Taxes. Borrower shall pay and discharge all taxes, assessments, ---------------- and governmental charges or levies imposed upon Borrower or upon its income or profits, or upon any properties belonging to it prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid might become a lien or charge of a material nature upon any of its properties, provided that Borrower shall not be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it maintains adequate reserves with respect thereto. 4.6 Preservation Of Existence. Borrower, if other than a natural person, will, ------------------------- so long as Borrower remains obligated on the Loan, do all things necessary to preserve and keep in full force and effect its organizational status, and will comply with all Laws, orders and decrees of any Governmental Agency or court applicable to Borrower or in the Project. 4.7 Compliance With Laws And Contracts. Borrower shall comply with the ---------------------------------- requirements of all applicable Laws and orders of any Governmental Agency, provided that if Borrower has not so complied by the date prescribed in any such Law or order, regulation. Borrower shall comply therewith by the date set forth in any order of the Governmental Agency charged with the enforcement of such Law, rule or regulation if such date is later, and comply with all contracts, agreements, indentures or instruments by which it is bound. 4.8 Maintenance Of Properties. Borrower shall use its best efforts to maintain ------------------------- and preserve, or cause to be maintained and preserved, all of its properties, necessary or useful in the proper conduct of its business, including such as may be under lease, in good working order and condition, ordinary wear and tear excepted. 4.9 Debt Service Coverage Ratio. Borrower shall maintain a debt Service Coverage --------------------------- Ratio of not less than 1.50:1.0. For purposes of this section, the term "Debt Service Coverage Ratio" shall mean the ratio of the combined annualized earnings before interest, taxes, depreciation, amortization and other non-cash expense (plus or minus) derived from realized gains or losses from investment divided by the sum of current portion maturities of long term debts and/or capital lease obligations plus annualized interest expense as those terms are understood in accordance with GAAP. Page 8 of 16 4.10 Minimum Liquidity. Glacier shall maintain at all times a minimum ----------------- liquidity of not less than $2,000,000.00. For purpose of this section, the term "Liquidity" shall mean cash and marketable securities, excluding margined marketable securities or pledged cash. The liquidity shall be monitored by Lender on a quarterly basis. 4.12 Limitation On Advances and Investment. Borrower shall not make or permit ------------------------------------- to exist any advances or loans to, or any investments in, any person, and shall not assume or incur any contingent obligation or liability, as guarantor or otherwise, with respect to the obligations of any person, whether by contributions to capital, purchase of stock, securities or other evidences of indebtedness or otherwise, except as provided for herein. 4.13 Limitation On Disposition of Assets. Except for Assets or properties ----------------------------------- sold, leased or otherwise disposed of in the ordinary course of business, and the sale or leasing of properties or Assets of less than $25,000,000.00 in the aggregate. Borrower shall not convey, sell, lease or otherwise dispose of properties or Assets without the prior written content of the Lender which consent shall not be unreasonably withheld. 4.14 Tangible Net Worth. Borrower shall maintain a minimum effective Tangible ------------------ Net Worth including subordinated debt at all times of not less than $60,000,000.00. Starting January 2, 2001, the effective Tangible Net Worth including subordinated debt shall be not less than $50,000,000.00. 4.15 Operating Profit. Borrower shall reflect operating profit on the ---------------- year-to-date basis for the period ending June 30, 2001, and thereafter. 4.16 Reporting Requirements. So long as Borrower shall have any obligation to ---------------------- Lender under this Agreement. Borrower shall deliver to the Lender the following financial statements and reports: (a) As soon as available and in any event within five (5) days after Borrower knows or should reasonably have known of the commencement of any legal action against it, except actions seeking money judgment that are fully insured or bonded, a report of the commencement of such action containing a statement signed by the chief financial officer of Borrower setting forth details of such legal action and any action Borrower proposes to take with respect thereto; (b) Within five (5) days of the occurrence of any Event of Default or event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, a report regarding such Event of Default or event setting forth details and describing any action which Borrower proposes to take with respect thereto, signed by an officer of Borrower; (c) Any change in name of Borrower or use of any trade names or trade styles not presently used; (d) As soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Glacier, a copy of the Glacier's Financial Statements for such year, in form and substance acceptable to Lender; (e) As soon as available and in any event within forty-five (45) days after the end of each quarter, complete copies of Form 10-Q quarterly report of Glacier, pursuant to Section Page 9 of 16 13 or 15(d) of the Securities Exchange Act of 1934, in form and substance acceptable to Lender. (f) As soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Glacier complete copies of Form 10-K annual report of Glacier, pursuant to Section 13 for 15(d) of the Securities Exchange Act of 1934, in form and substance acceptable to lender; (g) As soon as available and in any event within ninety (90) days after the end of each fiscal year, a copy of Glacier's annual budget in form and substance acceptable to Lender; (h) Within sixty (60) days after the end of each fiscal year, a certificated of the president and chief financial officer of the Borrower stating that neither such officer has any knowledge that an Event of Default or any event which, with notice or lapse of time, or both, would constitute an Event of Default, has occurred and is continuing, or if, in the opinion of either such officer, an Event of Default or such an event has occurred and is continuing, a statement as to the nature thereof; (i) Promptly upon receipt thereof, one (1) copy of any other report submitted to Borrower by independent accounts in connection with any annual, interim or special audit made by them, of the books of Borrower; (j) Within five (5) days of (i) any contact from any Governmental Agency concerning any environmental protection Laws, including, but not limited to, any notice of any proceeding or inquiry with respect to the presence of any hazardous waste, toxic substances or hazardous materials on the Property or the migration thereof from or to other property, (ii) any and all claims made or threatened by any third party against or relating to the Property concerning any loss or injury resulting from toxic substances, hazardous waste, or hazardous materials, or (iii) Borrower's discovery of any occurrence or condition on any property adjoining or in the vicinity of the Property that could cause the Property, or any part thereof, to be subject to any restrictions on the ownership, occupancy, transferability, or loss of the Property under any Law. Borrower shall delivery to Lender a report regarding such contract and setting forth in detail and describing any action which Borrower proposes to take with respect thereto, signed by an officer of Borrower; (k) Within five (5) business days of becoming aware of any developments or other information which may materially and adversely affect Borrower's properties, business, prospects, profits or condition (financial otherwise) or Borrower's ability to perform this agreement or the other Loan Documents, telephonic or telegraphic notice specifying the nature of such development or information and such anticipated effect, which shall be promptly confirmed in writing; (i) Such other information respecting the business, properties or the condition or operations, financial or otherwise, of Borrower as the Lender may from time to time request. 4.17 Transfer. There shall not be, wither voluntarily, involuntarily, or by operation of Law, a transfer or sale of real and/or personal property. Page 10 of 16 5. EVENTS OF DEFAULT ----------------- An "Event of Default" shall be deemed to have occurred hereunder if: 5.1 Default Under Loan Documents. Borrower shall fail to pay principal or ---------------------------- interest, or both, when due under the terms of the Notes, or Borrower shall fail to perform or observe any term, covenant, or agreement contained in this Agreement or in any of the other Loan Documents, which failure may be cured by the payment of money, and, in any of such events, such failure shall continue for a period of ten (10) days from the date such payment or performance was due; or Borrower shall fail to perform or observe any term, covenant or agreement contained in this agreement or in any of the other Loan Documents, which failure cannot be cured by the payment of money and such failure shall continue for a period of fifteen (15) days after the Lender shall have given written notice to Borrower specifying such default; or 5.2 Breach Of Warranty. Any warranties or representations made or agreed to ------------------ be made in this Agreement or in any of the other Loan Documents shall be breached in any material respect or shall prove to be false or misleading in any respect when made; or 5.3 Litigation Against Borrower. Any suit shall be filed against Borrower, --------------------------- which, if adversely determined, could substantially impair the ability of Borrower to perform any or all of its obligations under and by virtue of this agreement or any of the other Loan Documents, unless Borrower's counsel furnishes to Lender its opinion, to the satisfaction of Lender and Lenders counsel, that, in its judgment the suit is essentially without merit; or 5.4 Levy Upon Property. A levy shall be made on the Property under any ------------------ process and such levy shall not be bonded over or shall continue unstayed for thirty (30) days or more; or 5.5 Acceleration Of Other Debts. Borrower does, or omits to do, any act, or --------------------------- any event occurs, as a result of which any material obligation of Borrower, whether or not arising hereunder and/or relating to or affecting the Property or Borrower's ability to perform hereunder, may be declared immediately due and payable by the holder thereof; or 5.6 Bankruptcy. Borrower shall fail to pay its debts as they become due, or ---------- shall make an assignment for the benefit of its creditors, or shall admit, in writing, its inability to pay its debts as they become due, or shall file a petition under any chapter of the Federal Bankruptcy Code or any similar law, now or hereafter existing, or shall become "insolvent" as that term is generally defined under the Federal Bankruptcy Code, or shall in any involuntary bankruptcy case commenced against it file an answer admitting insolvency or inability to pay its debts as they become due, or shall fail to obtain a dismissal of such case within thirty (30) calendar days after its commencement or convert the case from one chapter of the Federal Bankruptcy Code to another chapter, or be the subject of an order for relief in such bankruptcy case, or be adjudged a bankrupt or insolvent, or shall have a custodian, trustee, or receiver appointed for, or have any court take jurisdiction of, its properties, or any part thereon, in any voluntary or involuntary proceeding, including, but not limited to, those for the purpose of reorganization, arrangement, dissolution, or liquidation, and such custodian, trustee, or receiver shall not be discharged, or such jurisdiction shall not be relinquished, vacated, or stayed within thirty (30) days after the appointment; or 5.7 Borrower Status. Without Lenders prior written consent, Borrower shall be --------------- liquidated, dissolved, or fail to maintain its status as a going concern; or 5.8 Execution Levy. Execution shall have been levied against the Property in -------------- excess of $1,000,000.00 or any lien creditor shall commence suit to enforce a judgment lien against the Property in excess of $1,000,000.00 and such action or suit shall not have been bonded or shall continue unstayed for a period of thirty (30) days or more; or Page 11 of 16 5.9 Attachment. Any proceeding shall be brought, the object of which is ---------- that any part of the Lender's commitment to make the Advances hereunder shall at any time be subject or liable to attachment or levy by any creditor of Borrower; or 5.10 Destruction. Any part or all of the Property in excess of ----------- $1,000,000.00 is materially damaged or destroyed by fire or other casualty and the loss shall prove to be inadequately covered by insurance actually collected or in the process of collection to restore the Property to its condition prior to such fire or other casualty; or 5.11 Eminent Domain. Any part of all of the Property shall be the subject of -------------- an eminent domain proceeding or a taking adverse to the interest of Lender; or 5.12 Misrepresentation And/Or Non-Disclosure. Borrower has made certain --------------------------------------- statements and disclosures in order to induce Lender to make the Loan and enter into this Agreement, and, in the event Borrower has made material misrepresentations or failed to disclose any material fact. Lender may treat such misrepresentation or omission as a breach of this Agreement. Such action shall not affect any remedies Lender may have for such misrepresentation or non-disclosure, as such, or under its Deed of Trust for such misrepresentation or concealment; or 5.13 ERISA. Any of the following events occur or exist with respect to ----- Borrower; (a) Any Reportable Event with respect to any Plan; (b) The filing under Title IV of ERISA of a notice of intent to terminate any Plan or the termination of any Plan; (c) Any event or circumstance that might constitute grounds entitling the PBGC to institute proceedings for the termination of, or for the appointment of a trustee to administrate any Plan, or the institution by the PBGC of any such proceeding; or 5.14 Financial Condition. There shall be any material adverse changes in ------------------- Borrower's financial condition. 6. REMEDIES. -------- 6.1 Cease Payment And/Or Accelerate. Upon, or at any time after, the ------------------------------- occurrence of an Event of Default or upon the occurrence of a default in any other joint and/or several obligation or obligations of the Borrower to Lender, Lender shall have no obligation to make any further Advances, all sums disbursed or advanced by Lender and all accrued and unpaid interest thereon shall, at the option of Lender, become immediately due and payable, and Lender shall be released from any and all obligations to Borrower under the terms of this Agreement. 6.2 Rights And Remedies Non-Exclusive. In addition to the specific rights --------------------------------- and remedies hereinabove mentioned, Lender shall have the right to avail itself of any other rights or remedies to which it may be entitled, at Law or in equity, including, but not limited to, the right to realize upon any or all of its security, and to do so in any order. Furthermore, the rights and remedies set forth above are not exclusive, and Lender may avail itself of any individual right or remedy set forth in this Agreement, or available at Law or in equity, without utilizing any other right or remedy. Page 12 of 16 7. GENERAL CONDITIONS AND MISCELLANEOUS. ------------------------------------ 7.1 Nonliability Of Lender. Borrower acknowledges and agrees that by ---------------------- accepting or approving anything required to be observed, performed, fulfilled or given to Lender pursuant to this Agreement or insurance policy Lender shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof an such acceptance or approval thereof shall not be or constitute any warranty or representation to anyone with respect thereto by Lender. 7.2 No Third Parties Benefitted. This agreement is made for the purpose --------------------------- of defining and setting forth certain obligations rights, and duties of Borrower and Lender in connection with the Loan. It shall be deemed a supplement to the Note and the other Loan Documents, and shall not be construed as a modification of the Note or other Loan Documents, except as provided herein. It is made for the sole protection of Borrower and Lender, and Lender's successors and assigns. No other person shall have any rights of any nature hereunder or by reason hereof or the right to rely hereon. 7.3 Indemnity By Borrower. Borrower hereby indemnifies and agrees to hold --------------------- harmless Lender and its directors, officers, agents and employees (individually and collectively the "Indemnitees") from and against: (a) Any and all claims, demands, actions or causes or actions that are asserted against any indemnitee by any person if the claim, demand, action or cause of action that the person has or asserts against Borrower; and (b) Any and all liabilities, losses, costs or expenses (including court costs and attorneys' fees) that any indemnitee suffers or incurs as a result of the assertion of any claim, demand, action or cause of action specified in this Section 7.3. 7.4 Change In Laws. In the event of the enactment, after the date of this -------------- Agreement, of any Laws; (a) deducting from the value of property for the purpose of taxation of any lien or security interest thereon; (b) imposing upon Lender the payment of the whole or any part of the taxes or assessments or charges or liens herein required to be paid by Borrower. (c) changing in any way the Laws relating to the taxation of deeds of trust or mortgages or security agreements, or the interest of the mortgagee or secured party in the property covered thereby; or (d) the manner of collection of such taxes so as to affect the Deed of Trust secured thereby or longer, then, and in any such event. Borrower, upon demand by Lender, shall promptly pay such taxes, assessments, charges or liens, or reimburse Lender therefor. If Borrower shall be prohibited from paying such tax or from reimbursing Lender for the amount thereof. Borrower shall execute a modification to the Loan Documents which modifications shall increase the interest rate payable pursuant to the Note so as to permit Lender to maintain its yield as if such tax had not been imposed. If Borrower shall be prohibited from executing the above-referenced modifications, Lender may, in Lender's sole opinion and judgement, declare the principal of all amounts disbursed and owing under the Note, this Agreement, and the other Loan Documents (including all obligations secured by this Agreement or the other Loan Documents) and all other indebtedness of Borrower to Lender, together with interest thereon, to be forthwith due and payable, regardless of any other specified maturity or due date. 7.5 Time Is Of The Essence. Time is of the essence of this Agreement and ---------------------- of each and every provision hereof. The waiver by Lender of any breach or breaches hereof shall not be deemed, nor shall the same constitute, a waiver of any subsequent breach or breaches. Page 13 of 16 7.6 Binding Effect; Assignment. This Agreement shall be binding upon and inure -------------------------- to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower may not assign its rights hereunder or any interest herein without the prior written consent of Lender. Lender shall have the right to assign its rights under this Agreement or the other Loan Documents and to grant participations in the Loan to others, but all waivers or abridgments of Borrower's obligations that may be granted from time to time by Lender in writing, shall be binding upon such assignees or participants. 7.7 Execution in Counterparts. This Agreement and any other Loan Document, ------------------------- except the Note, may be executed in any number of counterparts, and any party hereto or thereto may execute any counterpart, each of which, when executed and delivered, will be deemed to be an original, and all of which counterparts of this Agreement or any other Loan Document, as the case may be, taken together will be deemed to be but one and the same instrument. The execution of this Agreement or any other Loan Document by any party hereto or thereto will not become effective until counterparts hereon or thereof, as the case may be, have been executed by all the parties hereto or thereto. 7.8 Integration; Amendments; Consents. This Agreement, together with the --------------------------------- documents referred to herein, constitutes the entire agreement of the parties touching upon the subject matter hereof, supersedes any prior negotiations or agreements on such matter. No amendment, modification or supplement of any provision of this Agreement or any of the other Loan Documents shall be effective unless in writing, signed by Lender and Borrower; and no waiver of any of Borrower's obligations under this Agreement or any of the other Loan Documents or consent to any departure by Borrower therefrom shall be effective unless in writing, signed by Lender, and then only in the specific instance and for the specific purpose given. 7.9 Costs, Expenses And Taxes. Borrower shall pay to Lender, on demand: ------------------------- (a) The reasonable attorneys' fees and out-of-pocket expenses incurred by Lender in connection with the negotiation, preparation, execution, delivery and administration of the Agreement and any other Loan Document and any matter related thereto, including, but not limited to, appraisals of the Property; (b) The reasonable costs and expenses of Lender in connection with the enforcement of this Agreement and any other Loan Document and any matter related thereto, including the reasonable fees and out-of- pocket expenses of any legal counsel, independent public accountants, and other outside experts retained by Lender; and (c) All costs, expenses, fees, premiums and other charges relating to or arising from this Agreement or any of the other Loan Documents or any transactions contemplated hereby or thereby or the compliance with any of the terms and conditions hereof or thereof, including, but not limited to, recording fees, filing fees, credit report fees, release or reconveyance fees, title insurance premiums and the cost of realty tax service for the term of the Loan. All sums paid or expended by Lender under the terms of this Agreement shall be considered to be, and shall be, a part of the Loan. All such sums, together with all amounts to be paid by Borrower pursuant to this Agreement, shall bear interest from the date of expenditure at the default rate provided in the Note, shall be secured by the Deed of Trust and shall be immediately due and payable by Borrower upon demand. 7.10 Survival of Representations And Warranties. All representations and ------------------------------------------ warranties of Borrower contained herein or in any other Loan Document shall survive the making of the Loan and the execution and delivery of the Note, and are material and have been or will be Page 14 of 16 relied upon by Lender, notwithstanding any investigation made by Lender or on behalf of Lender. For the purpose of this Agreement, all statements contained in any certificate, agreement. Financial Statement or other writing delivered by or on behalf of Borrower pursuant hereto or to any other Loan Document or in connection with the transactions contemplated hereby or thereby shall be deemed to be representations and warranties of Borrower contained herein or in the other Loan Documents, as the case may be. 7.11 Notices. All notices, requests, demands, directions, and other -------- communications provided for hereunder and under any other Loan Document (a "Notice"), must be in writing and must be mailed, telegraphed, delivered or sent by telex, cable or other form of electronic written communication to the appropriate party at its respective address set forth below or, as to the other parties in accordance with this Section. Any notice given by telegram, telex, cable or other form of electronic written communication must be confirmed within forty-eight (48) hours by letter mailed or delivered to the appropriate party at its respective address. If any notice is given by mail, it will be effective three (3) calendar days after being deposited in the mails with first-class or air mail postage prepaid; if given by telegraph or cable, when delivered to the telegraph company with charges prepaid; if given by telex or other form of electronic written communication, when sent; or if given by personal delivery, when delivered. Such notices will be given to the following: To Lender: TOKAI BANK OF CALIFORNIA 300 South Grand Avenue, 5th Floor Los Angeles, California 90071 Attn: Loan Servicing Department To Borrower: GW SERVICES, INC., and GLACIER WATER SERVICES, INC. 2261 Cosmos Court Carlsbad, California 92009 7.12 Further Assurances. Borrower shall, at its sole expense and without ------------------- expense to Lender, do, execute and deliver such further acts and documents as Lender from time to time may reasonably require for the purpose of assuring and confirming unto Lender the rights hereby created or intended, now or hereafter so to be, or for carrying out the intention or facilitating the performance of the terms of any Loan Documents, or for assuring the validity of any security interest. 7.13 Governing Law. The Loan shall be deemed to have been made in California -------------- and this Agreement and the other Loan Documents shall be governed by and construed and enforced in accordance with the Laws of the State of California. 7.14 Severability Of Provisions. If any provision of this Agreement or of any --------------------------- of the other Loan Documents is held to be inoperative, unenforceable or invalid, such provision shall be inoperative, unenforceable or invalid without affecting the remaining provisions; this Agreement and the other Loan Documents shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement or the other Loan Documents; and to this end the provisions of this Agreement and the other Loan Documents are declared to be severable, remaining in full force and effect. 7.15 Joint and Several Obligations. If this Agreement is executed by more ------------------------------ than one person as Borrower, the obligations of each of such persons hereunder shall be joint and several obligations. Page 15 of 16 7.16 Construction. Whenever the context of this Agreement requires, the ------------ singular shall include the plural and the masculine gender shall include the feminine and/or neuter. 7.17 Headings. Paragraph and Section headings in this Agreement are -------- included for convenience of reference only and are not part of this Agreement for any other purpose. IN WITNESS WHEREOF, Borrower and Lender have hereunto caused this Agreement to be executed on the date first above written. "LENDER" TOKAI BANK OF CALIFORNIA a California banking corporation By: /s/ Alonso Munoz ------------------------------------ Alonso Munoz, Regional Vice President/Credit Officer Orange County Regional Office By: /s/ Anthony Huitrado ------------------------------------ Anthony Huitrado, Assistant Vice President/ Documentation Team Leader Loan Servicing Department "BORROWER" GW SERVICES, INC., a California corporation By: /s/ Jerry A. Gordon ------------------------------------ Name: Jerry A. Gordon ---------------------------------- Title: President & CEO ---------------------------------- By: /s/ W. David Walters ------------------------------------ Name: W. David Walters ---------------------------------- Title: Senior Vice President & CFO ---------------------------------- GLACIER WATER SERVICES, INC., a Delaware corporation By: /s/ Jerry A. Gordon ------------------------------------ Name: Jerry A. Gordon ---------------------------------- Title: President & CEO ---------------------------------- By: /s/ W. David Walters ------------------------------------ Name: W. David Walters ---------------------------------- Title: Senior Vice President & CFO ---------------------------------- Page 16 of 16 EX-27.1 3 0003.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-2000 JAN-03-2000 JUL-03-2000 1,560 7,372 825 0 2,801 14,210 99,285 43,566 85,195 4,607 0 0 0 0 35 85,195 28,724 28,724 29,325 29,325 0 0 3,027 (3,628) 0 (3,628) 0 1,533 0 (2,095) (0.74) (0.74)
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