<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended June 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from __________ to
__________
Commission file Number 000-17288
TIDEL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2193593
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5847 San Felipe, Suite 900
Houston, Texas 77057
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713)783-8200
----------------------
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. YES [X] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of Common Stock outstanding as of the close of
business on August 10, 1998 was 15,775,468.
<PAGE> 2
TIDEL TECHNOLOGIES, INC.
I N D E X
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998
and September 30, 1997 (unaudited)........................................ 1
Consolidated Statements of Operations for the three
months and nine months ended June 30, 1998
and 1997 (unaudited)...................................................... 2
Consolidated Statements of Cash Flows for the nine
months ended June 30, 1998 and 1997
(unaudited) .......................................................... 3
Notes to Consolidated Financial
Statements (unaudited).................................................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................... 6
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings .......................................................... 11
Item 2. Changes in Securities........................................................ 11
Item 3. Defaults Upon Senior Securities.............................................. 11
Item 4. Submission of Matters to a Vote
Of Security Holders....................................................... 11
Item 5. Other Information .......................................................... 11
Item 6. Exhibits and Reports on Form 8-K............................................. 11
SIGNATURE..................................................................................... 12
</TABLE>
<PAGE> 3
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
ASSETS 1998 1997
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,459,504 $ 1,549,331
Trade accounts receivable, net of allowance of
$781,715 and $750,347, respectively 9,946,774 8,732,080
Notes and other receivables 796,415 852,514
Inventories 5,238,998 4,208,360
Deferred tax asset 912,622 318,810
Prepaid expenses and other 221,754 233,273
------------ ------------
Total current assets 18,576,067 15,894,368
Investment in 3CI, at market value 1,135,004 553,505
Property, plant and equipment, at cost 2,548,198 2,126,726
Accumulated depreciation (1,432,703) (1,189,409)
------------ ------------
Net property, plant and equipment 1,115,495 937,317
Intangible assets, net of accumulated amortization of
$783,015 and $692,814, respectively 710,822 801,023
Other assets 65,375 77,238
------------ ------------
Total assets $ 21,602,763 $ 18,263,451
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term notes payable $ -- $ 948,697
Accounts payable 2,043,997 3,239,412
Accrued liabilities 2,021,782 2,328,917
------------ ------------
Total current liabilities 4,065,779 6,517,026
Long-term debt 4,894,604 3,654,604
------------ ------------
Total liabilities 8,960,383 10,171,630
------------ ------------
Commitments and contingencies
Shareholders' Equity:
Common stock, $.01 par value, authorized 100,000,000
shares; issued and outstanding 15,702,968 and
14,851,050 shares, respectively 157,030 148,511
Additional paid-in capital 14,033,378 13,387,412
Accumulated deficit (733,256) (4,026,262)
Stock subscriptions receivable (382,063) (424,437)
Unrealized loss on investment in 3CI (432,709) (993,403)
------------ ------------
Total shareholders' equity 12,642,380 8,091,821
------------ ------------
Total liabilities and shareholders' equity $ 21,602,763 $ 18,263,451
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 9,935,472 $ 8,002,189 $25,111,381 $21,060,580
Cost of sales 6,180,517 4,992,185 15,700,347 13,545,832
----------- ----------- ----------- -----------
Gross profit 3,754,955 3,010,004 9,411,034 7,514,748
Selling, general and administrative 1,792,813 2,022,382 5,207,874 5,116,402
Depreciation and amortization 122,235 121,657 340,161 344,990
----------- ----------- ----------- -----------
Operating income 1,839,907 865,965 3,862,999 2,053,356
Interest expense, net 99,456 99,207 297,993 367,910
----------- ----------- ----------- -----------
Income before taxes 1,740,451 766,758 3,565,006 1,685,446
Income taxes 204,000 -- 272,000 --
----------- ----------- ----------- -----------
Net income $ 1,536,451 $ 766,758 $ 3,293,006 $ 1,685,446
=========== =========== =========== ===========
Basic earnings per share:
Income from continuing operations $ 0.10 $ 0.05 $ 0.21 $ 0.13
=========== =========== =========== ===========
Net income $ 0.10 $ 0.05 $ 0.21 $ 0.13
=========== =========== =========== ===========
Weighted average common shares
outstanding 15,650,484 14,633,159 15,491,399 13,293,063
=========== =========== =========== ===========
Diluted earnings per share:
Income from continuing operations $ 0.09 $ 0.05 $ 0.19 $ 0.11
=========== =========== =========== ===========
Net income $ 0.09 $ 0.05 $ 0.19 $ 0.11
=========== =========== =========== ===========
Weighted average common and
dilutive shares outstanding 17,159,142 16,387,186 17,027,845 14,965,852
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,293,006 $ 1,685,446
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 340,161 344,990
Deferred tax benefit (593,812) --
Changes in assets and liabilities:
Trade accounts receivable, net (1,214,694) (2,732,364)
Notes and other receivables 56,099 (282,079)
Inventories (1,030,638) (189,641)
Prepaids and other assets 23,382 (239,709)
Accounts payable and accrued liabilities (1,502,550) 635,012
----------- -----------
Net cash used in operating activities (629,046) (778,345)
----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (428,138) (511,459)
Proceeds from sale of property, plant and equipment -- 39,725
Increase in investment in 3CI (20,805) --
----------- -----------
Net cash used in investing activities (448,943) (471,734)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable 1,240,000 4,549,604
Repayments of notes payable (948,697) (4,513,675)
Proceeds from exercise of warrants 654,485 1,607,816
Payments of stock subscriptions 42,374 --
----------- -----------
Net cash provided by financing activities 988,162 1,643,745
----------- -----------
Net (decrease) increase in cash and cash equivalents (89,827) 393,666
Cash and cash equivalents at beginning of period 1,549,331 582,108
----------- -----------
Cash and cash equivalents at end of period $ 1,459,504 $ 975,774
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 351,506 $ 417,499
=========== ===========
Cash paid for taxes $ 812,231 $ --
=========== ===========
Supplemental disclosure of noncash financing activities:
Exercise of warrants in exchange for notes receivable $ -- $ 743,000
=========== ===========
Exercise of warrants in exchange for retirement of
note payable $ -- $ 38,750
=========== ===========
Conversion of note payable to common stock $ -- $ 60,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
(1) CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated balance sheets and related interim
consolidated statements of operations and cash flows of Tidel
Technologies, Inc. (the "Company"), a Delaware corporation, are unaudited.
In the opinion of management, these financial statements include all
adjustments (consisting only of normal recurring items) necessary for
their fair presentation in accordance with generally accepted accounting
principles. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Actual results may differ from these
estimates. Interim results are not necessarily indicative of results for a
full year. Certain amounts in the prior year's financial statements have
been reclassified to conform with the current year presentation format.
The information included in this Form 10-Q should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended September
30, 1997.
(2) INVENTORIES
Inventories consist of the following at June 30, 1998 and September 30,
1997:
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
----------- -----------
<S> <C> <C>
Raw materials $ 4,378,662 $ 3,635,349
Work in process 407,136 379,708
Finished goods 749,426 492,636
Other (demo) 260,774 212,667
----------- -----------
5,795,998 4,720,360
Inventory reserve (557,000) (512,000)
----------- -----------
$ 5,238,998 $ 4,208,360
=========== ===========
</TABLE>
(3) EARNINGS PER SHARE
Basic earnings per share is computed by dividing the income available to
common shareholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed by
dividing the income available to common shareholders by the weighted
average number of common shares and dilutive potential common shares. The
following is a reconciliation of the numerators and denominators of the
basic and diluted per-share computations for income from continuing
operations and net income for the three months and nine months ended June
30, 1998 and 1997:
4
<PAGE> 7
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator) (Denominator) Amount
------------ ---------- ---------
<S> <C> <C> <C>
Three months ended June 30, 1998:
--------------------------------
Basic EPS:
Income available to common shareholders $ 1,536,451 15,650,484 $ 0.10
Diluted EPS:
Effect of dilutive options and warrants 1,508,658
Income available to common shareholders $ 1,536,451 17,159,142 $ 0.09
Three months ended June 30, 1997:
--------------------------------
Basic EPS:
Income available to common shareholders $ 766,758 14,633,159 $ 0.05
Diluted EPS:
Effect of dilutive options and warrants 1,754,027
Income available to common shareholders $ 766,758 16,387,186 $ 0.05
Nine months ended June 30, 1998:
-------------------------------
Basic EPS:
Income available to common shareholders $ 3,293,006 15,491,399 $ 0.21
Diluted EPS:
Effect of dilutive options and warrants 1,536,446
Income available to common shareholders $ 3,293,006 17,027,845 $ 0.19
Nine months ended June 30, 1997:
-------------------------------
Basic EPS:
Income available to common shareholders $ 1,685,446 13,293,063 $ 0.13
Diluted EPS:
Effect of dilutive options and warrants 1,643,230
Effect of convertible notes 3,038 29,559
Income available to common shareholders $ 1,688,484 14,965,852 $ 0.11
</TABLE>
(4) INVESTMENT IN 3CI
The Company currently owns 698,464 shares of the common stock of 3CI
Complete Compliance Corporation ("3CI"), which is carried at market value.
During the nine months ended June 30, 1998, the Company received 17,646
shares of 3CI common stock, together with 226,939 warrants to purchase 3CI
common stock at $1.50 per share, as its pro rata portion of a settlement
of the Texas class-action litigation against the majority shareholder of
3CI. The Company's pro rata portion of the legal fees incurred in
connection with the settlement in the amount of $20,805 have been
capitalized and included in Investment in 3CI.
5
<PAGE> 8
(5) LITIGATION
The Company and its subsidiaries are each subject to certain litigation
and claims arising in the ordinary course of business. In the opinion of
the management of the Company, the amounts ultimately payable, if any, as
a result of such litigation and claims will not have a materially adverse
effect on the Company's consolidated financial position, results of
operations or cash flows.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company develops, manufactures, sells and supports products designed
for specialty retail marketers, including automated teller machines and
related software (the "AnyCard" or "ATM" products); electronic cash
security systems (the "Timed Access Cash Controller" or "TACC" products);
and underground fuel storage monitoring and leak detection devices (the
"Environmental Monitoring System" or "EMS" products).
PRODUCT REVENUES
Total revenues increased $1,933,283, or 24%, for the third quarter of
fiscal 1998 over the comparable quarter of 1997. On a year-to-date basis,
revenues increased $4,050,801, or 19%, compared to the same period of the
prior fiscal year. As discussed below, a significant increase in AnyCard
sales was the principal factor in the Company's revenue growth. Revenue by
product is detailed in the following table:
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
--------------------- ---------------------
Net product revenues (in 000's) 1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
AnyCard $ 7,386 $ 5,705 $ 17,513 $ 14,428
TACC 1,549 1,529 4,842 4,367
Parts, service and other 678 592 1,969 1,643
EMS 322 176 787 623
-------- -------- -------- --------
$ 9,935 $ 8,002 $ 25,111 $ 21,061
======== ======== ======== ========
</TABLE>
AnyCard product sales for the quarter ended June 30, 1998 increased 29.5%
over the comparable period in 1997. On a year-to-date basis, AnyCard
product sales increased 21.4% when compared to the same period in 1997.
Demand for all of the Company's ATM products continues to be strong, and
management believes AnyCard product sales should continue to increase
during the fourth fiscal quarter.
TACC product sales increased slightly for the quarter ended June 30, 1998,
when compared to the same period in 1997. On a year-to-date basis, TACC
product sales increased 10.9% when compared to
6
<PAGE> 9
the same period in 1997. Management believes TACC product sales should
continue to be strong during the fourth fiscal quarter due to the
development of new customers as a result of increased marketing efforts.
All marketing activities for EMS products have terminated as the marketing
focus of the Company has shifted to its two other product lines. Certain
existing customers have continued to purchase these products, however, to
complete retrofit projects that are currently in progress.
Parts, service and other revenues vary directly with sales of finished
goods, and have increased accordingly.
GROSS PROFIT, OPERATING EXPENSES AND NON-OPERATING ITEMS
Gross profit was 37.8% and 37.6% of revenues for the quarters ended June
30, 1998 and 1997. On a year-to-date basis, gross profit increased from
35.7% of revenues in 1997 to 37.5% of revenues in 1998. The increase was
primarily due to improvements in ATM product design and engineering
resulting in lower costs, offset by lower average sales prices for ATM
products.
As a percentage of revenues, selling, general and administrative expense
was 18.0% and 25.3% in the respective third quarters of fiscal 1998 and
1997. On a year-to-date basis, selling, general and administrative expense
was 20.7% of revenues in 1998, compared to 24.3% of revenues in 1997.
Management believes that selling, general and administrative expense, as a
percentage of revenues, should continue to decrease during the fourth
fiscal quarter.
Depreciation and amortization decreased slightly during fiscal 1998 on a
year-to-date basis due to fewer additions of property, plant and
equipment.
Interest expense decreased slightly during fiscal 1998 on a year-to-date
basis as a result of a decline in average rates for borrowed funds.
LIQUIDITY AND CAPITAL RESOURCES
The financial position of the Company continues to improve primarily as a
result of profitable operations and the infusion of capital from the
exercise of warrants, as reflected in the following key indicators as of
June 30, 1998 and September 30, 1997:
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
------------ -----------
<S> <C> <C>
Shareholders' equity $ 12,634,510 $ 8,091,821
Tangible net worth 11,923,688 7,290,798
Working capital 14,531,093 9,377,342
</TABLE>
The improvement in working capital is principally due to increased
inventories, the repayment of current liabilities, and the replacement of
all short-term notes payable with a long-term note. The
7
<PAGE> 10
increase in inventories arose from a build-up of raw materials related to
overall higher sales expectations. The repayment of current liabilities
was facilitated by improved collections of accounts and notes receivable.
During the quarter ended June 30, 1998, the Company refinanced $640,000 of
short-term notes payable with a long-term installment note from a bank
which provides for interest at 8.5% and matures May 31, 2003.
During the quarter ended June 30, 1997, the Company's wholly owned
subsidiary entered into a revolving credit agreement with a bank. During
the quarter ended June 30, 1998, the agreement was extended from May 31,
1999 to May 31, 2000 and the maximum borrowing limit was increased from
$5,000,000 to $7,000,000 at the prime rate, with certain LIBOR
alternatives. At June 30, 1998, $4,254,604 was outstanding pursuant to the
revolving credit agreement.
The Company continues to own 680,818 shares of 3CI common stock subsequent
to its divestiture of a majority interest in February 1994. The Company
has no immediate plans for the disposal of the shares, and accordingly,
the shares may be utilized to collateralize borrowings. At present, all
the shares are pledged to secure the aforementioned long-term installment
note payable in the principal amount of $400,000.
The Company's registration statement covering the offering and sale by
selling shareholders of the common stock underlying all of the Company's
5,517,500 outstanding warrants was declared effective in January 1997.
During the nine-month period ended June 30, 1998, warrants to purchase
851,918 shares were exercised generating net proceeds to the Company of
approximately $654,000. As of June 30, 1998, the Company has outstanding
warrants to purchase 1,570,692 shares of common stock, which if exercised
would generate proceeds to the Company of approximately $1,353,000.
The Company's research and development budget for fiscal 1998 has been
estimated at $1,650,000. The majority of these expenditures are applicable
to enhancements of the existing product lines, development of new
automated teller machine products and the development of new technology to
facilitate the dispensing of products such as postage stamps, money
orders, and prepaid telephone cards, as well as multiple denominations of
currency. During the nine months ended June 30, 1998, $1,001,903 was
expended for research and development.
With its present capital resources, its potential capital from the
exercise of warrants, and with its borrowing facility, the Company should
have sufficient resources to meet its operating needs for the foreseeable
future and to provide for debt maturities and capital expenditures.
The Company does not anticipate paying dividends on shares of its common
stock in the foreseeable future.
SEASONALITY
The Company can experience seasonal variances in operations and
historically has its lowest dollar volume sales months between November
and March. The Company's operating results for any particular quarter may
not be indicative of the results for the future quarter or for the year.
8
<PAGE> 11
MAJOR CUSTOMERS AND CREDIT RISKS
The Company generally does not require collateral or other security from
its customers and would incur an accounting loss equal to the carrying
value of the account receivable if a customer failed to perform according
to the terms of the credit arrangements. Sales to major customers were as
follows for the three and nine months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
----------- ------------ ----------- --------------
1998 1997 1998 1997
----------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Customer A $ 1,452,721 $ 661,816 $ 3,217,937 $ 1,426,911
Customer B 2,043,914 -- 2,677,493 --
Customer C 1,241,212 -- -- --
Customer D -- 657,930 -- 2,933,968
</TABLE>
Foreign sales accounted for 2% and 6% of the Company's total sales during
the three months ended June 30, 1998 and 1997, respectively, and 3% and 6%
of the Company's total sales during the nine months ended June 30, 1998
and 1997, respectively.
YEAR 2000
Many computer software systems, as well as certain hardware and equipment
containing date sensitive data were structured to utilize a two-digit date
field meaning that they may not be able to properly recognize dates in the
Year 2000. This could result in significant system and equipment failures.
While Year 2000 considerations are not expected to materially impact the
Company's internal operations because they are either Year 2000 compliant
or required changes are not expected to be material, they may have an
effect on some of the Company's customers and suppliers and thus
indirectly affect the Company. It is not possible to quantify the
aggregate cost to the Company with respect to customers and suppliers with
Year 2000 problems, although the Company does not anticipate it will have
a material adverse impact on its business. The Company believes that its
management, operational and financial systems will be free of any Year
2000 limitations.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 128, Earnings Per
Share ("SFAS 128"). SFAS 128 establishes new standards for computing and
presenting earnings per share ("EPS") amounts for companies with publicly
held common stock or potential common stock. The new standards require the
presentation of both basic and diluted EPS amounts for companies with
complex capital structures. Basic EPS is computed by dividing income
available to common stockholders by the weighted-average number of common
shares outstanding for the period, and excludes the effect of potentially
dilutive securities (such as options, warrants and convertible securities)
which are convertible into common stock. Dilutive EPS reflects the
potential dilution from convertible securities. SFAS 128 is effective for
periods ending after December 15, 1997.
9
<PAGE> 12
In February 1997, the FASB issued Statement of Financial Accounting
Standards No 129, Disclosure of Information about Capital Structure ("SFAS
129"). SFAS 129 establishes standards for disclosing information about a
company's outstanding debt and equity securities and eliminates exemptions
from such reporting requirements for nonpublic companies. SFAS 129 is
effective for periods ending after December 15, 1997.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS 130 establishes
standards for the reporting and display of comprehensive income in a
company's financial statements. Comprehensive income includes all changes
in a company's equity accounts (including net income or loss) except
investments by, or distributions to, the company's owners. Items which are
components of comprehensive income (other than net income or loss) include
foreign currency translation adjustments, minimum pension liability
adjustments and unrealized gains and losses on certain investments in debt
and equity securities. The components of comprehensive income must be
reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS 130 is effective for fiscal
years beginning after December 15, 1997.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related
Information ("SFAS 131"). SFAS 131 establishes standards for the way that
public companies report, in their annual financial statements, certain
information about their operating segments, their products and services,
the geographic areas in which they operate and their major customers. SFAS
131 also requires that certain information about operating segments be
reported in interim financial statements. SFAS 131 is effective for
periods beginning after December 15, 1997.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors created thereby. Investors are
cautioned that all forward-looking statements involve risks and
uncertainty, (including without limitation, the Company's future gross
profit, selling, general and administrative expense, the Company's
financial position, working capital and seasonal variances in the
Company's operations, as well as general market conditions) though the
Company believes that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could
be inaccurate, and therefore, there can be no assurance that the
forward-looking statements included in this Form 10-Q will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company or
any other person that the objectives and plans of the Company will be
achieved.
10
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Pursuant to recent amendments to the proxy rules under the Securities
Exchange Act of 1934, as amended, the Company's stockholders are notified
that the deadline for providing the Company timely notice of any
stockholder proposal to be submitted outside of the Rule 14a-8 process for
consideration at the Company's 1999 Annual Meeting of Stockholders (the
"Annual Meeting") will be May 11, 1999. As to all such matters which the
Company does not have notice on or prior to May 11, 1999, discretionary
authority shall be granted to the designated persons in the Company's
proxy statement for the Annual Meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
4.01 - First Amendment to Credit Agreement dated February 1, 1998
by and between Tidel Engineering, Inc. and Chase Bank of
Texas, N. A.
4.02 - Second Amendment to Credit Agreement dated May 27, 1998 by
and among Tidel Engineering, Inc., the Company and Chase
Bank of Texas, N. A.
4.03 - Promissory Note dated May 27, 1998 executed by Tidel
Engineering, Inc. payable to the order of Chase Bank of
Texas, N. A.
11
<PAGE> 14
4.04 - Promissory Note dated May 27, 1998 executed by Tidel
Engineering, Inc. payable to the order of Chase Bank of
Texas, N. A.
4.05 - First Amendment to Security Agreement (Personal Property)
dated as of May 27, 1998, by and between Tidel Engineering,
Inc. and Chase Bank of Texas, N. A.
4.06 - First Amendment to Pledge and Security Agreement (3CI Stock)
dated as of May 27, 1998 executed by the Company in favor of
Chase Bank of Texas, N. A.
27 - Financial Data Schedule
b) Reports on Form 8-K
The Company filed no Reports on Form 8-K during the quarter ended
June 30, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TIDEL TECHNOLOGIES, INC.
(Registrant)
DATE: August 13, 1998 By: /s/ JAMES T. RASH
---------------------------
James T. Rash
Principal Executive
and Financial Officer
12
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
4.01 - First Amendment to Credit Agreement dated February 1, 1998
by and between Tidel Engineering, Inc. and Chase Bank of
Texas, N. A.
4.02 - Second Amendment to Credit Agreement dated May 27, 1998 by
and among Tidel Engineering, Inc., the Company and Chase
Bank of Texas, N. A.
4.03 - Promissory Note dated May 27, 1998 executed by Tidel
Engineering, Inc. payable to the order of Chase Bank of
Texas, N. A. 4.04 - Promissory Note dated May 27, 1998
executed by Tidel Engineering, Inc. payable to the order of
Chase Bank of Texas, N. A.
4.04 - Promissory Note dated May 27, 1998 executed by Tidel
Engineering, Inc. payable to the order of Chase Bank of
Texas, N. A.
4.05 - First Amendment to Security Agreement (Personal Property)
dated as of May 27, 1998, by and between Tidel Engineering,
Inc. and Chase Bank of Texas, N. A.
4.06 - First Amendment to Pledge and Security Agreement (3CI Stock)
dated as of May 27, 1998 executed by the Company in favor of
Chase Bank of Texas, N. A.
27 - Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 4.01
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (this "Amendment") is
made and entered into as of February __, 1998, by and between CHASE BANK OF
TEXAS, N.A., a national banking association ("Lender"), formerly known as TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, and TIDEL ENGINEERING, INC., a Delaware
corporation ("Borrower").
R E C I T A L S:
A. On June 12, 1997, Lender and Borrower entered into that certain
Credit Agreement (the "Credit Agreement") pursuant to which Lender agreed to
make loans and advances (collectively the "Loans") to Borrower in accordance
with the terms thereof. The Loans are evidenced by that certain Promissory Note
of even date with the Credit Agreement, in the stated principal amount of
$5,000,000.00, bearing interest and being payable to the order of Lender as
therein provided (as amended, the "Note"). The Credit Agreement, the Note and
the documents, instruments and agreements executed in connection therewith are
collectively referred to herein as the "Loan Documents".
B. Borrower has requested Lender to modify the Credit Agreement so as
to require Annual Audited Financial Statements (as such term is defined in the
Credit Agreement) only on Tidel Technologies, Inc., formerly known as American
Medical Technologies, Inc., d/b/a AMT Industries, Inc., the parent of Borrower,
and Annual Consolidating Financial Statements (as such term is defined in this
Amendment), instead of Annual Audited Financial Statements, on Borrower.
C. Lender, at the request of Borrower, for good and valuable
consideration, is willing to enter into this Amendment upon the terms and
conditions set forth below:
A G R E E M E N T:
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Borrower and Lender hereby covenant and agree
as follows:
1. Defined Terms. Capitalized terms used but not otherwise defined
herein shall have the meanings given to them in the Credit Agreement.
2. Annual Audited Financial Statements. The second sentence of the
definition of Annual Audited Financial Statements in the Credit Agreement is
hereby amended to read in its entirety as follows:
<PAGE> 2
The Annual Audited Financial Statements for the Parent and its
Subsidiaries shall be prepared on a Consolidated and consolidating
basis in accordance with GAAP.
3. Annual Consolidating Financial Statements. Section 1.1 of the Credit
Agreement is hereby amended by adding the following definition of Annual
Consolidating Financial Statements:
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.
4. Financial Statements and Information. Clause (a) of Section 6.3 of
the Credit Agreement is hereby amended to read in its entirety as follows:
(a) as soon as available and in any event within ninety (90) days after
the end of each fiscal year of the Borrower or the Parent, as the case
may be, Annual Audited Financial Statements of the Parent and its
Subsidiaries, and Annual Consolidating Financial Statements of the
Borrower;
This amendment to clause (a) of Section 6.3 is effective for the fiscal
year of the Parent and the Borrower that ended September 30, 1997, except that
the Annual Consolidating Financial Statements of the Borrower for the 1997
fiscal year shall be furnished to the Lender by March 17, 1998.
5. Costs and Expenses. Borrower agrees to reimburse Lender for Lender's
costs and expenses, including, but not limited to, attorneys' fees and legal
expenses, incurred by Lender in connection with the preparation of this
Amendment and in connection with the negotiation and consummation of the
transaction contemplated hereby.
6. The Credit Agreement. All references to the Credit Agreement in the
Loan Documents shall be deemed to be the Credit Agreement, as modified hereby.
Borrower expressly promises to perform all of its obligations under the Credit
Agreement and other Loan Documents, as modified by this Amendment.
7. Acknowledgments of Borrower. Borrower hereby acknowledge and agree
that (a) Lender is not in default in the performance of its obligations under
the Loan Documents; (b) Borrower has no claims, counterclaims, offsets, credits
or defenses to the Loan Documents and the performance of its obligations
thereunder, or if Borrower has any such claims, counterclaims, offsets, credits
or defenses to the Loan Documents or any transaction related to the Loans and/or
the Loan Documents, same are hereby waived, relinquished and released in
consideration of Lender's execution and delivery of this Amendment; (c) all of
the provisions of the Loan Documents, except as amended hereby, are in full
force and effect; and (d) upon the
<PAGE> 3
execution hereof, the Credit Agreement, the Note, and the other Loan Documents
are not in default.
8. Full Force and Effect. Except as expressly modified and amended in
this Amendment, all of the terms, provisions and conditions of the Credit
Agreement, the Note, and all other Loan Documents are and shall remain in full
force and effect and are incorporated herein by reference.
9. Counterparts. This Amendment may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original, and all of
which taken together shall constitute but one and the same instrument.
10. No Oral Agreements. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS
EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF.
THIS WRITTEN AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Credit Agreement as of the day and year first above written.
LENDER:
CHASE BANK OF TEXAS, N.A.,
a national banking association
By: /s/ JOANNE BRAMANTI
Joanne Bramanti, Vice President
BORROWER:
TIDEL ENGINEERING, INC.,
a Delaware corporation
By: /s/ JAMES T. RASH
James T. Rash, Chairman of the Board
<PAGE> 5
By its execution below, Tidel Technologies, Inc., formerly known as
American Medical Technologies, Inc., a Delaware corporation ("Guarantor"), d/b/a
AMT Industries, Inc., acknowledges and consents to all of the terms and
conditions of this Amendment, and ratifies and confirms its respective Guaranty
to and for the benefit of Lender. Guarantor acknowledges that Guarantor has no
claims, counterclaims, offsets, credits or defenses to the Loan Documents and
the performance of its obligations thereunder, or if Guarantor does have any
such claims, counterclaims, offsets, credits or defenses to the Loan Documents
or any transaction related to the Loans and/or the Loan Documents, same are
hereby waived, relinquished and released in consideration of Lender's execution
and delivery of this Amendment. Further, Guarantor agrees that nothing contained
in this Amendment shall adversely affect any right or remedy of Lender under the
Guaranty and that with respect to the Guaranty, all references in the Guaranty
to the "Obligations" shall mean the "Obligations", as amended by this Amendment;
that the execution and delivery of this Amendment shall in no way change or
modify its obligations as Guarantor pursuant to its Guaranty; and that the
execution and delivery of any agreements by Borrower and Lender in connection
with this Amendment shall not constitute a waiver by Lender of any of Lender's
rights against Guarantor.
TIDEL TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ JAMES T. RASH
James T. Rash, Chairman of the Board
<PAGE> 1
EXHIBIT 4.02
SECOND AMENDMENT TO CREDIT AGREEMENT
This Second Amendment to Credit Agreement (this "Amendment") is
made and entered into as of May 27, 1998, by and among CHASE BANK OF TEXAS,
N.A., a national banking association ("Lender"), formerly known as TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, and TIDEL ENGINEERING, INC., a Delaware
corporation ("Borrower"), and TIDEL TECHNOLOGIES, INC., a Delaware corporation
("Parent"), formerly known as American Medical Technologies, Inc., d/b/a AMT
Industries, Inc.
R E C I T A L S:
A. On June 12, 1997, Lender and Borrower entered into that certain
Credit Agreement (as amended, the "Credit Agreement") pursuant to which Lender
agreed to make loans and advances (collectively the "Loans") to Borrower in
accordance with the terms thereof. The Credit Agreement was amended pursuant to
that certain First Amendment to Credit Agreement dated as of February 23, 1998.
The Loans are evidenced by that certain Promissory Note of even date with the
Credit Agreement, in the stated principal amount of $5,000,000.00, bearing
interest and being payable to the order of Lender as therein provided (as
amended, the "Note"). The Credit Agreement, the Note and the documents,
instruments and agreements executed in connection therewith are collectively
referred to herein as the "Loan Documents".
B. Borrower has requested Lender to modify the Credit Agreement so
as to increase the Commitment from $5,000,000 to $7,000,000.
C. Borrower and Parent also have requested Lender to modify the
Credit Agreement so as to add a term loan facility in the amount of $640,000, to
be evidenced by a term note from Borrower and Parent, jointly and severally,
which will be governed by the Credit Agreement.
D. Finally, Borrower and Parent have requested that Lender modify
certain of the covenants set forth in the Credit Agreement, including, without
limitation, the covenants pertaining to Tangible Net Worth and Capital
Expenditures.
E. Lender, at the request of Borrower and Parent, for good and
valuable consideration, is willing to enter into this Amendment upon the terms
and conditions set forth below:
A G R E E M E N T:
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Borrower and Lender hereby covenant and agree
as follows:
1. Defined Terms. Capitalized terms used but not otherwise defined
herein shall have the meanings given to them in the Credit Agreement.
<PAGE> 2
2. Additional Definitions. Article 1 of the Credit Agreement is
hereby amended by adding the following definitions:
Dividend means, in respect of any corporation: (a) the payment or
making of any dividend or other distribution of Property in respect of
capital stock of such corporation, other than distributions in capital
stock of the same class; or (b) the redemption or other acquisition of
any capital stock of such corporation.
Fixed Rate means eight and four-tenths percent (8.4%) per annum.
Second Amendment Closing Date shall mean the date of the Second
Amendment to the Agreement.
Term Loan shall mean the Term Loan made pursuant to Section 2A.1
hereof.
Term Loan Commitment shall mean the obligation of Lender to make
the Term Loan in an aggregate principal amount of Six Hundred Forty
Thousand Dollars ($640,000).
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 8.1 hereof.
3. Consequential Loss. The definition of "Consequential Loss" in
Section 1.1 of the Credit Agreement is hereby amended to add the following
provisions:
Consequential Loss also shall mean, with respect to (a) the
Borrower's payment of principal of a Fixed Rate Borrowing on a day
other than the last day of the applicable Interest Period, or (b) the
Borrower's failure to borrow a Fixed Rate Borrowing on the date
specified by the Borrower for any reason, 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 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.
4. Concentration Limits for Eligible Receivables. The definition of
"Eligible Receivables" in Section 1.1 of the Credit Agreement is hereby amended
by revising clause (d) of the definition to delete the following parenthetical:
(other than Hanco Systems, in which case 25%, and Retriever Payment
Systems, in which case 15%).
<PAGE> 3
5. Maturity Date for Revolving Loans. The definition of "Maturity
Date" in Section 1.1 of the Credit Agreement is hereby amended by revising
clause (a) of the definition to read in full as follows:
(a) May 31, 2000.
6. Term Loan. The Credit Agreement is hereby amended by adding
Article 2A as follows:
2A. Term Loan; Term Note; Payments; Prepayments; Interest Rates.
2A.1 Term Loan Commitment. Subject to the terms and conditions
hereof, Lender agrees to make a Term Loan to the Borrower after the
Second Amendment Closing Date until, but not including, the Term Loan
Maturity Date, in a principal amount up to, but not exceeding the Term
Loan Commitment.
2A.2 Mandatory and Voluntary Prepayments.
(a) The Borrower shall have the right, at its option and
subject to the requirements of Section 2.4, to prepay the Term Loan as
provided in this Section 2A.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.
2A.3 Term Note; Payments.
(a) The Term Loan made by Lender to the Borrower shall be
evidenced by a Term Note dated as of the Second Amendment Closing Date,
delivered and payable to Lender in a principal amount equal to the Term
Loan Commitment as of the Term Loan Closing Date.
<PAGE> 4
(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 August 31, November 30, February 28 and May 31
during the term of the Term Note, beginning August 31, 1998. 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 9.6 hereof, the Borrower hereby
agrees to pay accrued interest on the unpaid principal balance of the
Term Loan on each August 31, November 30, February 28 and May 31 during
the term of the Term Note, beginning August 31, 1998. 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 4.1 hereof, the Lender may, but shall not be obligated
to, make a 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 Loan is to be made prior to the Maturity Date, (ii) the
Availability would be equal to or greater than zero after giving effect
to the 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 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 Parent's obligation to otherwise pay such
amounts in accordance with the applicable terms hereof or any other
Loan Documents.
2A.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 2A.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
<PAGE> 5
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
2A.5 Interest Rate for Term Loan.
(a) Subject to Section 9.6 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.
2A.6 Special Provisions Applicable to Fixed Rate Borrowings. THE
BORROWER AND PARENT HEREBY AGREE TO INDEMNIFY THE LENDER AGAINST AND
HOLD 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 PARENT IN THE PAYMENT OF
ANY PRINCIPAL AMOUNT OF OR INTEREST ON THE TERM NOTE, OR ANY FAILURE BY
THE BORROWER OR THE PARENT TO CONVERT OR TO BORROW ANY FIXED RATE
BORROWING ON THE DATE SPECIFIED BY THE BORROWER, IN EACH CASE INCLUDING
ANY INTEREST PAYABLE BY LENDER TO THE LENDERS OF THE FUNDS OBTAINED BY
IT IN ORDER TO MAKE OR MAINTAIN ANY FIXED RATE BORROWING (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 SUBMITTED BY THE LENDER TO THE
BORROWER AND PARENT SHALL BE CONCLUSIVE AND BINDING UPON THE BORROWER
AND PARENT, ABSENT MANIFEST ERROR, PROVIDED THE CALCULATION THEREOF IS
SET FORTH IN REASONABLE DETAIL IN SUCH NOTICE.
2A.7 Use of Proceeds. The proceeds of the Term Loan will be used
to refinance the existing Indebtedness of Parent to Felton Investments
Ltd.
7. Tangible Net Worth. Section 7.12 of the Credit Agreement is hereby
amended to read in its entirety as follows:
7.12 Tangible Net Worth. Permit the Tangible Net Worth of the
Borrower (expressly excluding Parent, its Subsidiaries and Borrower's
Subsidiaries) to be less than:
(i) $6,900,000 as of the Second Amendment Closing Date and at
all times thereafter through and including September 30, 1998; and
(ii) thereafter, at all times, an amount equal to the minimum
Tangible Net Worth requirement for the preceding fiscal year end,
plus fifty percent (50%) of cumulative, positive net income of the
Borrower for the preceding fiscal year, plus one hundred percent
(100%) of the consideration received in exchange for
<PAGE> 6
the issuance of any capital stock of the Borrower during the
fiscal year in which the Tangible Net Worth of the Borrower is
being measured.
8. Capital Expenditures. Section 7.13 of the Credit Agreement is
hereby amended to read in its entirety as follows:
7.13 Capital Expenditures. Make, directly or indirectly, Capital
Expenditures other than such expenditures which do not exceed Six
Hundred Thousand Dollars ($600,000) in any fiscal year.
9. Dividends and Distributions. Article 7 of the Credit Agreement is
hereby amended by adding Section 7.18 as follows:
7.18 Dividends. The Borrower shall not directly or indirectly
declare or make, or incur any liability to make, any Dividend, except
Dividends to the Parent by Borrower, so long as no Event of Default has
occurred or would result therefrom, solely for the following purposes:
(a) payment of Federal income tax liabilities of Parent, in
the amount of such Federal income tax liabilities, and at time as the
same become due and payable; and
(b) payment of principal and interest as they becomes due
and payable under the Term Loan.
10. Officer's and Borrowing Base Certificates. Exhibit C to the
Credit Agreement, the form of Officer's Certificate, and Exhibit G to the Credit
Agreement, the form of Borrowing Base Compliance Certificate, are hereby amended
and restated in their entirety to read in full in the forms of Exhibits C and G,
respectively, attached to this Amendment.
11. Conditions.
11.1 Second Amendment. The agreements of Lender to increase the
Commitment from $5,000,000 to $7,000,000, to make the Term Loan, and to be bound
by the terms and conditions of this Amendment are subject to the accuracy of all
representations and warranties of the Borrower on the date of the Term Loan, to
the performance by the Borrower and the Parent of their respective obligations
under the Loan Documents and to the satisfaction of the following further
conditions:
(a) all representations and warranties of the Borrower and the
Parent set forth in this Amendment, the Credit 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
Amendment;
<PAGE> 7
(b) the Borrower and the Parent shall be in compliance with all
the terms and provisions contained in this Amendment, the Credit Agreement or in
any other Loan Document which are to be observed or performed by the Borrower or
the Parent, if applicable;
(c) prior to the making of the Term Loan there shall have
occurred no Material Adverse Effect in the assets, liabilities, financial
condition, business or affairs of the Borrower or the Parent since the date
hereof; and
(d) no Default or Event of Default shall have occurred and be
continuing.
11.2 Documentation. In addition to the matters described in Section
6.1 hereof, the agreements of Lender to increase the Commitment from $5,000,000
to $7,000,000, to make the Term Loan, and to be bound by the terms and
conditions of this Amendment are subject to the receipt by the Lender of each of
the following, in Proper Form:
(a) the amended and restated $7,000,000 Revolving Credit Note,
executed by the Borrower;
(b) the Term Note, executed by the Borrower and the Parent;
(c) the amendments to Security Documents executed by the Borrower
and the Parent;
(d) a certificate executed by the Secretary or Assistant
Secretary of the Borrower and the Parent dated as of the date thereof;
(e) certified copies of any amendments to the Organizational
Documents of the Borrower or the Parent;
(f) a legal opinion from counsel for the Borrower and the Parent,
dated as of the Closing Date, addressed to the Lender and acceptable in all
respects to the Lender in its sole and absolute discretion;
(g) an executed disbursement authorization letter from the
Borrower and the Parent to the Lender with respect to the disbursement of the
proceeds of the Term Loan to be made on or after the Second Amendment Closing
Date;
(h) all other Loan Documents and any other instruments or
documents consistent with the terms of this Amendment 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;
and subject to the further conditions that, at the time of the Term Loan,
(1) 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
<PAGE> 8
limitation, the delivery to the Lender of all Property with
respect to which possession is necessary for the purpose of
perfecting such Liens (including, without limitation, delivery
to the Lender of the stock certificates described on Schedule I
to this Amendment);
(2) the Borrower shall have paid all fees owing to the Lender by the
Borrower under this Amendment, including without limitation, the
following;
(i) a fee in consideration for the Term Loan and the
increase in the Commitment, in the amount of $12,000; and
(ii) the administration fee, in the amount of $5,000,
pursuant to Section 2.3(b) of the Credit Agreement;
(3) all other legal matters incident to the transactions herein
contemplated shall be reasonably satisfactory to counsel for the
Lender.
12. Collateral. The Term Loan and all other Obligations shall be
secured by the Collateral described in the Security Documents and are entitled
to the benefits thereof.
13. Costs and Expenses. Borrower agrees to reimburse Lender for
Lender's costs and expenses, including, but not limited to, attorneys' fees and
legal expenses, incurred by Lender in connection with the preparation of this
Amendment and in connection with the negotiation and consummation of the
transaction contemplated hereby.
14. The Credit Agreement. All references to the Credit Agreement in
the Loan Documents shall be deemed to be the Credit Agreement, as modified
hereby. Borrower expressly promises to perform all of its obligations under the
Credit Agreement and other Loan Documents, as modified by this Amendment.
15. Acknowledgments of Borrower and Parent. Borrower and Parent
hereby acknowledge and agree that (a) Lender is not in default in the
performance of its obligations under the Loan Documents; (b) neither Borrower
nor Parent has any claims, counterclaims, offsets, credits or defenses to the
Loan Documents and the performance of its respective obligations thereunder, or
if Borrower or Parent has any such claims, counterclaims, offsets, credits or
defenses to the Loan Documents or any transaction related to the Loans and/or
the Loan Documents, same are hereby waived, relinquished and released in
consideration of Lender's execution and delivery of this Amendment; (c) all of
the provisions of the Loan Documents, except as amended hereby, are in full
force and effect; and (d) upon the execution hereof, the Credit Agreement, the
Note, and the other Loan Documents are not in default.
16. Full Force and Effect. Except as expressly modified and amended
in this Amendment, all of the terms, provisions and conditions of the Credit
Agreement, the Note, and all other Loan Documents are and shall remain in full
force and effect and are incorporated herein by reference.
<PAGE> 9
17. Counterparts. This Amendment may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original, and all of
which taken together shall constitute but one and the same instrument.
18. No Oral Agreements. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS
EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF.
THIS WRITTEN AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Second Amendment to
Credit Agreement as of the day and year first above written.
LENDER:
CHASE BANK OF TEXAS, N.A.,
a national banking association
By: /s/ JOANNE BRAMANTI
--------------------------------------
Joanne Bramanti, Vice President
BORROWER:
TIDEL ENGINEERING, INC.,
a Delaware corporation
By: /s/ JAMES T. RASH
James T. Rash, Chairman of the Board
PARENT:
TIDEL TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ JAMES T. RASH
James T. Rash, Chairman of the Board
Exhibits:
C - Officer's Certificate
G - Borrowing Base Compliance Certificate
Schedule:
1 - 3CI Complete Compliance Corporation Stock Certificates
<PAGE> 11
By its execution below, Tidel Technologies, Inc., formerly known as
American Medical Technologies, Inc., a Delaware corporation ("Guarantor"), d/b/a
AMT Industries, Inc., acknowledges and consents to all of the terms and
conditions of this Amendment, and ratifies and confirms its respective Guaranty
to and for the benefit of Lender. Guarantor acknowledges that Guarantor has no
claims, counterclaims, offsets, credits or defenses to the Loan Documents and
the performance of its obligations thereunder, or if Guarantor does have any
such claims, counterclaims, offsets, credits or defenses to the Loan Documents
or any transaction related to the Loans and/or the Loan Documents, same are
hereby waived, relinquished and released in consideration of Lender's execution
and delivery of this Amendment. Further, Guarantor agrees that nothing contained
in this Amendment shall adversely affect any right or remedy of Lender under the
Guaranty and that with respect to the Guaranty, all references in the Guaranty
to the "Obligations" shall mean the "Obligations", as amended by this Amendment;
that the execution and delivery of this Amendment shall in no way change or
modify its obligations as Guarantor pursuant to its Guaranty; and that the
execution and delivery of any agreements by Borrower and Lender in connection
with this Amendment shall not constitute a waiver by Lender of any of Lender's
rights against Guarantor.
TIDEL TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ JAMES T. RASH
James T. Rash, Chairman of the Board
<PAGE> 1
EXHIBIT 4.03
REVOLVING CREDIT NOTE
Dallas, Texas
$7,000,000.00 May 27, 1998
FOR VALUE RECEIVED, TIDEL ENGINEERING, INC., a Delaware corporation
(herein called "Borrower"), promises to pay to the order of CHASE BANK OF TEXAS,
N.A., a national banking association (herein called "Payee"), at 2200 Ross
Avenue, Dallas, Texas 75201, or at such other place as Payee may hereafter
designate in writing, in immediately available funds and in lawful money of the
United States of America, the principal sum of SEVEN MILLION AND NO/100 DOLLARS
($7,000,000.00) (or the unpaid balance of all principal advanced against this
note, if that amount is less), together with interest on the unpaid principal
balance of this note from time to time outstanding until maturity at the rate or
rates provided for in the Credit Agreement and interest on all past due amounts
at the Past Due Rate as provided in the Credit Agreement; provided, that for the
full term of this note, the interest rate produced by the aggregate of all sums
paid or agreed to be paid to the holder of this note for the use, forbearance or
detention of the debt evidenced hereby shall not exceed the Highest Lawful Rate,
if any, applicable to Payee.
If, for any reason whatever, the interest paid or received on this note
during its full term produces a rate which exceeds the Highest Lawful Rate, if
any, applicable to Payee, the holder of this note shall refund to the payor or,
at the holder's option, credit against the principal of this note such portion
of said interest as shall be necessary to cause the interest paid on this note
to produce a rate equal to the Highest Lawful Rate, if any, applicable to payee.
All sums paid or agreed to be paid to the holder of this note for the use,
forbearance or detention of the indebtedness evidenced hereby shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
in equal parts throughout the full term of this note, so that the interest rate
is uniform throughout the full term of this note. 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 1D.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 Article 1D.103 (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 1D of the
Texas Credit Title, whichever that Lender shall elect to substitute for the
"weekly ceiling," and vice versa, each such substitution to have the effect
provided in Chapter 1D of the Texas Credit Title; and 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 1D 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 Section 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 regulate certain revolving credit loan accounts and
revolving tri-party accounts) shall not govern or in any manner apply to the
Obligations.
<PAGE> 2
This note has been issued pursuant to the terms of a Credit Agreement
(which, as it may have been or may be amended, restated, modified or
supplemented from time to time, is herein called the "Credit Agreement") dated
June 12, 1997, by and between Borrower and Payee, as amended by the First
Amendment to Credit Agreement dated as of February 23, 1998, and by the Second
Amendment to Credit Agreement of even date herewith, to which reference is made
for all purposes. This note is a Note under the terms of the Credit Agreement,
and advances against this note by Payee or other holder hereof, payments and
prepayments hereunder and acceleration hereof shall be governed by the Credit
Agreement. Capitalized words and phrases used herein and not defined herein and
which are defined in the Credit Agreement shall have the same meanings herein as
are ascribed to them in the Credit Agreement.
The unpaid principal balance of this note at any time shall be the
total of all principal lent or advanced against this note less the sum of all
principal payments and permitted prepayments made on this note by or for the
account of Borrower. All loans and advances and all payments and permitted
prepayments made hereon may be endorsed by the holder of this note on the
schedule which is attached hereto (and hereby made a part hereof for all
purposes) or otherwise recorded in the holder's records; provided, that any
failure to make notation of (a) any advance shall not cancel, limit or otherwise
affect Borrower's obligations or any holder's rights with respect to that
advance, or (b) any payment or permitted prepayment of principal shall not
cancel, limit or otherwise affect Borrower's entitlement to credit for that
payment as of the date received by the holder.
Borrower and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF TEXAS (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF)
AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT.
This note is a renewal, extension, modification and rearrangement, and
not a novation or extinguishment, of that certain Promissory Note (the "Prior
Note") dated June 12, 1997, executed by Borrower, payable to the order of Payee
(formerly known as Texas Commerce Bank National Association), in the original
principal amount of $5,000,000.00. All rights, titles, liens and security
interests securing the Prior Note are preserved, maintained and carried forward
to secure this note.
<PAGE> 3
TIDEL ENGINEERING, INC.,
a Delaware corporation
By: /s/ JAMES T. RASH
James T. Rash, Chairman of the Board
<PAGE> 1
EXHIBIT 4.04
TERM NOTE
Dallas, Texas
$640,000.00 May 27, 1998
FOR VALUE RECEIVED, TIDEL ENGINEERING, INC., a Delaware corporation,
and TIDEL TECHNOLOGIES, INC., a Delaware corporation (herein called
"Borrowers"), jointly and severally promise to pay to the order of CHASE BANK OF
TEXAS, N.A., a national banking association (herein called "Payee"), at 2200
Ross Avenue, Dallas, Texas 75201, or at such other place as Payee may hereafter
designate in writing, in immediately available funds and in lawful money of the
United States of America, the principal sum of SIX HUNDRED FORTY THOUSAND AND
NO/100 DOLLARS ($640,000.00), together with interest on the unpaid principal
balance of this note from time to time outstanding until maturity at the rate or
rates provided for in the Credit Agreement and interest on all past due amounts
at the Past Due Rate as provided in the Credit Agreement; provided, that for the
full term of this note, the interest rate produced by the aggregate of all sums
paid or agreed to be paid to the holder of this note for the use, forbearance or
detention of the debt evidenced hereby shall not exceed the Highest Lawful Rate,
if any, applicable to Payee.
If, for any reason whatever, the interest paid or received on this note
during its full term produces a rate which exceeds the Highest Lawful Rate, if
any, applicable to Payee, the holder of this note shall refund to the payor or,
at the holder's option, credit against the principal of this note such portion
of said interest as shall be necessary to cause the interest paid on this note
to produce a rate equal to the Highest Lawful Rate, if any, applicable to payee.
All sums paid or agreed to be paid to the holder of this note for the use,
forbearance or detention of the indebtedness evidenced hereby shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
in equal parts throughout the full term of this note, so that the interest rate
is uniform throughout the full term of this note. 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 1D.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 Article 1D.103 (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 1D of the
Texas Credit Title, whichever that Lender shall elect to substitute for the
"weekly ceiling," and vice versa, each such substitution to have the effect
provided in Chapter 1D of the Texas Credit Title; and 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 1D of the Texas Credit Title.
This note has been issued pursuant to the terms of a Credit Agreement
(which, as it may have been or may be amended, restated, modified or
supplemented from time to time, is herein called the "Credit Agreement") dated
June 12, 1997, by and between Tidel Engineering, Inc. and Payee, as amended by
the First Amendment to Credit Agreement dated as of February 23, 1998,
<PAGE> 2
by and between Tidel Engineering, Inc. and Payee, and by the Second Amendment to
Credit Agreement of even date herewith, , by and between Borrowers and Payee, to
which reference is made for all purposes. This note is the Term Note under the
terms of the Credit Agreement, and the advance against this note by Payee or
other holder hereof, payments and prepayments hereunder and acceleration hereof
shall be governed by the Credit Agreement. Capitalized words and phrases used
herein and not defined herein and which are defined in the Credit Agreement
shall have the same meanings herein as are ascribed to them in the Credit
Agreement.
The unpaid principal balance of this note at any time shall be the
total of all principal lent or advanced against this note less the sum of all
principal payments and permitted prepayments made on this note by or for the
account of Borrowers. All loans and advances and all payments and permitted
prepayments made hereon may be endorsed by the holder of this note on the
schedule which is attached hereto (and hereby made a part hereof for all
purposes) or otherwise recorded in the holder's records; provided, that any
failure to make notation of (a) any advance shall not cancel, limit or otherwise
affect Borrowers' obligations or any holder's rights with respect to that
advance, or (b) any payment or permitted prepayment of principal shall not
cancel, limit or otherwise affect Borrowers' entitlement to credit for that
payment as of the date received by the holder.
Borrowers and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF TEXAS (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF)
AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT.
[This space intentionally left blank. The next page is the signature page]
<PAGE> 3
SIGNATURE PAGE TO TERM NOTE
TIDEL ENGINEERING, INC.,
a Delaware corporation
By: /s/ JAMES T. RASH
James T. Rash, Chairman of the Board
TIDEL TECHNOLOGIES, INC.,
By: /s/ JAMES T. RASH
James T. Rash, Chairman of the Board
<PAGE> 1
EXHIBIT 4.05
FIRST AMENDMENT
TO
SECURITY AGREEMENT (PERSONAL PROPERTY)
This First Amendment to Security Agreement (this "Amendment") is
made and entered into as of May 27, 1998, by and between CHASE BANK OF TEXAS,
N.A., a national banking association ("Secured Party"), formerly known as TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, and TIDEL ENGINEERING, INC., a Delaware
corporation ("Debtor"), under the Credit Agreement (including any and all
existing and future amendments thereto, the "Credit Agreement") dated as of June
12, 1997, as amended by that certain Second Amendment to Credit Agreement of
even date herewith, by and among Debtor, Secured Party and Tidel Technologies,
Inc.
R E C I T A L S:
A. On June 12, 1997, Secured Party and Debtor entered into that
certain Security Agreement (as further amended, restated and supplemented from
time to time, the "Security Agreement") pursuant to which Debtor granted to
Secured Party a security interest in the Collateral as described therein.
B. Debtor has requested Secured Party to modify the Security
Agreement so as to include within the definition of "Secured Indebtedness"
certain obligations of Tidel Technologies, Inc., formerly known as American
Medical Technologies, Inc., d/b/a AMT Industries, Inc., the parent of Debtor,
which are evidenced by a Term Note in the original principal amount of
$640,000.00.
C. Secured Party, at the request of Debtor, for good and valuable
consideration, is willing to enter into this Amendment upon the terms and
conditions set forth below:
A G R E E M E N T:
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Debtor and Secured Party hereby covenant and
agree as follows:
1. Defined Terms. Capitalized terms used but not otherwise defined
herein shall have the meanings given to them in the Security Agreement.
2. Secured Indebtedness. Section 2.1 of the Security Agreement is
hereby amended by adding the following paragraph (c):
(c) The obligations of Debtor and Tidel Technologies, Inc. under that
certain $640,000.00 Term Note, dated May 27, 1998, executed by
Debtor and Tidel
<PAGE> 2
Technologies, Inc. and payable to Secured Party, and any
renewals, extensions, rearrangements and modifications thereof.
3. Costs and Expenses. Debtor agrees to reimburse Secured Party for
Secured Party's costs and expenses, including, but not limited to, attorneys'
fees and legal expenses, incurred by Secured Party in connection with the
preparation of this Amendment and in connection with the negotiation and
consummation of the transaction contemplated hereby.
4. The Security Agreement. All references to the Security Agreement
in the Loan Documents shall be deemed to be the Security Agreement, as modified
hereby. Debtor expressly promises to perform all of its obligations under the
Security Agreement and other Loan Documents, as modified.
5. Full Force and Effect. Except as expressly modified and amended
in this Amendment, all of the terms, provisions and conditions of the Security
Agreement are and shall remain in full force and effect and are incorporated
herein by reference.
6. Counterparts. This Amendment may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original, and all of
which taken together shall constitute but one and the same instrument.
7. No Oral Agreements. THIS AMENDMENT, THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND
SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO THE
SUBJECT MATTER HEREOF. THIS WRITTEN AMENDMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL
AGREEMENTS BETWEEN THE PARTIES.
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
SECURED PARTY:
CHASE BANK OF TEXAS, N.A.,
a national banking association
By: /s/ JOANNE BRAMANTI
Joanne Bramanti, Vice President
DEBTOR:
TIDEL ENGINEERING, INC.,
a Delaware corporation
By: /s/ JAMES T. RASH
James T. Rash, Chairman of the Board
<PAGE> 1
EXHIBIT 4.06
FIRST AMENDMENT
TO
PLEDGE AND SECURITY AGREEMENT
This First Amendment to Pledge and Security Agreement (this
"Amendment") is executed as of the 27th day of May, 1998, by TIDEL TECHNOLOGIES,
INC. ("Pledgor"), formerly known as American Medical Technologies, Inc., d/b/a
AMT Industries, Inc., and CHASE BANK OF TEXAS, N.A., a national banking
association ("Pledgee"), formerly known as Texas Commerce Bank National
Association.
R E C I T A L S:
A. Tidel Engineering, Inc., a Delaware corporation ("TEI"), and
Pledgee entered into that certain Credit Agreement dated as of June 12, 1997, as
amended by that First Amendment to Credit Agreement dated as of February 23,
1998 (as amended, modified or supplemented from time to time, the "Credit
Agreement"), pursuant to which Pledgee agreed to make available to TEI a credit
facility subject to the terms and conditions contained therein.
B. On June 12, 1997, Pledgee and Pledgor entered into that certain
Pledge and Security Agreement (as further amended, restated and supplemented
from time to time, the "Pledge Agreement") pursuant to which Pledgor granted to
Pledgee a security interest in the Initial Pledged Stock, as described therein.
C. Pledgor is the legal, record and beneficial owner of 680,818
shares of the issued and outstanding common stock of 3CI Complete Compliance
Corporation, evidenced by common stock certificates registered in the name of
Pledgor, copies of which certificates are attached hereto as SCHEDULE 1 (the
"3CI Stock").
D. TEI has requested Pledgee to modify the Pledge Agreement so as to
grant a security interest to Pledgee in the 3CI Stock.
E. It is a condition precedent to the obligations of Pledgee under
the Credit Agreement, as amended by that certain Second Amendment to Credit
Agreement (the "Second Amendment") dated of even date herewith by and among
Pledgor, TEI and Pledgee, that Pledgor shall have executed and delivered this
Amendment to Pledgee.
F. Pledgor, by virtue of its ownership of the 3CI Stock, deems it to
be in its best interest, based on sound judgment, in that valuable benefits will
be derived by the Pledgor by virtue of the Second Amendment, to execute and
deliver to Pledgee this Amendment.
G. In consideration of these premises and in order to induce Pledgee
to extend the credit pursuant to the Credit Agreement, as amended by the certain
Second Amendment, and for other
<PAGE> 2
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor and Pledgee hereby agree as follows:
AGREEMENTS:
1. Defined Terms. Capitalized terms used but not otherwise defined
herein shall have the meanings given to them in the Pledge Agreement.
2. Collateral. Pledgor and Pledgee agree and acknowledge that the
3CI Stock is property that Pledgor has pledged, and hereby does pledge, to
Pledgee under the terms and conditions of the Pledge Agreement, and that the 3CI
Stock, together with all income therefrom and proceeds thereof, shall be
"Collateral", as such term is defined in the Pledge Agreement.
3. Costs and Expenses. TEI agrees to reimburse Pledgee for Pledgee's
costs and expenses, including, but not limited to, attorneys' fees and legal
expenses, incurred by Pledgee in connection with the preparation of this
Amendment and in connection with the negotiation and consummation of the
transaction contemplated hereby.
4. Full Force and Effect. Except as expressly modified and amended
in this Amendment, all of the terms, provisions and conditions of the Pledge
Agreement are and shall remain in full force and effect and are incorporated
herein by reference.
5. Counterparts. This Amendment may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original, and all of
which taken together shall constitute but one and the same instrument.
6. No Oral Agreements. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS
EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF.
THIS WRITTEN AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Pledge and Security Agreement as of the day and year first above written.
PLEDGEE:
CHASE BANK OF TEXAS, N.A.,
a national banking association
By: /s/ JOANNE BRAMANTI
Joanne Bramanti, Vice President
PLEDGOR:
TIDEL TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ JAMES T. RASH
James T. Rash, Chairman of the Board
Schedule:
1 - Copies of 3CI Stock Certificates
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,459,504
<SECURITIES> 0
<RECEIVABLES> 9,946,774
<ALLOWANCES> 781,715
<INVENTORY> 5,238,998
<CURRENT-ASSETS> 18,576,067
<PP&E> 2,548,198
<DEPRECIATION> 1,432,703
<TOTAL-ASSETS> 21,602,763
<CURRENT-LIABILITIES> 4,065,779
<BONDS> 4,894,604
0
0
<COMMON> 157,030
<OTHER-SE> 12,485,350
<TOTAL-LIABILITY-AND-EQUITY> 21,602,763
<SALES> 25,111,381
<TOTAL-REVENUES> 25,111,381
<CGS> 15,700,347
<TOTAL-COSTS> 15,700,347
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 297,993
<INCOME-PRETAX> 3,565,006
<INCOME-TAX> 272,000
<INCOME-CONTINUING> 3,293,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,293,006
<EPS-PRIMARY> .21
<EPS-DILUTED> .19
</TABLE>
