EXHIBIT 10.20.2
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Amendment to Documents
AMENDMENT NO. 2 TO BUSINESS LOAN AGREEMENT
This Amendment No. 2 (the "Amendment") dated as of October 31, 2000, is
between Bank of America, N.A. (the "Bank") and Variflex, Inc. (the "Borrower").
RECITALS
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A. The Bank and the Borrower entered into a certain Business Loan Agreement
dated as of March 31, 2000, as previously amended (the "Agreement").
B. The Bank and the Borrower desire to further amend the Agreement.
AGREEMENT
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1 Definitions. Capitalized terms used but not defined in this Amendment
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shall have the meaning given to them in the Agreement.
2 Amendments. The Agreement is hereby amended as follows:
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2.1Paragraph 1.1 of the Agreement is amended to read in
its entirety as follows:
"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 the
lesser of Sixteen Million and 00/100 Dollars
($16,000,000.00) or the following amounts as indicated on
the borrowing base certificates required to be delivered to
the Bank under Paragraph 7.2(f) below:
(i)With respect to the borrowing base
certificates from and including June 30 through and
including November 30 of each year, the sum of 60%
of the balance due on the Borrower's accounts
receivable, plus 60% of the market value of the
Borrower's short-term investments, plus the lesser
of (A) 25% of the cost of the Borrower's inventory,
excluding in-transit inventory, or (B) Four Million
and 00/100 Dollars ($4,000,000.00);
(ii)With respect to the borrowing base
certificates from and including December 31 through
and including May 31 of each year, the sum of 60% of
the balance due on the Borrower's accounts
receivable, plus One Million Five Hundred Thousand
and 00/100 Dollars ($1,500,000.00), plus the lesser
of (A) 25% of the cost of the Borrower's inventory,
excluding in-transit inventory, or (B) Four Million
and 00/100 Dollars ($4,000,000.00).
(b)This is a revolving line of credit providing for
cash advances, letters of credit and shipside bonds. During
the availability period, the Borrower may repay principal
amounts and reborrow them.
(c)The aggregate principal balance of cash advances
outstanding at any one time may not exceed Seven Million and
00/100 Dollars ($7,000,000.00).
(d)The Borrower agrees not to permit the outstanding
principal balance of advances under the line of credit plus
the outstanding amounts of any letters of credit, including
amounts drawn on letters of credit and not yet reimbursed
and shipside bonds, to exceed the Commitment."
2.2A new Paragraph 1.3(a)(iii) is added to the Agreement, which
reads in its entirety as follows:
"(iii)The amount of letters of credit outstanding at
any one time (including amounts drawn on letters of credit
and not yet reimbursed) may not exceed Sixteen Million and
00/100 Dollars ($16,000,000)."
2.3In Paragraph 1.4 of the Agreement, the amount "One Million and 00/100
Dollars ($1,000,000.00)" is substituted for the amount of "Five Hundred Thousand
and 00/100 Dollars ($500,000.00)".
2.4New Paragraphs of 1.5, 1.6 and 1.7 are added to the Agreement,
which reads in its entirety as follows:
"1.5 Interest Rate. Unless the Borrower elects an optional
interest rate as described below, the
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interest rate is the Bank's Prime Rate.
1.6 Repayment Terms.
(a)The Borrower will pay interest on
December 1, 2000, and then monthly thereafter
until payment in full of any principal
outstanding under this line of credit.
(b)The Borrower will repay in full all
principal and any unpaid interest or other
charges outstanding under this line of credit no
later than the Expiration Date. Any interest
period for an optional interest rate (as
described below) shall expire no later than the
Expiration Date.
1.7 Optional Interest 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.' The following optional interest rates are
available:
(a)the IBOR Rate plus 2.00 percentage
points."
2.5A new Article 2A is added to the Agreement, which
reads in its entirety as follows:
"2A. OPTIONAL INTEREST RATES
2A.1 Optional Rates. Each optional interest rate is a
rate per year. Interest will be paid on the last days
of each interest period, and on the first day of each
month during the 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.
Upon the occurrence of an event of default under this
Agreement, the Bank may terminate the availability of
optional interest rates for interest periods commencing
after the default occurs.
2A.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 no shorter than
30 days and no longer than 90 days. 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 Five Hundred Thousand
Dollars ($500,000).
(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
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(1.00 - Reserve Percentage)
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
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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."
2.6A new Paragraph 7.2(h) is added to the Agreement,
which reads in its entirety as follows:
"(h)An inventory listing within 20 days
after the end of each month; the listing must
include a description of the inventory, its
location and cost, and such other information as
the Bank may require."
2.7 Paragraph 7.3 of the Agreement is amended to read
in its entirety as follows:
"7.3 Tangible Net Worth. To maintain tangible net
worth equal to at least the sum of the following:
(a)Twenty Six Million Dollars ($26,000,000);
plus
(b)the sum of 100% of net income after income taxes (without
subtracting losses) earned in each quarterly accounting period
commencing with the period ending October 31, 2000.
'Tangible net worth' means the gross book value of
the Borrower's 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 liabilities, including but
not limited to accrued and deferred income taxes, and
any reserves against assets."
2.8In Paragraph 7.4 of the Agreement, the ratio "1.00
:1.00" is substituted for the ratio of "0.5:1.0".
2.9In Paragraph 7.21(f) of the Agreement, the amount
"One Million Dollars ($1,000,000)" is substituted for
the amount "Five Million Dollars ($5,000,000)".
2.10A new Paragraph 7.23 is added to the Agreement,
which reads in its entirety as follows:
"7.23 Paydown Period. To reduce the amount of advances outstanding
under this Agreement to zero for a period of at least 30 consecutive
days during each semi-annual calendar period in each year. For the
purposes of this paragraph, `advances' does not include undrawn amounts
of outstanding letters of credit."
3 Representations and Warranties. When the Borrower signs this Amendment, the
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Borrower represents and warrants to the Bank that: (a) there is no
event which is, or with notice or lapse of time or both would be, a
default under the Agreement except those events, if any, that have been
disclosed in writing to the Bank or waived in writing by the Bank, (b)
the representations and warranties in the Agreement are true as of the
date of this Amendment as if made on the date of this Amendment, (c)
this Amendment is within the Borrower's powers, has been duly
authorized, and does not conflict with any of the Borrower's
organizational papers, and (d) this Amendment does not conflict with
any law, agreement, or obligation by which the Borrower is bound.
4 Conditions. This Amendment will be effective when the Bank receives the
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following items, in form and content acceptable to the Bank:
4.1A Corporate Resolution to Obtain Credit executed by the Borrower in
the amount of Sixteen Million and 00/100 Dollars ($16,000,000.00).
5 Effect of Amendment. Except as provided in this Amendment, all of the terms
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and conditions of the Agreement shall remain in full force and effect.
This Amendment is executed as of the date stated at the beginning of this
Amendment.
Bank of America, N.A. Variflex, Inc.
/s/ Xxxxxx X. Xxxxxxx /s/ Xxxxx X. Xxxxxxxxx
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By: Xxxxxx X. Xxxxxxx, Vice President By: Xxxxx X. Xxxxxxxxx, chief
Financial Officer
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