Exhibit 10.42.7
FOURTH AMENDMENT TO AMENDED AND RESTATED NOTE AGREEMENT
dated January 26, 1996, between the Registrant and
Principal Mutual Life Insurance Company
FOURTH AMENDMENT TO AMENDED AND RESTATED NOTE AGREEMENT
THIS AMENDMENT ("Amendment") effective as of January 26, 1996 (the
"Effective Date") is entered into between Hurco Companies, Inc., an Indiana
corporation (the "Company"), and Principal Mutual Life Insurance Company (the
"Purchaser").
WITNESSETH:
The Company and the Purchaser have entered into that certain Hurco
Companies, Inc. Amended and Restated Note Agreement dated as of March 24, 1994,
as amended by that certain (1) Amendment and Notes Modification Agreement dated
as of January 31, 1995 and (2) Amendment dated May 31, 1995, and (3) Third
Amendment to Amended and Restated Note Agreement dated as of July 31, 1995 (as
so amended the "Note Agreement"). The Company and the Purchaser agree to amend
the Note Agreement on the terms and conditions hereinafter set forth. Terms
defined in the Note Agreement which are used herein shall have the same meaning
set forth in the Note Agreement unless otherwise specified herein.
l. AMENDMENT. Effective as of the Effective Date and subject to the
conditions precedent set forth in paragraph 3 hereof, the Note Agreement is
hereby amended as follows:
1.1 SECTION 1.2 is amended and restated, in its entirety, as follows:
1.2 DESCRIPTION OF NOTES. The Notes shall be dated the Closing Date, shall
bear interest from such date at the rate of 11.12% per annum prior to maturity,
payable monthly on the first day of each calendar month commencing April 1,
1994, and at maturity, to bear interest on overdue principal (including any
overdue required or optional prepayment), premium, if any, and (to the extent
legally enforceable) on any overdue installment of interest at the rate of
13.12% per annum, shall be expressed to mature on December 1, 2000 and to be
substantially in the form attached as Exhibit A. Provided, however, that as long
as (1) the Company is not in default of this Note Agreement and has a
Consolidated Adjusted Net Worth that equals or exceeds $15,000,000 (as evidenced
by delivery to Purchaser by Company of a certificate required under Section 6.6)
and (2) the annual rate of interest on all money loaned to the Company by NBD
under the New Facility Note (or any replacement facility) does not exceed the
Prime Rate, as defined in the original Amended and Restated Credit Agreement and
Amendment to Term Loan Agreement, dated as of January 26,1996, between the
Company and NBD (the "New Bank Agreement"), then the Notes shall bear interest
at a rate of 10.87% per annum, payable monthly on the first day of the calendar
month, commencing on the first day of the calendar month following the month in
which the Company fulfills all the above conditions until such time as any of
the above conditions are not met. If above conditions are not met, then the
interest rate shall revert to 11.12% or 13.12%, whichever is applicable.
Notwithstanding anything to the contrary herein or in the Notes, the July, 1996
Payment (as defined in Section 2.1) shall earn interest at a rate of 13.12% per
annum from February 1, 1996 until paid in full. Each required prepayment of
principal shall be considered to be overdue if it is not paid on its due date
notwithstanding any Forbearance Default. The term "Notes" as used herein shall
include each Amended and Restated Note delivered pursuant to this Agreement (the
"Agreement") and each Note delivered in substitution or exchange therefor and,
where applicable, shall include the singular number as well as the plural. Any
reference to the Purchaser in this Agreement shall in all instances be deemed to
include any nominee of the Purchaser or any separate account or other person on
whose behalf the Purchaser has acquired the Notes and any Person to whom a Note
is assigned. Concurrently with the execution and delivery to it of the Notes,
each of the 1990 Notes shall be marked by Purchaser with the following legend:
"This Note has been amended and, as amended, restated by a promissory note
executed pursuant to an Amended and Restated Note Agreement, dated as of March
24, 1994, executed by Hurco Companies, Inc. and the payee hereof."
1.2 SECTION 2.1 is amended and restated, in its entirety, as follows:
2.1 REQUIRED PREPAYMENTS. In addition to payment of all outstanding
principal of the Notes at maturity and regardless of the amount of Notes which
may be outstanding from time to time, the Company shall make the following
prepayments:
(a) The Company shall prepay and there shall become due and payable on
the dates set forth below, $1,785,714.29 of the principal amount of the
Notes or such lesser amount as would constitute payment in full on the
Notes, with the remaining principal payable on December 1, 2000: December
1, 1995, December 1, 1996, December 1, 1997, December 1, 1998, and December
1, 1999. The Company shall also prepay $1,676,229 of the principal amount
of the Notes on the earlier of July 31, 1996 or an Equity Infusion (the
"July, 1996 Payment"). Each such prepayment shall be at a price of 100% of
the principal amount prepaid, together with interest accrued thereon to the
date of prepayment.
(b) The Company shall prepay and there shall become due and payable on
December 15, 1994 and December 15, 1995, an amount equal to seventy-five
percent (75%) of Excess Cash Flow multiplied by the Intercreditor Fraction.
The Intercreditor Fraction shall be determined as of the last day of the
preceding fiscal year. Such amounts shall be applied FIRST, to the
principal prepayment required to be made on the earlier of July 31, 1996
and an Equity Infusion until prepaid in full, SECOND, to the principal
prepayment required to be made on December 1, 1995 until prepayment in
full, and THIRD, to the anticipated payment at maturity until prepaid in
full, and FOURTH, to the remaining principal prepayments in the inverse
order of their required prepayment dates until prepaid in full. Any amounts
paid by the Company and applied pursuant to clauses THIRD and FOURTH of the
preceding sentences shall be subject to the payment by the Company of a
premium by the Company on December 15, 1994 or December 14, 1995, as
applicable, calculated in accordance with the provisions of Section 2.2(d).
(c) The Company shall prepay and there shall become due and payable
not later than ten days after receipt thereof, an amount equal to one
hundred percent (100%) of Permitted Asset Sale Proceeds or Equity Sale
Proceeds (excluding any Equity Infusion) multiplied by the fraction
determined by reference to clause (ii) of the definition of Intercreditor
Fraction. Such fraction shall be determined as of each date that Permitted
Asset Sale Proceeds or Equity Sale Proceeds are received by the Company.
Such amounts shall be applied in accordance with the provisions of the
third sentence of Section 2.1(b), and a prepayment premium shall be
required on each date of prepayment to the extent set forth in the last
sentence of Section 2.1(b). Any Equity Infusion received by the Company
prior to July 31, 1996 shall be applied to pay the July, 1996 Payment and
the installment payment due NBD on its term loan to the Company which is
due the same date as the July, 1996 Payment, with any remaining balance of
the Equity Infusion retained by the Company for working capital.
1.3 Add to Section 5.1 the following defined terms: "EQUITY INFUSION - The
proceeds (net of reasonable issuance expenses not to exceed $500,000) realized
from the sale by the Company or any of its Subsidiaries on or prior to October
31, 1996, of any capital stock or Subordinated Debt of the Company or its
Subsidiaries, provided that the gross amount of such proceeds (before issuance
expenses) shall not exceed $5,000,000.
EBITDA - shall mean, for any period, the sum of (i) net income determined in
accordance with generally accepted accounting principles (without taking into
account any extraordinary gains or non-cash extraordinary losses), (ii) interest
expense determined in accordance with generally accepted accounting principles,
(iii) depreciation and amortization, (iv) federal, state and local income taxes,
in each case for the Company and its consolidated Subsidiaries, determined in
accordance with generally accepted accounting principles.
CAPITAL EXPENDITURES shall mean capital expenditures as defined and classified
in accordance with generally accepted accounting principles and including,
without duplication, any Capitalized Lease and capitalized software development
costs of the Company and its Subsidiaries, computed on a consolidated basis in
accordance with generally accepted accounting principles.
1.4 The definition of "Indebtedness," as set forth in Section 5.1 is
amended by adding to the end of such definition the following words: "Provided,
however, that the foregoing shall exclude for all purposes Subordinated Debt, as
defined herein.
1.5 Subparagraph (viii) in the definition of "Permitted Investments," as
set forth in Section 5.1, is amended and restated, in its entirety, as follows:
(viii) capital contributions not to exceed $200,000 to Hurco
S.A.R.L., an indirectly wholly-owned French Subsidiary of the
Company (PROVIDED that the capital contributions are used by
Hurco S.A.R.L. to immediately repay intercompany receivables
owed by it to Hurco Europe); and
(b) a capital investment of up to $250,000 (or such greater
amounts as may be approved in writing by NBD and Purchaser) in
a new Taiwanese joint venture company to be organized with a
Taiwanese investor for the purpose of developing, producing
and marketing CNC controls and related software products,
PROVIDED that 66% of the Company's resulting equity interest
shall be pledged to the Collateral Agent for the benefit of
the Collateral Agent, the Purchaser and NBD upon the request
of either Purchaser or NBD, if permitted and not unlawful
under applicable law.
1.6 The definition of the term "NBD Agreement," as set forth in Section
5.1, is amended and restated, in its entirety, as follows:
NBD AGREEMENT - That certain Amended and Restated Credit Agreement and Amendment
to Term Loan Agreement, dated as of January 26, 1996, between the Company and
NBD, as the same may be amended from time to time, to the extent permitted by
the Intercreditor Agreement, as well any collateral, related or successor credit
lending arrangement.
1.7 The definition of the term "Consolidated Adjusted Net Worth," as set
forth in Section 5.1, is amended and restated, in its entirety, as follows:
CONSOLIDATED ADJUSTED NET WORTH - The consolidated stockholders'
equity (including preferred stock other than preferred stock which would be
characterized as Indebtedness in accordance with generally accepted
accounting principles) of the Company and its Subsidiaries determined in
accordance with generally accepted accounting principles after elimination
of minority interests, plus the sum of any Subordinated Debt, as defined
herein, less the sum of all goodwill, trade names, trademarks, patents,
organization expense, unamortized debt discount and expense and other
similar intangibles properly classified as intangibles in accordance with
generally accepted accounting principles, and excluding the effects of any
foreign currency translation adjustment.
1.8 The definition of the term "Consolidated Current Assets and
Consolidated Current Liabilities," as set forth in Section 5.1, is amended by
adding at the end of such definition the following words: "Provided, however,
that Consolidated Current Liabilities shall not include any Subordinated Debt,
as defined herein.."
1.9 The definition of the term "Consolidated Fixed Charges," as set forth
in Section 5.1, is amended by adding at the end of such definition the following
words: "Provided, however, that Fixed Charges shall not include any interest
which accrues on Subordinated Debt, as defined herein, during any period, unless
actually paid during such period. "
1.10 The definition of "Subordinated Indebtedness," as set forth in Section
5.1, is amended and restated, in its entirety, as follows: Subordinated Debt
means any Indebtedness of the Company or any of its Subsidiaries for borrowed
money which expressly provides that no payment of any kind including principal
or interest shall be made to the holders thereof so long as there is any unpaid
balance on either of the Notes and which is otherwise expressly subordinate and
junior in right and priority of payment to all obligations to Purchaser in the
manner and by agreement satisfactory in form and substance to Purchaser.
1.11 Delete Section 6.16 EQUITY INFUSION in its entirety.
1.12 Add Section 6.17 as follows:
6.17 LEVERAGE FEE. The Company shall pay to Purchaser on each payment
date set forth below the amounts set forth next to such payment date if the
Company does not deliver to Purchaser a certificate required under Section
6.6 as of the corresponding reporting date set forth below that
demonstrates that the Consolidated Adjusted Net Worth as of the reporting
date equals or exceeds $12,000,000
REPORTING Date LEVERAGE FEE PAYMENT DATE
July 31, 1996 16,740 August 25, 1996
August 31, 1996 16,740 September 25, 1996
September 30, 1996 27,900 October 25, 1996
October 31, 1996 27,900 November 25, 1996
1.13 SECTION 7.1 is amended and restated, in its entirety, as follows:
7.1 NET WORTH. The Company will not at any time permit its
Consolidated Adjusted Net Worth to be less than (a) $6,750,000 plus (b) 50%
of the Consolidated Net Income for each fiscal quarter ending on and after
January 31, 1996 (if positive) plus (c) 85% of the Equity Infusion, if any.
1.14 SECTION 7.2 is amended and restated, in its entirety, as follows:
7.2 CURRENT RATIO. The Company will not at any time permit the ratio
of Consolidated Current Assets to Consolidated Current Liabilities to be
less than 1.50 to 1.0, provided that during the period beginning on
November 1, 1995 and ending on October 31, 1997, the above covenant shall
be replaced by the following covenant: For each of the fiscal quarters
ending on January 31, April 30, July 31, and October 31, beginning with the
quarter ending on January 31, 1996, through and including the quarter
ending October 31, 1997, the Company will not at any time permit its
Consolidated Current Assets to be less than $40,000,000, PROVIDED FURTHER,
that (i) the amount of Consolidated Current Assets shall be increased or
decreased, as appropriate, to exclude (using as the base in the adjustments
the "October, 1995 Exchange Rates," as defined in the New Bank Agreement)
the effect of any foreign currency translation adjustments subsequent to
October 31, 1995 in any such fiscal quarter solely for the purpose of
determining compliance with this Section 7.2, and (ii) if in any such
fiscal quarter the proceeds from the sale of receivables or the sale of
inventory outside the ordinary course of business are applied to pay any of
the Target Indebtedness, then such amounts shall be added back to
Consolidated Current Assets in such fiscal quarter determining compliance
with this Section 7.2
1.15 SECTION 7.3 is amended and restated, in its entirety, as follows:
7.3 INDEBTEDNESS. The Company will not, and will not permit any
Subsidiary to, create, assume, incur, guarantee or otherwise become liable
for, directly or indirectly, any Indebtedness, other than Indebtedness of
the Company and its Subsidiaries which, after giving effect thereto and the
application of the proceeds thereof, would result in Consolidated Total
Indebtedness of the Company and its Subsidiaries then to be outstanding,
determined on a consolidated basis in accordance with generally accepted
accounting principles and reflected on the Company's consolidated balance
sheet, of not in excess of 50% of the Consolidated Total Capitalization,
PROVIDED that for each of the fiscal periods set forth below, the Company
will not at any time permit Consolidated Total Indebtedness as reflected on
the Company's consolidated balance sheet to exceed the percentage of
Consolidated Total Capitalization set forth opposite such fiscal period in
the column captioned "Percentage"; and provided further that for each
fiscal period from and after any Equity Infusion equal to or in excess of
$3,000,000, the Company will not at any time permit Consolidated Total
Indebtedness, as reflected on the Company's consolidated balance sheet, to
exceed the percentage of Consolidated Total Capitalization set forth
opposite such fiscal period in the column captioned "Post-Infusion
Percentage":
FISCAL QUARTER ENDED PERCENTAGE POST-INFUSION PERCENTAGE
--------------------- ---------- -------------------------
January 31, 1996 87% 87%
April 30, 1996 87% 87%
July 31, 1996 82% 78%
October 31, 1996 80% 78%
January 31, 1997 78% 75%
April 30, 1997 78% 75%
July 31, 1997 78% 75%
October 31, 1997 75% 70%
1.16 SECTION 7.5 is amended and restated, in its entirety, as follows:
7.5 FIXED CHARGE RATIO. The Company will not, as of the end of any
fiscal quarter, permit the ratio of Consolidated Income Available for Fixed
Charges to Consolidated Fixed Charges for the preceding twelve months to be
less than 1.25 to 1.0, PROVIDED that such covenant shall not be applicable
during the fiscal year ending October 31, 1994, and PROVIDED FURTHER that
for each of the fiscal periods set forth below, the Company will not as of
the end of any such fiscal period permit the ratio of Consolidated Income
Available for Fixed Charges to Consolidated Fixed Charges for the preceding
twelve months to be less than the set forth amount opposite such fiscal
period:
FISCAL QUARTER ENDED RATIO
January 31, 1996 .67 to 1.0
April 30, 1996 1.0 to 1.0
July 31, 1996 1.0 to 1.0
October 31, 1996 1.125 to 1.0
January 31, 1997 1.125 to 1.0
1.17 SECTION 7.14 is amended and restated, in its entirety, as follows:
7.14 CAPITAL EXPENDITURES. The Company shall not, and shall not permit
its Subsidiaries to, make any Capital Expenditure (i) if the aggregate
purchase price and other acquisition costs of all such Capital Expenditures
made by the Company or any of its Subsidiaries during fiscal year 1996,
when combined with all other Capital Expenditures made during that fiscal
year, would exceed $2,750,000, or (ii) if the aggregate purchase price and
other acquisition costs of all such Capital Expenditures made by the
Company or any of its Subsidiaries during fiscal year 1997, when combined
with all other Capital Expenditures made during that fiscal year, would
exceed $2,500,000. Thereafter, the Company will not permit the sum of
consolidated aggregate capital expenditures, including, without limitation,
' Capitalized Leases, plus capitalized software development costs to exceed
$1,750,000 in any fiscal year.
1.18 SECTION 7.16 is amended and restated, in its entirety, as follows:
7.16 LEVERAGE RATIO. The Company will not permit the ratio of (i) the
Consolidated Total Indebtedness of the Company and its Subsidiaries, as
reflected on the Company's consolidated balance sheet, to (ii) the
Consolidated Adjusted Net Worth of the Company and its Subsidiaries, all
determined in accordance with generally accepted accounting principles, to
exceed 10.5 to 1.0 at any time from the Effective Date through July 30,
1996, to exceed 4.5 to 1.0 at any time from July 31, 1996, through October
30, 1996, to exceed 4.0 to 1.0 from October 31, 1996, through January 30,
1997, to exceed 3.5 to 1.0 at any time from January 31, 1997, to October
30, 1997, and 3.0 to 1.0 at any time thereafter, PROVIDED, HOWEVER, that if
the Equity Infusion equals or exceeds $3,000,000, such ratio shall not
exceed 3.55 to 1.0 at any time from the later of the Equity Infusion and
July 31, 1996, through January 30, 1997, shall not exceed 3.0 to 1.0 at any
time from January 31, 1997, through October 30, 1997, and shall not exceed
2.5 to 1.0 at any time thereafter.
1.19 Add SECTION 7.19 as follows:
7.19 CASH FLOW COVENANT. For each of the fiscal periods set forth
below, the Company shall not, as of the end of any such fiscal period,
permit the dollar amount of the difference obtained by deducting Capital
Expenditures from EBITDA, to be less than the amount set forth opposite
such fiscal period on a rolling four-quarter basis:
FISCAL QUARTER ENDED AMOUNT
October 31, 1996 $4,500,000.00
January 31, 1997 $4,500,000.00
April 30, 1997 $4,700,000.00
July 31, 1997 $5,200,000.00
October 31, 1997 $5,500,000.00
Default in the performance of this Section 7.19 shall constitute an Event
of Default under Section S.1(d).
1.20. Add SECTION S.1(J) as follows:
Section 8.1(j). The Company fails to provide to Purchaser with a
binding commitment for a replacement working capital facility, similar to
NBD Bank Association's New Facility under the NBD Agreement (the "NBD
Facility"), 45 days prior to any termination of the NBD Facility.
2. NOTES MODIFICATION. At the end of the first paragraph of each of the
Notes add the words "Provided, however, that as long as (1) the Company is not
in default of the Note Agreement and has a Consolidated Adjusted Net Worth that
equals or exceeds $15,000,000 ' (as evidenced by delivery to Purchaser by the
Company of a certificate required under Section 6.6 of the Note Agreement) and
(2) the annual rate of interest on all money loaned to the Company by NBD under
the New Facility Note (or any replacement facility) does not exceed the Prime
Rate, as defined in the original New Bank Agreement, then the Notes shall bear
interest at the rate of 10.87% per annum, payable monthly on the first day of
the calendar month, commencing on the first day of the calendar month following
the month in which the Company fulfills the above conditions until such time as
any of the above conditions are not met. Notwithstanding anything to the
contrary herein or in the Agreement, the amount of the July, 1996 Payment shall
earn interest at a rate of 13.12% per annum from February 1, 1996 until paid in
full." In clause (b) of the fourth paragraph of each of the Notes, the date
"February 1, 1996" is deleted and replaced by "the earlier of July 31, 1996 and
receipt by the Company of an Equity Infusion."
3. CONDITIONS PRECEDENT. This Amendment shall become effective as of the
latest to occur of the date (i) the Company shall have delivered to the
Purchaser reaffirmations of each of the Subsidiary Guaranties and the Autocon
Guaranty executed in favor of Purchaser, (ii) the Company and NBD execute and
deliver amendments to the NBD Agreement and the NBD Term Loan in the form of
EXHIBIT A attached hereto, (iii) the Purchaser and NBD execute and deliver an
amendment to the Intercreditor Agreement in the form of EXHIBIT B attached
hereto (the "Intercreditor Amendments"), and (iv) the Company shall have paid to
the Purchaser an amendment fee in the amount of $35,301.71.
4. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Purchaser that (i) this Amendment constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, and (ii) that no event has occurred and no condition exists
which constitutes an "Event of Default" (as defined in the Note Agreement) or
with the lapse of time or the giving of notice or both, would become an Event of
Default.
5. COST AND EXPENSES. In accordance with SECTION 11.1 of the Note
Agreement, the Company acknowledges that it is liable to pay all reasonable
expenses of Purchaser, including, without limitation, reasonable charges and
disbursements of special counsel, incurred in connection with the preparation,
execution and delivery of this Amendment.
6. RATIFICATION. Except as specifically amended or modified above, the Note
Agreement and each of the Notes shall remain in full force and effect and are
hereby ratified and confirmed. The execution, delivery and effectiveness of this
Amendment shall neither operate as a waiver of any right, power or remedy of the
Purchaser under the Note Agreement or the Notes nor operate a waiver of the
provisions of the Note Agreement or the Notes except as specifically set forth
herein.
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Amendment to be executed and delivered by their respective officer or officers
thereunto duly authorized.
HURCO COMPANIES, INC.
By: /S/XXXXX X. XXXX
------------------------
Title: Senior Vice President and
Chief Financial Officer
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /S/XXXX XXXXXXX
-----------------------
Its: Counsel
By: /S/XXXXX X. XXXXXX
--------------------------
Its: Counsel
REAFFIRMATION OF GUARANTY
Reference is made to that certain Guaranty Agreement dated as of March 24,
1994 (the "Guaranty"), and executed by the undersigned in favor of Principal
Mutual Life Insurance Company ("PML"). The undersigned has reviewed that certain
Fourth Amendment to Amended and Restated Note Agreement, effective as of January
26, 1996 (the "Amendment") between PML and Hurco Companies, Inc. (the "Company")
and reaffirms that the Guaranty continues in full force and effect in accordance
with its terms notwithstanding the execution and delivery of the Amendment.
AUTOCON TECHNOLOGIES, INC.
By: /S/XXXXX X. XXXX
------------------------
Title: Secretary
