UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1999
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 No. 0-25148
Global Payment Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 11-2974651
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
20 East Sunrise Highway, Suite 201, Valley Stream, New York 11581
(Address of principal executive offices) (Zip Code)
(516) 256-1000
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [x] NO ___
Shares of Common Stock outstanding on August 10, 1999 5,388,700
---------
<PAGE>
Global Payment Technologies, Inc.
Index
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1999 and September 30, 1998 3
Consolidated Statements of Income - Nine Months ended June 30, 1999 and 1998 4
Consolidated Statements of Income - Three Months ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows -
Nine Months ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10 - 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See Item 2 Above.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
2
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
-------- --------
(Dollar amounts in thousands,
except share data)
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,192 $ 834
Accounts receivable from affiliates 13,670 4,497
Accounts receivable, less allowance for doubtful accounts
of $285 and $248, respectively 2,822 5,854
Inventory, less allowance for obsolescence of $881 and
$942, respectively 7,040 8,090
Prepaid expenses and other current assets 421 254
Deferred income tax benefit 1,217 584
-------- --------
Total current assets 26,362 20,113
Property and equipment, net 1,650 1,758
Investments in unconsolidated affiliates 1,143 582
Other assets 112 130
-------- --------
Total assets $ 29,267 $ 22,583
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ 7,194 $ 4,097
Accounts payable 2,317 2,044
Accrued expenses and other current liabilities 2,365 2,925
Income taxes payable 754 430
-------- --------
Total current liabilities 12,630 9,496
-------- --------
Shareholders' equity:
Common Stock, 20,000,000 shares authorized; $.01 par value,
5,597,900 and 5,570,300 shares issued 56 56
Additional paid-in capital 8,456 8,334
Retained earnings 9,419 5,744
-------- --------
17,931 14,134
Less: Treasury stock, at cost, 209,200 and 165,000 shares (1,294) (1,047)
-------- --------
Total shareholders' equity 16,637 13,087
-------- --------
Total liabilities and shareholders' equity $ 29,267 $ 22,583
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended June 30,
1999 1998
----------- -----------
(Dollar amounts in thousands,
except share and per share data)
<S> <C> <C>
Net sales
Affiliates $ 25,177 $ 556
Non-affiliates 13,566 27,825
----------- -----------
38,743 28,381
Cost of sales 23,349 16,362
----------- -----------
Gross profit 15,394 12,019
Operating expenses 8,112 8,484
----------- -----------
Income from operations 7,282 3,535
----------- -----------
Other (expense) income:
Equity in (loss) income of unconsolidated affiliates (1,350) 137
Gain on sale of investment in unconsolidated affiliate -- 385
Interest (expense) income, net (286) --
----------- -----------
Total other (expense) income (1,636) 522
----------- -----------
Income before provision for income taxes 5,646 4,057
Provision for income taxes 1,971 1,611
----------- -----------
Net income $ 3,675 $ 2,446
=========== ===========
Net income per share:
Basic $ .68 $ .44
=========== ===========
Diluted $ .63 $ .41
=========== ===========
Common shares used in computing net income
per share amounts:
Basic 5,377,656 5,514,025
=========== ===========
Diluted 5,837,104 6,022,255
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended June 30,
1999 1998
----------- -----------
(Dollar amounts in thousands,
except share and per share data)
<S> <C> <C>
Net sales
Affiliates $ 7,658 $ 354
Non-affiliates 5,593 10,174
----------- -----------
13,251 10,528
Cost of sales 7,978 6,086
----------- -----------
Gross profit 5,273 4,442
Operating expenses 2,512 3,077
----------- -----------
Income from operations 2,761 1,365
----------- -----------
Other (expense) income:
Equity in (loss) income of unconsolidated affiliates (695) 64
Gain on sale of investment in unconsolidated affiliate -- 385
Interest (expense) income, net (109) (30)
----------- -----------
Total other (expense) income (804) 419
----------- -----------
Income before provision for income taxes 1,957 1,784
Provision for income taxes 708 715
----------- -----------
Net income $ 1,249 $ 1,069
=========== ===========
Net income per share:
Basic $ .23 $ .19
=========== ===========
Diluted $ .21 $ .18
=========== ===========
Common shares used in computing net income
per share amounts:
Basic 5,386,221 5,526,636
=========== ===========
Diluted 5,920,072 6,054,475
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
GLOBAL PAYMENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended June 30,
1999 1998
------- -------
(Dollar amounts in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,675 $ 2,446
Adjustments to reconcile net income to net cash used in
operating activities:
Equity in loss (income) of unconsolidated affiliates 1,350 (137)
Depreciation and amortization 528 448
Provision for losses on accounts receivable 59 122
Provision for inventory obsolescence 450 225
Deferred income taxes (633) (59)
Changes in operating assets and liabilities:
Increase in accounts receivable (7,946) (3,494)
Decrease (increase) in inventory 600 (4,624)
Increase in prepaid expenses and other assets (149) (64)
Increase in accounts payable 273 691
(Decrease) increase in accrued expenses and other current liabilities (560) 1,465
Increase in income taxes payable 324 237
------- -------
NET CASH USED IN OPERATING ACTIVITIES (2,029) (2,744)
------- -------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net of proceeds from disposals (420) (759)
Investments in unconsolidated affiliates (166) (45)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (586) (804)
------- -------
FINANCING ACTIVITIES:
Net proceeds from note payable to bank 3,097 2,500
Purchase of treasury stock (247) --
Issuance of stock upon exercise of stock options and warrants 123 129
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,973 2,629
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 358 (919)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 834 1,913
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,192 $ 994
======= =======
CASH PAID DURING THE PERIOD FOR:
Interest $ 305 $ 38
======= =======
Income taxes $ 2,271 $ 1,491
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Global Payment Technologies, Inc.
Notes to Consolidated Financial Statements
June 30, 1999
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Global Payment
Technologies, Inc. (the "Company"), including the September 30, 1998
consolidated balance sheet which has been derived from audited financial
statements, have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The operating results for the three- and
nine-month periods ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the fiscal year ending September 30, 1999. We
recommend that you refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended September 30, 1998.
NOTE B - RECLASSIFICATION
Certain prior-year financial statement amounts have been reclassified to conform
to the current year's presentation.
NOTE C - STOCK REPURCHASE
In June 1998, the Board of Directors approved a common stock repurchase plan,
providing for the purchase of up to 500,000 shares of the Company's common stock
over a one-year period, using a separately established line of credit. In
September 1998, the Company purchased 165,000 shares of its common stock at a
cost of $1,047,000 and in October 1998, the Company purchased 41,000 shares of
its common stock at a cost of $223,000. During January 1999, the Company
purchased an additional 3,200 shares of its common stock at a cost of $24,000.
NOTE D - NET INCOME PER COMMON SHARE
The Company accounts for earnings per share pursuant to Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." In accordance with SFAS No.
128, net income per common share amounts ("basic EPS") were computed by dividing
net income by the weighted average number of common shares outstanding for the
period. Net income per common share amounts, assuming dilution ("diluted EPS"),
were computed by reflecting the potential dilution from the exercise of stock
options and warrants. SFAS No. 128 requires the presentation of both basic EPS
and diluted EPS on the face of the income statement.
7
<PAGE>
Global Payment Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
June 30, 1999
NOTE D - NET INCOME PER COMMON SHARE (continued)
A reconciliation between the numerators and denominators of the basic and
diluted EPS computations for net income appears below:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
June 30, 1999 June 30, 1998
(In thousands, except per share data) (In thousands, except per share data)
------------------------------------- -------------------------------------
Net Income Shares Per Share Net Income Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
----------- ------------- ------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Net income $3,675 $2,446
------ ------
Basic EPS
Net income attributable to Common Stock 3,675 5,377.7 $.68 2,446 5,514.0 $.44
Effect of dilutive securities
Stock options and warrants -- 459.4 .05 -- 508.3 .03
------ ------- ------ ------ ------- ------
Diluted EPS
Net income attributable to Common
Stock and assumed option and warrant
exercises $3,675 5,837.1 $.63 $2,446 6,022.3 $.41
====== ======= ====== ====== ======= ======
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1999 June 30, 1998
(In thousands, except per share data) (In thousands, except per share data)
------------------------------------- -------------------------------------
Net Income Shares Per Share Net Income Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
----------- ------------- ------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Net income $1,249 $1,069
------ ------
Basic EPS
Net income attributable to Common Stock 1,249 5,386.2 $.23 1,069 5,526.6 $.19
Effect of dilutive securities
Stock options and warrants -- 533.9 .02 -- 527.9 .01
------ ------- ------ ------ ------- ---------
Diluted EPS
Net income attributable to Common
Stock and assumed option and warrant
exercises $1,249 5,920.1 $.21 $1,069 6,054.5 $.18
====== ======= ====== ====== ======= =========
</TABLE>
Options to purchase 44,000 shares of Common Stock in the nine months and three
months ended June 30, 1999 and 1998 were not included in the computation of
diluted EPS because the exercise prices exceeded the average market price of the
common shares for these periods. These options were still outstanding at the end
of the related periods.
NOTE E - ACQUISITION
On April 7, 1999, the Company acquired a 25% equity interest in Abacus Financial
Management Systems, Ltd. ("Abacus"), a UK-based software company, for a de
minimis amount. This investment is being accounted for under the equity method.
Abacus has developed a cash management system of which the Company's validators
8
<PAGE>
Global Payment Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
June 30, 1999
NOTE E - ACQUISITION (continued)
are a key component. In addition, the Company and the principal of Abacus have
formed Abacus Financial Management, Inc. USA, which is 80% owned by the Company
and which has the exclusive right to distribute Abacus' product in North
America. To date, there has been no significant activity in this entity.
NOTE F - RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Statement
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting.
Pursuant to SFAS No. 137, which was issued in June 1999, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133 - An Amendment of FASB Statement No. 133", SFAS No.
133 will be effective for fiscal years beginning after June 15, 2000. A company
may also implement the Statement as of the beginning of any fiscal quarter after
issuance (that is, fiscal quarters beginning June 16, 1999 and thereafter). SFAS
No. 133 cannot be applied retroactively. SFAS No. 133 must be applied to (a)
derivative instruments and (b) certain derivative instruments imbedded in hybrid
contracts that were issued, acquired, or substantively modified after either
December 31, 1997 or 1998, at the company's election.
While the Company operates in international markets, it does so presently
without the use of derivative instruments and therefore SFAS No. 133 is not
currently applicable.
In the first quarter of 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires companies to report all changes in equity
during a period, except those resulting from investments by owners and
distributions to owners, for the period in which they are recognized.
Comprehensive income is the total of net income and all other non-owner changes
in equity (or other comprehensive income) such as unrealized gains/losses on
securities classified as available-for-sale, foreign currency translation
adjustments and minimum pension liability adjustments. Comprehensive and other
comprehensive income must be reported on the face of annual financial statements
or in the case of interim reporting, the footnote approach may be utilized. For
fiscal years 1998 and 1997, and for the quarters ended June 30, 1999 and 1998,
the Company's operations did not give rise to items includable in comprehensive
income which were not already included in net income. Accordingly, the Company's
comprehensive income is the same as its net income for all periods presented.
9
<PAGE>
Global Payment Technologies, Inc.
June 30, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This commentary should be read in conjunction with the Company's consolidated
financial statements and related notes thereto and management's discussion and
analysis of financial condition and results of operations incorporated by
reference in the Company's Form 10-KSB for the year ended September 30, 1998.
Results of Operations
Nine months ended June 30, 1999 compared with nine months ended June 30, 1998
Sales
Net sales increased by 36.5%, or $10,362,000, to $38,743,000 in the nine months
ended June 30, 1999, as compared with $28,381,000 in the comparative prior-year
period. The Company attributed the strong revenue growth to increased demand for
its bill validator products in the international gaming industry.
On June 24, 1999, the Company announced that it expects its fourth quarter sales
to be negatively impacted by a temporary softness in the Australian gaming
market, the Company's largest export region. While earnings will also be
negatively impacted in the fourth quarter, the reduction is anticipated to be
partially offset by recognizing income on a portion of the Company's previously
deferred inter-company gross profit as the inventory at its Australian affiliate
sells through to the customer. The Company expects overall production and
shipments in its first quarter of fiscal 2000 to return to levels achieved
earlier in the year.
Gross Profit
Gross profit increased to $15,394,000, or 39.7% of net sales, in the nine months
ended June 30, 1999 from $12,019,000, or 42.3% of net sales, in the comparative
prior-year period. The decrease in gross profit as a percentage of sales was
primarily the result of a change in the Company's distribution method which
began during the fourth quarter of fiscal 1998, whereby the Company sells
directly to its Australian and South African affiliates which subsequently sell
the Company's products into those respective markets. Previously, the Company
sold directly to the customer, recognizing additional revenues and the related
commission expense. In the nine months ended June 30, 1999, the Company's gross
profit as a percent of net sales was consistent with the comparative prior-year
period, after excluding the effects of this change in distribution method.
Operating Expenses
Operating expenses decreased to $8,112,000, or 20.9% of net sales, in the nine
months ended June 30, 1999 as compared with $8,484,000, or 29.9% of net sales,
in the comparative prior-year period. The Company's operating expenses increased
due to higher staffing and related payroll costs to support its growth strategy
in fiscal 1999 and beyond, and to a lesser extent, through inclusion of the
operating expenses of the Company's 70%-owned European subsidiary, formed in
June 1998 and consolidated in the results of the Company's operations
thereafter. However, due to the change in distribution strategy described
previously, the reduction in sales commissions more than offset these increases.
On a comparable basis, exclusive of the effects of these sales commissions,
operating expenses as a percentage of net sales for the nine months ended June
30, 1999 and 1998 were 20.9% and 26.4%, respectively.
10
<PAGE>
Global Payment Technologies, Inc.
June 30, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations (continued)
Net Income
Net income for the nine months ended June 30, 1999 was $3,675,000, or $0.63 per
share, as compared with $2,446,000, or $0.41 per share, in the comparative
prior-year period. The Company owns a one-third interest in its South African
affiliate, a 25% interest in a UK-based software company and 50% non-controlling
interests in a local sales and service organization in Australia and in a
manufacturing firm in China, all of which are accounted for using the equity
method. Included in the results of operations for the nine months ended June 30,
1999 and 1998 are the Company's share of (net losses) net profits of these
affiliates of ($1,350,000) and $137,000, respectively. In the nine months ended
June 30, 1999, equity in income of unconsolidated affiliates has been reduced by
approximately $1,745,000, which represents the Company's share of gross profit
on sales to its affiliates that have not yet been recognized by the affiliates.
Excluding the elimination of inter-company gross profit, the Company's share of
net income of these unconsolidated affiliates was $395,000 as compared with
$137,000 in the prior-year period. Such increase is principally due to improved
operating results at the Company's South African affiliate. In addition, the
Company owns 70% of GPT-Europe Limited, a local sales and service organization
in Europe whose results are not significant and are consolidated in the
Company's financial statements. During the nine months ended June 30, 1998, the
Company recognized an after-tax gain of $225,000, or $.04 per share, which was
the result of the sale of a portion of the Company's equity interest in its
South African affiliate. On a comparable basis, excluding the effect of this
one-time gain, net income for 1999 increased by 65.5% to $3,675,000, or $.63 per
share, as compared with $2,221,000, or $.37 per share, in 1998.
Three months ended June 30, 1999 compared with three months ended June 30, 1998
Sales
Net sales increased by 25.9%, or $2,723,000 to $13,251,000 in the three months
ended June 30, 1999 as compared with $10,528,000 in the comparative prior-year
period. The Company attributed the strong revenue growth to increased demand for
its bill validator products in the international gaming industry.
Gross Profit
Gross profit increased to $5,273,000, or 39.8% of net sales, in the three months
ended June 30, 1999 from $4,442,000, or 42.2% of net sales, in the comparative
prior-year period. The decrease in gross profit as a percentage of sales was
primarily the result of a change in the Company's distribution method which
began during the fourth quarter of fiscal 1998, whereby the Company sells
directly to its Australian and South African affiliates which subsequently sell
the Company's products into those respective markets. Previously, the Company
sold directly to the customer, recognizing additional revenues and the related
commission expense. In the three months ended June 30, 1999, the Company's gross
profit as a percent of net sales was consistent with the comparative prior-year
period, after excluding the effects of this change in distribution method.
11
<PAGE>
Global Payment Technologies, Inc.
June 30, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations (continued)
Operating Expenses
Operating expenses decreased to $2,512,000, or 19.0% of net sales, in the three
months ended June 30, 1999 as compared with $3,077,000, or 29.2% of net sales,
in the comparative prior-year period. The Company's operating expenses increased
due to higher staffing and related payroll costs to support its growth strategy
in fiscal 1999 and beyond, and to a lesser extent, through inclusion of the
operating expenses of the Company's 70%-owned European subsidiary as noted for
the nine months ended June 30, 1999. However, the reduction in sales
commissions, due primarily to the change in distribution strategy described
previously, more than offset these increases. On a comparable basis, exclusive
of the effects of these sales commissions, operating expenses as a percentage of
net sales for the three months ended June 30, 1999 and 1998, were 19.0% and
25.6%, respectively.
Net Income
Net income for the three months ended June 30, 1999 was $1,249,000, or $0.21 per
share, as compared with $1,069,000, or $0.18 per share, in the comparative
prior-year period. The Company owns a one-third interest in its South African
affiliate, a 25% interest in a UK-based software company and 50% non-controlling
interests in a local sales and service organization in Australia and in a
manufacturing firm in China, all of which are accounted for using the equity
method. Included in the results of operations for the three months ended June
30, 1999 and 1998 are the Company's share of (net losses) net profits of these
affiliates of ($695,000) and $64,000, respectively. In the three months ended
June 30, 1999, equity in income of unconsolidated affiliates has been reduced by
approximately $740,000, which represents the Company's share of gross profit on
sales to its affiliates that have not yet been recognized by the affiliates.
Excluding the elimination of inter-company gross profit, the Company's share of
net income of these unconsolidated affiliates was $45,000 as compared with
$64,000 in the prior-year period. In addition, the Company owns 70% of
GPT-Europe Limited, a local sales and service organization in Europe whose
results are not significant and are consolidated in the Company's financial
statements. During the three months ended June 30, 1998, the Company recognized
an after-tax gain of $225,000, or $.04 per share, which was the result of the
sale of a portion of the Company's equity interest in its South African
affiliate. On a comparable basis, excluding the effect of this one-time gain,
net income for 1999 increased by 48.0% to $1,249,000 or $.21 per share, as
compared with $844,000, or $.14 per share, in 1998.
Liquidity and Capital Resources
The Company's capital requirements consist primarily of those necessary to
continue to expand and improve manufacturing and product development
capabilities and sales and marketing operations, and to a lesser degree,
interest payments on the Company's indebtedness. The Company believes that its
available resources, including its new credit facility agreement dated July 15,
1999, should be sufficient to meet its obligations as they become due and permit
continuation of its planned expansion throughout fiscal 1999 and beyond.
12
<PAGE>
Global Payment Technologies, Inc.
June 30, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Liquidity and Capital Resources (continued)
At June 30, 1999, the Company's cash and cash equivalents were $1,192,000 as
compared with $834,000 at September 30, 1998. On July 15, 1999, the Company
entered into a credit agreement with The Chase Manhattan Bank which is comprised
of a $4,000,000 five-year term loan, payable monthly, with a fixed interest rate
of 7.66% per annum and a $6,000,000 unsecured revolving line of credit ("RLC").
The term of the RLC is three years and outstanding borrowings bear interest at
the bank's prime rate or at the Company's option, for borrowings greater than
$500,000, LIBOR plus a range of 125 to 200 basis points. The precise borrowing
rate is determined by the Company's financial performance under certain
covenants. Simultaneous with the signing of the new credit agreement, the
Company repaid all of its then outstanding bank debt and terminated its existing
credit facilities.
Net cash used in operating activities was $2,029,000 in the nine months ended
June 30, 1999. This amount is due to an increase in accounts receivable of
$7,946,000, an increase in prepaid expenses and other assets of $149,000 and a
decrease in accrued expenses and other current liabilities of $560,000, offset,
in part, by net income for the period, adjusted for non-cash items, of
$5,429,000, a decrease in inventory of $600,000, increased accounts payable of
$273,000 and an increase in income taxes payable of $324,000. Net cash used in
operating activities was $2,744,000 in the nine months ended June 30, 1998. This
amount was due to increased accounts receivable of $3,494,000, an increase in
inventory of $4,624,000 and an increase in prepaid expenses and other assets of
$64,000, offset, in part, by net income for the period, adjusted for non-cash
items of $3,045,000, increased accounts payable of $691,000, an increase in
accrued expenses and other current liabilities of $1,465,000 and an increase in
income taxes payable of $237,000.
Cash used in investing activities in the nine months ended June 30, 1999
amounted to $586,000 as compared with $804,000 in the prior year period.
Investments in property and equipment in the nine months ended June 30, 1999
amounted to $420,000 as compared with $759,000 in 1998. In addition, the Company
made additional investments to its joint ventures of $166,000 and $45,000 in the
nine months ended June 30, 1999 and 1998, respectively, which have been added to
the investment in unconsolidated affiliates based on the terms of the related
agreements.
Cash provided by financing activities in the nine months ended June 30, 1999 and
1998, consisted of net proceeds from bank borrowings of $3,097,000 and
$2,500,000, respectively, augmented by proceeds of $123,000 and $129,000,
respectively, received from the exercise of stock options and warrants. In
addition, in the nine months ended June 30, 1999, cash provided by financing
activities was used for the repurchase of the Company's common stock for
$247,000.
13
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Global Payment Technologies, Inc.
June 30, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Quantitative and Qualitative Disclosures About Market Risk
In the opinion of management, the Company's operations do not give rise to
transactions or financial instruments which are subject to material quantitative
or qualitative market risk.
Year 2000
The Company has developed a comprehensive plan to address Year 2000 issues. The
plan addresses two main areas: (a) information systems and (b) supply chain
readiness. To oversee the process, the Company has established a Steering
Committee comprised of senior executives. The Company has identified minimal
potential deficiencies related to Year 2000 in its information systems and is in
the process of addressing them through upgrades and other remediation.
Completion of the remediation and testing is expected in the summer of 1999. To
mitigate the risk of Year 2000 non-compliance by third parties, the Company has
identified, contacted and met with critical inventory suppliers. The Company is
also in the process of communicating with its larger customers about their Year
2000 readiness. These meetings and communications are ongoing and the Company is
assessing the state of readiness of the various suppliers and customers. The
Company believes it is difficult to specifically identify the cause of the most
reasonable worst case Year 2000 scenario; however, based upon its work to date,
the Company believes it would likely be the result of the failure of third
parties to be Year 2000 compliant. Accordingly, in the event the Company is
aware of a potential problem with third parties, it will formulate contingency
plans to limit, to the extent possible, lost revenues and other adverse effects
arising from third party failures. Such plans would necessarily be limited to
matters over which the Company can reasonably exercise control and may require
the acceleration of certain shipments that may necessitate adjustments to the
production and procurement schedules. Incremental out-of-pocket costs incurred
through June 30, 1999 have not been significant and, based upon the Company's
current estimates, the costs of its Year 2000 program are expected to be
immaterial. Such costs do not include internal employee costs and costs related
to the deferral of other information technology projects. While the Company does
not have a system to track internal employee costs specifically related to the
Year 2000, those costs are not expected to be material to the Company's results
of operations or financial condition. The Company's Year 2000 efforts are
ongoing and its overall plan, as well as the implementation of contingency
plans, will continue to evolve as new information becomes available. While the
Company anticipates continuity of its business activities, that continuity will
be dependent upon its ability, and the ability of third parties with whom the
Company relies on, directly or indirectly, to be Year 2000 compliant.
Special Note Regarding Forward-Looking Statements A number of statements
contained in this discussion and analysis are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 that involve
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied in the applicable statements. These risks and
uncertainties include but are not limited to: the Company's dependence on the
paper currency validator market and its potential vulnerability to technological
obsolescence; the risks that its current and future products may contain errors
or defects that would be difficult and costly to detect and correct; potential
manufacturing difficulties; possible risks of product inventory obsolescence;
potential shortages of key parts and/or raw materials; potential difficulties in
managing growth; dependence on
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Global Payment Technologies, Inc.
June 30, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Special Note Regarding Forward-Looking Statements (continued)
key personnel; the Company's dependence on a limited base of customers for a
significant portion of sales; the Company's and its customers' and vendors'
readiness for Year 2000 compliance; the possible impact of competitive products
and pricing; uncertainties with respect to the Company's business strategy;
general economic conditions in the domestic and international markets in which
the Company operates; and other risks described in the Company's Securities and
Exchange Commission filings.
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Global Payment Technologies, Inc.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit # Description
--------- -----------
4.1 Credit Agreement dated July 15, 1999 between the Company and The
Chase Manhattan Bank ("Chase"). (1)
4.1(a) Revolving Credit Note dated July 15, 1999 issued by the Company
to Chase. (1)
4.1(b) Term Note dated July 15, 1999 issued by the Company to Chase. (1)
4.1(c) Limited Corporate Guaranty dated July 15, 1999 issued by Abacus
Financial Management Systems Ltd. USA to Chase. (1)
4.1(d) Pledge Agreement dated July 15, 1999 between the Company and
Chase. (1)
10.11 Employment Agreement dated May 1, 1999 between the Company and
Thomas McNeill. (1)
27 Financial Data Schedule (1)
- ---------
(1) Filed herewith.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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Global Payment Technologies, Inc.
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Global Payment Technologies, Inc.
By: /s/ Thomas McNeill
-------------------------------
Vice President,
Chief Financial Officer and
Principal Accounting Officer
Dated: August 12, 1999
17
Exhibit 4.1
================================================================================
CREDIT AGREEMENT
Dated as of July 15, 1999
by and between
GLOBAL PAYMENT TECHNOLOGIES, INC.
and
THE CHASE MANHATTAN BANK
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS............................................. 1
SECTION 1.01. Definitions........................................... 1
SECTION 1.02. Terms Generally...................................... 14
ARTICLE II
LOANS....................................................................... 15
SECTION 2.01. Revolving Credit Loans............................... 15
SECTION 2.02. Revolving Credit Note................................ 16
SECTION 2.03. Term Loan............................................ 16
SECTION 2.04. Term Note............................................ 16
ARTICLE III
PROVISIONS RELATING TO ALL EXTENSIONS OF CREDIT;
FEES AND PAYMENTS........................................................... 17
SECTION 3.01. Interest Rate; Continuation and Conversion of Loans.. 17
SECTION 3.02. Use of Proceeds...................................... 19
SECTION 3.03. Prepayments.......................................... 20
SECTION 3.04. Fees................................................. 20
SECTION 3.05. Inability to Determine Interest Rate................. 21
SECTION 3.06. Illegality........................................... 21
SECTION 3.07. Increased Costs...................................... 21
SECTION 3.08. Indemnity. .......................................... 23
SECTION 3.09. Taxes................................................ 23
SECTION 3.10. Payments............................................. 24
SECTION 3.11. Disbursement of Loans................................ 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.............................................. 24
SECTION 4.01. Organization, Powers. .............................. 24
SECTION 4.02. Authorization of Borrowing, Enforceable Obligations.. 25
SECTION 4.03. Financial Condition.................................. 25
SECTION 4.04. Taxes................................................ 26
SECTION 4.05. Title to Properties.................................. 26
SECTION 4.06. Litigation........................................... 26
SECTION 4.07. Agreements........................................... 27
SECTION 4.08. Compliance with ERISA................................ 27
SECTION 4.09. Federal Reserve Regulations; Use of Proceeds......... 27
SECTION 4.10. Approval............................................. 28
SECTION 4.11. Direct Affiliates.................................... 28
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SECTION 4.12. Hazardous Materials.................................. 28
SECTION 4.13. Investment Company Act............................... 28
SECTION 4.14. No Default........................................... 28
SECTION 4.15. Material Contracts................................... 28
SECTION 4.16. Permits and Licenses................................. 29
SECTION 4.17. Compliance with Law.................................. 29
SECTION 4.18. Y2K.................................................. 29
SECTION 4.19. Disclosure........................................... 29
SECTION 4.20. Pledge Agreements.................................... 29
ARTICLE V
CONDITIONS OF LENDING....................................................... 29
SECTION 5.01. Conditions to Initial Extension of Credit............ 29
SECTION 5.02. Conditions to All Extensions of Credit............... 32
ARTICLE VI
AFFIRMATIVE COVENANTS....................................................... 32
SECTION 6.01. Existence, Properties, Insurance..................... 32
SECTION 6.02. Payment of Indebtedness and Taxes.................... 33
SECTION 6.03. Financial Statements, Reports, etc................... 33
SECTION 6.04. Books and Records; Access to Premises................ 35
SECTION 6.05. Notice of Adverse Change............................. 35
SECTION 6.06. Notice of Default.................................... 35
SECTION 6.07. Notice of Litigation................................. 35
SECTION 6.08. Notice of Default in Other Agreements................ 35
SECTION 6.09. Notice of ERISA Event................................ 36
SECTION 6.10. Notice of Environmental Law Violations............... 36
SECTION 6.11. Notice Regarding Material Contracts.................. 36
SECTION 6.12. Compliance with Applicable Laws...................... 36
SECTION 6.13. Direct Affiliates.................................... 36
SECTION 6.14. Environmental Laws................................... 37
SECTION 6.15. Legal Charge......................................... 37
ARTICLE VII
NEGATIVE COVENANTS.......................................................... 38
SECTION 7.01. Liens................................................ 38
SECTION 7.02. Indebtedness......................................... 39
SECTION 7.03. Guaranties........................................... 40
SECTION 7.04. Sale of Assets....................................... 41
SECTION 7.05. Sales of Receivables................................. 41
SECTION 7.06. Loans and Investments................................ 41
SECTION 7.07. Nature of Business................................... 42
SECTION 7.08. Sale and Leaseback................................... 42
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SECTION 7.09. Federal Reserve Regulations.......................... 42
SECTION 7.10. Accounting Policies and Procedures................... 42
SECTION 7.11. Hazardous Materials.................................. 42
SECTION 7.12. Limitations on Fundamental Changes................... 42
SECTION 7.13. Financial Covenants.................................. 43
SECTION 7.14. Subordinated Debt.................................... 43
SECTION 7.15. Dividends............................................ 44
SECTION 7.16. Transactions with Affiliates......................... 44
ARTICLE VIII
EVENTS OF DEFAULT........................................................... 44
SECTION 8.01. Events of Default.................................... 44
ARTICLE IX
MISCELLANEOUS............................................................... 47
SECTION 9.01. Notices.............................................. 47
SECTION 9.02. Effectiveness; Survival.............................. 48
SECTION 9.03. Expenses............................................. 48
SECTION 9.04. Successors and Assigns; Participations............... 48
SECTION 9.05. No Waiver; Cumulative Remedies....................... 49
SECTION 9.06. APPLICABLE LAW....................................... 49
SECTION 9.07. SUBMISSION TO JURISDICTION........................... 49
SECTION 9.08. Severability......................................... 50
SECTION 9.09. Right of Setoff...................................... 50
SECTION 9.10. Headings............................................. 50
SECTION 9.11. Construction......................................... 50
SECTION 9.12. Counterparts......................................... 50
SCHEDULES
Schedule I - Existing Liens
Schedule II - Pre-Existing Indebtedness
Schedule III - Existing Guarantees
Schedule IV - Material Contracts
Schedule V - Subsidiaries and other Direct Affiliates
Schedule VI - Existing Direct Affiliate Investments
EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Term Note
Exhibit C-1 - Form of Unlimited Corporate Guaranty
Exhibit C-2 - Form of Limited Corporate Guaranty
Exhibit D - Form of Pledge Agreement
Exhibit E - Form of Opinion of Counsel
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<PAGE>
CREDIT AGREEMENT dated as of July 15, 1999, by and among GLOBAL PAYMENT
TECHNOLOGIES, INC., a Delaware corporation (the "Company") and THE CHASE
MANHATTAN BANK, a New York banking corporation, (the "Lender").
RECITALS
The Company has requested the Lender to extend credit from time to time and
the Lender is willing to extend such credit to the Company, subject to the terms
and conditions hereinafter set forth.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Definitions. As used herein, the following words and terms
shall have the following meanings:
"Adjusted Libor Loans" shall mean Loans at such time as they are made
and/or being maintained at a rate of interest based upon Reserve Adjusted Libor.
"Affiliate" shall mean with respect to a specified Person, another Person
which, directly or indirectly, controls or is controlled by or is under common
control with such specified Person. For the purpose of this definition,
"control" of a Person shall mean the power, direct or indirect, to direct or
cause the direction of the management or policies of such Person whether through
the ownership of voting securities, by contract or otherwise; provided that, in
any event, any Person who owns directly or indirectly 10% or more of the
securities having ordinary voting power for the election of directors or other
governing body of a corporation or 10% or more of the partnership or other
ownership interest of any Person (other than as a limited partner of such other
Person) will be deemed to control such corporation or other Person.
"Aggregate Outstandings" shall mean, at a particular time, the aggregate
outstanding principal amount of all Revolving Credit Loans at such time.
"Agreement" shall mean this Credit Agreement dated as of July 15, 1999, as
it may hereafter be amended, restated, supplemented or otherwise modified from
time to time.
"Alternate Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate as in effect on such day, and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. If for any reason the Lender shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate, for any reason,
including the inability or failure of the Lender to obtain sufficient quotations
in accordance with the terms thereof, the Alternate Base Rate shall be
determined without regard to clause (b) of the first
<PAGE>
sentence of this definition, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively.
"Alternate Base Rate Loans" shall mean Loans at such times as they are
being made and/or maintained at a rate of interest based on the Alternate Base
Rate.
"Borrowing Date" shall mean, with respect to any Loan, the date on which
such Loan is disbursed to the Company.
"Business Day" shall mean (a) any day not a Saturday, Sunday or legal
holiday, on which banks in New York City are open for business and (b) as it
relates to any payment, determination, funding or notice to be made or given in
connection with any Adjusted Libor Loan, any day specified in clause (a) on
which trading is carried on by and between banks in Dollar deposits in the
London interbank eurodollar market.
"Capital Lease" shall mean any lease the obligations of which are required
to be capitalized on the balance sheet of a Person in accordance with Generally
Accepted Accounting Principles.
"Change of Control" shall mean (a) the acquisition by any Person (other
than Mr. Stephen Katz, Mr. Edward Seidenberg or an entity of which all of the
outstanding capital stock is owned by Mr. Stephen Katz and/or Mr. Edward
Seidenberg or Odyssey Financial Company if Mr. Stephen Katz has the power
directly or indirectly through his nominees to vote the capital stock of a
Person held by Odyssey Financial Company and to control the disposition of such
capital stock), or two or more Persons (other than Mr. Stephen Katz, Mr. Edward
Seidenberg or an entity of which all of the outstanding capital stock is owned
by Mr. Stephen Katz and/or Mr. Edward Seidenberg or Odyssey Financial Company if
Mr. Stephen Katz has the power directly or indirectly through his nominees to
vote the capital stock of a Person held by Odyssey Financial Company and to
control the disposition of such capital stock) acting in concert, of beneficial
ownership of 25% or more of the outstanding shares of voting stock (as
determined below) of the Company, or (b) at any time Continuing Directors do not
constitute a majority of the Board of Directors of the Company. "Continuing
Director" means at any date a member of the Company's Board of Directors (i) who
is a member of such Board on the Closing Date or (ii) who was nominated or
elected by at least two-thirds of the directors who were Continuing Directors at
any time of such nomination or election or whose election to the Company's Board
of Directors was recommended or endorsed by at least two-thirds of the directors
who were Continuing Directors at the time of such election. Under this
definition, if the present Board of Directors of the Company were to nominate,
elect, recommend, endorse or otherwise approve a new director or directors and
then resign, no Change of Control would occur even though the present Board of
Directors would thereafter cease to be in office. A "beneficial owner" shall be
determined in accordance with Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, as in
effect on the Closing Date, except that, for
2
<PAGE>
purposes of clause (a), the number of shares of capital stock of the Company
entitling the holders thereof to vote generally in elections of directors shall
be deemed to include, in addition to all outstanding shares of capital stock of
the Company entitling the holders thereof to vote generally in the election of
directors and Unissued Shares deemed to be held by the Person with respect to
which the Change of Control determination is being made, all Unissued Shares
deemed to be held by all other Persons. As used herein, "Unissued Shares" shall
mean shares of capital stock of the Company not outstanding that are subject to
options, warrants, rights to purchase or conversion privileges exercisable
within 60 days following the date of determination of a Change of Control and
that, upon issuance, shall entitle the holders thereof to vote generally in the
election of directors.
"Chief Financial Officer" shall mean the Chief Financial Officer of the
Company.
"Closing Date" shall mean July 15, 1999.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Commitments" shall mean, collectively, the Revolving Credit Commitment and
the Term Loan Commitment.
"Company" shall have the meaning set forth in the preamble hereto.
"Consequential Loss" shall mean, with respect to the Company's payment of
all or any portion of a Fixed Rate Loan on a day other than the Term Loan
Maturity Date, any loss, cost or expense incurred by the Lender as a result of
the timing of such payment or in redepositing such principal amount, including
the sum of (a) the interest which, but for such payment, the Lender would have
earned in respect of such principal amount so paid until the Term Loan Maturity
Date, reduced, if the Lender is able to redeposit such principal amount so paid
for the balance of such period, by the interest earned by the Lender as a result
of so redepositing such principal amount, plus (a) any expense or penalty
incurred by the Lender on redepositing such principal amount.
"Default" shall mean any condition or event which upon notice, lapse of
time or both would constitute an Event of Default.
"Direct Affiliate" shall mean, collectively, each direct and indirect
Subsidiary of the Company and each other Person controlled by the Company or
collectively by the Company and its direct or indirect Subsidiaries. For
purposes of this definition "control" of a Person shall have the meaning set
forth in the second sentence of the definition of "Affiliate".
"Dollar" and the symbol "$" shall mean lawful money of the United States of
America.
"Domestic Subsidiary" shall mean any Subsidiary of the Company which is
organized under the laws of any state or territory of the United States of
America.
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<PAGE>
"EBIT" shall mean the Net Income (or net loss), plus the sum, without
duplication, of (a) Interest Expense and (b) all income taxes to any government
or governmental instrumentality expensed on the Company's books (whether paid or
accrued) minus the sum, without duplication, of (a) all extraordinary or unusual
gains, and (b) equity in positive income of unconsolidated Affiliates, in each
case, determined in accordance with Generally Accepted Accounting Principles
applied on a consistent basis. All of the foregoing categories shall be
calculated with respect to the Company and shall be calculated (without
duplication) as of the end of each applicable fiscal quarter for the four fiscal
quarter period then ended.
"EBITDA" shall mean for any period, Net Income (or net loss), plus the sum,
without duplication, of (a) Interest Expense, (b) depreciation and amortization
expenses or charges, and (c) all income taxes to any government or governmental
instrumentality expensed on the Company's books (whether paid or accrued) minus
the sum, without duplication, of (a) all extraordinary or unusual gains and (b)
equity in positive income of unconsolidated Affiliates, in each case, determined
in accordance with Generally Accepted Accounting Principles applied on a
consistent basis. All of the foregoing categories shall be calculated with
respect to the Company and shall be calculated (without duplication) as of the
end of each applicable fiscal quarter for the four fiscal quarter period then
ended.
"Eligible Investments" shall mean (a) direct obligations of the United
States of America or any governmental agency thereof which are fully guaranteed
by the United States of America, provided that such obligations mature within
one year from the date of acquisition thereof; or (b) dollar denominated
certificates of time deposit maturing within one year issued by any bank
organized and existing under the laws of the United States or any state thereof
and having aggregate capital and surplus in excess of $1,000,000,000; or (c)
money market mutual funds having assets in excess of $2,500,000,000; or (d)
commercial paper rated not less than P-1 or A-1 or their equivalent by Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group, respectively; or (e)
tax exempt securities of a U.S. issuer rated A or better by Standard and Poor's
Ratings Group or Moody's Investors Service, Inc.
"Environmental Law" shall mean any law, ordinance, rule, regulation, or
policy having the force of law of any Governmental Authority relating to
pollution or protection of the environment or to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections
9601, et seq.), the Hazardous Materials Transportation Act, as amended (49
U.S.C. Sections 1801, et seq.) the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 6901, et seq.) and the rules and regulations
promulgated pursuant thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
4
<PAGE>
"ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
ERISA) which together with the Company or any Subsidiary of the Company would be
deemed to be a member of the same "controlled group" within the meaning of
Section 414(b), (c), (m) or (o) of the Code.
"Eurocurrency Reserve Requirement" shall mean 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 (without duplication) of the rates
(expressed as a decimal) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves, under any regulations of the Board of Governors of the Federal Reserve
System or any other governmental authority having jurisdiction with respect
thereto) as from time to time in effect, dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "eurocurrency
liabilities" in Regulation D) maintained by the Lender. For purposes hereof each
Adjusted Libor Loan shall be deemed to constitute a "eurocurrency liability" as
defined in Regulation D, and subject to the reserve requirements of "Regulation
D," without benefit of credit or proration, exemptions or offsets which might
otherwise be available to the Lenders from time to time under Regulation D.
"Event of Default" shall have the meaning set forth in Article VIII.
"Executive Officer" shall mean any of the President, the Chief Executive
Officer, Chief Financial Officer or the Secretary of the Company, and their
respective successors, if any, designated by the Company's board of directors.
"Exercise Period" shall mean the period commencing the date hereof and
ending on the six month anniversary of such date.
"Existing Adjusted Libor Loan" shall mean the loan in the principal amount
of $1,046,718.75 accruing interest at a rate based on Reserve Adjusted Libor
which was funded by the Lender on June 17, 1999 pursuant to its line of credit
to the Company.
"Existing Direct Affiliate" shall mean a Direct Affiliate of the Company
existing on the Closing Date.
"Existing Direct Affiliate Investments" shall mean guarantees, loans and
capital contributions made by the Company from time to time to each Direct
Affiliate set forth on Schedule VI hereto provided the sum of (a) the aggregate
outstanding principal amount of all loans to such Direct Affiliate, (b) the
aggregate outstanding capital contributions to such Direct Affiliate, and (c)
the aggregate obligations of such Direct Affiliate guaranteed by the Company
shall not exceed the amount set forth opposite the name of such Direct Affiliate
on Schedule VI hereto.
"Existing Indebtedness" shall mean the Company's outstanding indebtedness
owing to the Lender pursuant to lines of credit made available by the Lender to
the Company prior to the Closing Date.
5
<PAGE>
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal fund 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 fund brokers of recognized standing selected by the Lender.
"Fixed Rate" shall mean a rate of interest per annum quoted to the Company
by the Lender in its discretion, at approximately 11:00 a.m., New York City
time, on the Borrowing Date of a proposed Fixed Rate Loan. Such quoted rate
shall be the fixed rate applicable to Fixed Rate Loan made by the Lender on the
requested date for such Fixed Rate Loan in the specified amount and for the
period commencing on the requested date and ending on the Term Loan Maturity
Date. Notwithstanding any other provision of this Agreement, the rate so quoted
by the Lender shall be determined in the sole discretion of the Lender by
reference to such factors and considerations as the Lender shall deem relevant.
"Fixed Rate Loan" shall mean the Term Loan at such time as it is made/or
being maintained at the rate of interest based upon the Fixed Rate.
"Foreign Subsidiary" shall mean any Subsidiary of the Company other than a
Domestic Subsidiary.
"Generally Accepted Accounting Principles" shall mean those generally
accepted accounting principles in the United States of America, as in effect
from time to time.
"Governmental Authority" shall mean any nation or government, any state,
province, city or municipal entity or other political subdivision thereof, and
any governmental, executive, legislative, judicial, administrative or regulatory
agency, department, authority, instrumentality, commission, board or similar
body, whether federal, state, provincial, territorial, local or foreign.
"Guarantor" shall mean any Subsidiary of the Company which has executed a
Guaranty.
"Guaranty" shall mean, collectively, the Unlimited Corporate Guaranty and
the Limited Corporate Guaranty.
"Hazardous Materials" shall mean any explosives, radioactive materials, or
other materials, wastes, substances, or chemicals regulated as toxic hazardous
or as a pollutant, contaminant or waste under any applicable Environmental Law.
"Hedging Agreement" shall mean any interest rate swap, collar, cap, floor
or forward rate agreement or other agreement regarding the hedging of interest
rate risk exposure executed in connection with hedging the interest rate
exposure of the Company or any of its Subsidiaries and
6
<PAGE>
any confirming letter executed pursuant to such agreement, all as amended,
supplemented, restated or otherwise modified from time to time.
"Indebtedness" shall mean, without duplication, as to any Person or Persons
(a) indebtedness for borrowed money; (b) indebtedness for the deferred purchase
price of property or services; (c) indebtedness evidenced by bonds, debentures,
term notes or other similar instruments; (d) obligations and liabilities secured
by a Lien upon property owned by such Person, whether or not owing by such
Person and even though such Person has not assumed or become liable for the
payment thereof; (e) obligations and liabilities directly or indirectly
guaranteed by such Person; (f) obligations or liabilities created or arising
under any conditional sales contract or other title retention agreement with
respect to property used and/or acquired by such Person; (g) obligations of such
Person as lessee under Capital Leases; (h) net liabilities of such Person under
Hedging Agreements and foreign currency exchange agreements, as calculated in
accordance with accepted practice; (i) all obligations of such Person in respect
of bankers' acceptance; and (j) all obligations, contingent or otherwise of such
Person as an account party or applicant in respect of letters of credit.
"Interest Coverage Ratio" shall mean, for any period, the ratio of (a) EBIT
to (b) Interest Expense.
"Interest Expense" shall mean the gross interest expense of the Company
determined in accordance with Generally Accepted Accounting Principles applied
on a consistent basis and calculated as of the end of each applicable fiscal
quarter for the four fiscal quarter period then ended.
"Interest Payment Date" shall mean (a) as to any Alternate Base Rate Loan
and any Fixed Rate Loan, the last day of each calendar month during the term
hereof; (b) as to any Adjusted Libor Loan, with respect to which the Company has
selected an Interest Period of one, two or three months, the last day of the
Interest Period for such Adjusted Libor Loan; (c) as to any Adjusted Libor Loan,
with respect to which the Company has selected an Interest Period of six, nine
or twelve months, the date which is three months from the first date of such
Interest Period and the last day of each three month period thereafter and the
last day of such Interest Period; and (d) as to any Loan, the date such Loan is
paid in full or in part.
"Interest Period" shall mean with respect to any Adjusted Libor Loan:
(a) initially, the period commencing on the date such Adjusted Libor
Loan is made and ending one, two, three, six, nine or twelve months
thereafter, as selected by the Company in its notice of borrowing or in its
notice of conversion from an Alternate Base Rate Loan provided, in each
case, in accordance with the terms of Articles II and III hereof; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Adjusted Libor Loan and ending
one, two, three, six, nine or
7
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twelve months thereafter, as selected by the Company by irrevocable written
notice to the Lender not later than 11:00 a.m. New York, New York time
three Business Days prior to the last day of the then current Interest
Period with respect to such Adjusted Libor Loan; provided, however, that
all of the foregoing provisions relating to Interest Periods are subject to
the following:
(i) if any Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(ii) if the Company shall fail to give notice as provided in
clause (b) above, the Company shall be deemed to have requested
conversion of the affected Adjusted Libor Loan to an Alternate Base
Rate Loan on the last day of the then current Interest Period with
respect thereto;
(iii) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month;
(iv) no more than four (4) Interest Periods may exist at any one
time; and
(v) the Company shall select Interest Periods so as not to
require a payment or prepayment of any Adjusted Libor Loan during an
Interest Period for such Adjusted Libor Loan.
"Interest Rate Margin" shall mean (a) with respect to each Adjusted Libor
Loan, the percentage set forth below under the heading "LIBOR Margin" opposite
the applicable ratio and (b) with respect to each Alternate Base Rate Loan, the
percentage set forth below under the heading "ABR Margin" opposite the
applicable ratio.
Total Unsubordinated
Liabilities to LIBOR Margin ABR Margin
EBITDA (360 day basis) (360 day basis)
- ------ --------------- ---------------
Less than 1.25:1.00 1.25% 0%
Greater than or equal to
1.25:1.00 but less than
1.50:1.00 1.50% 0%
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Greater than or equal to
1.50:1.00 but less than
1.75:1:00 1.75% 0%
Greater than or equal to
1.75:1:00 2.00% .25%
Notwithstanding the foregoing, during the period commencing the Closing Date and
ending on the fifth Business Day following the date of delivery of the financial
statements to the Lender for the fiscal quarter ending June 30, 1999 (a) the
Interest Rate Margin with respect to each Adjusted Libor Loan shall be 1.50% per
annum, and (b) the Interest Rate Margin with respect to each Alternate Base Rate
Loan shall be 0% per annum. The Interest Rate Margin will be set or reset
quarterly with respect to each Loan on the date which is five Business Days
following the date of receipt by the Lender of the financial statements referred
to in Section 6.03(a) or Section 6.03(b), as applicable, together with a
certificate of the Chief Financial Officer of the Company certifying the ratio
of Total Unsubordinated Liabilities to EBITDA and setting forth the calculation
thereof in detail; provided, however, if any such financial statement and
certificate are not received by the Lender within the time period required
pursuant to Section 6.03(a) or Section 6.03(b), as the case may be, the Interest
Rate Margin will be set or reset, unless the rate of interest specified in
Section 3.01(d) is in effect, based on a ratio of Total Unsubordinated
Liabilities to EBITDA of greater than 1.75:1.00 from the date such financial
statement and certificate were due until the date which is five Business Days
following the receipt by the Lender of such financial statements and
certificate, and provided, further, that the Lender shall not in any way be
deemed to have waived any Default or Event of Default, including, without
limitation, an Event of Default resulting from the failure of the Company to
comply with Section 7.13 of this Agreement, or any rights or remedies hereunder
or under any other Loan Document in connection with the foregoing proviso.
During the occurrence and continuance of an Event of Default, no downward
adjustment, and only upward adjustments, shall be made to the Interest Rate
Margin.
"Lender" shall have the meaning set forth in the preamble hereto.
"Lien" shall mean any lien (statutory or otherwise), security interest,
mortgage, deed of trust, pledge, charge, conditional sale, title retention
agreement, Capital Lease or other encumbrance or similar right of others, or any
agreement to give any of the foregoing.
"Limited Corporate Guaranty" shall mean the Limited Corporate Guaranty in
the form attached hereto as C-2 to be executed and delivered by each Domestic
Subsidiary which is not directly or indirectly wholly-owned by the Company on
the Closing Date and thereafter by each such Domestic Subsidiary of the Company
pursuant to Section 6.13, as the same may hereafter be amended, restated,
supplemented or otherwise modified from time to time.
"Loan Documents" shall mean, collectively, this Agreement, the Notes, the
Guaranty and the Pledge Agreement and each other agreement executed in
connection with the transactions
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contemplated hereby or thereby, as each of the same may hereafter be amended,
restated, supplemented or otherwise modified from time to time.
"Loans" shall mean, collectively, the Revolving Credit Loans and the Term
Loan.
"Material Adverse Effect" shall mean a material adverse effect upon (a) the
business, operations, property, prospects or condition (financial or otherwise)
of the Company or the Company and its Subsidiaries taken as a whole, or (b) the
ability of the Company or any Guarantor to perform in any material respect any
material obligations under any Loan Document to which it is a party.
"Material Contract" shall mean each contract, instrument or agreement (a)
to which the Company or any Subsidiary is a party which is material to the
business, operations or condition (financial or otherwise), prospects, or
properties of the Company or the Company and its Subsidiaries taken as a whole,
or (b) which requires the payment during the term thereof in excess of $250,000.
"Net Income" shall mean, for any period, the net income (or net loss) of
the Company for such period determined in accordance with Generally Accepted
Accounting Principles applied on a consistent basis.
"New Direct Affiliate" shall mean a Direct Affiliate formed, acquired or
established after the Closing Date.
"Notes" shall mean, collectively, the Revolving Credit Note and the Term
Note.
"Obligations" shall mean all obligations, liabilities and indebtedness of
the Company to the Lender, whether now existing or hereafter created, absolute
or contingent, direct or indirect, due or not, whether created directly or
acquired by assignment or otherwise, arising under or relating to this
Agreement, the Notes or any other Loan Document including, without limitation,
all obligations, liabilities and indebtedness of the Company with respect to the
principal of and interest on the Loans, and the obligations arising under
Hedging Agreements with the Lender and all fees, costs, expenses and indemnity
obligations of the Company hereunder and under any other Loan Document.
"Payment Office" shall mean the Lender's office located at 395 North
Service Road, Melville, New York 11747 or such other office as the Lender may
designate from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Liens" shall mean the Liens specified in clauses (a) through (h)
of Section 7.01.
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"Person" shall mean any natural person, corporation, limited liability
company, limited liability partnership, business trust, joint venture,
association, company, partnership or Governmental Authority.
"Plan" shall mean any multi-employer or single-employer plan defined in
Section 4001 of ERISA, which covers, or at any time during the five calendar
years preceding the date of this Agreement covered, employees of the Company or
an ERISA Affiliate on account of such employees' employment by the Company or an
ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement, substantially in the
form of Exhibit D attached hereto, to be executed and delivered on the Closing
Date by the Company with respect to the outstanding capital stock of each
Foreign Subsidiary of the Company and thereafter by the Company and/or its
Domestic Subsidiaries pursuant to Section 6.13 with respect to the outstanding
capital stock of each Foreign Subsidiary created or acquired after the Closing
Date, as the same may hereafter be amended, restated, supplemented or otherwise
modified from time to time.
"Prime Rate" shall mean the rate per annum announced by the Lender from
time to time as its prime rate in effect at its principal office, each change in
the Prime Rate shall be effective on the date such change is announced to become
effective.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan as to which the 30 day notice requirement has not
been waived by the PBGC.
"Reserve Adjusted Libor" shall mean with respect to the Interest Period
pertaining to an Adjusted Libor Loan, the rate per annum equal to the product
(rounded upwards to the next higher 1/16 of one percent) of (a) the annual rate
of the interest at which Dollar deposits of an amount comparable to the amount
of such Loan and for a period equal to the Interest Period applicable thereto
are offered to the Lender in immediately available funds in the London interbank
market for eurodollars at approximately 11:00 A.M. (London time) on the second
Business Day prior to the commencement of such Interest Period, multiplied by
(b) the Eurocurrency Reserve Requirement.
"Revolving Credit Commitment" shall mean the Lender's obligation to make
Revolving Credit Loans to the Company in an aggregate amount not to exceed
$6,000,000, as such amount may be adjusted in accordance with the terms of this
Agreement.
"Revolving Credit Commitment Period" shall mean the period from and
including the Closing Date to, but not including, the Revolving Credit
Commitment Termination Date or such earlier date as the Revolving Credit
Commitment to extend Revolving Credit Loans shall terminate as provided herein.
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<PAGE>
"Revolving Credit Commitment Termination Date" shall mean the third
anniversary of the Closing Date.
"Revolving Credit Loans" shall have the meaning set forth in Section
2.01(a).
"Revolving Credit Note" shall have the meaning set forth in Section 2.02.
"Solvent" shall mean with respect to any Person as of the date of
determination thereof that (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise," as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required on its debts as such debts become absolute
and matured, (c) such Person will not have as of such date, an unreasonably
small amount of capital with which to conduct its business, and (d) such Person
will be able to pay its debts as they mature.
"Subordinated Indebtedness" shall mean all debt which is subordinated in
right of payment to the prior final and indefeasible payment in full of the
obligations of the Company to the Lender hereunder and under any other Loan
Document on terms satisfactory to and approved in writing by the Lender.
"Subsidiaries" shall mean with respect to any Person any corporation,
association or other business entity more than 50% of the voting stock or other
ownership interests (including, without limitation, membership interests in a
limited liability company) of which is at the time owned or controlled, directly
or indirectly, by such Person or one or more of its Subsidiaries or a
combination thereof.
"Tangible Net Worth" shall mean (a) total assets of the Company, except
that there shall be excluded therefrom (to the extent included therein) (i) all
obligations due to the Company from an Affiliate other than receivables due from
any Affiliate of the Company which are due within 150 days of the date of the
related invoice and are not greater than 60 days past due, (ii) all intangible
assets including, without limitation, organizational expenses, patents,
trademarks, copyrights, goodwill, covenants not to compete, research and
development costs, training costs and all unamortized debt discount and deferred
charges, and (iii) investments in unconsolidated Affiliates less (b) total
liabilities of the Company, in each case, determined in accordance with
Generally Accepted Accounting Principles applied on a consistent basis.
"Taxes" shall have the meaning set forth in Section 3.09.
"Term Loan" shall have the meaning set forth in Section 2.03.
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<PAGE>
"Term Loan Commitment" shall mean the Lender's obligation to make the Term
Loan on the Closing Date to the Company in an amount equal to $4,000,000.
"Term Loan Maturity Date" shall mean June 30, 2004.
"Term Note" shall have the meaning set forth in Section 2.04.
"Total Commitment" shall mean, at any time, the aggregate of the
Commitments in effect at such time which, initially, shall be $10,000,000.
"Total Unsubordinated Liabilities" shall mean all items which, in
accordance with Generally Accepted Accounting Principles applied on a consistent
basis, would properly be included on the liability side of the balance sheet
(other than capital stock, capital surplus, treasury stock, retained earnings
and Subordinated Indebtedness), as of the date on which the amount of Total
Unsubordinated Liabilities is to be determined, of the Company, computed in
accordance with Generally Accepted Accounting Principles applied on a consistent
basis.
"Type" shall mean as to any Loan its status as an Alternate Base Rate Loan,
an Adjusted Libor Loan or a Fixed Rate Loan.
"Unfunded Current Liability" of any Plan shall mean the amount, if any, by
which the present value of the accrued benefits under the Plan as of the close
of its most recent plan year exceeds the fair market value of the assets
allocable thereto, determined in accordance with Section 412 of the Code.
"Unlimited Corporate Guaranty" shall mean the Unlimited Corporate Guaranty
in the form attached hereto as Exhibit C-1 to be executed and delivered by each
direct and indirect wholly-owned Domestic Subsidiary of the Company on the
Closing Date and thereafter by each such Domestic Subsidiary pursuant to Section
6.13, as the same may hereafter be amended, restated, supplemented or otherwise
modified from time to time.
"Unused Fee Rate" shall mean the percentage set forth below opposite the
applicable ratio.
Total Unsubordinated Unused Fee Rate
Liabilities to EBITDA (360 day basis)
- --------------------- ---------------
Less than 1.50:1.00 .250%
Greater than or equal to 1.50:1.00 but less
than 1.75:1.00 .375%
Greater than or equal to 1.75:1.00 .500%
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<PAGE>
Notwithstanding the foregoing, during the period commencing the Closing Date and
ending on the fifth Business Day following the date of the delivery of the
financial statements for the fiscal quarter ending June 30, 1999, the Unused Fee
Rate shall be .250%. The Unused Fee Rate will be set or reset quarterly on the
date which is five Business Days following the date of receipt by the Lender of
the financial statements referred to in Section 6.03(a) or Section 6.03(b), as
applicable, together with a certificate of the Chief Financial Officer of the
Company certifying the ratio of Total Unsubordinated Liabilities to EBITDA and
setting forth the calculation thereof in detail; provided, however, if any such
financial statement and certificate are not received by the Lender within the
time period required pursuant to Section 6.03(a) or Section 6.03(b), as the case
may be, the Unused Fee Rate will be set or reset, based on a ratio of Total
Unsubordinated Liabilities to EBITDA of greater than 1.75:1.00 from the date
such financial statement and certificate were due until the date which is five
Business Days following the receipt by the Lender of such financial statements
and certificate, and provided, further, that the Lender shall not in any way be
deemed to have waived any Default or Event of Default, including without
limitation, an Event of Default resulting from the failure of the Company to
comply with Section 7.13 of this Agreement, or any rights or remedies hereunder
or under any other Loan Document in connection with the foregoing proviso.
During the occurrence and continuance of an Event of Default, no downward
adjustment, and only upward adjustments, shall be made to the Unused Fee Rate.
SECTION 1.02. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, pronouns stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and the neuter. Except as otherwise herein
specifically provided, each accounting term used herein shall have the meaning
given to it under Generally Accepted Accounting Principles. The term "including"
shall not be limited or exclusive, unless specifically indicated to the
contrary. The word "will" shall be construed to have the same meaning in effect
as the word "shall". The words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole, including the
exhibits and schedules hereto, all of which are by this reference incorporated
into this Agreement.
ARTICLE II
LOANS
SECTION 2.01. Revolving Credit Loans. (a) Subject to the terms and
conditions, and relying upon the representations and warranties, set forth
herein, the Lender agrees to make loans (individually a "Revolving Credit Loan"
and, collectively, the "Revolving Credit Loans") to the Company from time to
time during the Revolving Credit Commitment Period up to but not exceeding at
any one time outstanding the amount of its Revolving Credit Commitment;
provided, however, that no Revolving Credit Loan shall be made if, after giving
effect to such Revolving Credit Loan, the Aggregate Outstandings would exceed
the Revolving Credit Commitment in effect at such time. During the Revolving
Credit Commitment Period, the Company may from
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<PAGE>
time to time borrow, repay and reborrow hereunder on or after the date hereof
and prior to the Revolving Credit Commitment Termination Date, subject to the
terms, provisions and limitations set forth herein. The Revolving Credit Loans
may be (i) Adjusted Libor Loans, (ii) Alternate Base Rate Loans or (iii) a
combination thereof.
(b) The Company shall give the Lender irrevocable written notice (or
telephonic notice promptly confirmed in writing) not later than 11:00 a.m., New
York, New York time, three Business Days prior to the date of each proposed
Adjusted Libor Loan under this Section 2.01 or prior to 11:00 a.m. New York, New
York time on the date of each proposed Alternate Base Rate Loan under this
Section 2.01. Such notice shall be irrevocable and shall specify (i) the amount
and Type of the proposed borrowing, (ii) the proposed use of the loan proceeds,
(iii) the initial Interest Period if an Adjusted Libor Loan, and (iv) the
proposed Borrowing Date. Except for borrowings which utilize the full remaining
amount of the Revolving Credit Commitment, each borrowing of an Alternate Base
Rate Loan shall be in an amount not less than $100,000 or, if greater, whole
multiples of $100,000 in excess thereof. Each borrowing of an Adjusted Libor
Loan shall be an amount not less than $500,000 or whole multiples of $100,000 in
excess thereof. Funding of all Loans shall be made in accordance with Section
3.11 of this Agreement.
(c) The Company shall have the right, upon not less than three Business
Days' prior written notice to the Lender to terminate the Revolving Credit
Commitment or from time to time to permanently reduce the amount of the
Revolving Credit Commitment; provided, however, that no such termination or
reduction shall be permitted if, after giving effect thereto and to any
prepayments of the Revolving Credit Loans made on the effective date thereof,
the Aggregate Outstandings would exceed the Revolving Credit Commitment as then
reduced; provided, further, that any such termination or reduction requiring
prepayment of any Adjusted Libor Loan shall be made only on the last day of the
Interest Period with respect thereto or on the date of payment in full of all
amounts owing pursuant to Section 3.08 as a result of such termination or
reduction. Any such reduction shall be in the amount of $500,000 or whole
multiples of $100,000 in excess thereof, and shall reduce permanently the amount
of the Revolving Credit Commitment then in effect.
(d) The agreement of the Lender to make Revolving Credit Loans pursuant to
this Section 2.01 shall automatically terminate on the Revolving Credit
Commitment Termination Date. Upon such termination, the Company shall
immediately repay in full the principal amount of the Revolving Credit Loans
then outstanding, together with all accrued interest thereon and all other
amounts due and payable hereunder.
SECTION 2.02. Revolving Credit Note. The Revolving Credit Loans made by the
Lender shall be evidenced by a promissory note of the Company (the "Revolving
Credit Note"), substantially in the form attached hereto as Exhibit A,
appropriately completed, duly executed and delivered on behalf of the Company
and payable to the order of the Lender in a principal amount equal to the
Revolving Credit Commitment of the Lender. The Revolving Credit Note shall (a)
be dated the Closing Date, (b) be stated to mature on the Revolving Credit
Commitment
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Termination Date, and (c) bear interest from the date thereof until paid in full
on the unpaid principal amount thereof from time to time outstanding as provided
in Section 3.01. The Lender is authorized to record the date, Type and amount of
each Revolving Credit Loan and the date and amount of each payment or prepayment
of principal of each Revolving Credit Loan in the Lender's records or on the
grid schedule annexed to the Revolving Credit Note; provided, however, that the
failure of the Lender to set forth each such Revolving Credit Loan, payment and
other information shall not in any manner affect the obligation of the Company
to repay each Revolving Credit Loan made by the Lender in accordance with the
terms of its Revolving Credit Note and this Agreement. The Revolving Credit
Note, the grid schedule and the books and records of the Lender shall constitute
presumptive evidence of the information so recorded absent manifest error.
SECTION 2.03. Term Loan. Subject to the terms and conditions hereof, the
Lender agrees to make a term loan (the "Term Loan") to the Company on the
Closing Date in an amount not to exceed the Term Loan Commitment. The Company
shall give the Lender irrevocable written notice (or telephonic notice promptly
confirmed in writing) not later than 11:00 a.m. New York, New York time on the
Closing Date specifying the amount to be borrowed, which amount shall equal the
Term Loan Commitment. The Term Loan shall initially be an Alternate Base Rate
Loan. Subject to the preceding sentence, the Term Loan may, at the election of
the Company, consist of (i) Adjusted Libor Loans, (ii) Alternate Base Rate
Loans, (iii) a combination of Adjusted Libor Loans and Alternate Base Rate Loan
or (iv) subject to Section 3.01(i), a Fixed Rate Loan. The Term Loan Commitment
shall terminate upon funding of the Term Loan on the Closing Date.
SECTION 2.04. Term Note. The Term Loan made by the Lender shall be
evidenced by a promissory note of the Company, substantially in the form of
Exhibit B, with appropriate insertions (the "Term Note") payable to the order of
the Lender and representing the obligation of the Company to pay the unpaid
principal amount of the Term Loan of the Lender with interest thereon as
prescribed in Section 3.01. The Lender is authorized to record the Type and the
date and amount of each payment or prepayment of principal thereof in the
Lender's records or on the grid schedule annexed to the Term Note; provided,
however, that the failure of the Lender to set forth each payment and other
information shall not in any manner affect the obligation of the Company to
repay the Term Loan in accordance with the terms of the Term Note and this
Agreement. The Term Note, the grid schedule and the books and records of the
Lender shall constitute presumptive evidence of the information so recorded
absent manifest error. The Term Note shall (a) be dated the Closing Date, (b) be
stated to mature on the Term Loan Maturity Date and (c) be payable as to
principal in sixty consecutive monthly installments of $66,667 commencing July
31, 1999; provided that the final installment on the Term Loan Maturity Date
shall be in an amount equal to the remaining principal amount outstanding on the
Term Loan Maturity Date. Repayments and prepayments of the Term Loan may not be
reborrowed. The Term Note shall bear interest from the date thereof until paid
in full on the unpaid principal amount thereof from time to time outstanding at
the applicable interest rate per annum determined as provided in, and payable as
specified in, Section 3.01.
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ARTICLE III
PROVISIONS RELATING TO ALL EXTENSIONS OF CREDIT;
FEES AND PAYMENTS
SECTION 3.01. Interest Rate; Continuation and Conversion of Loans.
(a) Each Alternate Base Rate Loan shall bear interest for the period from
the date thereof on the unpaid principal amount thereof at a fluctuating rate
per annum equal to the Alternate Base Rate plus the applicable Interest Rate
Margin.
(b) Each Adjusted Libor Loan (other than a portion of the principal amount
of the Revolving Credit Loans equal to the principal amount of the Existing
Adjusted Libor Loan) shall bear interest for the Interest Period applicable
thereto on the unpaid principal amount thereof at a rate per annum equal to the
Reserve Adjusted Libor determined for each Interest Period thereof in accordance
with the terms hereof plus the applicable Interest Rate Margin. A portion of the
principal amount of the Revolving Credit Loans equal to the principal amount of
the Existing Adjusted Libor Loan shall bear interest at a rate per annum equal
to 6.75% for the period commencing June 17, 1999 to July 19, 1999.
(c) The Fixed Rate Loan shall bear interest for the period from the date
thereof on the unpaid principal amount thereof at a fixed rate per annum equal
to the Fixed Rate.
(d) Upon the occurrence and during the continuance of an Event of Default
the outstanding principal amount of the Loans (excluding any defaulted payment
of principal accruing interest in accordance with clause (e) below), shall, at
the option of the Lender, bear interest payable on demand at a rate of interest
2% per annum in excess of the interest rate otherwise then in effect.
(e) If the Company shall default in the payment of the principal of or
interest on any portion of any Loan or any other amount becoming due hereunder,
whether interest, fees, expenses or otherwise, the Company shall pay interest on
such defaulted amount accruing from the date of such default (without reference
to any period of grace) up to and including the date of actual payment (after as
well as before judgment) at a rate of 2% per annum in excess of the rate
otherwise in effect or, if no rate is in effect, 2% per annum in excess of the
Alternate Base Rate.
(f) The Company may elect from time to time to convert outstanding Loans
from Adjusted Libor Loans to Alternate Base Rate Loans by giving the Lender at
least three Business Day's prior irrevocable written notice of such election,
provided that any such conversion of Adjusted Libor Loans shall only be made on
the last day of an Interest Period with respect thereto or upon the date of
payment in full of any amounts owing pursuant to Section 3.08 as a result of
such conversion. The Company may elect from time to time to convert outstanding
Loans from Alternate Base Rate Loans to Adjusted Libor Loans by giving the
Lender irrevocable
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written notice of such election not later than 11:00 a.m. New York, New York
time, three Business Days prior to the date of the proposed conversion. All or
any part of outstanding Alternate Base Rate Loans may be converted as provided
herein, provided that each conversion shall be in the principal amount of
$500,000 or whole multiples of $100,000 in excess thereof, and further provided
that no Event of Default shall have occurred and be continuing. Any conversion
to or from Adjusted Libor Loans hereunder shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, the aggregate
principal amount of each Adjusted Libor Loan having the same Interest Period
shall not be less than $500,000.
(g) Any Adjusted Libor Loan in a minimum principal amount of $500,000 may
be continued as such upon the expiration of an Interest Period with respect
thereto by compliance by the Company with the notice provisions contained in the
definition of Interest Period; provided, that no Adjusted Libor Loan may be
continued as such when any Event of Default has occurred and is continuing, but
shall be automatically converted to an Alternate Base Rate Loan on the last day
of the Interest Period in effect when the Lender is notified, or otherwise has
actual knowledge, of such Event of Default.
(h) If the Company shall fail to select the duration of any Interest Period
for any Adjusted Libor Loan in accordance with the definition of "Interest
Period" set forth in Section 1.01, the Company shall be deemed to have selected
an Interest Period of one month.
(i) The Company may elect at any time during the Exercise Period to convert
the full outstanding principal amount of the Term Loan to a Fixed Rate Loan,
subject to availability thereof as set forth in the definition thereof, by
giving the Lender prior irrevocable written notice of such election not later
than 11:00 a.m., New York, New York time on the date of the proposed conversion;
provided, however, (i) no conversion may be requested or funded if an Event of
Default shall have occurred and be continuing and (ii) no Adjusted Libor Loan
may be converted to a Fixed Rate Loan unless the date of conversion is the last
day of the Interest Period applicable to such Adjusted Libor Loan.
(j) No Loan may be converted to or continued as an Adjusted Libor Loan with
an Interest Period that extends beyond (i) the Revolving Credit Commitment
Termination Date, with respect to Revolving Credit Loans, or (ii) the Term Loan
Maturity Date with respect to the Term Loan. No Fixed Rate Loan can be converted
at the request of the Company to a Term Loan of another Type.
(k) Anything in this Agreement or in any Note to the contrary
notwithstanding, the obligation of the Company to make payments of interest
shall be subject to the limitation that payments of interest shall not be
required to be paid to the Lender to the extent that the charging or receipt
thereof would not be permissible under the law or laws applicable to the Lender
limiting the rates of interest that may be charged or collected by the Lender.
In each such event payments of interest required to be paid to the Lender shall
be calculated at the highest rate permitted by applicable law until such time as
the rates of interest required hereunder may lawfully be charged
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and collected by the Lender. If the provisions of this Agreement or any Note
would at any time otherwise require payment by the Company to the Lender of any
amount of interest in excess of the maximum amount then permitted by applicable
law, the interest payments to the Lender shall be reduced to the extent
necessary so that the Lender shall not receive interest in excess of such
maximum amount. To the extent that, pursuant to the foregoing sentence, the
Lender shall receive interest payments hereunder or under any Note in an amount
less than the amount otherwise provided herein or in any Note, such deficit
(hereinafter called the "Interest Deficit") will accumulate and will be carried
forward (without interest) until the termination of this Agreement. Interest
otherwise payable to the Lender hereunder and under such Note for any subsequent
period shall be increased by such maximum amount of the Interest Deficit that
may be so added without causing the Lender to receive interest in excess of the
maximum amount then permitted by applicable law. The amount of the Interest
Deficit relating to any Note at the time of complete payment of such Note and
termination of the Commitments shall be cancelled and not paid.
(l) Interest on each Loan shall be payable in arrears on each Interest
Payment Date and shall be calculated on the basis year of 360 days and shall be
payable for the actual days elapsed. Any rate of interest on the Loans or other
Obligations which is computed on the basis of the Alternate Base Rate shall
change when and as the Alternate Base Rate changes in accordance with the
definition thereof. Each determination by the Lender of an interest rate or fee
hereunder shall, absent manifest error, be conclusive and binding for all
purposes.
SECTION 3.02. Use of Proceeds. The Term Loan shall be used solely to pay
the Existing Indebtedness on the Closing Date. The proceeds of the Revolving
Credit Loans shall be used solely (i) to pay the Existing Indebtedness on the
Closing Date, (ii) for working capital purposes of the Company, (iii) to
purchase shares of the Company's outstanding capital stock from time to time;
provided, however, (x) the aggregate purchase price of all such shares purchased
during the term of this Agreement shall not exceed $1,000,000 and (y) the
aggregate number of such shares purchased by the Company during the term of this
Agreement (adjusted as appropriate, in the event of any split, reclassification
or other adjustments to the capital stock of the Company after the date hereof)
shall not exceed 100,000, (iv) to fund the purchase price of acquisitions
permitted pursuant to Section 7.12, and (v) to fund loans and investments in
Affiliates permitted pursuant to Section 7.06(c) and 7.06(d).
SECTION 3.03. Prepayments.
(a) The Company shall have the right at any time and from time to time to
prepay any Alternate Base Rate Loan in whole or in part, without premium or
penalty, upon the written notice to the Lender (or telephonic notice promptly
confirmed in writing) not later than 11:00 a.m. New York, New York time on the
Business Day of the proposed date of prepayment. The Company shall also have the
right at any time and from time to time to prepay any Fixed Rate Loan or
Adjusted Libor Loan, in whole or in part, without premium or penalty, (except as
provided in Section 3.08 hereof) upon written notice to the Lender (or
telephonic notice promptly confirmed in writing) not later than 11:00 a.m. New
York, New York time, three Business Days
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before the date of prepayment. Each notice shall be irrevocable and shall
specify the Loan to be prepaid, the date and amount of prepayment and whether
such prepayment is of Adjusted Libor Loans, Fixed Rate Loans or Alternate Base
Rate Loans or a combination thereof, and if a combination thereof, the amount of
prepayment allocable to each. If such notice is given, the Company shall make
such prepayment, and the amount specified in such notice shall be due and
payable, on the date specified therein. Each partial prepayment pursuant to this
Section 3.03 shall be in a principal amount of $500,000 or whole multiples of
$100,000 in excess thereof with respect to any Fixed Rate Loan or Adjusted Libor
Loan, and in a principal amount of $100,000 or whole multiples of $100,000 in
excess thereof with respect to any Alternate Base Rate Loan.
(b) Each prepayment of principal of a Loan pursuant to this Section 3.03
shall be accompanied by accrued interest to the date prepaid on the amount
prepaid. All partial prepayments of the Term Loan, shall be applied to the
remaining installments of principal thereof in inverse order of maturity.
Prepayments of the Term Loan may not be reborrowed. Unless otherwise directed by
the Company pursuant to Section 3.03(a), partial prepayments of any Loan (other
than prepayments of the Term Loan accruing interest at the Fixed Rate) shall be
applied first to outstanding Alternate Base Rate Loans and then to Adjusted
Libor Loans having the shortest remaining Interest Periods.
SECTION 3.04. Fees.
(a) The Company agrees to pay to the Lender a commitment fee on the average
daily unused portion of the Revolving Credit Commitment from the date of this
Agreement until the Revolving Credit Commitment Termination Date at a rate per
annum equal to the Unused Fee Rate, based on a year of 360 days, payable
quarterly in arrears on the first day of July, October, January and April of
each year commencing October 1, 1999, on the Revolving Credit Commitment
Termination Date, and on each date the Revolving Credit Commitment is
permanently reduced in whole or in part.
(b) The Company agrees to pay to the Lender a nonrefundable structuring fee
of $25,000 which shall be paid in full on the Closing Date.
SECTION 3.05. Inability to Determine Interest Rate. In the event that the
Lender shall have determined (which determination shall be conclusive and
binding upon the Company) that, by reason of circumstances affecting the London
interbank market, adequate and reasonable means do not exist for ascertaining
the Reserve Adjusted Libor applicable pursuant to Section 3.01(b) for any
requested Interest Period with respect to (a) the making of an Adjusted Libor
Loan, (b) an Adjusted Libor Loan that will result from the requested conversion
of an Alternate Base Rate Loan into an Adjusted Libor Loan, or (c) the
continuation of an Adjusted Libor Loan beyond the expiration of the then current
Interest Period with respect thereto, the Lender shall forthwith give notice by
telephone of such determination, promptly confirmed in writing, to the Company
of such determination. Until the Lender notifies the Company that the
circumstances
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giving rise to the suspension described herein no longer exist, the Company
shall not have the right to request or continue an Adjusted Libor Loan or to
convert an Alternate Base Rate Loan to an Adjusted Libor Loan.
SECTION 3.06. Illegality. Notwithstanding any other provisions herein, if
any introduction of or change in any law, regulation, treaty or directive or in
the interpretation or application thereof shall make it unlawful for the Lender
to make or maintain a Fixed Rate Loan or Adjusted Libor Loans as contemplated by
this Agreement, the Lender shall forthwith give notice by telephone of such
circumstances, promptly confirmed in writing, and (a) the commitment of the
Lender to make and to allow conversion to or continuations of Adjusted Libor
Loans or conversion to a Fixed Rate Loan shall forthwith be cancelled for the
duration of such illegality and (b) the Loans then outstanding as Adjusted Libor
Loans or a Fixed Rate Loan, as applicable, if any, shall be converted
automatically to Alternate Base Rate Loans on the next succeeding last day of
each Interest Period applicable to any Adjusted Libor Loan or, with respect to
any Adjusted Libor Loan or Fixed Rate Loan, within such earlier period as may be
required by law. The Company shall pay to the Lender, upon demand, any
additional amounts required to be paid pursuant to Section 3.08 hereof.
SECTION 3.07. Increased Costs. (a) In the event that any introduction of or
change in any applicable law, regulation, treaty, order, directive or in the
interpretation or application thereof (including, without limitation, any
request, guideline or policy, whether or not having the force of law, of or from
any central bank or other governmental authority, agency or instrumentality and
including, without limitation, Regulation D), by any authority charged with the
administration or interpretation thereof shall occur, which:
(i) shall subject the Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note, or any Loan, or change the basis of
taxation of payments to the Lender of principal, interest, fees or any
other amount payable hereunder (other than any tax that is measured with
respect to the overall net income of the Lender or lending office of the
Lender and that is imposed by the United States of America, or any
political subdivision or taxing authority thereof or therein, or by any
jurisdiction in which the Lender's lending office is located, or by any
jurisdiction in which the Lender is organized, has its principal office or
is managed and controlled); or
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement (whether or not having the
force of law) against assets held by, or deposits or other liabilities in
or for the account of, advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of the Lender; or
(iii) shall impose on the Lender any other condition, or change
therein;
and the result of any of the foregoing is to increase the cost to the Lender of
making, renewing or maintaining or participating in advances or extensions of
credit hereunder or to reduce any
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amount receivable hereunder, in each case by an amount which the Lender deems
material, then, in any such case, the Company shall pay the Lender, upon demand,
such additional amount or amounts as the Lender shall have determined will
compensate the Lender for such increased costs or reduction.
(b) If the Lender shall have determined that the adoption of any applicable
law, rule or regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Lender (or any lending office of
the Lender) or the Lender's holding company, with any request or directive
regarding capital adequacy (whether or not having the force of the law) of any
such authority, central bank or comparable agency, has or would have the effect
of reducing the rate of return on the Lender's capital or on the capital of the
Lender's holding company as a consequence of its obligations hereunder to a
level below that which the Lender could have achieved but for such adoption,
change or compliance (taking into consideration the Lender's policies and the
policies of the Lender's holding company with respect to capital adequacy) by an
amount deemed by the Lender to be material, then from time to time, the Company
shall pay to the Lender, the additional amount or amounts as the Lender shall
have determined will compensate the Lender or the Lender's holding company for
such reduction. The Lender's determination of such amounts shall be conclusive
and binding on the Company absent manifest error.
(c) A certificate of the Lender setting forth the amount or amounts payable
pursuant to Sections 3.07(a) and 3.07(b) above shall be conclusive absent
manifest error. The Company shall pay the Lender the amount shown as due on any
such certificate within five days after receipt thereof.
(d) In the event the Lender shall be entitled to compensation pursuant to
Section 3.07(a) or Section 3.07(b), it shall promptly notify the Company of the
event by reason of which it has become so entitled; provided, however, no
failure on the part of the Lender to demand compensation under clause (a) or
clause (b) above on one occasion shall constitute a waiver of its right to
demand compensation on any other occasion.
SECTION 3.08. Indemnity. The Company agrees to indemnify the Lender and to
hold the Lender harmless from any loss, cost or expense which the Lender may
sustain or incur, including, without limitation, interest or fees payable by the
Lender to lenders of funds obtained by it in order to maintain Adjusted Libor
Loans hereunder, as a consequence of (a) default by the Company in payment of
the principal amount of or interest on any Adjusted Libor Loan, (b) default by
the Company to accept or make a borrowing of an Adjusted Libor Loan or a
conversion into or continuation of an Adjusted Libor Loan after the Company has
requested such borrowing, conversion or continuation, (c) default by the Company
in making any prepayment of any Adjusted Libor Loan after the Company gives a
notice in accordance with Section 3.03 of this Agreement and/or (d) the making
of any payment or prepayment (whether mandatory or optional) of an Adjusted
Libor Loan or the making of any conversion of an Adjusted Libor Loan to an
Alternate
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Base Rate Loan on a day which is not the last day of the applicable Interest
Period with respect thereto. The Company further agrees to indemnify the Lender
and to hold the Lender harmless from any Consequential Loss which the Lender may
sustain or incur as a consequence of (a) default by the Company in payment of
the principal amount of or interest on any Fixed Rate Loan, (b) default by the
Company to accept or make a borrowing of a Fixed Rate Loan or a conversion into
a Fixed Rate Loan after the Company has requested such borrowing or conversion,
(c) default by the Company in making any prepayment of any Fixed Rate Loan after
the Company gives notice in accordance with Section 3.03 of this Agreement
and/or (e) the making of any payment or prepayment (whether mandatory or
optional) of any Fixed Rate Loan on a day other than the Term Loan Maturity
Date. A certificate of the Lender setting forth such amounts shall be conclusive
absent manifest error. The Company shall pay the Lender the amount shown as due
on any certificate within five days after receipt thereof.
SECTION 3.09. Taxes. All payments made by the Company under this Agreement
shall be made free and clear of, and without reduction for or on account of, any
present or future taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority, excluding income and franchise taxes imposed on
the Lender by (i) the United States of America or any political subdivision or
taxing authority thereof or therein, (ii) the jurisdiction under the laws of
which the Lender is organized or in which it has its principal office or is
managed and controlled or any political subdivision or taxing authority thereof
or therein, or (iii) any jurisdiction in which the Lender's lending office is
located or any political subdivision or taxing authority thereof or therein
(such non-excluded taxes being called "Taxes"). If any Taxes are required to be
withheld from any amounts payable to the Lender hereunder, or under the Notes,
the amount so payable to the Lender shall be increased to the extent necessary
to yield to the Lender (after payment of all Taxes and free and clear of all
liability in respect of such Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and the
Notes. Whenever any Taxes are payable by the Company, the Company shall promptly
send to the Lender, a certified copy of an original official receipt showing
payment thereof. If the Company fails to pay Taxes when due to the appropriate
taxing authority or fails to remit to the Lender the required receipts or other
required documentary evidence, the Company shall indemnify the Lender for any
incremental taxes, interest or penalties that may become payable by the Lender
as a result of any such failure together with any expenses payable by the Lender
in connection therewith.
SECTION 3.10. Payments. All payments (including prepayments) to be made by
the Company on account of principal, interest, fees and reimbursement
obligations shall be made without set-off or counterclaim and shall be made to
the Lender, at the Payment Office of the Lender in Dollars in immediately
available funds. The Lender may, in its sole discretion, directly charge
principal and interest payments due in respect of the Loans to the Company's
accounts at the Payment Office or other office of the Lender. Except as
otherwise provided in the definition of "Interest Period", if any payment
hereunder becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day, and, with
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respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
SECTION 3.11. Disbursement of Loans. The Lender shall make each Loan to be
made by it hereunder available to the Company at the Payment Office by crediting
the account of the Company with such amount and in like funds; provided,
however, that if the proceeds of any Loan or any portion thereof are to be used
to prepay outstanding Loans, then the Lender shall apply such proceeds for such
purpose to the extent necessary and credit the balance, if any, to the Company's
account.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to extend
the credit herein provided for, the Company represents and warrants to the
Lender that:
SECTION 4.01. Organization, Powers. The Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (b) has the corporate power and authority to own its properties and to
carry on its business as now being conducted, (c) is duly qualified to do
business in every jurisdiction wherein the conduct of its business or the
ownership of its properties are such as to require such qualification except
those jurisdictions in which the failure to be so qualified could not reasonably
be expected to have a Material Adverse Effect, and (d) has the corporate power
to execute, deliver and perform each of the Loan Documents to which it is a
party, including, without limitation, the power to obtain extensions of credit
hereunder and to execute and deliver the Notes. Each Subsidiary (a) is a
corporation, limited liability company or limited partnership duly organized,
validity existing and in good standing under the laws of its jurisdiction of
incorporation or formation, (b) has the requisite power and authority to own its
properties and to carry on its business as now being conducted, (c) is duly
qualified to do business in every jurisdiction wherein the conduct of its
business or the ownership of its properties are such as to require such
qualification except those jurisdictions in which the failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect, and (d) to
the extent such Subsidiary is a Guarantor, has the requisite power to execute,
deliver and perform each of the Loan Documents to which it is a party.
SECTION 4.02. Authorization of Borrowing, Enforceable Obligations. The
execution, delivery and performance by the Company of this Agreement, and the
other Loan Documents to which it is a party, the borrowings and the other
extensions of credit to the Company hereunder and the execution, delivery and
performance by each Guarantor of each Loan Document to which it is a party (a)
have been duly authorized by all requisite action, (b) will not violate or
require any consent (other than consents as have been made or obtained and which
are in full force and effect) under (i) any provision of law applicable to the
Company or any Guarantor, any rule or regulation of any Governmental Authority,
or the Certificate of
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Incorporation or By-laws of the Company or the Certificate of Incorporation or
By-laws (or other organizational documents) of any Guarantor or (ii) any order
of any court or other Governmental Authority binding on the Company or any
Guarantor or any indenture, agreement or other instrument to which the Company
or any Guarantor is a party, or by which the Company or any Guarantor or any of
its property is bound, and (c) will not be in conflict with, result in a breach
of or constitute (with due notice and/or lapse of time) a default under, any
such indenture, agreement or other instrument, or result in the creation or
imposition of any Lien, of any nature whatsoever upon any of the property or
assets of the Company or any Guarantor other than as contemplated by this
Agreement or the other Loan Documents. This Agreement and each other Loan
Document to which the Company or any Guarantor is a party constitutes a legal,
valid and binding obligation of the Company and each Guarantor, as the case may
be, enforceable against the Company and each Guarantor in accordance with its
terms except to the extent that enforcement may be limited by applicable
bankruptcy, reorganization, moratorium, insolvency and similar laws affecting
creditors' rights generally or by equitable principles of general application,
regardless of whether considered in a proceeding in equity or at law.
SECTION 4.03. Financial Condition. (a) The Company has heretofore furnished
to the Lender (i) the audited consolidated balance sheet of the Company and its
consolidated Subsidiaries and the related consolidated statements of income,
retained earnings and cash flow of the Company and its consolidated
Subsidiaries, audited by Arthur Andersen LLP, independent certified public
accountants, for the fiscal year ended September 30, 1998 and (ii) the unaudited
balance sheet of the Company and its consolidated Subsidiaries and the related
consolidated statements of income, retained earnings and cash flow of the
Company and its consolidated Subsidiaries for the six month period ended March
31, 1999. Such financial statements were prepared in conformity with Generally
Accepted Accounting Principles, applied on a consistent basis, and fairly
present the financial condition and the results of operations of the Company and
its consolidated Subsidiaries as of the date of such financial statements and
for the periods to which they relate and since September 30, 1998, no Material
Adverse Effect has occurred. The Company shall deliver to the Lender, a
certificate of the Chief Financial Officer of the Company to that effect on the
Closing Date. Other than obligations and liabilities arising in the ordinary
course of business since September 30, 1998, there are no obligations or
liabilities contingent or otherwise, of the Company or any of its consolidated
Subsidiaries which are not reflected or disclosed on such audited statements
other than obligations of the Company and of its consolidated Subsidiaries
incurred in the ordinary course of business (which shall be deemed to exclude
acquisitions by the Company or any consolidated Subsidiary of the business or
assets (including, without limitation, stock) of any Person).
(b) The Company, individually, and together with its consolidated
Subsidiaries, is Solvent and immediately after giving effect to each Loan and
each other extension of credit contemplated by this Agreement and the execution
of each Loan Document, will be Solvent.
(c) As of the Closing Date the assets of Global Payment Technologies
(Europe) Limited do not exceed five percent (5%) of the total consolidated
assets of the Company and its
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Subsidiaries. The revenues of Global Payment Technologies (Europe) Limited for
the fiscal quarter ended June 30, 1999 and the six month period then ended did
not exceed five percent (5%) of the total consolidated revenues of the Company
and its Subsidiaries for such quarter and period. The earnings of Global Payment
Technologies (Europe) Limited for the fiscal quarter ended June 30, 1999 and the
six month period then ended did not exceed five percent (5%) of the total
consolidated earnings of the Company and its Subsidiaries for such quarter and
period.
SECTION 4.04. Taxes. All assessed deficiencies resulting from Internal
Revenue Service examinations of the federal income tax returns of the Company
and each of its Subsidiaries have been discharged or reserved against in
accordance with Generally Accepted Accounting Principles. The Company and each
of its Subsidiaries has filed or caused to be filed all federal, state and local
tax returns which are required to be filed, and has paid or has caused to be
paid all taxes as shown on said returns or on any assessment received by them,
to the extent that such taxes have become due, except taxes which are being
contested in good faith and which are reserved against in accordance with
Generally Accepted Accounting Principles.
SECTION 4.05. Title to Properties. The Company and each of its Subsidiaries
has good title to its properties and assets reflected on the financial
statements referred to in Section 4.03 hereof, except for such properties and
assets as have been disposed of since the date of such financial statements as
no longer used or useful in the conduct of their respective businesses or as
have been disposed of in the ordinary course of business, and all such
properties and assets of the Company and each Guarantor are free and clear of
all Liens other than Permitted Liens.
SECTION 4.06. Litigation. (a) There are no actions, suits or proceedings
(whether or not purportedly on behalf of the Company or any of its Subsidiaries)
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries at law or in equity or before or by any
Governmental Authority, which involve any of the transactions contemplated
herein or which, if adversely determined against the Company or any of its
Subsidiaries, could reasonably be expected to result in a Material Adverse
Effect; and (b) neither the Company nor any Subsidiary is in default with
respect to any judgment, writ, injunction, decree, rule or regulation of any
Governmental Authority which could reasonably be expected to result in a
Material Adverse Effect.
SECTION 4.07. Agreements. Neither the Company nor any Subsidiary is a party
to any agreement or instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree or regulation which
could reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any Subsidiary is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party, which default could reasonably
be expected to have a Material Adverse Effect.
SECTION 4.08. Compliance with ERISA. Each Plan is in compliance with ERISA;
no Plan is insolvent or in reorganization, no Plan or Plans have an Unfunded
Current Liability,
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and no Plan has an accumulated or waived funding deficiency; neither the Company
nor any ERISA Affiliate nor any Subsidiary has incurred any liability to or on
account of a Plan pursuant to Section 515, 4062, 4063, 4064, 4201 or 4204 of
ERISA or reasonably expects to incur any liability under any of the foregoing
sections on account of the prior termination of participation in or
contributions to any such Plan; no proceedings have been instituted to terminate
any Plan; no condition exists which could reasonably be expected to present a
risk to the Company, any Subsidiary or any ERISA Affiliate of incurring a
liability to or on account of a Plan pursuant to the foregoing provisions of
ERISA and the Code; no lien imposed under the Code or ERISA on the assets of the
Company, any Subsidiary or any of its ERISA Affiliates exists or to the
knowledge of the Company is likely to arise on account of any Plan and the
Company and each Subsidiary may terminate contributions to any other employee
benefit plans maintained by it without incurring any material liability to any
Person interested therein.
SECTION 4.09. Federal Reserve Regulations; Use of Proceeds. (a) Neither the
Company nor any of its Subsidiaries is engaged principally in, nor has as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying any "margin stock" (as that term is defined in Regulation
U of the Board of Governors of the Federal Reserve System of the United States,
as amended from time to time).
(b) No part of the proceeds of any Loan and no other extension of credit
hereunder will be used, whether directly or indirectly, and whether immediately,
incidentally or ultimately, (i) to extend credit to others for the purpose of
purchasing or carrying margin stock, or (ii) for any purpose which violates or
is inconsistent with the provisions of Regulation T,U, or X of the Board of
Governors of the Federal Reserve System.
(c) The proceeds of each Loan, and each other extension of credit hereunder
shall be used solely for the purposes permitted under Section 3.02.
(d) At the time of the incurrence of the Existing Indebtedness and at all
times thereafter until the repayment of such Existing Indebtedness, and after
giving effect to the payment in full of the Existing Indebtedness on the Closing
Date and to the making of each Loan hereunder, not more than 25% of the value of
the assets of the Company as determined by any reasonable method were, are or
will be margin securities (as that term is defined in Regulation U of the Board
of Governors of the Federal Reserve System, as amended, from time to time).
SECTION 4.10. Approvals. No registration with or consent or approval of, or
other action by, any Governmental Authority or any other Person is required in
connection with the execution, delivery and performance of this Agreement by the
Company or any Guarantor, or with the execution and delivery of other Loan
Documents to which it is a party or with respect to the Company, the borrowings
hereunder other than registrations, consents or approvals which have been made
or obtained and which are in full force and effect.
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SECTION 4.11. Direct Affiliates. Attached hereto as Schedule V is a correct
and complete list of each of the Company's Subsidiaries as of the Closing Date
showing as to each Subsidiary, its name, the jurisdiction of its incorporation,
its shareholders or other owners of an interest in each Subsidiary and the
number of outstanding shares or other ownership interest owned by each
shareholder or other owner of an interest. The Subsidiaries asterisked on
Schedule V are those Subsidiaries which are Foreign Subsidiaries. Schedule V
also sets forth a correct and complete list of each of the Company's Existing
Direct Affiliates which are not Subsidiaries of the Company showing as to each
such Direct Affiliate, its name, the jurisdiction of its incorporation, its
shareholders or other owners of an interest in such Direct Affiliate and the
number of outstanding shares or other ownership interests owned by each
shareholder or other owner of an interest. The Direct Affiliates asterisked on
Schedule V are those Direct Affiliates which are not incorporated under the laws
of any state or territory of the United States of America.
SECTION 4.12. Hazardous Materials. The Company and each of its Subsidiaries
is in compliance in all material respects with all applicable Environmental Laws
and neither the Company nor any of its Subsidiaries has used Hazardous Materials
on, from, or affecting any property now owned or occupied or hereafter owned or
occupied by the Company or any of its Subsidiaries in any manner which violates
any applicable Environmental Law. No prior owner of any such property or any
tenant, subtenant, prior tenant or prior subtenant have used Hazardous Materials
on, from, or affecting such property in any manner which violates any applicable
Environmental Law.
SECTION 4.13. Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.14. No Default. No Default or Event of Default has occurred and
is continuing.
SECTION 4.15. Material Contracts. All Material Contracts are disclosed on
Schedule IV hereto. Each such Material Contract is in full force and effect and
is binding upon and enforceable against the Company and each of its
Subsidiaries, in each case, to the extent they are a party thereto, and, to the
Company's knowledge, all other parties thereto in accordance with its terms, and
there exists no default, in any material respect, under any Material Contract by
the Company or any of its Subsidiaries or by any other party thereto which has
not been fully cured or waived.
SECTION 4.16. Permits and Licenses. The Company and each of its
Subsidiaries has all permits, licenses, certifications, authorizations and
approvals required for it lawfully to own and operate their respective
businesses except those the failure of which to have could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
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SECTION 4.17. Compliance with Law. The Company and each of its Subsidiaries
is in compliance, with all laws, rules, regulations, orders and decrees which
are applicable to the Company, or to any of its properties, which the failure to
comply with could, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
SECTION 4.18. Y2K. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (a) the Company's or any of its
Subsidiaries' computer systems and (b) equipment containing embedded microchips
(including systems and equipment supplied by others or with which the Company's
or any of its Subsidiaries' systems interface, and the testing of all such
systems and equipment, as so reprogrammed, will be completed by August 15, 1999.
The cost to the Company and each of its Subsidiaries of such reprogramming and
testing and of the reasonably foreseeable consequences of the year 2000 to the
Company and each of its Subsidiaries (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) will not
result in a Default or Event of Default or have a Material Adverse Effect.
Except for such of the reprogramming referred to in the preceding sentence as
may be necessary, the computer and management information systems of the Company
and each of its Subsidiaries are and, with ordinary course upgrading and
maintenance, will continue to be sufficient to permit the Company and its
Subsidiaries to conduct their respective business without having a Material
Adverse Effect.
SECTION 4.19. Disclosure. Neither this Agreement, any other Loan Document,
nor any other document, certificate or written statement furnished to the Lender
by or on behalf of the Company or any of its Subsidiaries for use in connection
with the transactions contemplated by this Agreement contains any untrue
statement of material fact or omits to state a material fact necessary in order
to make the statements contained herein or therein not misleading in light of
the circumstances in which they were made.
SECTION 4.20. Pledge Agreements. The Pledge Agreements executed by the
Company and each of its Domestic Subsidiaries shall constitute a valid and
continuing lien on and security interest in the collateral referred to in such
Pledge Agreements in favor of the Lender, which shall be prior to all other
Liens, claims and rights of all other persons.
ARTICLE V
CONDITIONS OF LENDING
SECTION 5.01. Conditions to Initial Extension of Credit. The obligation of
the Lender to make the initial Loan hereunder is subject to the following
conditions precedent:
(a) Notes. On or prior to the Closing Date, the Lender shall have received
the Revolving Credit Note and the Term Note, each duly executed by the Company.
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(b) Guaranties. On or prior to the Closing Date, the Lender shall have
received an Unlimited Corporate Guaranty duly executed by each direct or
indirect wholly-owned Domestic Subsidiary of the Company and a Limited
Corporate Guaranty from each other Domestic Subsidiary of the Company.
(c) Pledge Agreements. On or prior to the Closing Date, the Lender
shall have received Pledge Agreements with respect to each Foreign
Subsidiary of the Company duly executed by the Company, together with the
stock certificates evidencing the shares pledged thereunder and stock
powers duly executed in blank by the Company.
(d) Opinion of Counsel. On or prior to the Closing Date, the Lender
shall have received a written opinion of (i) counsel for the Company and
the Guarantors dated the Closing Date and addressed to the Lender,
substantially in the form of Exhibit E attached hereto, and (ii) local
counsel to each Foreign Subsidiary opining as to the enforceability of the
lien created under the Pledge Agreement and other matters customary and
usual for such an agreement.
(e) Supporting Documents. On or prior to the Closing Date, the Lender
shall have received (i) a certificate of good standing for the Company and
each of its Subsidiaries from the secretary of state of the state of its
organizational jurisdiction dated as of a recent date; (ii) certified
copies of the Certificate of Incorporation and By-laws of the Company and
each of its Subsidiaries; (iii) a certificate of the Secretary or an
Assistant Secretary of the Company and each of its Subsidiaries which is a
Guarantor dated the Closing Date and certifying: (x) that neither the
Certificates of Incorporation nor the By-laws of the Company and each of
its Subsidiaries has been amended since the date of their certification (or
if there has been any such amendment, attaching a certified copy thereof);
(y) with respect to the Company and each Subsidiary which is a Guarantor,
that attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of the Company or Guarantor, as the case may be,
authorizing the execution, delivery and performance of each Loan Document
to which it is a party and the borrowings and other extensions of credit
hereunder; and (z) with respect to the Company and each Subsidiary which is
a Guarantor, the incumbency and specimen signature of each officer of the
Company or Guarantor, as the case may be, executing each Loan Document to
which it is a party and any certificates or instruments furnished pursuant
hereto or thereto, and a certification by another officer of the Company as
to the incumbency and signature of the Secretary or Assistant Secretary of
the Company; and (iv) such other documents as the Lender may reasonably
request.
(f) Assets Free from Liens. Prior to the Closing Date, the Lender
shall have received UCC-1 financing statement, tax and judgment lien
searches evidencing that the Company's and each Guarantor's accounts
receivable, inventory, equipment and all other assets of the Company and
each Guarantor are free and clear of all Liens except (i) Permitted Liens
and (ii) liens to be satisfied on the Closing Date pursuant to the terms
hereof.
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(g) Fees and Expenses. On or prior to the Closing Date, the Lender
shall have received the fees payable on the Closing Date pursuant to
Section 3.04(b) and reimbursement of expenses in accordance with Section
9.03(b).
(h) No Litigation. There shall exist no action, suit, investigation,
litigation or proceeding affecting the Company or any of its Subsidiaries
pending or, to the knowledge of the Company, threatened before any court,
governmental agency or arbiter that could reasonably be expected to be
adversely determined against the Company or any of its Subsidiaries and, if
so adversely determined, could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
(i) Consents and Approvals. All governmental and third party consents
and approvals necessary in connection with the transactions contemplated by
this Agreement and the other Loan Documents shall have been obtained
(without the imposition of any conditions that are not acceptable to the
Lender) and shall remain in effect, and no law or regulation shall be
applicable in the judgment of the Lender that imposes materially adverse
conditions upon the transactions contemplated hereby.
(j) No Material Adverse Changes. There shall not have occurred any
material adverse change in the business, operations, properties, prospects
or condition (financial or otherwise) of the Company or of the Company and
its Subsidiaries, taken as a whole, since September 30, 1998.
(k) Joint Venture Agreements. Prior to the Closing Date, the Lender
shall have received true, correct and complete copies of all shareholder
agreements, joint venture agreements and all other agreements governing the
rights and obligations of the shareholders in the following entities:
Global Payment Technologies Holdings (Proprietary) Limited, Global Payment
Technologies Australia Pty. Ltd., CBV China Venture Limited, Global Payment
Technologies (Europe) Limited, Abacus Financial Management Systems Ltd.,
Abacus Financial Management Systems Ltd. USA, and such agreements shall be
in form and substance satisfactory to the Lender.
(l) Employment Agreements. Prior to the Closing Date, the Lender shall
have received true, correct and complete copies of each employment
agreement, if any, between the Company and its executive officers, and such
agreements shall be in form and substance satisfactory to the Lender.
(m) Insurance. On or prior to the Closing Date, the Lender shall have
received a certificate or certificates of insurance from an independent
insurance broker or brokers confirming the insurance required to be
maintained pursuant to Section 6.01 hereof.
(n) Other Information, Documentation. The Lender shall have received
such other and further information and documentation as it may require,
including, but not limited to,
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any information or documentation relating to compliance by the Company with the
requirements of all Environmental Laws.
(o) Completion of Proceedings. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by the Loan Documents, shall be satisfactory in form
and substance to the Lender.
SECTION 5.02. Conditions to All Extensions of Credit. The obligation of the
Lender to make each Loan hereunder, including, without limitation, the initial
Loan, are subject to the conditions precedent set forth in Section 5.01 and the
following conditions precedent:
(a) Representations and Warranties. The representations and warranties by
the Company and each Guarantor pursuant to this Agreement and the other Loan
Documents to which each is a party shall be true and correct in all material
respects on and as of the Borrowing Date, with the same effect as though such
representations and warranties had been made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred and be
continuing on the Borrowing Date or will result after giving effect to the Loan
requested.
(c) Availability. After giving effect to any requested Revolving Credit
Loan, the Aggregate Outstandings shall not exceed the Revolving Credit
Commitment then in effect. Each borrowing hereunder shall constitute a
representation and warranty of the Company that the statements contained in
clauses (a), (b), and (c) of Section 5.02 are true and correct on and as of the
Borrowing Date.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Company covenants and agrees with the Lender that so long as the
Commitments remain in effect, or any of the principal of or interest on the
Notes or any other Obligations hereunder shall be unpaid it will, and will cause
each Guarantor to:
SECTION 6.01. Existence, Properties, Insurance. Do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights and franchises and comply with all laws applicable to it; at
all times maintain, preserve and protect all franchises and trade names and
preserve all of its property, and keep the same in good repair, working order
and condition and from time to time make, or cause to be made, all needful and
proper repairs, renewals, replacements, betterments and improvements thereto so
that the business carried on in connection therewith may be properly and
advantageously conducted in the ordinary course at all times; and at all times
maintain insurance covering its assets and its businesses with financially
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sound and reputable insurance companies or associations in such amounts and
against such risks (including, without limitation, hazard, business
interruption, public liability and product liability) as are usually carried by
companies engaged in the same or similar business.
SECTION 6.02. Payment of Indebtedness and Taxes. (a) Pay all indebtedness
and obligations, now existing or hereafter arising, as and when due and payable,
and (b) pay and discharge or cause to be paid and discharged promptly all taxes,
assessments and government charges or levies imposed upon it or upon its income
and profits, or upon any of its property, real, personal or mixed, or upon any
part thereof, before the same shall become in default, as well as all lawful
claims for labor, materials and supplies or otherwise which, if unpaid, might
become a lien or charge upon such properties or any part thereof; provided,
however, that neither the Company nor any Guarantor shall be required to pay and
discharge or cause to be paid and discharged any such indebtedness or obligation
owing to a vendor in the ordinary course of business, tax, assessment, charge,
levy or claim so long as the validity thereof shall be contested in good faith
by appropriate proceedings, and the Company or such Guarantor shall have set
aside on its books adequate reserves determined in accordance with Generally
Accepted Accounting Principles with respect to any such indebtedness,
obligation, tax, assessment, charge, levy or claim so contested; further,
provided (i) the aggregate of such indebtedness and obligations so contested
shall not exceed $250,000 at any one time outstanding, and (ii) that, subject to
the foregoing proviso, the Company and each Guarantor shall pay or cause to be
paid all such indebtedness, obligations, taxes, assessments, charges, levies or
claims upon the commencement of proceedings to foreclose any lien which has
attached as security therefor.
SECTION 6.03. Financial Statements, Reports, etc. Furnish to the Lender:
(a) as soon as available, but in any event within 90 days after the end of
each fiscal year of the Company, (i) a copy of the audited consolidated balance
sheet of the Company as of the end of such year and the related audited
consolidated statements of income, shareholders equity and cash flow for such
year, setting forth in comparative form the respective figures as of the end of
and for the previous fiscal year, and accompanied by a report thereon of Arthur
Andersen LLP or other independent certified public accountants of recognized
standing selected by the Company and satisfactory to the Lender (the "Auditor"),
which report shall be unqualified and shall be to the effect that such
consolidated financial statements present fairly in all material respects the
financial condition and results of operations of the Company and its
consolidated Subsidiaries on a consolidated basis in accordance with Generally
Accepted Accounting Principles consistently applied, and (ii) a copy of the
comparative consolidating financial statements of the Company and its
consolidated Subsidiaries, prepared in accordance with Generally Accepted
Accounting Principles, consistently applied, which support the financial
statements delivered pursuant to clause (i);
(b) as soon as available, but in any event not later than 45 days after the
end of each quarterly period of each fiscal year of the Company, (i) a copy of
the unaudited interim consolidated balance sheet of the Company as of the end of
each such quarter and the related
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unaudited interim consolidated statements of income, shareholders equity and
cash flow for such quarter and the portion of the fiscal year through such date
and setting forth in each case in comparative form the respective figures for
the corresponding date and period in the previous fiscal year, in each case
prepared by the Chief Financial Officer and accompanied by a certificate
executed by the Chief Financial Officer to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of the Company and its consolidated
Subsidiaries on a consolidated basis in accordance with Generally Accepted
Accounting Principles consistently applied, subject to normal year-end
adjustments and the absence of footnotes, and (ii) a copy of the comparative
consolidating financial statements of the Company and its consolidated
Subsidiaries, prepared in accordance with Generally Accepted Accounting
Principles, consistently applied, which support the financial statements
delivered pursuant to clause (i);
(c) a certificate prepared and signed by the Chief Financial Officer with
each delivery required by clause (a) and (b), as to whether or not, as of the
close of such preceding period and at all times during such preceding period,
the Company and its Subsidiaries were in compliance with all the provisions in
this Agreement, showing computation of financial covenants and quantitative
negative covenants, and if the Chief Financial Officer shall have obtained
knowledge of any default in such compliance or notice of such default, it shall
disclose in such certificate such default or defaults or notice thereof and the
nature thereof, whether or not the same shall constitute a Default or an Event
of Default hereunder;
(d) a certificate prepared and signed by the Auditor with each delivery
required by clause (a) above stating whether they obtained knowledge during the
course of their examination of such financial statements of any Default or Event
of Default (which certificate may be limited to the extent required by any
accounting rules or guidelines binding upon the Auditors);
(e) at all times indicated in clause (a) above a copy of the management
letter, if any, prepared by the Auditor;
(f) promptly after filing thereof, copies of all regular and periodic
financial information, proxy materials and other information and reports which
the Company or any of its Subsidiaries shall file with the Securities and
Exchange Commission;
(g) promptly after submission to any government or regulatory agency, all
documents and information furnished to such government or regulatory agency
other than such documents and information prepared in the normal course of
business and which could not reasonably be expected to result in any materially
adverse action to be taken by such agency; and
(h) promptly, from time to time, such other information regarding the
operations, business affairs and condition (financial or otherwise) of the
Company or any of its Subsidiaries as the Lender may reasonably request.
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SECTION 6.04. Books and Records; Access to Premises. Keep adequate records
and proper books of record and account in which complete entries will be made in
a manner to enable the preparation of financial statements in accordance with
Generally Accepted Accounting Principles, and which shall reflect all financial
transactions of the Company and each Guarantor. At any time, and from time to
time (and provided that no Default or Event of Default has occurred and is
continuing, upon reasonable prior notice) permit the Lender or any agents or
representatives thereof, to examine and make copies of any abstracts from the
books and records of such information which the Lender deems is necessary or
desirable (including, without limitation, the financial records of the Company)
and to visit the properties of the Company or any Guarantor and to discuss the
affairs, finances and accounts of the Company and the Guarantor with any of
their executive officers or the Company's independent accountants.
SECTION 6.05. Notice of Adverse Change. Promptly notify the Lender in
writing of (a) any change in the business or the operations of the Company or
any Guarantor which could reasonably be expected to have a Material Adverse
Effect, and (b) any information which indicates that any financial statements
which are the subject of any representation contained in this Agreement, or
which are furnished to the Lender pursuant to this Agreement, fail, in any
material respect, to present fairly, as of the date thereof and for the period
covered thereby, the financial condition and results of operations purported to
be presented therein, disclosing the nature thereof.
SECTION 6.06. Notice of Default. Promptly notify the Lender of any Default
or Event of Default which shall have occurred, which notice shall include a
written statement as to such occurrence, specifying the nature thereof and the
action (if any) which is proposed to be taken with respect thereto.
SECTION 6.07. Notice of Litigation. Promptly notify the Lender of any
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency which, if adversely determined against the
Company or any Guarantor on the basis of the allegations and information set
forth in the complaint or other notice of such action, suit or proceeding, or in
the amendments thereof, if any, could reasonably be expected to have a Material
Adverse Effect.
SECTION 6.08. Notice of Default in Other Agreements. Promptly notify the
Lender of any default in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any agreement or
instrument to which the Company or any Guarantor is a party which default could
reasonably be expected to have a Material Adverse Effect.
SECTION 6.09. Notice of ERISA Event. Promptly deliver to the Lender a
certificate of the Chief Financial Officer of the Company setting forth details
as to such occurrence and such action, if any, which the Company, any Guarantor,
or such ERISA Affiliate is required or proposes to take, together with any
notices required or proposed to be given to or filed with or by the Company,
such Guarantor, ERISA Affiliate, the PBGC, a Plan participant or the Plan
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administrator, with respect thereto: that a Reportable Event has occurred with
respect to a Plan, that an accumulated funding deficiency has been incurred or
an application may be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code with respect to a Plan, that a Plan has been terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA, that one
or more Plans have an Unfunded Current Liability giving rise to a Lien under
ERISA, that proceedings may be or have been instituted to terminate a Plan, that
a proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan, or that the Company, any Guarantor or any
ERISA Affiliate will incur any liability (including any contingent or secondary
liability) to or on account of the termination of or withdrawal from a Plan
under Section 4062, 4063, 4064, 4201 or 4204 of ERISA. The Company will deliver
to the Lender a complete copy of the annual report (Form 5500) of each Plan that
is a single employer Plan (within the meaning of Section 4001(a)(15) of ERISA),
filed with the Internal Revenue Service. In addition to any certificates or
notices delivered to the Lender pursuant to the first sentence hereof, copies of
annual reports and any other notices received by the Company or any Guarantor
required to be delivered to the Lender hereunder shall be delivered to the
Lender no later than ten days after the later of the date such report or notice
has been filed with the Internal Revenue Service or the PBGC, given to Plan
participants or received by the Company or any Guarantor.
SECTION 6.10. Notice of Environmental Law Violations. Promptly notify the
Lender of the receipt of any notice of an action, suit, and proceeding before
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending against the Company or any
Guarantor relating to any alleged violation of any Environmental Law which could
reasonably be expected to have a Material Adverse Effect.
SECTION 6.11. Notice Regarding Material Contracts. Promptly notify the
Lender of (a) any termination (prior to the end of its stated term), material
amendment, material supplement or other material modification of any Material
Contract and (b) the occurrence of a default in any material respect by the
Company, any Guarantor or by any other party to any Material Contract of which
the Company is aware.
SECTION 6.12. Compliance with Applicable Laws. Comply with the requirements
of all applicable laws, rules, regulations and orders of any Governmental
Authority, the breach of which could reasonably be expected to have a Material
Adverse Effect.
SECTION 6.13. Direct Affiliates. Give the Lender prompt written notice of
the creation, establishment or acquisition, in any manner, of any Subsidiary of
the Company and cause to be delivered to the Lender within thirty days of the
creation, establishment or acquisition of such Subsidiary (i) a duly executed
Unlimited Corporate Guaranty with respect to each direct or indirect
wholly-owned Domestic Subsidiary, and (ii) a duly executed Limited Corporate
Guaranty with respect to any other Domestic Subsidiary. The Company or its
Domestic Subsidiaries, as applicable, shall further execute and deliver to the
Lender within such thirty day period a Pledge
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Agreement with respect to 65% of the outstanding shares of capital stock or
other ownership interest of each such Subsidiary (or, if less, the aggregate
shares or interests owned by the Company and its Domestic Subsidiaries) which is
a Foreign Subsidiary, (in each case, together with certificates and powers with
respect to such interest duly endorsed in blank, and in the event of
uncertificated interest, UCC-1 financing statements identifying such interest
and executed by the Company or such Domestic Subsidiary). Together with the
delivery of such Guaranty and/or Pledge Agreement, the Company shall provide to
the Lender (i) the supporting documents identified in clauses (i), (ii) and
(iii) of Section 5.01(e) in each case with respect to such Subsidiary, (ii) a
favorable written opinion of counsel in the form attached hereto as Exhibit E
and with respect to the documents required to be executed by each Subsidiary
pursuant to this Section 6.13, and (iii) a favorable written opinion of local
counsel to each Foreign Subsidiary, which opinion shall be consistent in
substance and as to the matters opined to in the opinion of local counsel
delivered pursuant to Section 5.01(d) on the Closing Date; further, give the
Lender prompt written notice of the creation, establishment or acquisition in
any manner of any New Direct Affiliate which is not a Subsidiary of the Company.
SECTION 6.14. Environmental Laws.
Comply in all material respects with the requirements of all Environmental
Laws, provide to the Lender all documentation in connection with such compliance
that the Lender may reasonably request, and defend, indemnify, and hold harmless
the Lender and its respective employees, agents, officers, and directors, from
and against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs, or expenses of whatever kind or nature, known or unknown,
contingent or otherwise, arising out of, or in any way related to, (a) the
presence, disposal, or release of any Hazardous Materials on any property at any
time owned or occupied by the Company or any Subsidiary of the Company; (b) any
personal injury (including wrongful death) or property damage (real or personal)
arising out of or related to such Hazardous Materials; (c) any lawsuit brought
or threatened, settlement reached, or government order relating to such
Hazardous Materials, and/or (d) any violation of applicable Environmental Laws,
including, without limitation, reasonable attorney and consultant fees,
investigation and laboratory fees, court costs, and litigation expenses.
SECTION 6.15. Legal Charge. In the event that (i) the assets of Global
Payment Technologies (Europe) Limited as of the last day of any fiscal quarter
of the Company exceeds 10% of the total consolidated assets of the Company and
its Subsidiaries as of such date, (ii) the revenues of Global Payment
Technologies (Europe) Limited for any period consisting of four consecutive
fiscal quarters of the Company exceeds 10% of the total consolidated revenues of
the Company and its Subsidiaries for such period, or (iii) the earnings of
Global Payment Technologies (Europe) Limited for any period consisting of four
consecutive fiscal quarters of the Company exceeds 10% of the total consolidated
earnings of the Company and its Subsidiaries for such period, the Company will
take such actions as are necessary to create in favor of the Lender a legal
charge (as that term is understood under the laws of the United Kingdom) with
respect to 65% of the issued and outstanding shares of Global Payment
Technologies (Europe) Limited,
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including, without limitation, the delivery of a charge agreement substantially
in the form previously delivered to the Company. On or prior to August 15, 1999,
the Company shall deliver to the Lender a consent executed by each shareholder
of Global Payment Technologies (Europe) Limited (other than the Company) wherein
such shareholder consents to the granting by the Company of a legal charge on
its shares of Global Payment Technologies (Europe) Limited in favor of the
Lender and to the transfer by the Lender of such shares to any third party
without any claim of a right of first refusal, preemptive right or other similar
right or restriction.
ARTICLE VII
NEGATIVE COVENANTS
The Company covenants and agrees with the Lender that so long as the
Commitments remain in effect or any of the principal of or interest on any Note
or any other Obligations hereunder shall be unpaid, it will not, and will not
cause or permit any Guarantor, directly or indirectly to:
SECTION 7.01. Liens. Incur, create, assume or suffer to exist any Lien on
any of its assets now or hereafter owned, other than:
(a) Liens existing on the date hereof as set forth on Schedule I attached
hereto including any renewals or extensions thereof; provided that no such Lien
is extended to cover any additional property and that the amount of Indebtedness
secured thereby is not increased;
(b) Liens for taxes, assessments or other governmental charges or levies
not yet delinquent or which are being contested in good faith by appropriate
proceedings, provided, however, that adequate reserves with respect thereto are
maintained on the books of the Company in accordance with Generally Accepted
Accounting Principles;
(c) carriers', warehousemens', mechanics', suppliers' or other like Liens
arising in the ordinary course of business and not overdue for a period of more
than 30 days or which, if so overdue, are being contested in good faith by
appropriate proceedings in a manner which will not jeopardize or diminish the
interest of the Lender;
(d) Liens incurred or deposits to secure the performance of tenders, bids,
trade contracts (other than for borrowed money), leases, statutory obligations,
surety, performance and appeal bonds, and other obligations of similar nature
incurred in the ordinary course of business;
(e) easements, rights of way, restrictions and other similar charges or
encumbrances which in the aggregate do not interfere in any material respect
with the occupation, use and enjoyment by the Company or any Guarantor of the
property or assets encumbered thereby in the normal course of their respective
business or impair the value of the property subject thereto;
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(f) deposits under workmen's compensation, unemployment insurance and
social security laws;
(g) Liens granted to the Lender;
(h) purchase money Liens for fixed or capital assets including obligations
with respect to Capital Leases; provided in each case (i) no Default or Event of
Default shall have occurred and be continuing at the time of creation of such
Lien or shall occur after giving effect to such Lien, (ii) the obligation
secured by such purchase money Lien does not exceed 100% of the purchase price
of the asset and such Lien encumbers only, the asset acquired, and (iii) such
purchase money Lien does not secure any Indebtedness other than in respect of
the purchase price of the asset acquired; and
(i) Judgment and other similar Liens arising in connection with court
proceedings, provided, however, that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings.
SECTION 7.02. Indebtedness. Incur, create, assume or suffer to exist or
otherwise become liable in respect of any Indebtedness, other than:
(a) Indebtedness incurred prior to the date hereof as described in Schedule
II attached hereto, including any renewals or extensions thereof; provided such
renewal or extension does not result in an increase in the aggregate principal
amount of such Indebtedness;
(b) Indebtedness to the Lender;
(c) Indebtedness for trade payables incurred in the ordinary course of
business; provided, subject to Section 6.02, such payables shall be paid or
discharged when due;
(d) Indebtedness consisting of guarantees and loans permitted pursuant to
Sections 7.03 and 7.06, respectively, or consisting of Liens permitted pursuant
to Section 7.01 (other than Section 7.01(h));
(e) Subordinated Indebtedness; provided, however, that no Default or Event
of Default shall have occurred and be continuing at the time of incurrence of
such Subordinated Indebtedness or would occur after giving effect to the
incurrence of such Subordinated Indebtedness; and
(f) Indebtedness secured by purchase money liens (including Capital Leases)
as permitted under Section 7.01(h); provided such Indebtedness incurred in any
fiscal year of the Company shall not exceed $250,000 in the aggregate with
respect to the Company and the Guarantors and, further, provided no Default or
Event of Default shall have occurred and be
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continuing at the time of incurrence of such Indebtedness or would occur after
giving effect to the incurrence of such Indebtedness.
SECTION 7.03. Guaranties. Guarantee, endorse, become surety for, or
otherwise in any way become or be responsible for the Indebtedness or
obligations of any Person, whether by agreement to maintain working capital or
equity capital or otherwise maintain the net worth or solvency of any Person or
by agreement to purchase the Indebtedness of any other Person, or agreement for
the furnishing of funds, directly or indirectly, through the purchase of goods,
supplies or services for the purpose of discharging the Indebtedness of any
other Person or otherwise, or enter into or be a party to any contract for the
purchase of merchandise, materials, supplies or other property if such contract
provides that payment for such merchandise, materials, supplies or other
property shall be made regardless of whether delivery of such merchandise,
supplies or other property is ever made or tendered except:
(a) guaranties executed prior to the date hereof as described on Schedule
III attached hereto but not including any renewals or extension
thereof;
(b) endorsements of negotiable instruments for collection or deposit in
the ordinary course of business;
(c) guaranties of any Indebtedness owing to the Lender; and
(d) guaranties by the Company of the obligations of its New Direct
Affiliates provided (x) the aggregate outstanding obligations of any
single New Direct Affiliate guaranteed by the Company shall not exceed
$500,000 less the sum of the aggregate outstanding principal amount of
all loans and capital contributions to such New Direct Affiliate
permitted pursuant to Sections 7.06(c) and (y) the aggregate
outstanding obligations of all such New Direct Affiliates guaranteed
by the Company shall not exceed $1,500,000 less the sum of (i) the
aggregate outstanding principal amount of loans and capital
contributions to all New Direct Affiliates permitted pursuant to
Section 7.06(c) and (ii) the aggregate purchase price of all assets
and businesses acquired pursuant to acquisitions permitted pursuant to
Section 7.12.
(e) guaranties by the Company of the obligations of its Existing Direct
Affiliates provided that the aggregate outstanding obligations of any
single Existing Direct Affiliate guaranteed by the Company shall not
exceed (x) the amount set forth opposite such Existing Direct
Affiliate's name on Schedule VI, less (y) the aggregate outstanding
loans and capital contributions made to such Existing Direct Affiliate
pursuant to Section 7.06(d).
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SECTION 7.04. Sale of Assets. Sell, lease, transfer or otherwise dispose of
its properties and assets, whether or not pursuant to an order of a federal
agency or commission, except for (a) the sale of inventory disposed of in the
ordinary course of business, and (b) the sale or other disposition of properties
or assets no longer used or useful in the conduct of its business.
SECTION 7.05. Sales of Receivables. Sell, transfer, discount or otherwise
dispose of notes, accounts receivable or other obligations owing to the Company
or any Guarantor with or without recourse, except for collection in the ordinary
course of business; provided, however, nothing in this Section 7.05 shall be
deemed to limit the Company or any Guarantor from granting discounts and rebates
to its customers or compromising or otherwise accepting less than the full
amount of any receivable due from the customer, in each case, in the ordinary
course of the Company's or such Guarantor's business, consistent with past
practice.
SECTION 7.06. Loans and Investments. Make or commit to make any advance,
loan, extension of credit, or capital contribution to, or purchase or hold
beneficially any stock or other securities or evidence of Indebtedness of, or
purchase or acquire all or a substantial part of the assets of, or make or
permit to exist any interest whatsoever in, any other Person except (a)
investments consisting of Eligible Investments, (b) purchases by the Company of
its outstanding capital stock from time to time; provided, however, (x) the
aggregate purchase price of all such stock purchased during the term of this
Agreement shall not exceed $1,000,000 and (y) the aggregate number of shares of
such stock purchased by the Company during the term of this Agreement shall not
exceed 100,000 (adjusted as appropriate in the event of any split,
reclassification or other adjustment to the capital stock of the Company after
the date hereof), (c) loans and capital contributions by the Company to its New
Direct Affiliates provided (x) the sum of (I) the aggregate outstanding
principal amount of all loans to any such New Direct Affiliate, (II) the
aggregate outstanding capital contributions to any such New Direct Affiliate,
and (III) the aggregate outstanding obligations of such New Direct Affiliate
guaranteed by the Company as permitted by Section 7.03 shall not exceed $500,000
at any time, (y) the sum of (I) the aggregate outstanding principal amount of
all loans to all such New Direct Affiliates, (II) the aggregate outstanding
capital contributions to all such New Direct Affiliates, and (III) the aggregate
outstanding obligations of all such New Direct Affiliates guaranteed by the
Company as permitted pursuant to Section 7.03 shall not exceed at any time an
amount equal to $1,500,000 less the aggregate purchase price of all assets and
businesses acquired pursuant to acquisitions permitted pursuant to Section 7.12,
and (z) each New Direct Affiliate is engaged in a business similar in all
material respects to the business of the Company, (d) Existing Direct Affiliate
Investments and (e) transactions permitted pursuant to Section 7.12.
Notwithstanding the foregoing, no investment permitted pursuant to the preceding
clauses (b), (c), (d) or (e) shall be made if a Default or Event of Default
shall have occurred or be continuing or would occur after giving effect to such
loan or investment.
SECTION 7.07. Nature of Business. Change or alter, in any material respect,
the nature of its business from the nature of the business engaged in by it on
the date hereof.
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SECTION 7.08. Sale and Leaseback. Enter into any arrangement, directly or
indirectly, with any Person whereby it shall sell or transfer any property,
whether real or personal, used or useful in its business, whether now owned or
hereafter acquired, of it, if at the time of such sale or disposition it intends
to lease or otherwise acquire the right to use or possess (except by purchase)
such property or like property for a substantially similar purpose.
SECTION 7.09. Federal Reserve Regulations. Permit any Loan or the proceeds
of any Loan to be used for any purpose which violates or is inconsistent with
the provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System.
SECTION 7.10. Accounting Policies and Procedures. Permit any change in the
accounting policies and procedures of the Company or any Guarantor, including a
change in fiscal year, provided, however, that any policy or procedure required
to be changed by the Financial Accounting Standards Board (or other board or
committee thereof) in order to comply with Generally Accepted Accounting
Principles may be so changed.
SECTION 7.11. Hazardous Materials. Cause or permit any of its properties or
assets to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose of, transfer, produce or process Hazardous Materials, except in
compliance, in all material respects, with all applicable federal, state and
local laws or regulations, or cause or permit, as a result of any intentional or
negligent act or omission on the part of the Company or any Guarantor, a release
of Hazardous Materials onto such property or asset or onto any other property in
violation, in any material respect, of any applicable Environmental Law.
SECTION 7.12. Limitations on Fundamental Changes. Merge or consolidate
with, or sell, assign, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether
now or hereafter acquired) to, any Person, or, acquire all of the stock or all
or substantially all of the assets or the business of any Person or liquidate,
wind up or dissolve or suffer any liquidation or dissolution. Notwithstanding
the foregoing, the Company may acquire all or substantially all of the assets or
the business of any Person provided (a) the aggregate purchase price of any
single acquisition or series of related acquisitions shall not exceed $500,000,
(b) the aggregate purchase price of all such acquisitions shall not exceed an
amount equal to $1,500,000 less the sum of (i) the aggregate outstanding loans
and investments in New Direct Affiliates permitted pursuant to Section 7.06(c)
and (ii) the aggregate outstanding obligations of New Direct Affiliates
guaranteed by the Company as permitted pursuant to Section 7.03(d), (c) no
Default or Event of Default shall have occurred and be continuing prior to or,
would occur after giving effect to, the proposed acquisition, (d) the assets or
business acquired are used or useful in the Company's existing lines of business
and (e) in the event of the acquisition of stock or other equity interest, such
acquisition is not opposed by the board of directors or other governing body of
such Person.
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SECTION 7.13. Financial Covenants.
(a) Tangible Net Worth. Permit at any time Tangible Net Worth to be less
than the amount set forth below opposite the applicable period:
Period Amount
------ ------
Closing Date through September 29, 1999 $12,900,000
September 30, 1999 through
September 29, 2000 Actual Tangible Net Worth at September
30, 1998 plus 25% of Net Income (but not
less than zero) for the fiscal year ended
1999.
September 30, 2000 through
September 29, 2001 Actual Tangible Net Worth at September
30, 1999 plus 25% of Net Income (but not
less than zero) for the fiscal year ended
2000.
September 30, 2001 through
September 29, 2002 Actual Tangible Net Worth at September
30, 2000 plus 25% of Net Income (but not
less than zero) for the fiscal year ended
2001.
September 30, 2002 through
September 29, 2003 Actual Tangible Net Worth at September
30, 2001 plus 25% of Net Income (but not
less than zero) for the fiscal year ended
2002.
September 30, 2003 through
the Term Loan Maturity Date Actual Tangible Net Worth at September
30, 2002 plus 25% of Net Income (but not
less than zero) for the fiscal year ended
2003.
(b) Interest Coverage Ratio. Permit at any time the Interest Coverage Ratio
to be less than 1.85:1.00.
(c) Total Unsubordinated Liabilities to EBITDA. Permit at any time the
ratio of Total Unsubordinated Liabilities to EBITDA to be greater than
2.25:1.00.
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SECTION 7.14. Subordinated Debt. Directly or indirectly prepay, defease,
purchase, redeem, or otherwise acquire any Subordinated Debt (other than in
accordance with the subordination provisions thereof which provisions were
approved by the Lender in accordance with the definition of "Subordinated Debt")
or amend, supplement or otherwise modify any of the terms thereof without the
prior written consent or approval of the Lender.
SECTION 7.15. Dividends. Declare any dividend on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for the
purchase, redemption, defeasance, retirement or other acquisition of, any shares
of any class of stock of the Company or any Guarantor or any warrant to purchase
any class of stock of the Company or any Guarantor, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash, securities or property or in obligations of the
Company or any Guarantor or in any combination thereof, or permit any Subsidiary
to make any payment on account of, or purchase or otherwise acquire, any shares
of any class of the stock of the Company or any Guarantor or any warrant to
purchase any class of stock of the Company or any Guarantor from any Person.
Notwithstanding the foregoing (a) the Company may redeem, repurchase or retire
shares of any class of its capital stock to the extent permitted by Section
7.06(b), (b) each wholly-owned Guarantor of the Company may declare or pay
dividends to any other wholly-owned Guarantor of the Company or to the Company,
and (c) the Company may declare and pay dividends in an aggregate amount not to
exceed $250,000 in any fiscal year; provided, however, in each case of (a) and
(c) no Default or Event of Default shall have occurred and be continuing prior
to or after giving effect to the declaration or payment of such dividend.
SECTION 7.16. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate, except in the ordinary course
of and pursuant to the reasonable requirements of the Company's or Guarantor's
business and upon fair and reasonable terms no less favorable to the Company or
relevant Guarantor than they would obtain in a comparable arms-length
transaction with a Person not an Affiliate; provided, however, the Company may
extend loans to the Company's Direct Affiliates at below market interest rates
provided the aggregate outstanding principal amount of all such indebtedness
accruing interest at such rates shall not exceed $50,000 at any one time.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. In the case of the happening of any of the
following events (each an "Event of Default"):
(a) failure to pay the principal of or interest on any Loan, or any fees
under this Agreement as and when due and payable and, with respect to interest
and fee payments only, such failure shall continue unremedied for a period of
three Business Days;
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(b) default shall be made in the due observance or performance of (i)
any covenant, condition or agreement set forth in Section 6.01, 6.02, 6.11,
6.12 or 6.14 if such default shall continue unremedied for a period of 30
days or (ii) any other covenant, condition or agreement of the Company to
be performed pursuant to this Agreement or of the Company or any Guarantor
to be performed pursuant to any other Loan Document (other than those
specified in clause (a) of this Section 8.01);
(c) any representation or warranty made or deemed made in this
Agreement or any other Loan Document or in any report, certificate,
financial statement or other instrument furnished in connection with this
Agreement or any other Loan Document or the borrowings hereunder shall
prove to be false or misleading in any material respect when made or when
deemed made;
(d) default in the performance or compliance in respect of any
agreement or condition relating to any Indebtedness of the Company or any
Guarantor in excess of $50,000 individually or in the aggregate (other than
the Notes) if the effect of such default is to accelerate the maturity of
such Indebtedness or to permit the holder or obligee thereof (or a trustee
on behalf of such holder or obligee) to cause such Indebtedness to become
due prior to the stated maturity thereof, or, except as otherwise expressly
permitted pursuant to Section 6.02, any such Indebtedness shall not be paid
when due;
(e) the Company or any Guarantor shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code or any other federal or state bankruptcy, insolvency or similar
law, (ii) consent to the institution of, or fail to controvert in a timely
and appropriate manner, any such proceeding or the filing of any such
petition, (iii) apply for or consent to the employment of a receiver,
trustee, custodian, sequestrator or similar official for the Company or any
Guarantor or for a substantial part of its property; (iv) file an answer
admitting the material allegations of a petition filed against it in such
proceeding, (v) make a general assignment for the benefit of creditors,
(vi) take corporate action for the purpose of effecting any of the
foregoing; or (vii) become unable or admit in writing its inability or fail
generally to pay its debts as they become due; or any of the actions
identified in the preceding clauses (i) through (vii) shall have occurred
with respect to any Guarantor;
(f) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of the Company or any Guarantor or of a substantial part
of its property, under Title 11 of the United States Code or any other
federal or state bankruptcy insolvency or similar law, (ii) the appointment
of a receiver, trustee, custodian, sequestrator or similar official for the
Company or any Guarantor or for a substantial part of their property, or
(iii) the winding-up or liquidation of the Company or any Guarantor and in
any such case such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the foregoing shall
continue unstayed and in effect for 60 days;
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(g) one or more orders, judgments or decrees for the payment of money in
excess of $50,000 in the aggregate shall be rendered against the Company or any
Guarantor and the same shall not have been paid in accordance with such
judgment, order or decree or settlement and either (i) an enforcement proceeding
shall have been commenced by any creditor upon such judgment, order or decree,
or (ii) there shall have been a period of thirty (30) days during which a stay
of enforcement of such judgment, order or decree, by reason of pending appeal or
otherwise, was not in effect;
(h) any Plan shall fail to maintain the minimum funding standard required
for any Plan year or part thereof or a waiver of such standard or extension of
any amortization period is applied for or granted under Section 412 of the Code,
any Plan is terminated by the Company, any Guarantor or any ERISA Affiliate or
the subject of termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, a Reportable Event shall have occurred with respect
to a Plan or the Company, or any ERISA Affiliate shall have incurred a liability
to or on account of a Plan under Section 515, 4062, 4063, 4201 or 4204 of ERISA,
and there shall result from any such event or events the imposition of a lien
upon the assets of the Company or any Guarantor, the granting of a security
interest on such assets, or a liability to the PBGC or a Plan or a trustee
appointed under ERISA or a penalty under Section 4971 of the Code;
(i) any material provision of any Loan Document shall for any reason cease
to be in full force and effect in accordance with its terms or the Company or
any Guarantor shall so assert in writing;
(j) a Change of Control shall have occurred;
(k) any Guarantor shall fail to perform or observe any term or provision of
the Guaranty (subject, with respect to Section 4(b) of the Guaranty, to the same
grace period, if any, as would apply under this Section 8.01 to the Company's
performance or observance of the applicable covenant) or any representation or
warranty made by any Guarantor in connection with such Guarantor's Guaranty
shall prove to have been incorrect in any material respect when made or deemed
made; or
(l) any of the Liens purported to be granted pursuant to the Pledge
Agreement shall cease for any reason to be legal, valid and enforceable Liens on
the collateral purported to be covered thereby or have the priority purported to
be created thereby;
then, at any time thereafter during the continuance of any such event, the
Lender may, in its sole discretion, by written or telephonic notice to the
Company, take either or both of the following actions, at the same or different
times, (a) terminate the Commitments and (b) declare (i) the Notes, both as to
principal and interest, and (ii) all other Obligations, to be forthwith due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the Notes to
the contrary notwithstanding; provided, however, that if an event specified in
Section 8.01(e) or (f) shall have occurred, the
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Commitments shall automatically terminate and interest, principal and amounts
referred to in the preceding clauses (i) and (ii) shall be immediately due and
payable without presentment, demand, protest, or other notice of any kind, all
of which are expressly waived, anything contained herein or in the Notes to the
contrary notwithstanding.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including
telecopy), and unless otherwise expressly provided herein, shall be conclusively
deemed to have been received by a party hereto and to be effective on the day on
which delivered by hand to such party or one Business Day after being sent by
overnight mail to the address set forth below, or, in the case of telecopy
notice, when acknowledged as received, or if sent by registered or certified
mail, three (3) Business Days after the day on which mailed in the United
States, addressed to such party at such address:
(a) if to the Lender, at
The Chase Manhattan Bank
395 North Service Road
Melville, New York 11747
Attention: Relationship Manager for
Global Payment Technologies, Inc.
Telecopy: (516) 755-0143
(b) if to the Company, at
Global Payment Technologies, Inc.
20 East Sunrise Highway
Suite 201
Valley Stream, New York 11581
Attention: Thomas McNeill
Vice President & Chief Financial Officer
Telecopy: (516) 256-1620
- and -
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(c) as to each such party at such other address as such party
shall have designated to the other in a written notice
complying as to delivery with the provisions of this Section
9.01.
SECTION 9.02. Effectiveness; Survival. This Agreement shall become
effective on the date on which all parties hereto shall have signed a
counterpart copy hereof and shall have delivered the same to the Lender. All
representations and warranties made herein and in the other Loan Documents and
in the certificates delivered pursuant hereto or thereto shall survive the
making by the Lender of the Loans, in each case, as herein contemplated and the
execution and delivery to the Lender of the Notes evidencing the Loans and shall
continue in full force and effect so long as the Obligations hereunder are
outstanding and unpaid and the Commitments are in effect. The obligations of the
Company pursuant to Section 3.07, Section 3.08, Section 3.10 and Section 9.03
shall survive termination of this Agreement and payment of the Obligations.
SECTION 9.03. Expenses. The Company agrees (a) to indemnify, defend and
hold harmless the Lender and its officers, directors, employees, and affiliates
(each, an "indemnified person") from and against any and all losses, claims,
damages, liabilities or judgments to which any such indemnified person may be
subject and arising out of or in connection with the Loan Documents, the
financings contemplated hereby, the use of any proceeds of such financings or
any related transaction or any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not any of such indemnified persons
is a party thereto, and to reimburse each of such indemnified persons upon
demand for any reasonable, legal or other expenses incurred in connection with
the investigation or defending any of the foregoing; provided that the foregoing
indemnity will not, as to any indemnified person, apply to losses, claims,
damages, liabilities, judgments or related expenses to the extent arising from
the wilful misconduct or gross negligence of such indemnified person, (b) to pay
or reimburse the Lender for all its reasonable out-of-pocket costs and expenses
incurred in connection with the preparation and execution of and any amendment,
supplement or modification to this Agreement, the Notes any other Loan
Documents, and any other documents prepared in connection herewith or therewith,
and the consummation of the transactions contemplated hereby and thereby,
including without limitation, the reasonable fees and disbursements of Farrell
Fritz, P.C., counsel to the Lender, and (c) to pay or reimburse the Lender for
all their costs and expenses incurred in connection with the enforcement and
preservation of any rights under this Agreement, the Notes, the other Loan
Documents, and any other documents prepared in connection herewith or therewith,
including, without limitation, the reasonable fees and disbursements of counsel
(including, without limitation, in-house counsel) to the Lender, including all
such out-of-pocket expenses incurred during any work-out, restructuring or
negotiations in respect of the Obligations.
SECTION 9.04. Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and inure to the benefit of the
Company, the Lender, all future holders of the Notes and their respective
successors and assigns,
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except that the Company may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Lender.
(b) The Lender reserves the right to sell participations in or to sell and
assign its rights, duties or obligations with respect to the Loans or the
Commitments to such banks, lending institutions or other financial institutions
as it may choose and without the consent of the Company. The Lender may furnish
any information concerning the Company in its possession from time to time to
any assignee or participant (or proposed assignee or participant). The Lender
may at any time pledge or assign or grant a security interest in all or any part
of its rights under this Agreement and its Notes to a Federal Reserve Bank,
provided that no such assignment shall release the transferor Lender from its
Commitments or its obligations hereunder or substitute any such pledgee or
assignee for the Lender as a party to this Agreement.
SECTION 9.05. No Waiver; Cumulative Remedies. Neither any failure nor any
delay on the part of the Lender in exercising any right, power or privilege
hereunder or under any Note or any other Loan Document shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise of any other right, power or privilege. The rights, remedies,
powers and privileges herein provided or provided in the other Loan Documents
are cumulative and not exclusive of any rights, remedies powers and privileges
provided by law.
SECTION 9.06. APPLICABLE LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAW.
SECTION 9.07. SUBMISSION TO JURISDICTION; JURY WAIVER. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT IN THE
STATE OF NEW YORK, COUNTY OF NEW YORK, COUNTY OF NASSAU OR COUNTY OF SUFFOLK IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, AND TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE COMPANY HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF
MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY
CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH FEDERAL OR
STATE COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OTHER DOCUMENT OR INSTRUMENT
REFERRED TO HEREIN OR THEREIN OR THE SUBJECT MATTER HEREOF THEREOF MAY NOT BE
LITIGATED IN OR BY SUCH FEDERAL OR STATE COURTS. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE COMPANY AGREES NOT TO (i) SEEK AND
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HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH FEDERAL OR
STATE COURT BY ANY FEDERAL OR STATE COURT OF ANY OTHER NATION OR JURISDICTION
WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT OR (ii) ASSERT
ANY COUNTERCLAIM IN ANY SUCH SUIT, ACTION OR PROCEEDING UNLESS SUCH COUNTERCLAIM
CONSTITUTES A COMPULSORY COUNTERCLAIM UNDER APPLICABLE RULES OF CIVIL PROCEDURE.
THE COMPANY AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR
REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS AGREEMENT OR ANY
METHOD AUTHORIZED BY THE LAWS OF NEW YORK. EACH PARTY HERETO 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 OR ANY
OTHER LOAN DOCUMENT.
SECTION 9.08. Severability. In case any one or more of the provisions
contained in this Agreement, any Note or any other Loan Document should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.
SECTION 9.09. Right of Setoff. If an Event of Default shall have occurred
and be continuing, the Lender and each of its Affiliates are hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Lender or any Affiliate of the Lender to or for the credit or the account
of the Company against any and all of the Obligations of the Company now and
hereafter existing under this Agreement and the Notes held by the Lender,
irrespective of whether or not the Lender shall have made any demand under this
Agreement or any Note and although such obligations may be unmatured. The rights
of the Lender and each Affiliate of the Lender under this Section 9.09 are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which they may have.
SECTION 9.10. Headings. Section headings used herein are for convenience of
reference only and are not to affect the construction of or be taken into
consideration in interpreting this Agreement.
SECTION 9.11. Construction. This Agreement is the result of negotiations
between, and has been reviewed by, each of the Company, the Lender and their
respective counsel. Accordingly, this Agreement shall be deemed to be the
product of each party hereto, and no ambiguity shall be construed in favor of or
against either the Company or the Lender.
SECTION 9.12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
taken together, shall constitute one and the same instrument.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the Company and the Lender have caused this Agreement
to be duly executed by their duly authorized officers, as of the day and year
first above written.
GLOBAL PAYMENT TECHNOLOGIES, INC.
By: /s/ Edward Seidenberg
-----------------------------------------
Name: Edward Seidenberg
Title: President and Chief Operating Officer
THE CHASE MANHATTAN BANK
By: /s/ Carolyn Lattanzi
-----------------------------------------
Name: Carolyn Lattanzi
Title: Vice President
51
EXHIBIT 4.1(a)
REVOLVING CREDIT NOTE
$6,000,000 Uniondale, New York
July 15, 1999
FOR VALUE RECEIVED, GLOBAL PAYMENT TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), promises to pay to the order of THE CHASE MANHATTAN
BANK (the "Lender"), on or before July 15, 2002, SIX MILLION DOLLARS
($6,000,000) or, if less, the unpaid principal amount of all Revolving Credit
Loans made by the Lender to the Company under the Credit Agreement referred to
below.
The Company promises to pay interest on the unpaid principal amount hereof
from the date hereof until paid in full at the rates and at the times which
shall be determined, and to make principal repayments on this Note at the times
which shall be determined, in accordance with the provisions of the Credit
Agreement referred to below.
This Note is the "Revolving Credit Note" referred to in the Credit
Agreement dated as of July 15, 1999, by and between the Company and the Lender
(as the same may be amended, modified or supplemented from time to time, the
"Credit Agreement") and is issued pursuant to and entitled to the benefits of
the Credit Agreement to which reference is hereby made for a more complete
statement of the terms and conditions under which the Revolving Credit Loans
evidenced hereby were made and are to be repaid. Capitalized terms used herein
without definition shall have the meanings set forth in the Credit Agreement.
Each of the Lender and any subsequent holder of this Note agrees, by its
acceptance hereof, that before transferring this Note it shall record the date,
Type and amount of each Revolving Credit Loan and the date and amount of each
payment or prepayment of principal of each Revolving Credit Loan previously made
hereunder on the grid schedule annexed to this Note; provided, however, that the
failure of the Lender or holder to set forth such Revolving Credit Loans,
payments and other information on the attached grid schedule shall not in any
manner affect the obligation of the Company to repay the Revolving Credit Loans
made by the Lender in accordance with the terms of this Note.
This Note is subject to prepayment pursuant to Section 3.03 of the Credit
Agreement.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note together with all accrued but unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in immediately available
funds at the office of The Chase Manhattan
<PAGE>
Bank, located at 395 North Service Road, Melville, New York 11747 or at such
other place as shall be designated in writing for such purpose in accordance
with the terms of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
The Company and endorsers of this Note waive presentment, diligence,
demand, protest, and notice of any kind in connection with this Note.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and at the
place first above written.
GLOBAL PAYMENT TECHNOLOGIES, INC.
By: /s/ Edward Seidenberg
---------------------------------
Name: Edward Seidenberg
Title: President and COO
2
<PAGE>
SCHEDULE
Date Principal Type Applicable Amount of Notation
of Amount of of Interest Interest Principal Made
Loan Loan Loan Rate Period Paid By
- ---- --------- ---- ---- ---------- --------- --------
3
EXHIBIT 4.1(b)
TERM NOTE
$4,000,000 Uniondale, New York
July 15, 1999
FOR VALUE RECEIVED, GLOBAL PAYMENT TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), promises to pay to the order of THE CHASE MANHATTAN
BANK (the "Lender"), on or before June 30, 2004 (the "Maturity Date"), the
principal amount of FOUR MILLION DOLLARS ($4,000,000) in sixty (60) consecutive
monthly installments of $66,667 on the last day of each month commencing July
31, 1999 provided that the final installment on the Maturity Date shall be in an
amount equal to the remaining principal amount outstanding on the Maturity Date.
The Company also promises to pay interest on the unpaid principal amount hereof
from the date hereof until paid in full at the rates and at the times which
shall be determined in accordance with the provisions of the Credit Agreement
referred to below.
This Note is the "Term Note" issued pursuant to and entitled to the
benefits of the Credit Agreement dated as of July 15, 1999 by and between the
Company and The Chase Manhattan Bank (as the same may be amended, modified or
supplemented from time to time, the "Credit Agreement"), to which reference is
hereby made for a more complete statement of the terms and conditions under
which the Term Loan evidenced hereby was made and is to be repaid. Capitalized
terms used herein without definition shall have the meanings set forth in the
Credit Agreement.
Each of the Lender and any subsequent holder of this Note agrees, by its
acceptance hereof, that before transferring this Note, it shall record the date
and amount of each payment or prepayment of principal of the Term Loan
previously made hereunder on the grid schedule annexed to this Note; provided,
however, that the failure of the Lender or holder to set forth the Term Loan,
payments and other information on the attached grid schedule shall not in any
manner affect the obligation of the Company to repay the Term Loan made by the
Lender in accordance with the terms of this Note.
This Note is subject to prepayment pursuant to Section 3.03 of the Credit
Agreement.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued but unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
<PAGE>
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in immediately available
funds at the office of The Chase Manhattan Bank, located at 395 North Service
Road, Melville, New York 11747 or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
The Company and endorsers of this Note waive diligence, presentment,
protest, demand, and notice of any kind in connection with this Note.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officer as of the day and year and at the place
first above written.
GLOBAL PAYMENT TECHNOLOGIES, INC.
By /s/ Edward Seidenberg
---------------------------
Name: Edward Seidenberg
Title: President & COO
2
<PAGE>
SCHEDULE
Date Principal Type Applicable Amount of Notation
of Amount of of Interest Interest Principal Made
Loan Loan Loan Rate Period Paid By
- ---- --------- ---- ---- ---------- --------- --------
3
EXHIBIT 4.1(c)
LIMITED CORPORATE GUARANTY
THIS GUARANTY is entered into as of July 15, 1999, by EACH OF THE
UNDERSIGNED (each a "Guarantor" and, collectively, the "Guarantors") in favor of
and for the benefit of THE CHASE MANHATTAN BANK, a New York banking corporation
(the "Lender").
RECITALS
A. Pursuant to a Credit Agreement dated July 15, 1999, by and between
Global Payment Technologies, Inc., (the "Company"), and the Lender (as the same
may be amended, modified or supplemented from time to time, the "Credit
Agreement"), the Company will receive Loans and other financial accommodations
from the Lender and will incur Obligations.
B. The Guarantors, being members of a group of entities affiliated with the
Company and being engaged in related businesses will receive direct and indirect
benefits from such loans and financial accommodations.
C. Each Guarantor wishes to grant the Lender assurance in connection with
the payment and performance by the Company of all of its present and future
Obligations, and, to that effect, to guaranty the Company's Obligations as set
forth herein.
Accordingly, each Guarantor hereby agrees as follows:
1. Guaranty.
(a) Each Guarantor, jointly and severally, unconditionally and irrevocably
guarantees to the Lender the full and punctual payment by the Company, when due,
whether at the stated due date, by acceleration or otherwise, of all Obligations
of the Company, howsoever created, arising or evidenced, voluntary or
involuntary, whether direct or indirect, absolute or contingent now or hereafter
existing or owing to the Lender, (collectively, the "Guaranteed Obligations").
This Guaranty is an absolute, unconditional, continuing guaranty of payment and
not of collection of the Guaranteed Obligations and includes Guaranteed
Obligations arising from successive transactions which shall either continue
such Guaranteed Obligations or from time to time renew such Guaranteed
Obligations after the same has been satisfied. This Guaranty is in no way
conditioned upon any attempt to collect from the Company or upon any other event
or contingency, and shall be binding upon and enforceable against each Guarantor
without regard to the validity or enforceability of the Credit Agreement, the
Notes or any other Loan Document or of any term of any thereof. If for any
reason the Company shall fail or be unable duly and punctually to pay any of the
Guaranteed Obligations (including, without limitation amounts that would become
due but for the operation of the automatic stay under Section 362(a) of the
<PAGE>
Bankruptcy Code, 11 U.S.C. ss. 362(a)), each Guarantor will forthwith pay the
same, in cash, immediately upon demand.
(b) In the event the Credit Agreement, any Note or any other Loan Document
shall be terminated as a result of the rejection thereof by any trustee,
receiver or liquidating agent of the Company or any of its properties in any
bankruptcy, insolvency, reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar proceeding, each Guarantor's obligations
hereunder shall continue to the same extent as if such Credit Agreement, Notes
or such other Loan Document had not been so rejected.
(c) Each Guarantor shall pay all costs, expenses (including, without
limitation, reasonable attorneys' fees and disbursements) and damages incurred
in connection with the enforcement of the Guaranteed Obligations of the Company
under the Credit Agreement or the Note or any other Loan Document to the extent
that such costs, expenses and damages are not paid by the Company pursuant to
the respective documents, and such costs, fees and disbursements incurred in
connection with the enforcement of the obligations of each Guarantor under this
Guaranty.
(d) Each Guarantor further agrees that if any payment made by the Company
or any Guarantor to the Lender on any Obligation is rescinded, recovered from or
repaid by the Lender, in whole or in part, in any bankruptcy, insolvency or
similar proceeding instituted by or against the Company or any Guarantor, this
Guaranty shall continue to be fully applicable to such Guaranteed Obligation to
the same extent as though the payment so recovered or repaid had never
originally been made on such Guaranteed Obligation.
(e) Anything to the contrary herein notwithstanding, the maximum amount of
liability of any Guarantor with respect to its Guaranty of the Obligations shall
in no event exceed such Guarantor's Maximum Guaranteed Amount. As used herein,
the term "Maximum Guaranteed Amount" shall mean:
(i) all unpaid loans and advances and outstanding capital contributions
made to such Guarantor by the Company or any other Guarantor; plus
(ii) the outstanding obligations of such Guarantor guaranteed by the
Company or any other Guarantor.
The limitations on liability of a Guarantor set forth in this paragraph 1(e)
shall cease to be effective with respect to such Guarantor on the first date
after the date hereof on which such Guarantor is wholly owned, directly or
indirectly, by the Company.
(f) If any Event of Default shall have occurred and be continuing, the
Lender, Chase Securities, Inc. and any other Affiliate of the Lender are each
hereby authorized at any time
2
<PAGE>
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Lender,
Chase Securities, Inc. or any Affiliate of the Lender to or for the credit or
the account of any Guarantor against any of and all the obligations of any
Guarantor now or hereafter existing under this Guaranty, irrespective of whether
or not the Lender shall have made any demand hereunder and although such
obligations may be unmatured. The rights under this paragraph 1(f) are in
addition to other rights and remedies (including other rights of set off) which
the Lender may have.
2. Guaranty Continuing, Absolute, Unlimited.
The obligations of each Guarantor hereunder shall be continuing, absolute,
unlimited and unconditional, shall not be subject to any counterclaim, set-off,
deduction or defense based upon any claim any Guarantor may have against the
Lender or the Company or any other person, and shall remain in full force and
effect without regard to, and, to the fullest extent permitted by applicable
law, shall not be released, discharged or in any way affected by, any
circumstance or condition (whether or not any Guarantor shall have any knowledge
or notice thereof) whatsoever which might constitute a legal or equitable
discharge or defense including, but not limited to, (a) any express or implied
amendment, modification or supplement to the Credit Agreement, any Note, or any
other Loan Document or any other agreement referred to in any thereof, or any
other instrument applicable to the Company or to the Loans, or any part thereof;
(b) any failure on the part of the Company to perform or comply with the Credit
Agreement, any Note or any other Loan Document or any failure of any other
person to perform or comply with any term of the Credit Agreement, any Note, or
any other Loan Document or any other agreement as aforesaid; (c) any waiver,
consent, change, extension, indulgence or other action or any action or inaction
under or in respect of the Credit Agreement, any Note, or any other Loan
Document or any other agreement as aforesaid, whether or not the Lender, the
Company or any Guarantor has notice or knowledge of any of the foregoing; (d)
any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or similar proceeding with respect to the Company, or
its properties or its creditors, or any action taken by any trustee or receiver
or by any court in any such proceeding; (e) any furnishing or acceptance of
additional security or any release of any security; (f) any limitation on the
liability or obligations of the Company under the Credit Agreement, any Note or
any other Loan Document or any termination, cancellation, frustration,
invalidity or unenforceability, in whole or in part, of the Credit Agreement,
any Note, this Guaranty or any other Loan Document or any term of any thereof;
(g) any lien, charge or encumbrance on or affecting any Guarantor's or any of
the Company's respective assets and properties; (h) any act, omission or breach
on the part of the Lender under the Credit Agreement, any Note or any other Loan
Document or any other agreement at any time existing between the Lender and the
Company or any law, governmental regulation or other agreement applicable to the
Lender or any Loan; (i) any claim as a result of any other dealings among the
Lender, any Guarantor or the Company; (j) the assignment of this Guaranty, the
Credit Agreement, any Note or any other Loan Document by the Lender to any other
Person; or (k) any change in the name of the Lender, the Company or any other
Person referred to herein.
3
<PAGE>
3. Waiver.
Each Guarantor unconditionally waives, to the fullest extent permitted by
applicable law: (a) notice of any of the matters referred to in Section 2
hereof; (b) all notices which may be required by statute, rule of law or
otherwise to preserve any rights against any Guarantor hereunder, including,
without limitation, notice of the acceptance of this Guaranty, or the creation,
renewal, extension, modification or accrual of the Guaranteed Obligations or
notice of any other matters relating thereto, any presentment, demand, notice of
dishonor, protest, nonpayment of any damages or other amounts payable under the
Credit Agreement, any Note or any other Loan Documents; (c) any requirement for
the enforcement, assertion or exercise of any right, remedy, power or privilege
under or in respect of the Credit Agreement, any Note or any other Loan
Documents, including, without limitation, diligence in collection or protection
of or realization upon the Guaranteed Obligations or any part thereof or any
collateral thereof; (d) any requirement of diligence; (e) any requirement to
mitigate the damages resulting from a default by the Company under the Credit
Agreement, any Note or any other Loan Documents; (f) the occurrence of every
other condition precedent to which any Guarantor or the Company may otherwise be
entitled; (g) the right to require the Lender to proceed against the Company or
any other person liable on the Guaranteed Obligations, to proceed against or
exhaust any security held by the Company or any other person, or to pursue any
other remedy in the Lender power whatsoever, and (h) the right to have the
property of the Company first applied to the discharge of the Guaranteed
Obligations.
The Lender may, at its election, exercise any right or remedy it may have
against the Company without affecting or impairing in any way the liability of
any Guarantor hereunder and each Guarantor waives, to the fullest extent
permitted by applicable law, any defense arising out of the absence, impairment
or loss of any right of reimbursement, contribution or subrogation or any other
right or remedy of any Guarantor against the Company, whether resulting from
such election by the Lender or otherwise. Each Guarantor waives any defense
arising by reason of any disability or other defense of the Company or by reason
of the cessation for any cause whatsoever of the liability, either in whole or
in part, of the Company to the Lender for the Guaranteed Obligations.
Each Guarantor understands that the exercise by the Lender of certain
rights and remedies contained in the Credit Agreement, the Notes or any other
Loan Documents may affect or eliminate each Guarantor's rights of subrogation
against the Company and that each Guarantor may therefore incur partially or
totally nonreimbursable liability hereunder; nevertheless, each Guarantor hereby
authorizes and empowers the Lender, its successors, endorses and/or assignees,
to exercise in their sole discretion, any rights and remedies, or any
combination thereof, which may then be available, it being the purpose and
intent of each Guarantor that its obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances.
Each Guarantor assumes the responsibility for being and keeping informed of
the financial condition of the Company and of all other circumstances bearing
upon the risk of nonpayment of the Guaranteed Obligations and agrees that the
Lender shall not have any duty to advise any
4
<PAGE>
Guarantor of information regarding any condition or circumstance or any change
in such condition or circumstance. Each Guarantor acknowledges that the Lender
has not made any representations to any Guarantor concerning the financial
condition of the Company.
4. Representations and Covenants of each Guarantor.
(a) Each Guarantor hereby severally represents and warrants that the
representations and warranties contained in Article IV of the Credit Agreement,
to the extent they relate to such Guarantor, are true and correct as of the date
hereof and such Guarantor further agrees that the Lender is entitled to rely on
such representations and warranties to the same extent as though the same were
set forth in full herein.
(b) Each Guarantor hereby severally agrees to perform the covenants
contained in Article VI and Article VII of the Credit Agreement, to the extent
they relate to such Guarantor, and agrees that the Lender is entitled to rely on
such agreement to perform such covenants to the same extent as though the same
were set forth in full herein.
5. Payments.
Each payment by each Guarantor to the Lender under this Guaranty shall be
made in the time, place and manner provided for payments in the Credit Agreement
without set-off or counterclaim to the account at which such payment is required
to be paid by the Company under the Credit Agreement.
6. Parties.
This Guaranty shall inure to the benefit of the Lender and its
successors, assigns or transferees, and shall be binding upon the Guarantors and
their respective successors and assigns. No Guarantor may delegate any of its
duties under this Guaranty without the prior written consent of the Lender.
7. Notices.
All notices, requests and demands to or upon the respective parties hereto
to be effective shall be in writing, and unless otherwise expressly provided
herein, shall be conclusively deemed to have been received by a party hereto and
to be effective on the day on which delivered to such party at the address set
forth below, or, in the case of telecopy notice, when acknowledged as received,
or if sent by registered or certified mail, on the third Business Day after the
day on which mailed in the United States, addressed to such party at said
address:
(a) if to the Lender, at
The Chase Manhattan Bank
5
<PAGE>
395 North Service Road
Melville, New York 11747
Attention: Relationship Manager
Global Payment Technologies, Inc.
Telecopy: (516) 755-0143
(b) if to the Guarantor, at
c/o Global Payment Technologies, Inc.
20 East Sunrise Highway
Suite 201
Valley Stream, NY 11581
Attention: Thomas McNeill
Vice President & Chief Financial Officer
Telecopy: (516) 256-1620
- and -
(c) as to each such party at such other address as such party shall
have designated to the other in a written notice complying as to
delivery with the provisions of this Section 7.
8. Remedies.
Each Guarantor stipulates that the remedies at law in respect of any
default or threatened default by a Guarantor in the performance of or compliance
with any of the terms of this Guaranty are not and will not be adequate, and
that any of such terms may be specifically enforced by a decree for specific
performance or by an injunction against violation of any such terms or
otherwise.
9. Rights to Deal with the Company.
At any time and from time to time, without terminating, affecting or
impairing the validity of this Guaranty or the obligations of any Guarantor
hereunder, the Lender may deal with the Company in the same manner and as fully
as if this Guaranty did not exist and shall be entitled, among other things, to
grant the Company, without notice or demand and without affecting the
Guarantor's liability hereunder, such extension or extensions of time to
perform, renew, compromise, accelerate or otherwise change the time for payment
of or otherwise change the terms of indebtedness or any part thereof contained
in or arising under the Credit Agreement, any Note or any other Loan Documents,
or to waive any obligation of the Company to perform, any act or acts as the
Lender may deem advisable.
6
<PAGE>
10. Subrogation.
(a) Upon any payment made or action taken by a Guarantor pursuant to this
Guaranty, such Guarantor shall, subject to the provisions of Sections 10(b) and
(c) hereof, be fully subrogated to all of the rights of the Lender against the
Company arising out of the action or inaction of the Company for which such
payment was made or action taken by such Guarantor.
(b) Any claims of such Guarantor against the Company arising from payments
made or actions taken by such Guarantor pursuant to the provisions of this
Guaranty shall be in all respects subordinate to the full and complete
indefeasible payment or performance and discharge, as the case may be, of all
amounts, obligations and liabilities, the payment or performance and discharge
of which are guaranteed by this Guaranty, and no payment hereunder by a
Guarantor shall give rise to any claim of such Guarantor against the Lender.
(c) Notwithstanding anything to the contrary contained in this Section 10,
no Guarantor shall be subrogated to the rights of the Lender against the Company
until all of the Obligations of the Company have been paid indefeasibly in full,
and that subrogation shall be suspended upon the occurrence of the events
described in Section 1(d) until the Obligations are indefeasibly paid in full.
11. Survival of Representations, Warranties, etc.
All representations, warranties, covenants and agreements made herein,
including representations and warranties deemed made herein, shall survive any
investigation or inspection made by or on behalf of the Lender and shall
continue in full force and effect until all of the obligations of the Guarantors
under this Guaranty shall be fully performed in accordance with the terms
hereof, and until the payment in full of the Guaranteed Obligations.
12. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. THIS
GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OR CHOICE OF
LAWS. EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT IN THE STATE OF NEW YORK, COUNTY OF NEW YORK, COUNTY OF NASSAU
OR COUNTY OF SUFFOLK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND
RELATED TO OR IN CONNECTION WITH THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH GUARANTOR HEREBY
WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN
ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF SUCH COURTS, THAT ANY SUCH SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING IS
7
<PAGE>
IMPROPER, OR THAT THIS GUARANTY OR ANY DOCUMENT OR ANY INSTRUMENT REFERRED TO
HEREIN OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH GUARANTOR AGREES (i) NOT TO SEEK
AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY
ANY COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT
AN ENFORCEMENT OF SUCH JUDGMENT AND (ii) NOT TO ASSERT ANY COUNTERCLAIM, IN ANY
SUCH SUIT, ACTION OR PROCEEDING UNLESS SUCH COUNTERCLAIM CONSTITUTES A
COMPULSORY COUNTERCLAIM UNDER APPLICABLE RULES OF CIVIL PROCEDURE. EACH
GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR
REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS GUARANTY OR ANY
METHOD AUTHORIZED BY THE LAWS OF NEW YORK. THE GUARANTORS AND THE Lender EACH
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13. Miscellaneous.
(a) All capitalized terms used herein and not defined herein shall have the
meanings specified in the Credit Agreement.
(b) This Guaranty is the joint and several obligation of each Guarantor,
and may be enforced against each Guarantor separately, whether or not
enforcement of any right or remedy hereunder has been sought against any other
Guarantor. Each Guarantor acknowledges that its obligations hereunder will not
be released or affected by the failure of the other Guarantors to execute the
Guaranty or by a determination that all or a part of this Guaranty with respect
to any other Guarantor is invalid or unenforceable.
(c) If any term of this Guaranty or any application thereof shall be
invalid or unenforceable, the remainder of this Guaranty and any other
application of such term shall not be affected thereby.
(d) Any term of this Guaranty may be amended, waived, discharged or
terminated only by an instrument in writing signed by each Guarantor and the
Lender.
(e) The headings in this Guaranty are for purposes of reference only and
shall not limit or define the meaning hereof.
(f) No delay or omission by the Lender in the exercise of any right under
this Guaranty shall impair any such right, nor shall it be construed to be
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise of any other right.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Guaranty to be
executed and delivered as of the day and year first above written.
ABACUS FINANCIAL MANAGEMENT
-------------------------------
SYSTEMS LTD. USA
By: /s/ Edward Seidenberg
----------------------------
Name: Edward Seidenberg
Title: President
9
EXHIBIT 4.1(d)
PLEDGE AGREEMENT
PLEDGE AGREEMENT, (the "Agreement") dated as of July 15, 1999, by and
between GLOBAL PAYMENT TECHNOLOGIES, INC., a Delaware corporation (the
"Pledgor"), and THE CHASE MANHATTAN BANK, a New York banking corporation having
an office at 395 North Service Road, Melville, New York 11768 (the "Pledgee").
RECITALS
A. The Pledgor and the Pledgee have entered into a Credit Agreement dated
as of July 15, 1999 (as the same may be hereafter amended, modified, restated or
supplemented from time to time, the "Credit Agreement") pursuant to which the
Pledgor will receive loans and other financial accommodations from the Pledgee
and will incur Obligations.
B. The Pledgor is the beneficial owner of that percentage of the issued and
outstanding capital stock or membership or other equity interests of each
Foreign Subsidiary of the Pledgor listed on Schedule A annexed hereto
(collectively, the "Pledged Companies") as indicated on such Schedule A.
C. In order to induce the Pledgee to extend credit to the Pledgor on and
after the date hereof as provided in the Credit Agreement, the Pledgor wishes to
grant to the Pledgee security and assurance in order to secure the payment and
performance of all Obligations, and to that effect to pledge to the Pledgee 65%
of the issued and outstanding capital stock, membership interests or other
equity interests of such Pledged Companies or such lesser percentage as is owned
by the Pledgor (such capital stock the "Pledged Shares" and such membership or
other equity interest the "Pledged Rights" and the Pledged Shares and the
Pledged Rights, collectively, the "Pledged Interests").
Accordingly, the parties hereto agree as follows:
1. Security Interest. As security for the Obligations, including any and
all renewals or extensions thereof, the Pledgor hereby delivers, pledges and
assigns to the Pledgee and creates in the Pledgee a first security interest in
all of the Pledgor's right, title and interest in and to all of the Pledged
Interests, together with all rights and privileges of the Pledgor with respect
thereto, all proceeds, income and profits thereof and all property received with
respect to the Pledged Interests in addition thereto, in exchange thereof or in
substitution therefor (collectively, the "Collateral"). The Pledgor has
delivered to the Pledgee, with respect to the Pledged Shares existing on the
date hereof, certificates evidencing such Pledged Shares, together with undated
stock powers duly executed in blank by the Pledgor.
2. Stock Dividends, Options, or Other Adjustments. The Pledgee shall
receive, as Collateral, any and all additional shares of stock, membership
interests or any other property of
64
<PAGE>
any kind distributable on or by reason of the Collateral pledged hereunder,
whether in the form of or by way of dividends, warrants, partial liquidation,
conversion, prepayments or redemptions (in whole or in part), liquidation, or
otherwise with the exception of cash dividends or other cash distributions to
the extent permitted under Section 7(a); provided, however, Pledgee shall not be
entitled to receive any additional shares of stock, membership interests or
other equity interests of any Pledged Company if such receipt would cause in
excess of two-thirds of the issued and outstanding capital stock or membership
interest or other equity interest of such Pledged Company to be pledged
hereunder. Notwithstanding the foregoing, if as a result of a change in the tax
laws of the United States of America after the date of this Agreement, the
pledge by the Pledgor of capital stock, membership interests or other equity
interest of a Pledged Company in excess of 65% of the outstanding capital stock,
membership interests or other equity interests would not result in an increase
in the aggregate net consolidated tax liabilities of the Pledgor and its
Subsidiaries, then promptly after the change in such laws, all capital stock,
membership interest or other equity interest (or such lesser amount which would
not result in an increase in such consolidated tax liabilities) in each Pledged
Company which is owned by the Pledgor (regardless how or when received,
including, without limitation shares or interests owned by the Pledgor as of the
date of this Agreement) shall be pledged under this Agreement and shall
constitute Pledged Shares or Pledged Rights, as the case may be. If any such
additional shares of capital stock, instruments, or other property against which
a security interest can only be perfected by possession by the Pledgee, which
are distributable on or by reason of the Collateral pledged hereunder, shall
come into the possession or control of the Pledgor, the Pledgor shall, hold or
control in trust and forthwith transfer and deliver the same to the Pledgee
subject to the provisions hereof.
3. Delivery of Share Certificates; Stock Powers; Documents. The Pledgor
agrees to deliver all share certificates, undated stock powers duly executed in
blank, documents, agreements, financing statements, amendments thereto,
assignments or other writings as the Pledgee may request to carry out the terms
of this Agreement or to protect or enforce the lien and security interest in the
Collateral hereunder granted hereby to the Pledgee and further agrees to do and
cause to be done, upon the Pledgee's request, all things reasonably determined
by the Pledgee to be necessary to perfect and keep in full force the lien in the
Collateral hereunder granted hereby in favor of the Pledgee, including, but not
limited to, the prompt payment of all documented out-of-pocket fees and expenses
incurred in connection with any filings made to perfect or continue the lien and
security interest in the Collateral hereunder granted hereby in favor of the
Pledgee. The Pledgor agrees to make appropriate entries upon its books and
records (including without limitation its stock record and transfer books)
disclosing the lien against the Collateral hereunder granted hereby to the
Pledgee hereunder. The Pledgor further agrees to promptly deliver to the
Pledgee, or cause the corporation or other entity issuing the Collateral to
deliver directly to the Pledgee, share certificates or other documents
representing Collateral acquired or received after the date of this Agreement
with an undated stock power duly executed by the Pledgor in blank. If at any
time the Pledgee notifies the Pledgor that additional stock powers endorsed in
blank with respect to the Collateral are required, the Pledgor shall promptly
execute in blank and deliver such stock powers as the Pledgee may request.
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4. Power of Attorney. The Pledgor hereby constitutes and irrevocably
appoints the Pledgee, with full power of substitution and revocation by the
Pledgee, as Pledgor's true and lawful attorney-in-fact, to the full extent
permitted by law, at any time or times when an Event of Default has occurred and
is continuing to affix to certificates and documents representing the Collateral
the stock power delivered with respect thereto, to transfer or cause the
transfer of the Collateral, or any part thereof on the books of the corporation
or other entity issuing the same, to the name of the Pledgee or the Pledgee's
nominee and thereafter to exercise as to such Collateral all the rights, powers
and remedies of an owner. The power of attorney granted pursuant to this
Agreement and all authority hereby conferred are granted and conferred solely to
protect the Pledgee's interest in the Collateral and shall not impose any duty
upon the Pledgee to exercise any power. Subject to Section 11, this power of
attorney shall be irrevocable as one coupled with an interest.
5. Inducing Representations of the Pledgor. The Pledgor makes the following
representations and warranties to the Pledgee; each and all of which shall
survive the execution and delivery of this Agreement:
(a) The information concerning the Pledged Companies and the Pledgor's
beneficial ownership of the Pledged Interests thereof that is contained in
Schedule A is correct in all respects as of the Closing Date.
(b) The Pledgor is the sole legal and beneficial owner of, and has good and
indefeasible title to, the Pledged Interests pledged by the Pledgor, free and
clear of all pledges, liens, security interests and other encumbrances and
restrictions on the transfer and assignment thereof, other than the security
interest created by this Agreement, and has the unqualified right and authority
to execute this Agreement and to pledge the Collateral to the Pledgee as
provided for herein.
(c) There are no outstanding options, warrants or other agreements to which
any Pledged Company or the Pledgor is a party with respect to the Pledged
Interests pledged by the Pledgor.
(d) The Pledged Shares pledged by the Pledgor have been validly issued and
are fully paid and non-assessable; the holder or holders of the Pledged
Interests are not and will not be subject to any personal liability as such
holder under any applicable law; and are not subject to any charter, by-law,
statutory, contractual or other restrictions governing their issuance, transfer,
ownership or control other than restrictions on transfer imposed by applicable
state and federal laws applicable to the issuance, transfer, ownership or
control of securities generally, including, without limitation, applicable
federal and state securities laws and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
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(e) Any consent, approval or authorization of or designation or filing with
any authority on the part of the Pledgor which is required in connection with
the pledge and security interest granted under this Agreement has been obtained
or effected.
(f) The execution and delivery of this Agreement by the Pledgor, and the
performance by the Pledgor of its obligations hereunder, will not result in a
violation of any mortgage, indenture, contract, instrument, judgment, decree,
order, statute, rule or regulation to which the Pledgor is subject.
(g) The Pledgor has delivered to the Pledgee all instruments and stock
certificates, if any, representing the Pledged Shares, duly endorsed in blank or
accompanied by an assignment or assignments sufficient to transfer title
thereto. There are neither any instruments or certificates evidencing the
Pledged Rights nor registration books in which ownership of the Pledged Rights
are recorded except as may be permitted pursuant to Section 6(c).
6. Obligations of the Pledgor. The Pledgor hereby covenants and agrees with
the Pledgee as follows:
(a) The Pledgor will not sell, transfer or convey any interest in, or
suffer or permit any lien or encumbrance to be created upon or with respect to,
any of the Collateral (other than as created under this Agreement) during the
term of the pledge established hereby.
(b) The Pledgor will, at its own expense, at any time and from time to time
at the Pledgee's request, do, make, procure, execute and deliver all acts,
things, writings, assurances and other documents as may be required by the
Pledgee to further enhance, preserve, establish, demonstrate or enforce the
Pledgee's rights, interests and remedies created by, provided in, or emanating
from, this Agreement.
(c) The Pledgor agrees, except with respect to the Pledged Shares, that (i)
it shall not permit any Pledged Company to issue certificates representing the
Pledged Interests without the Pledgee's written consent and (ii) it shall cause
each Pledged Company to issue certificates with respect to any Pledged Interests
at the Pledgee's request.
7. Rights of the Pledgor. So long as no Event of Default has occurred and
is continuing, and so long as the Pledgee has not transferred the Collateral to
its own name under Section 8 hereof:
(a) The Pledgor shall be entitled to receive and retain any cash dividends
and other cash distributions paid on the Collateral, in each case, solely to the
extent permitted pursuant to the Credit Agreement.
(b) The Pledgor shall be entitled to vote or consent or grant waivers or
ratifications with respect to the Collateral in any manner not inconsistent with
this Agreement, the
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Credit Agreement or any other Loan Document. The Pledgor hereby grants to the
Pledgee an irrevocable proxy to vote the Collateral, which proxy shall be
effective immediately upon the occurrence of and during the continuance of an
Event of Default or registration of the Collateral in the name of the Pledgee
pursuant to Section 8 hereof. Upon request of the Pledgee, the Pledgor agrees to
deliver to the Pledgee such further evidence of such irrevocable proxy or such
further irrevocable proxy to vote the Collateral during the continuance of an
Event of Default as the Pledgee may request.
8. Rights of the Pledgee. At any time when an Event of Default has occurred
and is continuing, the Pledgee may in its sole discretion:
(a) Cause the Collateral to be transferred to its name or to the name of
its nominee or nominees and thereafter exercise as to such Collateral all of the
rights, powers and remedies of an owner.
(b) Collect by legal proceedings or otherwise all dividends, interest,
principal payments, capital distributions and other sums now or hereafter
payable on account of said Collateral, and hold the same as part of the
Collateral, or apply the same to any of the Obligations in such manner and order
as the Pledgee may decide in its sole discretion.
(c) Enter into any extension, subordination, reorganization, deposit,
merger, or consolidation agreement, or any other agreement relating to or
affecting the Collateral, and in connection therewith deposit or surrender
control of the Collateral thereunder, and accept other property in exchange
therefor and hold and apply such property or money so received in accordance
with the provisions hereof.
(d) Discharge any taxes, liens, security interests or other encumbrances
levied or placed on the Collateral or pay for the maintenance and preservation
of the Collateral; the amount of such payments, plus any and all fees, costs and
expenses of the Pledgee (including reasonable attorneys' fees and disbursements)
in connection therewith shall, at the Pledgee's option, be (i) reimbursed by the
Pledgor on demand, with interest thereon from the date paid by Pledgee at two
percent (2%) per annum above the Alternate Base Rate or (ii) added to the
Obligations secured hereby.
9. Event of Default; Remedies. Upon the occurrence and continuance of an
Event of Default:
(a) In addition to all the rights and remedies of a secured party under
applicable law, the Pledgee shall have the right, and without demand of
performance or other demand, advertisement or notice of any kind, except as
specified below, to or upon Pledgor or any other Person (all and each of which
demands, advertisements and/or notices are hereby expressly waived to the extent
permitted by law), to proceed forthwith to collect, receive, appropriate and
realize upon the Collateral, or any part thereof and to proceed forthwith to
sell, assign, give an option or
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options to purchase, contract to sell, or otherwise dispose of and deliver
the Collateral or any part thereof in one or more parcels at public or
private sale or sales at any stock exchange or broker's board or at any of
the Pledgee's offices or elsewhere at such prices and on such terms
(including, without limitation, a requirement that any purchaser of all or
any part of the Collateral shall be required to purchase any securities
constituting the Collateral solely for investment and without any intention
to make a distribution thereof) as the Pledgee in its sole and absolute
discretion deems appropriate without any liability for any loss due to
decrease in the market value of the Collateral during the period held. The
Pledgee agrees that if notice of sale shall be required by law such
notification shall be deemed reasonable and properly given if mailed to the
Pledgor, postage prepaid, at least five (5) days before any such
disposition, to the address indicated in Section 13(c) below. Any
disposition of the Collateral or any part thereof may be for cash or on
credit or for future delivery without assumption of any credit risk, with
the right of the Pledgee to purchase all or any part of the Collateral so
sold at any such sale or sales, public or private, free of any equity or
right of redemption in the Pledgor, which right or equity is, to the extent
permitted by applicable law, hereby expressly waived and released by the
Pledgor.
(b) All of the Pledgee's rights and remedies, including but not
limited to the foregoing, shall be cumulative and not exclusive and shall
be enforceable alternatively, successively or concurrently as the Pledgee
may deem expedient.
(c) The Pledgee may elect to obtain (at the Pledgor's expense) the
advice of any independent investment banking firm with respect to the
method and manner of sale or other disposition of any of the Collateral,
the best price reasonably obtainable therefor, the consideration of cash
and/or credit terms, or any other details concerning such sale or
disposition. The Pledgee, in its sole discretion, may elect to sell on such
credit terms which it deems reasonable. The sale of any of the Collateral
on credit terms shall not relieve the Pledgor of its liability under any
Loan Document until the Obligations have been paid in full. All payments
received by the Pledgee in respect of a sale of Collateral shall be applied
to the Obligations in the manner provided in Section 10 of this Agreement,
as and when such payments are received.
(d) The Pledgor recognizes that the Pledgee may be unable to effect a
public sale of all or a part of the Collateral by reason of certain
prohibitions contained in any applicable securities law, but may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view for
the distribution or resale thereof. The Pledgor agrees that private sales
so made may be at prices and on other terms less favorable to the seller
than if the Collateral were sold at public sale, and that the Pledgee has
no obligation to delay the sale of any Collateral for the period of time
necessary to permit the registration of the Collateral for public sale
under the Securities Act of 1933, as amended. The Pledgor agrees that a
private sale or sales made under the foregoing circumstances shall be
deemed to have been made in a commercially reasonable manner.
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(e) If any consent, approval or authorization of any state, municipal or
other governmental department, agency or authority should be necessary to
effectuate any sale or other disposition of the Collateral, or any partial
disposition of the Collateral, the Pledgor will execute all such applications
and other instruments as may be required in connection with securing any such
consent, approval or authorization, and will otherwise use its best efforts to
secure such sale or other disposition of the Collateral as the Pledgee may
reasonably deem necessary pursuant to the terms of this Agreement.
(f) Upon any sale or other disposition, the Pledgee shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold or
disposed of. Each purchaser at any such sale or other disposition (including the
Pledgee) shall hold the Collateral free from any claim or right of the Pledgor
of whatever kind, including any equity or right of redemption of the Pledgor.
The Pledgor specifically waives, to the extent permitted by applicable laws, all
rights of redemption, stay or appraisal which it had or may have under any rule
of law or statute now existing or hereafter adopted.
(g) The Pledgee shall not be obligated to make any sale or other
disposition, unless the terms thereof shall be satisfactory to it. The Pledgee
may, subject to applicable laws, without notice or publication, adjourn any
private or public sale, and, upon five (5) days' prior notice to the Pledgor,
hold such sale at any time or place to which the same may be so adjourned. In
case of any sale of all or any part of the Collateral, on credit or future
delivery, the Collateral so sold may be retained by the Pledgee until the
selling price is paid by the purchaser thereof, but the Pledgee shall incur no
liability in the case of the failure of such purchaser to take up and pay for
the property so sold and, in case of any such failure, such property may again
be sold as herein provided.
10. Disposition of Proceeds.
(a) The proceeds of any sale or disposition of all or any part of the
Collateral shall be applied by the Pledgee in the following order:
(i) to the payment in full of the costs and expenses of such sale or sales,
collections, and the protection, declaration and enforcement of any security
interest granted hereunder including the reasonable compensation of the
Pledgee's agents and attorneys;
(ii) to the payment of the Obligations; and
(iii) to the payment to the Pledgor of any surplus then remaining from such
proceeds, subject to the rights of any holder of a lien on the Collateral of
which the Pledgee has actual notice.
(b) In the event that the proceeds of any sale or other disposition of the
Collateral are insufficient to cover the principal of, and premium, if any, and
interest on, the
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Obligations secured thereby plus costs and expenses of the sale or other
disposition, the Pledgor shall remain liable for any deficiency.
11. Termination. This Agreement shall continue in full force and effect
until all of the Obligations shall have been indefeasibly paid in full and
satisfied, and the Credit Agreement shall have been terminated. Subject to any
sale or other disposition by the Pledgee of the Collateral or any part thereof
pursuant to this Agreement, the Collateral shall be returned to the Pledgor upon
full payment, satisfaction and termination of all of the Obligations.
12. Expenses of the Pledgee. All expenses (including reasonable fees and
disbursements of counsel) incurred by the Pledgee in connection with the
perfection and continuation of the security interest granted hereunder and any
actual or attempted sale or exchange of, or any enforcement, collection,
compromise or settlement respecting,the Collateral, or any other action taken by
the Pledgee hereunder whether directly or as attorney-in-fact pursuant to a
power of attorney or other authorization herein conferred, for the purpose of
satisfaction of the liability of the Pledgor for failure to pay the Obligations
or as additional amounts owing by the Pledgor to cover the Pledgee's costs of
acting against the Collateral, shall be deemed an Obligation of the Pledgor for
all purposes of this Agreement and the Pledgee may apply the Collateral to
payment of or reimbursement of itself for such liability.
13. General Provisions.
(a) All capitalized terms used in this Pledge Agreement and not defined
herein shall have the respective meanings assigned to them in the Credit
Agreement.
(b) The Pledgee and its assigns shall have no obligation in respect of the
Collateral, except to use reasonable care in holding the Collateral and to hold
and dispose of the same in accordance with the terms of this Agreement and
applicable law.
(c) All notices, requests and demands to or upon the respective parties
hereto shall be given in the manner specified and shall be addressed as set
forth in Section 9.01 of the Credit Agreement.
(d) No failure on the part of the Pledgee to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Pledgee of any right,
power or remedy hereunder preclude any other or future exercise thereof, or the
exercise of any other right, power or remedy. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law or any other
agreement. The representations, covenants and agreements of the Pledgor herein
contained shall survive the date hereof. Neither this Agreement nor the
provisions hereof can be changed, waived or terminated orally. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, legal representatives and assigns except that the Pledgor
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may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of the Pledgee.
(e) If any term of this Pledge Agreement or any application thereof shall
be invalid or unenforceable, the remainder of this Pledge Agreement and any
other application of such term shall not be affected thereby.
SECTION 14. APPLICABLE LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OR CHOICE
OF LAWS. THE PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
FEDERAL OR STATE COURT IN THE STATE OF NEW YORK, COUNTY OF NEW YORK, COUNTY OF
NASSAU OR COUNTY OF SUFFOLK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT
AND RELATED TO OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR
HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH FEDERAL OR STATE COURTS, THAT THE
SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE
OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS AGREEMENT OR ANY
DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER HEREOF OR
THEREOF MAY NOT BE LITIGATED IN OR BY SUCH FEDERAL OR STATE COURTS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR AGREES NOT TO (I) SEEK AND
HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY
FEDERAL OR STATE COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED
UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT AND (II) ASSERT ANY COUNTERCLAIM
IN ANY SUCH SUIT, ACTION OR PROCEEDING UNLESS SUCH COUNTERCLAIM CONSTITUTES A
COMPULSORY COUNTERCLAIM UNDER APPLICABLE RULES OF CIVIL PROCEDURE. THE PLEDGOR
AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED
MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS AGREEMENT OR ANY METHOD
AUTHORIZED BY THE LAWS OF NEW YORK. THE PLEDGOR AND THE PLEDGEE EACH IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first above written.
GLOBAL PAYMENT TECHNOLOGIES, INC.
By: /s/ Edward Seidenberg
----------------------------
Title: President & COO
THE CHASE MANHATTAN BANK
By: Carolyn Lattanzi
----------------------------
Title: Vice President
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SCHEDULE A
Pledged Company:
Jurisdiction of Incorporation:
Stock owned by Pledgor
Class:
Number of Shares
Stock Certificate no.
Percentage of issued and outstanding shares:
11
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), effective as of May 1, 1999,
by and between Global Payment Technologies, Inc., a Delaware corporation, with
executive offices at 20 East Sunrise Highway, Valley Stream, New York 11581 (the
"Company"), and Thomas McNeill, residing at 32 Seneca Drive, Commack NY 11725,
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to formalize the employment of the Executive
as a senior executive officer of the Company; and
WHEREAS, the Company and Executive desire to enter into an agreement
relating to such employment;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT
1.1 As of the commencement of the Employment Term (as hereinafter defined),
the Company hereby employs Executive in a senior executive capacity (it being
contemplated that he shall be elected and serve as the Vice President and Chief
Financial Officer upon the terms and conditions herein contained, with
responsibility for the performance of such duties as may be from time to time be
assigned to him by the Board of Directors of the Company (the"Board of
Directors"), its Chief Operating Officer or its Chief Executive Officer.
Executive hereby accepts employment.
1.2 The term of employment under this Agreement shall commence on the
effective date of this Agreement, and, subject to the terms hereof, shall
terminate on April 30, 2000. It is the Company's intention to commence
renegotiation ninety (90) days prior to the end of this Agreement. For purposes
hereof, the term "year"
<PAGE>
shall mean May 1 through April 30.
1.3 Throughout the Employment Term, Executive shall devote his best efforts
and all of his business time, attention and skills to the business and affairs
of the Company.
2. SALARY
During the Employment Term, Executive shall be entitled to receive a base
salary at the rate of $105,000 per year, payable in accordance with the
Company's regular payroll practice for senior executives of the Company;
provided that such base salary shall be reviewed by the Board of Directors no
less than annually and may be increased, but not decreased.
3. ANNUAL BONUSES
For each year during the term of this Agreement, commencing with the first
year, Executive shall be entitled to receive a bonus in an amount to be
determined by the Board of Directors in its sole discretion.
4. INCENTIVE STOCK OPTION PLAN
4.1 The Executive shall be entitled to participate in the Company's Stock
Option ("ISO") plan in a manner equal to that of other senior executives.
4.2 The ISO shall be subject to such other terms and conditions as are set
forth in the grant.
5. TERMINATION UNDER CERTAIN CONDITIONS
Subject to section 7(d), in the event that Executive's employment is
terminated by the Company (other than for "Cause" as hereinafter defined) or
Executive terminates his employment for "Good Reason" (as hereinafter defined)
prior to the end of the Employment Term, Executive shall be entitled to receive
in lieu of any and all other payments a severance payment in an aggregate amount
equal to (1) Executive's yearly base salary in effect on the date of his
termination of employment hereunder multiplied
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by 50% plus (2) an amount equal to the bonus projected by the Board of Directors
for the fiscal year in which termination occurred (subject to the terms and
conditions of paragraph 3), and, in the case of (2), pro rated by a fraction,
the numerator of which shall be the actual number of days elapsed in the current
fiscal year and denominator of which shall be 365 (the "Severance Payment"). The
Severance Payment shall be payable in four equal monthly installments, the first
installment to be due and payable on the first day of the month immediately
following such termination.
6. CERTAIN EMPLOYEE BENEFITS
6.1 During the Employment Term, Executive shall be entitled to participate,
to the extent he is eligible under the terms and conditions thereof, in any
benefit plans which the Company may from time to time provide to its senior
executives during the Employment Term. Unless otherwise specifically set forth
herein, the Company shall be under no obligation to institute or thereafter
continue the existence of any such benefit plan.
6.2 The Executive shall be entitled to the full time use of an automobile
and shall be reimbursed by the Company for all related insurance expenses in an
amount not to exceed the aggregate of seven thousand two hundred dollars $7,200
per calendar year, such amount to be pro-rated in any year hereunder if less
than a full calendar year.
6.3 The Company currently has directors and officers liability insurance.
The Company covenants that Executive shall be covered under such policy through
the Employment Term, and thereafter with respect to matters occurring during the
Employment Term.
7. CHANGE OF CONTROL
(a) For the purpose of this Agreement, a "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial
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ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 30% or more (on a fully diluted basis) of either (i) the then
outstanding shares of common stock of the Company, taking into account as
outstanding for this purpose such common stock issuable upon the exercise
of options or warrants, the conversion of convertible stock or debt, and
the exercise of any similar right to acquire such common stock (the
"Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a),
the following acquisitions shall not constitute a Change of Control: (W)
any acquisition by the Company or any "affiliate" of the Company, within
the meaning of 17 C.F.R. ss. 230.405 (an "Affiliate"), (X) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained by
the Company or any Affiliate, (Y) any acquisition by any corporation
pursuant to a transaction which complies with clauses (X), (Y) and (Z) of
subsection (iii) of this Section 7(a), and (Z) any acquisition by any
entity in which the Executive has a direct or indirect equity interest; or
(ii) Individuals who, as of the effective date hereof, constitute the
Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors; provided,
however, that any individual becoming a director subsequent to such
effective date whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board of
Directors; or
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
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the Company (a "Business Combination"), in each case, unless, following
such Business Combination, (X) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 60% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result
of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, and (Y) no
Person (excluding (I) any employee. benefit plan (or related trust)
sponsored or maintained by the Company or any Affiliate of the Company, or
such corporation resulting from such Business Combination or any Affiliate
of such corporation, or (II) any entity in which the Executive has an
equity interest, or any Affiliate of such entity) beneficially owns,
directly or indirectly, 20% or more (on a fully diluted basis) of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination, taking into account
as outstanding for this purpose such common stock issuable upon the
exercise of options or warrants, the conversion of convertible stock or
debt, and the exercise of any similar right to acquire such common stock,
or the combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed prior to
the Business Combination and (Z) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board of
Directors, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a
5
<PAGE>
complete liquidation or dissolution of the Company.
(b) The Company or its successor or purchaser shall notify Executive in
writing, no later than 10 days prior to a Change in Control, whether it desires
Executive to remain employed for a maximum of six months following the Change in
Control (the "Transition Period"). If Executive is notified that it is not
desired that he remain employed following the Change in Control, or if no such
notice is given or the notice references a Transition Period of more than five
months, Executive shall have the right to voluntarily terminate his employment
for the 60-day period following the Change in Control and, subject to Section
7(d) below, such termination shall be deemed to have occurred for Good Reason
for purposes of this Agreement.
(c) If Executive is properly notified that the Company or its successor or
purchaser desires Executive to remain employed for a Transition Period, and if
Executive remains employed for the Transition Period, then Executive shall have
the right to voluntarily terminate his employment for the 60-day period
following the end of the Transition Period and, subject to Section 7(d) below,
such termination shall be deemed to have occurred for Good Reason for purposes
of this Agreement.
(d) If, following a Change in Control, Executive's employment is terminated
by the Company other than for Cause, or Executive terminates his employment for
Good Reason (including for this purpose under circumstances described in Section
7(b) and (c)), (i) the Severance Payment due to Executive pursuant to Section 5
shall be increased by Executive's current base salary multiplied by 33% and (ii)
such payment shall be made to Executive in a single lump sum no later than five
days following his termination.
8. TERMINATION FOR GOOD REASON
Executive may terminate his employment hereunder for Good Reason at any
time during the Employment Term, in which event Executive shall resign from all
of his positions with the Company. For purposes of this Agreement, "Good Reason"
shall mean the Executive's good faith determination that any of the following
has occurred (without Executive's express prior written consent):
(i) The assignment to executive by the Company of
6
<PAGE>
duties inconsistent with those of a President or those of such other equivalent
or more senior position then held by Executive, if any (including status,
titles, offices and lines of reporting), except in connection with the
termination of Executive's employment for Cause (as described in paragraph 9),
disability (as defined in section 9.2(c) below), or as a result of Executive's
death or termination by Executive other than for Good Reason;
(ii) A reduction by the Company in Executive's base salary;
(iii) The taking of any action by the Company which would deprive Executive
of any material fringe benefit enjoyed by Executive at any time during the
Emp1oyment Term as set forth in paragraph 6; or
(iv) Any material breach by the Company of any provision of this Agreement.
9. DISCHARGE FOR CAUSE
9.1 The Company shall have the right to terminate the employment of
Executive during the Employment Term. If the Company terminates the employment
of Executive other than for Cause, the provisions of paragraph 5 hereof shall
apply. If the Company terminates the employment of Executive for Cause, its
obligation under this Agreement to make any further payments to Executive shall
thereupon cease and terminate except for any obligations accrued but which
remain unpaid.
9.2 As used herein, the term "cause" shall be limited to (a) action by
Executive involving willful malfeasance or gross negligence having an adverse
effect on the Company, or (b) failure to act by Executive involving material
malfeasance or gross negligence having an adverse effect on the Company provided
that any action or failure to act by Executive shall not constitute "Cause" if,
in good faith, Executive believed such action or failure to act to be in or not
opposed to the best interests of the Company, or if Executive shall be entitled,
under applicable law or the Certificate of Incorporation or By-Laws of the
Company, to be indemnified with respect to such action or failure to act, (c) in
the event Employer makes a good faith determination that Executive is so
disabled, for mental or physical reasons, that he is unable to satisfactorily
perform his duties hereunder for an aggregate of 180 days during any period of
12
7
<PAGE>
consecutive months, or (d) the death of Executive.
9.3 Termination of Executive for Cause pursuant to this section 9 shall be
communicated by a notice of termination.
10. EXPENSES
The Company shall reimburse Executive for reasonable expenses incurred in
connection with the performance of his duties hereunder upon presentation to it
by Executive from time to time of an itemized account of such expenditures in
accordance with the Company's procedures as in effect from time to time.
11. NONDISCLOSURE; NONCOMPETE; INVENTIONS
11.1 "Confidential Information" Defined. As used in this paragraph 11, the
term "Confidential Information" shall mean any and all information (verbal and
written) relating to the Company or any of its respective subsidiaries or any of
its respective activities, other than such information which can be shown by
Executive to be in the public domain (such information not being deemed to be in
the public domain merely because it is embraced by more general information
which is in the public domain) other than as the result of a breach of the
provisions of section 11.2 below, including, but not limited to, information
relating to: technology; research; test procedures and results; machinery and
equipment; manufacturing processes; financial information; products; identity
and description of raw materials and services used; purchasing; costs; pricing;
engineering; customers and prospects; marketing; and selling and servicing.
11.2 Nondisclosure of Confidential Information. Executive shall not, at any
time during the term of his employment by the Company (other than as may be
required in connection with the performance by him of his duties hereunder) or
thereafter directly or indirectly, use, communicate, disclose or disseminate any
Confidential Information in any manner whatsoever.
11.3 Noncompete Covenant
(a) Unless Executive has terminated for Good Reason, Executive shall not,
during the period of his employment by the Company and for a
8
<PAGE>
period of 24 months thereafter, directly or indirectly (a) engage in any
business (whether as owner, manager, operator, lender, partner, shareholder,
licensor, licensee, joint venturer, employee, consultant or otherwise) in which
the Company or any of its then subsidiaries is engaged (or is actively
considering engaging) during the term of Executive's employment by the Company
in any geographic area in which the Company or any of its respective
subsidiaries is so engaged or is actively considering engaging, or (b) take any
other action which constitutes an interference with or a disruption of the
activities of the company or any of its subsidiaries. Notwithstanding the
foregoing, Executive shall be permitted to own (as a passive investment) not
more than 1% of any class of securities which is registered under the Securities
Exchange Act of 1934, as amended; provided, however, that said 1% limitation
shall apply to the aggregate holdings of Executive and those of all other
persons and entities with whom Executive has agreed to act for the purpose of
acquiring, holding, voting or disposing of such securities.
11.4 Certain Activities. For purposes of clarification, but not of
limitation, Executive hereby acknowledges and agrees that the provisions of
section 11.3 above shall serve as a prohibition against him, during the period
referred to therein, directly or indirectly, hiring, offering to hire, enticing
away or in any other manner persuading or attempting to persuade any officer,
employee, agent, lessor, lessee, licensor, licensee, customer, prospective
customer or supplier of the Company or any of its subsidiaries to discontinue or
alter his or its relationship with the Company or any of its subsidiaries;
provided, however, that in the event Executive has terminated for Good Reason,
the 24 months period referred to in section 11.3 shall be reduced to 12 months
for purposes of this section 11.4.
11.5 Inventions. Executive shall assign, transfer, convey and deliver to
the Company, and hereby does assign, transfer and convey to the Company, all
right, title and interest in and to all ideas, concepts, inventions, devices and
improvements which pertain to methods, apparatus, designs, products, processes,
devices or services sold, leased, used under consideration or development by the
Company or any of subsidiaries, or which otherwise relate or pertain to the
business, functions or operations of the Company or any of its subsidiaries,
whether or not patentable or copyrightable
9
<PAGE>
(collectively called "Inventions"), and in and to any and all patents,
copyrights, trademarks and other protection with respect thereto and
applications therefor (including continuations, continuations-in-part,
divisions, reissues, renewals and extensions) for all countries relating to such
Inventions, which Executive, either alone or with others, may make, conceive or
reduce to practice during the term of his employment by the Company (it being
agreed that any Invention disclosed by Executive within one year following the
termination of his employment by the Company shall be deemed to fall within the
provisions of this section 11.5 unless proved by him to have been first
conceived, made and reduced to practice following the termination of his
employment by the Company). Executive shall (i) promptly communicate and
disclose to the Company all information, data and details concerning all
Inventions, and (ii) during the term of his employment by the Company and at any
time thereafter, execute all papers and perform all acts, and cooperate with the
Company and its counsel in any other way which, in the sole view of the Company,
is necessary and proper to more fully effectuate the provisions of this section
11.5. All expenses in connection with the obligations of Executive under this
section 11.5 shall be borne by the Company or its nominee.
11.6 Records. During the period of his employment by the Company, Executive
shall make and maintain adequate and current written records of all Inventions,
in the form of notes, sketches, drawings and/or reports relating thereto, which
records shall be and shall remain the property of the Company and shall be
available to the Company at all times. Upon the termination of Executive's
employment for any reason whatsoever, all documents, records, notebooks and
other materials which refer or relate to any aspect of the business of the which
are in the possession of Executive, including all copies thereof, shall be
promptly returned to Employer.
11.7 Injunctive Relief, etc. The parties hereto hereby acknowledge and
agree that (i) the Company would be irreparably injured in the event of a breach
by Executive of any of his obligations under this paragraph 11, (ii) monetary
damages would not be an adequate remedy for any such breach, and (iii) the
Company shall be entitled to injunctive relief, in addition to any other remedy
which it may have, in the event of any such breach. It is hereby also agreed
that the existence of any claims which Executive may have against the Company or
its subsidiaries, whether under this
10
<PAGE>
Agreement or otherwise, shall not be a defense to the enforcement by the Company
of any of its rights under this paragraph 11.
11.8 Scope of Restriction. It is the intent of the parties hereto that the
covenants contained in this paragraph 11 shall be enforced to the fullest extent
permissible under the laws and public policies of each jurisdiction in which
enforcement is sought (Executive hereby acknowledging that said restrictions are
reasonably necessary for the protection of the Company). Accordingly, it is
hereby agreed that if any of the provisions of this paragraph 11 shall be
adjudicated to be invalid or unenforceable for any reason whatsoever, said
provision shall be (only with respect to the operation thereof in the particular
jurisdiction in which such adjudication is made) construed by limiting and
reducing it so as to be enforceable to the extent permissible, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of said provision in any other jurisdiction.
11.9 Nonexclusivity. The undertakings of Executive contained in this
paragraph 11 shall be in addition to, and not in lieu of, any obligations which
he may have with respect to the subject matter hereof, whether by contract, as a
matter of law or otherwise.
12. CAPACITY, ETC.
Employee hereby represents and warrants to Employer that: (a) he has full
power, authority and capacity to execute and deliver this Agreement, and to
perform his obligations hereunder, (b) said execution, delivery and performance
will not (and with the giving of notice or lapse of time or both would not)
result in the breach of any agreements or other obligations to which he is a
party or otherwise bound, and (c) this Agreement is his valid and binding
obligation in accordance with its terms.
13. NOTICES
All notices or communications hereunder shall be in writing, addressed as
follows:
To the Company:
20 East Sunrise Highway
11
<PAGE>
Suite 201
Valley Stream, New York 11581
To Executive:
32 Seneca Drive
Commack, NY 11725
Any such notice or communication shall be sent certified or registered
mail, return receipt requested, postage prepaid, addressed as above (or to such
other address as such party may designate in writing from time to time), and the
actual date of receipt, as shown by the receipt therefor, shall determine the
time at which notice was given.
14. SEPARABILITY, LEGAL FEES
If any provision of this Agreement shall be declared to be invalid or
unenforceable, in whole or in part, such invalidity or unenforceability shall
not affect the remaining provisions hereof which shall remain in full force and
effect. The Company shall pay all legal fees and other fees and expenses which
Executive may incur in entering into this Agreement, if executed (provided the
amount of such legal fees shall not exceed $2,500) or in obtaining, or
attempting to obtain compensation or other benefits under this Agreement.
15. INDEMNIFICATION
The Company shall indemnify and hold harmless the Executive from and
against any and all damage, loss, liability or expense (including reasonable
attorneys' fees which shall be advanced by the Company) arising out of or with
respect to the performance of his duties hereunder in his capacity as an officer
and employee of the Company (or any subsidiary or affiliate thereof) to the
maximum extent permitted by law. The Executive shall notify the Company of any
claim by any third party coming to his attention which could result in any
liability on the Company's part. The Company shall have the right to conduct the
defense against any such claim with counsel of its selection. The obligations of
the Company under this Section 16 shall continue following the termination of
this Agreement and/or the termination of employment of the Executive
12
<PAGE>
with the Company.
16. BINDING EFFECT, ASSIGNMENT
(a) This Agreement shall be binding upon and inure to the benefit of the
heirs and representatives of Executive and the assigns and successors of the
Company, but neither this Agreement nor any rights hereunder shall be assignable
or otherwise subject to hypothecation by Executive or by the Company. The
Company shall not assign this Agreement to any successor or assign of the
Company without the written consent of Executive.
(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
17. GOVERNING LAW
This Agreement shall be construed, interpreted, and governed in accordance
with the laws of the State of New York.
18. ARBITRATION
Any controversy or claim arising out of or relating to this agreement, or
the breach thereof, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in New
York, New York, and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
19. ENTIRE AGREEMENT
This Agreement represents the entire agreement of the parties and
13
<PAGE>
shall supersede any and all previous contracts, arrangements or understandings
between the Company and Executive with respect to the subject matter hereof. The
Agreement may be amended at any time by mutual written agreement of the parties
hereto
20. HEADINGS
The headings contained herein are for the sole purpose of convenience of
reference, and shall not in any way limit or affect the meaning or
interpretation of any of the terms or provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and Executive has hereunto set his hand effective as of the date set
forth above.
GLOBAL PAYMENT TECHNOLOGIES, INC.
By: /s/ Stephen Katz
--------------------------------
Stephen Katz
Chairman of the Board
/s/ Thomas McNeill
--------------------------------
Thomas McNeill
14
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