CREDIT AGREEMENT
($5,000,000 Subordinate Debt)
This Credit Agreement (the "Agreement") is entered into as of the 31st
day of May, 2001, by and between INTERLOTT TECHNOLOGIES, INC., a Delaware
corporation, ("Borrower") and FIFTH THIRD BANK, an Ohio banking corporation,
located at 00 Xxxxxxxx Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxx 00000 ("Bank").
Section 1. Definitions.
Certain capitalized terms have the meanings set forth on Exhibit 1
hereto. All financial terms used in this Agreement but not defined on Exhibit 1
have the meanings given to them by generally accepted accounting principles as
in effect on the date hereof. All other undefined terms have the meanings given
to them in the Ohio Uniform Commercial Code.
Section 2. Loans.
2.1 Term Loan.
(a) Bank agrees, subject to the terms and conditions
hereinafter set forth, to make a term loan (the "Term
Loan") to Borrower on the date of this Agreement in the
amount of $5,000,000. Borrower's obligation to pay the
Term Loan will be evidenced by its promissory note (the
"Term Note") in substantially the form of Exhibit 2.1
attached hereto. The Term Note will be dated the date
of this Agreement.
(b) Interest will accrue on the principal amount of the
Term Note at the rate of 12% per annum. Interest only
payments will be made in immediately available funds at
the principal office of the Bank in accordance with the
terms of the Term Note. The entire principal amount of
the Term Note, plus all accrued and unpaid interest and
any other charges, advances or fees required to be paid
hereunder, will be due and payable on June 30, 2003.
(c) The proceeds of the Term Loan will be used to finance
the acquisition of certain assets of On-Point
Technology Systems, Inc. ("On Point"), and for other
general corporate matters .
(d) The indebtedness evidenced by the Term Note is
expressly subject to the terms of a Standby and
Subordination Agreement by and between Bank and
Borrower of even date herewith in the form attached
hereto as Exhibit 2.1(d).
2.2 Time of Payment. All payments of principal and interest
made by Borrower shall be made no later than 2:00 P.M., on the Business Day such
payments are due. All amounts paid after such time will be credited on the
following date.
2.3 Prepayment. Borrower may prepay any portion of the Term Loan
without premium or penalty but only if: (a) Borrower is in full compliance with
the Senior Debt Credit Facility, and (b) all pre-payments are made in increments
of $500,000, and (c) all pre-payments are made not earlier than 40 days after
the close of each fiscal quarter, and not later than 50 days after the close of
each fiscal quarter, commencing on September 30, 2001.
2.4 Fees.
(a) Closing Fee: Borrower will pay to Bank, a one-time,
non-refundable closing fee (the "Closing Fee") equal to
2% of the face amount of the Note, being $100,000.00,
due and payable upon execution of this Agreement.
(b) Success Fee: On the date which is fifty-one (51) days
after the end of each fiscal quarter, Borrower shall
pay to Bank a success fee equal to 1% of the unpaid
principal balance of the Note outstanding on the last
day of the fiscal quarter for each of the four (4)
fiscal quarters ending on September 30, 2001, December
31, 2001, March 31, 2002, and June 30, 2002; and equal
to 1.5% of the unpaid principal balance of the Note
outstanding on the last day of the fiscal quarter for
each of the four (4) fiscal quarters ending on
September 30, 2002, December 31, 2002, March 31, 2003,
and June 30, 2003 (the "Success Fee").
(c) Reimbursement of Expenses: On the date hereof, Borrower
will reimburse Bank for all of its reasonable costs and
expenses incurred in negotiating, reviewing and
preparing this Agreement, the Note, the other Loan
Documents and all other documents required to
consummate the transactions contemplated hereby,
including but not limited to attorney's and other
professional's fees.
Section 3. Representations And Warranties.
Except as set forth on the Disclosure Schedule attached as Exhibit 3 to
the Senior Debt Credit Facility or the legal opinion of Xxxx, Xxxxxxxxxx &
Xxxxxxxxx provided to Bank in connection herewith , Borrower hereby warrants and
represents to Bank the following:
3.1 Organization and Qualification. Borrower is a duly organized,
validly existing corporation in good standing under the laws of the State of
Delaware, has the power and authority (corporate and otherwise) to carry on its
business and to enter into and perform this Agreement, the Term Note and the
other Loan Documents, is qualified and licensed to do business in each
jurisdiction in which failure to be so qualified or licensed would have a
material adverse effect on the Borrower. All information provided by Borrower to
Bank with respect to Borrower and its operations is true and correct in all
material respects.
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3.2. Due Authorization. The execution, delivery and performance by
Borrower of this Agreement, the Term Note and the other Loan Documents have been
duly authorized by all necessary corporate action, and will not contravene any
law or any governmental rule or order binding on Borrower, or the certificate of
incorporation or bylaws of Borrower, nor violate any agreement or instrument by
which Borrower is bound except any anti-assignment clause in a Lease or other
contract with any lottery (if any) nor result in the creation of a Lien on any
assets of Borrower except the Lien granted to Bank herein. Borrower has duly
executed and delivered this Agreement, the Term Note and the other Loan
Documents and they are valid and binding obligations of Borrower enforceable
according to their respective terms except as limited by equitable principles
and by bankruptcy, insolvency or similar laws affecting the rights of creditors
generally. No notice to or consent by any governmental body is needed in
connection with the transaction, except as required by any Lease or other
contract with any lottery.
3.3. Litigation. There are no suits or proceedings pending
or threatened against Borrower, and no proceedings before any governmental body
are pending or threatened against Borrower.
3.4 Margin Stock. No part of the Loans will be used to purchase or
carry, or to reduce or retire or refinance any credit incurred to purchase or
carry, any margin stock (within the meaning of Regulations U and X of the Board
of Governors of the Federal Reserve System) or to extend credit to others for
the purpose of purchasing or carrying any margin stock. If requested by Bank,
Borrower will furnish to Bank statements in conformity with the requirements of
Federal Reserve Form U-1.
3.5 Business. Borrower is not a party to or subject to any agreement or
restriction which in the opinion of Borrower's management is so unusual or
burdensome that it might have a material adverse effect on Borrower's business,
properties or prospects.
3.6 Licenses, etc.. Borrower has obtained any and all licenses,
permits, franchises, governmental authorizations, patents, trademarks,
copyrights or other rights necessary for the ownership of its properties and the
advantageous conduct of its business. Borrower possesses adequate licenses,
patents, patent applications, copyrights, trademarks, trademark applications,
and trade names to continue to conduct its business as currently conducted by
it, without any conflict with the rights of any other person or entity. All of
the foregoing are in full force and effect and none of the foregoing are in
known conflict with the rights of others.
3.7 Laws and Taxes. Borrower is in material compliance with all
material laws, regulations, rulings, orders, injunctions, decrees, conditions or
other requirements applicable to or imposed upon Borrower by any law or by any
governmental authority, court or agency. Borrower has filed all required tax
returns and reports that are now required to be filed by it in connection with
any federal, state and local tax, duty or charge levied, assessed or imposed
upon Borrower or its assets, including unemployment, social security, and real
estate taxes. Borrower has paid all taxes which are now due and payable except
for the current Arizona privilege tax dispute in which the disputed amount shall
not exceed $250,000.00. No taxing authority has asserted or assessed any
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additional tax liabilities against Borrower which are outstanding on the date of
this Agreement, and Borrower has not filed for any extension of time for the
payment of any tax or the filing of any tax return or report.
3.8 Financial Condition. All financial information relating to Borrower
which has been or may hereafter be delivered by Borrower or on its behalf to
Bank fairly reflects the financial conditions or results of operations of
Borrower and has been prepared in accordance with generally accepted accounting
principles consistently applied except for internally prepared financial
information shall not include footnotes or year end adjustments. Borrower had at
the date of such financial statement no material obligations or liabilities of
any kind not disclosed in that financial information, and there has been no
material adverse change in the financial condition of Borrower nor has Borrower
suffered any material damage, destruction or loss which has adversely affected
its business or assets since the submission of the most recent Borrower's
financial statement by Borrower to Bank.
3.9 Title. Borrower has good and marketable title to the assets
reflected on the most recent balance sheet submitted to Bank, free and clear
from all liens and encumbrances of any kind, except for (collectively, the
"Permitted Liens"): (a) current taxes and assessments not yet due and payable,
(b) liens and encumbrances, if any, reflected or noted on such balance sheet or
notes thereto, (c) assets disposed of in the ordinary course of business, (d)
any security interests, pledges, assignments or mortgages granted to Bank to
secure the repayment or performance of the Obligations, (e) normal easements or
rights of way or similar restrictions on real property which do not adversely
affect Borrower's use of said real estate, (f) ordinary arms length market
leases of Borrower's assets to third parties as reflected or noted on such
balance sheet or notes thereto, and (g) purchase money security interests or
capital leases permitted pursuant to Section 5.1 of this Agreement.
3.10 Defaults. Borrower is in material compliance in the aggregate with
all material agreements applicable to it and there does not now exist any
material in the aggregate default or violation by Borrower of or under any of
the terms, conditions or obligations of (a) its Certificate of Incorporation or
Bylaws, or (b) any material indenture, mortgage, deed of trust, franchise,
permit, contract, agreement or other material instrument to which Borrower is a
party or by which it is bound, and the consummation of the transactions
contemplated by this Agreement will not result in such default or violation.
3.11 Environmental Laws.
(a) Borrower has obtained all material permits, licenses
and other authorizations or approvals which are
required under Environmental Laws and Borrower is in
compliance in all material respects with all terms
and conditions of the required permits, licenses,
authorizations and approvals, and is also in
compliance in all material respects with all other
limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules
and timetables contained in the Environmental Laws.
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(b) Borrower is not aware of, and has not received notice
of, any past, present or future events, conditions,
circumstances, activities, practices, incidents,
actions or plans which may interfere with or prevent
compliance or continued compliance, in any material
respect, with Environmental Laws, or may give rise to
any material common law or legal liability, or
otherwise form the basis of any material claim, action,
demand, suit, proceeding, hearing, study or
investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage,
disposal, transport or handling or the emission,
discharge, release or threatened release into the
environment, of any pollutant, contaminant, chemical,
or industrial, toxic or hazardous substance or waste.
(c) There is no civil, criminal or administrative action
suit, demand, claim, hearing, notice or demand letter,
notice of violation, investigation or proceeding
pending or threatened against Borrower, relating in any
way to Environmental Laws.
3.12 Subsidiaries and Partnerships. Borrower has no
subsidiaries and is not a party to any partnership agreement or joint venture
agreement.
3.13 ERISA. Borrower and all individuals or entities which along with
Borrower would be treated as a single employer under ERISA or the Internal
Revenue Code of 1986, as amended (an "ERISA Affiliate"), are in compliance in
all material respects with all of their obligations to contribute to any
"employee benefit plan" as that term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, and any regulations promulgated
thereunder from time to time ("ERISA"). Borrower and each of its ERISA
Affiliates are in compliance in all material respects with ERISA, and there
exists no event described in Section 4043(b) thereof ("Reportable Event").
Section 4. Affirmative Covenants.
4.1 Books and Records. Borrower will maintain proper books of account
and records and enter therein complete and accurate entries and records of all
of its transactions in accordance with generally accepted accounting principles
and give representatives of Bank access thereto at all reasonable times,
including permission to examine, copy and make abstracts from any such books and
records and such other information which might be helpful to Bank in evaluating
the status of the Loans as it may reasonably request from time to time. Borrower
will give Bank reasonable access to the Collateral and the other property
securing the Obligations for the purpose of performing examinations thereof and
to verify its condition or existence.
4.2 Financial Statements. Borrower will maintain a standard
and modern system for accounting and will furnish to Bank:
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(a) Within forty-five (45) days after the end of each
month, a copy of Borrower's internally prepared
financial statements for that month and for the year to
date in a form reasonably acceptable to Bank, prepared
and certified as complete and correct, subject to
changes resulting from year-end adjustments, by the
principal financial officer of Borrower;
(b) Within ninety (90) days after the end of each fiscal
year, a copy of Borrower's financial statements for
that year audited by a firm of independent certified
public accountants acceptable to Bank (which acceptance
will not be unreasonably withheld), and accompanied by
a standard audit opinion of such accountants without
qualification;
(c) All of the statements referred to in (a) and (b) above
shall be in conformance with generally accepted
accounting principles except that in regard to
financial statements delivered under 4.2(a) such
financial statements shall not have footnotes or year
end adjustments;
(d) With the statements submitted under (a) and (b) above,
a certificate in the form as set forth in Exhibit 4.2
(d) to the Senior Debt Credit Facility signed by the
principal financial officer of Borrower, (i) stating he
is familiar with all documents relating to Bank and
that no Event of Default specified in this Agreement,
nor any event which upon notice or lapse of time, or
both would constitute such an Event of Default, has
occurred, or if any such condition or event existed or
exists, specifying it and describing what action
Borrower has taken or proposes to take with respect
thereto, and (ii) setting forth, in summary form,
figures showing the financial status of Borrower in
respect of the financial restrictions contained in this
Agreement;
(e) Prior to the end of each fiscal year, a projected
income statement and projected statement of cash flow
for the subsequent fiscal year prepared in accordance
with generally accepted accounting principles
consistently applied;
(f) Immediately upon any CFO, CEO, COO or other senior
officer that deals with the Credit Agreement and or the
Loan Documents of Borrower ("Responsible Officer of
Borrower") obtaining knowledge of any condition or
event which constitutes or, after notice or lapse of
time or both, constitutes an Event of Default, a
certificate of such person specifying the nature and
period of the existence thereof, and what action
Borrower has taken or is taking or proposes to take in
respect thereof;
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(g) Upon request, copies of all federal, state and local
income tax returns and such other information as Bank
may reasonably request, including but not limited to, a
listing of all transactions with affiliates of
Borrower;
(h) On the date hereof and within forty-five (45) days
after the end of each calendar month, Borrower will
deliver to Bank a Collateral Report in the form as set
forth in Exhibit 4.2(h) to the Senior Debt Credit
Facility and Account Receivable Aging Reports in the
form regularly used by Bank's commercial loan customers
provided however if Borrower's monthly availability on
average for the prior calendar month is on average less
than $1,000,000.00 then Bank may require and Borrower
shall provide Collateral Reports more frequently (but
not more frequently than weekly) as requested by Bank;
and
(i) With all financial statements delivered to Bank as
provided in (a) and (b) above, Borrower shall deliver
to Bank a Compliance Certificate in the form attached
to the Senior Debt Credit Facility as Exhibit 4.2(d)
confirming, in addition to the other information set
forth therein, the Borrower's compliance with the
financial covenants set forth herein and that no Event
of Default has occurred.
(j) Borrower shall within fifteen days of the close of each
fiscal quarter complete, execute and deliver to Bank
the certificate attached to the Senior Debt Credit
Facility as Exhibit 4.2(j).
If at any time Borrower has any additional subsidiaries which have
financial statements that could be consolidated with those of Borrower under
generally accepted accounting principles, the financial statements required by
subsections (a) and (b) above will be the financial statements of Borrower and
all such subsidiaries prepared on a consolidated basis.
4.3 Condition and Repair. Borrower will maintain its assets in good
repair and working order (normal wear and tear excepted) and will make all
appropriate repairs and replacements thereof except for obsolete assets or
assets no longer used in Borrower's business.
4.4 Insurance. Borrower will insure its properties and business against
loss or damage of the kinds and in the amounts customarily insured against by
corporations with established reputations engaged in the same or similar
business as Borrower. All such policies will (a) be issued by financially sound
and reputable insurers, (b) name Bank as an additional insured and, where
applicable, as loss payee under a lender loss payable endorsement reasonably
satisfactory to Bank, and (c) will provide for thirty (30) days written notice
to Bank before such policy is altered or canceled all of which will be evidenced
by a Certificate of Insurance delivered to Bank by Borrower on the date of
execution of this Agreement.
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4.5 Taxes. Borrower will pay when due all taxes, assessments and other
governmental charges imposed upon it or its assets, franchises, business, income
or profits before any penalty or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which by law might be a lien or charge upon any of its
assets, provided that (unless any material item or property would be lost,
forfeited or materially damaged as a result thereof) no such charge or claim
need be paid if it is being diligently contested in good faith, if Bank is
notified in advance of such contest and if Borrower establishes an adequate
reserve or other appropriate provision required by generally accepted accounting
principles .
4.6 Existence; Business. Borrower will (a) maintain its
existence, and (b) engage primarily in business of the same general character as
that now conducted .
4.7 Compliance with Laws. Borrower will comply with all federal, state
and local laws, regulations and orders applicable to Borrower or its assets
including but not limited to all Environmental Laws, in all respects material to
Borrower's business, assets or prospects and will immediately notify Bank of any
violation of any material rule, regulation, statute, ordinance, order or law
relating to the public health or the environment and of any complaint or
notifications received by Borrower regarding to any material environmental or
safety and health rule, regulation, statute, ordinance or law.
4.8 Notice of Default. Borrower will, within three (3) days of its
knowledge thereof, give written notice to Bank of: (a) the occurrence of any
event or the existence of any condition which would be, after notice or lapse of
applicable grace periods, an Event of Default, and (b) the occurrence of any
event or the existence of any condition which would prohibit Borrower from
continuing to make the representations set forth in this Agreement.
4.9 Costs. Borrower will pay to Bank its fees, costs and expenses
(including, without limitation, reasonable attorneys' fees, other professionals'
fees, appraisal fees, environmental assessment fees (including Phase I and Phase
II assessments), expert fees, court costs, litigation and other expense
(collectively, "Costs") incurred or paid by Bank in connection with the
negotiating, documenting, administering and enforcing the Facility, the Loans
and the Loan Documents and the defense, preservation and protection of Bank's
rights and remedies thereunder, including without limitation, its security
interest in the Collateral or any other property pledged to secure the Loans,
whether incurred in bankruptcy, insolvency, foreclosure or other litigation or
proceedings or otherwise. The Costs will be due and payable upon demand by Bank.
If Borrower fails to pay the Costs when upon such demand, Bank is entitled to
disburse such sums as an advance under the Facility. Thereafter, the Costs will
bear interest from the date incurred or disbursed at the highest rate set forth
in the Notes. This provision will survive the termination of this Agreement
and/or the repayment of any amounts due or the performance of any Obligation.
4.10 Depository/Banking Services. So long as this Agreement is in
effect, Bank will be the principal depository in which a majority of Borrower's
funds are deposited, and the principal bank of account of Borrower, as long as
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this Agreement is in effect, and Borrower will maintain in its principal bank
account at all times collected funds of at least .875% of the total amount of
the Facility and shall grant Bank the first and last opportunity to provide any
corporate banking services required by Borrower and its Affiliates, including,
without limitation, payroll, cash management, treasury management, and employee
benefit plan services.
4.11 Other Amounts Deemed Loans. If Borrower fails to pay any tax,
assessment, governmental charge or levy or to maintain insurance within the time
permitted or required by this Agreement, or to discharge any Lien prohibited
hereby, or to comply with any other Obligation, Bank may, but shall not be
obligated to, pay, satisfy, discharge or bond the same for the account of
Borrower, and to the extent permitted by law and at the option of Bank, all
monies so paid by Bank on behalf of Borrower will be deemed Loans and
Obligations.
4.12 Assignment of Lease Proceeds. Borrower shall use its best efforts
to deliver to the Bank original fully executed Assignment of Lease Proceeds for
all of Borrower's Leases executed by Borrower and all lessees within sixty (60)
days of the Closing Date or for Leases executed after the Closing Date within
sixty (60) days of the execution of the Lease. All Assignments of Lease Proceeds
shall be in the form set forth in Exhibit 7.1 (g) to the Senior Debt Credit
Facility or with such minor variations therefrom as reasonably approved by Bank.
4.13 Leases. Borrower shall make available for review by Bank copies of
all Borrower's Leases executed by Borrower and all lessees at the Closing and
shall deliver copies of all new Leases executed by Borrower and lessees after
the Closing within five (5) days of execution.
4.14 Intellectual Property. Borrower shall, within ten (10) days of
request by Bank, execute and deliver to Bank such security documents as
reasonably requested by Bank to perfect a first priority security interest in
the intellectual property of Borrower including but not limited to the
Borrower's trademarks and patents.
Section 5. Negative Covenants.
5.1 Indebtedness. Borrower will not incur, create, assume or permit to
exist any additional Indebtedness for borrowed money (other than the
Obligations) or Indebtedness on account of deposits, advances or progress
payments under contracts, notes, bonds, debentures or similar obligations or
other indebtedness evidenced by notes, bonds, debentures, capitalized leases or
similar obligations in excess of $750,000 in the aggregate in any calendar year
without the written consent of Bank in its sole discretion except that the
limitation contained herein shall not apply to performance bonds required to be
maintained in connection with lottery leases.
5.2 Prepayments. Borrower will not voluntarily prepay any Indebtedness
owing by Borrower prior to the stated maturity date thereof other than (i) the
Obligations, except as permitted herein, and (ii) Indebtedness to trade
creditors where the prepayment will result in a discount on the amount due or is
paid in the ordinary course of business.
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5.3 [Intentionally Omitted]
5.4 [Intentionally Omitted]
5.5 Pledge or Encumbrance of Assets. Other than the Permitted Liens,
Borrower will not create, incur, assume or permit to exist, arise or attach any
Lien in any present or future asset, except for Liens to Bank, Liens existing on
the date of this Agreement which have been disclosed to and approved by Bank and
Liens imposed by law which secure amounts not at the time due and payable.
5.6 Guarantees and Loans. Borrower will not enter into any direct or
indirect guarantees other than by endorsement of checks for deposit or other
than in the ordinary course of business nor make any advance or loan other than
in the ordinary course of business as presently conducted, including, without
limitation, loans and advances to employees, officers or directors of Borrower
except for (i) advances to employees, officers or directors for travel,
entertainment and similar expenses in amounts outstanding at any given time not
to exceed $500,000.00, (ii) a presently outstanding loan to Xxxxxx Xxxxx in the
amount of $280,000 which may be increased by not more than $350,000 and which
shall be paid off at such time as Borrower makes the Preferred Share Redemption
and, (iii) other loans to officers, directors or employees in amounts in the
aggregate outstanding at any one time not to exceed $500,000.
5.7 Share Interest; Distributions. Borrower will not (a) declare or pay
any distributions excepting dividends to equity shareholders (provided however
dividends to equity shareholders may not be made at such time as there is an
Event of Default and an Event of Default is Continuing or where such dividend
shall cause an Event of Default) (b) make any payments of any kind to its
shareholders (including, without limitation, debt repayments, payments for goods
or services or otherwise, but excluding ordinary salary payments to shareholders
employed by Borrower and dividends to shareholders) or (c) redeem any shares of
its equity interests in any fiscal year except the redemption on or about April
1, 2001 or at any time thereafter of all the issued and outstanding preferred
stock of Borrower for redemption price of $1,350,000.00 (the "Preferred Share
Redemption").
5.8 [Intentionally Deleted]
5.9 Merger Purchase of Assets; Disposition of Assets. Borrower
will not (a) merge or consolidate with any corporation, including but not
limited to affiliates except in regards to an Acquisition or (b) sell, transfer
or otherwise dispose of all or substantially all of its assets, whether now
owned or hereafter acquired .
5.10 Transactions with Affiliates. Borrower will not (except as
permitted under Section 5.6 hereof) (a) directly or indirectly issue any
guarantee for the benefit of any of its Affiliates, (b) directly or indirectly
make any loans or advances to or investments in any of its Affiliates, (c) enter
into any transaction with any of its Affiliates, other than transactions entered
into on an arm's length basis in the normal course of Borrower's business, or
(d) divert (or permit anyone to divert) any of its business opportunities to any
Affiliate or any other corporate or business entity in which Borrower or its
shareholders hold a direct or indirect interest.
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5.11 Investments. Borrower will not purchase or hold beneficially any
stock, securities or evidences of indebtedness of, or make any investment or
acquire any interest in, any other firm, partnership, corporation or entity
other than in regards to an Acquisition and/or short term investments of excess
working capital in one or more of the following: (a) investments (of one year or
less) in direct or guaranteed obligations of the United States, or any agencies
thereof; and (b) investments (of one year or less) in certificates of deposit of
banks or trust companies organized under the laws of the United States or any
jurisdiction thereof, provided that such banks or trust companies are insured by
the Federal Deposit Insurance Corporation and have capital in excess of
$25,000,000.
5.12 [Intentionally Omitted]
5.13 Minimum Tangible Net Worth. Borrower will not permit its
Tangible Net Worth to be less than the amounts set forth below on the dates set
forth below:
Date Minimum Amount
5/31/01 $15,953,000
9/30/01 $16,617,000
12/31/01 $18,142,000
3/31/02 $18,151,000
6/30/02 $18,738,000
9/30/02 $19,365,000
12/31/02 $19,221,000
3/31/03 $19,726,000
6/30/03 $19,968,000
9/30/03 $20,000,000
12/31/03 $20,000,000
3/31/04 $20,000,000
5.14 [Intentionally Omitted]
5.15 Funded Debt / EBITDA Ratio. Borrower will not at any time permit
its Funded Debt to EBITDA ratio to exceed the ratio set forth below for Funded
Debt as calculated on the date below and for EBITDA calculated based on a
trailing twelve month period from the date set forth below:
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Determination Date Ratio
6/30/01 3.00 : 1
9/30/01 3.10 : 1
12/31/01 3.00 : 1
3/31/02 3.00 : 1
6/30/02 2.50 : 1
9/30/02 2.50 : 1
12/31/02 2.25 : 1
3/31/03 2.25 : 1
6/30/03 2.00 : 1
9/30/03 2.00 : 1
12/31/03 1.75 : 1
3/31/04 1.75 : 1
6/30/04 1.75 : 1
5.16 Indebtedness to EBITDA Ratio. Borrower will not at any time permit
its Indebtedness to EBITDA ratio to exceed the ratio set forth below for
Indebtedness as calculated on the date below and for EBITDA calculated based on
a trailing twelve month period from the date set forth below:
Determination Date Ratio
6/30/01 3.50 : 1
9/30/01 3.50 : 1
12/31/01 3.50 : 1
3/31/02 3.50 : 1
6/30/02 3.25 : 1
9/30/02 3.25 : 1
12/31/02 3.00 : 1
3/31/03 3.00 : 1
6/30/03 2.75 : 1
9/30/03 2.75 : 1
12/31/03 2.50 : 1
3/31/04 2.50 : 1
6/30/04 2.50 : 1
5.17 Maximum Annual Capital Expenditures. Borrower will not make any
capital expenditure, or any commitment therefore, or obtain equipment subject to
a purchase money security interest, trust deed or lease, in an amount exceeding
$500,000 in the aggregate in any calendar year, without the written consent of
Bank in its sole discretion.
12
5.18 Minimum Fixed Charge Coverage Ratio. Borrower will not at any
time permit its Fixed Charge Coverage Ratio to be less than the ratio set forth
below calculated based on a trailing twelve month period from the date set forth
below:
Determination Date Ratio
6/30/01 2.25 : 1
9/30/01 2.25 : 1
12/31/01 2.25 : 1
3/31/02 2.25 : 1
6/30/02 3.00 : 1
9/30/02 3.00 : 1
12/31/02 3.00 : 1
3/31/03 3.00 : 1
6/30/03 3.00 : 1
9/30/03 3.00 : 1
12/31/03 3.00 : 1
3/31/04 3.00 : 1
6/30/04 3.00 : 1
5.19 Cancelled Lease Units. Commencing on June 30, 2001, and measured
at the end of each subsequent fiscal quarter, Borrower shall not permit lottery
machines subject to Leases to be cancelled during the preceding twelve month
period which either: a) exceed a number equal to 15% of the total number of
lottery machines being leased by Borrower as of the end of such fiscal quarter,
or b) exceed 10% of the lottery machines being leased by the Borrower as of the
end of such fiscal quarter and which cancelled leases arise from two or more
states.
Section 6. Events of Default and Remedies.
6.1 Events of Default. Any of the following events will be an
Event of Default ("Event of Default"):
(a) any representation or warranty made by Borrower herein or in any
of the Loan Documents is incorrect when made or reaffirmed and
such misrepresentations and/or breached warranties in the
aggregate are material; or
(b) Borrower defaults in the payment of any principal or interest on
any Obligation for two (2) business days after such payment is
due and payable, by acceleration or otherwise; or
(c) Borrower fails to observe or perform any covenant, condition or
agreement herein, in the Term Note or in the Senior Debt Credit
Facility, and fails to cure such default within 30 days of the
earlier of (i) written notice thereof from Bank to Borrower if
13
such default is not known by a Responsible Officer of Borrower or
(ii) knowledge of a Responsible Officer of such default, provided
that such 30 day grace period will not apply to (i) a breach of
any covenant which in Bank's good faith judgment is incapable of
cure, (ii) any failure to maintain insurance or permit inspection
of the Collateral or of the books and records of Borrower, (iii)
any breach in any negative covenant set forth in Section 5
hereof, or (iv) any breach of any covenant which has already
occurred; or
(d) a court enters a decree or order for relief with respect to
Borrower in an involuntary case under any applicable bankruptcy,
insolvency or other similar law then in effect, or appoints a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of Borrower or for any substantial
part of its property, or orders the wind-up or liquidation of its
affairs; or a petition initiating an involuntary case under any
such bankruptcy, insolvency or similar law is filed and is
pending for forty-five (45) days without dismissal; or
(e) Borrower commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law in effect, or makes
any general assignment for the benefit of creditors, or fails
generally to pay its debts as such debts become due, or takes
corporate action in furtherance of any of the foregoing; or
(f) Borrower defaults under the terms of any Indebtedness or lease
involving obligations of the Borrower in the aggregate of
$100,000.00 or more and such default gives any creditor or lessor
the right to accelerate the maturity of any such indebtedness or
lease payments which right is not contested by Borrower or is
determined by any court of competent jurisdiction to be valid; or
(g) final judgment of the payment of money is rendered against
Borrower and remains undischarged for 10 days during which
execution is not effectively stayed; or
(h) the dissolution of Borrower; or
(i) the commencement of any foreclosure proceedings, proceedings in
aid of execution, attachment actions, levies against, or the
filing by any taxing authority of a lien which is not discharged
within ten (10) days of Borrower's knowledge thereof against any
of the Collateral or any property securing the repayment of any
of the Obligations; or
(j) the loss, theft or substantial damage to the Collateral or any
property securing the repayment of the Obligations which is not
fully covered by insurance (subject to a reasonable deductible)
if the result of such occurrence will be, in Bank's reasonable
judgment, the failure or inability of Borrower to continue
substantially normal operation of its business within thirty (30)
days of the date of such occurrence; or
14
(k) (i) the validity or effectiveness of any of the Loan Documents or
its transfer, grant, pledge, mortgage, or assignment by the party
executing such Loan Document is impaired; (ii) any party
executing any of the Loan Documents asserts that any of such Loan
Documents is not a legal, valid and binding obligation of the
party thereto enforceable in accordance with its terms; (iii) the
security interest or Lien purporting to be created by any of the
Loan Documents will for any reason (other than as a result of
Bank's fault) cease to be a valid, perfected lien subject to no
other liens other than Liens permitted by the terms of this
Agreement; or (iv) any Loan Document is amended, hypothecated,
subordinated, terminated or discharged, or if any person is
released from any of its covenants or obligations under any of
the Loan Documents except as permitted by Bank in writing; or
(l) Bank has called for additional security from the assets of
Borrower and the Borrower has not furnished such additional
security on demand; or
(m) a Reportable Event (as defined in ERISA) occurs with respect to
any employee benefit plan maintained by Borrower for its
employees other than a Reportable Event caused solely by a
decrease in employment; or a trustee is appointed by a United
States District Court to administer any employee benefit plan; or
the Pension Benefit Guaranty Corporation institutes proceedings
to terminate any of Borrower's employee benefit plans; or
(n) the filing of any lien or charge against the Collateral or any
part thereof which is not removed to the satisfaction of Bank
within a period of 30 days thereafter; or
(o) the abandonment by Borrower of all or any material part of the
Collateral.or
(p) the prepayment of all or any part of the Term Note of Borrower to
Bank (except as authorized by the Note or the other documents
relating thereto).
(q) the failure of Borrower to pay the Success Fee and Closing Fee to
Bank within two (2) business days after such payment is due as
provided herein.
6.2 Remedies. If any Event of Default occurs and the Event of Default
is Continuing, Bank may (i) cease advancing money hereunder, (ii) declare all
Obligations to be immediately due and payable, whereupon such Obligations will
immediately become due and payable, (iii) exercise any and all rights and
remedies provided by applicable law and the Loan Documents, (iv) proceed to
realize upon the Collateral or any property securing the Obligations, including,
without limitation, causing all or any part of the Collateral to be transferred
or registered in its name or in the name of any other person, firm or
corporation, with or without designation of the capacity of such nominee, all
without presentment, demand, protest, or notice of any kind, each of which are
hereby expressly waived by Borrower. Borrower shall be liable for any deficiency
remaining after disposition of any Collateral, and waives all valuation and
appraisement laws.
15
6.3 Setoff. Subject to the prior rights of the holders of the Senior
Indebtedness, if any Event of Default occurs and the Event of Default is
Continuing, Bank is authorized, without notice to Borrower, to offset and apply
to all or any part of the Obligations all moneys, credits and other property of
any nature whatsoever of Borrower now or at any time hereafter in the possession
of, in transit to or from, under the control or custody of, or on deposit with
(whether held by Borrower individually or jointly with another party), Bank,
including but not limited to certificates of deposit.
6.4 Default Rate. After the occurrence of an Event of Default and the
Event of Default is Continuing, all amounts of principal outstanding as of the
date of the occurrence of such Event of Default will accrue interest at the
Default Rate, in Bank's sole discretion, without notice to Borrower. This
provision does not constitute a waiver of any Events of Default or an agreement
by Bank to permit any late payments whatsoever.
6.5 Intentionally Omitted
6.6 No Remedy Exclusive. No remedy set forth herein is exclusive of any
other available remedy or remedies, but each is cumulative and in addition to
every other remedy available under this Agreement, the Loan Documents or as may
be now or hereafter existing at law, in equity or by statute. Borrower waives
any requirement of marshaling of assets which may be secured by any of the Loan
Documents.
6.7 Effect of Termination. The termination of this Agreement will not
affect any rights of either party or any obligation of either party to the
other, arising prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights created or Obligations incurred prior to such termination
have been fully disposed of, concluded or liquidated.
6.8 Intentionally Omitted.
Section 7. Conditions Precedent.
7.1 Conditions to the Loan. Bank will have no obligation to make or
advance the Term Loan until Borrower has delivered to Bank at or before the
closing date, in form and substance satisfactory to Bank:
(a) Executed versions of the Term Note in the form of Exhibit
2.1 attached hereto.
(b) A Certificate of Borrower in the form of Exhibit 7.1(b) to
the Third Amendment to Credit Agreement executed of even
date herewith, and all attachments thereto.
16
(c) A favorable opinion of counsel to Borrower, substantially in
the form of Exhibit 7.1(c) attached hereto.
(d) The Closing Fee and the reimbursements of Bank's expenses
contained in Section 2.4 (c) hereof have been paid in full.
(e) A Certificate of Insurance as described in Section 4.4
hereof, if same has not previously been provided to Bank.
(f) Bank shall have completed to its reasonable satisfaction an
audit of the books and records of Borrower. It is
understood, however, that any such audit by Bank will in no
respect waive Bank's rights to pursue remedies upon an Event
of Default.
(g) Such additional information and materials as Bank may
reasonably request.
(h) UCC searches, tax lien and litigation searches, insurance
certificates, notices or other documents which Bank may
require to reflect, perfect or protect Bank's first priority
lien in the Collateral and all other property pledged to
secure the Obligations and to fully consummate this
transaction.
(i) An Amendment to Mortgage of Intellectual Property of
Borrower in a form reasonably acceptable to Bank.
7.2 Conditions to Term Loan. On the date of the Term Loan, the
following statements will be true:
(a) All of the representations and warranties contained
herein and in the Loan Documents will be correct in
all material respects as though made on such date
except for those changes permitted under this
Agreement;
(b) No event will have occurred and be continuing, or
would result from such Term Loan, which constitutes
an Event of Default, or would constitute an Event of
Default but for the requirement that notice be given
or lapse of time or both;
Section 8. Miscellaneous Provisions.
8.1 Miscellaneous. This Agreement, the exhibits and the other Loan
Documents are the complete agreement of the parties hereto and supersede all
previous understandings relating to the subject matter hereof. This Agreement
may be amended only in writing signed by the party against whom enforcement of
the amendment is sought. This Agreement may be executed in counterparts. If any
17
part of this Agreement is held invalid, illegal or unenforceable, the remainder
of this Agreement will not in any way be affected. This Agreement is and is
intended to be a continuing agreement and will remain in full force and effect
until the Loans are finally and irrevocably paid in full and the Term Loan is
terminated.
8.2 Waiver by Borrower. Borrower waives notice of non-payment, demand,
presentment, protest or notice of protest of any Accounts or other Collateral,
and all other notices (except those notices specifically provided for in this
Agreement); consents to any renewals or extensions of time of payment thereof.
Borrower hereby waives all suretyship defenses, including but not limited to,
all defenses set forth in Section 3-605 of the Uniform Commercial Code, as
revised in 1990 (the "UCC"). Such waiver is entered to the full extent permitted
by Section 3-605 (i) of the UCC.
8.3 Binding Effect. This Agreement will be binding upon and inure to
the benefit of the respective legal representatives, successors and assigns of
the parties hereto; however, Borrower may not assign or transfer any of its
rights or delegate any of its obligations under this Agreement or under any of
the Loan Documents, by operation of law or otherwise. Bank (and any subsequent
assignee) may transfer and assign any of its rights or delegate any of its
duties under this Agreement or may transfer or assign partial interests or
participation in the Loans to other persons. Bank may disclose to all
prospective and actual assignees and participants all financial, business and
other information about a Borrower which Bank may possess at any time.
8.4 Subsidiaries. If Borrower has any additional Subsidiaries at any
time during the term of this Agreement, the term "Borrower" in each
representation, warranty and covenant herein will mean "Borrower" and each
Subsidiary individually and in the aggregate, and Borrower will cause each
Subsidiary to be in compliance therewith.
8.5 Security. The Obligations are secured as provided herein, in this
Agreement, the Senior Debt Credit Facility, the Security Agreement, in the Loan
Documents and in each other document or agreement which by its terms secures the
repayment or performance of the Obligations. Notwithstanding anything contained
in the Credit Agreement or the Loan Documents to the contrary, to the extent of
any prohibition in a Lease applicable thereto, the assignment of the payments
and/or rights under each Lease from Borrower to Bank shall not be effective as
to each Debtor under a Lease until such time as the Assignment of Lease Proceeds
shall be executed by such Debtor.
8.6 Survival. All representations, warranties, covenants and agreements
made by Borrower herein and in the Loan Documents will survive the execution and
delivery of this Agreement, the Loan Documents and the issuance of the Term
Note.
8.7 Delay or Omission. No delay or omission on the part of Bank in
exercising any right, remedy or power arising from any Event of Default will
impair any such right, remedy or power or any other right remedy or power or be
considered a waiver or any right, remedy or power or any Event of Default nor
will the action or omission to act by Bank upon the occurrence of any Event of
18
Default impair any right, remedy or power arising as a result thereof or affect
any subsequent Event of Default of the same or different nature.
8.8 Notices. Any notices under or pursuant to this Agreement will be
deemed duly sent when delivered in hand or when mailed by registered or
certified mail, return receipt requested, addressed as follows:
To Borrower: INTERLOTT TECHNOLOGIES, INC.
0000 Xxxxxxxxxx Xxx
Xxxxx, Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx
With a copy to: Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxx, Xxxxxxxxxx & Xxxxxxxxx, LLP
1800 Firstar Tower
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
To Bank: Fifth Third Bank
00 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: J. Xxxxxxx Xxxxxxxx
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
Statman, Harris, Xxxxxx & Xxxxxx, LLC
2900 Chemed Center
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Either party may change such address by sending written notice of the
change to the other party.
8.9 No Partnership. Nothing contained herein or in any of the Loan
Documents is intended to create or will be construed to create any partnership,
joint venture or other relationship between Bank and Borrower other than as
expressly set forth herein or therein and will not create any joint venture,
partnership or other relationship.
8.10 Indemnification. If after receipt of any payment of all or part of
the Obligations, Bank is for any reason compelled to surrender such payment to
any person or entity, because such payment is determined to be void or voidable
as a preference, impermissible setoff, or diversion of trust funds, or for any
other reason, this Agreement will continue in full force and effect and Borrower
will be liable to, and will indemnify, save and hold Bank, its officers,
19
directors, attorneys, and employees harmless of and from the amount of such
payment surrendered. The provisions of this Section will be and remain effective
notwithstanding any contrary action which may have been taken by Bank in
reliance on such payment, and any such contrary action so taken will be without
prejudice to Bank's rights under this Agreement and will be deemed to have been
conditioned upon such payment becoming final, indefeasible and irrevocable. In
addition, Borrower will indemnify, defend, save and hold Bank, its officers,
directors, attorneys, and employees harmless of, from and against all claims,
demands, liabilities, judgments, losses, damages, costs and expenses, joint or
several (including all accounting fees and attorneys' fees reasonably incurred),
that Bank or any such indemnified party may incur arising out of this Agreement,
any of the Loan Documents or any act taken by Bank hereunder except for the
willful misconduct or gross negligence of such indemnified party. The provisions
of this Section will survive the termination of this Agreement.
8.11 Governing Law; Jurisdiction. This Agreement, the Note and the
other Loan Documents will be governed by the domestic laws of the State of Ohio.
Borrower agrees that the state and federal courts in Xxxxxxxx County, Ohio, or
any other court in which Bank initiates proceedings have exclusive jurisdiction
over all matters arising out of this Agreement, and that service of process in
any such proceeding will be effective if mailed to Borrower at its address
described in the Notices section of this Agreement. BANK AND BORROWER HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
THIS SPACE INTENTIONALLY LEFT BLANK
20
IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement by
their duly authorized officers as of the date first above written.
INTERLOTT TECHNOLOGIES, INC.
By:________________________________
Its:_______________________________
FIFTH THIRD BANK
By:________________________________
Its:________________________________
21
EXHIBITS
TO
CREDIT AGREEMENT
BETWEEN
INTERLOTT TECHNOLOGIES, INC.
AND
FIFTH THIRD BANK
Exhibit 1 - Definitions
Exhibit 2.1 - Term Note
Exhibit 2.1(d) - Subordination Agreement
Exhibit 7.1 (c) - Form of Opinion of Borrower's Counsel
22
EXHIBIT 1
DEFINITIONS
1. "Acquisitions" means any purchase of assets from a third party or merger or
consolidation with a third party (all of the foregoing being in the same
business as Borrower) which (i) requires a purchase price consisting of
cash payments at closing or required thereafter in connection with the
closing plus assumed liabilities (in accordance with general accepted
accounting principles), but exclusive of any contingent obligations that
would not be treated as a liability in accordance with generally accepted
accounting principles and/or any contingent liabilities associated with
earn out or deferred payment provisions based on future performance, of not
more than fifty percent (50%) of the average excess availability under the
Revolving Loans for the thirty day period prior to the acquisition and (ii)
Borrower has delivered to Bank at least thirty (30) days prior to the
acquisition projected proforma financial statements for the Borrower for
the period after the acquisition to the Termination Date in a form
reasonably acceptable to the Bank prepared in accordance with generally
accepted accounting principles and certified as complete and correct by an
officer of Borrower and evidencing future compliance with the terms of the
Agreement in a manner reasonably acceptable to Bank.
2. "Affiliate" means, as to Borrower, (a) any person or entity which, directly
or indirectly, is in control of, is controlled by or is under common
control with, Borrower, or (b) any person who is a director, officer or
employee (i) of Borrower or (ii) of any person described in the preceding
clause (a). For purposes of this definition, control of a person shall mean
(a) the power, direct or indirect, (i) to vote ten percent (10%) or more of
the securities having ordinary voting power for the election of directors
of such person or (ii) to direct or cause the direction of the management
and policies of such person whether by contract or otherwise, or (b) the
ownership, direct or indirect, of ten percent (10%) or more of any class of
equity securities of such person.
3. "Business Day" means any day which the Bank and the Federal Reserve Bank of
Cleveland is open for business.
4. "Calculation Date" means in regards to the calculation of Funded Debt to
EBITDA Ratio the first day of the calendar month following the month of
receipt by Bank from Borrower of Borrower's audited financial statement for
any calendar year end period or receipt from Borrower by Bank of Borrower's
10K or 10Q for any other calendar quarter provided however if such audited
financial statement, 10K or 10Q is received in the last three (3) business
23
days of the month it shall be deemed received in the next calendar month.
Borrower shall deliver to Bank its audited calendar year end financial
statement within 5 days of its receipt by Borrower and its 10K or 10Q
within five (5) days of filing by the Borrower.
5. "Collateral" has the meaning assigned to that term in any Security
Agreement between Borrower and Bank.
6. "Default Rate" means three percent (3%) in excess of the interest rate
otherwise in effect under amounts outstanding under the Note. In no event
will the interest rate accruing under such Note be increased to be in
excess of the maximum interest rate permitted by applicable state or
federal usury laws then in effect.
7. "EBITDA" means net income of Borrower before taxes, interest expense,
depreciation and amortization expenses, plus principal payments received
from sales type lease payments, and less extraordinary gains.
8. "Environmental Laws" means all federal, state, local and foreign laws
relating to pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial toxic or hazardous
substances or wastes into the environment (including without limitation
ambient air, surface water, ground water or land), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes, and any and all
regulations, codes, plans, orders, decrees, judgments, injunctions, notices
or demand letters issued, entered promulgated or approved thereunder.
9. "ERISA" means the Federal Employee Retirement Income Security Act of 1974.
10. "Event(s) of Default" will have the meaning set forth in Section 6.1 of the
Agreement.
11. "Event of Default is Continuing" shall mean that an Event of Default has
occurred and has not been cured by the Borrower, provided however an Event
of Default cannot be cured in the following circumstances: (i) a breach of
any covenant which in Bank's good faith judgment is incapable of cure, (ii)
any failure to maintain insurance in accordance with the terms of the
Agreement or related documents (provided however one breach of the
maintenance of insurance during the term of this Agreement for a period of
not more than three (3) business days prior to its cure shall be capable of
cure) or failure to permit inspection of the Collateral or books and
records of the Borrower, or (iii) more than two (2) breaches of Section
6.1(b) of the Agreement in any calendar year.
24
12. "Fixed Charge Coverage Ratio" means the ratio of (a) Borrower's EBITDA for
the applicable measurement period to (b) Borrower's Fixed Charges for the
applicable measurement period.
13. "Fixed Charges" means the sum of Borrower's scheduled principal payments
(including principal payments arising from the acquisition of the assets of
On-Point), interest, dividends, income tax expense as reported on
Borrower's profit and loss statements, capital lease payments and
unfinanced capital expenditures (excluding Borrower's cost of lottery
machines subject to Leases) for the applicable measurement period.
Notwithstanding the foregoing, Fixed Charges shall not include principal
payments on the Subordinated Debt.
14. "Funded Debt" means the sum of Borrower's Obligations to Bank or any other
lender or financial institution for borrowed money, including capitalized
leases, and Subordinated Debt, and the total amount of outstanding debt of
Borrower incurred in acquiring the assets of On-Point (including but not
limited to the $9,000,000 seller note), as reflected on Borrower's balance
sheet
15. "Funded Debt to EBITDA Ratio" means the ratio of Borrower's Funded Debt to
the Borrower's EBITDA. The Funded Debt to EBITDA Ratio shall be calculated
for each calendar quarter on each Calculation Date (as defined in the
Senior Debt Credit Facility) and shall be effective from each Calculation
Date to the subsequent Calculation Date. The calculation of the Funded Debt
to EBITDA Ratio shall be based upon Borrower's audited year end financial
statement for the year end calculation and upon applicable securities
filing forms 10Q or 10K for other calendar quarterly periods. The
calculation shall be made on a trailing twelve month basis. The first
calculation period shall commence for the twelve month period ending March
31, 2001.
16. "Indebtedness" means (a) all items (except items of capital stock, of
capital surplus, of general contingency reserves or of retained earnings,
deferred income taxes, and amount attributable to minority interests, if
any) which in accordance with generally accepted accounting principles
would be included in determining total liabilities on a consolidated basis
as shown on the liability side of a balance sheet as at the date as of
which Indebtedness is to be determined, (b) all indebtedness secured by any
mortgage, pledge, lien or conditional sale or other title retention
agreement to which any property or asset owned or held is subject, whether
or not the indebtedness secured thereby will have been assumed (excluding
non-capitalized leases which may amount to title retention agreements but
including capitalized leases), and (c) all indebtedness of others which
Borrower or any Subsidiary has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of
25
business), discounted or sold with recourse or agreed (contingently or
otherwise) to purchase or repurchase or otherwise acquire, or in respect of
which Borrower or any Subsidiary has agreed to apply or advance funds
(whether by way of loan, stock purchase, capital contribution or otherwise)
or otherwise to become directly or indirectly liable.
17. "Lien" means any security interest, mortgage, pledge, assignment, lien or
other encumbrance of any kind, including interests of vendors or lessors
under conditional sale contracts and capitalized leases.
18. "Loan Documents" means this Agreement, the Term Note and every other
document or agreement executed by any party evidencing, guarantying or
securing any of the Obligations; and "Loan Document" means any one of the
Loan Documents.
19. "Loans" means the Term Loan.
20. "Mortgage[s]" means all mortgages, deeds of trust or trust deeds executed
by Borrower encumbering real property of Borrower to secure the repayment
of the Obligations.
21. "Note" means the Term Note.
22. "Obligation(s)" means all loans, advances, indebtedness, liabilities and
obligations of Borrower owed to each of Bank and the Affiliates of Fifth
Third Bancorp of every kind and description whether now existing or
hereafter arising including without limitation, those owed by Borrower to
others and acquired by Bank or any Affiliate of Fifth Third Bancorp, by
purchase, assignment or otherwise, and whether direct or indirect, primary
or as guarantor or surety, absolute or contingent, liquidated or
unliquidated, matured or unmatured, whether or not secured by additional
collateral, and including without limitation all liabilities, obligations
and indebtedness arising under this Agreement, the Term Note and the other
Loan Documents, all obligations to perform or forbear from performing acts,
all amounts represented by letters of credit now or hereafter issued by
Bank for the benefit of or at the request of Borrower, and all expenses and
attorneys' fees incurred by Bank and any Affiliate of Fifth Third Bancorp
under this Agreement or any other document or instrument related to any of
the foregoing.
23. "On Point" means On Point Technology Systems, Inc..
24. "Permitted Liens" has the meaning assigned thereto as set forth in Section
3.9 hereof.
25. "Prime Rate" means the rate of interest per annum announced to be its prime
rate from time to time by Bank at its principal office in Cincinnati, Ohio
whether or not Bank will at times lend to borrowers at lower rates of
26
interest or, if there is no such prime rate, then its base rate or such
other rate as may be substituted by Bank for the prime rate.
26. "Responsible Officer of Borrower" has the meaning assigned to that term in
Section 4.2(f) of this Agreement.
27. "Security Agreement" means any Security Agreement executed between Borrower
and Bank, securing the Obligations.
28. "Senior Debt Credit Facility" shall mean that certain Credit Agreement by
and between Borrower and Bank originally dated January 25, 2001, as amended
thereafter, the most recent amendment being a Third Amendment to Credit
Agreement dated of even date herewith
29. "Senior Indebtedness" means all Obligations of Borrower to Bank under the
Senior Debt Credit Facility.
30. "Subsidiary" means any corporation of which Borrower directly or indirectly
owns or controls at the time outstanding stock having under ordinary
circumstances (not depending on the happening of a contingency) voting
power to elect a majority of the board of directors of said corporation.
31. "Success Fee" shall have the meaning assigned to that term in Section
2.4(b) of this Agreement.
32. "Tangible Net Worth" means the total of the capital stock (less treasury
stock), paid-in surplus, general contingency reserves and retained earnings
(deficit) of Borrower, and the value of all leases acquired from On Point,
all as determined and/or valued in accordance with generally accepted
accounting principles, after eliminating all inter-company items and all
amounts properly attributable to minority interests, if any, in the stock
and surplus of any Subsidiary plus subordinated debt there to Borrower's
shareholders as a result of cash loans to the Borrower, minus the following
items (without duplication of deductions) if any, appearing on the
consolidated balance sheet of Borrower: (i) all deferred charges (less
amortization, unamortized debt discount and expense and corporate
organization expenses); (ii) the book amount of all assets which would be
treated as intangibles under generally accepted accounting principles,
including, without limitation, such items as good-will, trademark
applications, trade names, service marks, brand names, copyrights, patents,
patent applications and licenses, and rights with respect to the foregoing;
(iii) the amount by which aggregate net inventories or aggregate net
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securities appearing on the consolidated balance sheet exceed the lower of
cost or market value (at the date of such balance sheet) thereof; (iv) any
subsequent write-up in the book amount of any asset resulting from a
revaluation thereof from the book amount entered upon acquisition of such
asset; and (v) any outstanding stock warrants.
33. "Term Loan" has the meaning assigned to that term in Section 2.1 of this
Agreement.
34. "Term Note" has the meaning assigned to that term in Section 2.1 of this
Agreement.
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