EXHIBIT 10.22
AGREEMENT REGARDING [NAME REDACTED] TRANSACTION AND OTHER ASSET SALES
THIS AGREEMENT, dated as of November 26, 2004 (the "AGREEMENT"), is by and
between Tidel Technologies, Inc., a Delaware corporation (the "COMPANY"), and
Laurus Master Fund, Ltd., a Cayman Islands company ("LAURUS").
RECITALS
WHEREAS, the Company has issued to Laurus that certain convertible note in
the original principal amount of Six Million Four Hundred Fifty Thousand Dollars
($6,450,000), dated November 25, 2003 (as amended, modified or supplemented from
time to time, the "CONVERTIBLE TERM NOTE");
WHEREAS, certain events of default have occurred and are continuing under
the Convertible Term Note and related agreements (the "CONVERTIBLE TERM NOTE
FACILITY") and, notwithstanding the occurrence of such events of default and the
significant risk in extending additional funds to the Company at this time, the
Company has requested that Laurus reorganize the Convertible Term Note Facility
by, among other thing, extending additional financial accommodations to the
Company in amount equal to Two Million One Hundred Thousand Dollars
($2,100,000), and entering into that certain Purchase Order Finance and Security
Agreement by and between Tidel Engineering, L.P., any other Credit Party (as
defined therein) signatory thereto, and Laurus, dated as of the date hereof (as
amended, modified or supplemented from time to time, the "PO Agreement") which
when aggregated with the outstanding principal balance under the Convertible
Term Note Facility shall constitute a total facility of Ten Million Seventeen
Thousand Nine Hundred Eighty-Eight Dollars ($10,017,988) (the "REORGANIZED
FACILITY");
WHEREAS, to induce Laurus to consider providing the Reorganized Facility
to the Company, the Company has informed Laurus that the Company has entered
into a letter of intent dated October 1, 2004 with [Name Redacted] for the sale
to [Name Redacted] of all of the Company's and its Subsidiaries' assets related
to its automatic teller machine business (the "[Name Redacted] TRANSACTION"),
the net proceeds of which will be utilized to pay the indebtedness owing by the
Company to Laurus under the Reorganized Facility together with all interest,
fees and other charges related thereto;
WHEREAS, to further induce Laurus to consider providing the Reorganized
Facility to the Company, the Company has informed Laurus that subsequent to
consummation of the [Name Redacted] Transaction the Company and its Subsidiaries
intend to sell all or substantially all of their equity interests and/or other
assets in one or more transactions (each such equity and asset sale, an "ASSET
SALE" and all such Asset Sales, collectively, the "TOTAL ASSET SALE"), the net
proceeds of which will be utilized in part to pay the indebtedness owing by the
Company to Laurus under the Reorganized Facility together with all interest,
fees and other charges related thereto (it being understood that any assets of
the Company and/or any Subsidiary of the Company that are not sold in the [Name
Redacted] Transaction shall be considered sold in an Asset Sale hereunder, with
the exception of assets sold in the ordinary course of the Company's and its
Subsidiaries' operations as in effect on the date hereof (each, an "ORDINARY
COURSE ASSET SALE"), so long as each
Ordinary Course Asset Sale is consistent with the past practices of the Company
and its Subsidiaries); and
WHEREAS, simultaneously with the execution of this Agreement and as part
of the Reorganized Facility, the Company shall issue to Laurus a convertible
note, dated the date hereof, in the original principal amount of Six Hundred
Thousand Dollars ($600,000) convertible into the Company's common stock, par
value $.01 per share (the "CONVERTIBLE NOTE");
WHEREAS, simultaneously with the execution of this Agreement and as part
of the Reorganized Facility, the Company shall also issue to Laurus a term note,
dated the date hereof, in the original principal amount of One Million Five
Hundred Thousand Dollars ($1,500,000) (the "TERM NOTE"); and
WHEREAS, as a condition to the issuance of the Convertible Note and the
Term Note by the Company to Laurus, and as a condition to the entering into of
the PO Agreement, the Company and Laurus desire to enter into this Agreement on
the terms and conditions set forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. In consideration of Laurus' agreement to provide the Reorganized
Facility to the Company on the terms and conditions set forth herein and in all
such other documentation evidencing the same, the Company shall pay to Laurus a
reorganization fee in the amount of $2,000,000, payable in accordance with the
terms of this Agreement (the "REORGANIZATION FEE"). The Reorganization Fee shall
be deemed fully earned on the date hereof, shall not be subject to rebate or
proration for any reason, and shall constitute an obligation of the Company to
Laurus secured by the collateral granted by the Company and its subsidiaries to
Laurus under any and all security agreements and pledge agreements at any time
entered into by the Company and/or any such subsidiaries in favor of Laurus, as
each of the same may be amended, modified and supplemented from time to time. In
addition, the Reorganization Fee shall be guaranteed by certain subsidiaries of
the Company pursuant to any and all guaranty agreements at any time entered into
by such subsidiaries in favor of Laurus, as each of the same may be amended,
modified and supplemented from time to time.
2. Notwithstanding the foregoing, in the event that the Company requires
additional financing (an "Additional Loan") subsequent to such time as all of
the Laurus Obligations (as such term is defined herein) have been paid in full,
other than the Reorganization Fee, the Company shall be able to seek such
financing, subject to the following conditions:
a. the Additional Loan may only be in the form of a non-convertible
bank loan in an aggregate principal amount not to exceed $4,000,000;
b. Laurus shall have a right of first refusal, which shall be
exercised within four business days of written notice from the Company, to loan
such amount sought by the
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Company from any bank (an "Additional Lender") on the terms and conditions no
less favorable to the Company than the terms of the Additional Loan; and
c. In the event that an Additional Lender loans the Additional Loan
to the Company, so long as there is no Event of Default outstanding at such time
with respect to the Reorganization Fee, Laurus agrees that the Additional Loan
shall be senior in right of payment to the Reorganization Fee, and Laurus
furthermore agrees to enter into a subordination agreement with the Additional
Lender on mutually agreeable terms that are reasonably standard in the banking
industry. Laurus agrees to negotiate the terms of such subordination agreement
in good faith. Notwithstanding anything to the contrary set forth in this
Section 2(c), the Company and Laurus agree that no term or condition of the
subordination agreement referred to in this Section 2(c) shall in any respect
limit any payments contemplated in the Convertible Term Note Facility, the
Reorganized Facility or in connection with the Reorganization Fee (as amended,
modified or supplemented from time to time).
3. The Company acknowledges that the Reorganized Facility shall be
evidenced by the Convertible Term Note, the Convertible Note, the Term Note, the
PO Agreement, this Agreement and all documents, instruments and agreements from
time to time entered into in connection therewith, as each of the same may be
amended, modified and supplemented from time to time.
4. (a) The Company hereby agrees that any Net Proceeds (as defined below)
that are received by the Company or any of its subsidiaries and/or affiliates
(each a "Tidel Party" and collectively, the "Tidel Parties") in connection with
the [Name Redacted] Transaction shall be distributed in the following manner:
(i) first, to Laurus to repay the outstanding obligations (including, without
limitation, principal, interest, fees, default interest, premiums, etc., but
excluding the Reorganization Fee) owed by each such Tidel Party to Laurus in
connection with the Convertible Note, the Term Note, the Convertible Term Note,
the Purchase Order Agreement and any document related to any of the Convertible
Note, the Term Note, the Convertible Term Note, the Purchase Order Agreement or
otherwise (excluding the Reorganization Fee) (collectively, the "Laurus
Obligations"), in such order of application as Laurus shall determine in its
sole discretion, and (ii) second, to the extent that any Tidel Party receives
Net Proceeds from the [Name Redacted] Transaction in excess of the amount of the
Laurus Obligations, to such Tidel Party.
(b) The Company hereby agrees that any Net Proceeds that are
received by any Tidel Party in connection with any Asset Sale consummated on or
prior to the fifth anniversary of this Agreement (the "TERMINATION DATE") shall
be distributed in the following manner: (I) first, to Laurus to repay the Laurus
Obligations, in such order of application as Laurus shall determine in its sole
discretion, (II) second, to the extent that any Tidel Party receives Net
Proceeds from any Asset Sale in excess of the amount of the Laurus Obligations
(such amounts, "EXCESS NET PROCEEDS"), (A) to Laurus in an amount equal to
Applicable Excess Net Proceeds Percentage (as defined below) of the remainder of
(i) the sum of (the following clauses (x) and (y) of this clause (i), the "TOTAL
NET PROCEEDS") (x) the Net Proceeds attributable to such Asset Sale plus (y) the
aggregate amount of Net Proceeds attributable to the [Name Redacted] Transaction
and all other Asset Sales consummated prior to such Asset Sale minus (ii) the
sum of (x) $7,267,988 plus (y) the aggregate amount received by Laurus pursuant
to this clause (A) on or after the date of this Agreement without giving effect
to such Asset Sale, and (B) to such Tidel Party in an
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amount equal to the remainder of such Excess Net Proceeds not distributed in
accordance with the immediately preceding clause (A); provided that,
notwithstanding the foregoing, in the event that the amount calculated pursuant
to the immediately preceding clause (A) is less than or equal to $0, all Excess
Net Proceeds attributable to such Asset Sale shall be distributed in accordance
with the immediately preceding clause (B). Any Excess Net Proceeds received by
Laurus shall be applied to reduce the obligation of the Company to pay the
Reorganization Fee. In the event that (I) Laurus receives Excess Net Proceeds in
an amount greater than the Reorganization Fee in accordance with clause (A) of
the first sentence of this Section 3(b), Laurus shall be entitled to retain all
of such Excess Net Proceeds in consideration of its agreements set forth herein
or (II) Laurus has not, prior to the fifth anniversary of the date of this
Agreement, received Excess Net Proceeds in an amount sufficient to pay in full
the Reorganization Fee, Tidel shall make a payment to Laurus in cash equal to
the remainder of (i) the amount of the Reorganization Fee minus (ii) the
aggregate amount of Excess Net Proceeds received by Laurus prior to the fifth
anniversary of this Agreement, by direct wire transfer to a bank account
designated in writing by Laurus to the Company, no later than 90 days after the
fifth anniversary of this Agreement. Upon payment in full of the Reorganization
Fee, the parties hereto agree that any and all warrants held by Laurus to
purchase Common Stock as of the date hereof and/or as a result of the
Reorganized Facility shall be canceled.
(c) For purposes of this Agreement, (I) "NET PROCEEDS" shall mean,
with respect to the [Name Redacted] Transaction or any Asset Sale, the remainder
of (x) gross cash proceeds received by any Tidel Party as consideration for the
sale of assets, equity interests or other property in connection with the [Name
Redacted] Transaction or such Asset Sale (the "GROSS PROCEEDS"), minus (y) the
sum of (I) any trade accounts payable reasonably related to the assets sold in
connection with the [Name Redacted] Transaction or such Asset Sale (solely to
the extent that (x) such trade accounts payable are not assumed by the buyer of
the assets, equity interests or other property sold in connection with the [Name
Redacted] Transaction or such Asset Sale and (y) such trade accounts payable are
reasonably related to the assets, equity interest or other property sold in
connection with the [Name Redacted] Transaction or such Asset Sale) (II) any
indebtedness for borrowed money (other than the Laurus Obligations) of the
Company and its Subsidiaries that is required to be repaid in connection with
the [Name Redacted] Transaction or such Asset Sale, and (III) all reasonable
cash expenses that constitute sale expenses, reasonable legal fees, reasonable
investment banker fees and state, local and federal taxes, in each case,
incurred in connection with, and directly related to, the sale of assets in the
relevant transaction (as determined by Laurus in its sole discretion) and (II)
"APPLICABLE EXCESS NET PROCEEDS PERCENTAGE" shall mean, with respect to each
Asset Sale, (x) in the event that the Total Net Proceeds are less than
$28,000,000, the percentage set forth in the table below opposite the Total Net
Proceeds at such time and (y) in the event that the Total Net Proceeds are
greater than or equal to $28,000,000, 56.80% plus 0.1% for each $1,000,000
increment above $28,000,000 (for example, if Total Net Proceeds at any time are
$30,000,00, the Applicable Excess Net Proceeds Percentage shall be 57.0%):
Total Net Proceeds Applicable Excess Net Proceeds Percentage
------------------ -----------------------------------------
Less than $13,000,000 55.50%
Greater than or equal to $13,000,000 and 55.58%
less than $14,000,000
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Greater than or equal to $14,000,000 and 55.87%
less than $17,000,000
Greater than or equal to $17,000,000 and 56.01%
less than $18,500,000
Greater than or equal to $18,500,000 and 56.10%
less than $19,500,000
Greater than or equal to $19,500,000 and 56.30%
less than $22,000,000
Greater than or equal to $22,000,000 and 56.50%
less than $25,000,000
Greater than or equal to $25,000,000 and 56.70%
less than $27,000,000
Greater than or equal to $27,000,000 and 56.80%
less than $28,000,000
(d) Commencing on December 31, 2004, the Company covenants and
agrees that, within ten days following the close of each fiscal quarter ended
December 31 or June 30, it shall deliver its projected revenue for the six-month
period immediately following the end of such fiscal period.
(ii) The Company hereby agrees that it shall accept an offer
to buy all or substantially all of the assets, equity interests or other
property of the Company and its Subsidiaries pursuant to one Asset Sale or a
group of Asset Sales so long as the aggregate Gross Proceeds offered in
connection with such Asset Sale or Asset Sales equals or exceeds 0.75 multiplied
by the Revenue (as hereinafter defined), unless the parties hereto mutually
agree that an offer for less Gross Proceeds is acceptable.
(iii) The "REVENUE" shall mean, for purposes of the Agreement,
the sum of (x) either (A) if the consolidated income statement of the Company
and its Subsidiaries for the last six fiscal months then ended is audited by a
reputable accounting firm acceptable to Laurus, the six-month trailing revenue
of the Company as so audited or (B) if the consolidated income statement of the
Company and its Subsidiaries for the last six fiscal months then ended is not
audited by a reputable accounting firm reasonably acceptable to Laurus, the
Unaudited Trailing Revenue (as hereinafter defined) plus (y) the Projected
Revenue (as hereinafter defined).
(iv) Within three (3) business days of receipt of a written
offer for an Asset Sale, the Company shall deliver a statement of the Company's
projected revenue for the upcoming six-month period (the "PROJECTED REVENUE,"
and such statement, the "PROJECTED REVENUE STATEMENT") and, if the consolidated
income statement of the Company and its Subsidiaries for the last six fiscal
months then ended is not audited by a reputable accounting
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firm reasonably acceptable to Laurus, the unaudited consolidated income
statement of the Company and its Subsidiaries for such six month period (the
"Unaudited Trailing Income Statement", and the revenue amount set forth in such
Unaudited Trailing Income Statement, the "Unaudited Trailing Revenue"), in each
case, to Laurus. In the event that Laurus disputes either the Projected Revenue
contained in such Projected Revenue Statement or, if applicable, the Unaudited
Trailing Revenue contained in the Unaudited Trailing Income Statement, Laurus
shall deliver a notice of dispute (a "Dispute Notice") to the Company within
three (3) business days of receipt of the Projected Revenue and/or, if
applicable, the Unaudited Trailing Revenue. Laurus and the Company shall
negotiate to agree upon a mutually agreed upon value for the Projected Revenue
and/or, if applicable, the Unaudited Trailing Revenue. If, within twenty (20)
business days of receipt of the Dispute Notice by Laurus to the Company, Laurus
and the Company are unable to come to agreement on the Projected Revenue and/or,
if applicable, the Unaudited Trailing Revenue, then they shall obtain the
assistance of a mutually-agreed upon investment banker, to whom each of Laurus
and the Company shall deliver their respective estimates of Projected Revenue
and/or, if applicable, the Unaudited Trailing Revenue, and such investment
banker shall decide which estimate shall prevail. If the Company and Laurus are
unable to mutually agree upon an investment banker, then they shall each choose
their own investment banker, and such two investment bankers shall appoint a
third investment banker, to whom each of Laurus and the Company shall deliver
their respective estimates of Projected Revenue and/or, if applicable, the
Unaudited Trailing Revenue, and such third investment banker shall review the
estimates of Projected Revenue and/or, if applicable, the Unaudited Trailing
Revenue, and decide which estimate shall prevail.
(e) Any Net Proceeds required to be paid to Laurus in accordance
with the terms of this Agreement shall be wired directly to a bank account
designated in writing by Laurus to the Company on the date that such Tidel Party
is entitled to receive such Net Proceeds.
5. The Company hereby agrees that, notwithstanding anything to the
contrary contained in this Agreement or any other agreement between Laurus and
any Tidel Party, neither the [Name Redacted] Transaction nor any Asset Sale
shall be consummated without the prior written consent of Laurus including,
without limitation, the consent of Laurus to the amount and type of
consideration to be received by the Company in the [Name Redacted] Transaction
or such Asset Sale, as the case may be).
6. The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
7. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
8. All notices, requests, demands and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given when (i) delivered personally or by facsimile
transmission (and a copy is mailed by regular
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mail within 24 hours of such transmission), in either case with receipt
acknowledged, (ii) three business days after being sent by registered or
certified mail, return receipt requested, or (iii) one business day after being
sent by prepaid overnight carrier, with a record of receipt, to the parties at
their addresses as provided in that certain Securities Purchase Agreement by and
between Laurus and the Company dated as of the date hereof.
9. This Agreement constitutes the full and entire understanding and
agreement between the parties with regard to the subject matter hereof. Any term
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the other
party to this Agreement.
10. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
11. This Agreement shall be deemed executed and delivered in the State of
New York.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, except that body of law relating to choice of laws.
Each of the parties hereto hereby irrevocably submits to the exclusive
jurisdiction of the courts located in New York County, New York (the "COURTS")
in any action or proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby (each, an "ACTION") and each of the parties
hereto irrevocably agrees that all claims in respect of an Action shall be heard
and determined in the Courts. Each of the parties hereto (i) acknowledges that
the Courts are the most appropriate forum for the resolution of any claims that
could be asserted in an Action, and (ii) hereby irrevocably and unconditionally
waives any objection that he or it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement or any of the transactions contemplated hereby in the Courts. Each of
the parties hereto hereby irrevocably waives the defense of an inconvenient
forum to the maintenance of such action or proceeding and any other defense
relating to the choice of forum for an Action.
12. Each of the parties hereto represents that it has consulted with
counsel of its own choosing in connection with the negotiation and execution of
this Agreement or has knowingly chosen not to do so.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TIDEL TECHNOLOGIES, INC.
By: /s/ Mark K. Levenick
---------------------
Name: Mark K. Levenick
Title: President
Address: 2900 Wilcrest
Suite 205
Houston, Texas 77042
LAURUS MASTER FUND, LTD.
By: /s/ Eugene Grin
--------------------
Name: Eugene Grin
Title: Director
Address: c/o M&C Corporate Services Limited,
P.O. Box 309 GT, Ugland House, South
Church Street, George Town, Grand
Cayman, Cayman Islands
CONSENTED AND AGREED TO:
TIDEL ENGINEERING, LP
By: /s/ Mark K. Levenick
--------------------
Name: Mark K. Levenick
Title: President
TIDEL CASH SYSTEMS, INC.
By: /s/ Mark K. Levenick
-----------------------
Name: Mark K. Levenick
Title: President
TIDEL SERVICES, INC.
By: /s/ Mark K. Levenick
-----------------------
Name: Mark K. Levenick
Title: President
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ANYCARD INTERNATIONAL, INC.
By: /s/ Mark K. Levenick
-----------------------
Name: Mark K. Levenick
Title: President
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