-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SjTw65oIfJ0jcr7Yb4mfV2t3A/saA2sYaJ2BqhTggDWC3LVSKV3Ancl4TWYHX/4V XbqgAwNydrfKEg+V+5BAqw== /in/edgar/work/20000814/0000912057-00-037508/0000912057-00-037508.txt : 20000921 0000912057-00-037508.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-037508 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRM CORP CENTRAL INDEX KEY: 0000749254 STANDARD INDUSTRIAL CLASSIFICATION: [7200 ] IRS NUMBER: 930809419 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19657 FILM NUMBER: 700817 BUSINESS ADDRESS: STREET 1: 5208 N E 122ND AVENUE CITY: PORTLAND STATE: OR ZIP: 97230-1074 BUSINESS PHONE: 5032578766 FORMER COMPANY: FORMER CONFORMED NAME: TRM COPY CENTERS CORP DATE OF NAME CHANGE: 19940411 10-Q 1 a10-q.txt 10-Q FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 0-19657 -------- TRM CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) OREGON 93-0809419 ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporationor organization) Identification No.) 5208 N.E. 122nd Avenue PORTLAND, OREGON 97230 --------------------------------------------------- (Address of principal executive offices) (Zip Code) (503) 257-8766 --------------------------------------------------- (Registrant's telephone number, including area code) --------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: CLASS OUTSTANDING AT JUNE 30, 2000 ----- ---------------------------- Common Stock 7,063,190 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TRM CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands)
December 31, June 30, 1999 2000 --------- --------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 16,775 $ 4,297 Accounts receivable, net 7,362 8,835 Income tax receivable 378 1,456 Inventories 3,771 4,465 Prepaid expenses and other 2,188 3,446 Deferred tax asset 1,243 1,243 --------- --------- Total current assets 31,717 23,742 Equipment and vehicles, less accumulated depreciation 62,648 73,705 Other assets 1,541 5,282 --------- --------- $ 95,906 $ 102,729 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable 2,880 7,497 Accrued expenses 3,539 6,222 --------- --------- Total current liabilities 6,419 13,719 Long Term Debt 23,192 26,485 Deferred income taxes 5,016 4,953 --------- --------- Total liabilities 34,627 45,157 --------- --------- Minority Interest -- 222 Shareholders' equity: Preferred stock, no par value. Authorized 5,000 shares; 1,778 shares issued and outstanding 19,798 19,798 Common stock, no par value. Authorized 50,000 shares; issued and outstanding 7,071 and 7,063 shares, respectively 19,095 19,032 Accumulated other comprehensive income (427) (1,492) Retained earnings 22,813 20,012 --------- --------- Total shareholders' equity 61,279 57,350 --------- --------- $ 95,906 102,729 ========= =========
See accompanying notes to consolidated financial statements 2 TRM CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share data)
Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 1999 2000 1999 2000 -------- -------- -------- -------- Sales $ 17,268 $ 19,337 $ 34,216 $ 37,418 Less discounts 3,098 3,213 6,187 6,382 -------- -------- -------- -------- Net sales 14,170 16,124 28,029 31,036 Cost of sales 7,287 10,085 14,396 19,017 -------- -------- -------- -------- Gross profit 6,883 6,039 13,633 12,019 Selling, general and administrative expense 5,604 7,423 11,029 14,262 -------- -------- -------- -------- Operating income (loss) 1,279 (1,384) 2,604 (2,243) Other (income) expense: Interest 64 545 94 1,018 Other, net (78) 65 (228) 88 -------- -------- -------- -------- Income (loss) before minority interest in earnings of a consolidated subsidiary 1,293 (1,994) 2,738 (3,349) Minority interest 28 28 Income (loss) before income taxes 1,293 (1,966) 2,738 (3,321) Provision (benefit) for income taxes 505 (722) 1,069 (1,266) -------- -------- -------- -------- Net income (loss) $ 788 $ (1,244) $ 1,669 $ (2,055) ======== ======== ======== ======== Earnings per share computation: Net income (loss) $ 788 $ (1,244) $ 1,669 $ (2,055) Preferred stock dividends (374) (373) (744) (746) -------- -------- -------- -------- Net income (loss) available to common Shareholders $ 414 $ (1,617) $ 925 $ (2,801) ======== ======== ======== ======== Basic net income (loss) per share: Shares outstanding 7,096 7,069 7,099 7,072 -------- -------- -------- -------- Net income (loss) per share $ .06 $ (.23) $ .13 $ (.40) ======== ======== ======== ======== Diluted net income (loss) per share: Shares outstanding 7,276 7,069 7,314 7,072 -------- -------- -------- -------- Net income (loss) per share $ .06 $ (.23) $ .13 $ (.40) ======== ======== ======== ========
See accompanying notes to consolidated financial statements. 3 TRM CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited) (In thousands)
Accumulated Other Comprehensive Preferred Stock Common Stock Comprehen- Retained Income Shares Amounts Shares Amounts sive Income Earnings Total ------------- ------- ----------- -------- ---------- --------------- ---------- --------- BALANCES, DECEMBER 31, 1999 1,778 $ 19,798 7,071 $ 19,095 $ (427) $ 22,813 $61,279 Comprehensive income Net loss $ (2,055) (2,055) (2,055) Other comprehensive income (loss), net of tax Foreign currency translation adjustment (1,065) (1,065) (1,065) ---------- Comprehensive income $ (3,120) ========= Issuance of stock to employees 8 35 35 Repurchase of common stock (16) (98) (98) Preferred stock dividends (746) (746) ------- ----------- -------- ---------- --------------- ---------- --------- BALANCES, JUNE 30, 2000 1,778 $ 19,798 7,063 $ 19,032 $ (1,492) $ 20,012 $57,350 ======= =========== ======== ========== =============== ========== =========
See accompanying notes to consolidated financial statements. 4 TRM CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands)
Six Months Ended June 30, -------------------- 1999 2000 -------- -------- Cash flows from operating activities: Net income (loss) $ 1,669 $ (2,055) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 4,136 5,363 Other -- (28) (Gain) loss on disposal of equipment and vehicles 52 (35) Changes in items affecting operations: Accounts receivable 881 (1,220) Inventories 16 (635) Income tax receivable 389 (1,055) Prepaid expenses and other 28 (1,530) Accounts payable (7,119) 4,461 Accrued expenses 166 2,609 Deferred income tax (90) (63) -------- -------- Cash provided by operating activities 128 5,812 -------- -------- Cash flows from investing activities: Proceeds from sale of equipment 435 234 Capital expenditures (10,533) (16,430) Other (890) (1,104) Acquisition of a business, net of cash acquired (799) -------- -------- Cash used in investing activities (10,988) (18,099) -------- -------- Cash flows from financing activities: Net borrowings on notes payable 6,783 1,618 Net proceeds from issuance of common stock 65 35 Repurchase of common stock (36) (98) Dividends on preferred stock (744) (746) -------- -------- Cash provided by financing activities 6,068 809 -------- -------- Effect of exchange rate changes (507) (1,000) -------- -------- Net increase (decrease) in cash and cash equivalents (5,299) (12,478) Cash and cash equivalents at beginning of period 14,285 16,775 -------- -------- Cash and cash equivalents at end of period $ 8,986 $ 4,297 ======== ========
See accompanying notes to consolidated financial statements. 5 TRM CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Interim Financial Data: The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments, consisting only of normal recurring adjustments, which, in the opinion of management, are necessary for a fair statement of the results of the interim periods. These condensed interim financial data should be read in conjunction with the Company's latest annual report to shareholders. 2. Net Income Per Share: Basic and diluted net income per share are based on the weighted average number of common shares outstanding during each year, with diluted including the effect of potentially dilutive securities. For the three months and six months ended June 30, 1999 and June 30, 2000, the weighted average number of common shares for basic net income per share computations were 7,096,000 and 7,099,000, and 7,069,000 and 7,072,000, respectively. For diluted net income per share, 180,000 and 215,000 shares were added to weighted average shares outstanding for the three and six months ended June 30, 1999, representing potential dilution for stock options outstanding, calculated using the treasury stock method. In calculating basic net income per share, dividends for preferred stock are deducted to arrive at income available for common stockholders. For diluted net income per share, the calculation assumes the conversion of common stock equivalents including the conversion of preferred stock to common unless such conversion is anti-dilutive. For the three and six months ended June 30, 2000, no shares were added to the weighted average shares outstanding because the addition of shares would be anti-dilutive. 3. Inventories (in thousands):
December 31, June 30, 1999 2000 --------------- --------------- Paper $ 696 $ 693 Toner and developer 550 495 Parts 2,525 3,277 --------------- --------------- $ 3,771 $ 4,465 =============== ===============
4. Segment Reporting (in thousands): In fiscal 1998, the Company adopted SFAS No. 131 - "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"). This statement establishes new standards for the manner in which companies report operating segment information, as well as disclosures about products and services and major customers. Prior to 1999, the Company had only one business segment. 6 The Company has three reportable segments: CopyCenters, ATM and e-Commerce. CopyCenters owns and maintains self-service photocopiers in retail establishments. ATM owns and operates ATM machines in retail establishments. The e-commerce business develops software to deliver products and services to ATMs. The Company evaluates each segment's performance based on income or loss before interest and income taxes, excluding non-recurring charges. Information regarding the operations in these reportable segments is as follows:
(Dollar Amounts in Thousands) Three months ended Six months ended June 30, June 30, June 30, June 30, 1999 2000 1999 2000 -------- -------- -------- -------- Sales: CopyCenters $ 17,079 $ 17,052 $ 34,027 $ 34,008 ATM 189 2,225 189 3,350 e-Commerce 60 60 -------- -------- -------- -------- $ 17,268 $ 19,337 $ 34,216 $ 37,418 ======== ======== ======== ======== Depreciation and amortization: CopyCenters $ 2,162 $ 2,396 $ 4,103 $ 4,911 ATM 33 273 33 419 e-Commerce 33 33 -------- -------- -------- -------- $ 2,195 $ 2,702 $ 4,136 $ 5,363 ======== ======== ======== ======== Income (loss) before interest and taxes & minority interest: CopyCenters $ 1,580 $ 517 $ 3,055 $ 1,076 ATM (223) (1,404) (223) (2,845) e-Commerce (562) (562) -------- -------- -------- -------- $ 1,357 $ (1,449) $ 2,832 $ (2,331) ======== ======== ======== ======== Capital expenditures: CopyCenters $ 6,491 $ 1,283 $ 8,988 $ 3,928 ATM 1,225 8,476 1,545 12,502 e-Commerce 0 0 -------- -------- -------- -------- $ 7,716 $ 9,759 $ 10,533 $ 16,430 ======== ======== ======== ========
As of As of Dec 31, June 30, 1999 2000 -------- -------- Assets: CopyCenters $ 71,984 $ 79,671 ATM 23,922 21,023 e-Commerce 2,035 -------- -------- $ 95,906 $102,729 ======== ========
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL During the quarter ending June 30, 2000, the Company continued the expansion of its new ATM services business while its CopyCenters services business generated solid cash flow. The Company's financial position remains sound, offering it flexibility to meet its aggressive growth strategy. Also in the second quarter of 2000, iATMglobal.net, the San Francisco based e-commerce infrastructure subsidiary of the Company acquired Strategic Software Solutions Limited, a leading developer of custom Internet solutions for automated teller machines (ATMs) for $2.7 million, most of which was recorded as goodwill. Strategic Software Solutions develops custom Internet and software solutions for ATMs manufactured by NCR (NYSE: NCR). Strategic Software Solutions and NCR jointly market @tmLink, the only Internet-based ATM uploading and notification product for NCR-built ATMs. Strategic Software Solutions' proprietary product, offered through a strategic alliance with PSINet (NASDAQ: PSIX), an Internet Super Carrier offering global e-commerce infrastructure, leverages its global Internet communications backbone. Together, Strategic Software Solutions and iATMglobal.net plan to build a Web-based distribution channel to deliver convenient access to e-commerce goods and services through the existing worldwide network of approximately one million ATMs. Strategic Software Solutions is located in Alloa, Scotland. iATMglobal.net intends to relocate its technology development headquarters to Alloa. As of June 30, 2000, the Company had a total of 1,537 ATM operating units installed, with 920 and 617 deployed in the United States and United Kingdom respectively, as compared to 141 in the United States at June 30, 1999, an overall increase of 1,396 units. The ATM business contributed $2.2 million to quarterly gross revenues and $3.4 million year to date compared to $189,000 for both the quarter and year to date ended June 30, 1999. The Company believes that revenues generated from services delivered through its ATM network will become an increasingly higher percentage of its overall revenue in the future as it expands the product offerings through its ATM network, and pursues new geographic opportunities. As a result of the Company's development of its ATM services business and start up of its e-commerce subsidiary, the Company expects to record quarterly losses for at least the balance of the current fiscal year. In the CopyCenters business, as of June 30, 2000, the Company had 36,200 TRM Copy Centers in operation compared to 31,461 at June 30, 1999, an increase of 4,739 centers (15.06%). In the second quarter of 2000, the CopyCenters business generated $2.9 million earnings before interest, taxes, depreciation, amortization and minority interest, compared to $3.7 million in the same quarter of 1999. In the second quarter of 2000, iATMglobal.net and Strategic Software Solutions, the Company's e-commerce business, generated $60,000 in gross revenues from contracted software engineering services. The Company's balance sheet maintains a low debt to equity ratio. This financial position offers TRM Corporation the flexibility to finance its strategic expansion plans related to its ATM business. In the first quarter of 2000 the Company replaced its existing bank line of credit. The Company signed a new Loan Agreement with Bank of America N.A. to provide a line of credit commitment equal to $30 million through June 30, 2001, reducing to $25 million through June 30, 2002. Also in the first quarter of 2000, the Company (through a special purpose finance entity) established a $30.0 million Loan Facility to provide vault cash for its ATM network. The financing 8 was completed off the Company's balance sheet on a non-recourse basis. The Company initially funded $23.6 million under the facility to supply its ATMs with cash. See "Liquidity and Capital Resources." RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected statement of operations data, expressed as a percentage of sales, and the percentage change in dollar amounts of each item on the Consolidated Statements of Operations (see page 3 of this Form 10-Q).
Three Months Ended Six Months Ended June 30, Percentage Change June 30, Percentage Change 1999 2000 Increase (Decrease) 1999 2000 Increase (Decrease) ---- ---- ------------------- ---- ---- ------------------- Sales 100.0% 100.0% 12.0% 100.0% 100.0% 9.4% Sales discounts 17.9 16.6 3.7 18.1 17.1 3.2 Cost of sales 42.2 52.2 38.4 42.1 50.8 32.1 Selling, general and Administrative 32.5 38.4 32.6 32.2 38.1 29.4 Special charges -- -- -- -- -- Operating income (loss) 7.4 (7.2) (208.0) 7.6 (6.0) (186.0) Interest expense, net .4 2.8 751.6 .3 2.7 983.0 Other (income) expense Net (.5) .3 (183.3) (.7) .2 (138.6) Income (loss) before Minority interest 7.5 (10.3) (254.2) 8.0 (8.9) (222.3) Minority interest .1 N/A .1 N/A Income (loss) before Income taxes 7.5 (10.2) (252.0) 8.0 (8.8) (221.3) Provision (benefit) for income taxes 2.9 (3.8) (243.0) 3.1 (3.3) (218.5) ----- ----- ------ ----- ----- ------ Net income (loss) 4.6% (6.4)% (257.9)% 4.9% (5.5)% (223.1)% ===== ===== ====== ===== ===== ======
THREE AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE AND SIX MONTHS ENDED JUNE 30, 1999 For the three and six month period ended June 30, 2000, consolidated sales increased by $2.1 million (12.0%) and $3.2 million (9.4%), respectively. The $2.1 million increase in gross revenue for the second quarter and $3.2 million year to date is primarily attributed to the Company's ATM business. CopyCenters business revenues were unchanged in the second quarter of 2000 and year to date were substantially the same as compared to the same periods in 1999. Although CopyCenters sales were flat for the quarter and year ended June 30, 2000 as compared to the same period in 1999, there was an increase in billed units of 14.9% and 12.7%, respectively. Most of these units were added to the installed base in the fourth quarter of 1999 and the first quarter of 2000. Revenue per billed unit decreased 13.0% for the quarter and 15.6% year to date, resulting in no change in revenue on the higher installed base. Revenue from the Company's new ATM business were $2.0 million and $3.4 million for the quarter and year to date ended June 30, 2000, respectively as compared to $189,000 for both the quarter and year to date ended June 30, 1999. The Company is expecting a significant increase in ATM revenue in 2000 over 1999's revenue because of the aggressive growth plans it has for the newly established ATM services business. In the second quarter of 2000, iATMglobal.net and Strategic Software Solutions, the Company's e-commerce business, generated $60,000 in gross revenues from contracted software engineering services with no revenue generated last year. 9 Sales discounts are the portion of revenue retained by retail customers. Sales discounts generally vary at individual retail businesses depending on volume - the higher the volume, the greater the discount. The increase in sales discounts for the quarter and the year ended June 30, 2000 compared to the prior year is $115,000 (3.7%) and $195,000 (3.2%), respectively, which is attributed to the Company's ATM business. Costs of sales on a consolidated basis increased $2.8 million (38.4%) for the quarter and $4.6 million (32.1%) for the year ended June 30, 2000 compared to the same periods in 1999. ATM related costs attributed to the increase of $2.0 million for the quarter and $2.8 million year to date. CopyCenters' field labor and other costs increased by $266,000 for the quarter and $396,000 year to date, due mostly to the increase in the installed base. CopyCenters' Service partner related costs increased $261,000 for the quarter and $447,000 year to date. This cost is attributed to the increase in installed units located outside a TRM service area and are serviced by a third party. Service partner units installed were 1,757 and 1,127 for periods ended June 30, 2000 and June 30, 1999, respectively. The remaining increase in cost of sales of $278,000 for the quarter and $801,000 year to date is due to copier machine depreciation, which relates to the additional NextGen-TM- photocopiers in the Company's installed base. Selling, general and administrative expenses increased $1.8 million (32.6%) and $3.2 million (29.4%) during the quarter and year ended June 30, 2000, respectively, compared to the same periods in 1999. iATMglobal.net costs contributed $578,000 of the increase for both periods. ATM direct costs increased $391,000 for the quarter and $800,000 year to date. ATM indirect costs contributed $854,000 for the quarter and $1.9 million year to date to the increase. The core CopyCenters business's infrastructure is providing the support for the iATMglobal start-up and the aggressive expansion of the Company's ATM business. Interest expense increased to $545,000 from $64,000 for the quarter ended June 30, 2000, and increased to $1.0 million from $94,000 year to date ended June 30, 2000 from the same periods in 1999, respectively. The increase was due to an increase in borrowings on the Company's revolving line of credit during 2000 primarily as the result of increased borrowings to finance ATM machines operated by the Company in its newly formed ATM business and the formation of it's e-Commerce subsidiary. Borrowings to finance the cash needs of the ATM network are not expected to be necessary for the remainder of the year as a result of the establishment of a commercial paper facility. See the section on "Liquidity and Capital Resources" in this Form 10-Q. Other income decreased $143,000 during the quarter ended June 30, 2000 and $316,000 year to date, compared to the same periods in 1999. The decrease was primarily due to interest income generated from short-term investments in the first six months of 1999, which investments were not outstanding in 2000. The Company's effective tax rate for the quarter ended June 30, 2000 is 36.7 percent, resulting in an income tax benefit of $722,000, compared to an effective rate of 39.1 percent and an income tax provision of $505,000 in 1999. The Company's year to date effective tax rate is 38.1 percent year ended June 30, 2000 resulting in an income tax benefit of $1.3 million compared to 39.0 percent and an income tax provision of $1.1 million for June 30, 1999. LIQUIDITY AND CAPITAL RESOURCES During the six months ended June 30, 2000, TRM generated $5.8 million in cashflows from operations and decreased its net working capital from $25.3 million at December 31, 1999 to $10.0 million at June 30, 2000 (including cash and cash equivalents of $4.3 million). The Company also 10 has a $30.0 million bank line of credit, with $24.8 million in borrowings outstanding at June 30, 2000. During the six months ended June 30, 2000, the Company funded capital expenditures of $16.4 million primarily from bank borrowings on its line of credit. Capital expenditures were primarily for NCR ATM machines, merchandising signage and computer systems implementation costs. The Company obtained a new source for vault cash inventory in its ATM network during the first quarter of 2000. As of December 31, 1999, the Company had a cash balance related to the ATM vault cash inventory of $16.1 million, financed through its line of credit. In March of 2000, the Company established a $30.0 million financing facility to access a commercial paper conduit to provide vault cash for its ATM network. This agreement resulted in the removal of the cash and underlying bank borrowings from the Company's balance sheet. The financing was completed off the Company's balance sheet on a non-recourse basis. As such, the ATM vault cash inventory and related debt financing was removed from the balance sheet as of March 31, 2000. The Company anticipates increasing this facility to $75 million before the end of the year to support expansion of its ATM network. The Company currently anticipates capital expenditures of approximately $35 million during calendar 2000. Approximately $25 million will be used to acquire ATM machines and the remainder will be used to acquire computer related systems and other capital items. The Company expects to finance these capital expenditures with cash generated from operations, bank borrowings and asset leasing. The Company entered into a new bank line of credit arrangement which will allow it greater flexibility in its use of proceeds. The line of credit also will not encumber the Company's ATM assets, allowing it to refinance its existing ATM assets and finance future ATM asset purchases, subject to limits based on the Company's ratio of funded debt to EBIDTA. The Company expects that these sources will provide adequate cash to fund its expansion through at least December 31, 2000. DISCLOSURE REGARDING EURO CONVERSION On January 1, 1999, eleven member countries of the European Community began a process to convert their existing sovereign currencies to a single common denomination, the Euro. The process of conversion is gradual over the next three years, culminating in the eventual removal from circulation of all existing domestic currency for the participating countries. The Company presently operates in the United Kingdom and France and transacts business in the local currency of those countries. France will be subject to the Euro Conversion, and the United Kingdom may become subject to the conversion. The Company believes that it will be able to accommodate the conversion to the Euro without a material impact on its financial statements. FORWARD-LOOKING STATEMENTS Information in "Management's Discussion and Analysis," in this Form 10-Q about the Company's goals, plans and expectations regarding expansion, capital expenditures, effectively using a third-party network of service providers, expanding the ATM business, offering and providing e-commerce goods and services through ATMs, constitutes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The following factors that could cause the actual results to differ materially from the forward-looking statements: business conditions in the market areas in which the Company operates, competitive factors, customer demand for the Company's services, the Company's ability to execute its plans successfully and the volatility of paper costs. Any forward-looking statements should be 11 considered in light of these factors as well as risk factors and business conditions discussed in the Company's SEC Form 10-K for the year ended December 31, 1999. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to minimal market risks. Sensitivity of results of operations to these risks is managed by maintaining a conservative investment portfolio, which is comprised solely of money market funds, and entering into long-term debt obligations with appropriate price and term characteristics. The Company does not hold or issue derivative commodity instruments or other financial instruments for trading purposes. Financial instruments held for other than trading purposes do not impose a material market risk. The Company is exposed to interest rate risk, as additional financing will be needed due to the capital expenditures associated with expanding the Company's business operations. The interest rate that the Company will be able to obtain on debt financing will depend on market conditions at that time, and may differ from the rates the Company has secured on its current debt. Additionally, the Company is exposed to interest rate risk related to its credit facility as of June 30, 2000. Advances against the credit facility periodically renew, at which point the borrowings are subject to the then current market interest rates, which may differ from the rates the Company is currently paying on its borrowings. The Company is exposed to foreign currency exchange rate risk, as it has operations in Canada, France and the United Kingdom. The relative amount of business transacted in these countries is outlined in footnote 11 to the Consolidated Financial Statements of the Company's 1999 Form 10-K. 12 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 21, 2000 at the Company's Annual Meeting of shareholders, the holders of the Company's outstanding Common Stock and Series A Preferred Stock took the actions described below. As of the record date for the Annual Meeting, 7,074,440 shares of Common Stock and 1,777,778 shares of Series A Preferred Stock were issued and outstanding. Each share of Preferred Stock is entitled to one vote per share and votes together with the Common Stock as one class. 1. The shareholders elected each of Edward E. Cohen, Slavka Bachurova Glaser, Frederick O. Paulsell, and Frederic P. Stockton, by the votes indicated below, to serve on the Company's Board of Directors for the next three years: EDWARD E. COHEN 6,237,216 shares in favor 1,882,956 shares against or withheld SLAVKA BACHUROVA GLASER 6,237,256 shares in favor 1,882,916 shares against or withheld FREDERICK O. PAULSELL 6,211,505 shares in favor 1,848,667 shares against or withheld FREDERIC P. STOCKTON 6,001,609 shares in favor 2,058,563 shares against or withheld Daniel G. Cohen, Joel R. Mesznik, Kenneth L. Tepper, Joseph G. Denton, Kent B. Godfrey, and Debbi Hurd Baptist will continue their terms of office as directors. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS 10.11 Second Amended and Restated Business Loan Agreement dated as of May 30, 2000, between TRM Corporation and Bank of America, N.A. 27.1 Financial Data Schedule (b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the period. 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TRM CORPORATION Date: August 15, 2000 By: /s/ Daniel L. Spalding ---------------- -------------------------------------- Daniel L. Spalding Vice President, Finance and Chief Financial Officer 14 EX-10.11 2 ex-10_11.txt EX-10.11 EXHIBIT 10.11 SECOND AMENDED AND RESTATED BUSINESS LOAN AGREEMENT This Second Amended and Restated Agreement dated as of May 30, 2000 (this "Agreement") is between Bank of America, N.A. (the "Bank") and TRM Corporation (the "Borrower") and supersedes the First Amended and Restated Business Loan Agreement between Bank and Borrower dated as of March 29, 2000, under which Bank provided a standby letter of credit to which Section 1.6 now applies. 1. LINE OF CREDIT AMOUNT AND TERMS 1.1 LINE OF CREDIT AMOUNT. (a) During the availability period described below, the Bank will provide a line of credit to the Borrower. The amount of the line of credit (the "Commitment") is equal to the amount indicated for each period specified below:
PERIOD AMOUNT From the date of this Agreement through June 30, 2001 $30,000,000.00 From July 1, 2001 through June 30, 2002 $25,000,000.00
(b) This is a revolving line of credit providing for cash advances. During the availability period, the Borrower may repay principal amounts and reborrow them. (c) If Borrower sells or disposes of any interest in TRM ATM Corporation such that Borrower no longer holds more than 50% of the ownership and voting interests in such Corporation, the Commitment shall automatically be reduced to Ten Million Dollars ($10,000,000.00). (d) Upon three (3) Banking Days' prior written notice to the Bank, Borrower may, at any time, and from time to time, permanently and irrevocably reduce the Commitment in an amount of not less than Five Hundred Thousand Dollars ($500,000.00) to an amount not less than the outstanding principal amount of advances at such time; provided, however, any such reduction which occurs before July 1, 2001 shall not apply to reduce the Commitment for the period July 1, 2001 through June 30, 2002 except to the extent that all reductions prior to July 1, 2001 exceed in the aggregate Five Million Dollars ($5,000,000.00). Any such reduction shall be accompanied by the payment of all accrued and unpaid fees with respect to the portion of the Commitment being reduced. (e) The Borrower agrees not to permit the outstanding principal balance of advances under the line of credit to exceed the Commitment. 1.2 COMMITMENT PERIOD. The line of credit is available between the date of this Agreement and June 30, 2002 or such earlier date as the Commitment may terminate as provided in this Agreement (the "Expiration Date"). 1.3 INTEREST RATE. (a) Unless the Borrower elects an optional interest rate as described below, the interest rate is the Bank's Prime Rate plus the Applicable Margin set forth under the appropriate heading in Section 1.5 below. Interest will be calculated on the basis of a 360-day year and actual days elapsed, which results in more interest than if a 365-day year were used. (b) The Prime Rate is the rate of interest publicly announced from time to time by the Bank as its Prime Rate. The Prime Rate is set by the Bank based on various factors, including the Bank's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans. The Bank may price loans to its customers at, above, or below the Prime Rate. Any change in the Prime Rate shall take effect at the opening of business on the day specified in the public announcement of a change in the Bank's Prime Rate. 1.4 REPAYMENT TERMS. Second Amended and Restated Loan Agreement - Page 1 (a) The Borrower will pay interest on April 30, 2000, and then at the end of each month thereafter until payment in full of any principal outstanding under this line of credit; provided, however, that interest on any Portion bearing interest at an IBOR Rate or a LIBOR Rate shall be paid at the end of each interest period until payment in full of any principal outstanding under this line of credit. (b) The Borrower will repay the principal balance of advances so that such balance at no time exceeds the Commitment. (c) Borrower will repay the principal amount of advances by an amount equal to the amount of any financing secured by ATM machines unless Borrower demonstrates to the satisfaction of the Bank that the ATM machines in which security interests are to be created were financed from sources other than the Bank. This repayment shall be made whether such financing is obtained by Borrower, TRM ATM Corporation or any other affiliate of Borrower. (d) If Borrower has not prepaid the principal balance of the advances in full on or before the Expiration Date, the Borrower will repay the principal amount of the advances outstanding on the Expiration Date in 36 successive equal monthly installments starting July 31, 2002. On June 30, 2005, the Borrower will repay the remaining principal balance of the advances plus any interest then due. This is called the "Term Repayment Option." (e) The Borrower may prepay the advances in full or in part at any time. The prepayment will be applied to the most remote payment of principal due under this Agreement. 1.5 APPLICABLE MARGIN. The Applicable Margin shall be the following amounts per annum, based upon the ratio of Funded Debt to EBITDA (as defined in the "Covenants" section of this Agreement), as set forth in the most recent compliance certificate received by the Bank as required in the "Covenants" section; provided, however, that, until the Bank receives the first compliance certificate, such amounts shall be those indicated for pricing level 4 set forth below:
Applicable Margin (in percentage points per annum) Pricing Level Ratio Prime Rate + LIBOR / IBOR Rate + ----- ----- ------------ ------------------- 1 greater than 2.00:1.0 0.25% 2.25% greater than 1.75:1.0 but less than or equal to 2 2.00:1.0 0.00% 2.00% greater than 1.25:1.0 but less than or equal to 3 1.75:1.0 0.00% 1.75% greater than 0.00:1.0 but less than or equal to 4 1.25:1.0 0.00% 1.50%
The Applicable Margin shall be in effect from the date the most recent compliance certificate is received by the Bank until the date the next compliance certificate is received; provided, however, that if the Borrower fails to deliver the next compliance certificate within thirty (30) days of the date it is due, the Applicable Margin from the date such compliance certificate was due until the date such compliance certificate is received by the Bank shall be the highest pricing level set forth above, whereupon the pricing level shall be based on the ratio reflected in such compliance certificate. Pricing to be set quarterly. If the Term Repayment Option is chosen, the Applicable Margin for every interest rate will increase 0.25% 1.6 LETTERS OF CREDIT. (a) The line of credit may be used for financing standby letters of credit (either in U.S. or foreign currency) with a maximum maturity of two years but not to extend beyond the Expiration Date. The standby letters of credit may include a provision providing that the maturity date will be automatically extended each year for an additional year unless the Bank gives written notice to the contrary; provided, however, that each letter of credit must include a final maturity date not later than the Expiration Date which will not be subject to automatic extension. (b) The amount of the standby letters of credit outstanding at any one time (including amounts drawn on the letters of credit and not yet reimbursed) may not exceed Three Million Dollars ($3,000,000.00), which sum is a sub-limit included within the Commitment and is not in addition thereto. Second Amended and Restated Loan Agreement - Page 2 (c) Any sum drawn under a standby letter of credit may, at the option of the Bank, be added to the principal amount outstanding under this Agreement. The amount will bear interest and be due as described elsewhere in this Agreement. (d) If there is an Event of Default under this Agreement, Borrower shall immediately prepay and make the Bank whole for any outstanding letters of credit. (e) The issuance of any letter of credit and any amendment to any letter of credit is subject to the Bank's written approval and must be in form and content satisfactory to the Bank and in favor of a beneficiary acceptable to the Bank. (f) Borrower shall sign the Bank's form Application and Agreement for Standby Letter of Credit. (g) Borrower agrees to pay the Bank a non-refundable fee equal to the Applicable Margin for LIBOR/IBOR Rate described in Section 1.5 less 25 basis points applied to the outstanding undrawn amount of each standby letter of credit. Such fee shall be calculated and payable on the date each letter of credit is issued, and quarterly in advance thereafter, calculated on the basis of the face amount outstanding on the day the fee is calculated, and utilizing the Applicable Margin in effect on such date. 2. OPTIONAL INTEREST RATES 2.1 OPTIONAL RATES. Instead of the interest rate based on the Bank's Prime Rate, the Borrower may elect the optional interest rates listed below during interest periods agreed to by the Bank and the Borrower. The optional interest rates shall be subject to the terms and conditions described later in this Agreement. Any principal amount bearing interest at an optional rate under this Agreement is referred to as a "Portion". Each optional interest rate is a rate per year. Interest will be paid on the last day of each interest period. At the end of any interest period, the interest rate will revert to the rate based on the Prime Rate, unless the Borrower has designated another optional interest rate for the Portion. No Portion will be converted to a different interest rate during the applicable interest period, although the Applicable Margin can be changed pursuant to Section 1.5. Upon the occurrence, and during the continuation, of an Event of Default under this Agreement, the Bank may terminate the availability of optional interest rates for interest periods commencing after the Event of Default occurs. The following optional interest rates are available: (a) IBOR Rates. (b) LIBOR Rates. 2.2 IBOR RATE. The election of IBOR Rates shall be subject to the following terms and requirements: (a) The interest period during which the IBOR Rate will be in effect will be 90 days or less. The last day of the interest period will be determined by the Bank using the practices of the offshore dollar inter-bank market. (b) Each IBOR Rate Portion will be for an amount not less than the following: (i) for interest periods of between 7 days and 90 days, One Million Dollars ($1,000,000). (ii) for interest periods of between 7 days and 15 days, an amount which, when multiplied by the number of days in the applicable interest period, is not less than fifteen million (15,000,000) dollar-days. (c) The Borrower may not elect an IBOR Rate with respect to any principal amount which is scheduled to be repaid before the last day of the applicable interest period. (d) The "IBOR Rate" means the interest rate determined by the following formula, rounded upward to the nearest 1/100 of one percent. (All amounts in the calculation will be determined by the Bank as of the first day of the interest period.) IBOR Rate = IBOR Base Rate plus the Applicable Margin ------------------------------------- (1.00 - Reserve Percentage)
Second Amended and Restated Loan Agreement - Page 3 Where, (i) "IBOR Base Rate" means the interest rate at which the Bank's Grand Cayman Branch, Grand Cayman, British West Indies, would offer U.S. dollar deposits for the applicable interest period to other major banks in the offshore dollar inter-bank market. (ii) "Reserve Percentage" means the total of the maximum reserve percentages for determining the reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency Liabilities, as defined in Federal Reserve Board Regulation D, rounded upward to the nearest 1/100 of one percent. The percentage will be expressed as a decimal, and will include, but not be limited to, marginal, emergency, supplemental, special, and other reserve percentages. (e) Each prepayment of an IBOR Rate Portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid, and a prepayment fee as described below. A "prepayment" is a payment of an amount on a date earlier than the scheduled payment date for such amount as required by this Agreement. (f) The prepayment fee shall be in an amount sufficient to compensate the Bank for any loss, cost or expense incurred by it as a result of the prepayment, including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Portion or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by the Bank in connection with the foregoing. For purposes of this paragraph, the Bank shall be deemed to have funded each Portion by a matching deposit or other borrowing in the applicable interbank market, whether or not such Portion was in fact so funded. (g) The Bank will have no obligation to accept an election for an IBOR Rate Portion if any of the following described events has occurred and is continuing: (i) Dollar deposits in the principal amount, and for periods equal to the interest period, of an IBOR Rate Portion are not available in the offshore dollar inter-bank market; or (ii) the IBOR Rate does not accurately reflect the cost of an IBOR Rate Portion. 2.3 LIBOR RATE. The election of LIBOR Rates shall be subject to the following terms and requirements: (a) The interest period during which the LIBOR Rate will be in effect will be one, two, or three months. The first day of the interest period must be a day other than a Saturday or a Sunday on which the Bank is open for business in New York and London and dealing in offshore dollars (a "LIBOR Banking Day"). The last day of the interest period and the actual number of days during the interest period will be determined by the Bank using the practices of the London inter-bank market. (b) Each LIBOR Rate Portion will be for an amount not less than the following: (i) for interest periods of one, two or three months, One Million Dollars ($1,000,000). (c) The "LIBOR Rate" means the interest rate determined by the following formula, rounded upward to the nearest 1/100 of one percent. (All amounts in the calculation will be determined by the Bank as of the first day of the interest period.) LIBOR Rate = London Inter-Bank Offered Rate plus the Applicable Margin ---------------------------------------- (1.00 - Reserve Percentage)
Where, (i) "London Inter-Bank Offered Rate" means the interest rate at which the Bank's London Branch, London, Great Britain, would offer U.S. dollar deposits for the applicable interest period to other major banks in the London inter-bank market at approximately 11:00 a.m. London time two (2) London Banking Days before the commencement of the interest period. A "London Banking Day" Second Amended and Restated Loan Agreement - Page 4 is a day on which the Bank's London Banking Center is open for business and dealing in offshore dollars. (ii) "Reserve Percentage" means the total of the maximum reserve percentages for determining the reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency Liabilities, as defined in Federal Reserve Board Regulation D, rounded upward to the nearest 1/100 of one percent. The percentage will be expressed as a decimal, and will include, but not be limited to, marginal, emergency, supplemental, special, and other reserve percentages. (d) The Borrower shall irrevocably request a LIBOR Rate Portion no later than 12:00 noon time on the LIBOR Banking Day preceding the day on which the London Inter-Bank Offered Rate will be set, as specified above. For example, if there are no intervening holidays or weekend days in any of the relevant locations, the request must be made at least three days before the LIBOR Rate takes effect. (e) The Borrower may not elect a LIBOR Rate with respect to any principal amount which is scheduled to be repaid before the last day of the applicable interest period. (f) Each prepayment of a LIBOR Rate Portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid and a prepayment fee as described below. A "prepayment" is a payment of an amount on a date earlier than the scheduled payment date for such amount as required by this Agreement. (g) The prepayment fee shall be in an amount sufficient to compensate the Bank for any loss, cost or expense incurred by it as a result of the prepayment, including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Portion or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by the Bank in connection with the foregoing. For purposes of this paragraph, the Bank shall be deemed to have funded each Portion by a matching deposit or other borrowing in the applicable interbank market, whether or not such Portion was in fact so funded. (h) The Bank will have no obligation to accept an election for a LIBOR Rate Portion if any of the following described events has occurred and is continuing: (i) Dollar deposits in the principal amount, and for periods equal to the interest period, of a LIBOR Rate Portion are not available in the London inter-bank market; or (ii) the LIBOR Rate does not accurately reflect the cost of a LIBOR Rate Portion. 3. FEES AND EXPENSES 3.1 FEES. (a) LOAN FEE. The Borrower agrees to pay a loan fee in the amount of Twenty Five Thousand and 00/100 Dollars ($25,000.00). This fee is due on or before the date of this Agreement. On the Expiration Date, the Borrower shall to pay a one time loan fee of 0.25% of the principal balance unpaid on the Expiration Date. (b) UNUSED COMMITMENT FEE. The Borrower agrees to pay a fee on any difference between the Commitment and the amount of credit it actually uses (including, for this purpose, outstanding standby letters of credit), determined by the weighted average credit outstanding during the specified period. The fee will be calculated at 0.125% and charged quarterly in arrears. 3.2 EXPENSES. The Borrower agrees to immediately repay the Bank for expenses that include, but are not limited to, filing, recording and search fees, appraisal fees, title report fees and documentation fees. 3.3 REIMBURSEMENT COSTS. (a) The Borrower agrees to reimburse the Bank for any expenses it incurs in the preparation of this Agreement and any agreement or instrument required by this Agreement in excess of those fees and costs listed above. Expenses include, but are not limited to, reasonable attorneys' fees, including any allocated costs of the Bank's in-house counsel. Second Amended and Restated Loan Agreement - Page 5 (b) The Borrower agrees to reimburse the Bank for the cost of periodic appraisals of the personal property collateral securing this Agreement, at such intervals as the Bank may reasonably require. The appraisals may be performed by employees of the Bank or by independent appraisers. In the absence of an Event of Default which is continuing, the Bank will not charge Borrower for more than one (1) periodic appraisal per year. 4. COLLATERAL AND GUARANTIES 4.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this Agreement will be secured by personal property the Borrower now owns or will own in the future as listed below. The collateral is further defined in the pledge agreement and security agreement(s) executed by the Borrower. In addition, all personal property collateral securing this Agreement shall also secure all other present and future obligations of the Borrower to the Bank (excluding any consumer credit covered by the federal Truth in Lending law, unless the Borrower has otherwise agreed in writing). All personal property collateral securing any other present or future obligations of the Borrower to the Bank shall also secure this Agreement. (a) Machinery and equipment, excluding ATM machines. (b) Inventory, excluding ATM machines. (c) Receivables. (d) General intangibles, excluding general intangibles relating to ATM machines. (e) Contract rights, excluding contract rights relating to ATM machines. (f) 100% of the shares of stock or other equity interests in TRM Copy Centers (USA) Corporation. 4.2 LENT COLLATERAL - TRM COPY CENTERS (USA) CORPORATION. The Borrower's obligations to the Bank under this Agreement will be secured by personal property now owned or owned in the future by TRM Copy Centers (USA) Corporation as listed below. The collateral is further defined in security agreement(s) executed by TRM Copy Centers (USA) Corporation. (a) Machinery and equipment. (b) Inventory. (c) Receivables. (d) General intangibles (e) Contract rights. (f) 100% of the shares of stock or other equity interests in FPC France Ltd. And TRM Copy Centres (Overseas) Ltd. (g) Sixty-five percent (65%) of the shares of stock or other equity interests in TRM Copy Centres (Canada) Ltd. 4.3 LENT COLLATERAL - TRM COPY CENTRES (OVERSEAS) LTD. Borrower's obligations to the Bank under this Agreement will be secured by sixty-five percent (65%) of the shares of stock or other equity interests in TRM Copy Centres (U.K.) Ltd., which are owned by TRM Copy Centres (Overseas) Ltd. TRM Copy Centres (U.K.) Ltd. and TRM Copy Centres (Canada) Ltd. are referred to in this Agreement as the "Material Foreign Subsidiaries." 4.4 SUBSIDIARY GUARANTIES. The Borrower's obligations to the Bank under this Agreement will be guaranteed by TRM Copy Centers (USA) Corporation, TRM Copy Centres (Overseas) Ltd. and FPC France Ltd. The foregoing are called "Guarantors." Second Amended and Restated Loan Agreement - Page 6 5. DISBURSEMENTS, PAYMENTS AND COSTS 5.1 REQUESTS FOR CREDIT. Each request for an extension of credit will be made in writing in a manner acceptable to the Bank, or by another means acceptable to the Bank. 5.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each payment by the Borrower will be: (a) made at the Bank's branch (or other location) selected by the Bank in consultation with the Borrower, from time to time; (b) made for the account of the Bank's branch selected by the Bank in consultation with the Borrower, from time to time; (c) made in immediately available funds; (d) evidenced by records kept by the Bank. In addition, the Bank may, at its discretion, require the Borrower to sign one or more promissory notes. 5.3 TELEPHONE AND TELEFAX AUTHORIZATION. (a) The Bank may honor telephone or telefax instructions for advances or repayments or for the designation of optional interest rates given, or purported to be given, by any one of the individuals authorized to sign loan agreements on behalf of the Borrower, or any other individual designated by any one of such authorized signers. (b) Advances will be deposited in and repayments will be withdrawn from the Borrower's account number 28011-01047, or such other of the Borrower's accounts with the Bank as designated in writing by the Borrower. (c) The Borrower will indemnify and hold the Bank harmless from all liability, loss, and costs in connection with any act resulting from telephone or telefax instructions the Bank reasonably believes are made by any individual authorized by the Borrower to give such instructions. This paragraph will survive this Agreement's termination, and will benefit the Bank and its officers, employees, and agents. 5.4 DIRECT DEBIT (PRE-BILLING). (a) The Borrower agrees that the Bank will debit the Borrower's deposit account number 28011-01047, or such other of the Borrower's accounts with the Bank as designated in writing by the Borrower (the "Designated Account") on the date each payment of principal and interest and any fees from the Borrower becomes due (the "Due Date"). If the Due Date is not a Banking Day, the Designated Account will be debited on the next Banking Day. (b) Approximately 5 days prior to each Due Date, the Bank will mail to the Borrower a statement of the amounts that will be due on that Due Date (the "Billed Amount"). The calculation will be made on the assumption that no new extensions of credit or payments will be made between the date of the billing statement and the Due Date, and that there will be no changes in the applicable interest rate. (c) The Bank will debit the Designated Account for the Billed Amount, regardless of the actual amount due on that date (the "Accrued Amount"). If the Billed Amount debited to the Designated Account differs from the Accrued Amount, the discrepancy will be treated as follows: (i) If the Billed Amount is less than the Accrued Amount, the Billed Amount for the following Due Date will be increased by the amount of the discrepancy. The Borrower will not be in default by reason of any such discrepancy. (ii) If the Billed Amount is more than the Accrued Amount, the Billed Amount for the following Due Date will be decreased by the amount of the discrepancy. Regardless of any such discrepancy, interest will continue to accrue based on the actual amount of principal outstanding without compounding. The Bank will not pay the Borrower interest on any overpayment. Second Amended and Restated Loan Agreement - Page 7 (d) The Borrower will maintain sufficient funds in the Designated Account to cover each debit. If there are insufficient funds in the Designated Account on the date the Bank enters any debit authorized by this Agreement, the debit will be reversed. 5.5 BANKING DAYS. Unless otherwise provided in this Agreement, a Banking Day is a day other than a Saturday, Sunday or other day on which the Bank is open for business in Oregon. All payments and disbursements which would be due on a day which is not a Banking Day will be due on the next Banking Day. All payments received on a day which is not a Banking Day will be applied to the credit on the next Banking Day. 5.6 ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the Bank's costs or losses arising from any statute or regulation, or any request or requirement of a regulatory agency which is applicable to all national banks or a class of all national banks. The costs and losses will be allocated to the loan in a manner determined by the Bank, using any reasonable method. The costs include the following: (a) any reserve or deposit requirements; and (b) any capital requirements relating to the Bank's assets and commitments for credit. 5.7 INTEREST CALCULATION. Except as otherwise stated in this Agreement, all interest and fees, if any, will be computed on the basis of a 360-day year and the actual number of days elapsed. This results in more interest or a higher fee than if a 365-day year is used. Installments of principal which are not paid when due under this Agreement shall continue to bear interest until paid. 5.8 DEFAULT RATE. Upon the occurrence of and during the continuation of any Event of Default under this Agreement, principal amounts outstanding under this Agreement will at the option of the Bank bear interest at a rate which is two (2) percentage point(s) higher than the rate of interest otherwise provided under this Agreement. This will not constitute a waiver of any Event of Default. 6. CONDITIONS Before the Bank is required to extend any additional credit to the Borrower under this Agreement, it must receive any documents and other items it may reasonably require as conditions precedent to such extensions of credit, except as provided in the "Open Terms Letter" between the parties executed the same date as this Agreement: 6.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by the Borrower and each Guarantor of this Agreement and any instrument or agreement required under this Agreement have been duly authorized. 6.2 GOVERNING DOCUMENTS. A copy of the Borrower's articles of incorporation. 6.3 SECURITY AGREEMENTS. (i) Original security agreements signed by Borrower and by TRM Copy Centers (USA) Corporation, (ii) original pledge agreements signed by Borrower and TRM Copy Centers (USA) Corporation covering all of the equity securities of the Guarantors, (iii) original pledge agreements signed by TRM Copy Centers (USA) Corporation and TRM Copy Centres (Overseas) Ltd. covering sixty-five percent (65%) of the equity securities of the Material Foreign Subsidiaries, and (iv) such assignments, financing statements, fixture filings and delivery of pledged securities indorsed in blank, which the Bank requires in connection with such security agreements and pledge agreement, all in form and substance satisfactory to Bank.. 6.4 EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor of the Bank are valid, enforceable, and prior to all others' rights and interests, except those the Bank consents to in writing. 6.5 INSURANCE. Evidence of insurance coverage, as required in the "Covenants" section of this Agreement. 6.6 GUARANTIES. Guaranties signed by TRM Copy Centers (USA) Corporation, TRM Copy Centres (Overseas) Ltd. and FPC France Ltd. 6.7 LEGAL OPINION. Written opinions from the Borrower's Oregon legal counsel, covering such matters as the Bank may require. The legal counsel and the terms of the opinion must be acceptable to the Bank. Second Amended and Restated Loan Agreement - Page 8 6.8 GOOD STANDING. Certificates of good standing or existence for the Borrower and each Guarantor and Material Foreign Subsidiary from its state or country of formation. 6.9 OTHER ITEMS. Any other items that the Bank reasonably requires. 7. REPRESENTATIONS AND WARRANTIES When the Borrower signs this Agreement, and until the Bank is repaid in full, the Borrower makes the following representations and warranties. Each request for an extension of additional credit constitutes a renewed representation: 7.1 ORGANIZATION OF BORROWER. The Borrower, each Guarantor and each Material Foreign Subsidiary is a corporation duly formed and existing under the laws of the state or jurisdiction where organized. 7.2 AUTHORIZATION. This Agreement, and any instrument or agreement required hereunder, are within the Borrower's powers, have been duly authorized, and do not conflict with any of its or their organizational papers. 7.3 ENFORCEABLE AGREEMENTS. This Agreement and each other agreement to be signed by Borrower is a legal, valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly legal, valid, binding and enforceable. Each Guarantee is the legal, valid and binding agreement of the Guarantor that signs it, enforceable against such Guarantor in accordance with its terms. 7.4 GOOD STANDING. In each state or country in which the Borrower or a Guarantor or Material Foreign Subsidiary does business, it is properly licensed, in good standing (if applicable) and, where required, in compliance with fictitious name statutes, except where such failure would not have a Material Adverse Effect. 7.5 NO CONFLICTS. This Agreement and the other agreements required herein does not conflict with any law, agreement, or obligation by which the Borrower or any Guarantor or Material Foreign Subsidiary is bound, except where such conflict would not have a Material Adverse Effect. 7.6 FINANCIAL INFORMATION. All financial and other information that has been or will be supplied to the Bank is: (a) sufficiently complete to fairly present the Borrower's consolidated financial condition, including all material contingent liabilities. (b) in material compliance with all government regulations that apply. 7.7 LAWSUITS. There is no lawsuit, tax claim or other dispute, pending or threatened against Borrower, which seeks, together with related lawsuits, tax claims or other disputes, an aggregate of more than Two Hundred Fifty Thousand Dollars ($250,000.00), except as has been disclosed in writing to the Bank prior to the date hereof, or pursuant to Section 8.12(e). 7.8 COLLATERAL. All collateral required in this Agreement is owned by the grantor of the security interest free of any title defects or any liens or interests of others, except for Permitted Liens. 7.9 PERMITS, FRANCHISES. The Borrower possesses all permits, memberships, franchises, contracts and licenses required and all trademark rights, trade name rights, patent rights and fictitious name rights necessary to enable it to conduct the business in which it is now engaged, except where such failure would not have a Material Adverse Effect. 7.10 OTHER OBLIGATIONS. The Borrower is not in default on any material obligation for borrowed money, any material purchase money obligation or any other material lease, commitment, contract, instrument or obligation. 7.11 TAX MATTERS. The Borrower has no knowledge of any pending material assessments or material adjustments of its taxes for any year, except as have been previously disclosed to the Bank in writing. 7.12 NO TAX AVOIDANCE PLAN. The Borrower's obtaining of credit from the Bank under this Agreement does not have as a principal purpose the avoidance of U.S. withholding taxes. Second Amended and Restated Loan Agreement - Page 9 7.13 NO EVENT OF DEFAULT. There is no event which is, or with notice or lapse of time or both would be, an Event of Default under this Agreement. 7.14 INSURANCE. The Borrower has obtained, and maintained in effect, the insurance coverage required in the "Covenants" section of this Agreement. 7.15 LOCATION OF BORROWER. The Borrower's place of business (or, if the Borrower has more than one place of business, its chief executive office) is located at the address listed under the Borrower's signature on this Agreement. 7.16 MATERIAL ADVERSE EFFECT. "Material Adverse Effect" means any set of circumstances or events which: (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of this Agreement or any related document; (b) is or could reasonably expect to be material and adverse to the condition (financial or otherwise), business, assets, operations or prospects of Borrower and the Guarantors and Material Foreign Subsidiaries, taken as a whole, or (c) materially impairs or could reasonably be expected to materially impair the ability of Borrower and the Guarantors, taken as a whole, to perform their obligations under this Agreement, the Guaranties or any related document(s). 7.17 PERMITTED LIENS. "Permitted Liens" means: (a) Liens in favor of the Bank; (b) Liens for taxes not yet due; (c) Liens outstanding on the date of this Agreement, disclosed in writing to the Bank; (d) Carriers', warehousemen's, mechanics', materialmen's or other like liens arising in the ordinary course of business, which are not overdue for a period of more than 60 days, or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable person; (e) Attachment, judgment or similar liens arising in connection with litigation or other legal proceedings (and not otherwise an Event of Default hereunder) in the ordinary course of business that are currently being contested in good faith by appropriate proceedings, and for which adequate reserves have been set aside; (f) Purchase money security interests in equipment which is non-ATM equipment or other equipment or other fixed assets acquired after the date of this Agreement, if the total principal amount of debts secured by such liens does not exceed One Million Dollars ($1,000,000.00) during any one fiscal year. (g) Security interests in ATM machines and related equipment owned by Borrower, but not in ATM machines and related equipment owned by Guarantors or Material Foreign Subsidiaries. 8. COVENANTS The Borrower agrees, so long as credit is available under this Agreement and until the Bank is repaid in full: 8.1 USE OF PROCEEDS. To use the proceeds of the credit only to finance working capital of Borrower and to finance purchase of copy machines for Guarantors and Material Foreign Subsidiaries and ATM machines for Borrower or its subsidiaries. In addition, up to Seven Million Dollars ($7,000,000.00) of such proceeds may be used for the initial capitalization of iATMglobal.net, and up to Two Million Dollars ($2,000,000.00) of such Seven Million Dollars ($7,000,000.00) may be used for the acquisition by iATMglobal.net of Strategic Software Solutions. 8.2 FINANCIAL INFORMATION. To provide the following financial information and statements in form and content reasonably acceptable to the Bank, and such additional information as requested by the Bank from time to time: Second Amended and Restated Loan Agreement - Page 10 (a) Within 120 days of the Borrower's fiscal year end, the Borrower's annual financial statements, certified and dated by an authorized financial officer of the Borrower. These financial statements must be audited (with an unqualified opinion) by a Certified Public Accountant reasonably acceptable to the Bank. (b) Within 45 days of the period's end, the Borrower's quarterly financial statements, certified and dated by an authorized financial officer of the Borrower. The statements shall be prepared by Borrower on a consolidated basis, with consolidating financial statements included for information purposes only. (c) Copies of the Borrower's Form 10-K Annual Report within ten (10) days after the date of filing with the Securities and Exchange Commission. (d) Copies of the Borrower's Form 10-Q Quarterly Report within ten (10) days after the date of filing with the Securities and Exchange Commission. (e) Within 60 days of fiscal year end, Borrower prepared budgets for subsequent two (2) years. (f) Within the period(s) provided in (a) and (b) above, a compliance certificate of the Borrower signed by an authorized financial officer of the Borrower setting forth (i) the information and computations in sufficient detail (including detailed computations removing the results for iATMglobal.net where necessary) to establish that the Borrower is in compliance with all financial covenants at the end of the period covered by the financial statements then being furnished and (ii) whether there existed as of the date of such financial statements and whether there exists as of the date of the certificate, any default under this Agreement and, if any such default exists, specifying the nature thereof and the action the Borrower is taking and proposes to take with respect thereto. 8.3 TANGIBLE NET WORTH. To maintain on a consolidated basis Tangible Net Worth at least equal to at least 90% of Tangible Net Worth on December 31, 1999 and increasing quarterly by 50% of net income for such quarter (no credit for losses), and 75% of new equity proceeds. "Tangible Net Worth" means the gross book value of the Borrower's consolidated assets (excluding goodwill, patents, trademarks, trade names, organization expense, unamortized debt discount and expense, capitalized or deferred research and development costs, deferred marketing expenses, deferred receivables, and other like intangibles), less total consolidated liabilities, including but not limited to accrued and deferred income taxes, and any reserves against assets. "Tangible Net Worth" shall not include any assets or liabilities of iATMglobal.net. 8.4 FUNDED DEBT TO EBITDA RATIO. To maintain on a consolidated basis a ratio of Funded Debt to EBITDA not exceeding the amounts indicated for each period specified below:
Period Ratio - ------ ----- From the date of this Agreement through June 29, 2001 Less than 2.50:1.0 From June 30, 2001 through June 29, 2002 Less than 2.25:1.0 From June 30, 2002 and thereafter Less than 2.00:1.0
"Funded Debt" means all outstanding indebtedness for borrowed money and other interest-bearing indebtedness, including current and long term indebtedness. "EBITDA" means the sum of net income before taxes, plus interest expense, plus depreciation, depletion, amortization and other non-cash charges. This ratio will be calculated at the end of each fiscal quarter, using the results of that quarter and the three (3) immediately preceding fiscal quarters. "EBITDA" shall not include any income, interest expense, depreciation, depletion, amortization or other non-cash charges of iATMglobal.net. 8.5 FIXED CHARGE COVERAGE RATIO. To maintain on a consolidated basis a Fixed Charge Coverage Ratio of at least 2.0:1.0. "Fixed Charge Coverage Ratio" means the ratio of (a) the sum of EBITDAR, less taxes and dividends and less extensions of credit to or investments in iATMglobal.net in excess of those described in Section 8.11(f), to (b) the sum of current portion of long-term debt, plus interest expense, plus rents. "EBITDAR" means the sum of net income before taxes, plus interest expense, plus depreciation, depletion, amortization, rents and other non-cash charges. Rents include operating lease expense as well as the "Cash Second Amended and Restated Loan Agreement - Page 11 Provision Fee for ATM Cash" as defined in the Loan and Servicing Agreement dated as of March 17, 2000 among TRM Inventory Funding Trust, TRM ATM Corporation, Autobahn Funding Company, LLC and DG Bank Deutsche Genossenschaftsbank HG, and KeyBank National Association (the "Loan and Servicing Agreement"). "EBITDAR" shall not include any income, interest expense, depreciation, depletion, amortization, rents or other non-cash charges of iATMglobal.net. This ratio will be calculated at the end of each fiscal quarter, using the results of that quarter and the three (3) immediately preceding fiscal quarters. 8.6 OTHER DEBTS. Not to have outstanding or incur, or to permit any subsidiary of Borrower to have or incur, any direct or contingent liabilities (other than those to the Bank), or become liable for the liabilities of others, without the Bank's written consent. This does not prohibit: (a) Acquiring goods, supplies, or merchandise on normal trade credit. (b) Endorsing negotiable instruments received in the usual course of business. (c) Obtaining surety bonds in the usual course of business. (d) Liabilities in existence on the date of this Agreement and reflected in Borrower's most recent financial statements or otherwise disclosed in writing to the Bank. (e) Additional debts for the acquisition of equipment or other fixed assets, to the extent permitted elsewhere in Sections 8.6 or 8.7. (f) Additional funded indebtedness for financing ATM machines limited to Forty Million Dollars ($40,000,000.00) during the period where the ratio of Funded Debt to EBITDA is greater than 2.25:1.0 but less than 2.50:1.0, and Seventy Five Million Dollars ($75,000,000.00) during the period where the ratio of Funded Debt to EBITDA is greater than 2.0:1.0 but less than 2.25:1.0. 8.7 OTHER LIENS. Not to create, assume, or allow, or permit Borrower or any Guarantor or Material Foreign Subsidiary to create, assume or allow, any security interest or lien (including judicial liens) on property it now or later owns, except for Permitted Liens. 8.8 CAPITAL EXPENDITURES. Not to spend or incur obligations to acquire equipment or other fixed assets, and not to permit any Guarantor or Material Foreign Subsidiary to spend or incur obligations to acquire equipment or other fixed assets, exceeding, in the aggregate for Borrower, Guarantors and Material Foreign Subsidiaries, Ten Million Dollars ($10,000,000.00) in any one fiscal year. 8.9 DIVIDENDS; STOCK REPURCHASES. Not to declare or pay any dividends on any of its common shares except dividends payable in capital stock of the Borrower, and not to repurchase or redeem any of its capital stock. However, notwithstanding the foregoing prohibition, Borrower may declare and pay dividends or repurchase capital stock so long as no Event of Default has occurred and is continuing, and so long as the total of all dividends and stock repurchases in any period of four consecutive quarters does not exceed 50% of the Borrower's consolidated net income after taxes for such four quarters. Not to pay any dividend on any of its preferred shares, if any Event of Default has occurred and is continuing. 8.10 LOANS TO OFFICERS. Not to make, or permit any of its subsidiaries to make, any loans, advances or other extensions of credit (including extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services) to any of its executives, officers, directors or shareholders (or any relatives of any of the foregoing), except in the ordinary course of business not exceeding at any one time an aggregate of Two Hundred Thousand Dollars ($200,000.00). 8.11 LOANS AND INVESTMENTS. Not to have any existing, or make, or permit any of its subsidiaries to have or make, any new loans or other extensions of credit to, or investments in, any individual or entity, or make any capital contributions or other transfers of assets to any individual or entity, except for: (a) existing investments in the Borrower's current subsidiaries. Second Amended and Restated Loan Agreement - Page 12 (b) extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business to non-affiliated entities. (c) investments in any of the following: (i) certificates of deposit; (ii) U.S. treasury bills and other obligations of the federal government. (d) extensions of credit to or investments in Guarantors and Material Foreign Subsidiaries. (e) extensions of credit to or investments in TRM ATM Corporation only for the purposes of acquiring ATM machines, contributing to costs for facilities, employees or services shared with Borrower, and for payment of other infrastructure expenses related to ATM expansion. (f) extensions of credit to or investments in iATMglobal.net not to exceed Seven Million Dollars ($7,000,000.00) from proceeds of the credit as provided in Section 8.1. (g) after receipt of compliance certificate and financial statements required for the fiscal quarter ended March 31, 2001, Borrower may make additional extensions of credit to or investments in iATMglobal.net if: (i) Borrower is in compliance with all financial covenants and will continue to be in compliance, both before and immediately after giving effect to such extensions of credit or investment on a pro-forma basis; (ii) the Commitment exceeds and will exceed by at least Five Million Dollars ($5,000,000) the amount of credit Borrower is actually using, both immediately before and immediately after such extension of credit or investment; (iii) Borrower notifies Bank before making any extension of credit or investment permitted under this provision and provides the Bank with a calculation showing compliance with the conditions applicable to this provision; and (iv) Borrower retains more than fifty percent (50%) direct or indirect beneficial ownership of all voting interests and ownership interests in iATMglobal.net at all times after such extension of credit or investment, the retention of such interests becoming a covenant of Borrower from and after such time. (h) capital expenditures permitted by Section 8.8. 8.12 NOTICES TO BANK. To promptly notify the Bank in writing of: (a) any substantial dispute between the Borrower (or any Guarantor or Material Foreign Subsidiary) and any government authority. (b) any Event of Default under this Agreement, or any event which, with notice or lapse of time or both, would constitute an Event of Default. (c) any material adverse change in the Borrower's (or any Guarantor's or Material Foreign Subsidiary's) business condition (financial or otherwise), operations, properties or prospects, or ability to repay the credit. (d) any change in the Borrower's name, legal structure, place of business, or chief executive office if the Borrower has more than one place of business. (e) any lawsuit, tax claim or other dispute, pending or threatened against Borrower, which seeks, together with related lawsuits, tax claims or other disputes, an aggregate of more than Two Hundred Fifty Thousand Dollars ($250,000.00). 8.13 BOOKS AND RECORDS. To maintain adequate books and records. Second Amended and Restated Loan Agreement - Page 13 8.14 AUDITS. To allow the Bank and its agents to inspect the Borrower's, Guarantors' and Material Foreign Subsidiaries' properties and examine, audit, and make copies of books and records at any reasonable time. If any of the Borrower's, Guarantors' and Material Foreign Subsidiaries' properties, books or records are in the possession of a third party, the Borrower authorizes that third party to permit the Bank or its agents to have access to perform inspections or audits and to respond to the Bank's requests for information concerning such properties, books and records, affording Borrower an opportunity to be present. Bank's right to inspect will be on prior notice to Borrower unless an Event of Default has occurred and is continuing. 8.15 COMPLIANCE WITH LAWS. To comply, and to cause each of its subsidiaries to comply, with the laws (including any fictitious name statute), regulations, and orders of any government body with authority over its business, and that of its subsidiaries. 8.16 PRESERVATION OF RIGHTS. To maintain and preserve all material rights, privileges, and franchises the Borrower and its subsidiaries now have. 8.17 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or replacements to keep the Borrower's and its subsidiaries' properties in good working condition. 8.18 PERFECTION OF LIENS. To help the Bank perfect and protect, and to cause its subsidiaries to perfect and protect, Bank's security interests and liens, and reimburse it for related costs it incurs to protect its security interests and liens. 8.19 COOPERATION. To take any action, and to cause its subsidiaries to take any action reasonably requested by the Bank to carry out the intent of this Agreement. 8.20 INSURANCE. (a) INSURANCE COVERING COLLATERAL. To maintain all risk property damage insurance policies covering the tangible property comprising the collateral. Each insurance policy must be in an amount reasonably acceptable to the Bank. The insurance must be issued by an insurance company reasonably acceptable to the Bank and must include a lender's loss payable endorsement in favor of the Bank in a form reasonably acceptable to the Bank. (b) GENERAL BUSINESS INSURANCE. To maintain insurance reasonably satisfactory to the Bank as to amount, nature and carrier covering property damage (including loss of use and occupancy) to any of the properties or Borrower or its subsidiaries, public liability insurance including coverage for contractual liability, product liability and workers' compensation and business interruption insurance, and any other insurance which is usual for the Borrower's business. (c) EVIDENCE OF INSURANCE. Upon the request of the Bank, to deliver to the Bank a copy of each insurance policy, or, if permitted by the Bank, a certificate of insurance listing all insurance in force. 8.21 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written consent, do any of the following things or permit any Guarantor or Material Foreign Subsidiary to do such things: (a) engage in any material business activities substantially different from the Borrower's, Guarantor's or Material Foreign Subsidiary's present business. (b) liquidate or dissolve the Borrower's, Guarantor's or Material Foreign Subsidiary's business, except that a Guarantor or Material Foreign Subsidiary may liquidate if its assets are transferred to Borrower or another Guarantor or Material Foreign Subsidiary. (c) enter into any consolidation, merger, or other combination, or become a partner in a partnership, a member of a joint venture, or a member of a limited liability company without written consent of Bank. (d) sell, assign, lease, transfer or otherwise dispose of any part of the Borrower's or any Guarantor's or Material Foreign Subsidiary's business or the Borrower's or any Guarantor's or Material Foreign Subsidiary's assets except in the ordinary course of the Borrower's or Guarantor's or Material Foreign Subsidiary's business, and except that Borrower, Guarantors and Material Foreign Subsidiaries may dispose of their presently owned Savin liquid toner copy machines. Second Amended and Restated Loan Agreement - Page 14 (e) enter into any sale and leaseback agreement covering any of its equipment or other fixed assets (other than relating to Savin liquid toner copy machines). (f) acquire or purchase a business or its assets. (g) voluntarily suspend its business for more than 7 days in any 30-day period. (h) pledge or mortgage of assets of Borrower or any Guarantor or Material Foreign Subsidiary, except for Permitted Liens. (i) except for loans or capital contributions specifically permitted herein, transfer money or assets to TRM ATM Corporation or any other affiliate whose business is utilizing ATM machines. 9. HAZARDOUS WASTE INDEMNIFICATION The Borrower will indemnify and hold harmless the Bank from any loss or liability the Bank incurs in connection with or as a result of this Agreement, which directly or indirectly arises out of the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of a hazardous substance. This indemnity will apply whether the hazardous substance is on, under or about the Borrower's property or operations or property leased to the Borrower. The indemnity includes but is not limited to reasonable attorneys' fees (including the reasonable estimate of the allocated cost of in-house counsel and staff). The indemnity extends to the Bank, its parent, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys and assigns. "Hazardous substances" means any substance, material or waste that is or becomes designated or regulated as "toxic," "hazardous," "pollutant," or "contaminant" or a similar designation or regulation under any federal, state or local law (whether under common law, statute, regulation or otherwise) or judicial or administrative interpretation of such, including without limitation petroleum or natural gas. This indemnity will survive repayment of the Borrower's obligations to the Bank. 10. DEFAULT If any of the following events (each an Event of Default) occurs, the Bank may do one or more of the following: declare the Borrower in default, stop making any additional credit available to the Borrower, and require the Borrower to repay its entire debt immediately and without prior notice. If an Event of Default occurs under the paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the entire debt outstanding under this Agreement will automatically be due immediately. 10.1 FAILURE TO PAY. The Borrower fails to make a payment under this Agreement within two (2) Banking Days after the date when due. 10.2 LIEN PRIORITY. The Bank fails to have an enforceable first lien (except for any prior liens permitted by this Agreement or to which the Bank has consented in writing) on or security interest in any property given as security for this Agreement (or any guaranty). 10.3 FALSE INFORMATION. The Borrower (or any Guarantor or Material Foreign Subsidiary) has given the Bank materially false or misleading information or representations. 10.4 BANKRUPTCY. The Borrower (or any Guarantor or Material Foreign Subsidiary) files a bankruptcy petition or the Borrower or any Guarantor or Material Foreign Subsidiary makes a general assignment for the benefit of creditors. A bankruptcy petition is filed against the Borrower or any Guarantor or Material Foreign Subsidiary and remains undismissed for 45 days; provided, however, the Bank will not be obligated to extend any additional credit to Borrower during such period. 10.5 RECEIVERS. A receiver or similar official is appointed for a substantial portion of the Borrower's (or any Guarantor's or Material Foreign Subsidiary's) business, or the business is terminated, or any Guarantor or Material Foreign Subsidiary is liquidated or dissolved (unless such Guarantor's or Material Foreign Subsidiary's assets are transferred to Borrower or another Guarantor or Material Foreign Subsidiary as contemplated by Section 8.21(b)). 10.6 JUDGMENTS. Any unstayed and unsatisfied final judgments or arbitration awards are entered against the Borrower (or any Guarantor or Material Foreign Subsidiary), or the Borrower (or any Guarantor or Material Foreign Subsidiary) enters into any settlement agreements with respect to any litigation or arbitration, in an aggregate amount Second Amended and Restated Loan Agreement - Page 15 outstanding at any time of One Million Dollars ($1,000,000.00) or more in excess of any insurance coverage, or in excess of uncontested indemnity rights satisfactory to Bank. 10.7 GOVERNMENT ACTION. Any government authority takes action that the Bank believes will have a Material Adverse Effect upon the Borrower's (or any Guarantor's or Material Foreign Subsidiary's) financial condition or ability to repay. 10.8 MATERIAL ADVERSE CHANGE. A material adverse change occurs, or is reasonably likely to occur, in the business condition (financial or otherwise), operations, properties or prospects, or ability to repay the credit, of the Borrower and the Guarantors and the Material Foreign Subsidiaries, taken as a whole. 10.9 CROSS-DEFAULT. Any default occurs under any agreement (excluding the Loan and Servicing Agreement) in connection with any credit in excess of One Million Dollars ($1,000,000.00) of the Borrower (or any Guarantor or Material Foreign Subsidiary or TRM ATM Corporation or any other subsidiary of Borrower), or which the Borrower (or any Guarantor or Material Foreign Subsidiary or TRM ATM Corporation or any other subsidiary of Borrower) has guaranteed if the default is not cured within thirty (30) days; provided, however, the Bank will not be obligated to extend any additional credit to the Borrower during such period. 10.10 CROSS-DEFAULT - LOAN AND SERVICING AGREEMENT. Any event of default occurs under the Loan and Servicing Agreement followed by the automatic occurrence of the "Termination Date" or the optional acceleration of the "Termination Date" as defined in the Loan and Servicing Agreement. Any default occurs in any future agreement which replaces the Loan and Servicing Agreement resulting in an acceleration of the "Termination Date" or similar remedy. 10.11 DEFAULT UNDER RELATED DOCUMENTS. (i) Any default occurs under any guaranty, subordination agreement, security agreement, pledge agreement, deed of trust, mortgage, or other document required by this Agreement, or (ii) any such document is no longer in effect; provided, however, in the case of clause (ii) of this section, if, in the Bank's opinion, the breach is capable of being remedied, the breach will not be considered an Event of Default under this Agreement for a period of thirty (30) days after the date on which the Bank gives written notice of the breach to the Borrower; provided, further, that the Bank will not be obligated to extend any additional credit to the Borrower during that period. 10.12 OTHER BANK AGREEMENTS. The Borrower (or any Guarantor or Material Foreign Subsidiary) fails to meet the conditions of, or fails to perform any obligation under any other agreement the Borrower (or any Guarantor or Material Foreign Subsidiary) has with the Bank or any affiliate of the Bank, after giving effect to any applicable cure period specified therein. If, in the Bank's opinion, the breach is capable of being remedied, the breach will not be considered an Event of Default under this Agreement for a period of thirty (30) days after the date on which the Bank gives written notice of the breach to the Borrower (such cure period to run concurrently with any applicable cure period specified in such agreement); provided, however, that the Bank will not be obligated to extend any additional credit to the Borrower during that period. 10.13 OTHER BREACH UNDER AGREEMENT. The Borrower fails to meet the conditions of, or fails to perform any obligation under, any term of this Agreement not specifically referred to in this Article. This includes any failure or reasonably anticipated failure by the Borrower to comply with any financial covenants set forth in this Agreement, whether such failure is evidenced by financial statements delivered to the Bank or is otherwise known to the Borrower or the Bank. If, in the Bank's opinion, the breach is capable of being remedied, the breach will not be considered an Event of Default under this Agreement for a period of thirty (30) days after the date on which the Bank gives written notice of the breach to the Borrower; provided, however, that the Bank will not be obligated to extend any additional credit to the Borrower during that period. 11. ENFORCING THIS AGREEMENT; MISCELLANEOUS 11.1 GAAP. Except as otherwise stated in this Agreement, all financial information provided to the Bank and all financial covenants will be made under generally accepted accounting principles, consistently applied. 11.2 OREGON LAW. This Agreement is governed by Oregon law. 11.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and the Bank's successors and assignees. The Borrower agrees that it may not assign this Agreement without the Bank's prior consent. The Bank may sell participations in or, with the prior written consent of Borrower, not to be unreasonably withheld, assign this Second Amended and Restated Loan Agreement - Page 16 loan, and may exchange financial information about the Borrower with actual or potential participants or assignees (subject to Section 11.5 hereof). If a participation is sold or the loan is assigned, the purchaser will have the right of set-off against the Borrower. 11.4 ARBITRATION AND WAIVER OF JURY TRIAL. (a) This paragraph concerns the resolution of any controversies or claims between the Borrower and the Bank, whether arising in contract, tort or by statute, including but not limited to controversies or claims that arise out of or relate to: (i) this Agreement (including any renewals, extensions or modifications); or (ii) any document related to this Agreement (collectively a "Claim"). (b) At the request of the Borrower or the Bank, any Claim shall be resolved by arbitration in accordance with the Federal Arbitration Act (Title 9, U. S. Code) (the "Act"). The Act will apply even though this Agreement provides that it is governed by the law of a specified state. (c) Arbitration proceedings will be determined in accordance with the Act, the rules and procedures for the arbitration of financial services disputes of JAMS/Endispute, LLC, a Delaware limited liability company or any successor thereof ("JAMS"), and the terms of this paragraph. In the event of any inconsistency, the terms of this paragraph shall control. (d) The arbitration shall be administered by JAMS and conducted in any U.S. state where real or tangible personal property collateral for this credit is located or if there is no such collateral, in Oregon. All Claims shall be determined by one arbitrator; however, if Claims exceed Five Million Dollars ($5,000,000), upon the request of any party, the Claims shall be decided by three arbitrators. All arbitration hearings shall commence within ninety (90) days of the demand for arbitration and close within ninety (90) days of commencement and the award of the arbitrator(s) shall be issued within thirty (30) days of the close of the hearing. However, the arbitrator(s), upon a showing of good cause, may extend the commencement of the hearing for up to an additional sixty (60) days. The arbitrator(s) shall provide a concise written statement of reasons for the award. The arbitration award may be submitted to any court having jurisdiction to be confirmed and enforced. (e) The arbitrator(s) will have the authority to decide whether any Claim is barred by the statute of limitations and, if so, to dismiss the arbitration on that basis. For purposes of the application of the statute of limitations, the service on JAMS under applicable JAMS rules of a notice of Claim is the equivalent of the filing of a lawsuit. Any dispute concerning this arbitration provision or whether a Claim is arbitrable shall be determined by the arbitrator(s). The arbitrator(s) shall have the power to award legal fees pursuant to the terms of this Agreement. (f) This paragraph does not limit the right of the Borrower or the Bank to: (i) exercise self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or nonjudicial foreclosure against any real or personal property collateral; (iii) exercise any judicial or power of sale rights, or (iv) act in a court of law to obtain an interim remedy, such as but not limited to, injunctive relief, writ of possession or appointment of a receiver, or additional or supplementary remedies. (g) The filing of a court action is not intended to constitute a waiver of the right of the Borrower or the Bank, including the suing party, thereafter to require submittal of the Claim to arbitration. (h) BY AGREEING TO BINDING ARBITRATION, THE PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM. FURTHERMORE, WITHOUT INTENDING IN ANY WAY TO LIMIT THIS AGREEMENT TO ARBITRATE, TO THE EXTENT ANY CLAIM IS NOT ARBITRATED, THE PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF SUCH CLAIM. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT. 11.5 SEVERABILITY; WAIVERS; CONFIDENTIALITY. (a) If any part of this Agreement is not enforceable, the rest of the Agreement may be enforced. (b) The Bank retains all rights, even if it makes a loan after an Event of Default. If the Bank waives an Event of Default, it may enforce a later Event of Default. Any consent or waiver under this Agreement must be in writing. Second Amended and Restated Loan Agreement - Page 17 (c) Bank shall use any confidential non-public information concerning Borrower and its subsidiaries that is furnished to it by or on behalf of Borrower and its subsidiaries in connection with this Agreement (collectively, "Confidential Information") solely for the purpose of evaluating and providing products and services to them, and administering and enforcing this Agreement and related documents, and it will hold the Confidential Information in confidence. Notwithstanding the foregoing, Bank may disclose Confidential Information to (i) any governmental agency or regulatory body having or claiming to have authority to regulate or oversee any aspect of the Bank's business in connection with the exercise of such authority or claimed authority; (ii) the extent necessary or appropriate to effect or preserve Bank's security or to enforce any right or remedy in connection with any claims asserted by or against Bank; (iii) representatives whom it determines need to know such information for the purposes set forth in this Section; and (iv) any bank or financial institution or other entity to which Bank has assigned or desires to assign an interest or participation in this Agreement or the advances, provided that any such recipient of Confidential Information agrees to keep such Confidential Information confidential as specified herein. For purposes hereof, the term "Confidential Information" shall not include information that is in Bank's possession prior to its being provided by or on behalf of Borrower, and shall not include information which is or becomes publicly available other than through a breach hereof by the Bank, or information that becomes available to the Bank on a non-confidential basis. 11.6 ADMINISTRATION COSTS. The Borrower shall pay the Bank for all reasonable costs incurred by the Bank in connection with administering this Agreement. 11.7 ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any reasonable costs and attorneys' fees incurred by the Bank in connection with the preparation of this Agreement or related documents and in connection with the enforcement or preservation of any rights or remedies under this Agreement and any other documents executed in connection with this Agreement, and in connection with any amendment, waiver, "workout" or restructuring under this Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing party is entitled to recover costs and reasonable attorneys' fees incurred in connection with the lawsuit or arbitration proceeding, as determined by the court or arbitrator. In the event that any case is commenced by or against the Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar or successor statute, the Bank is entitled to recover costs and reasonable attorneys' fees incurred by the Bank related to the preservation, protection, or enforcement of any rights of the Bank in such a case. As used in this paragraph, "attorneys' fees" includes the allocated costs of the Bank's in-house counsel, including attorneys' fees at trial, on appeal or review. 11.8 ONE AGREEMENT. This Agreement and any related security or other agreements required by this Agreement, collectively: (a) represent the sum of the understandings and agreements between the Bank and the Borrower concerning this credit; (b) replace any prior oral or written agreements between the Bank and the Borrower concerning this credit; and (c) are intended by the Bank and the Borrower as the final, complete and exclusive statement of the terms agreed to by them. In the event of any conflict between this Agreement and any other agreements required by this Agreement, this Agreement will prevail. 11.9 INDEMNIFICATION. The Borrower will indemnify and hold the Bank harmless from any loss, liability, damages, judgments, and costs of any kind resulting from claims against the Bank, relating to or arising directly or indirectly out of (a) this Agreement or any document required hereunder, (b) any credit extended or committed by the Bank to the Borrower hereunder, and (c) any litigation or proceeding related to or arising out of this Agreement, any such document, or any such credit. This indemnity includes but is not limited to reasonable attorneys' fees (including the allocated cost of in-house counsel). This indemnity extends to the Bank, its parent, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys, and assigns. This indemnity will not, however, indemnify the Bank or any other person from liabilities caused by the gross negligence or willful misconduct of the Bank or such person. This indemnity will survive repayment of the Borrower's obligations to the Bank. All sums due to the Bank hereunder shall be obligations of the Borrower, due and payable immediately without demand. 11.10 NOTICES. All notices required under this Agreement shall be personally delivered or sent by first class mail, postage prepaid, or by overnight courier, to the addresses on the signature page of this Agreement, or sent by facsimile to the fax numbers listed on the signature page, or to such other addresses as the Bank and the Borrower may specify from time to time in writing. Notices sent by first class mail shall be deemed delivered on the earlier of Second Amended and Restated Loan Agreement - Page 18 actual receipt or on the fourth business day after deposit in the U.S. mail. Notices sent by other means shall be deemed delivered on actual receipt. 11.11 HEADINGS. Article and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of this Agreement. 11.12 COUNTERPARTS. This Agreement may be executed in as many counterparts as necessary or convenient, and by the different parties on separate counterparts each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same agreement. 11.13 ORAL AGREEMENTS. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE BANK AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE ENFORCEABLE. This Agreement is executed as of the date stated at the top of the first page.
BANK OF AMERICA, N.A. TRM CORPORATION By: /s/ Margaret W. Willer By: /s/ Daniel L. Spalding Typed Name: Margaret W. Willer Typed Name: Daniel L. Spalding Title: Senior Vice President Title: Vice President and Chief Financial Officer Address where notices to the Bank are to be sent: Address for Notices: Oregon Commercial Banking #02801 5208 NE 122nd Avenue PO Box 6400 Portland, OR 97230-1074 Portland, OR 97228
Second Amended and Restated Loan Agreement - Page 19 EX-27.1 3 ex-27_1.txt EX-27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-2000 JUN-30-2000 4,297 0 8,996 (161) 4,465 23,742 103,008 (29,303) 102,729 13,719 0 0 19,798 19,032 18,520 102,729 37,418 37,418 19,017 19,017 0 0 1,018 (3,321) (1,266) (2,055) 0 0 0 (2,055) (0.40) 0
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