Exhibit 10.7
ACKNOWLEDGMENT, WAIVER AND AMENDMENT NO. 1 TO THE SECOND AMENDED
AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT
This ACKNOWLEDGMENT, WAIVER AND AMENDMENT NO. 1 ("Amendment") TO THE
SECOND AMENDED AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT is made as of
March 30, 2001 by and among IBM Credit Corporation, a Delaware corporation,
("IBM Credit"), IBM Financing, a division of IBM Canada Limited ("IBM Canada")
(each a "Lender" and jointly the "Lenders"), Applied Digital Solutions, Inc.,
("USA Customer") and Ground Effects Ltd. (the "Canadian Customers") (USA
Customer and Canadian Customer are each referred to herein as a "Customer" or,
collectively, the "Customers").
RECITALS
WHEREAS, Customers and Lenders have entered into that certain Second
Amended and Restated Term and Revolving Credit Agreement dated as of October 17,
2000 (as amended, supplemented or otherwise modified from time to time, the
"Agreement").
WHEREAS, based on the Financial Statements provided by USA Customer for
the fiscal year ending December 31, 2000, Customers (a) are in default of one or
more of its financial covenants contained in the Agreement and (b) have been in
default of other terms and conditions of the Agreement (as more specifically
explained in Section 2 hereof); and
WHEREAS, Lenders are willing to waive such defaults subject to the
conditions set forth below.
AGREEMENT
NOW THEREFORE, in consideration of the premises set forth herein, and
for other good and valuable consideration, the value and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Agreement.
Section 2. Acknowledgment.
(A) Each Customer acknowledges that the financial covenants set forth
in Attachment A to the Agreement are applicable to the financial results of
Customers for the fiscal year ending December 31, 2000, and Customers were
required to maintain such financial covenants at all times. Each Customer
further acknowledges that the actual attainment, for the fiscal year ending on
December 31, 2000, for the financial covenant listed below, based on the
Financial Statements, was as follows:
Covenant Covenant
Covenant Requirement Actual
-------------------------------------- ---------------- ----------------
(i) Tangible Net Worth ($11,750,000.00) ($56,820,000.00)
(ii) Current Assets to Current Liabilities 1.0:1.0 1.30:1.0
(iii) Minimum EBITDA with no Net Loss after $6,100,000.00 ($15,062,700.00)
Tax in more than two consecutive
quarters
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(B) In addition, each Customer acknowledges that the following defaults
occurred:
Term Requirement Default
----------------------------- --------------------------------- -------------------------
(a) Unpaid Shortfall Amount As defined in Section Unpaid Shortfall of
2.7 of the Agreement $3,988,000.00
(b) Collateral Management Reports As required in Section 7.1 (I) of Month ending 12/31/00
the Agreement received late and months
ending 01/31/01 and
02/28/01 not received
(c) Financial Reports As required in Section 7.1 (A) of Fiscal year ending
the Agreement 12/31/00 received late
Section 3. Waivers to Agreement. Subject to the conditions set forth in Section
5 hereof, Lenders hereby waive the default of Customers under the terms of the
Agreement to the extent such default is set forth in Section 2 hereof.
Section 4. Amendment. The Agreement is hereby amended as follows:
A. Attachment A to the Agreement is hereby amended by deleting such
Attachment A in its entirety and substituting, in lieu thereof, the Attachment A
attached hereto. Such new Attachment A shall be effective as of the date
specified in the new Attachment A. The changes contained in the new Attachment A
include, without limitation, the following:
(a) USA R/C Finance Charge is increased from Base Rate plus 2.75% to Base Rate
plus 3.25%;
(b) Term Loan A Finance Charge is increased from Base Rate plus 3.50% to Base
Rate plus 4.00%;
(c) Canadian R/C Finance Charge is increased from Base Rate plus 1.17% to Base
Rate plus 1.67%;
(d) Term Loan C Finance Charge is increased from Base Rate plus 1.17% to Base
Rate plus 1.67%;
(e) Credit Line is decreased from Sixty Seven Million Two Hundred Sixty
Thousand Dollars ($67,260,000) to Fifty Three Million Three Hundred Fifty
Five Thousand Dollars ($53,355,000);
(f) USA Credit Line is decreased from Sixty Three Million Four Hundred Five
Thousand Dollars ($63,405,000) to Forty Nine Million Five Hundred Thousand
Dollars ($49,500,000);
(g) Shortfall Transaction Fee is increased from Shortfall Amount multiplied by
0.30% to Shortfall Amount multiplied by 0.50%;
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(h) Section III of the Attachment A is hereby amended by deleting section (i)
thereof in its entirety and substituting, in lieu thereof, the following
section (i):
Covenant Covenant Requirement
---------------------------- ----------------------------------
(i) Tangible Net Worth As of the following dates not less than:
03/31/01 ($57,000,000.00)
06/30/01 ($47,000,000.00)
09/30/01 ($35,000,000.00)
12/31/01 ($34,500,000.00)
03/31/02 ($20,000,000.00)
(i) Section III of the Attachment A is hereby amended by deleting section
(ii) thereof in its entirety and substituting, in lieu thereof, the
following section (ii):
(ii) Current Assets to Current As of the following dates greater than:
Liabilities
03/31/01 1.45:1.00
06/30/01 0.60:1.00
09/31/01 0.80:1.00
12/31/01 0.80:1.00
03/31/02 1.00:1.00
(j) Section III of the Attachment A is hereby amended by deleting section (iii)
thereof in its entirety and substituting, in lieu thereof, the following
section (iii):
(iii) Minimum EBITDA (calculated on As of the following dates not less than:
a cumulative annualized basis)
03/31/01 ($ 4,700,000.00)
06/30/01 $ 5,000,000.00
09/30/01 $ 7,000,000.00
12/31/01 $ 11,000,000.00
03/31/02 $10,000,000.00
B. Section 1 of the Agreement is hereby amended by inserting, in
the appropriate alphabetical order, the following definition of "Maximum
Permitted Shortfall Amount":
"`Maximum Permitted Shortfall Amount': at the time of determination,
any Shortfall Amount equal to or less than (i) from the effective date of this
Amendment to and including March 31, 2001, Nine Million Dollars ($9,000,000),
(ii) from April 1, 2001 to and including April 30, 2001, Eight Million Five
Hundred Thousand Dollars ($8,500,000), (iii) from May 1, 2001 to and including
May 31, 2001, Seven Million Five Hundred Thousand Dollars ($7,500,000), (iv)
from June 1, 2001 to and including June 30, 2001, Six Million Five Hundred
Thousand Dollars ($6,500,000), (v) from July 1, 2001 to and including July 31,
2001, Four Million Dollars ($4,000,000), (vi) from August 1, 2001 to and
including August 31, 2001, One Million Five Hundred Thousand Dollars
($1,500,000), (vii) from September 1, 2001 to and including September 30, 2001,
Eight Million Six Hundred Thousand Dollars ($8,600,000), (viii) from October 1,
2001 to and including October 31, 2001, Five Million Six Hundred Thousand
Dollars ($5,600,000), (ix) from November 1, 2001 to and including November 30,
2001, Eight Million Five Hundred Thousand Dollars ($8,500,000), (x) from
December 1, 2001 to and including December 31, 2001, Seven Million Dollars
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($7,000,000), (xi) from January 1, 2002 to and including March 31, 2002, Two
Million Dollars ($2,000,000), and (xii) thereafter, Zero Dollars ($0)."
C. Section 2.3 (C) of the Agreement is hereby amended by deleting this
section in its entirety and substituting, in lieu thereof, the following:
"(C) USA Customer shall, within three (3) Business Days of the date of
receipt of the Net Cash Proceeds by the USA Customer or any of its Subsidiaries
from the sale, lease, transfer or other disposition of any assets (other than
the sale by any Customer or any Subsidiary of inventory in the ordinary course
of business) of the USA Customer or any Subsidiary pay an amount equal to One
Hundred Percent (100%) of such Net Cash Proceeds to pay (i) an aggregate
principal amount of the Outstanding Term Loan A, or (ii) in the event there is
no Outstanding Term Loan A, any unpaid Shortfall Amount, or (iii) in the event
there is no unpaid Shortfall Amount, the oldest R/C Advance owed by USA Customer
to IBM Credit. Notwithstanding the previous sentence, Net Cash Proceeds received
from the sale, transfer or other disposition of a minority of USA Customer's
interest in Digital Angel Corporation and payable to IBM Credit hereunder shall
be limited to Eighteen Million Dollars ($18,000,000)."
D. Section 7.1 (C) of the Agreement is hereby amended by deleting this
section in its entirety and substituting, in lieu thereof, the following:
"(C) as soon as available and in any event within thirty five (35) days
after the end of each fiscal month of USA Customer, USA Customer's internally
generated consolidated and consolidating balance sheets and income statements,
prepared in accordance with GAAP (subject to normal year-end audit adjustments
and except for the absence of consolidated statements of cash flows and of
shareholders' equity and except for the absence of footnotes) and reflecting any
loans to or from any Customer or Guarantor;"
E. Section 7.1(I) of the Agreement is hereby amended by deleting this
section in its entirety and substituting, in lieu thereof, the following:
"(I) by the thirty fifth (35th) day of each month, or as otherwise
agreed in writing, a Collateral Management Report as of a date no earlier than
the last day of the immediately preceding month;"
F. Section 9.1 of the Agreement is hereby amended by inserting
immediately following subsection 9.1(G), the following new subsection 9.1(H) and
by realphabetizing the two subsections immediately following to 9.1(I) and
9.1(J) respectively:
"(H) by the tenth (10th) day of each month, a certificate of the chief
executive officer or chief financial officer of USA Customer specifying that
neither USA Customer nor any Domestic Subsidiary is in default of its lease in
real property and that all rental and other payments have been made to lessor
according to the terms of each lease agreement.
G. Section 9.1 of the Agreement is hereby amended by inserting
immediately following realphabetized subsection 9.1 (J), the following new
subsection 9.1 (K) and by realphabetizing the three subsections immediately
following to 9.1 (L), 9.1(M) and 9.1 (N) respectively:
"(K) The failure of USA Customer to immediately pay any Shortfall
Amount in excess of Maximum Permitted Shortfall Amount;"
H. The Agreement is hereby amended by deleting Exhibit 2.3.1 in its
entirety and substituting, in lieu thereof, the Exhibit 2.3.1 attached hereto.
I. The Agreement is hereby amended by deleting Exhibit 8.5 in its
entirety and substituting, in lieu thereof, the Exhibit 8.5 attached hereto.
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J. The Agreement is hereby amended by deleting Exhibit 8.12 in its
entirety and substituting, in lieu thereof, the Exhibit 8.12 attached hereto.
Section 5. Post Closing. USA Customer agrees it shall provide to IBM Credit the
following reports and documents and, in the event such action does not occur to
the satisfaction of IBM Credit within the time periods set forth below, such
noncompliance with this Section 5 shall constitute an immediate Event of Default
under the Agreement :
(i) on or prior to April 2, 2001, the term sheet for the private equity
placement of Digital Angel Corporation in form and substance satisfactory to IBM
Credit together with the confirmation by the USA Customer that its also has been
circulated in the investment community;
(ii) on or prior to April 16, 2001, the Collateral Management Reports
as of the month ending January 31, 2001 and February 28, 2001; and
(iii) on or prior to April 16, 2001, the Financial Statements and other
documents required pursuant to Section 7.1 (A).
Customers agree to provide any evidence reasonably requested by IBM Credit that
any of the items requested hereunder have been duly authorized and are legal,
valid, binding and enforceable.
Section 6. Conditions to Effectiveness of Waiver. The waiver set forth in
Section 3 hereof shall become effective upon the receipt by IBM Credit from
Customers of (i) this Amendment executed by each Customer and each Lender, and
(ii) a waiver fee, in immediately available funds, equal to Three Hundred
Seventy Five Thousand Dollars ($375,000). Such waiver fee payable to IBM Credit
hereunder shall be nonrefundable and shall be in addition to any other fees IBM
Credit may charge Customers.
Section 7. Success Fee. USA Customer shall pay to IBM Credit a fee of Three
Million Dollars ($3,000,000), in immediately available funds, on January 10,
2002 if any Subsequent Financing shall have occurred on or prior to that date.
For the purposes of this Section 7, the following terms have the following
meanings: "Subsequent Financing" shall mean any issuance by Digital Angel
Corporation (or any successor thereto or transferee or assignee of substantially
all of the assets of Digital Angel Corporation) of Convertible Securities or
Common Stock from the date of this Amendment until January 10, 2002;
"Convertible Securities" shall mean any evidence of indebtedness, shares or
other securities directly or indirectly convertible into or exchangeable for
Common Stock; "Common Stock" shall mean the common shares of Digital Angel
Corporation (or any successor thereto or transferee or assignee of substantially
all of the assets of Digital Angel Corporation). Failure to comply with this
Section 7 shall constitute an Event of Default under the Agreement
Section 8. Rights and Remedies. Except to the extent specifically waived herein,
Lenders reserve any and all rights and remedies that Lenders now have or may
have in the future with respect to Customers, including any and all rights or
remedies which it may have in the future as a result of Customers' failure to
comply with their financial covenants to Lenders. Except to the extent
specifically waived herein neither this Amendment, any of Lenders' actions or
Lenders' failure to act shall be deemed to be a waiver of any such rights or
remedies.
Section 9. Stock Options. USA Customer shall deliver to IBM Credit all proceeds
it receives from any stock options for USA Customer stock exercised by Xxxxxxx
Xxxxxxxx, Xxxxxx Xxxxxxxxxx and/or Xxxxxxxx Xxxxxx during the term of Agreement
to pay (i) an aggregate principal amount of the Outstanding Term Loan A, or (ii)
in the event there is no Outstanding Term Loan A, any unpaid Shortfall Amount,
or (iii) in the event there is no unpaid Shortfall Amount, the oldest R/C
Advance owed by USA Customer to IBM Credit.
Section 10. Ratification of Agreement. Except as specifically amended hereby,
all of the provisions of the Agreement shall remain unamended and in full force
and effect. Each Customer hereby, ratifies, confirms and agrees that the
Agreement, as amended hereby, represents a valid and enforceable obligation of
such Customer, and is not subject to any claims, offsets or defense.
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Section 11. Governing Law. This Amendment shall be governed by and interpreted
in accordance with the laws which govern the Agreement.
Section 12. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
Section 13. RELEASE OF CLAIMS. TO INDUCE IBM CREDIT TO ENTER INTO THIS
AMENDMENT, EACH CUSTOMER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES IBM
CREDIT AND IBM CREDIT'S OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND
ASSIGNS FROM ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OF ACTIONS OF
ANY KIND (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DUE OR TO BECOME
DUE, DISPUTED OR UNDISPUTED, LIQUIDATED OR UNLIQUIDATED, AT LAW OR IN EQUITY,
THAT ANY ONE OR MORE OF THEM NOW HAVE OR EVER HAVE HAD AGAINST IBM CREDIT,
WHETHER ARISING UNDER OR IN CONNECTION WITH THE AGREEMENT, THIS AMENDMENT OR
OTHERWISE.
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IN WITNESS WHEREOF, this Amendment has been executed by duly authorized
representatives of the undersigned as of the day and year first above written.
IBM CREDIT CORPORATION IBM FINANCING, A DIVISION OF IBM CANADA
LIMITED
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxx Xxxxx
Print Name: Xxxx X. Xxxxx Print Name: Xxxxx Xxxxx
Title: Director of Global Title: Manager, Commercial Financing
Credit Operations
APPLIED DIGITAL SOLUTIONS, INC. GROUND EFFECTS LTD.
By: /s/ Xxxxxx X. Xxxxxxxxxx By: /s/ Xxxxx Xxxxx
Print Name: Xxxxxx X. Xxxxxxxxxx Print Name: Xxxxx Xxxxx
Title: Senior Vice President Title: President
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EXHIBIT 2.3.1
Term Loan A
Term Loan A Commitment: Twenty Five Million United States Dollars
(U.S.$25,000,000)
Term Loan A Finance Charge: as set forth in Attachment A
Term Loan A Stated Maturity Date: May 25, 2002.
Term Loan A Repayment Schedule: The principal amount of Term Loan A shall be
amortized over six years and shall be payable by USA Customer at the end of each
calendar quarter, provided that all unpaid principal of such Term Loan A shall
be paid in full on the Term Loan A Stated Maturity Date. Notwithstanding the
foregoing, USA Customer shall have no obligation to pay the principal amount due
on April 1, 2001 (the "April Principal Amount") until July 1, 2001. USA Customer
shall pay the April Principal Amount together with the next principal payment
due on July 1, 2001 .
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EXHIBIT 8.5
(Permitted Payments)
Provided that no Event of Default has occurred and is continuing and provided
further, that the effect of any payment hereunder is not likely to have a
Material Adverse Effect:
(a) the USA Customer may acquire, in exchange for its capital stock, or
in accordance with the terms of agreements in place at the execution of this
Agreement, the remaining equity interests in Subsidiaries which are not wholly
owned by the USA Customer, all as set forth in Exhibit A attached hereto;
(b) the USA Customer, in exchange for its capital stock, may make
certain "earnout" payments at the times and upon satisfaction of the earnings
targets set forth in Exhibit B attached hereto;
(c) the USA Customer, in exchange for its capital stock, may pay
certain "price protection" payments, all as set forth on Exhibit C attached
hereto; and
(d) any Subsidiary may declare and pay cash dividends, to the extent
permitted under the provisions of the Stock Pledge Agreement.
In addition, upon the prior written consent by IBM Credit, the USA
Customer may make distributions of up to $6 million in cash to the holders of
the Series C Preferred Stock (the "Preferred Stockholders") upon the exercise by
the Preferred Stockholders of their rights upon the occurrence of the following
events:
(i) trading of the shares of common stock of the USA Customer has been
suspended for a period of 5 consecutive trading days or for any 30
non-consecutive trading days during a 365 day period;
(ii) a suspension of the effectiveness of the Registration Statement,
as defined in the Certificate of Designation of the Series C
Convertible Preferred Stock (the "Certificate of Designation"), or
the use of the Registration Statement for any 30 trading days in
any 365 day period;
(iii) failure of the shares of USA Customer's common stock to be listed
on the American Stock Exchange, the New York Stock Exchange or the
Nasdaq National Market System for a period of 10 consecutive
trading days or any 30 non-consecutive trading days during a 365
day period;
(iv) failure to deliver shares of USA Customer's common stock upon a
conversion notice or as otherwise provided in section B.(3)(d)(iv)
of the Certificate of Designation;
(v) the USA Customer shall have failed to obtain Stockholder Approval
if such Stockholder Approval would then be required to permit the
conversion of the then outstanding shares of Preferred Stock and
the exercise of the outstanding Warrants, as set forth in section
B.(3)(d)(v) of the Certificate of Designation; and
(vi) failure to have the Registration Statement declared effective
within 180 days after the issuance of the Preferred Stock.
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EXHIBIT 8.12
(Permitted Loans)
All loans existing, as of March 29, 2001, to directors, officers,
employees, and shareholders, of any Customer or Subsidiary.
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ATTACHMENT A ("ATTACHMENT A") TO
SECOND AMENDED AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT
("AGREEMENT") DATED October 17, 2000
Customers' Names: USA Customer - Applied Digital Solutions, Inc.
Canadian Customer- Ground Effects Ltd.
Effective Date of this Attachment A: Xxxxx 00, 0000
X. Fees, Rates and Repayment Terms:
(A) Credit Line: Fifty Three Million Three Hundred Fifty Five
Thousand Dollars ($53,355,000);
(i) USA Credit Line: Forty Nine Million Five Hundred
Thousand Dollars ($49,500,000)
(ii) Canadian Credit Line: Five Million Six Hundred Twenty
Eight Thousand Canadian Dollars
(CND$5,628,000 or when converted to
US$3,855,000) of which Two Hundred
Thousand Canadian Dollars
(CND$200,000) is reserved for the
repayment drawn under the Letter of
Credit;
(B) Borrowing Base:
(i) 75% of the amount of the Customer's Accounts net of all
applicable reserves as of the date of determination as reflected
in the Customer's most recent monthly internal financial
statement .
(ii) 45% of Unencumbered Inventory
(iii) 100% of Approved Inventory
(C) Collateral Insurance Amount: Twenty Five Million ($25,000,000.00)
(D) Finance Charges:
(I) Cash Advance Charge:
A) USA R/C Finance Charge Base Rate plus 3.25%
B) Term Loan A Finance Charge Base Rate plus
4.00%
C) Canadian R/C Finance Charge Base Rate plus
1.67%
D) Term Loan C Finance Charge Base Rate plus
1.67%
(II) Delinquency Fee Rate:
(i) USA: Base Rate plus 6.00%
(ii) Canadian: Base Rate plus 4.00%
(III) Shortfall Transaction Fee: Shortfall Amount multiplied
by 0.50%
(IV) Other Charges:
Annual Facility Fee: $ 85,000.00 payable on each
anniversary of the Closing
Date of the Second Amended
and Restated Term and
Revolving Credit Agreement
1
ATTACHMENT A, ("ATTACHMENT A") TO
SECOND AMENDED AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT
("AGREEMENT")
II. Bank Account
Customer's Lockbox(es) and Special Account(s) will be maintained at the
following Bank(s):
Name of Bank: Key Bank, N.A.
Address: Xxx Xxxxx Xxxxx
Xxxxxxxx, Xxxxx 00000
Telecopy: 000-000-0000
Lockbox Address: See Contingent Lockbox Account Agreement
dated as of March 9, 2001
Special Account #: See Contingent Lockbox Account Agreement
dated as of March 9, 2001
2
ATTACHMENT A ("ATTACHMENT A") TO
SECOND AMENDED AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT
("AGREEMENT")
III. Financial Covenants:
Definitions: The following terms shall have the following respective meanings in
this Attachment. All amounts shall be determined in accordance with generally
accepted accounting principles (GAAP).
"Consolidated Earnings before Income Taxes" shall be defined as
consolidated income before provision for income taxes, minority
interest and extraordinary items as determined in accordance with GAAP.
"Consolidated Net Income" shall mean, for any period, the net income
(or loss), after taxes, of Customer on a consolidated basis for such
period determined in accordance with GAAP.
"Current" shall mean within the ongoing twelve month period.
"Current Assets" shall mean assets that are cash or expected to become
cash within the ongoing twelve months.
"Current Liabilities" shall mean payment obligations resulting from
past or current transactions that require settlement within the ongoing
twelve month period.
"EBITDA" shall mean, for any period (determined on a consolidated basis
in accordance with GAAP), (a) the Consolidated Earnings before Income
Taxes of Customer for such period, caluclated on a cumulative,
annualized basis, plus (b) each of the following to the extent
reflected as an expense in the determination of such Consolidated
Earnings before Income Taxes: (i) Interest Income and Interest Expense
for such period; (ii) depreciation and amortization of tangible and
intangible assets of Customer for such period; and (iii) the Bostek
litigation, which is to be included in the 6/30/01 EBITDA caluclation.
"Fixed Charges" shall mean, for any period, an amount equal to the sum,
without duplication, of the amounts for such as determined for the
Customer on a consolidated basis, of (i) scheduled repayments of
principal of all Indebtedness (as reduced by repayments thereon
previously made), (ii) Interest Expense, (iii) capital expenditures
(iv) dividends, (v) leasehold improvement expenditures and (vi) all
provisions for U.S. and non U.S. Federal, state and local taxes.
"Fixed Charge Coverage Ratio" shall mean the ratio as of the last day
of any fiscal period of (i) EBITDA as of the last day of such fiscal
period to (ii) Fixed Charges.
"Interest Expense" shall mean, for any period, the aggregate
consolidated interest expense of Customer during such period in respect
of Indebtedness determined on a consolidated basis in accordance with
GAAP, including, without limitation, amortization of original issue
discount on any Indebtedness and of all fees payable in connection with
the incurrence of such Indebtedness (to the extent included in interest
expense), the interest portion of any deferred payment obligation and
the interest component of any capital lease obligations.
"Interest Income" shall mean, for any period, the aggregate
consolidated interest income of Customer during such period determined
on a consolidated basis in accordance with GAAP.
"Long Term" shall mean beyond the ongoing twelve month period.
"Long Term Assets" shall mean assets that take longer than a year to be
converted to cash. They are divided into four categories: tangible
assets, investments, intangibles and other.
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ATTACHMENT A ("ATTACHMENT A") TO
SECOND AMENDED AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT
("AGREEMENT")
"Long Term Debt" shall mean payment obligations of indebtedness which
mature more than twelve months from the date of determination, or
mature within twelve months from such date but are renewable or
extendible at the option of the debtor to a date more than twelve
months from the date of determination.
"Net Profit/Loss after Tax" shall mean Revenue plus all other income,
minus all costs, including applicable taxes.
"Revenue" shall mean the monetary expression of the aggregate of
products or services transferred by an enterprise to its customers for
which said customers have paid or are obligated to pay, plus other
income as allowed.
"Subordinated Debt" shall mean Customer's indebtedness to third parties
as evidenced by an executed Notes Payable Subordination Agreement in
favor of IBM Credit.
"Tangible Net Worth" shall mean:
Total Net Worth minus;
(a) goodwill, intangible assets, prepaid expenses and other
current and non-current assets as identified in Customer's
financial statements; and
(b) all accounts receivable from employees, officers,
directors, stockholders and affiliates; and
(c) all callable/redeemable preferred stock.
"Total Assets" shall mean the total of Current Assets and Long Term
Assets.
"Total Liabilities" shall mean the Current Liabilities and Long Term
Debt less Subordinated Debt, resulting from past or current
transactions, that require settlement in the future.
"Total Net Worth" (the amount of owner's or stockholder's ownership in
an enterprise) is equal to Total Assets minus Total Liabilities.
"Working Capital" shall mean Current Assets minus Current Liabilities.
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ATTACHMENT A ("ATTACHMENT A") TO
SECOND AMENDED AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT
("AGREEMENT")
USA Customer will be required to maintain the following financial ratios,
percentages and amounts as of the last day of the fiscal period under review by
IBM Credit:
Compliance with the covenants set forth below will be based on the consolidated
financial statements of USA Customer.
Covenant
Covenant Requirement
-------------------------- ----------------------------------
(i) Tangible Net Worth As of the following dates not less
than:
03/31/01 ($57,000,000)
06/30/01 ($47,000,000)
09/30/01 ($35,000,000)
12/31/01 ($34,500,000)
03/31/02 ($20,000,000)
(ii) Current Assets to Current As of the following dates greater
Liabilities than:
03/31/01 1.45:1.00
06/30/01 0.60:1.00
09/31/01 0.80:1.00
12/31/01 0.80:1.00
03/31/02 1.00:1.00
(iii) Minimum EBITDA (calculated on a As of the following dates not less
cumulative, annualized basis) than:
03/31/01 ($ 4,700,000)
06/30/01 $ 5,000,000
09/30/01 $ 7,000,000
12/31/01 $ 11,000,000
03/31/02 $ 10,000,000
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ATTACHMENT A ("ATTACHMENT A") TO
SECOND AMENDED AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT
("AGREEMENT")
IV. Additional Conditions Precedent Pursuant to Section 5.1 of the Agreement:
o Executed Contingent Blocked Account Amendment;
o A Certificate of Location of Collateral whereby the Customer certifies
where each Customer and Domestic Subsidiaries presently keeps or sells
inventory, equipment and other tangible Collateral;
o Subordination or Intercreditor Agreements from all creditors having a
lien which is superior to IBM Credit in any assets that IBM Credit
relies on to satisfy Customer's obligations to IBM Credit;
o A copy of an all-risk insurance certificate pursuant to Section 7.8
(B) of the Agreement.
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