1
EXHIBIT 4.02
CREDIT AGREEMENT
made and entered into
April 1, 1999
by and among
TIDEL ENGINEERING, L.P.,
TIDEL TECHNOLOGIES, INC.
and
CHASE BANK OF TEXAS, N.A.,
a national banking association
2
Index to Credit Agreement
Page
----
1. Definitions..............................................................................................1
1.1 Certain Defined Terms...........................................................................1
Adjusted LIBOR Rate.............................................................................1
Affiliate.......................................................................................1
Alternate Base Rate.............................................................................1
Alternate Base Rate Borrowing...................................................................2
Annual Audited Financial Statements.............................................................2
Annual Consolidating Financial Statements.......................................................2
Applicable Lending Office.......................................................................3
Applicable Margin...............................................................................3
Applications....................................................................................3
Assessment Rate.................................................................................3
Availability....................................................................................3
Base CD Rate....................................................................................3
Borrower........................................................................................3
Borrowing Base..................................................................................3
Borrowing Base Certificate......................................................................4
Business Day....................................................................................4
Business Entity.................................................................................4
Capital Lease Obligations.......................................................................4
Closing Date....................................................................................4
Code............................................................................................5
Collateral......................................................................................5
Commitments.....................................................................................5
Commitment Fee..................................................................................5
Compliance Certificate..........................................................................5
Consequential Loss..............................................................................5
Consolidated....................................................................................5
Contingent Obligation...........................................................................5
Current Sum.....................................................................................6
Discontinued Operations.........................................................................6
Domestic Lending Office.........................................................................6
EBITDA..........................................................................................6
Eligibility Reserves............................................................................6
Eligible Inventory..............................................................................6
Eligible Receivables............................................................................7
Environmental Claim.............................................................................8
Environmental Liabilities.......................................................................8
Environmental Permit............................................................................9
ERISA...........................................................................................9
i
3
ERISA Affiliate.................................................................................9
Event of Default................................................................................9
Excess Interest Amount..........................................................................9
Federal Funds Effective Rate....................................................................9
Financial Officer...............................................................................9
Fixed Rate......................................................................................9
GAAP...........................................................................................10
General Partner................................................................................10
Governmental Authority.........................................................................10
Guarantors.....................................................................................10
Guaranty.......................................................................................10
Hazardous Substance............................................................................10
Highest Lawful Rate............................................................................10
Indebtedness...................................................................................10
Initial Public Offering........................................................................11
Interest Coverage Ratio........................................................................11
Interest Expense...............................................................................11
Interest Option................................................................................11
Interest Payment Dates.........................................................................11
Interest Period................................................................................12
Interest Reserves..............................................................................12
Investment.....................................................................................12
Joinder Agreement..............................................................................12
Legal Requirement..............................................................................12
Letters of Credit..............................................................................12
Letter of Credit Advances......................................................................12
Letter of Credit Exposure Amount...............................................................12
LIBOR Borrowing................................................................................12
LIBOR Lending Office...........................................................................13
LIBOR Rate.....................................................................................13
Lien...........................................................................................13
Limited Partner................................................................................13
Loan Documents.................................................................................13
Loans..........................................................................................13
Lockbox Agreement..............................................................................13
Material Adverse Effect........................................................................13
Monthly Unaudited Financial Statements.........................................................14
Net Amount of Eligible Receivables.............................................................14
Net Income.....................................................................................14
Notes..........................................................................................14
Obligations....................................................................................14
Organizational Documents.......................................................................14
Parties........................................................................................15
Past Due Rate..................................................................................15
PBGC...........................................................................................15
Permitted Affiliate Transactions...............................................................15
ii
4
Permitted Dispositions.........................................................................15
Permitted Investments..........................................................................16
Permitted Investment Securities................................................................16
Person.........................................................................................16
Plan...........................................................................................16
Prime Rate.....................................................................................17
Principal Office...............................................................................17
Prior Term Loan................................................................................17
Prior Term Note................................................................................17
Proper Form....................................................................................17
Property.......................................................................................17
Quarterly Unaudited Financial Statements.......................................................17
Rate Selection Date............................................................................17
Rate Selection Notice..........................................................................18
Receivables....................................................................................18
Refinancing Indebtedness.......................................................................18
Regulation D...................................................................................18
Regulatory Change..............................................................................18
Reportable Event...............................................................................18
Request for Extension of Credit................................................................18
Requirements of Environmental Law..............................................................18
Responsible Officer............................................................................19
Revolving Commitment...........................................................................19
Revolving Loan Maturity Date...................................................................19
Revolving Loans................................................................................19
Revolving Note.................................................................................19
Security Agreements............................................................................19
Security Documents.............................................................................19
Statutory Reserves.............................................................................20
Stock..........................................................................................20
Subordinated Indebtedness......................................................................20
Subsidiary.....................................................................................20
Tangible Net Worth.............................................................................20
Term Loan......................................................................................20
Term Loan Commitment...........................................................................21
Term Loan Maturity Date........................................................................21
Term Loan Payment Date.........................................................................21
Term Note......................................................................................21
Three-Month Secondary CD Rate..................................................................21
Ultimate Parent................................................................................21
Unused Revolving Commitment....................................................................21
1.2 Accounting Terms and Determinations............................................................21
iii
5
2. Revolving Loans; Letters of Credit; Revolving Note; Payments; Prepayments;
Interest Rates..........................................................................................22
2.1 Revolving Commitment...........................................................................22
2.2 Revolving Loans................................................................................23
2.3 Commitment and Other Fees......................................................................23
2.4 Termination and Reductions of Revolving Commitment.............................................24
2.5 Mandatory and Voluntary Prepayments............................................................25
2.6 Revolving Note; Payments.......................................................................26
2.7 Application of Payments and Prepayments........................................................27
2.8 Interest Rates for Revolving Loans.............................................................27
2.9 Special Provisions Applicable to LIBOR Borrowings..............................................28
2.10 Letters of Credit..............................................................................32
2.11 Recapture......................................................................................35
2.12 Use of Proceeds................................................................................35
3. Term Loan; Term Note; Payments; Prepayments; Interest Rates.............................................35
3.1 Term Loan Commitment...........................................................................35
3.2 Mandatory and Voluntary Prepayments............................................................35
3.3 Term Note; Payments............................................................................36
3.4 Application of Payments and Prepayments........................................................37
3.5 Interest Rate for Term Loan....................................................................37
3.6 Special Provisions Applicable to the Term Loan.................................................37
3.7 Use of Proceeds................................................................................37
4. Collateral..............................................................................................38
4.1 Security Documents.............................................................................38
4.2 Filing and Recording...........................................................................38
5. Conditions..............................................................................................38
5.1 All Loans......................................................................................38
5.2 First Loan.....................................................................................39
6. Representations and Warranties..........................................................................42
6.1 Organization; Capitalization...................................................................42
6.2 Financial Statements...........................................................................42
6.3 Enforceable Obligations; Authorization.........................................................42
6.4 Other Debt.....................................................................................43
6.5 Litigation.....................................................................................43
6.6 Taxes..........................................................................................43
6.7 No Material Misstatements......................................................................43
6.8 Subsidiaries...................................................................................43
6.9 Representations by Others......................................................................43
6.10 Permits, Licenses, Etc.........................................................................44
6.11 ERISA..........................................................................................44
6.12 Title to Properties; Possession Under Leases...................................................44
6.13 Assumed Names..................................................................................44
iv
6
6.14 Investment Company Act.........................................................................45
6.15 Public Utility Holding Company Act.............................................................45
6.16 Indebtedness Agreements........................................................................45
6.17 Environmental Matters..........................................................................45
6.18 No Change in Credit Criteria or Collection Policies............................................46
6.19 Solvency.......................................................................................46
6.20 Status of Receivables and Other Collateral.....................................................46
6.21 Y2K Representation.............................................................................47
7. Affirmative Covenants...................................................................................48
7.1 Businesses and Properties......................................................................48
7.2 Taxes..........................................................................................48
7.3 Financial Statements and Information...........................................................48
7.4 Inspection.....................................................................................50
7.5 Further Assurances.............................................................................50
7.6 Books and Records..............................................................................50
7.7 Insurance......................................................................................50
7.8 ERISA..........................................................................................51
7.9 Use of Proceeds................................................................................51
7.10 Guarantors; Joinder Agreements.................................................................52
7.11 Notice of Events...............................................................................52
7.12 Environmental Matters..........................................................................52
7.13 End of Fiscal Year.............................................................................52
7.14 Pay Obligations and Perform Other Covenants....................................................53
7.15 Collection of Receivables; Application of Lockbox Agreement Proceeds...........................53
7.16 Additional Receivables Documentation...........................................................54
7.17 Y2K Covenant...................................................................................54
7.18 Further Information............................................................................55
8. Negative Covenants......................................................................................55
8.1 Indebtedness...................................................................................55
8.2 Liens..........................................................................................56
8.3 Contingent Liabilities.........................................................................58
8.4 Mergers, Consolidations and Dispositions and Acquisitions of Assets............................58
8.5 Nature of Business.............................................................................59
8.6 Transactions with Related Parties..............................................................59
8.7 Investments; Loans.............................................................................59
8.8 ERISA Compliance...............................................................................60
8.9 Credit Extensions..............................................................................60
8.10 Change in Accounting Method....................................................................60
8.11 Interest Coverage Ratio........................................................................60
8.12 Tangible Net Worth.............................................................................60
8.13 Capital Expenditures...........................................................................61
8.14 Sales of Receivables...........................................................................61
8.15 Sale and Lease-Back Transactions...............................................................61
8.16 Change of Name or Place of Business............................................................61
v
7
8.17 Availability...................................................................................61
8.18 Distribution of Capital........................................................................61
9. Events of Default and Remedies..........................................................................62
9.1 Events of Default..............................................................................62
9.2 Remedies Cumulative............................................................................65
10. Miscellaneous...........................................................................................65
10.1 No Waiver......................................................................................65
10.2 Notices........................................................................................65
10.3 Governing Law..................................................................................66
10.4 Survival; Parties Bound........................................................................66
10.5 Counterparts...................................................................................66
10.6 Limitation of Interest.........................................................................66
10.7 Survival.......................................................................................68
10.8 Captions.......................................................................................68
10.9 Expenses, Etc..................................................................................68
10.10 Indemnification................................................................................68
10.11 Amendments, Waivers, Etc.......................................................................69
10.12 Successors and Assigns.........................................................................69
10.13 Entire Agreement...............................................................................70
10.14 Severability...................................................................................70
10.15 Disclosures....................................................................................70
10.16 Taxes..........................................................................................70
10.17 Waiver of Claims...............................................................................72
10.18 Right of Setoff................................................................................72
10.19 Waiver of Right to Jury Trial..................................................................72
10.20 Additional Provisions Regarding Collection of Receivables;
Control of Inventory and other Collateral......................................................72
10.21 Joint and Several Obligations..................................................................74
10.22 Venue; Service of Process......................................................................74
10.23 No Other Agreements............................................................................75
10.24 Restatement of Credit Agreement................................................................75
vi
8
EXHIBITS
A - Revolving Note Form (Section. 1.1)
B - Term Note Form (Section. 1.1)
C - Standard Lockbox Agreement (Section 1.1)
D - Compliance Certificate (Section 1.1)
E - Request for Extension of Credit (Section 1.1)
F - Rate Selection Notice (Section 2.8[b][1])
G - Secretary's Certificate of General Partner (Section 4.2[c])
H - Borrowing Base Certificate Form (Section 6.3[g])
SCHEDULES
6.5 - Material Litigation
6.12 - Leases of Real Property
6.13 - List of Assumed Names
6.16 - Indebtedness & Capital Leases
6.17 - Environmental Matters
8.2 - Liens
8.6 - List of Existing Transaction with Related Parties
vii
9
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (together with all amendments, modifications and
supplements hereto and restatements hereof, this "Agreement") is made and
entered into as of 12:01 a.m., April 1, 1999, by and among TIDEL ENGINEERING,
L.P. ("Borrower"), a Delaware limited partnership, TIDEL TECHNOLOGIES, INC., a
Delaware corporation ("Ultimate Parent"), and CHASE BANK OF TEXAS, N.A., a
national banking association (the "Lender").
W I T N E S S E T H:
THAT, in consideration of the mutual covenants, agreements and
undertakings herein contained, the parties hereto agree as follows:
1. Definitions.
1.1 Certain Defined Terms. Unless a particular word or phrase is
otherwise defined or the context otherwise requires, capitalized words and
phrases used in the Loan Documents have the meanings provided below.
Adjusted LIBOR Rate shall mean, with respect to any LIBOR Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the sum of (a) the product of (i) the sum of
the LIBOR Rate in effect for such Interest Period and (ii) Statutory Reserves
and (b) the Applicable Margin.
Affiliate of any Person shall mean any other Person which controls or
is controlled by or under common control with such Person and, without limiting
the generality of the foregoing, includes (a) any Person which beneficially owns
or holds five percent (5%) or more of any class of voting securities of such
Person or five percent (5%) of the equity interest in such Person, (b) any
Person of which such Person beneficially owns or holds five percent (5%) or more
of any class of voting securities or in which such Person beneficially owns or
holds five percent (5%) or more of the equity interest in such Person, and (c)
any director, officer or employee of such Person. For purposes of this
definition, "control" (including "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of securities, partnership or other ownership interests,
by contract or otherwise.
Alternate Base Rate shall mean, for any day, a rate per annum (rounded
upwards to the nearest 1/16 of 1%) equal to the sum of the following:
(a) the greater of (i) the Prime Rate (computed on the basis of the
actual number of days elapsed over a year of 360 days, as the case may be) in
effect on such day, (ii) the Federal Funds Effective Rate (computed on the basis
of the actual number of days elapsed over a 360-day year) in effect for such day
plus 1/2 of 1%, and (iii) the Base CD Rate in effect for such day plus 1%, and
CREDIT AGREEMENT - Page 1
10
(b) the Applicable Margin.
For purposes of this Agreement, any change in the Alternate Base Rate due to a
change in the Prime Rate, Federal Funds Effective Rate or the Three-Month
Secondary CD Rate shall be effective on the effective date of such change in the
Prime Rate, Federal Funds Effective Rate or the Three-Month Secondary CD Rate,
respectively. If for any reason the Lender shall have determined (which
determination shall be conclusive and binding, absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate or Base CD Rate, or both,
for any reason, including the inability or failure of the Lender to obtain
sufficient quotations in accordance with the terms hereof, the Alternate Base
Rate shall be determined without regard to clauses (a)(ii) or (a)(iii), or both,
as appropriate, until the circumstances giving rise to such inability no longer
exist.
Alternate Base Rate Borrowing shall mean as of any date, that portion
of the principal balance of the Revolving Loans bearing interest at the
Alternate Base Rate as of such date.
Annual Audited Financial Statements shall mean the annual audited
Consolidated and consolidating financial statements of a Person, including all
notes thereto, which statements shall include a balance sheet as of the end of
such fiscal year and an income statement, a retained earnings statement and a
statement of cash flows for such fiscal year, all setting forth in comparative
form the corresponding figures from the previous fiscal year, all prepared in
conformity with GAAP and accompanied by a report and opinion of independent
certified public accountants with a "Big 6" accounting firm or other accounting
firm of similar national standing and reputation, which report shall not contain
any qualification except with respect to new accounting principles mandated by
the Financial Accounting Standards Board and shall state that such financial
statements, in the opinion of such accountants, present fairly, in all material
respects, the financial position of such Person as of the date thereof and the
results of its operations and cash flows for the period covered thereby in
conformity with GAAP. The Annual Audited Financial Statements for the Borrower
and its Subsidiaries shall be prepared on a Consolidated and consolidating basis
in accordance with GAAP. All such Annual Audited Financial Statements shall be
accompanied by a certificate of such accountants that in making the appropriate
audit and/or investigation in connection with such report and opinion, such
accountants did not become aware of any Default or Event of Default, or if in
the opinion of such accountant any such Default or Event of Default exists, a
description of the nature and status thereof.
Annual Consolidating Financial Statements shall mean the annual audited
consolidating financial statements of a Person, including all notes thereto,
which statements shall include a balance sheet as of the end of such fiscal year
and an income statement, a retained earnings statement and a statement of cash
flows for such fiscal year, all setting forth in comparative form the
corresponding figures from the previous fiscal year, all prepared in conformity
with GAAP by a "Big 6" accounting firm or other accounting firm of similar
national standing and reputation.
CREDIT AGREEMENT - Page 2
11
Applicable Lending Office shall mean, the Domestic Lending Office in
the case of an Alternate Base Rate Borrowing and the LIBOR Lending Office in the
case of a LIBOR Borrowing.
Applicable Margin shall mean with respect to any LIBOR Borrowing, two
and one-half percent (2.50%), and with respect to any Alternate Base Rate
Borrowing, zero percent (0.00%); provided, however, when and if the daily
collection and application procedure for Receivables is implemented and is
continuing in accordance with the provisions of Section 7.15(b) hereof, each
applicable percentage above shall be increased by one quarter of one percent
(0.25%).
Applications shall mean all applications and agreements for Letters of
Credit, or similar instruments or agreements, in Proper Form, now or hereafter
executed by any Person in connection with any Letter of Credit now or hereafter
issued or to be issued under the terms hereof at the request of any Person.
Assessment Rate shall mean the annual assessment rate (net of refunds
and rounded upwards, if necessary, to the next 1/16 of 1%) estimated by the
Lender (in good faith, but in no event in excess of statutory or regulatory
maximums) to be payable by the Lender to the Federal Deposit Insurance
Corporation (or any successor) for insurance by such Corporation (or such
successor) of time deposits made in dollars at the Lender's domestic offices
during the current calendar year.
Availability shall mean at any time
(a) the lesser at such time of (i) the Revolving Commitment (as such
amount may be reduced in accordance with the provisions of this Agreement) and
(ii) the Borrowing Base, less
(b) the sum of (i) the aggregate amount of the Lender's Current Sum at
such time, (ii) the aggregate amount of accrued interest outstanding under the
Revolving Loans at such time and (iii) all other Obligations (other than the
Term Loan) outstanding hereunder or any other Loan Documents at such time.
Base CD Rate shall mean the sum of (a) the product of (i) the sum of
the Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the
Assessment Rate.
Borrower shall have the meaning assigned to such term in the preamble
of this Agreement.
Borrowing Base shall mean, as of any date, the amount of the then most
recent computation of the Borrowing Base, determined by calculating the amount
equal to the sum of
(a) eighty percent (80%) of the Net Amount of Eligible Receivables at
such date, plus
(b) the lesser of (i) fifty percent (50%) of the Eligible Inventory,
and (ii) $2,500,000.
CREDIT AGREEMENT - Page 3
12
For purposes of this definition, Eligible Receivables and Eligible Inventory, in
each case, and as of the date of any determination, shall be determined after
deduction of all Eligibility Reserves and Interest Reserves then effective with
respect to such items. The Borrowing Base will be computed initially hereunder
on a weekly basis (based on all information reasonably available to the Lender,
including without limitation, the periodic reports and listings delivered to the
Lender in accordance with Section 7.3(f) hereof); and a weekly Borrowing Base
Certificate from a Responsible Officer of the General Partner presenting the
Borrower's computation of the Borrowing Base will be periodically delivered to
the Lender in accordance with Section 7.3(g) hereof. When and if the daily
collection and application procedure for Receivables is implemented and is
continuing in accordance with the provisions of Section 7.15(b) hereof, the
Borrowing Base will be computed on a daily basis (based on all information
reasonably available to the Lender, including without limitation, the periodic
reports and listings delivered to the Lender in accordance with Sections 7.3(f)
and 7.15(d) hereof), and a weekly Borrowing Base Certificate from a Responsible
Officer of the General Partner shall continue to be periodically delivered to
the Lender in accordance with Section 7.3(g) hereof.
Borrowing Base Certificate shall mean a certificate substantially in
the form of Exhibit H attached hereto.
Business Day shall mean a day when the principal office in Dallas,
Texas of the Lender is open for business and banks in New York City are
generally open for business.
Business Entity shall mean corporations, partnerships, joint ventures,
joint stock associations, business trusts and other business entities.
Capital Expenditures shall mean, with respect to any Person for any
period, the capital expenditures of such person during such period determined in
accordance with GAAP, consistently applied, and shall in any event include,
without limitation, all expenditures made and liabilities incurred for the
acquisition of any fixed asset, or improvement, replacement, substitution or
addition thereto, which has a useful life of more than one year, and Capital
Lease Obligations.
Capital Lease Obligations shall mean the obligations of a Person to pay
rent or other amounts under a lease of (or other agreement conveying the right
to use) real and/or personal Property which obligations are required to be
classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP (including Statement of Financial Accounting Standards No. 13
of the Financial Accounting Standards Board, as amended) and, for purposes of
this Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP (including such Statement No. 13).
Closing Date shall mean April 1, 1999.
Code shall mean the Internal Revenue Code of 1986, as amended, as now
or hereafter in effect, together with all regulations, rulings and
interpretations thereof or thereunder by the Internal Revenue Service.
CREDIT AGREEMENT - Page 4
13
Collateral shall mean all collateral and security as described in the
Security Documents.
Commitments shall mean the Revolving Commitment and the Term Loan
Commitment, collectively.
Commitment Fee shall have the meaning assigned to it in Section 2.3(a).
Compliance Certificate shall mean a certificate substantially in the
form of Exhibit D attached hereto.
Consequential Loss shall mean, with respect to (a) the Borrower's
payment of principal of a LIBOR Borrowing on a day other than the last day of
the applicable Interest Period, (b) the Borrower's failure to borrow a LIBOR
Borrowing on the date specified by the Borrower for any reason, or (c) any
cessation of the Adjusted LIBOR Rate to apply to the Revolving Loans or any part
thereof pursuant to Section 2.9 hereof, in each case whether voluntary or
involuntary, any loss, expense, penalty, premium or liability incurred by the
Lender as a result thereof, including without limitation, any interest paid by
the Lender to lenders of funds borrowed by it to make or carry the Revolving
Loans and any other costs and expenses sustained or incurred in liquidating or
employing deposits from third parties acquired to effect or maintain the
Revolving Loans. "Consequential Loss" also shall mean, with respect to the
Borrower's payment of principal of the Term Loan on a day other than a Term Loan
Payment Date, whether voluntary or involuntary, any loss, expense, penalty,
premium or liability incurred by the Lender as a result thereof, including
without limitation, any interest paid by the Lender to lenders of funds borrowed
by it to make or carry the Term Loan and any other costs and expenses sustained
or incurred in liquidating or employing deposits from third parties acquired to
effect or maintain the Term Loan.
Consolidated shall mean, for any Person, as applied to any financial or
accounting term, such term determined on a consolidated basis in accordance with
GAAP (except as otherwise required herein) for such Person and all Subsidiaries
thereof.
Contingent Obligation shall mean, as to any Person, any obligation of
such Person guaranteeing or intended to guarantee the payment or performance of
any Indebtedness, leases, dividends or other obligations (collectively "primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including without limitation, any obligation of the
Person for whom Contingent Obligations is being determined, whether or not
contingent, (a) to purchase any such primary obligation or other property
constituting direct or indirect security therefor, (b) assume or contingently
agree to become or be secondarily liable in respect of any such primary
obligation, (c) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital for the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (d) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation, or (e) otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof; provided, however, that the
term "Contingent
CREDIT AGREEMENT - Page 5
14
Obligation" shall not include (x) endorsements of checks or other negotiable
instruments in the ordinary course of business or (y) issuance of indemnities in
the ordinary course of business.
Current Sum shall mean on any day the sum of (a) the outstanding
principal balance of the Lender's Revolving Note on such day plus (b) the Letter
of Credit Exposure Amount on such day.
Discontinued Operations shall mean, as of any day, operations of the
Borrower or any of its Subsidiaries which have been discontinued, and which, as
of such day, have been fully terminated, disposed of or liquidated.
Domestic Lending Office shall mean the office of the Lender specified
as its "Domestic Lending Office" opposite its name on the signature pages
hereof, or such other office of the Lender as the Lender may from time to time
specify to the Borrower.
EBITDA shall mean with respect to any Person for any period the sum of
(i) Net Income, (ii) Interest Expense, (iii) depreciation and amortization of
assets, and (iv) federal, state and local income taxes, in each case of such
Person for such period, computed and calculated in accordance with GAAP
consistently applied.
Eligibility Reserves shall mean such amounts as the Lender, in the
exercise of its sole discretion, may from time to time establish against the
gross amounts of Eligible Receivables or Eligible Inventory to reflect risk or
contingencies arising after the Closing Date which may affect such items.
Eligible Inventory means an amount equal to the lesser of (i) the
original cost to Borrower, or (ii) the fair market value, of all its domestic
raw materials and finished goods inventory owned by it at the time in question,
determined on a first-in first-out basis in accordance with GAAP, (provided
that, the cost or fair market value, as the case may be, of finished goods
inventory eligible for inclusion in the Borrowing Base shall not exceed
thirty-five percent (35.00%) of cost or fair market value, as the case may be,
of raw materials eligible for inclusion in the Borrowing Base) so long as such
inventory (a) is owned by Borrower free and clear of all Liens other than Liens
permitted under Section 8.2 and, if held or stored on leased premises, is
subject to the terms of a landlord's waiver and agreement executed by the
landlord of such premises in form and substance acceptable to the Lender, (b) is
fully and adequately insured with the Lender named as loss payee pursuant to
Section 7.7 and is located in the United States, (c) is not on lease or
consignment or furnished under any contract of service from or to any Person to
or from Borrower, (d) is subject to an enforceable and duly perfected first
priority security interest in favor of the Lender, (e) is not in transit, (f) is
in good and merchantable condition, meets all standards or regulations imposed
by any Governmental Authority, where or when applicable, having regulatory
authority over such goods, their use and/or sale and is either currently usable
or currently saleable in the normal course of Borrower's business and is not, in
the opinion of the Lender, work-in-process, unsaleable, damaged, slow moving,
discontinued or non-current production, obsolete or otherwise not readily
usable, and (g) is not a demonstration unit nor an AnyCard II.
CREDIT AGREEMENT - Page 6
15
Eligible Receivables shall mean, as at any date of determination
thereof, Receivables created by the Borrower (but only to the extent that such
Receivables are Collateral hereunder and are subject to a first priority
perfected Lien in favor of the Lender) in the ordinary course of business
arising out of the sale of goods or rendering of services by the Borrower, which
do, and at all times shall continue to, satisfy the standards of eligibility
applicable thereto as established by the Lender in accordance with the terms
hereof. Standards of eligibility for Receivables may be fixed and revised from
time to time by the Lender in the Lender's reasonable, exclusive judgment;
provided, that the Lender shall give the Borrower notice within a reasonable
time after giving effect to any change in such standards of eligibility. In
general, without limiting the foregoing, an Eligible Receivable must comply with
all of the following requirements: (a) all payments due on the Receivable have
been billed and invoiced in a timely fashion and in the normal course of
business; (b) no payment is outstanding on the Receivable for more than 90 days
after the date of invoice; (c) the payments due on 50% or more of all
Receivables of the applicable account debtor are less than 90 days past the date
of invoice; (d) the total Receivables owing to the Borrower by the applicable
account debtor constitute 10% or less of the aggregate Receivables owing to the
Borrower by all account debtors, or if the total Receivables of the applicable
account debtor exceed 10% of the aggregate of all Receivables owing to the
Borrower and its Subsidiaries by all account debtors, the Receivables of the
applicable account debtor up to such respective percentage limit shall be deemed
to constitute Eligible Receivables (subject to compliance with all other
applicable standards of eligibility) and the Receivables of the applicable
account debtor exceeding such respective percentage limit shall be included
within Eligible Receivables (subject to compliance with all other applicable
standards of eligibility) only if the Receivables exceeding such respective
percentage limit are backed or secured by credit insurance reasonably
satisfactory to the Lender in all respects and such credit insurance has been
assigned to the Lender upon terms reasonably acceptable to the Lender in its
discretion; (e) the Receivable is free and clear of all security interests,
liens, charges and encumbrances of any nature whatsoever (except for the Lien in
favor of the Lender); (f) the Receivable arose from a completed, outright and
lawful sale of goods, to which title has passed to the applicable account debtor
on an absolute sales basis, or from the rendering of services by or on behalf of
the Borrower; (g) the Receivable constitutes an "account" within the meaning of
the Uniform Commercial Code of the state in which the Borrower's principal
offices are located; (h) the Borrower is not aware that the Receivable arises
out of a ▇▇▇▇ and hold (other than Receivables which have been specifically
identified to the Lender and for which, as a condition of eligibility,
appropriate documentation has been delivered to the Lender), consignment or
progress billing arrangement or is subject to any setoff, contra, offset,
deduction, dispute, charge-back, credit, counterclaim or other defense arising
out of the transactions represented by the Receivable or independently thereof
(such Receivable to be excluded only to the extent of such setoff, contra,
offset, etc., subject to compliance with all other standards of eligibility);
(i) the applicable account debtor has finally accepted the goods or services
from the sale out of which the Receivable arose and has not objected to such
account debtor's liability thereon or returned, rejected or repossessed any of
such goods, except for complaints made or goods returned in the ordinary course
of business for which, in the case of goods returned, goods of equal or greater
value have been shipped in return (such Receivable to be excluded to the extent
of such objection, return, rejection or repossession, subject to compliance with
all other standards of eligibility); (j) the applicable account debtor is not
any Governmental Authority, unless there has been in compliance reasonably
satisfactory to the Lender in all respects with the Assignment of
CREDIT AGREEMENT - Page 7
16
Claims Act or similar state statutes; (k) the applicable account debtor is not
an Affiliate of the Borrower or any Subsidiary; (l) the account debtor must be
located in the United States, except for Receivables insured or backed by credit
insurance or a letter of credit in form and substance reasonably acceptable to
the Lender in all respects; (m) the Receivable complies with all material Legal
Requirements (including without limitation, all usury laws, fair credit
reporting and billing laws, fair debt collection practices and rules, and
regulations relating to truth in lending and other similar matters); (n) the
Receivable is in full force and effect and constitutes a legal, valid and
binding obligation of the applicable account debtor enforceable in accordance
with the terms thereof; (o) the Receivable is denominated in and provides for
payment by the applicable account debtor in U.S. dollars; (p) the Receivable has
not been and is not required to be charged or written off as uncollectible in
accordance with GAAP; (q) if the Receivable is owing by an account debtor for
which the Borrower must have filed a "Notice of Business Activities Report" or
similar report in a state or states where failure to comply with such filing of
notice precludes bringing suit against the applicable account debtor, the
Borrower must have filed such requisite activities report or other similar
report and otherwise be in compliance with such Legal Requirement to the extent
necessary to allow the Borrower to bring suit against the applicable account
debtor in the applicable state or states; and (r) the Lender is satisfied in its
reasonable discretion with the credit standing of the applicable account debtor
in relation to the amount of credit extended.
Environmental Claim shall mean any third party (including any
Governmental Authority) action, lawsuit, claim or proceeding (including claims
or proceedings at common law) which seeks to impose or alleges any liability for
(i) noise; (ii) preservation, protection, conservation, pollution, contamination
of, or releases or threatened releases of, Hazardous Substances into the air,
surface water, ground water or land or the clean-up, abatement, removal,
remediation or monitoring of such pollution, contamination or Hazardous
Substances; (iii) generation, recycling, reclamation, handling, treatment,
storage, disposal or transportation of Hazardous Substances (as defined under
the Resource Conservation and Recovery Act and its regulations, as amended from
time to time); (iv) exposure to Hazardous Substances; (v) the safety or health
of employees or other Persons in connection with any of the activities specified
in any other subclause of this definition; or (vi) the manufacture, processing,
distribution in commerce, presence or use of Hazardous Substances. An
"Environmental Claim" includes a common law action, as well as a proceeding to
issue, modify or terminate an Environmental Permit, or to adopt or amend a
regulation, to the extent that such a proceeding attempts to redress violations
of the applicable permit, license, or regulation as alleged by any Governmental
Authority.
Environmental Liabilities shall mean all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including: remedial, removal,
response, abatement, restoration (including natural resources), investigative,
or monitoring liabilities, personal injury and damage to property, natural
resources or injuries to persons, and any other related costs, expenses, losses,
damages, penalties, fines, liabilities and obligations, and all costs and
expenses necessary to cause the issuance, reissuance or renewal of any
Environmental Permit including attorney's fees and court costs. Environmental
Liability shall mean any one of them.
CREDIT AGREEMENT - Page 8
17
Environmental Permit shall mean any permit, license, approval or other
authorization under any applicable law, regulation and other requirement of the
United States or of any state, municipality or other subdivision thereof
relating to pollution or protection of health or the environment, including
laws, regulations or other requirements relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, Hazardous
Substances or toxic materials or wastes into ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing,
distribution, recycling, presence, use, treatment, storage, disposal, transport,
or handling of wastes, pollutants, contaminants or Hazardous Substances.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the Department of
Labor thereunder.
ERISA Affiliate shall mean any trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary of the Borrower
would be treated as a single employer under the provisions of Title I or Title
IV of ERISA.
Event of Default shall mean any of the events specified in Section 9.1
hereof or otherwise specified as a Default in any other Loan Document, provided
there has been satisfied any requirement in connection with any such event for
the giving of notice or the lapse of time, or both, and Default shall mean any
of such events, whether or not any such requirement for the giving of notice, or
the lapse of time, or both, has been satisfied.
Excess Interest Amount shall have the meaning attributed to such term
in Section 2.11 hereof.
Federal Funds Effective Rate shall mean, for any day, a rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the Lender from three Federal funds brokers of
recognized standing selected by it.
Financial Officer shall mean, with respect to any Person, the Financial
Officer of such Person.
Fixed Rate means eight and four-tenths percent (8.4%) per annum.
GAAP shall mean, as to a particular Person, those principles and
practices (a) which are recognized as generally accepted accounting principles
by the Financial Accounting Standards Board or any successor organization, (b)
which are applied for all periods after the date hereof in a manner consistent
with the manner in which such principles and practices were applied to the most
recent audited financial statements of the relevant Person furnished to the
Lender, and (c) which are consistently applied for all periods after the date
hereof so as to reflect properly the financial condition, and results of
operations and changes in financial position, of such Person. If any changes in
accounting principles from those used in preparation of the financial statements
CREDIT AGREEMENT - Page 9
18
periodically required to be delivered to the Lender by the terms of this
Agreement are hereafter occasioned by promulgation of rules, regulations,
pronouncements or opinions by or other required by the Financial Accounting
Standards Board or any successor or organization, and any of such changes
results in a change of the method of calculation of, or affect the results of
such calculation of, any financial covenant or financial standard or term found
herein, then the parties hereto agree to continue to calculate financial
covenants, standards and terms hereunder in accordance with GAAP as in existence
on the Closing Date.
General Partner means Tidel Cash Systems, Inc., a Delaware corporation,
and sole general partner of Borrower.
Governmental Authority shall mean any foreign governmental authority,
the United States of America, any state of the United States and any political
subdivision of any of the foregoing, and any agency, instrumentality,
department, commission, board, bureau, central bank, authority, court or other
tribunal, in each case whether executive, legislative, judicial, regulatory or
administrative, having jurisdiction over the Lender, the Borrower, any
Subsidiary of the Borrower, or their respective Property.
Guarantors shall mean each and every Person executing a Guaranty from
time to time.
Guaranty shall mean each and every guaranty of the Obligations from
time to time executed and delivered to the Lender by any Guarantor, as amended,
supplemented, modified, joined in pursuant to a Joinder Agreement and restated
from time to time.
Hazardous Substance shall mean any hazardous or toxic waste, substance
or product or material defined or regulated from time to time by any applicable
law, rule, regulation or order described in the definition of "Requirements of
Environmental Law," including solid waste (as defined under RCRA or its
regulations, as amended from time to time), petroleum and any fraction thereof,
any radioactive materials and waste.
Highest Lawful Rate shall mean the maximum non-usurious rate of
interest permitted to be charged by the Lender under applicable laws (if any) of
the United States or any state from time to time in effect.
Indebtedness shall mean, as to any Person, without duplication: (a) all
indebtedness (including principal, interest, fees and charges) of such Person
for borrowed money; (b) any other indebtedness which is evidenced by a bond,
debenture or similar instrument; (c) all Capital Lease Obligations of such
Person; (d) all obligations of such Person for the deferred purchase price of
Property or services (except current trade accounts payable arising in the
ordinary course of business); (e) all obligations of such Person in respect of
outstanding letters of credit, acceptances and similar obligations created for
the account of such Person; (f) all indebtedness, liabilities, and obligations
secured by any Lien on any Property owned by such Person even though such Person
has not assumed or has not otherwise become liable for the payment of any such
indebtedness, liabilities or obligations secured by such Lien; (g) net
liabilities of such Person under interest rate cap agreements, interest rate
swap agreements, foreign currency exchange agreements and other hedging
agreements or arrangements (calculated on a basis
CREDIT AGREEMENT - Page 10
19
satisfactory to the Lender and in accordance with accepted practice); and (h)
all other indebtedness, liabilities and obligations of such Person which are
required to be included or listed in the liabilities section of such Person's
balance sheet according to GAAP; provided, that such term shall not mean or
include any Indebtedness in respect of which monies sufficient to pay and
discharge the same in full (either on the expressed date of maturity thereof or
on such earlier date as such Indebtedness may be duly called for redemption and
payment) shall be deposited with a depository, agency or trustee acceptable to
the Lender in trust for the payment thereof.
Initial Public Offering shall mean the first firm commitment
underwritten public offering of common stock to the general public under the
Securities Act of 1933 which results in the common stock of Borrower being
listed and publicly traded in the NASDAQ national market, American Stock
Exchange or New York Stock Exchange.
Interest Coverage Ratio shall mean, as of any date that the Interest
Coverage Ratio is calculated, the ratio of (a) the remainder of (i) EBITDA of
the Borrower, minus (ii) Capital Expenditures of the Borrower, to (b) cash
Interest Expense, for the four (4) most recent consecutive fiscal quarters of
the Borrower ending on or immediately prior to the date of determination of the
Interest Coverage Ratio.
Interest Expense shall mean, with respect to any Person for any period,
the interest expense of such Person during such period determined in accordance
with GAAP, consistently applied, and shall in any event include, without
limitation, (a) the amortization of debt discounts, (b) the amortization of all
fees payable in connection with the incurrence of Indebtedness to the extent
included in interest expense, (c) the portion of any Capital Lease Obligation
allocable to interest expense, (d) all fixed and calculable dividend payments on
preferred stock, and (e) payments of interest expense in kind.
Interest Option shall have the meaning given to such term in Section
2.8(a) hereof.
Interest Payment Dates shall mean (a) the first Business Day of each
calendar month prior to the Revolving Loan Maturity Date, commencing on [May] 1,
1999, and (b) the Revolving Loan Maturity Date. In addition to the Interest
Payment Dates described in the preceding sentence, an Interest Payment Date for
all LIBOR Borrowings shall be the last day of the Interest Period applicable
thereto.
Interest Period shall mean, as to any LIBOR Borrowing, the period
commencing on the date of such LIBOR Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is one (1), two (2), three (3) or six (6) months
thereafter, as the Borrower may elect in accordance herewith; provided, however,
that (a) if an Interest Period would end on a day that is not a Business Day,
such Interest Period shall be extended to the next succeeding Business Day
unless, with respect to LIBOR Borrowings, such next succeeding Business Day
would fall in the next calendar month, in which case such Interest Period shall
end on the next preceding Business Day, (b) no Interest Period shall end later
than the Revolving Loan Maturity Date, and (c) interest shall
CREDIT AGREEMENT - Page 11
20
accrue from and including the first day of an Interest Period to, but excluding,
the last day of such Interest Period.
Interest Reserves shall mean an amount equal to all accrued and unpaid
interest on the Loans and other Obligations.
Investment shall mean the purchase or other acquisition of any
securities or Indebtedness of, or the making of any loan, advance, transfer of
Property or capital contribution to, any Person.
Joinder Agreement shall mean any agreement, in Proper Form, executed by
a Subsidiary of the Borrower from time to time in accordance with Section 7.10
hereof, pursuant to which such Subsidiary joins in the execution and delivery of
a Guaranty.
Legal Requirement shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority.
Lender shall have the meaning assigned to such terms in the preamble of
this Agreement.
Letters of Credit shall mean all standby letters of credit and
documentary sight letters of credit issued by the Lender for the account of the
Borrower pursuant to the terms set forth in this Agreement.
Letter of Credit Advances shall mean all sums which may from time to
time be paid by the Lender pursuant to any and all of the Letters of Credit,
together with all other sums, fees, reimbursements or other obligations which
may be due to the Lender pursuant to any of the Letters of Credit.
Letter of Credit Exposure Amount shall mean at any time the sum of (i)
the aggregate undrawn amount of all Letters of Credit outstanding at such time
plus (ii) the aggregate amount of all Letter of Credit Advances for which the
Lender has not been reimbursed and which remain unpaid at such time.
LIBOR Borrowing shall mean, as of any date, that portion of the
principal balance of the Revolving Loans bearing interest at the Adjusted LIBOR
Rate as of such date.
LIBOR Lending Office shall mean the office of the Lender specified as
its "LIBOR Lending Office" opposite or below its name on the signature pages
hereof, or (if no such office is specified, its Domestic Lending Office), or
such other office of the Lender as the Lender may from time to time specify in
writing to the Borrower.
LIBOR Rate shall mean, with respect to any LIBOR Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the rate at which dollar deposits approximately
equal in principal amount to the Lender's portion of such LIBOR Borrowing and
for a maturity equal to the applicable Interest Period are offered in
CREDIT AGREEMENT - Page 12
21
immediately available funds to the London branch of the Lender by leading
lenders in the London interbank market for Eurodollars at approximately 11:00
a.m., London time, two (2) Business Days prior to the first day of such Interest
Period.
Lien shall mean, with respect to any asset of any Person, (a) any
mortgage, pledge, charge, encumbrance, security interest, collateral assignment
or other lien or restriction of any kind on such asset, whether based on common
law, constitutional provision, statute or contract, (b) the interest of any
vendor or a lessor under any conditional sale agreement, title retention
agreement or capital lease relating to such asset, (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities, or (d) any other right of or arrangement with any
creditor to have such creditor's claim satisfied out of such assets, or the
proceeds therefrom, prior to the general creditors of such Person owning such
assets.
Limited Partner means Tidel Services, Inc., a Delaware corporation, and
sole limited partner of Borrower.
Loan Documents shall mean this Agreement, the Notes, the Applications,
the Security Documents, the Guaranties, the Joinder Agreements, the Letters of
Credit, all instruments, certificates and agreements now or hereafter executed
or delivered to the Lender pursuant to any of the foregoing, and all amendments,
modifications, renewals, extensions, increases and rearrangements of, and
substitutions for, any of the foregoing.
Loans shall mean the Revolving Loans made pursuant to Section 2.1
hereof and the Term Loan made pursuant to Section 3.1 hereof. Loan shall mean
any one of the Loans.
Lockbox Agreement shall collectively mean one or more lockbox
agreements, in Proper Form, to be executed and delivered to the by the Borrower
and each of its Subsidiaries required by the Lender, together with all
modifications and/or replacements thereof which are approved in writing by the
Lender. As of the Closing Date, the Borrower has previously executed and
delivered to the Lender a Lockbox Agreement in substantially the form attached
hereto as Exhibit C.
Material Adverse Effect shall mean a material adverse effect on (a) the
business, assets, operations, financial or other condition of the Borrower and
its Subsidiaries, taken as a whole, (b) the ability of the Borrower and the
Guarantors, taken as a whole, or the Borrower individually, to perform or pay
the Obligations in accordance with the terms hereof or of any other Loan
Document, or (c) the Lender's Lien on any material portion of the Collateral or
the priority of such Lien.
Monthly Unaudited Financial Statements shall mean the unaudited
Consolidated and consolidating financial statements of a Person, which
Statements shall include (a) a balance sheet as of the end of the respective
fiscal month, (b) an income statement for such respective fiscal month, and for
the fiscal year to date, subject to normal year-end adjustments, all setting
forth in comparative form the corresponding figures for the corresponding period
of the preceding fiscal year, and (c) a statement of cash flows for the fiscal
year to date, subject to normal year-end adjustments, setting forth in
comparative form the corresponding figures for the corresponding
CREDIT AGREEMENT - Page 13
22
period of the preceding fiscal year, all prepared in accordance with GAAP and
certified as true and correct by a Responsible Officer of such Person. The
Monthly Unaudited Financial Statements for the Borrower and its Subsidiaries
shall be prepared on a Consolidated and consolidating basis in accordance with
GAAP.
Net Amount of Eligible Receivables shall mean and include at any time,
without duplication, the gross amount of Eligible Receivables at such time less
(a) unpaid sales, excise, or similar taxes owed by the Borrower or any of its
subsidiaries, and (b) returns, discounts, claims, credits and allowance of any
nature at any time issued, owing, granted, outstanding, available or claimed.
Net Income shall mean gross revenues and other proper income credits
for such Person, less all proper expenses and other income charges for such
Person, including taxes on income, all determined in accordance with GAAP;
provided, that there shall not be included in such revenues any extraordinary or
nonrecurring items, as determined in accordance with GAAP.
Notes shall mean, individually and collectively, the Revolving Note and
the Term Note.
Obligations shall mean, without duplication, all obligations,
liabilities and Indebtedness of the Borrower and the Guarantors with respect to
the Security Documents and other Loan Documents, including without limitation,
(a) the principal of and interest on the Loans and (b) the payment or
performance of all other obligations, liabilities and Indebtedness of the
Borrower or the Guarantors to the Lender hereunder, under the Notes, under the
Letters of Credit, under the Applications or under any one or more of the other
Loan Documents, including all fees, costs, expenses and indemnity obligations
hereunder and thereunder.
Organizational Documents shall mean, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement and the
certificate of limited partnership establishing such partnership; with respect
to a joint venture, the joint venture agreement establishing such joint venture,
and with respect to a trust, the instrument establishing such trust; in each
case including any and all modifications thereof as of the date of the Loan
Document referring to such Organizational Document and any and all future
modifications thereof which are consented to by the Lender.
Parties shall mean all Persons other than the Lender executing any Loan
Document.
Past Due Rate shall mean, on any day, the lesser of (a) the sum of (i)
the Alternate Base Rate, plus (ii) one percent (1%) or (b) the Highest Lawful
Rate, if any, applicable to the Lender on such day.
PBGC shall mean the Pension Benefit Guaranty Corporation.
Permitted Affiliate Transactions shall mean
CREDIT AGREEMENT - Page 14
23
(a) full-time employment agreements and incentive compensation programs
with employees on commercially reasonable terms;
(b) officer, director or employee loans for work related expenditures;
(c) advances to directors, officers or employees of the General
Partner, the Borrower and/or its Subsidiaries to provide for the payment of
reasonable expenses incurred by such Persons in the performance of such Persons'
responsibilities to the Borrower; and
(d) indemnities provided on behalf of officers, directors or employees
of the General Partner, the Borrower and/or in its Subsidiaries as determined in
good faith by the Borrower's Board of Directors or senior management.
Permitted Dispositions shall mean the following dispositions of assets:
(a) sales of inventory and other assets in the ordinary course of
business and for fair and adequate consideration;
(b) dispositions of damaged, worn-out or obsolete Property, or Property
which is no longer necessary for the proper conduct of any Person's business;
(c) the abandonment of any assets or Properties which are no longer
useful for the proper conduct of business and cannot (after good faith efforts
to sell the same) be sold;
(d) the liquidation of Permitted Investment Securities;
(e) transfers of Property from the Borrower to its domestic
Subsidiaries (whether presently existing or hereafter created in accordance with
the other provisions of this Agreement) or from one Subsidiary of the Borrower
to another domestic Subsidiary of the Borrower, provided, that if the entity to
whom such transfer or disposition is made is not the Borrower or is not yet a
Guarantor, simultaneously with such transfer, such entity executes and delivers
to the Lender a Joinder Agreement, together with all of the requested Security
Documents, as required at such time by the Lender, appropriately completed;
(f) sale/leaseback transactions permitted pursuant to Section 8.15
hereof; and
(g) leases to any Person of real Property of the Borrower, provided
that the terms (including lease term and rent) of such leases are commercially
reasonable.
Permitted Investments shall mean
(a) the endorsement of negotiable instruments for deposit or collection
in the ordinary course of business;
(b) Investments in Permitted Investments Securities;
CREDIT AGREEMENT - Page 15
24
(c) Investments representing Stock or obligations issued to the
Borrower or its Subsidiaries in settlement of claims against any other Person by
reason of a composition or readjustment of debt or a reorganization of any
debtor of the Borrower and/or its Subsidiaries;
(d) Investments made as a result of the receipt of non-cash
consideration from a Permitted Disposition;
(e) to the extent that any manufacturing and licensing agreements
constitute Investments, any such arrangements entered into in the ordinary
course of business; and
(f) any Stock owned and held by the Borrower or any of its Subsidiaries
in (1) any wholly-owned, domestic Subsidiary of the Borrower created by the
Borrower for purposes of receiving one or more transfers of Property from the
Borrower or any of its other Subsidiaries pursuant to the terms of clause (e) of
the "Permitted Dispositions" definition set forth above or (2) any other
wholly-owned Subsidiary of the Borrower created or acquired with the prior
written consent of the Lender after the Closing Date; and
Permitted Investment Securities shall mean: (1) readily marketable,
direct obligations of the United States of America or any agency or wholly owned
corporation thereof which are backed by the full faith and credit of the United
States, (2) certificates of deposit or other short-term direct obligations of
(i) the Lender, or (ii) any other financial institutions having capital and
surplus in excess of $5,000,000,000, and (3) other Investments mutually agreed
to in writing by the Borrower and the Lender; provided, that in each case
described in clauses (1) and (2), such obligation shall mature not more than one
(1) year from the acquisition thereof.
Person shall mean any individual, corporation, business trust,
unincorporated organization or association, partnership, joint venture,
Governmental Authority or any other form of entity.
Plan shall mean any plan subject to Title IV of ERISA and maintained
for employees of the Borrower or of any member of a "controlled group of
corporations," as such term is defined in the Code, of which the Borrower, any
of its Subsidiaries or any ERISA Affiliate it may acquire from time to time is a
part, or any such plan to which the Borrower, any of its Subsidiaries or any
ERISA Affiliate is required to contribute on behalf of its employees.
Prime Rate shall mean the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank, or its successor financial
institution, at its principal office in New York City as its prime rate in
effect at such time. Without notice to the Borrower or any other Person, the
Prime Rate shall change automatically from time to time as and in the amount by
which said prime rate shall fluctuate, with each such change to be effective as
of the date of each change in such prime rate. THE PRIME RATE IS A REFERENCE
RATE AND DOES NOT NECESSARILY REPRESENT THE LOWEST OR BEST RATE ACTUALLY CHARGED
BY THE CHASE MANHATTAN BANK OR SUCH SUCCESSOR FINANCIAL INSTITUTION TO ANY OF
ITS CUSTOMERS. THE CHASE MANHATTAN BANK OR SUCH SUCCESSOR FINANCIAL INSTITUTION
MAY MAKE COMMERCIAL LOANS OR OTHER LOANS AT RATES OF INTEREST AT, ABOVE AND
BELOW THE PRIME RATE.
CREDIT AGREEMENT - Page 16
25
Principal Office shall mean the principal office in Dallas, Texas of
the Lender, or at such other place as the Lender may from time to time by notice
to the Borrower designate.
Prior Term Loan means the term loan in the original principal sum of
$640,000.00, evidenced by the Prior Term Note.
Prior Term Note means the promissory note in the original principal sum
of $640,000.00, dated May 29, 1998, executed by Tidel Engineering, Inc, a
Delaware corporation, and the Ultimate Parent, as co-makers.
Proper Form shall mean in form and substance reasonably satisfactory to
the Lender.
Property shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
Quarterly Unaudited Financial Statements shall mean the unaudited
Consolidated financial statements of a Person, which Statements shall include
(a) a balance sheet as of the end of the respective fiscal quarter, (b) an
income statement for such respective fiscal quarter, and for the fiscal year to
date, subject to normal year-end adjustments, all setting forth in comparative
form the corresponding figures for the corresponding period of the preceding
fiscal year, and (c) a statement of cash flows for the fiscal year to date,
subject to normal year-end adjustments, setting forth in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
all prepared in accordance with GAAP and certified as true and correct by a
Responsible Officer of such Person. The Quarterly Unaudited Financial Statements
for the Ultimate Parent and for the Borrower shall be prepared on a Consolidated
basis in accordance with GAAP.
Rate Selection Date shall mean that Business Day which is (a) in the
case of the Alternate Base Rate Borrowings, the date of such borrowing, or (b)
in the case of LIBOR Borrowings, the date two (2) Business Days preceding the
first day of any proposed Interest Period.
Rate Selection Notice shall have the meaning ascribed to such term in
Section 2.8(b)(1) hereof.
Receivables shall mean and include all of the accounts, instruments,
documents, chattel paper and general intangibles of the Borrower or any of its
Subsidiaries, whether secured or unsecured, whether now existing or hereafter
created or arising, and whether or not specifically assigned to the Lender.
Refinancing Indebtedness shall mean any Indebtedness of the Borrower or
its Subsidiaries issued in exchange for, or the net proceeds of which are used
to extend, refinance, renew, replace, defease or refund other Indebtedness of
such Person, provided, that (a) the principal amount of such Refinancing
Indebtedness does not exceed the then outstanding principal amount of the
Indebtedness so extended, refinanced, renewed, replace, defeased or refunded
(plus the amount of reasonable expenses and any premium or penalty paid in
CREDIT AGREEMENT - Page 17
26
connection with such extension, refinancing, renewal, replacement, defeasance or
refund in accordance with the terms of the documents governing the original
issuance of such Indebtedness); (b) the interest rates, maturities, amortization
schedules, covenants, defaults, remedies, subordination provisions (with respect
to any Subordinated Indebtedness), collateral security provisions (or absence
thereof) and other terms of such Refinancing Indebtedness are in each case the
same or more favorable to the Borrower and/or its Subsidiaries as those in the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded;
and (c) no Default or Event of Default has occurred and is continuing or would
result from the issuance or origination of such Refinancing Indebtedness.
Regulation D shall mean Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect and shall include any
successor or other regulation relating to reserve requirements applicable to
member lenders of the Federal Reserve System.
Regulatory Change shall mean any change on or after the date of this
Agreement in any Legal Requirement (including Regulation D) or the adoption or
making on or after such date of any interpretation, directive or request
applying to a class of lenders including the Lender under any Legal Requirement
(whether or not having the force of law) by any Governmental Authority charged
with the interpretation or administration thereof.
Reportable Event shall mean a Reportable Event as defined in Section
4043(b) of ERISA.
Request for Extension of Credit shall mean a written request for
extension of credit substantially in the form of Exhibit E attached hereto.
Requirements of Environmental Law shall mean all requirements imposed
by any law (including The Resource Conservation and Recovery Act, The
Comprehensive Environmental Response, Compensation, and Liability Act, the Clean
Water Act, the Clean Air Act, and any state analogues of any of the foregoing),
rule, regulation, or order of any Governmental Authority now or hereafter in
effect which relate to (i) noise; (ii) pollution, protection or cleanup of the
air, surface water, ground water or land; (iii) solid, liquid or gaseous waste
or Hazard Substance generation, recycling, reclamation, release, threatened
release, treatment, storage, disposal or transportation; (iv) exposure of
Persons or property to Hazardous Substances; (v) the safety or health of
employees or other Persons; or (vi) the manufacture, presence, processing,
distribution in commerce, use, discharge, releases, threatened releases,
emissions or storage of Hazardous Substances into the environment. Requirement
of Environmental Law shall mean any one of them.
Responsible Officer shall mean, with respect to any Person, any
president or vice president, or the Financial Officer or controller of such
Person.
Revolving Commitment shall mean the obligation of the Lender to make
Revolving Loans and incur liability for the Letter of Credit Exposure Amount in
an aggregate principal amount at any one time outstanding up to, but not
exceeding, $7,000,000 (as the same may be reduced from time to time pursuant to
Section 2.4 hereof).
CREDIT AGREEMENT - Page 18
27
Revolving Loan Maturity Date shall mean the earlier of (a) May 31,
2000, (b) any date that the Revolving Commitment is terminated in full by the
Borrower pursuant to Section 2.4 hereof, and (c) any date the Revolving Loan
Maturity Date is accelerated by the Lender pursuant to Section 9.1 hereof.
Revolving Loans shall mean the Revolving Loans made pursuant to Section
2.1 hereof. Revolving Loan shall mean any one of the Revolving Loans.
Revolving Note shall mean the promissory note, substantially in the
form of Exhibit A attached hereto, of the Borrower evidencing the Revolving
Loans, payable to the order of the Lender in the amount of the Lender's
Revolving Commitment, and all renewals, extensions, modifications,
rearrangements and replacements thereof and substitutions therefor.
Security Agreements shall mean (a) the Security Agreement (Personal
Property) of even effective date herewith, between the Borrower and the Lender,
covering all Receivables, inventory and all other related tangible and
intangible personal Property of the Borrower more particularly described
therein, (b) any and all other security agreements, pledge agreements,
collateral assignments or other similar documents now or hereafter executed in
favor of the Lender as security for the payment or performance of any and or all
of the Obligations, and (c) any amendment, modification, restatement or
supplement of all or any of the above-described agreements and assignments.
Security Documents shall mean the Security Agreements, the Guaranties,
all related financing statements and any and all other agreements, mortgages,
deeds of trust, chattel mortgages, security agreements, pledges, guaranties,
assignments of income, assignments of contract rights, assignments or pledges of
stock or partnership interests, standby agreements, subordination agreements,
undertakings and other instruments and financing statements now or hereafter
executed and delivered in connection with, or as security for, the payment and
performance of the Obligations, as any of them may from time to time be amended,
modified, restated or supplemented.
Statutory Reserves shall mean (a) with respect to the Adjusted LIBOR
Rate, a fraction (expressed as a decimal), the numerator of which is the number
one and the denominator of which is the number one minus the aggregate of the
maximum reserve percentage (including without limitation, any marginal, special,
emergency or supplemental reserves) expressed as a decimal, established by the
Board of Governors of the Federal Reserve System of the United States and any
other banking authority to which the Lender is subject with respect to the
Adjusted LIBOR Rate for Eurocurrency Liabilities (as defined in Regulation D),
including without limitation, those reserve percentages imposed under Regulation
D, and (b) with respect to the Base CD Rate, a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentage
(including, without limitation, any marginal, special, emergency or supplemental
reserves) expressed as a decimal, established by the Board of Governors of the
Federal Reserve System of the United States or any banking authority to which
the Lender is subject with respect to the Base CD Rate for new negotiable
non-personal time deposits in U.S. dollars of over $100,000 with maturities
approximately equal to three months. Statutory
CREDIT AGREEMENT - Page 19
28
Reserves shall be adjusted automatically on and as of the effective date of any
change in any applicable reserve percentage. For purposes hereof, LIBOR
Borrowings shall be deemed to constitute Eurocurrency Liabilities (as defined in
Regulation D) and as such, shall be deemed to be subject to such reserve
requirements of Regulation D without benefit of or credit for proration,
exceptions or offsets which may be available from time to time to the Lender
under Regulation D.
Stock shall mean as to a Business Entity, all capital stock or other
indicia of equity rights issued by such Business Entity from time to time.
Subordinated Indebtedness shall mean, with respect to the Borrower or
any Guarantor, Indebtedness subordinated in right of payment to the Borrower's
or such Guarantor's monetary Obligations on terms satisfactory to and approved
in writing by the Lender.
Subsidiary shall mean, as to a particular parent Business Entity, any
Business Entity of which more than fifty percent (50%) of the Stock issued by
such Business Entity is at the time directly or indirectly owned by such parent
Business Entity or by one or more of its Affiliates.
Tangible Net Worth shall mean, as to any Person at any time, (a) the
sum of all such Person's assets, determined in accordance with GAAP less (b) the
sum of all such Person's liabilities, determined in accordance with GAAP, less
(c) the amount of any write-up subsequent to the effective date of this
Agreement in the value of any asset above the cost or depreciated costs thereof
to such Person, less (d) the book value of all assets which would be treated as
intangibles under GAAP, including without limitation, good will, trademarks,
trade names, patents, copyrights and licenses.
Term Loan shall mean the Term Loan made pursuant to Section 3.1 hereof.
Term Loan Commitment shall mean the obligation of the Lender to make
the Term Loan in an aggregate principal amount of Five Hundred Forty-Four
Thousand and No/100 Dollars ($544,000.00).
Term Loan Maturity Date shall mean the earlier of (a) May 31, 2003, and
(b) any date the Term Loan Maturity Date is accelerated by the Lender pursuant
to Section 9.1 hereof.
Term Loan Payment Date means each May 31, August 31, November 30 and
February 28 during the term of the Term Loan, beginning May 31, 1999.
Term Note shall mean the promissory note, substantially in the form of
Exhibit B attached hereto, of the Borrower and Ultimate Parent evidencing the
Term Loan, payable to the order of the Lender in the amount of the Lender's Term
Loan Commitment, and all renewals, extensions, modifications, rearrangements and
replacements thereof and substitutions therefor.
Three-Month Secondary CD Rate shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board of Governors of the
CREDIT AGREEMENT - Page 20
29
Federal Reserve System of the United States through the public information
telephone line of the Federal Reserve Bank of New York (which rate will, under
the current practices of such Board of Governors, be published in Federal
Reserve Statistical Release H.15(519) during the week following such day), or,
if such rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for three-month
certificates of deposit of major money center banks in New York City received at
approximately 10:00 a.m. on such day (or, if such day shall not be a Business
Day, on the next preceding Business Day) by the Lender from three New York City
negotiable certificate of deposit dealers of recognized standing selected by the
Lender.
Ultimate Parent shall have the meaning assigned to such term in the
preamble of this Agreement.
Unused Revolving Commitment shall mean the daily difference of the
Lender's Revolving Commitment on such day less the Current Sum applicable to the
Lender on such day.
1.2 Accounting Terms and Determinations. Except where specifically
otherwise provided:
(a) the symbol "$" and the word "dollars" shall mean lawful money of
the United States of America;
(b) any accounting term not otherwise defined shall have the meaning
ascribed to it under GAAP;
(c) unless otherwise expressly provided, any accounting concept and all
financial covenants shall be determined on a Consolidated basis, and financial
measurements shall be computed without duplication;
(d) wherever the term "including" or any of its correlatives appears in
the Loan Documents, it shall be read as if it were written "including (by way of
example and without limiting the generality of the subject or concept referred
to);"
(e) wherever the word "herein" or "hereof" is used in any Loan
Document, it is a reference to that entire Loan Document and not just to the
subdivision of it in which the word is used;
(f) references in any Loan Document to Section numbers are references
to the Sections of such Loan Document;
(g) references in any Loan Document to Exhibits, Schedules, Annexes and
Appendices are to the Exhibits, Schedules, Annexes and Appendices to such Loan
Document, they shall be deemed incorporated into such Loan Document by
reference;
(h) any term defined in the Loan Documents which refers to a particular
agreement, instrument or document shall also mean, refer to and include all
modifications, amendments,
CREDIT AGREEMENT - Page 21
30
supplements, restatements, renewals, extensions and substitutions of the same;
provided that nothing in this subsection shall be construed to authorize any
such modification, amendment, supplement, restatement, renewal, extension or
substitution except as may be permitted by other provisions of the Loan
Documents;
(i) all times of day used in the Loan Documents mean local time in
Dallas, Texas; and
(j) defined terms may be used in the singular or plural, as the context
requires.
2. Revolving Loans; Letters of Credit; Revolving Note; Payments; Prepayments;
Interest Rates.
2.1 Revolving Commitment. Subject to the terms and conditions hereof,
the Lender agrees to make Revolving Loans to the Borrower from time to time on
and after the Closing Date until, but not including, the Revolving Loan Maturity
Date, in an aggregate principal amount at any one time outstanding (including
the Lender's Letter of Credit Exposure Amount at such time) up to, but not
exceeding the Lender's Revolving Commitment. Notwithstanding the foregoing, the
aggregate principal amount of the Revolving Loans outstanding at any time shall
not exceed (a) the lesser of (i) the Revolving Commitment and (ii) the
applicable Borrowing Base at such time less (b) the Letter of Credit Exposure
Amount at such time. Subject to the conditions herein, any such Revolving Loan
repaid prior to the Revolving Loan Maturity Date may be re-borrowed as an
additional Revolving Loan by the Borrower pursuant to the terms of this
Agreement.
2.2 Revolving Loans.
(a) Subject to Sections 5.1 and 5.2 hereof, (i) all Revolving
Loans shall be advanced in accordance with the Lender's Revolving Commitment;
and (ii) the initial Revolving Loans shall be made on the Closing Date by the
Lender against delivery of the Revolving Note.
(b) When requesting a Revolving Loan hereunder, the Borrower
shall give the Lender notice of a request for a Revolving Loan in accordance
with Section 5.1(a) hereof.
(c) Except as otherwise provided or specified in Section
2.2(f) below, the Lender shall make its Revolving Loans available on the
proposed dates thereof by, as soon as practicable, but in no event later than
5:00 p.m. on such date, crediting the amount to a general deposit account
designated and maintained by the Borrower with the Lender at the Principal
Office.
(d) Each Revolving Loan made by the Lender on any date shall
be in an amount greater than $10,000; provided, however, that the LIBOR
Borrowings made on any date shall be in a minimum aggregate principal amount of
$500,000, with any increases over such minimal amount being in integral
aggregate multiples of $100,000.
CREDIT AGREEMENT - Page 22
31
(e) When and if the daily collection and application
procedures for Receivables are implemented and are continuing in accordance with
the provisions of Section 7.15(b) hereof, the Lender shall render to the
Borrower each month a statement of the Borrower's account of all transactions
which shall be deemed to be correct and accepted by and be binding upon the
Borrower unless the Lender receives a written statement of the Borrower's
exceptions to such account statement within thirty (30) days after such
statement was rendered to the Borrower.
2.3 Commitment and Other Fees.
(a) In consideration of the Lender's Revolving Commitment, the
Borrower agrees to pay to the Lender a commitment fee ("Commitment Fee")
(computed on the basis of the actual number of days elapsed in a year composed
of 360 days, subject to the terms of Section 10.6 hereof) in an amount equal to
the product of (A) one quarter of one percent (0.25%) times (B) the Lender's
Unused Revolving Commitment. The Commitment Fee shall be due and payable in
arrears (i) on the first Business Day of each December, March, June and
September prior to the Revolving Loan Maturity Date, commencing June 1, 1999,
and (ii) on the Revolving Loan Maturity Date, with each Commitment Fee to
commence to accrue as of the date hereof and to be effective as to any reduction
in the Revolving Commitment as of the date of any such decrease, and each
Commitment Fee shall cease to accrue (except with respect to interest at the
Past Due Rate on any unpaid portion thereof) on the Revolving Loan Maturity
Date. All past due Commitment Fees shall bear interest at the Past Due Rate and
shall be payable upon demand by the Lender.
(b) When and if the daily collection and application
procedures for Receivables are implemented and are continuing in accordance with
the provisions of Section 7.15(b) hereof, the Borrower hereby agrees to pay to
the Lender an administration fee in the amount of $10,000 per annum, payable in
advance in semi-annual installments of $5,000, commencing on any date such daily
collection procedures are implemented, and thereafter semi-annually on the same
Business Day of each subsequent six-month period in which such daily collection
procedures are continuing; provided, however, prior to the implementation of
such collection procedures, Borrower hereby agrees to pay the Lender an
administration fee in the amount of $5,000 per annum, payable in advance with
the first payment being due and payable on [the Closing Date (such amount having
been paid)] and annually thereafter, on each anniversary of the Closing Date.
2.4 Termination and Reductions of Revolving Commitment.
(a) Upon at least five (5) Business Days' prior irrevocable
written notice to the Lender, the Borrower may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Commitment;
provided, however, that the Revolving Commitment shall not be reduced at any
time to an amount not less than the aggregate of the Lender's Current Sum
outstanding at such time. Each partial reduction of the Revolving Commitment
shall be in a minimum of $500,000 or an integral multiple of $100,000 in excess
thereof.
CREDIT AGREEMENT - Page 23
32
(b) Simultaneously with any termination or reduction, in whole
or in part, of Revolving Commitment pursuant to Section 2.4(a) above, the
Borrower hereby agrees to pay to the Lender, (i) the Commitment Fee due and
owing through and including date of such termination or reduction on the amount
of the Revolving Commitment of the Lender so terminated or reduced and (ii)
unless such termination or reduction is accomplished with the proceeds of an
Initial Public Offering, a prepayment fee equal to one percent (1.00%) of the
Revolving Commitment of the Lender so terminated or reduced if such termination
or reduction occurs on or before the first anniversary of the Closing Date.
After the first anniversary date of the Closing Date, the Revolving Commitment
may be terminated or reduced, in whole or in part, without any prepayment fee,
penalty or other similar charge.
(c) To effect the payment of any and all Commitment Fees and
all other Obligations outstanding and owing hereunder or under any other Loan
Documents, subject to the provisions of Sections 2.1 and 5.1 hereof, the Lender
may, but shall not be obligated to, make a Revolving Loan if (i) such Revolving
Loan is to be made prior to the Revolving Loan Maturity Date, (ii) the
Availability would be equal to or greater than zero after giving effect to such
Revolving Loan, and (iii) no Default or Event of Default shall have occurred
which is then continuing. The inability of the Lender to cause the payment of
any such Commitment Fees or other Obligations in accordance with the preceding
sentence shall not in any way whatsoever affect the Borrower's and Guarantors'
obligation to otherwise pay such amounts in accordance with the applicable terms
hereof or of any other Loan Documents.
2.5 Mandatory and Voluntary Prepayments.
(a) If the Current Sum applicable to the Lender at any time
exceeds the Lender's Revolving Commitment, the Lender shall notify the Borrower
of the deficiency (such notice being permitted to be given orally and need not
be in writing) and the Borrower shall immediately make a prepayment on the
Lender's Revolving Note or otherwise reimburse Lender for Letter of Credit
Advances or cause one or more Letters of Credit to be canceled and surrendered
in an amount sufficient to reduce the Lender's Current Sum to an amount no
greater than the Lender's Revolving Commitment. Any prepayments required by this
subparagraph (a) shall be applied to outstanding Alternate Base Rate Borrowings
up to the full amount thereof before such prepayments are applied to outstanding
LIBOR Borrowings (together with any Consequential Loss resulting from such
prepayment).
(b) The Borrower shall make prepayments of the Revolving Loans
from time to time so that the Availability equals or exceeds zero at all times.
Specifically, if the Availability at any time is less than zero, the Lender
shall notify the Borrower of the deficiency (such notice being permitted to be
given orally and need not be in writing) and the Borrower shall immediately make
a prepayment on the Revolving Note or otherwise reimburse the Lender for Letter
of Credit Advances or cause one or more Letters of Credit to be canceled and
surrendered in an amount sufficient to cause the Availability to be at least
equal to zero. Any prepayments required by this subparagraph (b) shall be
applied to outstanding Alternate Base Rate Borrowings up to the full amount
thereof before such prepayments are applied to outstanding LIBOR Borrowings
(together with any Consequential Loss resulting from such prepayment).
CREDIT AGREEMENT - Page 24
33
(c) In addition to the mandatory prepayments required by Sections
2.5(a) and above, the Borrower shall have the right, at its option and subject
to the requirements of Section 2.4, to prepay any of the Revolving Loans in
whole at any time or in part from time to time, without premium or penalty,
except as otherwise provided in Section 2.4, this Section 2.5 or subsections
(a), (b) or (c) of Section 2.9 hereof. Each prepayment under this subsection
shall applied to the prepayment of the aggregate unpaid principal amount of the
Revolving Note. Prepayments under this subparagraph (c) shall be subject to the
following additional conditions:
(1) In giving notice of prepayment as hereinafter
provided, the Borrower shall specify, for the purpose of paragraphs (2)
and (3) immediately following, the manner of application of such
prepayment as between Alternate Base Rate Borrowings and LIBOR
Borrowings; provided, that in no event shall any LIBOR Borrowing be
partially prepaid.
(2) Prepayments applied to any LIBOR Rate Borrowing
may be made on any Business Day, provided, that (i) the Borrower shall
have given the Lender at least five (5) Business Days' prior
irrevocable written or telecopied notice of such prepayment, specifying
the principal amount of the LIBOR Borrowing to be prepaid, the
particular LIBOR Borrowing to which such prepayment is to be applied
and the prepayment date; and (ii) if such prepayment is made on any day
other than the last day of the Interest Period corresponding to the
LIBOR Borrowing to be prepaid, the Borrower shall pay directly to the
Lender, on the last day of such Interest Period, the Consequential Loss
as a result of such prepayment.
(3) Prepayments applied to any Alternate Base Rate
Borrowing may be made on any Business Day, provided that the Borrower
shall have given the Lender prior irrevocable written notice or notice
by telephone (which is to be promptly confirmed in writing) of such
prepayment on the Business Day of such prepayment, specifying the
principal amount of the Alternate Base Rate Borrowing to be prepaid.
(d) Notice of any prepayment having been given, the principal
amount specified in such notice, together with (in the case of any prepayment of
a LIBOR Borrowing) interest thereon to the date of prepayment, shall be due and
payable on such prepayment date.
2.6 Revolving Note; Payments.
(a) All Revolving Loans made by Lender to the Borrower shall
be evidenced by a single Revolving Note dated as of the Closing Date, delivered
and payable to the Lender in a principal amount equal to the Lender's Revolving
Commitment as of the Closing Date.
(b) The outstanding principal balance of each and every
Revolving Loan, as evidenced by the Revolving Note, shall mature and be fully
due and payable on the Revolving Loan Maturity Date.
CREDIT AGREEMENT - Page 25
34
(c) Subject to Section 10.6 hereof, the Borrower hereby agrees
to pay accrued interest on the unpaid principal balance of the Revolving Loans
on the Interest Payment Dates, commencing the first of such dates to occur after
the date hereof. After the Revolving Loan Maturity Date, accrued and unpaid
interest on the Revolving Loans shall be payable on demand.
(d) To effect payment of accrued interest owing on the
Revolving Loans as of the Interest Payment Dates, subject to the provisions of
Sections 2.1 and 5.1 hereof, the Lender may, but shall not be obligated to, make
a Revolving Loan to pay in full the amount of accrued interest owing and payable
on the Revolving Loans as of the respective Interest Payment Date if (i) such
Revolving Loan is to be made prior to the Revolving Loan Maturity Date, (ii) the
Availability would be equal to or greater than zero after giving effect to such
Revolving Loan, and (iii) no Default or Event of Default shall have occurred
which is then continuing. The inability of the Lender to cause a payment of any
accrued interest owing on the Revolving Loans on any Interest Payment Date as of
the respective due date thereof in accordance with the preceding sentence shall
not in any way whatsoever effect the Borrower's obligation to otherwise pay such
amounts in accordance with the applicable terms hereof or any other Loan
Documents.
2.7 Application of Payments and Prepayments.
(a) Except as otherwise provided in Sections 2.5(a) and (b)
hereof, prepayments on the Revolving Note shall be applied to payment of the
aggregate unpaid principal amounts of the Revolving Note, with the balance of
any such prepayments, if any, being applied to accrued interest. Payments of
accrued interest on the Revolving Note in accordance with Section 2.6(c) hereof
shall be applied to the aggregate accrued interest then outstanding under the
Revolving Note, while payment by the Borrower of the aggregate principal amount
outstanding under the Revolving Note on the Revolving Loan Maturity Date shall
be applied to principal.
(b) All sums payable by the Borrower to the Lender hereunder
or pursuant to the Revolving Note shall be payable in United States dollars in
immediately available funds not later than 12:00 noon on the date such payment
or prepayment is due and shall be made without set-off, counterclaim or
deduction of any kind. Any such payment or prepayment received and accepted by
the Lender after 12:00 noon shall be considered for all purposes (including the
payment of interest, to the extent permitted by law) as having been made on the
next succeeding Business Day. All such payments or prepayments shall be made at
the Principal Office. If any payment or prepayment becomes due and payable on a
day which is not a Business Day, then the date for the payment thereof shall be
extended to the next succeeding Business Day and interest shall be payable
thereon at the then applicable rate per annum during such extension
2.8 Interest Rates for Revolving Loans.
(a) Subject to Section 10.6 hereof, the Revolving Note shall
bear interest on their respective outstanding principal balances at the
Alternate Base Rate; provided, that (1) all past due principal and interest
shall bear interest at the Past Due Rate, which shall be payable on demand, and
(2) subject to the provisions hereof, the Borrower shall have the option of
having all or any portion of the principal balances from time to time
outstanding under the Revolving
CREDIT AGREEMENT - Page 26
35
Note bear interest until their respective maturities at a rate per annum equal
to the Adjusted LIBOR Rate (together with the Alternate Base Rate, individually
herein called an "Interest Option" and collectively called "Interest Options").
The records of the Lender with respect to Interest Options, Interest Periods and
the amounts of Revolving Loans to which they are applicable shall be binding and
conclusive, absent manifest error. Interest on the Revolving Loans shall be
calculated at the Alternate Base Rate, except where it is expressly provided
pursuant to this Agreement that the Adjusted LIBOR Rate is to apply.
(b) The Borrower shall have the right to designate or convert
its Interest Options in accordance with the provisions hereof. Provided no
Default or Event of Default has occurred and is continuing and subject to the
provisions of the last sentence of Subsection 2.8(a) hereinabove and of Section
2.9 hereof, the Borrower may elect to have the Adjusted LIBOR Rate apply or
continue to apply to all or any portion of the principal balances of the
Revolving Note. Each change in Interest Options shall be a conversion of the
rate of interest applicable to the specified portion of the Revolving Loans, but
such conversion alone shall not change the outstanding principal balance of the
Revolving Note. The Interest Options shall be designated or converted in the
manner provided below:
(1) The Borrower shall give the Lender notice by
telephone, promptly confirmed by written notice (the "Rate Selection
Notice") substantially in the form of Exhibit F hereto. Each such
telephone and written notice shall specify the amount and type of
borrowings which are the subject of the designation, if any; the amount
and type of borrowings into which such borrowings are to be converted
or for which an Interest Option is designated; the proposed date for
the designation or conversion (which, in the case of conversion of
LIBOR Borrowings, except as provided in Section 2.9 hereof, shall be
the last day of the Interest Period applicable thereto) and the
Interest Period or Periods, if any, selected by the Borrower. Such
notice by telephone shall be irrevocable and shall be given to the
Lender no later than the applicable Rate Selection Date. If (x) a new
Revolving Loan is to be a LIBOR Borrowing, (y) an existing LIBOR
Borrowing is maturing at the time that a new Revolving Loan is being
requested and the Borrower is electing to have such existing portion of
the outstanding principal balance of the Revolving Note going forward
bear interest at the same Interest Option and for the same Interest
Period as the new Revolving Loan, or (z) a portion of an Alternate Rate
Borrowing is to be converted so as to bear interest at the same
Interest Option and for the same Interest Period as the new Revolving
Loan, then the Rate Selection Notice shall be included in the Request
for Extension of Credit applicable to the new Revolving Loan, which
shall be given to the Lender no later than the applicable Rate
Selection Date.
(2) No more than three (3) LIBOR Borrowings and
corresponding Interest Periods shall be outstanding at any one time.
Each LIBOR Borrowing shall be in a minimum aggregate principal amount
of at least $500,000, with any increases over such minimum amount being
in integral aggregate multiples of $100,000.
(3) Principal included in any borrowing shall not be
included in any other borrowing which exists at the same time.
CREDIT AGREEMENT - Page 27
36
(4) Each designation or conversion shall occur on a
Business Day.
(5) Except as provided in Section 2.9 hereof, no
LIBOR Borrowing shall be converted on any day other than the last day
of the applicable Interest Period.
(c) All interest and fees (including the Commitment Fee) will
be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable, unless the effect of so computing shall be to cause the rate of
interest to exceed the Highest Lawful Rate.
2.9 Special Provisions Applicable to LIBOR Borrowings.
(a) If, after the date of this Agreement, the adoption of any
applicable Legal Requirement or any change in any applicable Legal Requirement
or in the interpretation or administration thereof by any Governmental Authority
or compliance by the Lender with any request or directive (whether or not having
the force of law) of any Governmental Authority shall at any time make it
unlawful or impossible for the Lender to permit the establishment of or to
maintain any LIBOR Borrowing, the commitment of the Lender to establish or
maintain the Adjusted LIBOR Rate affected by such adoption or change shall
forthwith be canceled and the Borrower shall forthwith, upon demand by the
Lender to the Borrower, (1) convert the Adjusted LIBOR Rate with respect to
which such demand was made to the Alternate Base Rate; (2) pay all accrued and
unpaid interest to date on the amount so converted; and (3) pay any amounts
required to compensate the Lender for any additional cost or expense which the
Lender may incur as a result of such adoption of or change in such Legal
Requirement or in the interpretation or administration thereof and any
Consequential Loss which the Lender may incur as a result of such conversion to
the Alternate Base Rate. If, when the Lender so notifies the Borrower, the
Borrower has given a Rate Selection Notice specifying one or more borrowings of
the type with respect to which such demand was made but the selected Interest
Period or Interest Periods has not yet begun, such Rate Selection Notice shall
be deemed to be of no force and effect, as if never made, and the balance of the
Revolving Loans specified in such Rate Selection Notice shall bear interest at
the Alternate Base Rate until a different available Interest Option shall be
designated in accordance herewith.
(b) If the adoption of any applicable Legal Requirement or any
change in any applicable Legal Requirement or in the interpretation or
administration thereof by any Governmental Authority or compliance by the Lender
with any request or directive (whether or not having the force of law) from any
Governmental Authority shall at any time as a result of any portion of the
principal balance of the Revolving Note being maintained on the basis of the
Adjusted LIBOR Rate:
(1) subject the Lender (or make it apparent that the
Lender is subject) to any tax (including any United States interest
equalization tax), levy, impost, duty, charge, fee (collectively,
"Taxes"), or any deduction or withholding for any Taxes on or from the
payment due under any LIBOR Borrowing or other amounts due hereunder,
other than income and franchise taxes of the United States and its
political subdivisions; or
CREDIT AGREEMENT - Page 28
37
(2) change the basis of taxation of payments due from
the Borrower to the Lender under any LIBOR Borrowing (otherwise than by
a change in the rate of taxation of the overall net income of the
Lender); or
(3) impose, modify, increase or deem applicable any
reserve requirement (excluding that portion of any reserve requirement
included in the calculation of the Statutory Reserves, special deposit
requirement or similar requirement (including state law requirements
and Regulation D)) imposed, modified, increased or deemed applicable by
any Governmental Authority against assets held by the Lender, or
against deposits or accounts in or for the account of the Lender, or
against loans made by the Lender, or against any other funds,
obligations or other Property owned or held by the Lender; or
(4) impose on the Lender any other condition
regarding any LIBOR Borrowing;
and the result of any of the foregoing is to increase the cost to the Lender of
agreeing to make or of making, renewing or maintaining such borrowing on the
basis of the Adjusted LIBOR Rate, or reduce the amount of principal or interest
received by the Lender, then, upon demand by the Lender, the Borrower shall pay
to the Lender, from time to time as specified by the Lender, additional amounts
which shall compensate the Lender for such increased cost or reduced amount. The
Lender will promptly notify the Borrower in writing of any event, upon becoming
actually aware of it, which will entitle the Lender to additional amounts
pursuant to this paragraph. The Lender's determination of the amount of any such
increased cost, increased reserve requirement or reduced amount shall be
conclusive and binding, absent manifest error, provided that the calculation
thereof is set forth in reasonable detail in such notice.
The Borrower shall have the right, if it receives from the Lender any
notice referred to in the preceding paragraph, upon three (3) Business Days'
notice to the Lender, either (i) to repay in full (but not in part) any
borrowing with respect to which such notice was given, together with any accrued
interest thereon, or (ii) to convert the Adjusted LIBOR Rate in effect with
respect to such borrowing to the Alternate Base Rate; provided, that any such
repayment or conversion shall be accompanied by payment of (x) the amount
required to compensate the Lender for the increased cost or reduced amount
referred to in the preceding paragraph; (y) all accrued and unpaid interest to
date on the amount so repaid or converted, and (z) any Consequential Loss which
may be incurred as a result of such repayment or conversion.
(c) If for any reason with respect to any Interest Period the
Lender shall have determined (which determination shall be conclusive and
binding upon the Borrower) that: (1) the Lender is unable through its customary
general practices to determine a rate at which the Lender is offered deposits in
United States dollars by prime banks in the London interbank market, in the
appropriate amount for the appropriate period, or by reason of circumstances
affecting the London interbank market, generally, the Lender is not being
offered deposits for the applicable Interest Period and in an amount equal to
the amount requested by the Borrower, or (2) the Adjusted LIBOR Rate will not
reflect the actual cost to the Lender of making and
CREDIT AGREEMENT - Page 29
38
maintaining any LIBOR Borrowing hereunder for any proposed Interest Period, then
the Lender shall give the Borrower notice thereof and thereupon, (A) any Rate
Selection Notice previously given by the Borrower designating an Adjusted LIBOR
Rate which has not commenced as of the date of such notice from the Lender shall
be deemed for all purposes hereof to be of no force and effect, as if never
given, and (B) until the Lender shall notify the Borrower that the circumstances
giving rise to such notice from the Lender no longer exist, each Rate Selection
Notice requesting an Adjusted LIBOR Rate shall be deemed a request for an
Alternate Base Rate Borrowing, and each outstanding LIBOR Borrowing then in
effect shall be converted, without any notice to or from the Borrower, upon the
termination of the Interest Period then in effect, to an Alternate Base Rate
Borrowing.
(d) THE BORROWER HEREBY AGREES TO INDEMNIFY THE LENDER AGAINST
AND HOLD THE LENDER HARMLESS FROM ANY LOSS OR EXPENSE WHICH IT MAY INCUR OR
SUSTAIN AS A CONSEQUENCE OF ANY UNTIMELY PAYMENT (MANDATORY OR OPTIONAL) OR
DEFAULT BY THE BORROWER IN THE PAYMENT OF ANY PRINCIPAL AMOUNT OF OR INTEREST ON
THE NOTE, OR ANY FAILURE BY THE BORROWER TO CONVERT OR TO BORROW ANY LIBOR
BORROWING ON THE DATE SPECIFIED BY THE BORROWER, IN EACH CASE INCLUDING ANY
INTEREST PAYABLE BY THE LENDER TO THE LENDERS OF THE FUNDS OBTAINED BY IT IN
ORDER TO MAKE OR MAINTAIN ANY LIBOR BORROWING (OR ANY PORTION THEREOF), AND, TO
THE EXTENT NOT COVERED ABOVE, ANY CONSEQUENTIAL LOSS. THIS AGREEMENT SHALL
SURVIVE THE PAYMENT OF THE REVOLVING NOTE. A CERTIFICATE AS TO ANY ADDITIONAL
AMOUNTS PAYABLE TO THE LENDER PURSUANT TO THIS PARAGRAPH SUBMITTED BY THE LENDER
TO THE BORROWER SHALL BE CONCLUSIVE AND BINDING UPON THE BORROWER, ABSENT
MANIFEST ERROR, PROVIDED THE CALCULATION THEREOF IS SET FORTH IN REASONABLE
DETAIL IN SUCH NOTICE.
(e) If the Borrower requests quotes of the Adjusted LIBOR Rate
for different Interest Periods being considered for election by the Borrower,
the Lender will use reasonable efforts to provide such quotes to the Borrower
promptly. However, all such quotes provided shall be representative only and
shall not be binding on the Lender, nor shall they be determinative, directly or
indirectly, of any Adjusted LIBOR Rate or any component of any rate, nor will
the Borrower's failure to receive or the Lender's failure to provide any
requested quote or quotes either (1) excuse or extend the time for performance
of an obligation of the Borrower or for the exercise of any right, option or
election of the Borrower or (2) impose any duty or liability on the Lender. If
the Borrower requests a list of the Business Days in any calendar month, the
Lender will use reasonable efforts to provide such list promptly. However, any
such list provided shall be understood to identify only those days which the
Lender believes in good faith at the time such list is prepared will be the
Business Days for such month. The Lender shall not have any liability for any
failure to provide, delay in providing, error or mistake in or omission from,
any such quote or list.
(f) If the Lender has a LIBOR Lending Office which differs
from its Domestic Lending Office, all Revolving Loans advanced by the Lender's
LIBOR Lending Office shall be deemed to have been made by the Lender and the
obligation of the Borrower to repay such Revolving Loans shall nevertheless be
to the Lender and shall be deemed held by the Lender, to the extent of such
portions of the Revolving Loan, for the account of the Lender's LIBOR Lending
Office.
CREDIT AGREEMENT - Page 30
39
(g) Notwithstanding any provision of this Agreement to the
contrary, the Lender shall be entitled to fund and maintain its funding of all
or any part of the Revolving Loans hereunder in any manner it sees fit, it being
understood, however, that for the purposes of this Agreement, all determinations
hereunder shall be made as if the Lender had actually funded and maintained its
portion of each LIBOR Borrowing during each Interest Period for the Revolving
Loans through the purchase of deposits having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the LIBOR Rate for such
Interest Period.
(h) The Borrower's obligation to pay increased costs and
Consequential Loss with regard to each LIBOR Borrowing as specified in this
Section 2.9 hereof shall survive termination of this Agreement.
2.10 Letters of Credit.
(a) Subject to the terms and conditions contained herein, the
Borrower shall have the right to utilize a portion of the Revolving Commitment
from time to time prior to the Revolving Loan Maturity Date to obtain from the
Lender one or more Letters of Credit for the account of the Borrower in such
amounts and in favor of such beneficiaries as the Borrower from time to time
shall request; provided, that in no event shall the Lender have any obligation
to issue any Letter of Credit if (i) the face amount of such Letter of Credit,
plus the Letter of Credit Exposure Amount at such time would exceed $500,000,
(ii) the face amount of such Letter of Credit, plus the aggregate of the
Lender's Current Sum at such time, would exceed the lesser of (1) the Revolving
Commitment or (2) the Availability, (iii) such Letter of Credit would have an
expiry date beyond the earlier to occur of (1) one month prior to the scheduled
Revolving Loan Maturity Date, (2) 90 days after the issuance date of such Letter
of Credit if such Letter of Credit is a documentary sight Letter of Credit or
(3) 365 days after the issuance date of such Letter of Credit if such Letter of
Credit is a standby Letter of Credit, (iv) such Letter of Credit is not in a
form and does not contain terms satisfactory to the Lender in its sole and
absolute discretion, (v) the Borrower have not executed and delivered such
Applications and other instruments and agreements relating to such Letter of
Credit as the Lender shall have requested, or (vi) an event has occurred and is
continuing which constitutes a Default or Event of Default.
(b) If requesting the issuance of any Letter of Credit, the
Borrower shall give at least three (3) Business Days' prior written notice to
the Lender, at its Domestic Lending Office, which written notice shall be the
requisite Application for a Letter of Credit on the Lender's customary form.
(c) The Borrower promises to pay to the order of the Lender
the amount of all Letter of Credit Advances. To effect repayment of any such
Letter of Credit Advance, the Lender shall automatically satisfy such Letter of
Credit Advance (subject to the terms and conditions of Sections 2.1 and 5.1
hereof) by making a Revolving Loan if (i) such Letter of Credit Advance is (and
such Revolving Loan is to be) made prior to the Revolving Loan Maturity Date,
(ii) the Availability would be equal to or greater than zero after giving effect
to such Revolving Loan and (iii) no Default or Event of Default shall have
occurred which is then continuing. If the Lender does not make a Revolving Loan
to satisfy such Letter of Credit Advance, each such letter of Credit Advance
shall be considered for all purposes as a demand
CREDIT AGREEMENT - Page 31
40
obligation owing by the Borrower to the Lender, and each Letter of Credit
Advance shall bear interest from the date thereof at the Past Due Rate, without
notice of presentment, demand, protest or other formalities of any kind (said
past due interest on such Letter of Credit Advance being payable on demand). The
failure of the Lender to affect repayment of any such Letter of Credit Advance
in accordance with the preceding sentences shall not in any way whatsoever
affect the Borrower's obligation to pay each Letter of Credit Advance on demand
and to pay interest at the Past Due Rate on the amount of unreimbursed Letter of
Credit Advance. All rights, powers, benefits and privileges of this Agreement
with respect to the Revolving Note, all security therefor (including the
Collateral) and guaranties thereof (including the Guaranties) and all
restrictions, provisions for repayment or acceleration and all other covenants,
warranties, representations and agreements of the Borrower contained in this
Agreement with respect to the Revolving Note shall apply to such Letter of
Credit Advances.
(d) In consideration of the issuance of each Letter of Credit
pursuant to the provisions of this Section 2.10, the Borrower agrees to pay
(subject to Section 10.6 hereof) to the Lender a letter of credit fee (computed
on the basis of the actual number of days elapsed in a year composed of 360
days) in an amount equal to, (i) with respect to each documentary letter of
credit, the product of (a) the Applicable Margin in effect for LIBOR Borrowings
for the applicable period times (b) the undrawn upon amount of the applicable
Letter of Credit, and (ii) with respect to each standby letter of credit, the
product of (a) the Applicable Margin in effect for LIBOR Borrowings for the
applicable period plus 200 basis points times (b) the undrawn upon amount of the
applicable Letter of Credit, with each letter of credit fee to commence to
accrue as of the date of issuance of such Letter of Credit and to be effective
as to any reductions in the undrawn amount of such Letter of Credit as of the
date of any such reduction (whether resulting from payments thereunder by the
Lender, by agreement of the beneficiary thereunder or automatically by the terms
of such Letter of Credit), and each letter of credit fee shall cease to accrue
(except with respect to interest at the Past Due Rate on any unpaid portion
thereof) on the date that such Letter of Credit expires, is returned to the
Lender undrafted upon by the beneficiary thereof or is fully paid by the Lender.
Said letter of credit fees shall be payable in arrears to the Lender at its
Principal Office in immediately available funds (i) on the first Business Day of
each calendar month that such Letter of Credit remains open, and (ii) on the
date that such Letter of Credit expires, is returned to the Lender undrafted
upon by the beneficiary thereof or is fully paid by the Lender. All past due
letter of credit fees shall bear interest at the Past Due Rate and shall be
payable upon demand by the Lender. The Borrower also hereby agrees to pay to the
Lender any and all other issuance, amendment, negotiation, and other normal and
customary fees which are charged by the Lender in connection with the issuance
or negotiation of any of Letter of Credit and the presentation or payment of any
draw under any such Letter of Credit, with all of such amounts being due and
payable to the Lender upon demand.
(e) The obligations of the Borrower under this Agreement in
respect of the Letters of Credit and all Letter of Credit Advances are absolute,
unconditional and irrevocable, shall be paid strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including the
following circumstances:
CREDIT AGREEMENT - Page 32
41
(1) any lack of validity or enforceability of this
Agreement, any Letter of Credit or any Loan Document;
(2) any amendment or waiver of default under or any
consent to departure from the terms of this Agreement or any Letter of
Credit without the express prior written consent of the Lender;
(3) the existence of any claim, set-off, defense or
other right which any beneficiary or any transferee of any Letter of
Credit (or any entities for whom any such beneficiary or any such
transferee may be acting), or any Person (other than the Lender) may
have, whether in connection with this Agreement, the Letters of Credit,
the transactions contemplated hereby or any unrelated transaction;
(4) any statement, draft, certificate, or any other
document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever; provided
that the Lender will examine each document presented under each Letter
of Credit to ascertain that such document appears on its face to comply
with the terms thereof; and
(5) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
In the event that any restriction or limitation is imposed upon or
determined or held to be applicable to the Lender or the Borrower by,
under or pursuant to any Legal Requirement now or hereafter in effect
or by reason of any interpretation thereof by any Governmental
Authority, which in the respective sole judgment of the Lender would
prevent the Lender from legally incurring liability under a Letter of
Credit issued or proposed to be issued hereunder, then the Lender shall
give prompt written notice thereof to the Borrower, whereupon the
Lender shall have no obligation to issue any additional Letters of
Credit then or at any time thereafter. In addition, if as a result of
any Regulatory Change which imposes, modifies or deems applicable (x)
any tax, reserve, special deposit or similar requirement against any
Letters of Credit issued or participated to by the Lender, (y) any fee,
expense or assessment against the Letters of Credit issued by the
Lender for deposit insurance, or (z) any other charge, expense or
condition which increases the actual cost to the Lender of issuing or
maintaining such Letters of Credit, or reduces any amount receivable by
the Lender hereunder in respect of any Letter of Credit or any
participation therein (which increase in cost, or reduction in amount
receivable, shall be the result of the Lender's reasonable allocation
of the aggregate of such increases or reductions resulting from such
event), then the Borrower (subject to Section 10.6 hereof) shall pay to
the Lender, upon demand and from time to time, amounts sufficient to
compensate such Person for each such increase from the effective date
of such increase to the date of demand therefor. Each such demand shall
be accompanied by a certificate setting forth in reasonable detail the
calculation of the amount then being demanded in accordance with the
preceding sentence and each such certificate shall be conclusive absent
manifest error.
CREDIT AGREEMENT - Page 33
42
(f) THE BORROWER HEREBY INDEMNIFIES AND HOLDS HARMLESS LENDER
FROM AND AGAINST ANY AND ALL CLAIMS AND DAMAGES, LOSSES, LIABILITIES, COSTS OR
EXPENSES WHICH LENDER MAY INCUR (OR WHICH MAY BE CLAIMED AGAINST LENDER BY ANY
PERSON WHATSOEVER) IN CONNECTION WITH THE EXECUTION AND DELIVERY OR TRANSFER OF
OR PAYMENT OR FAILURE TO PAY UNDER ANY LETTER OF CREDIT; PROVIDED, THAT THE
BORROWER SHALL NOT BE REQUIRED TO INDEMNIFY LENDER FOR ANY CLAIMS, DAMAGES,
LOSSES, LIABILITIES, COSTS OR EXPENSES TO THE EXTENT, BUT ONLY TO THE EXTENT,
CAUSED BY (I) THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF THE PARTY SEEKING
INDEMNIFICATION OR (II) LENDER'S FAILURE TO PAY UNDER ANY LETTER OF CREDIT AFTER
THE PRESENTATION TO IT OF A REQUEST REQUIRED TO BE PAID UNDER APPLICABLE LAW.
NOTHING IN THIS SECTION 2.10(F) IS INTENDED TO LIMIT THE OBLIGATIONS OF THE
BORROWER UNDER ANY OTHER PROVISION OF THIS AGREEMENT.
2.11 Recapture. If on any Interest Payment Date the Lender does not
receive payment in full of interest computed at the Alternate Base Rate and/or
the Adjusted LIBOR Rate, as applicable (computed without regard to any
limitation by the Highest Lawful Rate) because the sum of the Alternate Base
Rate and/or the Adjusted LIBOR Rate, as applicable (so computed) exceeds or has
exceeded the Highest Lawful Rate applicable to the Lender, the Borrower shall
pay to the Lender, in addition to interest otherwise required, on each Interest
Payment Date thereafter, the Excess Interest Amount (calculated as of each such
subsequent Interest Payment Date); provided that in no event shall the Borrower
be required to pay, for any computation period, interest at a rate exceeding the
Highest Lawful Rate applicable to the Lender during such period. As used herein,
the term "Excess Interest Amount" shall mean, on any day, the amount by which
(a) the amount of all interest which would have accrued prior to such day on the
outstanding principal of the Revolving Note (had the Alternate Base Rate and/or
the Adjusted LIBOR Rate, as applicable, at all times been in effect without
limitation by the Highest Lawful Rate applicable to the Lender) exceeds (b) the
aggregate amount of interest actually paid to the Lender on the Revolving Note
on or prior to such day.
2.12 Use of Proceeds. The proceeds of the Revolving Loans will be used
to (i) refinance the existing Indebtedness of Tidel Engineering, Inc. to the
Lender, and (ii) finance general working capital needs of Borrower.
3. Term Loan; Term Note; Payments; Prepayments; Interest Rates.
3.1 Term Loan Commitment. Subject to the terms and conditions hereof,
the Lender agrees to continue the Prior Term Loan in the form of a Term Loan to
the Borrower and to the Ultimate Parent, as co-borrowers, on the Closing Date
until, but not including, the Term Loan Maturity Date, in a principal amount up
to, but not exceeding the Term Loan Commitment.
CREDIT AGREEMENT - Page 34
43
3.2 Mandatory and Voluntary Prepayments.
(a) The Borrower and the Ultimate Parent shall have the right,
at their option and subject to the requirements of Section 2.4, to prepay the
Term Loan as provided in this Section 3.2. Any prepayment under this subsection
shall applied to the prepayment of the aggregate unpaid principal amount of the
Term Note. Prepayment under this subparagraph (a) shall be subject to the
following additional conditions:
(1) In no event shall the Term Note be partially
prepaid.
(2) Prepayment applied to the Term Note may be made
on any Business Day, provided, that (i) the Borrower shall have given
the Lender at least five (5) Business Days' prior irrevocable written
or telecopied notice of such prepayment, specifying the principal
amount of the Term Note to be prepaid, which shall be the entire amount
of the outstanding principal of the Term Note, and (ii) if such
prepayment is made on any day other than the Term Loan Maturity Date,
the Borrower shall pay directly to the Lender, on the date of such
prepayment, the Consequential Loss as a result of such prepayment.
(b) Notice of any prepayment having been given, the principal
amount specified in such notice, together with interest thereon to the date of
prepayment, shall be due and payable on such prepayment date.
3.3 Term Note; Payments.
(a) The Term Loan made by the Lender to the Borrower shall be
evidenced by a Term Note dated as of the Closing Date, delivered and payable to
the Lender in a principal amount equal to the Term Loan Commitment as of the
Term Loan Closing Date.
(b) Principal payments in the amount of Thirty-Two Thousand
and No/100 Dollars ($32,000.00), each, shall be due and payable quarterly, on
each Term Loan Payment Date. The remaining outstanding principal balance of the
Term Loan, as evidenced by the Term Note, shall mature and be fully due and
payable on the Term Loan Maturity Date.
(c) Subject to Section 10.6 hereof, the Borrower hereby agrees
to pay accrued interest on the unpaid principal balance of the Term Loan on each
Term Loan Payment Date. After the Term Loan Maturity Date, accrued and unpaid
interest on the Term Loan shall be payable on demand.
(d) To effect payment of accrued interest owing on the Term
Loan as of the Interest Payment Dates, subject to the provisions of Sections 2.1
and 5.1 hereof, the Lender may, but shall not be obligated to, make a Revolving
Loan to pay in full the amount of accrued interest owing and payable on the Term
Loan as of the respective Interest Payment Date if (i) such Revolving Loan is to
be made prior to the Revolving Loan Maturity Date, (ii) the Availability would
be equal to or greater than zero after giving effect to the Revolving Loan, and
(iii) no Default or Event of Default shall have occurred which is then
continuing. The inability
CREDIT AGREEMENT - Page 35
44
of the Lender to cause a payment of any accrued interest owing on the Term Loan
on any Interest Payment Date as of the respective due date thereof in accordance
with the preceding sentence shall not in any way whatsoever effect the
Borrower's and the Ultimate Parent's obligation to otherwise pay such amounts in
accordance with the applicable terms hereof or any other Loan Documents.
3.4 Application of Payments and Prepayments.
(a) Prepayment on the Term Note shall be applied to payment of
the aggregate unpaid principal amount of the Term Note, with the balance of any
such prepayments, if any, being applied to accrued interest. Payments of accrued
interest on the Term Note in accordance with Section 3.3(c) hereof shall be
applied to the aggregate accrued interest then outstanding under the Term Note,
while payment by the Borrower of the aggregate principal amount outstanding
under the Term Note on the Term Loan Maturity Date shall be applied to
principal.
(b) All sums payable by the Borrower to the Lender hereunder
or pursuant to the Term Note shall be payable in United States dollars in
immediately available funds not later than 12:00 noon on the date such payment
or prepayment is due and shall be made without set-off, counterclaim or
deduction of any kind. Any such payment or prepayment received and accepted by
the Lender after 12:00 noon shall be considered for all purposes (including the
payment of interest, to the extent permitted by law) as having been made on the
next succeeding Business Day. All such payments or prepayments shall be made at
the Principal Office. If any payment or prepayment becomes due and payable on a
day which is not a Business Day, then the date for the payment thereof shall be
extended to the next succeeding Business Day and interest shall be payable
thereon at the then applicable rate per annum during such extension.
3.5 Interest Rate for Term Loan.
(a) Subject to Section 10.6 hereof, the Term Note shall bear
interest on its outstanding principal balances at a rate per annum equal to the
Fixed Rate.
(b) All interest will be computed on the basis of a year of
360 days and actual days elapsed (including the first day but excluding the last
day) occurring in the period for which payable, unless the effect of so
computing shall be to cause the rate of interest to exceed the Highest Lawful
Rate.
3.6 Special Provisions Applicable to the Term Loan. THE BORROWER AND
ULTIMATE PARENT HEREBY AGREE TO INDEMNIFY THE LENDER AGAINST AND HOLD THE LENDER
HARMLESS FROM ANY LOSS OR EXPENSE WHICH IT MAY INCUR OR SUSTAIN AS A CONSEQUENCE
OF ANY UNTIMELY PAYMENT (MANDATORY OR OPTIONAL) OR DEFAULT BY THE BORROWER OR
THE ULTIMATE PARENT IN THE PAYMENT OF ANY PRINCIPAL AMOUNT OF OR INTEREST ON THE
TERM NOTE, INCLUDING ANY INTEREST PAYABLE BY THE LENDER TO THE LENDERS OF THE
FUNDS OBTAINED BY IT IN ORDER TO MAKE OR MAINTAIN THE TERM LOAN (OR ANY PORTION
THEREOF), AND, TO THE EXTENT NOT COVERED ABOVE, ANY CONSEQUENTIAL LOSS. THIS
AGREEMENT SHALL SURVIVE THE PAYMENT OF THE TERM NOTE. A CERTIFICATE AS TO ANY
ADDITIONAL AMOUNTS PAYABLE TO THE LENDER PURSUANT TO THIS PARAGRAPH
CREDIT AGREEMENT - Page 36
45
SUBMITTED BY THE LENDER TO THE BORROWER AND ULTIMATE PARENT SHALL BE CONCLUSIVE
AND BINDING UPON THE BORROWER AND ULTIMATE PARENT, ABSENT MANIFEST ERROR,
PROVIDED THE CALCULATION THEREOF IS SET FORTH IN REASONABLE DETAIL IN SUCH
NOTICE.
3.7 Use of Proceeds. The proceeds of the Term Loan will be used to
refinance the existing Indebtedness of Ultimate Parent and Tidel Engineering,
Inc. to the Lender.
4. Collateral.
4.1 Security Documents. The Loans and all other Obligations shall be
secured by Collateral described in the Security Documents and are entitled to
the benefits thereof. The Borrower shall duly execute and deliver the Security
Documents, all consents of third parties necessary to permit the effective
granting of the Liens created thereby, financing statements pursuant to the
Uniform Commercial Code and other documents, all in Proper Form, as may be
reasonably required by the Lender to grant to the Lender a valid, perfected and
enforceable first priority Lien on and security interest in the Collateral
(subject only to the Liens permitted under Section 8.2 hereof).
4.2 Filing and Recording. The Borrower shall, at its sole cost and
expense, cause all financing statements and other Security Documents pursuant to
this Agreement to be duly recorded and/or filed or otherwise perfected in all
places necessary, in the opinion of the Lender, and take such other actions as
the Lender may reasonably request, in order to perfect and protect the Liens of
the Lender in the Collateral. The Borrower, to the extent permitted by law,
hereby authorizes the Lender to file any financing statement in respect of any
Lien created pursuant to the Security Documents which may at any time be
required or which, in the opinion of the Lender, may at any time be desirable,
although the same may have been executed only by the Lender or, at the option of
the Lender, to sign such financing statement on behalf of the Borrower and file
the same, and the Borrower hereby irrevocably designates the Lender, its agent,
representatives and designees as its agent and attorney-in-fact for this
purpose. In the event that any re-recording or refiling thereof (or the filing
of any statements of continuation or assignment of any financing statement) is
reasonably required to protect and preserve such Lien, the Borrower shall, at
the Borrower's cost and expense, cause the same to be recorded and/or refiled at
the time and in the manner reasonably requested by the Lender.
5. Conditions.
5.1 All Loans. The obligation of the Lender to make any Revolving Loan
and the obligation of the Lender to issue any Letter of Credit is subject to the
accuracy of all representations and warranties of the Borrower on the date of
such Loan or issuance of such Letter of Credit, to the performance by the
Borrower of its obligations under the Loan Documents and to the satisfaction of
the following further conditions:
(a) the Lender shall have received the following, all of which
shall be duly executed and in Proper Form: (1) in the case of a Revolving Loan,
other than a Revolving Loan for the purposes described in Sections 2.6(d),
2.10(d) and 3.3(d),
CREDIT AGREEMENT - Page 37
46
(i) by no later than 12:00 noon on the
applicable Rate Selection Date, telephonic
notice from the Borrower of the proposed
date and amount of such Revolving Loan, and
(ii) no later than 1:00 p.m. on the applicable
Rate Selection Date, a Request for Extension
of Credit, signed by a Responsible Officer
of the General Partner.
or, in the case of issuance of a Letter of Credit, a completed Application (as
may be required by the Lender) signed by a Responsible Officer of the General
Partner by 12:00 noon three (3) Business Days prior to the proposed date of
issuance of such Letter of Credit and payment of the first letter of credit fee
as and by the time required in Section 2.10 of this Agreement, along with, in
each case, such financial information as the Lender may reasonably require to
substantiate compliance with all financial covenants contained herein by the
Borrower; and (2) such other Applications, certificates and other documents as
the Lender may reasonably require;
(b) Availability must be in excess of or equal to zero; after
giving effect to the requested Revolving Loan(s) or Letter(s) of Credit;
(c) all representations and warranties of the Borrower and any
other Person set forth in this Agreement and in any other Loan Document shall be
true and correct in all material respects with the same effect as though made on
and as of such date, except for (1) those representations and warranties which
relate only to the Closing Date or (2) such changes in the representations and
warranties otherwise permitted by the terms of this Agreement;
(d) the Borrower (and each Guarantor, if applicable) shall be
in compliance with all the terms and provisions contained in this Agreement or
in any other Loan Document which are to be observed or performed by the Borrower
(or such Guarantor, if applicable);
(e) prior to the making of such Revolving Loan or the issuance
of such Letter of Credit, there shall have occurred no Material Adverse Effect
in the assets, liabilities, financial condition, business or affairs of the
Borrower or any of its Subsidiaries since the date hereof;
(f) no Default or Event of Default shall have occurred and be
continuing;
(g) if requested by the Lender, it shall have received a
certificate executed by the Financial Officer or other Responsible Officer of
the General Partner as to the compliance with subparagraphs (b) through (f)
above;
(h) the making of such Revolving Loan or the issuance of such
Letter of Credit, shall not be prohibited by, or subject the Lender to, any
penalty or onerous condition under any Legal Requirement; and
CREDIT AGREEMENT - Page 38
47
(i) the Borrower shall have paid all legal fees and expenses
of the type described in Section 10.9 hereof through the date of such Revolving
Loan or the issuance of such Letter of Credit.
5.2 First Loan. In addition to the matters described in Section 5.1
hereof, the obligation of the Lender to make the initial Revolving Loan or the
obligation of the Lender to issue the first Letter of Credit is subject to the
receipt by the Lender of each of the following, in Proper Form:
(a) the Notes, executed by the Borrower and Ultimate Parent,
as applicable;
(b) the Security Documents executed by the Borrower;
(c) a certificate executed by the General Partner of the
Borrower dated as of the date thereof, substantially in the form attached hereto
as Exhibit G;
(d) certified copies of the Organizational Documents of the
Borrower;
(e) a certificate from the Secretary of State or other
appropriate public official of the State of Delaware as to the continued
existence of the Borrower in the State of Delaware;
(f) certificates from the appropriate public officials of
Texas and Delaware as to the existence, good standing and qualification as a
foreign limited partnership (as may be appropriate) of the Borrower in such
jurisdictions;
(g) the most recent schedule and aging of Receivables of the
Borrower (dated within thirty (30) days of the Closing Date), as well as a
current Borrowing Base Certificate executed by a Responsible Officer of the
General Partner in the form attached hereto as Exhibit H;
(i) a copy of the field examination, including a takeover
field examination, of the Borrower's books and records and the results of such
field examination;
(j) evidence that the Borrower has [$700,000] or more of
Availability, after giving effect to the Revolving Loans occurring and the
Letters of Credit issued on the Closing Date;
(k) a legal opinion from counsel for the Borrower (said
counsel to be reasonably acceptable to the Lender), dated as of the Closing
Date, addressed to the Lender and acceptable in all respects to the Lender in
its sole and absolute discretion;
(l) certificates of insurance satisfactory to the Lender in
all respects evidencing the existence of all insurance required to be maintained
by the Borrower pursuant to the terms of this Agreement and the Security
Documents;
CREDIT AGREEMENT - Page 39
48
(m) the Borrower and the Lender shall have entered into the
Lockbox Agreements;
(n) copies of all major customer and supplier contracts with
respect to the Borrower;
(o) copies of all employment agreements, management fee
agreements and tax sharing agreements;
(p) copies of all lease and warehouse agreements entered into
by Borrower;
(q) waivers or subordinations of any and all landlord and
warehousemen liens (whether statutory or contractual) held by any owner, or
warehousemen, of each real Property leased by the Borrower or where Borrower's
Property is warehoused;
(r) copies of all loan agreements, notes and other
documentation evidencing any Indebtedness of the Borrower;
(s) evidence satisfactory to the Lender that there has been no
material adverse change in the business, assets, operations, or financial
condition of Tidel Engineering, Inc. between February 28, 1999 and the merger of
Tidel Engineering, Inc. into Borrower;
(t) an executed disbursement authorization letter from the
Borrower to the Lender with respect to the disbursement of the proceeds of the
Loans and the issuance of the Letters of Credit, if any, to be made or issued on
the Closing Date;
(u) all other Loan Documents and any other instruments or
documents consistent with the terms of this Agreement and relating to the
transactions contemplated hereby as the Lender may reasonably request, executed
by the Borrower or any other Person required by the Lender, including without
limitation, the Lockbox Agreements;
and subject to the further conditions that, at the time of the initial Loan, (1)
the ownership, partnership structure, solvency and capitalization of the
Borrower shall be reasonably satisfactory to the Lender in all respects; (2) the
Lender shall have had the opportunity, if they elect, to examine the books of
account and other records and files of the Borrower and to make copies hereof,
and to conduct a pre-closing audit which shall include, without limitation,
verification of Eligible Receivables, verification of satisfactory status of
customer and supplier accounts, payment of payrolls taxes and accounts payable
and formulation of an opening Borrowing Base as of the Closing Date (with the
results of such examination and audits to have been satisfactory to the Lender
in all respects); (3) all such actions as the Lender shall reasonably require to
perfect the Liens created pursuant to the Security Documents shall have been
taken, including without limitation, the delivery to the Lender of all Property
with respect to which possession is necessary for the purpose of perfecting such
Liens, and with respect to Collateral covered by the Security Agreements, the
filing of appropriately completed and duly executed Uniform Commercial Code
financing statements; (4) the Lender shall also have received evidence
reasonably satisfactory to it that the Liens created by the Security Documents
constitute
CREDIT AGREEMENT - Page 40
49
first priority Liens (except for any Liens expressly provided for in Section 8.2
below); (5) the Borrower shall have paid all fees owing to the Lender by the
Borrower under this Agreement, including without limitation, legal fees and
expenses described in Section 10.9 or otherwise and (6) all other legal matters
incident to the transactions herein contemplated shall be reasonably
satisfactory to counsel for the Lender.
6. Representations and Warranties.
To induce the Lender to enter into this Agreement, the Borrower
represents and warrants to the Lender, as of the date hereof and as of the date
any Loan is made hereunder or any Letter of Credit is issued hereunder, as
follows:
6.1 Organization; Capitalization. The Borrower is duly organized and
validly existing under the laws of the state of its formation; has all power and
authority to own its Property and assets and to conduct its business as
presently conducted; and is duly qualified to do business in Texas and Delaware.
The partnership interests of Borrower are owned as follows: (i) one percent
(1.0%) general partnership interest owned by General Partner and (ii)
ninety-nine percent (99.0%) limited partnership interest owned by Limited
Partner. The General Partner is duly organized, validly existing and in good
standing under the laws of the state of its incorporation; has all the power and
authority to own its Property and assets and conduct its business as presently
conducted, and is duly qualified to do business and in good standing in each and
every state in the United States of America where its business requires such
qualification. The authorized capital stock of the General Partner consists of
100 shares of common stock, $.01 par value, of which 100 are issued and
outstanding and owned beneficially and of record by Ultimate Parent.
6.2 Financial Statements.
(a) The financial statements of the Borrower delivered to the
Lender in connection with this Agreement, including without limitation, the
financial statements of Tidel Engineering, Inc. dated as of February 28, 1999,
fairly present, in accordance with GAAP, the financial condition and the results
of operations of the Tidel Engineering, Inc. as of the dates and for the periods
indicated. No Material Adverse Effect has occurred since the dates of such
financial statements.
(b) The Borrower has heretofore furnished to the Lender, for
each quarter from the projected Closing Date through the first anniversary of
the Closing Date and for the 1999 fiscal year, projected income statements,
balance sheets and cash flows of the Borrower, together with one or more
schedules demonstrating prospective compliance with all financial covenants
contained in this Agreement, such projections disclosing all assumptions made by
the Borrower in formulating such projections. The projections are based upon
estimates and assumptions, all of which are reasonable in light of the
conditions which existed as of the time the projections were made, have been
prepared on the basis of the assumptions stated therein and reflect as of the
Closing Date a reasonable estimate of the Borrower as to the results of
operations and other information projected therein.
CREDIT AGREEMENT - Page 41
50
6.3 Enforceable Obligations; Authorization. The Loan Documents are
legal, valid and binding obligations of the Borrower, enforceable in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency
and other similar laws affecting creditors rights generally and by general
equitable principles. The execution, delivery and performance of the Loan
Documents have all been duly authorized, with respect to the General Partner, by
all necessary corporate, and if necessary, shareholder action, and with respect
to Borrower, by all necessary partnership, and if necessary, partner action; are
within the power and authority of the Borrower and General Partner; do not and
will not contravene or violate any Legal Requirement or the Organizational
Documents of the Borrower or General Partner; do not and will not result in the
creation of any Lien upon any Property of the Borrower except as expressly
contemplated therein. All necessary approvals of any Governmental Authority and
all other requisite permits, registrations and consents for that performance
have been obtained for the delivery and performance of the Loan Documents.
6.4 Other Debt. The Borrower is not in default in the payment of any
other Indebtedness or under any agreement, mortgage, deed of trust, security
agreement or lease to which it is a party, the result of which has, or is
reasonably likely to have, a Material Adverse Effect.
6.5 Litigation. Except as set forth on Schedule 6.5 attached hereto,
there is no litigation or administrative proceeding pending or, to the knowledge
of the Borrower, threatened against, nor any outstanding judgment, order or
decree affecting, the Borrower or any Subsidiary of the Borrower before or by
any Governmental Authority or arbitral body which individually or in the
aggregate have, or are reasonably likely to have, a Material Adverse Effect.
Neither the Borrower, nor any Subsidiary thereof, is in default with respect to
any judgment, writ, rule, regulation, order or decree of any Governmental
Authority.
6.6 Taxes. Except as otherwise permitted pursuant to the terms of
Section 7.2 hereof, the Borrower has filed all federal, state, local or foreign
tax returns required to have been filed and paid all taxes shown thereon to be
due, except those for which extensions have been obtained if adequate reserves
with respect thereto are maintained in accordance with GAAP. No federal income
tax returns of the Borrower have been audited by the Internal Revenue Service,
and the Borrower has not, as of the Closing Date, requested or been granted any
extension of time to file any Federal, state, local or foreign tax return. The
Borrower is not a party to, and does not have any obligation under, any tax
sharing arrangement.
6.7 No Material Misstatements. No information, report, financial
statement, exhibit or schedule prepared or furnished by or on behalf of the
Borrower to the Lender in connection with this Agreement or any other Loan
Documents knowingly contains any material misstatement of fact or knowingly
omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
6.8 Subsidiaries. As of the date hereof, the Borrower has no
Subsidiaries or any other material minority ownership interests in any other
Person.
CREDIT AGREEMENT - Page 42
51
6.9 Representations by Others. All representations and warranties made
by or on behalf of the Borrower in any Loan Document shall constitute
representations and warranties of the Borrower hereunder.
6.10 Permits, Licenses, Etc. The Borrower possesses all material
permits, licenses, patents, patent rights, trademarks, trademark rights, trade
names, trade name rights and copyrights which are required to conduct its
business.
6.11 ERISA. No Reportable Event has occurred with respect to any Plan.
Each Plan complies in all material respects with all applicable provisions of
ERISA, and the Borrower or each ERISA Affiliate have filed all reports required
by ERISA and the Code to be filed with respect to each Plan. The Borrower does
not have any knowledge of any event which could reasonably be expected to result
in a liability of the Borrower or any ERISA Affiliate to the PBGC other than for
applicable premiums. No accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, exists with
respect to any Plan. No event has occurred and no condition exists that could
reasonably be expected to constitute grounds for a Plan to be terminated under
circumstances which would cause the Lien provided under Section 4068 of ERISA to
attach to any Property of the Borrower or any ERISA Affiliate. No event has
occurred and no condition exists that could reasonably be expected to cause the
Lien provided under Section 302 of ERISA or Section 412 of the Code to attach to
any Property of the Borrower or any ERISA Affiliate.
6.12 Title to Properties; Possession Under Leases.
(a) The Borrower has good and indefeasible title to, or a
valid leasehold interest in, all of its Property and assets shown on the most
recent balance sheets of Tidel Engineering, Inc. referred to in Section 6.2
hereof and all assets and Property acquired since the date of such balance
sheets, except for such Property disposed of in accordance with the terms hereof
or no longer used or useful in the conduct of its business or as has been
disposed of in the ordinary course of business, and except for minor defects in
title that do not interfere with the ability of the Borrower or any of its
Subsidiaries to conduct its business as now conducted. All such assets and
Property are free and clear of all Liens other than those permitted by Section
8.2 hereof.
(b) The Borrower has complied in all material respects with
all obligations under all leases to which it is a party and under which it is in
occupancy, except where noncompliance does not effect the Borrower's use or
occupancy thereof, and all such leases are in full force and effect, and the
Borrower enjoys peaceful and undisturbed possession under all such leases.
Schedule 6.12 attached hereto sets forth each of such leases of real Property in
existence as of the Closing Date, and the Borrower has provided the Lender with
complete and correct copies of all of such leases of real Property in effect as
of the Closing Date where Collateral is located.
6.13 Assumed Names. The Borrower is not currently conducting its
business under assumed name or names, except as set forth on Schedule 6.13
attached hereto or as disclosed in
CREDIT AGREEMENT - Page 43
52
writing to the Lender within a reasonable time before the Borrower commences to
conduct business under the applicable assumed name or names.
6.14 Investment Company Act. The Borrowers is not an investment company
within the meaning of the Investment Company Act of 1940, as amended, or,
directly or indirectly, controlled by or acting on behalf of any Person which is
an investment company, within the meaning of said Act.
6.15 Public Utility Holding Company Act. The Borrower is not a "public
utility company," or an "affiliate" or a "subsidiary company" of a "public
utility company," or a "holding company," or a "subsidiary company" of a
"registered holding company," or an "affiliate" of a "registered holding
company" or of a "subsidiary company" of a "registered holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended
("PUHCA"). To the best of the Borrower's knowledge, the Borrower is not an
affiliate" or a "subsidiary company" of an unregistered, non-exempt "holding
company as such terms are defined in PUHCA.
6.16 Indebtedness Agreements. Schedule 6.16 attached hereto is a
complete and correct list of (i) all credit agreements for borrowed money,
indentures and capitalized leases and all Property subject to any Lien securing
such Indebtedness or lease obligation, (ii) each letter of credit and guaranty,
(iii) all other material instruments in effect as of the date hereof providing
for, evidencing, securing or otherwise relating to any Indebtedness for borrowed
money of the Borrower (other than the Indebtedness hereunder), and (iv) all
obligations of the Borrower to issuers of appeal bonds issued for account of the
Borrower. The Borrower shall, upon request by the Lender, deliver to the Lender
a complete and correct copy of all such credit agreements, indentures,
capitalized leases, letters of credit, guarantees and other instruments or
leases described in Schedule 6.16 or arising after the date hereof, including
any modifications or supplements thereto, as in effect on the date hereof.
6.17 Environmental Matters. Except as is described on Schedule 6.17
attached hereto, no activity of the Borrower requires any Environmental Permit
which has not been obtained and which is not now in full force and effect. The
Borrower is in compliance with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Requirement of Environmental Law or Environmental
Permit. The Borrower (and, to the knowledge of the Borrower, each of the prior
owners or operators and predecessors in interest with respect to any of its
Property) (i) has obtained and maintained in effect all Environmental Permits,
(ii) along with its Property has been (except as disclosed in the lease of the
premises known as ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as in effect on the Closing Date, and as
to which, to the knowledge of Borrower, proper remediation has occurred pursuant
to the terms of such lease) and is in compliance with all applicable
Requirements of Environmental Law and Environmental Permits, (iii) along with
its Property is not subject to any (A) Environmental Claims or (B) Environmental
Liabilities, in either case direct or contingent, and whether known or unknown,
arising from or based upon any act, omission, event, condition or circumstance
occurring or existing on or prior to the date hereof, and (iv) has not received
individually or collectively any notice of any violation or alleged violation of
any Requirements of Environmental Law or Environmental Permit or any
Environmental Claim in connection with
CREDIT AGREEMENT - Page 44
53
its Property. The present and future liability (including any Environmental
Liability and any other damage to Persons or Property), if any, of the Borrower
and with respect to the Property of the Borrower which is reasonably expected to
arise in connection with Requirements of Environmental Law, Environmental
Permits and other environmental matters will not have a Material Adverse Effect.
6.18 No Change in Credit Criteria or Collection Policies. There has
been no material adverse change in credit criteria or collection policies
concerning Receivables of the Borrower since [June 1, 1991].
6.19 Solvency.
(a) The fair salable value of the assets of the Borrower is
not less than the amount that will be required to be paid on or in respect of
the probable liability on the existing debts and other liabilities (including
contingent liabilities) of the Borrower, as they become absolute and mature.
(b) The assets of the Borrower do not constitute unreasonably
small capital for the Borrower to carry out its business as now conducted and as
proposed to be conducted including the capital needs of the Borrower, taking
into account the particular capital requirements of the business conducted by
the Borrower and projected capital requirements and capital availability
thereof.
(c) The Borrower does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be received by the Borrower, and of amounts to be payable on
or in respect of debt of the Borrower). The cash flow of the Borrower, after
taking into account all anticipated uses of the cash of the Borrower, should at
all times be sufficient to pay all such amounts on or in respect of debt of the
Borrower when such amounts are required to be paid.
(d) The Borrower does not believe that final judgments against
it in actions for money damages presently pending, if any, will be rendered at a
time when, or in an amount such that, it will be unable to satisfy any such
judgments promptly in accordance with their terms (taking into account the
maximum reasonable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered). The cash flow of the
Borrower, after taking into account all other anticipated uses of the cash of
the Borrower (including the payments on or in respect of debt referred to in
subparagraph (c) of this Section 6.19), should at all times be sufficient to pay
all such judgments promptly in accordance with their terms.
6.20 Status of Receivables and Other Collateral. The Borrower
represents and warrants that (a) it is and shall be the sole owner, free and
clear of all Liens except in favor of the Lender or otherwise permitted under
Section 8.2 hereunder, of and fully authorized to sell, transfer, pledge and/or
grant a security interest in each and every item of all Collateral owned by it;
(b) each Eligible Receivable is and shall be a good and valid account
representing an undisputed bona fide indebtedness incurred or an amount
indisputably owed by the account
CREDIT AGREEMENT - Page 45
54
debtor therein named, for a fixed sum as set forth in the invoice relating
thereto with respect to an absolute sale and delivery upon the specified terms
of goods sold by the Borrower, or work, labor and/or services theretofore
rendered by the Borrower; (c) no Eligible Receivable is or shall be subject to
any defense, offset, counterclaim, discount or allowance (as of the time of its
creation) except as may be stated in the invoice relating thereto or discounts
and allowances as may be customary in the Borrower's business; (d) none of the
transactions underlying or giving rise to any Eligible Receivable shall violate
any applicable state or federal laws or regulations, and all documents relating
to any Receivable shall be legally sufficient under such laws or regulations and
shall be legally enforceable in accordance with their terms, subject, as to
enforceability, to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creators' rights generally;
(e) to the best of the Borrower's knowledge, each account debtor, guarantor or
endorser with respect to any Eligible Receivable is solvent and able to pay all
Receivables on which it is obligated in full when due; (f) all documents and
agreements relating to Eligible Receivables shall be true and correct and in all
respects what they purport to be; (g) to the best of the Borrower's knowledge,
all signatures and endorsements that appear on all documents and agreements
relating to Eligible Receivables shall be genuine and all signatories and
endorsers with respect thereto shall have full capacity to contract; (h) it
shall maintain books and records pertaining to the Collateral owned by it in
detail, form and scope as the Lender shall reasonably require; (i) the Borrower
will immediately notify the Lender if any Receivables arise out of contracts
with the United States or any department, agency or instrumentality thereof, and
will, upon request from the Lender, execute any instruments and take any steps
required by the Lender in order that all monies due or to become due under any
such contract shall be assigned to the Lender and notice thereof given under the
Federal Assignment of Claims Act; (j) it will, immediately upon learning
thereof, report to the Lender any material loss or destruction of, or
substantial damage to, any of the Collateral, and any other matters adversely
affecting the value, enforceability or collectibility of any of the Collateral;
(k) if any amount payable under or in connection with any Receivable is
evidenced by a promissory note or other instrument, as such terms are defined in
the Uniform Commercial Code, such promissory note or instrument shall be
immediately pledged, endorsed, assigned and delivered to the Lender as
additional collateral; (l) it shall not re-date any invoice or sale or make
sales on extended dating beyond that customary in the industry; and (m) it shall
not be entitled to pledge the Lender's credit on any purchases or for any
purpose whatsoever.
6.21 Y2K Representation. Unless otherwise disclosed to the Lender, as
of no later than June 30, 1999, on the basis of a comprehensive review and
assessment of Borrower's systems and equipment and inquiry made of Borrower's
material suppliers, vendors and customers, Borrower's management will be of the
view that the "Year 2000 problem" (that is, the inability of computer, as well
as embedded microchips in non-computing devices, to perform date-sensitive
functions with respect to certain dates prior to and after December 31, 1999)
(the "Year 2000 Problem"), including costs of remediation, will not result in a
material adverse change in the operations, business, properties, condition
(financial or otherwise) or prospects of Borrower. By no later than June 30,
1999, Borrower will have developed feasible contingency plans adequately to
ensure uninterrupted and unimpaired business operation in the event of failure
of its own or a third party's systems or equipment due to the Year 2000 Problem,
including those of vendors, customers, and suppliers, as well as a general
failure of or interruption in its communications and delivery infrastructure.
CREDIT AGREEMENT - Page 46
55
7. Affirmative Covenants.
The Borrower covenants and agrees with the Lender that prior to the
termination of this Agreement, it will do, cause each of its Subsidiaries, if
any, to do, and if necessary cause to be done, each and all of the following:
7.1 Businesses and Properties. At all times: (a) do or cause to be done
all things necessary to obtain, preserve, renew and keep in full force and
effect the rights, licenses, permits, franchises, patents, copyrights,
trademarks and trade names material to the conduct of its businesses; (b)
maintain and operate such businesses in the same general manner in which are
they are presently conducted and operated; (c) comply with all Legal
Requirements applicable to the operation of such businesses whether now in
effect or hereafter enacted (including without limitation, all Legal
Requirements relating to public and employee health and safety and all
Environmental Laws) and with any and all other Legal Requirements; and (d)
maintain, preserve and protect all Property material to the conduct of such
businesses and keep such Property in good repair, working order and condition,
and from time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times.
7.2 Taxes. Pay and discharge promptly when due all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or profits
or in respect of its Property before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, and in excess of $10,000 with respect to claims for
labor, material and supplies or in excess of $10,000 with respect to claims for
taxes, assessments and governmental charges or levies, might give rise to Liens
upon such properties or any part thereof (except as otherwise permitted by
Section 8.2 hereof), unless being diligently contested in good faith by
appropriate proceedings and as to which adequate reserves in an amount not less
than the aggregate amount secured by such Liens have been established in
accordance with GAAP; provided, however, that such contested amounts giving rise
to such Liens shall be immediately paid upon commencement of any procedure or
proceeding to foreclose any of such Liens unless the same shall be validly
stayed by a court of competent jurisdiction or a surety bond, which is
satisfactory in all respects to the Lender, is delivered to the Lender in an
amount no less than such contested amounts.
7.3 Financial Statements and Information. Furnish to the Lender three
(3) copies of each of the following:
(a) Annual Statements. As soon as available and in any event
within one hundred twenty-one (121) days after the end of each fiscal
year of the Borrower or the Ultimate Parent, as the case may be, Annual
Audited Financial Statements of the Ultimate Parent and its
Subsidiaries, and Annual Consolidating Financial Statements of the
Ultimate Parent, its subsidiaries, and the Borrower;
CREDIT AGREEMENT - Page 47
56
(b) Monthly Statements. As soon as available and in any event
within thirty (30) days after the end of each fiscal month of the
Borrower, Monthly Unaudited Financial Statements of the Borrower and
its Subsidiaries;
(c) Quarterly Statements. As soon as available and in any
event within forty-five (45) days after the end of each fiscal quarter
of the Ultimate Parent and of the Borrower, Quarterly Unaudited
Financial Statements of the Ultimate Parent and the Borrower,
respectively;
(d) Compliance Certificate. Concurrently with the financial
statements of Borrower provided for in Subsections 7.3(a) and 7.3(b)
hereof, (1) a Compliance Certificate, signed by a Responsible Officer
of the General Partner, and (2) a written certificate in Proper Form,
identifying each Subsidiary which is otherwise required by the
provisions of Section 7.10 hereof to become a Guarantor at the request
of the Lender, but which has not yet done so as of the date of such
certificate, and providing an explanation of the reasons why each such
Subsidiary is not a Guarantor, signed by a Responsible Officer of the
General Partner;
(e) Management Letters. As soon as available and in any event
within five (5) days after the date of issuance thereof, a management
letter prepared by the independent public accountants who reported on
the financial statements provided for in Subsection 7.3(a) above with
respect to the internal audit and financial controls of the Ultimate
Parent, Borrower and either of their Subsidiaries;
(f) Agings. As soon as available and in any event within
fifteen (15) days after the end of each month, account receivable
agings and reconciliations, accounts payable agings and
reconciliations, monthly sales report, monthly inventory summary and
all other schedules, computations and other information, in reasonable
detail, as may be required or requested by the Lender, all certified by
a Responsible Officer of the General Partner;
(g) Borrowing Base Certificate. As soon as available and in
any event on the Monday after the end of each week, a Borrowing Base
Certificate, signed by a Responsible Officer of the General Partner in
the form attached hereto as Exhibit H;
(h) Projections. As soon as available and in any event within
thirty (30) days subsequent to the commencement of each fiscal year of
the Borrower, management-prepared Consolidated financial projections of
the Borrower and its Subsidiaries for the immediately following fiscal
year (setting forth such projections on both an annual basis and on a
monthly basis), such projections to be in such format and detail as
reasonably requested by the Lender;
(i) SEC Reports. Promptly after the same become publicly
available, copies of such financial information, registration
statements, annual, periodic and other reports, and such proxy
statements and other information, if any, as shall be filed by the
Ultimate Parent with the Securities and Exchange Commission pursuant to
the requirements of the
CREDIT AGREEMENT - Page 48
57
Securities Act of 1993 or the Securities Exchange Act of 1934 or
submitted to any shareholders of the Ultimate Parent or any Subsidiary
thereof, including without limitation, all 10-Q and 10-K Reports; and
(j) Other Information. Such other information relating to the
financial condition, operations and business affairs of the Borrower or
any of its Subsidiaries as from time to time may be reasonably
requested by the Lender.
7.4 Inspection. Upon reasonable notice (which may be telephonic
notice), at all reasonable times and as often as the Lender may request, permit
any authorized representative designated by the Lender to visit and inspect the
Properties and financial records of the Borrower and its Subsidiaries and to
make extracts from such financial records at the Lender's expense, and permit
any authorized representative designated by the Lender to discuss the affairs,
finances and condition of the General Partner and its Subsidiaries with the
appropriate Financial Officer and such other officers as the General Partner
shall deem appropriate and the Borrower's independent public accountants, as
applicable. The Lender agrees that it shall schedule any meeting with any such
independent public accountant through the Borrower, and a Responsible Officer of
the General Partner shall have the right to be present at any such meeting. At
the Borrower's expense, the Lender shall have the right to examine, as often as
it may request (but initially scheduled for three (3) times in each fiscal year
of the Borrower prior to a Default or Event of Default) the existence and
condition of the Receivables, books and records of the Borrower and its
Subsidiaries and to review their compliance with the terms and conditions of
this Agreement and the other Loan Documents, subject to governmental
confidentiality requirements. When and if the daily collection and application
procedures for Receivables are implemented and continuing in accordance with
Section 7.15(b) hereof, the Lender shall also have the right to verify with any
and all customers of the Borrower and any of its Subsidiaries the existence and
condition of the Receivables, as often as the Lender may require, without prior
notice to or consent of the Borrower or any of its Subsidiaries.
7.5 Further Assurances. Promptly execute and deliver any and all other
and further instruments which may be requested by the Lender to (a) cure any
defect, error or omission in the execution and delivery of any Loan Document and
(b) grant, preserve, protect and perfect the first priority Liens created by the
Security Documents in the Collateral.
7.6 Books and Records. Maintain financial records and books in
accordance with accepted financial practice in the Borrower's industry and GAAP.
7.7 Insurance.
(a) Keep its insurable Properties adequately insured at all
times by financially sound and reputable insurers.
(b) Maintain such other insurance, to such extent and against
such risks, including fire and other risks insured against by extended coverage,
employee liability and business interruption, as is customary with companies
similarly situated and in the same or similar businesses, provided, however,
that such insurance shall insure the Property of the
CREDIT AGREEMENT - Page 49
58
Borrower against all risk of physical damage, including without limitation, loss
by fire, explosion, theft, fraud and such other casualties as may be reasonably
satisfactory to the Lender, but in no event at any time in an amount less than
the replacement value of the Collateral.
(c) Maintain in full force and effect worker's compensation
coverage and public liability insurance against claims for personal injury or
death or property damage occurring upon, in, about or in connection with its
operations and with the use of any Properties owned, occupied or controlled by
the Borrower or any of its Subsidiaries, in such amounts as is customary with
companies similarly situated and in the same or similar businesses.
(d) Maintain such other insurance as may be required by law or
as may be reasonably requested by the Lender for purposes of assuring compliance
with this Section 7.7. All insurance covering tangible personal Property subject
to a Lien in favor of the Lender granted pursuant to the Security Documents
shall provide that, in the case of each separate loss, the full amount of
insurance proceeds shall be payable to the Lender and shall further provide for
at least thirty (30) days' prior written notice to the Lender of the
cancellation or substantial modification thereof.
7.8 ERISA. At all times: (a) make contributions to each Plan in a
timely manner and in an amount sufficient to comply with the minimum funding
standards requirements of ERISA; (b) immediately upon acquiring knowledge of (i)
any Reportable Event in connection with any Plan for which no administrative or
statutory exemption exists or (ii) any "prohibited transaction," as such term is
defined in Section 4975 of the Code, in connection with any Plan, furnish the
Lender a statement executed by a Responsible Officer of the General Partner or
such Subsidiary setting forth the details thereof and the action which the
Borrower or any such Subsidiary proposes to take with respect thereto and, when
known, any action taken by the Internal Revenue Service with respect thereto;
(c) notify the Lender promptly upon receipt by the Borrower or any Subsidiary
thereof of any notice of the institution of any proceedings or other actions
which may result in the termination of any Plan by the PBGC and furnish the
Lender with copies of such notice; (d) pay when due, or within any applicable
grace period allowed by the PBGC, all required premium payments to the PBGC; (e)
furnish the Lender with copies of the annual report for each Plan filed with the
Internal Revenue Service not later than ten (10) days after the Lender requests
such report; (f) furnish the Lender with copies of any request for waiver of the
funding standards or extension of the amortization periods required by Sections
303 and 304 of ERISA or Section 412 of the Code promptly after the request is
submitted to the Secretary of the Treasury, the Department of Labor or the
Internal Revenue Service, as the case may be; and (g) pay when due all
installment contributions required under Section 302 of ERISA or Section 412 of
the code or within ten (10) days of a failure to make any such required
contributions when due furnish the Lender with written notice of such failure.
7.9 Use of Proceeds. Subject to the terms and conditions contained
herein, (a) use the proceeds of the Loans for (a) financing ongoing working
capital needs of the Borrower and its Subsidiaries not otherwise prohibited
herein and/or (b) payment of the Obligations, as provided in this Agreement;
provided, that no proceeds of any Loan shall be used (a) for the purpose of
purchasing or carrying directly or indirectly any margin stock as defined in
Regulation U ("Reg U") of the Board of Governors of the Federal Reserve System,
(b) for the purpose of
CREDIT AGREEMENT - Page 50
59
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry any such margin stock, (c) for any other purpose which would cause such
Loan to be a "purpose credit" within the meaning of Reg U and (d) for any
purpose which would constitute a violation of Reg U or of Regulations G, T or X
of the Board of Governors of the Federal Reserve System or any successor
regulation of any thereof or of any other rule, statute or regulation governing
margin stock from time to time.
7.10 Guarantors; Joinder Agreements. Promptly inform the Lender of the
creation or acquisition of any Subsidiary of the Borrower after the Closing Date
and, if required by the Lender, promptly cause any such Subsidiary created after
the Closing Date (except as provided for below) to become a Guarantor by
execution and delivery to the Lender a Guaranty or a Joinder Agreement (if a
Joinder Agreement is requested by the Lender in lieu of a Guaranty) and execute
and deliver to the Lender any applicable Security Documents required by the
Lender, together with such related certificates, legal opinions and documents as
the Lender may reasonably require.
7.11 Notice of Events. Notify the Lender immediately upon acquiring
knowledge of the occurrence of, or if the Borrower or any of its Subsidiaries
causes or intends to cause, as the case may be: (a) the institution of any
lawsuit, administrative proceeding or investigation affecting the Borrower or
any of its Subsidiaries, including without limitation, any audit by the Internal
Revenue Service, (b) any development or change in the business or affairs of the
Borrower or any of its Subsidiaries which is reasonably likely to have a
Material Adverse Effect; (c) any Event of Default or any Default, together with
a detailed statement by a Responsible Officer of the General Partner of the
steps being taken to cure the effect of such Event of Default or Default; (d)
the occurrence of a default or event of default by the Borrower or any of its
Subsidiaries under any agreement or series of related agreements to which it is
a party; (e) any violation by, or investigation of, the Borrower or any of its
Subsidiaries in connection with any actual or alleged violation of any Legal
Requirement imposed by the Environmental Agency which is reasonably likely to
have a Material Adverse Effect; and (f) any material change in the accuracy of
the representations and warranties of the Borrower or any of any of its
Subsidiaries in this Agreement or any other Loan Document.
7.12 Environmental Matters. Without limiting the generality of Section
7.1(c) hereof, (a) comply in all material respects with all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Requirement of
Environmental Law or Environmental Permit; (b) obtain and maintain in effect all
Environmental Permits; and (c) keep its Property free of any Environmental
Claims or Environmental Liabilities.
7.13 End of Fiscal Year. Cause each of its fiscal years to end on
September 30.
7.14 Pay Obligations and Perform Other Covenants. Make full and timely
payment of the Obligations, whether now existing or hereafter arising, duly
comply with all of the terms and covenants contained in this Agreement and in
each of the other Loan Documents at all times and places and in the manner set
forth therein, and except for the filing of continuation statements and the
making of other filings by the Lender as secured party or assignee, at all times
take all
CREDIT AGREEMENT - Page 51
60
actions necessary to maintain the Liens and security interests provided for
under or pursuant to this Agreement and the Security Documents as valid
perfected first priority Liens on the Collateral intended to be covered thereby
(subject only to other Liens expressly permitted by Section 8.2 hereof) and
supply all information to the Lender necessary for such maintenance.
7.15 Collection of Receivables; Application of Lockbox Agreement
Proceeds.
(a) At the Borrower's own cost and expense, arrange for
remittances on all Receivables to be made directly to lockbox(es) designated by
the Lender under the terms of the Lockbox Agreements or in such other manner as
the Lender may direct. Prior to the implementation of the procedures discussed
in Section 7.15(b) below, the proceeds of all Receivables collected through such
lockbox(es) shall not be required to be remitted to the Lender for application
to the Revolving Loans and for other disbursements approved by the Lender as set
forth in Section 7.15(b) below, but instead shall be available for unrestricted
use by the Borrower by deposit of such proceeds into one or more operating
accounts maintained by the Borrower with the Lender.
(b) If at any time, either (i) a Default or Event of Default
shall occur and be continuing or (ii) Availability shall be less than $50,000
for more than five (5) consecutive Business Days after the Lender has notified
the Borrower in writing that Availability has fallen below $50,000 for any
reason, all remittances on all Receivables processed through lockbox(es) in
accordance with Section 7.15(a) above shall at all times thereafter be promptly
deposited in one or more accounts designated by the Lender, subject to
withdrawal by the Lender only, as hereinafter provided. In connection therewith,
the Lender is irrevocably authorized, in accordance with the terms of the
implementation and processing instructions for the applicable Lockbox
Agreement(s), to cause all such remittances on all Receivables to be promptly
deposited in such account or accounts designated by the Lender. All remittances
and payments that are deposited in accordance with the foregoing will be
immediately applied by the Lender to reduce the outstanding balance of the
Revolving Loans, subject to the continued accrual of interest on the Revolving
Loan balances to which such remittances and payments are applied for one (1)
Business Day (or two (2) Business Days in the case of remittances and payments
received after 12:00 noon) and in any event subject to final collection in cash
of the item deposited.
(c) As long as the procedures implemented under Section
7.15(b) above are in effect and are continuing, the Borrower shall cause all
payments, if any, received by the Borrower or any of its Subsidiaries on account
of Receivables which are not forwarded directly to the above-described
lockbox(es) (whether in the form of cash, checks, notes, drafts, bills of
exchanges, money orders or otherwise) to be promptly deposited in precisely the
form received (but with any endorsements of the Borrower or the applicable
Subsidiary necessary for deposit or collection) in the account or accounts
designated by the Lender in accordance with the provisions of Section 7.15(b)
above.
(d) In addition to the financial reporting requirements set
forth in Section 7.3 hereof, as long as the daily collection procedure
implemented by the provisions of Section 7.15(b) above is in effect, the
Borrower shall furnish to the Lender on each Business Day
CREDIT AGREEMENT - Page 52
61
a copy of a Receivables report setting forth the sales, collections and credits
for the Borrower and its Subsidiaries for the preceding Business Day prior to
the date of such Receivables report.
(e) If and when the daily collection procedures discussed in
Section 7.15(b) above are implemented in accordance with the provisions thereof,
such daily collection procedures shall thereafter continue to be in effect until
the end of the fiscal quarter of the Borrower during which all existing Defaults
and Events of Default, if applicable, shall have been cured to the satisfaction
of the Lender and Availability shall have increased to an amount equal to or
greater than $50,000, if applicable.
7.16 Additional Receivables Documentation. In addition to the
Receivables information delivered pursuant to the other provisions of this
Agreement, furnish such further schedules and/or information as the Lender may
reasonably require relating to the Receivables (including without limitation,
sales invoices if the same are required by the Lender), and the Borrower shall
notify the Lender of any non-compliance in respect of the representations and
warranties contained in Section 6.21 hereof. The items to be provided under this
Section 7.16 are to be in Proper Form and are to be executed and delivered to
the Lender from time to time solely for its convenience in maintaining records
of the Collateral. The Borrower's failure to give any of such items to the
Lender shall not affect, terminate, modify or otherwise limit the Lender's Lien
or security interest in the Collateral.
7.17 Y2K Covenant. Borrower has completed or accomplished, or will use
their best efforts to complete or accomplish, the following:
(a) By June 30, 1999 prepare a comprehensive, detailed
inventory and assessment of the risk posed by the Year 2000 Problem as it may
affect Borrower's own business, properties or operations;
(b) By June 30, 1999 make detailed inquiry of material
suppliers, vendors and customers of Borrower, to ascertain whether such persons
are aware of the need to address the Year 2000 Problem and whether they are
taking appropriate steps to do so;
(c) By June 30, 1999 prepare a detailed project plan and
budget for ensuring that the Year 2000 Problem is successfully addressed in all
material respects as it pertains to Borrower's own business, properties or
operations, and containing contingency plans to mitigate the effects of any
third party's unexpected failure to address the Year 2000 Problem;
(d) By September 30, 1999 renovate all systems and equipment
affected by the Year 2000 Problem to cause them to perform correctly
date-sensitive functions for relevant date data from before and after December
31, 1999 ("Year 2000 Compliance") or replace them with technology not so
affected, and commence testing; and
(e) By September 30, 1999 complete testing and installation of
all material systems and equipment to ensure timely Year 2000 Compliance.
CREDIT AGREEMENT - Page 53
62
7.18 Further Information. Subsequent to June 30, 1999, Borrower shall
deliver to the Lender, (a) promptly upon sending or receipt, copies of any and
all management letters and correspondence relating to management letters, sent
or received by Borrower to or from the independent public accountants who
reported on the financial statements provided for in Subsection 7.3(a) above,
and (b) upon request, a copy of Borrower's plan, timetable and budget to address
the Year 2000 Problem, together with periodic updates thereof and expenses
incurred to date, any third party assessment of Borrower's Year 2000 remediation
efforts, and any Year 2000 contingency plans, and any estimates of Borrower's
potential litigation exposure (if any) to the Year 2000 Problem.
8. Negative Covenants.
The Borrower covenants and agrees with the Lender that prior to the
termination of this Agreement, the Borrower will not, and will not suffer or
permit any of its Subsidiaries, if any, to, do any of the following:
8.1 Indebtedness. Except as otherwise permitted hereby, create, incur,
suffer or permit to exist, or assume or guarantee, directly or indirectly, or
become or remain liable with respect to any Indebtedness, whether direct,
indirect, absolute, contingent or otherwise, except the following:
(a) Indebtedness to the Lender pursuant hereto;
(b) Indebtedness secured by Liens permitted by Section 8.2
hereof;
(c) Purchase money Indebtedness incurred to finance the
Borrower's purchase of equipment used for the Borrower's or any of its
Subsidiaries' operations, not to exceed $100,000 in the aggregate at any time
during the period of time from the Closing Date and thereafter;
(d) Subordinated Indebtedness and Indebtedness due Ultimate
Parent in an aggregate principal amount at any time outstanding not to exceed
$350,000;
(e) other liabilities existing on the date of this Agreement
and set forth on Schedule 6.16 attached hereto;
(f) current accounts payable and unsecured current
liabilities, not the result of borrowings, to vendors, suppliers and persons
providing services, for expenditures on ordinary trade terms for goods and
services normally required by the Borrower or any of its Subsidiaries in the
ordinary course of its business;
(g) payment of or reimbursement of current and deferred taxes
and other assessments and governmental charges (to the extent permitted by any
of the other provisions of this Agreement); and
(h) Refinancing Indebtedness.
CREDIT AGREEMENT - Page 54
63
8.2 Liens. Except as otherwise permitted hereby, create or suffer to
exist any Lien upon any of its Property (including without limitation, real
property assets) now owned or hereafter acquired, or acquire any Property upon
any conditional sale or other title retention device or arrangement or any
purchase money security agreement; provided, however, that the Borrower and its
Subsidiaries (or any of them) may create or suffer to exist:
(a) Liens in effect on the date hereof and which are described
on Schedule 8.2 attached hereto, provided, that the Property covered thereby
does not increase in quantity and such Liens may not be renewed and extended
except as permitted by Section 8.2(l) below;
(b) Liens in favor of the Lender;
(c) Liens incurred and pledges and deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, old-age pensions, social security and other similar laws
(not including any lien described in Section 412(m) of the Code);
(d) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens and other similar liens, incurred
in good faith in the ordinary course of business and securing obligations which
are not overdue for a period of more than fifteen (15) days or which are being
contested in good faith by appropriate proceedings as to which the Borrower or
any of its Subsidiaries, as the case may be, shall, to the extent required by
GAAP, consistently applied, have set aside on its books adequate reserves;
(e) Liens securing the payment of taxes, assessments and
governmental charges or levies, that are not delinquent or are being diligently
contested in good faith by appropriate proceedings and as to which adequate
reserves have been established in accordance with GAAP; provided, however, that
in no event shall the aggregate amount of taxes, assessments and governmental
charges or levies which are being contested at any time exceed $50,000 and that
in no event shall the aggregate amount of such reserves be less than the
aggregate amount secured by such Liens;
(f) Zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of property
or minor irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created, assumed
or permitted to exist and arising by, through or under a landlord or owner of
the leased property, with or without consent of the lessee) which do not in the
aggregate materially detract from the value of such property or assets or
materially impair the use thereof in the operation of its business;
(g) Liens securing the performance of utility services, bids,
tenders, leases, contracts (other than for the repayment of borrowed money),
statutory obligations, surety customs and appeal bonds and other obligations of
like nature, incurred as an incident to and in the ordinary course of business;
CREDIT AGREEMENT - Page 55
64
(h) Purchase money Liens securing the Indebtedness permitted
by Section 8.1(c) above, provided, that as a result of the creation of any such
Lien, (i) no Default or Event of Default shall have occurred, (ii) the principal
amount of such Lien does not exceed 100% of the purchase price of the asset
acquired with such permitted Indebtedness plus accrued interest on such
Indebtedness plus protective advances made by the holder of such permitted
Indebtedness, and (iii) such Lien shall not apply to any other Property other
than the asset acquired with such purchase money Indebtedness;
(i) Any attachment or judgment Lien, unless the judgment it
secures shall not, within thirty (30) days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not have been
discharged within thirty (30) days after the expiration of any such stay;
(j) Liens arising by operation of law under Article 2 of the
Code in favor of unpaid sellers or prepaying buyers of goods relating to amounts
that are not past due in accordance with their respective terms of sale;
(k) Statutory or contractual Liens of landlords;
(l) Liens securing any Refinancing Indebtedness or other
renewals, replacement, reinstatements or refinancings (but not increases) of any
obligation secured by any of the Liens described in this definition;
(m) Liens on Property of a Person existing at the time such
Person is acquired by, merged into or consolidated with the Borrower or any of
its Subsidiaries in accordance with the terms hereof, provided that such Liens
were in existence prior to the contemplation of such acquisition, merger or
consolidation and do not extend to any assets other than those of the Person so
merged into, consolidated with or acquired by the Borrower or such Subsidiary;
and
(n) To the extent the contractual relationships described in
clauses (g) and (h) of the definition of "Permitted Dispositions" constitute
Liens, any such Liens.
Provided, however, that notwithstanding anything contained above in this Section
8.2 to the contrary, if any of the permitted Liens are of the type that are
being contested in good faith by appropriate proceedings as to the Borrower or
any of its Subsidiaries, the Indebtedness giving such contested Lien(s) must be
immediately paid upon commencement of any foreclosure process or proceeding with
respect to such Lien(s) unless the same shall be effectively stayed or a surety
bond with respect thereto (which is satisfactory in all respects to the Lender),
is posted.
8.3 Contingent Liabilities. Except as otherwise permitted hereby,
create, incur, suffer or permit to exist, directly or indirectly, any Contingent
Obligations, except for Contingent Obligations incurred for the benefit of any
Subsidiary of the Borrower, if the primary obligation of such Subsidiary is
otherwise permitted by any other provisions of this Agreement.
CREDIT AGREEMENT - Page 56
65
8.4 Mergers, Consolidations and Dispositions and Acquisitions of
Assets. Except as otherwise permitted hereby, in any single transaction or
series of related transactions, directly or indirectly:
(a) Wind up its affairs, terminate, liquidate or dissolve;
(b) Except as permitted by Section 8.4(e) and in connection
with Permitted Investments, be a party to any merger or consolidation;
(c) Except in connection with Permitted Dispositions, sell,
convey, lease, transfer or otherwise dispose of all or any portion of the assets
of the Borrower and/or its Subsidiaries, or agree to take any such action;
(d) Sell, assign, pledge, transfer or otherwise dispose of, or
in any way part with control of, any Stock of any of its Subsidiaries or any
Indebtedness or obligations of any character of any of its Subsidiaries, or
permit any such Subsidiary to do so with respect to any Stock of any other
Subsidiary or any Indebtedness or obligations of any character of the Borrower
or any of its Subsidiaries, or permit any of its Subsidiaries to issue any
additional Stock other than to the Borrower;
(e) Without the prior written consent of the Lender, purchase
or otherwise acquire, directly or indirectly, in a single transaction or a
series of related transactions, all or a substantial portion of the assets of
any Person or any shares of Stock of, or similar interest in, any Person;
provided, however that:
(1) any Subsidiary of the Borrower may merge or
consolidate with the Borrower or any other domestic Subsidiary of the Borrower,
provided that if one or more of the entities so merging or consolidation was a
Guarantor, if the surviving entity is not the Borrower or is not yet a
Guarantor, such surviving entity shall simultaneously with such merger, execute
and deliver to the Lender a Joinder Agreement, together with all requested
Security Documents, as required at such time by the Lender, appropriately
completed; and
(2) any transfer of assets otherwise permitted by
clause (e) of the definition of "Permitted Dispositions" may occur; or
(f) Permit any Person other than General Partner or Limited
Partner to own or control, directly or indirectly, any partnership interest of
Borrower.
8.5 Nature of Business. Materially change the nature of its business or
enter into any business which is substantially different from the business in
which it is engaged as of the Closing Date.
8.6 Transactions with Related Parties.
(a) Except for (i) Permitted Affiliate Transactions, (ii)
transactions, contracts or agreements existing on the date of this Agreement and
which are set forth on Schedule 8.6
CREDIT AGREEMENT - Page 57
66
attached hereto, provided that, management fees may be paid to the Ultimate
Parent and/or the General Partner, in no event exceed, on a cumulative basis,
$250,000 annually, (iii) transactions, contracts or agreements otherwise
permitted hereby, and (iv) any renewals and extensions of such existing
transactions, contracts or agreements, so long as such renewals and extensions
are upon terms and conditions substantially identical to the terms and
conditions set forth in the existing transactions, contracts and agreements (or
otherwise no less favorable to the Borrower and the Guarantors, as applicable):
(A) enter into any other transaction, contract or agreement of any kind with any
Affiliate, officer or director of the General Partner or any of Borrower's
Subsidiaries, unless such transaction, contract or agreement is made upon terms
and conditions not less favorable to such Person than those which could have
been obtained from wholly independent and unrelated sources; and (B) the
Borrower will not permit the compensation paid by the Borrower or any of its
Subsidiaries to any officer, stockholder, director, partner or proprietor of the
General Partner or any of Borrower's Subsidiaries to be excessive, based on the
reasonable determination of the Borrower's compensation committee, taking into
consideration the financial circumstances of the Borrower or the applicable
Subsidiary and the position and qualifications of such Person.
(b) Permit any officer or director of the General Partner or
any of Borrower's Subsidiaries to acquire or otherwise usurp any partnership or
corporate opportunity rightfully belonging to the Borrower or such Subsidiary in
any manner which would constitute a breach of such officer's or director's duty
of loyalty to the Borrower or such Subsidiary.
8.7 Investments; Loans. Except as otherwise permitted hereby, make,
directly or indirectly, any loan or advance to or have any Investment in any
Person, or make any commitment to make such loan, advance or Investment, except:
(a) Stock of any Subsidiary created or acquired after the
Closing Date in accordance with the other provisions of this Agreement or with
the prior written consent of the Lender; and
(b) Permitted Investments.
8.8 ERISA Compliance.
(a) At any time engage in any "prohibited transaction" as
defined in ERISA; or permit any Plan to be terminated in a manner which could
result in the imposition of a Lien on any Property of the Borrower or any of its
Subsidiaries pursuant to ERISA.
(b) Engage in any transaction in connection with which the
Borrower or any Subsidiary thereof could be subject to either a material civil
penalty assessed pursuant to the provisions of Section 502 of ERISA or a tax
imposed under the provisions of Section 4975 of the Code.
(c) Terminate any Plan in a "distress termination" under
Section 4041 of ERISA, or take any other action which could result in a
liability of the Borrower or any Subsidiary thereof to the PBGC.
CREDIT AGREEMENT - Page 58
67
(d) Fail to make payment when due of all amounts which, under
the provisions of any Plan, the Borrower or any Subsidiary thereof is required
to pay as contributions thereto, or, with respect to any Plan, permit to exist
any "accumulated funding deficiency" (within the meaning of Section 302 of ERISA
and Section 412 of the Code), whether or not waived, with respect thereto.
(e) Adopt an amendment to any Plan requiring the provision of
security under Section 307 of ERISA or Section 401(a)(29) of the Code.
8.9 Credit Extensions. Extend credit other than (a) normal and prudent
extensions of credit to customers for goods and services in the ordinary course
of business and (b) loans otherwise permitted by the provisions of Section 8.7
above.
8.10 Change in Accounting Method. Make or permit any change in
accounting method or financial reporting practices except as may be required by
GAAP, as in effect from time to time.
8.11 Interest Coverage Ratio. Permit the Interest Coverage Ratio of the
Borrower (expressly excluding Ultimate Parent, its Subsidiaries and Borrower's
Subsidiaries) to be less than 3.00 to 1.00. The Interest Coverage Ratio will be
measured as of the last day of each month for the period consisting of the
immediately preceding twelve (12) months.
8.12 Tangible Net Worth. Permit the Tangible Net Worth of the Borrower
(expressly excluding Ultimate Parent, its Subsidiaries and Borrower's
Subsidiaries), as determined at any time and from time to time, to be less than
the sum of the following:
(i) $9,000,000.00 (which was the Tangible Net Worth of Tidel
Engineering, Inc. as of September 30, 1998); plus
(ii) an amount equal to fifty percent (50%) of positive net
income of Tidel Engineering, Inc. for the period from October 1, 1998
through March 31, 1999, plus
(iii) the amount, which shall be added to the sum of clauses
(i) and (ii) above as of the end of each calendar month, on a
cumulative basis, beginning with the calendar month ending April 30,
1999 and continuing each calendar month thereafter through the term of
this Agreement, that is equal to the sequential monthly calculations of
fifty percent (50%) of the positive (but not the negative) net income
of the Borrower for each calendar month occurring on and after April
30, 1999.
8.13 Capital Expenditures. Make, directly or indirectly, Capital
Expenditures other than such expenditures which do not exceed One Million Three
Hundred Thousand Dollars ($1,300,000.00) in any fiscal year.
CREDIT AGREEMENT - Page 59
68
8.14 Sales of Receivables. Sell, assign, discount, transfer or
otherwise dispose of any Receivables, promissory notes, drafts or trade
acceptances or other rights to receive payment held by it, with or without
recourse.
8.15 Sale and Lease-Back Transactions. Enter into any arrangement,
directly or indirectly, with any Person whereby the Borrower or any of its
Subsidiaries shall sell or transfer any Property, real or personal, which is
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such Property or other Property which the Borrower or
such Subsidiary intends to use for substantially the same purpose or purposes as
the Property being sold or transferred.
8.16 Change of Name or Place of Business. Permit the Borrower or any of
its Subsidiaries to change its address, name, location of its chief executive
office or principal place of business or the place it keeps its books and
records, unless the Borrower has (a) notified the Lender of such change in
writing at least thirty (30) days before the effective date of such change, (b)
taken such action, reasonably satisfactory to the Lender, to have caused the
Liens against all Collateral in favor of the Lender to be at all times fully
perfected and in full force and effect and (c) delivered such certificates of
Governmental Authorities as the Lender may reasonably require substantiating
such name change.
8.17 Availability. Allow Availability to be less than zero at any time.
8.18 Distribution of Capital. The Borrower shall not directly or
indirectly declare or make, or incur any liability to make, any distribution of
income or capital on account of any general or limited partnership interest of
Borrower now or hereafter in existence ("Distributions"), or set aside or
otherwise deposit or invest any sums for such purpose, except Distributions to
the Ultimate Parent, the General Partner or the Limited Partner by Borrower, so
long as no Event of Default has occurred or would result therefrom, solely for
the following purposes:
(a) reimbursement of or payment of Federal income tax
liabilities and state income and franchise tax liabilities, if any, of
the General Partner or the Limited Partner, in the amount of such
Federal income tax liabilities or state income and franchise tax
liabilities, if any, and at such time or thereafter as the same become
due and payable; and
(b) payment of principal and interest by the Ultimate Parent
as they become due and payable under the Term Loan.
9. Events of Default and Remedies.
9.1 Events of Default. If any of the following events shall occur and
be continuing, then the Lender may, by written notice (or facsimile notice
promptly confirmed in writing) to the Borrower, take any or all of the following
actions at the same or different times: (1) accelerate the Revolving Loan
Maturity Date and declare the Revolving Note, accelerate the Term Loan Maturity
Date and declare the Term Note, all Letter of Credit Advances, the Commitment
Fees and all other Obligations then outstanding to be, and thereupon the
Revolving Note, the Term
CREDIT AGREEMENT - Page 60
69
Note, said Letter of Credit Advances, the Commitment Fees and all other
Obligations shall forthwith become, immediately due and payable, without further
notice of any kind, notice of acceleration or of intention to accelerate,
presentment and demand or protest, or other notice of any kind all of which are
hereby expressly WAIVED by the Borrower; (2) terminate all or any portion of the
Commitments and any obligation to issue any additional Letters of Credit; (3)
demand that the Borrower and the Guarantors provide the Lender, and the Borrower
and the Guarantors jointly and severally agree upon such demand to provide, cash
collateral in an amount equal to the aggregate Letter of Credit Exposure Amount
then outstanding, on terms and pursuant to documents in agreement and
satisfactory in all respects to the Lender; and (4) exercise any and all other
rights pursuant to the Loan Documents:
(a) The Borrower shall fail to pay or prepay any principal of
or interest on the Notes, any Application, the Commitment Fees or any other
Obligation hereunder as and when due and payable, whether at the due date
thereof (by acceleration, lapse of time or otherwise) or at any date fixed for
prepayment thereof in accordance with the other provisions of this Agreement; or
(b) The Borrower or any of its Subsidiaries (i) shall fail to
pay at maturity, or within any applicable period of grace, any Indebtedness, or
the equivalent thereof (excluding Indebtedness outstanding hereunder and
accounts payable created in the ordinary course of business), in excess of
$50,000 in principal amount unless such payment is being contested in good faith
(by appropriate proceedings) and adequate reserves have been provided therefor,
or (ii) shall default in any other manner with respect to any Indebtedness, or
the equivalent thereof (excluding Indebtedness outstanding hereunder), in excess
of $50,000 in principal amount if the effect of any such default or event of
default shall be to accelerate or to permit the holder of any such Indebtedness
or equivalent obligation, at its option, to accelerate the maturity of such
Indebtedness or equivalent obligations prior to the stated maturity thereof,
(iii) shall fail to observe or perform any term, covenant or agreement contained
in any agreement or obligation, other than any Loan Document, by which the
Borrower or any of its Subsidiaries is bound, or (iv) is in default under or in
violation of any Legal Requirement, or
(c) Any representation or warranty made or deemed made in
connection with any Loan Document shall prove to have been incorrect, false or
misleading in any material respect when made or deemed to have been made; or
(d) Default shall occur in the punctual and complete
performance or observance of any covenant, condition or agreement to be observed
or performed on the part of the Borrower or any of its Subsidiaries pursuant to
the terms of any provision of this Agreement or any other Loan Document;
provided, however, Borrower shall have fifteen (15) days from the date of
default to cure any default under Sections 7.1, 7.5, 7.6, 7.7, 7.8 and 7.13
hereof.
(e) Final judgment or judgments (or any decree or decrees for
the payment of any fine or any penalty) for the payment of an uninsured money
award in excess of $50,000 in the aggregate shall be rendered against the
Borrower or any of its Subsidiaries and the same shall remain undischarged for a
period of thirty (30) days during which execution shall not be effectively
stayed or bonded; or
CREDIT AGREEMENT - Page 61
70
(f) The General Partner, the Borrower or any of its
Subsidiaries shall claim, or any court shall find or rule, that the Lender does
not have a valid Lien on any portion of the Collateral which may now or
hereafter have been provided to secure the Obligations hereunder; or
(g) Any order shall be entered in any proceeding against the
General Partner, the Borrower or any Subsidiaries decreeing the dissolution,
liquidation or split-up thereof, and such order shall remain effect for thirty
(30) days; or
(h) The General Partner, the Borrower or any of its
Subsidiaries shall have concealed, removed, or permitted to be concealed or
removed, any part of its Property, with intent to hinder, delay or defraud its
creditors or any of them, or made or suffered a transfer of any of its Property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or shall have made any transfer of its Property to or for the benefit of a
creditor at a time when other creditors similarly situated have not been paid;
or
(i) A change shall occur in the financial condition, business
affairs or otherwise of the Borrower or any of its Subsidiaries, or in the value
of the Collateral given as security for the Obligations hereunder, which would
or does have a Material Adverse Effect; or
(j) Any of the following shall occur: (1) a Reportable Event
shall have occurred with respect to a Plan; (2) the filing by the Borrower, any
ERISA Affiliate, or an administrator of any Plan of a notice of intent to
terminate such Plan in a "distressed termination" under the provisions of
Section 4041 of ERISA; (3) the receipt of notice by the Borrower, any ERISA
Affiliate or an administrator of a Plan that the PBGC has instituted proceedings
to terminate (or appoint a trustee to administer) such a Plan; (4) any other
event or condition exists which might, in the opinion of the Lender, constitute
grounds under the provisions of Section 4042 of ERISA for the termination of or
the appointment of a trustee to administer any Plan by the PBGC; (5) a Plan
shall fail to maintain a minimum funding standard required by Section 412 of the
Code for any plan year or a waiver of standard is sought or granted under the
provisions of Section 412(d) of the Code; (6) the Borrower or any ERISA
Affiliate has incurred, or is likely to incur, a liability under the provisions
of Section 4062, 4063, 4064 or 4201 of ERISA; (7) the Borrower or any ERISA
Affiliate fails to pay the full amount of an installment required under Section
412(m) of the Code; or (8) the occurrence of any other event or condition with
respect to any Plan which would constitute an event of default or default under
any other agreement entered into by the Borrower or any ERISA Affiliate; or
(k) One or more notices of Liens arising from unpaid federal,
state or local taxes exceeding $25,000 in the aggregate shall be filed against
any of the Properties or assets of the Borrower or any of its Subsidiaries,
provided, however, that a reserve against the Borrowing Base will be established
in an amount equal to the amount of any and all federal, state or local taxes
less than such $25,000 aggregate threshold which are claimed to be owing under
any such notices of Liens; or
CREDIT AGREEMENT - Page 62
71
(l) This Agreement, any of the Notes, any of the Security
Documents or any other Loan Documents shall for any reason cease to be, or shall
be asserted by the General Partner, the Borrower or any Guarantor, not to be, a
legal, valid and binding obligation of the Borrower or such Guarantors, as
applicable, enforceable in accordance with its terms, or the Lien purported to
be created by any of the Security Documents shall for any reason cease to be, or
be asserted by the General Partner, the Borrower or any Guarantor, as applicable
not to be, a valid, first priority perfected Lien against any Collateral (except
to the extent otherwise permitted under this Agreement or any of the Security
Documents); or
(m) The Borrower or any of its Subsidiaries which is a party
to any of the Lockbox Agreements fails to perform and/or cause to be performed
and observed, all covenants, provisions and conditions to be performed,
discharged and observed by the Borrower or any such Subsidiary under the terms
of the Lockbox Agreements.
In addition, if any of the following events shall occur, then the Notes, the
Letter of Credit Advances, the Commitment Fees and all other Obligations then
outstanding and payable hereunder shall automatically, without demand,
presentment, protest, notice of intent to accelerate, notice of acceleration or
other notice to any Person of any kind, all of which are hereby expressly WAIVED
by the Borrower, become immediately due and payable and all Commitments and
further obligation to issue any additional Letters of Credit shall be
immediately and automatically terminated:
(n) The General Partner, the Borrower or any of its
Subsidiaries shall make a general assignment for the benefit of creditors or
shall petition or apply to any tribunal for the appointment of a trustee,
custodian, receiver or liquidator of all or any substantial part of its
business, estate or assets or shall commence any proceeding under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or hereafter in
effect; or
(o) Any such petition or application shall be filed or any
such proceeding shall be commenced against the General Partner, the Borrower or
any of its Subsidiaries and the General Partner, the Borrower or such Subsidiary
by any act or omission shall indicate approval thereof, consent thereto or
acquiescence therein, or an order shall be entered appointing a trustee,
custodian, receiver or liquidator of all or any substantial part of the assets
of the General Partner, the Borrower or any of its Subsidiaries or granting
relief to the General Partner, the Borrower or any of its Subsidiaries or
approving the petition in any such proceeding, and such order shall remain in
effect for more than thirty (30) days; or
(p) The General Partner, the Borrower or any of its
Subsidiaries shall admit in writing its inability to pay its debts as they
become due or fail generally to pay its debts as they become due or suffer any
writ of attachment or execution or any similar process to be issued or levied
against it or any substantial part of its Property which is not released,
stayed, bonded or vacated within ten (10) days after its issue or levy.
9.2 Remedies Cumulative. No remedy, right or power conferred upon the
Lender is intended to be exclusive of any other remedy, right or power given
hereunder or now or hereafter
CREDIT AGREEMENT - Page 63
72
existing at law, in equity, or otherwise, and all such remedies, rights and
powers shall be cumulative.
10. Miscellaneous.
10.1 No Waiver. No waiver of any Default or Event of Default shall be
deemed to be a waiver of any other Default or Event of Default. No failure to
exercise and no delay on the part of the Lender in exercising any right or power
under any Loan Document or at law or in equity shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
the abandonment or discontinuance of steps to enforce any such right or power,
preclude any further or other exercise thereof or the exercise of any other
right or power. No course of dealing between the Borrower and the Lender shall
operate as a waiver of any right or power of the Lender. Subject to the
provisions of Section 10.11 hereof, no amendment, modification or waiver of any
provision of this Agreement or any other Loan Document, nor any consent to any
departure therefrom, shall be effective unless the same is in writing and signed
by the Person against whom it is sought to be enforced, and then it shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Borrower or any other Person shall entitle the
Borrower or any other Person to any other or further notice or demand in similar
or other circumstances.
10.2 Notices. All notices under the Loan Documents shall be in writing
and either (i) delivered against receipt therefor, (ii) mailed by registered or
certified mail, return receipt requested, or (iii) sent by telex, telecopy
(promptly confirmed by mail, except for any notice pursuant to Section
5.1(a)(ii) hereof which need not be confirmed by mail) or telegram, in each case
to the intended recipient at the "Address for Notices" specified below its name
on the signature pages hereof. The Borrower or Ultimate Parent may change its
address for purposes hereof by providing written notice of such address change
to the Lender in accordance with the provisions of this Section 10.2, with any
such change in address only being effective ten (10) Business Days after such
change of address has been deemed given in accordance with the provisions
hereof. Notices shall be deemed to have been given (whether actually received or
not) when delivered (or, if mailed, on the next Business Day); however, the
notices required or permitted by Sections 2.2(b) and 5.1(a) hereof shall be
effective only when actually received by the Lender.
10.3 Governing Law. UNLESS OTHERWISE SPECIFIED THEREIN, EACH LOAN
DOCUMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF) AND THE
UNITED STATES OF AMERICA.
10.4 Survival; Parties Bound. All representations, warranties,
covenants and agreements made by or on behalf of the Borrower in connection
herewith shall survive the execution and delivery of the Loan Documents, shall
not be affected by any investigation made by any Person, and shall bind the
Borrower and its successors, trustees, receivers and assigns and inure to the
benefit of the successors and assigns of the Lender, provided that the
undertaking of the Lender hereunder to make Loans to the Borrower and to issue
Letters of Credit for the
CREDIT AGREEMENT - Page 64
73
account of the Borrower shall not inure to the benefit of any successor or
assign of the Borrower. The term of this Agreement shall be until the final
maturity of the Notes and the payment of all amounts due under the Loan
Documents.
10.5 Counterparts. This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an original
instrument, and all such separate counterparts shall constitute but one and the
same instrument.
10.6 Limitation of Interest. The Borrower and the Lender intend to
strictly comply with all applicable laws, including applicable usury laws, if
any. Accordingly, the provisions of this Section 10.6 shall govern and control
over every other provision of this Agreement or any other Loan Document which
conflicts or is inconsistent with this Section, even if such provision declares
that it controls. As used in this Section, the term "interest" includes the
aggregate of all charges, fees, benefits or other compensation which constitute
interest under applicable law, provided that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized as an
expense or as compensation for something other than the use, forbearance or
detention of money and not as interest, and (b) all interest at any time
contracted for, reserved, charged or received shall be amortized, prorated,
allocated and spread, in equal parts during the full term of the Loans and the
Commitments. In no event shall the Borrower or any other Person be obligated to
pay, or the Lender have any right or privilege to reserve, receive or retain,
(Y) any interest in excess of the maximum amount of non-usurious interest
permitted under the laws of the United States or of any state, if any, which are
applicable to the Lender, or (Z) total interest in excess of the amount which
the Lender could lawfully have contracted for, reserved, received, retained or
charged had the interest been calculated for the full term of the Loans at the
Highest Lawful Rate, if any, applicable to the Lender. On each day, if any, that
the sum of the Alternate Base Rate or the Adjusted LIBOR Rate, as applicable,
and the Applicable Margin, or any other applicable rate called for under any
other Loan Document exceeds the Highest Lawful Rate, if any, applicable to the
Lender, the rate at which interest shall accrue for the applicable type of
borrowing owing to the Lender shall automatically be fixed by operation of this
sentence at the Highest Lawful Rate applicable to the Lender for that day, and
shall remain fixed at the Highest Lawful Rate applicable to the Lender for each
day thereafter until the total amount of interest accrued and owing to the
Lender equals the total amount of interest which would have accrued on such
borrowing owing to the Lender if there were no such ceiling rate as is imposed
by this sentence. Thereafter, interest shall accrue at the Alternate Base Rate
plus the Applicable Margin, the Adjusted LIBOR Rate plus the Applicable Margin
or such other applicable rate, respectively, unless and until the sum of the
Alternate Base Rate and the Applicable Margin, the sum of the Adjusted LIBOR
Rate and the Applicable Margin or such other applicable rate (whichever is
applicable to the situation) again exceeds the Highest Lawful Rate applicable to
the Lender when the provisions of the immediately preceding since shall again
automatically operate to limit the interest accrual rate. The daily interest
rates to be used in calculating interest at the Highest Lawful Rate for the
Lender shall be determined by dividing the applicable Highest Lawful Rate, if
any, for the Lender per annum by the number of days in the calendar year for
which such calculation is being made. None of the terms and provisions contained
in this Agreement or in any other Loan Document which directly or indirectly
relate to interest shall ever be construed without reference to this Section
10.6, or be construed to create a
CREDIT AGREEMENT - Page 65
74
contract to pay the Lender for the use, forbearance or detention of money at an
interest rate in excess of the Highest Lawful Rate applicable to the Lender. If
the term of any Loans or any of the Notes is shortened by reason of acceleration
of maturity as a result of any Default or Event of Default or by any other
cause, or by reason of any required or permitted prepayment, and if for that (or
any other) reason the Lender at any time is owed or receives (and/or has
received) interest in excess of interest calculated at the Highest Lawful Rate
applicable to the Lender, then and in any such event all of any such excess
interest owed to or received by the Lender shall be canceled automatically as of
the date of such acceleration, prepayment or other event which produces the
excess, and, if such excess interest has been paid to the Lender, it shall be
credited pro tanto against the then-outstanding principal balance of the
Borrower's obligations to the Lender, effective as of the date or dates when the
event occurs which causes it to be excess interest, until such excess is
exhausted or all of such principal has been fully paid and satisfied, whichever
occurs first, and any remaining balance of such excess shall be promptly
refunded to its payor. To the extent the Laws of the State of Texas are
applicable for purposes of determining the "Highest Lawful Rate," such term
shall mean the "weekly ceiling" from time to time in effect under Article lD.
003, Title 79, Revised Civil Statutes of Texas, as amended, or, if permitted by
applicable Law and effective upon the giving of the notices required by such
Article lD. 103 and under the Texas Finance Code (or effective upon any other
date otherwise specified by applicable Law), the "monthly ceiling," the
"quarterly ceiling" or "annualized ceiling" from time to time in effect under
such Chapter lD of the Texas Credit Title, whichever that the Lender shall elect
to substitute for the "weekly ceiling," and vice versa, each such substitution
to have the effect provided in such Chapter lD of the Texas Credit Title; and
the Lender shall be entitled to make such election from time to time and one or
more times and, without notice to Borrower, to leave any such substitute rate in
effect for subsequent periods in accordance with Chapter lD of the Texas Credit
Title. Pursuant to Article 15.10(b) of Chapter 15, Subtitle 79, Revised Civil
Statutes of Texas, 1925, as amended, and pursuant to Chapter 346.004 of the
Texas Finance Code, as amended, Borrower agrees that Chapter 15 of the Texas
Credit Title and Chapter 346 of the Texas Finance Code (which regulates certain
revolving credit loan accounts and revolving tri-party accounts) shall not
govern or in any manner apply to the Obligations.
10.7 Survival. The obligations of the Borrower under Sections 2.3,
2.4(b), 2.9, 2.10(f), 10.9, 10.10 and 10.17 hereof shall survive the repayment
of the Loans, the termination of the Commitments and the cancellation or
expiration of the Letters of Credit.
10.8 Captions. The headings and captions appearing in the Loan
Documents have been included solely for convenience and shall not be considered
in construing the Loan Documents.
10.9 Expenses, Etc. Whether or not any Loan is ever made or any Letter
of Credit ever issued, the Borrower agrees to pay or reimburse on demand the
Lender for paying: (a) the reasonable fees and expenses of ▇▇▇▇▇▇ & ▇▇▇▇,
L.L.P., counsel to the Lender or any other legal counsel engaged by the Lender,
in connection with (i) the preparation, execution and delivery of this Agreement
(including the exhibits and schedules hereto) and the Loan Documents and the
making of the Loans and the issuance of Letters of Credit hereunder, and (ii)
any modification, supplement or waiver of any of the terms of this Agreement,
the Letters of Credit or any other
CREDIT AGREEMENT - Page 66
75
Loan Document; (b) all reasonable and documented costs and expenses (including
reasonable and documented attorneys fees) of the Lender in connection with the
enforcement of this Agreement, the Letters of Credit or any other Loan Document;
(c) all transfer, stamp, documentary or other similar taxes, assessments or
charges levied by any governmental or revenue authority in respect of this
Agreement, any Letter of Credit or any other Loan Document or any other document
referred to herein or therein; (d) all costs, expenses, taxes, assessments and
other charges incurred in connection with any filing, registration, recording or
perfection of any security interest contemplated by this Agreement, any other
Loan Document or any document referred to herein or therein, and the cost of
title insurance; and (e) reasonable and documented expenses of due diligence
incurred prior to or as of the Closing Date.
10.10 Indemnification. THE BORROWER AGREES TO INDEMNIFY THE LENDER AND
EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES,
COUNSEL OR AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES, LIABILITIES (INCLUDING ENVIRONMENTAL LIABILITIES), CLAIMS (INCLUDING
ENVIRONMENTAL CLAIMS) OR DAMAGES TO WHICH ANY OF THEM MAY BECOME SUBJECT,
INSOFAR AS SUCH LOSSES, LIABILITIES, CLAIMS OR DAMAGES ARISE OUT OF OR RESULT
FROM ANY (a) ACTUAL OR PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF ANY
EXTENSION OF CREDIT (WHETHER A LOAN OR A LETTER OF CREDIT) BY THE LENDER
HEREUNDER, (b) BREACH BY THE BORROWER OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, (c) VIOLATION BY THE BORROWER OR ANY OF ITS SUBSIDIARIES OF ANY LAW,
RULE, REGULATION OR ORDER INCLUDING ANY REQUIREMENTS OF ENVIRONMENTAL LAW, (d)
LIENS OR SECURITY INTERESTS GRANTED ON ANY PROPERTY PURSUANT TO OR UNDER THE
LOAN DOCUMENTS, TO THE EXTENT RESULTING FROM ANY HAZARDOUS SUBSTANCE LOCATED IN,
ON OR UNDER ANY SUCH PROPERTY, (e) OWNERSHIP BY THE LENDER OF ANY PROPERTY
FOLLOWING FORECLOSURE UNDER THE LOAN DOCUMENTS, TO THE EXTENT SUCH LOSSES,
LIABILITIES, CLAIMS OR DAMAGES ARISE OUT OF OR RESULT FROM ANY HAZARDOUS
SUBSTANCE, LOCATED IN, ON OR UNDER SUCH PROPERTY PRIOR TO OR AT THE TIME OF SUCH
FORECLOSURE, INCLUDING LOSSES, LIABILITIES, CLAIMS OR DAMAGES WHICH ARE IMPOSED
UPON PERSONS UNDER LAWS RELATING TO OR REGULATING HAZARDOUS SUBSTANCES, SOLELY
BY VIRTUE OF OWNERSHIP, (f) THE LENDER BEING DEEMED AN OPERATOR OF ANY SUCH
PROPERTY BY A COURT OR OTHER REGULATORY OR ADMINISTRATIVE AGENCY OR TRIBUNAL OR
OTHER THIRD PARTY, TO THE EXTENT SUCH LOSSES, LIABILITIES, CLAIMS OR DAMAGES
ARISE OUT OF OR RESULT FROM ANY HAZARDOUS SUBSTANCE, PETROLEUM, PETROLEUM
PRODUCT OR PETROLEUM WASTE LOCATED IN ON OR UNDER SUCH PROPERTY AT OR PRIOR TO
THE TIME OF ANY FORECLOSURE THEREON UNDER THE LOAN DOCUMENT, OR (g)
INVESTIGATION, LITIGATION OR OTHER PROCEEDING (INCLUDING ANY THREATENED
INVESTIGATION OR PROCEEDING) RELATING TO ANY OF THE FOREGOING, AND THE BORROWER
AGREES TO REIMBURSE THE LENDER, AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL AND AGENTS, UPON DEMAND FOR ANY EXPENSES
(INCLUDING LEGAL FEES) INCURRED IN CONNECTION WITH ANY SUCH INVESTIGATION OR
PROCEEDING, AND WHETHER ANY SUCH LOSS, LIABILITY, CLAIM OR DAMAGE RESULTS FROM
THE NEGLIGENCE OF ANY SUCH INDEMNIFIED PERSON; BUT EXCLUDING ANY SUCH LOSSES,
LIABILITIES, CLAIMS, DAMAGES OR EXPENSES INCURRED BY A PERSON OR ANY AFFILIATE
THEREOF OR THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL OR AGENTS BY
REASON OF (i) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PERSON,
AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE OR AGENT OR (ii) OWNERSHIP OR OPERATION
OF ANY PROPERTY BY THE LENDER FOLLOWING FORECLOSURE UNDER THE LOAN DOCUMENTS IF
SUCH LOSSES, LIABILITIES, ETC. ARE ATTRIBUTABLE SOLELY TO THE POST-FORECLOSURE
ACTIONS OF THE LENDER.
CREDIT AGREEMENT - Page 67
76
10.11 Amendments, Waivers, Etc. No amendment, modification or waiver of
any provision of this Agreement, any of the Notes or any other Loan Document,
nor any consent to any departure by the Borrower therefrom, shall in any event
be effective unless the same shall be or consented to by the Lender and the
Borrower, and each such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
10.12 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the Borrower and the Lender and their respective successors and
permitted assigns. The Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Lender.
(b) The Lender may assign to one or more Persons all or a
portion of its interests, rights and obligations under this Agreement or may
sell participations to any Person in all or part of any Loan, or all or part of
the Notes, the Letter of Credit Exposure Amount or Commitments.
(c) The Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.12, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to the Lender by
or on behalf of the Borrower; provided, however, that as a condition to any such
disclosure of information relating to the Borrower, the Lender shall require
such proposed assignee or participant to agree in writing to keep confidential
all information with respect to the Borrower furnished to it by the Lender in
connection with any proposed assignment or participation (other than information
generally available to the public or otherwise available to the Lender on a
non-confidential basis).
(d) Notwithstanding anything herein to the contrary, the
Lender may pledge and assign all or any portion of its rights and interests
under the Loan Documents to any Federal Reserve Bank.
10.13 Entire Agreement. This Agreement and the other Loan Documents
embody the entire agreement and understanding among the Borrower and the Lender
relating to the subject matter hereof and supersedes all prior proposals,
agreements and understandings relating to the subject matter hereof. Any
conflict between the provisions of this Agreement and the provisions of any
other Loan Documents shall be governed by the provisions of this Agreement. The
Borrower certifies that it is relying on no representation, warranty, covenant
or agreement except for those set forth in this Agreement and the other Loan
Documents of even date herewith.
10.14 Severability. If any provision of any Loan Documents shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired thereby.
CREDIT AGREEMENT - Page 68
77
10.15 Disclosures. Every reference in the Loan Documents to disclosures
of the Borrower to the Lender in writing, to the extent that such references
refer to disclosures at or prior to the execution of this Agreement, shall be
deemed strictly to refer only to written disclosures delivered to the Lender in
an orderly manner prior to or concurrently with the execution hereof.
10.16 Taxes.
(a) As used in this Section 10.16, the following terms shall
have the following meanings:
(i) "Indemnifiable Tax" means any Tax, but excluding,
in any case any Tax that (a) would not be imposed in respect of a
payment to the Lender under this Agreement, under any of the Notes or
under any of the other Loan Documents except for a present or former
connection between the jurisdiction of the Governmental Authority
imposing such Tax and the Lender (or a shareholder or other Person with
an interest in the Lender), including a connection arising from the
Lender's (or shareholder of the Lender or such other Person) being or
having been citizen or resident of such jurisdiction, or being or
having been organized, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or
fixed place of business in such jurisdiction, but excluding a
connection arising solely from the Lender having executed, delivered,
performed its obligations or received a payment under, or enforced,
this Agreements, any of the Notes or any other Loan Documents, or (b)
is imposed under United States federal income tax law or any state
income tax law.
(ii) "Tax" means any present or future tax, levy,
impost, duty, charge assessment or fee of any nature (including
interest thereon and penalties and additions thereto) that is imposed
by any Governmental Authority in respect of a payment to the Lender
under this Agreement, under any of the Notes or under any of the other
Loan Documents.
(b) If the Borrower is required by any Applicable Legal
Requirement to make any deduction or withholding for or on account of any
payment to be made by it under this Agreement, under any of the Notes or under
any other Loan Documents, then the Borrower shall (i) promptly notify the Lender
that is entitled to such payment of such requirement to so deduct or withhold
such Tax, (ii) pay to the relevant authorities the full amount required to be so
deducted or withheld, (iii) promptly forward to the Lender an official receipt
(or certified copies thereof), or other documentation reasonably acceptable to
the Lender holder, evidencing such payment to such Governmental Authorities and
(iv) if such Tax is an Indemnifiable Tax, pay, to the extent permitted by law,
to the Lender, in addition to whatever net amount of such payment is paid to the
Lender, such additional amount as is necessary to ensure that the total amount
actually received by the Lender (free and clear of Indemnifiable Tax) will equal
the full amount of the payment the Lender would have received had no such
deduction or withholding been required. If the Borrower pays any additional
amount to the Lender pursuant to the preceding sentence and the Lender shall
receive a refund of an Indemnifiable Tax with respect to which, in
CREDIT AGREEMENT - Page 69
78
the good faith opinion of the Lender, such payment was made, the Lender shall
pay to the Borrower the amount of such refund promptly upon receipt thereof.
(c) In the event that any Governmental Authority notifies the
Borrower that it has improperly failed to withhold or deduct any Tax from a
payment received by the Lender under this Agreement, under any of the Notes or
under any other Loan Document, the Borrower agrees to timely and fully pay such
Tax to such Governmental Authority and the Lender shall, upon receipt of written
notice of such payment, immediately pay to the Borrower, an amount necessary in
order that the amount of such payment to the Borrower after payment of all Taxes
with respect to such payment, shall equal the amount that the Borrower paid to
such Governmental Authority pursuant to this clause (c).
(d) The Lender shall, upon request by the borrower, take
requested measures to mitigate the amount of Indemnifiable Tax required to be
deducted or withheld from any payment made by the Borrower under this Agreement,
under any of the Notes or under any other Loan Documents if such measures can,
in the sole and absolute opinion of the Lender, be taken without the Lender
suffering any economic, legal, regulatory or other disadvantage (provided,
however, that the Lender shall not be required to designate a funding office
that is not located in the United States of America).
(e) Notwithstanding the foregoing, in no event shall the
amount payable under this Section 10.16 (to the extent, if any, constituting
interest under applicable laws) together with all amounts constituting interest
under applicable laws and payable in connection with this Agreement or any of
the Notes, exceed the Highest Lawful Rate or the maximum amount of interest
permitted to be charged by applicable laws.
10.17 Waiver of Claims. THE BORROWER HEREBY WAIVES AND RELEASES THE
LENDER FROM ANY AND ALL CLAIMS OR CAUSES OF ACTION WHICH THE BORROWER MAY OWN,
HOLD OR CLAIM IN RESPECT OF ANY OF THEM AS OF THE DATE HEREOF.
10.18 Right of Setoff. Upon the occurrence and during the continuation
of any Event of Default, the Lender is hereby authorized at any time and from
time to time, without notice to the Borrower or any of the Guarantors (any such
notice being expressly waived by the Borrower and by the Guarantors by their
execution of a Guaranty or a Joinder Agreement), to setoff and apply any and all
deposits (general or special, time or demand, provisional or final, whether or
not such setoff results in any loss of interest or other penalty, and including
without limitation all certificates of deposit) at any time held, and any other
funds or property at any time held, and other Indebtedness at any time owing by
the Lender to or for the credit or the account of the Borrower or any such
Guarantor against any and all of the Indebtedness arising in connection with
this Agreement irrespective of whether or not the Lender will have made any
demand under this Agreement, any of the Notes or any other Loan Document. The
Borrower and each of the Guarantors (by their execution of a Guaranty or a
Joinder Agreement) also hereby grants to the Lender a security interest in and
hereby transfers, assigns, sets over, and conveys to the Lender, as security for
payment of all Loans and Letter of Credit Exposure Amount, all such deposits,
funds or property of the Borrower or any such Guarantor or Indebtedness of the
Lender to the Borrower or any such Guarantor. Should the right of the Lender to
realize funds in any manner
CREDIT AGREEMENT - Page 70
79
set forth hereinabove be challenged and any application of such funds be
reversed, whether by court order or otherwise, the Lender shall make restitution
or refund to the Borrower or such Guarantor, as applicable. The Lender agrees to
promptly notify the Borrower after any such setoff and application, provided
that the failure to give such notice will not affect the validity of such setoff
and application. The rights of the Lender under this Section are in addition to
other rights and remedies (including without limitation other rights of setoff)
which the Lender may have.
10.19 Waiver of Right to Jury Trial. EXCEPT AS PROHIBITED BY APPLICABLE
LAW, EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT, THE NOTES, ANY OF THE OTHER LOAN DOCUMENTS OR
ANY TRANSACTIONS EVIDENCED THEREBY.
10.20 Additional Provisions Regarding Collection of Receivables;
Control of Inventory and other Collateral.
(a) So long as the procedures discussed in Section 7.15(b)
hereof have been implemented and are continuing, the Borrower hereby constitutes
the Lender or the Lender's designee as the Borrower's attorney-in-fact with
power to endorse the Borrower's name upon any notes, acceptances, checks,
drafts, money orders or other evidence of payment of any Receivables or any
other Collateral that may come into its possession; to sign or endorse the
Borrower's name on any invoice, ▇▇▇▇ of lading or other title or ownership
documents relating to any Receivables or inventory, drafts against any customers
of the Borrower, assignments and verifications of Receivables and notices to
customers of the Borrower; to send verifications of Receivables; to notify the
U.S. Postal Service authorities to change the address for delivery of mail
addressed to the Borrower to such address as the Lender may designate at any
time after the occurrence of any Event of Default which is continuing and to do
all other acts and things necessary to carry out this Agreement. All acts of
said attorney or designee are hereby ratified and approved by the Borrower, and
said attorneys or designee shall not be liable for any acts of omission or
commission, for any error of judgment or for any mistake of fact or law,
provided that the Lender or its designee shall not be relieved of liability to
the extent it is determined by a final judicial decision that its act, error or
mistake constituted gross negligence or willful misconduct. The power of
attorney granted under this subparagraph is coupled with an interest and is
irrevocable until all of the Obligations are paid in full and this Agreement and
the Commitments are terminated.
(b) The Lender, without notice to or consent of the Borrower,
at any time after the occurrence and during the continuation of an Event of
Default; (i) may ▇▇▇ upon or otherwise collect, extend the time of payment of,
or compromise or settle for cash, credit or otherwise upon any terms, any of the
Receivables or any instruments or insurance applicable thereto and/or release
any account debtor thereon; (ii) is authorized and empowered to accept or direct
shipments of inventory and accept the return of the goods represented by any of
the Receivables; and (iii) shall have the right to receive, endorse, assign
and/or deliver in its name or the name of the Borrower any and all checks,
drafts and other instruments for the payment of money relating
CREDIT AGREEMENT - Page 71
80
to the Receivables, and the Borrower hereby waives notice of presentment,
protest and non-payment of any instrument so endorsed.
(c) Nothing herein contained shall be construed to constitute
the Borrower as agent of the Lender for any purpose whatsoever, and the Lender
shall not be responsible or liable for any shortage, discrepancy, damage, loss
or destruction of any part of the Collateral wherever the same may be located
and regardless of the cause thereof (except to the extent it is determined by a
final judicial decision that the Lender's act or omission constituted gross
negligence of willful conduct). The Lender shall not, under any circumstances or
in any event whatsoever, have any liability for any error or omission or delay
of any kind occurring in the settlement, collection or payment of any of the
Receivables or any instrument received in payment thereof or for any damage
resulting therefrom (except to the extent it is determined by a final judicial
decision that the Lender's error, omission or delay constituted gross negligence
or willful misconduct). The Lender does not, by anything herein or in any
assignment or otherwise, assume any of the Borrower's obligations under any
contract or agreement assigned to the Lender, and the Lender shall not be
responsible in any way for the performance by the Borrower of any of the terms
and conditions thereof.
(d) Upon the occurrence and during the continuation of any
Event of Default: (i) if any of the Receivables includes a charge for any tax
payable to any governmental tax authority, the Lender is hereby authorized (but
in no event obligated) in its discretion to pay the amount thereof to the proper
taxing authority for the account of the Borrower and to charge the Borrower's
account therefor; and (ii) the Borrower shall notify the Lender if any
Receivables include any tax due to any such taxing authority and, in the absence
of such notice, the Lender shall have the right to retain the full proceeds of
such Receivables and shall not be liable for any taxes that may be due from the
Borrower by reason of the sale and delivery creating such Receivables.
(e) Upon the occurrence and continuation of any Event of
Default, the Lender may at any time and from time to time employ and maintain in
the premises of the Borrower a custodian selected by the Lender who shall have
full authority to do all acts necessary to protect the Lender's interests and to
report to the Lender thereon. The Borrower hereby agrees to cooperate with any
such custodian and to do so whatever the Lender may reasonably request to
preserve the Collateral. All costs and expenses incurred by the Lender by reason
of the employment of the custodian shall be charged to the Borrower's account
and added to the Obligations.
10.21 Joint and Several Obligations. Notwithstanding anything to the
contrary contained herein or in any other Loan Documents, the Borrower and the
Guarantors are jointly and severally responsible for their respective
agreements, covenants, representations, warranties and obligations contained and
set forth in this Agreement or in any other Loan Document to which they are a
party.
10.22 Venue; Service of Process. BORROWER, FOR ITSELF, ITS SUCCESSORS
AND ASSIGNS, HEREBY (A) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
THE STATE AND FEDERAL COURTS OF THE STATE OF
CREDIT AGREEMENT - Page 72
81
TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY
LEGAL PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS AND THE
OBLIGATION BY SERVICE OF PROCESS AS PROVIDED BY TEXAS LAW, (B) IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN
CONNECTION WITH THE LOAN DOCUMENTS AND THE OBLIGATION BROUGHT IN DISTRICT COURTS
OF DALLAS COUNTY, TEXAS, OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF TEXAS, DALLAS DIVISION, (C) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY
LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM,
(D) AGREES TO DESIGNATE AND MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN HOUSTON,
TEXAS, IN CONNECTION WITH ANY SUCH LITIGATION AND TO DELIVER TO LENDER EVIDENCE
THEREOF, (E) IF SERVICE OF PROCESS UPON THE REGISTERED AGENT IS UNSUCCESSFUL
AFTER ONE GOOD FAITH ATTEMPT, IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING OF
COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO
SUCH BORROWER AT ITS ADDRESS SET FORTH HEREIN, AND (F) IRREVOCABLY AGREES THAT
ANY LEGAL PROCEEDING AGAINST LENDER ARISING OUT OF OR IN CONNECTION WITH THE
LOAN DOCUMENTS ON THE OBLIGATION SHALL BE BROUGHT IN THE DISTRICT COURTS OF
DALLAS COUNTY, TEXAS, OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF TEXAS, DALLAS DIVISION. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
LENDER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN
ANY JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY APPLICABLE LAW.
10.23 No Other Agreements. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
10.24. Restatement of Credit Agreement. This Agreement is given in
renewal, amendment, replacement, and restatement in its entirety (but not in
novation, extinguishment or satisfaction of that certain Credit Agreement dated
as of June 12, 1997, executed by and between Tidel Engineering, Inc., the
non-surviving entity of the merger between Tidel Engineering, Inc. and the
Borrower, and Texas Commerce Bank National Association, the
predecessor-in-interest to the Lender (including any and all amendments thereto,
the "Prior Credit Agreement"). To the extent of any conflict between the terms
of this Agreement and the terms of the Prior Credit Agreement, the terms of this
Agreement shall control. All rights, titles, liens and security interests
securing the obligations of Tidel Engineering under the Prior Credit Agreement
are
CREDIT AGREEMENT - Page 73
82
preserved, maintained and carried forward to secure the Obligations, as defined
in this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
CREDIT AGREEMENT - Page 74
83
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
TIDEL ENGINEERING, L.P.,
a Delaware limited partnership
By: Tidel Cash Systems, Inc., its sole
general partner
By:
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
President and Chief Executive
Officer
TIDEL TECHNOLOGIES, INC.,
a Delaware corporation
By:
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chief Operating Officer
Address for Notices:
Borrower:
Tidel Engineering, L.P.
c/o Tidel Cash Systems, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Ultimate Parent:
Tidel Technologies, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
CREDIT AGREEMENT - Page 75
84
CHASE BANK OF TEXAS, N.A., a national
banking association, as a Lender
By:
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President
Address for Notices:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Domestic Lending Office:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
CREDIT AGREEMENT - Page 76
85
EXHIBIT "A"
TO
CREDIT AGREEMENT
Revolving Note Form
(See attached)
EXHIBIT A
86
EXHIBIT "B"
TO
CREDIT AGREEMENT
Term Note Form
(See attached)
EXHIBIT B
87
EXHIBIT "C"
TO
CREDIT AGREEMENT
Standard Lockbox Agreement
(See attached)
EXHIBIT C
88
EXHIBIT "D"
TO
CREDIT AGREEMENT
Compliance Certificate
(See attached)
EXHIBIT D
89
EXHIBIT "E"
TO
CREDIT AGREEMENT
Request for Extension of Credit
(See attached)
EXHIBIT E
90
EXHIBIT "F"
TO
CREDIT AGREEMENT
Rate Selection Notice
(See attached)
EXHIBIT F
91
EXHIBIT "G"
TO
CREDIT AGREEMENT
Secretary's Certificate of General Partner
(See attached)
EXHIBIT G
92
EXHIBIT "H"
TO
CREDIT AGREEMENT
Borrowing Base Certificate Form
(See attached)
EXHIBIT H
93
SCHEDULE "6.5"
TO
CREDIT AGREEMENT
Material Litigation
In August, 1998, Tidel Engineering, Inc. ("Tidel") filed a lawsuit (identified
as Cause No. DV98-06733 in the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇)
against Defendant Hanco Systems, Inc. ("Hanco") for its failure to pay for goods
accepted pursuant to a distributor agreement between Tidel and Hanco. The amount
for which Tidel sued equals $298,492.03, plus accrued prejudgment interest in
the amount of $21,939.16. In response, Hanco removed the case to federal court
(identified as Civil Action No. 3-98CV2279-D, currently pending in the United
States District Court of the Northern District of Texas, Dallas Division). Hanco
subsequently filed counterclaims for the following causes of action: various
breaches of the distributor agreement, defamation, breach of warranty, negligent
misrepresentation, promissory estoppel, breach of implied promise, negligence
and violations of the Texas Deceptive Trade Practices Act. Hanco seeks to
recover $6.45 million in actual damages plus an unspecified amount in punitive
damages on their counterclaims. Tidel believes that these counterclaims are
wholly unsupported by the facts and were filed merely to avoid or delay paying
monies rightfully owed to Tidel.
SCHEDULE 6.5
94
SCHEDULE "6.12"
TO
CREDIT AGREEMENT
Leases of Real Property
1. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
2. 1624 Diplomat
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE 6.12
95
SCHEDULE "6.13"
TO
CREDIT AGREEMENT
List of Assumed Names
NONE
SCHEDULE 6.13
96
SCHEDULE "6.16"
TO
CREDIT AGREEMENT
Indebtedness & Capital Leases
1. Capital Lease of one 1999 Cadillac Seville / Smart Lease under lease
agreement between GMAC, as lessor, and Tidel Engineering, Inc., as
lessee, dated November 3, 1998.
2. Operating Lease relating to cellular phones with Southwestern ▇▇▇▇,
previously entered into by Tidel Engineering, Inc.
SCHEDULE 6.16
97
SCHEDULE "6.17"
TO
CREDIT AGREEMENT
Environmental Matters
NONE
SCHEDULE 6.17
98
SCHEDULE "8.2"
TO
CREDIT AGREEMENT
Liens
NONE
SCHEDULE 8.2
99
SCHEDULE "8.6"
TO
CREDIT AGREEMENT
List of Existing Transactions with Related Parties
(1) Tax Allocation Agreement among the Borrower, Tidel Technologies, Inc.,
Tidel Cash Systems, Inc., and AnyCard International, Inc., dated
October 30, 1998.
SCHEDULE 8.6