EXHIBIT 10.23
THIRD AMENDMENT
TO THE
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT (this "Amendment") is made August 28, 2002 by and
between GOLDEN EAGLE LEASING, INC., an Arizona corporation ("Borrower"), and
XXXXXXX BANK, a federally chartered savings bank ("Lender").
Background
A. Lender has extended a revolving credit loan in the maximum amount of
$15,000,000 (the "Loan") to Borrower pursuant to the terms of that certain Loan
and Security Agreement by and between Lender and Borrower dated August 24, 2001
as amended by that certain First Amendment to Loan and Security Agreement by and
between Lender and Borrower dated September 19, 2001, that certain Second
Amendment to Loan and Security Agreement by and between Lender and Borrower
dated March 28, 2002 and that certain letter agreement by and among Lender,
Borrower and Guarantor dated August 22, 2002 (collectively, the "Loan
Agreement").
B. The Loan is evidenced by that certain Amended and Restated Revolving
Credit Note dated March 28,2002 in the original principal amount of $15,000,000
(the "Note"). The indebtedness of the Note is secured by Borrower's grant to
Lender of a security interest in the Collateral, as such term is defined in the
Loan Agreement.
C. The Loan has been guarantied by Hypercom Corporation, the Borrower's
parent corporation, pursuant to that certain Guaranty dated as of August 24,
2001 as reaffirmed by that certain Reaffirmation of Guaranty dated March 28,
2002 (collectively, the "Guaranty" and together with the Loan Agreement, the
Note, and all other documents relating thereto, the "Loan Documents").
D. Borrower has requested that Lender modify the terms of the Loan
Documents to provide for, among other things, an extension of the maturity of
the Loan, a decrease in the Revolving Credit Rate, and a modification of a
financial covenant.
E. Lender has agreed to Borrower's request, subject to the terms and
conditions contained in this Amendment.
Agreement
In consideration of the Background, which is incorporated by this
reference, other good and valuable consideration, the receipt and sufficiency of
which is acknowledged, and the mutual promises and covenants contained in this
Amendment, the parties, intending to be bound legally, agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Loan Agreement.
2. Extension of Maturity Date.
(a) The Term set forth in the Transaction Summary forming a part of
Recital A of the Loan Agreement is hereby amended to read as follows:
Term: Expires on February 24, 2004
(b) Section 1(ca) of the Loan Agreement is amended to read as
follows:
"Maturity Date" shall mean February 24, 2004.
(c) Section 1(de) of the Loan Agreement is amended to read as
follows:
"Stated Expiry Date" shall mean February 24, 2004.
3. Reduction of the Revolving Credit Rate.
(a) The Revolving Credit Rate set forth in the Transaction Summary
forming a part of Recital A of the Loan Agreement is hereby amended to read as
follows:
Revolving Credit Rate: The Wall Street Journal Prime Rate plus one and one
quarter percent (1.25%) or 30 day LIBOR plus four hundred (400) basis
points.
(b) Section 2.5(a) of the Loan Agreement is amended to read as
follows:
2.5 Interest. (a) Borrower shall pay interest to Lender on each Revolving
Credit Advance at the rate set forth in (i) or (ii) below as elected by
Borrower at the time the Revolving Credit Advance is requested (the
"Revolving Credit Rate") provided that (A) no more than fifty percent
(50%) of the aggregate principal balance of all Revolving Credit Advances
may bear interest pursuant to (i) below at any time; (B) each Revolving
Credit Advance for which the Revolving Credit Rate set forth in (i) below
is elected must be in the amount of no less than one hundred thousand
dollars ($100,000); (C) Borrower may have no more than five (5) Revolving
Credit Advances bearing interest at the Revolving Credit Rate set forth in
(i) below outstanding at any time; and (D) at the option of the Lender the
rate described in (i) below shall no longer be available following the
occurrence of an Event of Default hereunder:
(i) A rate per annum (the "Revolving LIBOR-Based Rate") equal to the sum
of London InterBank Offering Rate available to Lender for U.S.
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dollar thirty-day deposits, plus four hundred (400) basis points, such
Revolving LIBOR-Based Rate to be further adjusted to compensate Lender for
all applicable reserve requirements imposed upon Lender in respect of
LIBOR investments as determined by Lender at the time of such advance and
at the end of each successive 30 day period thereafter (each an "Interest
Period"). Each such rate shall remain in effect for the entire Interest
Period until redetermined for the next successive Interest Period; or
(ii) A floating rate per annum (the "Revolving Prime-Based-Rate") equal to
the "Prime Rate" as published in the section of the Wall Street Journal
entitled "Money Rates," (the "Wall Street Journal Prime Rate") plus one
and one quarter percent (1.25%). The Revolving Prime-Based Rate will
change automatically and immediately as of the date of a change in the
Prime Rate, without notice to the Borrower.
Interest shall be calculated on the basis of a 360-day year, but shall be
computed for the actual number of days in each period for which interest
is charged. With respect to a Revolving Prime-Based Rate, interest shall
be payable monthly in arrears on the first Business Day of each month.
With respect to a Revolving LIBOR-Based Rate, interest shall be payable,
in arrears, on the first Business Day following the expiration of the
30-day LIBOR period. Notwithstanding anything else set forth herein, all
interest on the Revolving Credit Loan shall be payable on the Commitment
Termination Date, and if any interest accrues or remains payable after the
Commitment Termination Date, upon demand by Lender.
4. Modification of Financial Covenant.
Section 5.2(a) of the Loan Agreement is amended to read as follows:
(a) Total Liabilities/Tangible Net Worth Ratio. Borrower shall maintain a
ratio of total liabilities (adding any contingent liabilities of the
Borrower arising from the sale of any Leases) to Tangible Net Worth of no
greater than (i) 15.0:1.0 as of the end of each Fiscal Quarter of the
Borrower, beginning with the Fiscal Quarter ending September 30, 2001
through and including the Fiscal Quarter ending June 30, 2002; and (ii)
2.25:1.0 as of the end of each Fiscal Quarter of the Borrower thereafter,
beginning with the Fiscal Quarter ending September 30, 2002.
5. Limitation on Indebtedness.
(a) The following is hereby added as Section 6(l) of the Loan
Agreement:
(l) Create, incur, assume or permit to exist any Indebtedness that would
cause
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(i) Borrower's total outstanding Lease Financing to exceed
$40,000,000.00,
(ii) total Lease Financing available to Borrower, including, without
limitation amounts outstanding and amounts unadvanced under existing
facilities or transactions, whether committed, discretionary or
otherwise, to exceed $45,000,000.00, or
(iii) Borrower's Indebtedness other than (w) Lease Financing, (x) other
Indebtedness of the Borrower disclosed in the Financial Statements
delivered by Borrower to Lender pursuant to Section 5.1(c) hereof for
the Fiscal Month ended June 30, 2002, (y) intercompany Indebtedness
owed by Borrower to Hypercom up to a maximum of $7,500,000.00, all of
which is fully subordinate to the Revolving Credit Loan pursuant to
that certain Subordination Agreement of Hypercom dated August 24, 2002,
and (z) Indebtedness incurred in connection with the implementation of
Borrower's new lease tracking and general ledger system (i.e.
"Leaseworks") up to a maximum of $700,000.00 (such amount to be in
addition to the approximately $391,000.00 in Indebtedness already
incurred for such purpose), to exceed $500,000.00,
in any such case without the prior written consent of the Lender. As used
herein, the term Lease Financing means the Obligations and other so called
asset based loans and extensions of credit (A) similar in structure and
terms to the Revolving Credit Loan, (B) secured solely by assets meeting
the definition of Leases in Section 1(bq) hereof (other than
identification on a Lease Certificate), (C) in which the total amount
advanced and permitted to remain outstanding is limited to a percentage of
the value of such collateral, and (D) having advance rates and collateral
eligibility criteria substantially similar to those contained herein. For
the purposes of this Section 6(l), Borrower's Lease Financing shall be
determined exclusive of the existing Indebtedness of Borrower as
evidenced in part by those certain Contract Backed Term Notes of Borrower
payable to the order of United of Omaha Life Insurance Company, Teachers'
Insurance and Annuity Association of America and Xxxxxx & Co. dated May
24, 2001, in the aggregate original principal amount of $31,960,044.00 and
having an aggregate current principal balance of $16,253,189.34.
(b) Section 1(bz) of the Loan Agreement is amended to read as
follows:
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(bz) "Material Adverse Effect" shall mean: a material adverse effect on
(a) the business, assets, operations, prospects or financial or other
condition of Borrower or any other Credit Party or the industry within
which Borrower or any other Credit Party operates, (b) Borrower's or any
other Credit Party's ability to pay or perform the Obligations under the
Loan Documents to which such Credit Party is a party in accordance with
the terms thereof, (c) the Collateral or Lender's Liens on the Collateral
or the priority of any such Lien, or (d) Lender's rights and remedies
under this Agreement and the other Loan Documents. Material Adverse Effect
shall include, without limitation, the incurrence by Borrower of any
liability (other than Indebtedness permitted by Section 6(c) or Section
6(l) and reasonable and customary business expenses incurred in the
ordinary course of business), contingent or liquidated, which has an
actual or estimated incurrence of liability, or dollar exposure or loss,
greater than $100,000.
6. Modification of Reporting Requirements
(a) Section 5.1(c) of the Loan Agreement is amended to read as
follows:
(c) Within 30 days following the end of each Fiscal Month, the internally
prepared Financial Statements for such Fiscal Month, accompanied by a
certification of Xxxx Xxxxxxx, Chief Operating Officer of Borrower that
such Financial Statements are complete and correct, that no Restricted
Payments have been made, that Borrower is in compliance with all financial
covenants contained herein and that no other Default has occurred (or
specifying those Defaults of which she is aware), and showing in
reasonable detail the calculations used in determining compliance with the
financial covenants hereunder, such certification to be in the form of
Exhibit H attached hereto, or such other form as Lender shall require;
(b) The following is hereby added as Section 5.1(g) of the Loan
Agreement:
(g) Within 30 days following the end of each Fiscal Quarter, a quarterly
reconciliation of the lease loss reserve in form, scope, substance and
level of detail acceptable to the Lender, reconciling the Borrower's
reserve for future lease losses against actual lease losses for such
preceding Fiscal Quarter.
7. Replacement Note.
(a) Simultaneously with the execution and delivery of this
Amendment, Borrower is executing and delivering to Lender a $15,000,000 Second
Amended and Restated Revolving Credit Note in the form of Exhibit F attached
hereto.
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(b) Borrower shall pay interest on the outstanding principal balance
of the Second Amended and Restated Revolving Credit Note and shall repay the
Indebtedness evidenced thereby in accordance with the terms thereof. The
Borrower's obligations under the Second Amended and Restated Revolving Credit
Note are and shall continue to be secured by the Collateral.
(c) The Second Amended and Restated Revolving Credit Note shall
constitute the Revolving Credit Note under the Loan Agreement for all purposes.
Exhibit F attached hereto shall be substituted for and shall constitute for all
purposes Exhibit F to the Loan Agreement.
(d) Section 1(db) of the Loan Agreement is amended to read as
follows:
(db) Revolving Credit Note shall mean the promissory note of Borrower
dated August __, 2002 substantially in the form of Exhibit F.
7. Representations and Warranties. All of the representations, warranties
and covenants contained in the Loan Documents are true and correct on and as of
the date hereof.
8. Conditions Precedent. Lender's obligations hereunder and extension of
the Maturity Date, decrease in the Revolving Credit Rate and modification of the
financial covenant as described above are subject to the satisfaction as of the
date of this Amendment of each of the following conditions precedent which shall
be in form, scope and substance satisfactory to Lender and its counsel:
(a) Evidence of Corporate Action. Lender shall have received
certified copies of all Board of Director resolutions (in form and substance
satisfactory to Lender) made by Borrower and Guarantor to authorize the
execution, delivery and performance of this Amendment, together with certified
copies of Borrower's and Guarantor's Articles of Incorporation and all
amendments thereto, certified copies of Borrower's and Guarantor's By-Laws and
all amendments thereto, and current Certificates of Good Standing for Borrower
and Guarantor, and such other documents as Lender or its counsel may reasonably
require.
(b) Guarantor's Documents. Lender shall have received a
Reaffirmation of Guaranty, duly executed by the Guarantor, in form and substance
satisfactory to Lender and its counsel.
(c) Commitment Fee. In consideration for entering into this
Amendment, the Borrower has paid to Lender a Commitment Fee of $56,250.
(d) Opinion. Lender shall have received a written opinion of counsel
to Borrower and Guarantor in form and substance satisfactory to Lender and its
counsel.
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(e) Legal Fees. Borrower shall have reimbursed Lender for the legal
fees and disbursements of Xxxxxxx & Xxxxxxx LLP, counsel to Lender, in
connection with the negotiation, review, execution and delivery of all of the
documents prepared with respect to the transactions contemplated herein, plus
related disbursements.
(f) Other Documents. Borrower shall have delivered to Lender such
other documents as Lender or its counsel reasonably require.
(g) Other Lender Approval. Borrower shall have delivered evidence to
the Lender that Borrower's other Lenders, including but not limited to Congress
Financial Corporation, have given their approval to the transactions
contemplated by this Amendment.
9. Reaffirmation of the Obligations. The Borrower acknowledges and
reaffirms the Obligations, the Borrower's liability for repayment thereof and
all previous grants of collateral by the Borrower to secure the Obligations. The
Borrower acknowledges that no setoff, counterclaim or defense exists with
respect to the Borrower's liability under the Obligations and that no claim
against the Lender exists, and waives its right to raise any such setoff,
counterclaim, defense or claim against the Lender arising out of occurrences on
or prior to the date hereof.
10. Loan Documents. Except to the extent explicitly modified by this
Amendment or by any document contemplated by, or executed pursuant to the
provisions of this Amendment, all of the provisions of the Loan Documents shall
remain in full force and effect, including, without limitation, all
representations, warranties, negative covenants, affirmative covenants, and
events of default. In addition, as of the date hereof, the Borrower represents
that the Borrower is in full compliance with all provisions of the Loan
Document, and no Event of Default, as specified in the Loan Documents, and no
event which, with the giving of notice or passage of time or both,
would constitute an Event of Default, has occurred. Any default under any of the
Loan Documents shall constitute a default hereunder.
11. Other.
(a) Prejudgement Remedy Waiver. THE BORROWER ACKNOWLEDGES THAT THE
TRANSACTIONS TO WHICH THIS AMENDMENT RELATE ARE COMMERCIAL TRANSACTIONS. THE
BORROWER HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ITS RIGHTS TO NOTICE AND
HEARING UNDER CHAPTER 903A OF THE CONNECTICUT GENERAL STATUTES, AS AMENDED AND
IN EFFECT ON THE DATE HEREOF, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL
LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY OR OTHER RIGHT OR REMEDY THAT THE
LENDER MAY ELECT TO USE OR OF WHICH IT MAY AVAIL ITSELF. THE BORROWER FURTHER
WAIVES, TO THE GREATEST EXTENT PERMITTED BY LAW, THE BENEFITS OF ALL
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PRESENT AND FUTURE VALUATION, APPRAISEMENT, EXEMPTION, STAY, REDEMPTION AND
MORATORIUM LAWS. THE BORROWER FURTHER WAIVES ANY REQUIREMENT THAT LENDER OBTAIN
A BOND OR OTHER SIMILAR DEVICE IN CONNECTION WITH THE EXERCISE OF ANY REMEDY OR
THE ENFORCEMENT OF ANY RIGHT HEREUNDER.
(b) Governing Law. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS ARISING UNDER
THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CONNECTICUT APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICTS OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.
(c) Jury Waiver. THE BORROWER WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AMENDMENT OR
UNDER ANY AGREEMENT, INSTRUMENT OR OTHER DOCUMENT CONTEMPLATED HEREBY OR RELATED
HERETO AND IN ANY ACTION DIRECTLY OR INDIRECTLY RELATED TO OR CONNECTED WITH THE
LOAN PROVIDED FOR HEREIN, OR ANY CONDUCT RELATING TO THE NEGOTIATION,
ADMINISTRATION OR ENFORCEMENT OF SUCH LOAN OR ARISING FROM THE DEBTOR/CREDITOR
RELATIONSHIP OF THE BORROWER AND THE LENDER HERETO. THE BORROWER ACKNOWLEDGES
THAT THIS WAIVER MAY DEPRIVE IT OF AN IMPORTANT RIGHT AND THAT SUCH WAIVER HAS
KNOWINGLY BEEN AGREED TO BY THE BORROWER.
The parties hereto have executed this Amendment as of the date first
written above.
GOLDEN EAGLE LEASING, INC.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: Senior Executive Officer
XXXXXXX BANK
By: /s/ Xxxxx Xxxx
---------------------------------
Name: Xxxxx Xxxx
Title: Vice President
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