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Exhibit 10.5
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Loan Agreement") dated the 4th day of June
2001, is made and executed by and between the lenders on Exhibit "A" attached
hereto (collectively, the "Lenders"), HYPERCOM CORPORATION, a Delaware
corporation ("Borrower") and XXXXXX X. XXXXXXX ("Xxxxxxx").
RECITALS
A. The Lenders have agreed to loan Borrower the aggregate sum of
Three Million Four Hundred Dollars ($3,400,000.00) in the dollar amount set
forth on Exhibit "A" (the "Loans") for the purchase of components and other raw
materials necessary to fill existing backlogged orders of POS terminals and
other products manufactured by Borrower.
B. Borrower has agreed to evidence the Loans provided by Lenders by
executing notes (separately, a "Note" and together, the "Notes") in favor of
each Lender in the principal sums set forth on Exhibit "A".
X. Xxxxxxx, a significant shareholder of Borrower, has agreed to
pledge certain collateral listed on Exhibit "B" hereto (the "Collateral") to
secure repayment of the Loan to Borrower.
NOW, THEREFORE, for and in consideration of the promises and covenants
herein contained, as well as the sum of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged by the parties hereto, Lenders, Borrower and Xxxxxxx agree
as follows:
1. Loans. On June 5, 2001, (the "Funding Date"), subject to
satisfaction of the conditions precedent provided herein, Lenders shall deliver
to, in immediately available funds, Borrower, pursuant to written instructions
provided by Borrower, the sums set forth next to their names on Exhibit "A" (the
"Loans").
2. Payment. The Loans shall be evidenced by the Notes, which shall
be in the form of Exhibit "C" hereto, and all amounts due under such Notes shall
be paid in accordance therewith.
3. Conditions Precedent to Funding Loan. Lenders' obligation to fund
the Loans shall be conditioned upon the satisfaction of each of the following
conditions precedent:
(a) Borrower and Xxxxxxx, as applicable, shall have executed and
delivered to the applicable Lenders the following documents;
(i) this Agreement;
(ii) the applicable Notes;
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(iii) the Security Agreement, dated June 4, 2001, and
executed by Xxxxxxx;
(iv) the Amended and Restated Notes executed by
Borrower payable to Xxxxxxx, dated December 27,
2000 and March 31, 2001, and in the principal
amounts of $1,500,000.00 and $1,000,000.00
(respectively the "Initial Xxxxxxx Note"); and
(v) the applicable Warrant, dated June 4, 2001, signed
by Borrower (each such warrant, a "Warrant").
The documents to be executed by Borrower described in this paragraph are
referred to herein as the "Borrower Documents".
(b) Counsel to Borrower shall have delivered an opinion to
Lenders relating to the corporate power and authority of Borrower to execute and
deliver the Borrower Documents.
(c) Borrower shall have paid all reasonable and ordinary fees of
counsel incurred by Lenders in connection with the Loans.
4. Collateral for Loans. The Loans shall be evidenced by the Notes
and shall be secured by the Initial Xxxxxxx Notes and the Xxxx Xxxxxxx Note (as
defined below).
5. Limitations on Use of Loan Proceeds. Borrower shall not be
permitted to use the Loan Proceeds for any purpose other than for the purchase
of components and other raw materials necessary to fill existing backlogged
orders of POS terminals and other products manufactured by Borrower.
6. Representations and Warranties of Borrower and Xxxxxxx. Borrower,
and Xxxxxxx only as to 6.e., hereby makes the following representations and
warranties:
a. Borrower is a Delaware corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the requisite corporate power and authority to execute, deliver and perform its
obligations under this Loan Agreement.
b. Borrower is duly qualified to conduct business as a foreign
corporation in good standing, and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of property or
the conduct of its business shall require such qualification.
c. The execution, delivery and performance by Borrower of this
Loan Agreement, the consummation of the transaction contemplated thereby, and
the fulfillment of the terms contained therein do not conflict with, result in
any breach of any of the terms and provisions of, nor constitute (with or
without notice or lapse of time) a default under, Borrower's articles of
incorporation or bylaws, or any indenture, agreement, mortgage, deed of trust or
other instrument to which Borrower is a party or by which it is bound or any of
its properties are subject; nor result in the creation or imposition of any lien
upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust, or other instrument; nor violate any law,
order, rule or regulation applicable to it or any of its properties, of any
court or
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of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over Borrower or any of its
properties.
d. The principal amount due and owing as of the date hereof under
the Initial Xxxxxxx Notes is $1,500,000.00 and $1,000,000.00, respectively, and
that the maturity dates have been extended to September 15, 2001. Borrower
hereby represents and warrants that it will not pay or otherwise satisfy its
obligations under the Initial Xxxxxxx Note or the Xxxx Xxxxxxx Note until the
Notes payable to the Lender has matured. Borrower shall not provide Xxxxxxx with
any collateral or otherwise secure any amounts due under the Initial Xxxxxxx
Note or the Xxxx Xxxxxxx Note without the written consent of the Lenders.
x. Xxxxxxx will loan to Borrower, no later than June 5, 2001, the
sum of One Million Dollars ($1,000,000.00), such loan to be evidenced by a note
(the "Xxxx Xxxxxxx Note"), and the Xxxx Xxxxxxx Note shall be delivered to
Lender (care of Lenders counsel set forth in Section 11 hereof) and held as
collateral pursuant to the Security Agreement.
7. Representations and Warranties of Lenders. Each Lender, as to
itself only, hereby makes the following representations and warranties to the
Borrower, as to which Borrower relies in delivering the Note and the Warrant to
such Lender:
a. Purchase for Own Account. The Note and any shares of common
stock received by Lender under the Warrant or by exercise of any conversion
rights under the Note (collectively, the "Stock") will be acquired for
investment for the Lender's own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof, and the Lender has no
present intention of selling, granting any participation in, or otherwise
distributing the Note or the Stock or any part thereof. The Lender does not have
any contract, undertaking, agreement or arrangement with any Person to sell,
transfer or grant participation to such Person with respect to the Note or the
Stock or any part thereof.
b. Disclosure of Information. The Lender is aware of the
Company's business affairs and financial condition, has received and reviewed
all information (including reports filed by the Company with the Securities and
Exchange Commission up to the date hereof and including the Company's status
with its senior lenders) he considers necessary or appropriate for making an
informed and knowledgeable decision as to whether to acquire the Note and
further represents that he has had sufficient opportunity to ask questions and
receive answers from the Company regarding the nature and affairs of the
Company, including its business, properties, prospects and financial condition.
c. Investment Experience. The Lender is an investor in securities
of companies and acknowledges that he is capable of bearing the economic risk of
its investment in the Note and the Stock, including the risk of total loss of
any or all of such investment, and has such knowledge and experience in
financial or business matters that he is capable of evaluating the merits and
risks of such investment.
d. Accredited Investor. The Lender is an "accredited investor"
within the meaning of Commission Rule 501 of Regulation D, as presently in
effect.
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e. Restricted Securities. The Lender understands and hereby
acknowledges that (i) the Note and the Stock it may receive upon conversion
pursuant to the provisions of the Note may not initially be registered under the
Securities Act of 1933 (the "Securities Act"), and in such event will be issued
in reliance upon a specific exemption from the registration requirements under
the Securities Act, which exemption depends upon, among other things, the bona
fide nature of the Lender's investment intent as expressed herein, and (ii) the
Note and Stock must be held indefinitely unless subsequently registered under
the Securities Act or unless an exemption from registration is available.
f. Rule 144 Restrictions. The Lender is aware of the provisions
of Rule 144 promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions, if
applicable, including, among other things: (i) the availability of certain
public information about the Company; (ii) the resale occurring not less than
one (1) year after the party has purchased and paid for the securities to be
sold; (iii) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Exchange Act) and the amount of securities being sold during
any three-month period not exceeding the specified limitations stated therein.
g. Rule 144 Limitations. The Lender understands that Rule 144
does not apply to the Note. The Lender understands and acknowledges that at the
time it wishes to sell the some or all of the Stock there may be no public
market upon which to make such a sale, and that, even if such a public market
upon which to make such a sale then exists, the Company may not be satisfying
the current public information requirements of Rule 144, and that, in such
event, the Lender may be precluded from selling the Stock under Rule 144 even if
the one-year minimum holding period had been satisfied. The Lender further
understands that (i) if all of the requirements of Rule 144 are not satisfied,
registration under the Securities Act, compliance with Regulation A or
Regulation S under the Securities Act or some other registration exemption will
be required to permit the Lender to sale the Stock, and (ii) notwithstanding the
fact that Rule 144 is not exclusive, the staff of the Commission has expressed
its opinion that persons proposing to sell private placement securities other
than in a registered offering and other than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
8. Debtor and Creditor. Lenders and Borrower intend that the
relationship between them be that of creditor and debtor only. Nothing herein
nor the acts of the parties hereto shall be construed to create a co-tenancy,
partnership, joint venture or similar relationship between Borrower and Lender.
Lender shall have no responsibility whatsoever for the debts, losses,
obligations or duties of Borrower. Borrower hereby indemnifies Lender and agrees
to defend and hold Lender harmless from and against any liability, claim,
demand, obligation, assessment, loss, cost, damage or expense of any nature
whatsoever (including, without limitation, any and all judgments, decrees,
settlements, awards and reasonable costs, expenses, attorneys' fees and court
costs), which are incurred, sustained, suffered, asserted or assessed against
Lender as a result of any claim, action suit or proceeding in which it is
alleged that Lender has liability to any person or entity because Lender and
Borrower have a relationship other than or in addition to
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that of creditor and debtor. The provisions of this Section 8 shall survive the
repayment of the Loan.
9. Assignment. This Loan Agreement may be endorsed, assigned and
transferred in whole or in part by Lender, and any such holder and assignee of
this Loan Agreement shall succeed to and be possessed of the rights of Lender
under this Loan Agreement to the extent transferred and assigned. This Loan
Agreement may not be endorsed, assigned or transferred by Borrower.
10. Entire Agreement. THIS AGREEMENT AND ALL OTHER INSTRUMENTS,
DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AGREEMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AGREEMENT, AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS WITH THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO. THIS AGREEMENT SHALL SUPERSEDE AND CONTROL
OVER THE SIMILAR PROVISIONS SET FORTH IN THE COMMITMENT.
11. Notices. All notices hereunder shall be deemed to have been duly
given and received (i) when personally delivered or transmitted by electronic
facsimile with printed confirmation of transmission received, (ii) on the third
business day next following the day when deposited in the U.S. Mail, postage
prepaid, certified or registered mail, return receipt requested, addressed as
set forth below, or (iii) on the first business day after proper and timely
deposit for next day delivery, charges prepaid, with a nationally recognized
courier service providing next day service to the location of the recipient, to
such party at the address set forth below.
If to Lender: Xxxxxx X. Xxxxxxxx
X.X. Xxx 00000
Xxxxxxx, Xxxxxxx 00000
Fax No: (000) 000-0000
With a Copy to: Xxxxx Xxxx LLP
Xxx Xxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn.: Xxxxxx X. Xxxxxxxxxx
Fax No: (000) 000-0000
If to Borrowers: Hypercom Corporation
0000 Xxxx Xxxxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxxx Xxxxxxx
Fax No: (000) 000-0000
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With a Copy to: Xxxxx & Xxxxxx
1500 UniSource Tower
Xxx Xxxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxx
Fax No.: (000) 000-0000
Any party hereto may designate a different address by notice to
the other pursuant to this Section 11. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a day that is not a business day, then such action may be taken or such
right may be exercised on the next succeeding business day.
12. Headings. The headings of the Sections of this Loan Agreement are
for the convenience of reference only, are not to be considered a part hereof
and shall not limit or otherwise affect any of the terms hereof.
13. Further Acts. Borrower agrees to execute and deliver to Lender
from time to time such certifications as Lender may reasonably request with
respect to the performance by Borrower of its obligations under this Loan
Agreement. In addition, Borrower agrees to execute and deliver to Loan Agreement
from time to time such other documents and instruments as may be reasonably
requested in order to effectuate the terms of this Loan Agreement.
14. Partial Invalidity. Wherever possible, each provision of this
Loan Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Loan Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Loan Agreement.
15. Time of Essence. Time shall be of the essence with respect to any
payment or performance due from Borrower hereunder.
16. No Amendments. Neither this Loan Agreement nor any provision
hereof may be changed, waived, discharged, modified or terminated orally, but
only by an instrument in writing signed by each of the parties hereto.
17. Governing Law. This Loan Agreement has been executed and
delivered in, and shall be governed by and construed in accordance with the laws
of, the State of Arizona.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
agreement.
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EXECUTED AND DELIVERED as of the date first above written.
LENDER: BORROWER:
XXXXXX X. XXXXXXXX HYPERCOM CORPORATION, a
Delaware corporation
/s/ Xxxxxx X. Xxxxxxxx
---------------------- By: /s/ Xxxxxxxxxxx X. Xxxxxxxxx
----------------------------
NORTON FAMILY LIVING TRUST UTD 2-15-96
Print Name: Xxxxxxxxxxx X. Xxxxxxxxx
By: Xxxx X. Xxxxxx III ------------------------
------------------
Its: Trustee Its: President and
------------------ Chief Executive Officer
-----------------------
NORTON FAMILY LIVING TRUST UTD 2-4-91
XXXXXX X. XXXXXXX
By: Xxxx X. Xxxxxx
------------------ /s/ Xxxxxx X. Xxxxxxx
Its: Trustee ---------------------
------------------
GUARANTEE & TRUST COMPANY TTEE FBO
Xxxx X. Xxxxxx SEP XXX
By: Xxxx X. Xxxxxx
------------------
Its: Power of Attorney -- Delaware Charter
Guarantee & Trust Co.
------------------
FIRST WESTERN CAPITAL LLC
By: Xxx Xxxxx
------------------
Its: Trustee
------------------
XXXXXXX X. XXXXXXXX
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------
XXXXXX X. XXXXXXXXX
/s/ Xxxxxx X. Xxxxxxxxx
-----------------------
XXXX X. XXXXX
/s/ Xxxx X. Xxxxx
-----------------------
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SCHEDULE B
COLLATERAL
1. AMENDED AND RESTATED PROMISSORY NOTE dated as of December 27, 2000 executed
by Hypercom Corporation.
2. AMENDED AND RESTATED PROMISSORY NOTE dated as of March 31, 2001 executed by
Hypercom Corporation.
3. Promissory Note dated June 5, 2001 executed by Hypercom Corporation.
