AMENDMENT NUMBER ONE TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT, dated as Of
July 7, 1998 (this "Amendment"), amends that certain Loan and Security
Agreement, dated as of March 26, 1997 (as amended from time to time, the "Loan
Agreement"), by and between ON-POINT TECHNOLOGY SYSTEMS, INC., dba Lottery
Enterprises ("Borrower"), on the one hand, and COAST BUSINESS CREDIT, a division
of Southern Pacific Bank, a California corporation ("Coast"), on the other hand.
All initially capitalized terms used in this Amendment shall have the meanings
ascribed thereto in the Loan Agreement unless specifically defined herein.
RECITALS
WHEREAS, Borrower has requested that Coast make certain amendments to
the Loan Agreement, including (i) increasing the Credit Limit to Five Million
Dollars ($5,000,000), (ii) reducing the interest rate on the line of credit, and
(iii) permitting Borrower's acquisition of all of the capital stock of VendTek,
Inc., a corporation formed under the laws of Canada; and
WHEREAS, Coast has given its approval to such requests in Accordance
with the terms and conditions set forth in this Amendment.
NOW, THEREFORE, the parties hereto agree as follows:
AMENDMENT
Section 1. AMENDMENT TO SECTION 5.5 OF THE LOAN AGREEMENT.
Section 5.5 (b) of the Loan Agreement is hereby amended by deleting such Section
in its entirety and replacing it with the following:
"(b) acquire any assets, except (i) in the ordinary course of
business, or (ii) in a transaction or a series of transactions not
involving the payment of an aggregate amount in excess of One Hundred
Thousand Dollars ($100,000), PROVIDED HOWEVER, that Borrower shall be
permitted to acquire the capital stock of VendTek, a corporation formed
under the laws of Canada ("VendTek"), in accordance with the terms of that
certain Agreement of Purchase and Sale of Stock, dated as of-------, 1998,
by and among Borrower, Shellborn Enterprises Ltd., Dover Management Ltd.,
VendTek and certain other parties (the "VendTek Purchase Agreement") SO
LONG AS (1) no Default or Event of Default has occurred and is continuing,
or will result therefrom, and (2) Coast shall have received evidence
satisfactory to Coast that, after giving effect to the transactions
contemplated by the VendTek Purchase Agreement, the assets and capital
stock of VendTek shall be free and clear of all Liens, other than Permitted
Liens, (3) Borrower, VendTek and all of VendTek's subsidiaries shall have
executed and delivered to Coast an amended and restated loan and security
agreement in the form of this Agreement, and otherwise in form and
substance satisfactory to Coast, together with such other agreements,
instruments and documents as Coast shall require in connection therewith
(including, without limitation, a joint and several borrower rider, UCC-1
Financing Statements and Fixture Filings, intellectual property security
agreements and a collateral assignment of the VendTek Purchase
Agreement), all duty executed and in form and substance satisfactory to
Coast, and (4) Coast shall have received evidence satisfactory to Coast
that all of the assets of VendTek and its subsidiaries are subject to
Coast's first priority Lien in accordance with the terms of this
Agreement."
Section 2. AMENDMENT TO SECTION 8 OF THE LOAN AGREEMENT.
Section 8 of the Loan Agreement is hereby amended by deleting the definitions of
"Applicable Amount", "Eligible Foreign Receivables", and "Eligible Receivables"
in their entirety and adding the following new definitions in Appropriate
alphabetical order:
"'Applicable Amount' means two percent (2%) per annum,
provided that the Applicable Amount shall be reduced to the per annum
percentage set forth below under Applicable Amount for each Applicable
Period if the Chief Financial Officer of Borrower delivers a certificate to
Coast no later than the first day of the Applicable Period certifying that
(i) Borrower has NPAT for the immediately preceding 12-month period equal
to or greater than the NPAT set forth below for such Applicable Period,
(ii) no Default or Event of Default has occurred and is continuing under
this Agreement and the other documents and agreements executed in
connection with this Agreement and (iii) Borrower is entitled to the
reduced Applicable Amount corresponding to the NPAT and Applicable Period
set forth below:
NPAT Applicable Applicable
Period Amount
>$2,500,000 for the prior March 31, 1998-March 31, 1999 1.5%
12-month period
ending with such
12-month period
>$3,000,000 for the prior March 31, 1999-Maturity Date 1.0%"
12-month period
ending with such
12-month period
"'ELIGIBLE FOREIGN RECEIVABLES' means Receivables arising from
Borrower's customers located outside the United States or Canada, provided
that (1) the Borrower's goods are shipped backed by a letter of credit, or
(ii) the Borrower's goods are shipped to a large or rated company having
a verifiable credit history, or (iii) Borrower's goods are shipped to a
foreign subsidiary of a customer of Borrower that is a company that was
formed and has its primary place of business within the United States, or
(iv) Borrower's goods are shipped to a large foreign corporation acceptable
to Coast in its sole and absolute discretion, or (v) Borrower's goods are
shipped to a foreign company with a Dun & Bradstreet rating acceptable to
Coast in its sole and absolute discretion, or (vi) Borrower's goods are
shipped to a company that has credit insurance acceptable to Coast in its
sole and absolute discretion."
"'ELIGIBLE RECEIVABLES' means Receivables arising in the
ordinary course of Borrower's business from the sale of goods or rendition
of services to Borrower's customers in the United States and Canada, which
Coast, in its good faith business judgment exercised in a commercially
reasonable manner in accordance with industry standards, shall deem
eligible for borrowing, based on such considerations as Coast may from time
to time deem appropriate."
"'NPAT' means, for the period of determination, Borrower's
consolidated net income for such period minus the amount of Borrower's
consolidated federal, state and local income tax expense for such period,
calculated in accordance with generally accepted accounting principles,
consistently applied."
Section 3. AMENDMENT TO SECTION I OF THE SCHEDULE.
The text of Section I of the Schedule to the Loan Agreement is hereby amended by
deleting such Section in its entirety and replacing it with the following:
"Loans in a total amount at any time outstanding not to exceed
the lesser of a total of Five Million Dollars ($5,000,000) at any one time
outstanding (the "Maximum Dollar Amount"), or the sum of (a), (b), (c),
(d), (e) and (f) below:
"(a) RECEIVABLE LOANS. Loans in an amount not to exceed:
(1) sixty percent (60%), of the amount of Borrower's
Eligible Receivables (as defined in Section 8 above)
with eligibility up to ninety (90) days past invoice
date; or
(2) on and after September 1, 1997, eighty percent (80%)
of the amount of Borrower's Eligible Receivables with
eligibility up to ninety (90) days past invoice date,
if the average Dilution for the period from the date
of this Agreement to and
including August 31, 1997 has been less than ten
percent (10%) of the amount of Borrower's Eligible
Receivables with eligibility up to ninety (90) days
past invoice date;
(3) sixty percent (60%), of the amount of Borrowers
Eligible Foreign Receivables, PROVIDED HOWEVER that,
in each case, the aggregate amount outstanding at any
one time based upon the Eligible Foreign Receivables
shall not exceed, at any time, $250,000, plus
"(b) INVENTORY LOANS. Loans (the "Inventory Loans") in an
amount not to exceed fifty percent (50%) of the value of Borrower's
Eligible inventory (as defined in Section 8 above), calculated at the lower
of cost or market value and determined on a first-in, first-out basis,
PROVIDED HOWEVER, that the aggregate amount of all outstanding Inventory
Loans from time to time shall not exceed $1,250,000, plus
"(c) ITR LEASE COLLECTIONS LOANS. Loans in an amount not to
exceed the lesser of:
(1) eight (8) times the average monthly lease
collections (for the rolling period of twelve (12)
consecutive months ending on the last day of each
month) on leases of the instant ticket retailer
vending terminals for instant scratch-off lottery
tickets (the "ITR's"); or
(2) seventy-five percent (75%) of the aggregate Net
Present Value of the projected rental revenues
from the lease of the ITRS, plus
"(d) ITR SERVICE COLLECTIONS LOANS. LOANS in an amount not to
exceed the lesser of:
(1) four (4) times the average monthly service collections
(for the rolling period of twelve (12) consecutive
months ending on the last day of each month) on
service agreements related to the ITRS; or
(2) fifty percent (50%) of the aggregate Net Present Value
of the projected revenues derived from the servicing
of the ITRS, plus
"(e) DCR LEASE COLLECTIONS LOANS. Loans in an amount not to
exceed the lesser of:
(1) eight (8) times the average monthly lease collections
(for the rolling period of twelve (12) consecutive
months ending on the last day of each month) on leases
of debit card retailer vending terminals for prepaid
telephone calling cards (the "DCRs"), excluding any
lease collections arising from the lease of the DCRs
to Fone America ("FA"); or
(2) seventy-five percent (75%) of the aggregate Net
Present Value of the projected rental revenues from
the lease of the DCRs, excluding the projected rental
revenues from the lease of the DCRs to FA, plus
"(f) FA/NON-SUPERAGENT LEASE COLLECTIONS LOANS. Loans in an
amount not to exceed the lesser of:
(1) four (4) times the average monthly Non-SuperAgent
lease collections (for the rolling period of twelve
(12) consecutive months ending on the last day of each
month) on leases of DCR's to FA; or
(2) fifty percent (50%) of the aggregate Net Present Value
of the projected Non-SuperAgent rental revenues from
the lease of the DCRs to FA."
Section 4. AMENDMENT TO SECTION 2 OF THF- SCHEDULE.
Section 2 of the Schedule to the Loan Agreement is hereby amendment is here By
Amended by deleting such section in its entirety and replacing it with the
following:
"2. INTEREST
"Interest Rate
(Section 1.2): A rate equal to the "Prime Rate" plus
the Applicable Amount per annum,
calculated on the basis of a 360-day
year for the actual number of days
elapsed. The interest rate applicable to
all Loans shall be adjusted monthly as
of the first day of each month, and the
interest to be charged for each month
shall be based on the highest "Prime
Rate" in effect during said month, but
in no event shall the rate of interest
charged on any Loans in any month be
less than 9% per annum. "Prime Rate"
means the actual "Reference Rate" or
the substitute therefor of the Bank of
America NT & SA whether or not that
rate is the lowest interest rate charged
by said bank. If the Prime Rate, as
defined, is unavailable, "Prime Rate"
shall mean the highest of the prime
rates published in the Wall Street
Journal on the first business day of the
month, as the base rate on corporate
loans at large U.S. money center
commercial banks.
"Minimum Monthly
Interest
(Section 1.2): $15,000 per month."
Section 5. AMENDMENT TO SECTION 3 OF THE SCHEDULE.
Section 3 of the Schedule to the Loan Agreement is hereby amended by deleting
such Section in its entirety and replacing it with the following:
"3. FEES
(Section 1.3):
"Loan Fee: $20,000, payable July 7, 1998.
"Facility Fee: $5,000 per quarter, payable in advance on
the date of this Agreement and on the first
day of each January, April, July and
October occurring thereafter.
"Audit Fee: $750 per audit day."
Section 6. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is expressly conditioned upon the receipt by
Coast of the following:
(a) Opinion of Borrower's Counsel. Coast shall have received a
date down opinion of Borrower's counsel with respect to this Amendment and
the warrant described below in the form-of the opinion previously rendered to
Coast from such counsel and otherwise in form and substance satisfactory to
Coast in its sole and absolute discretion;
(b) Corporate Documents. Coast shall have received copies of
the resolutions of the board of directors of Borrower, authorizing the
execution and delivery of this Amendment, the warrant described below and the
other documents contemplated hereby and thereby, and authorizing the
transactions contemplated hereunder and thereunder, and authorizing specific
officers of Borrower to execute the same on behalf of Borrower, in each
Case certified by the Secretary or other acceptable officer of Borrower as
of the date of this case certified Amendment;
(c) Warrant. Coast shall have received a warrant duly executed
by Borrower for the purchase of 10,000 shares of common stock of Borrower at
an exercise price equal to the closing price of Borrower's common stock on
the date of execution of this Amendment as reported in the Wall Street
Journal or similar newspaper. The warrant shall have an exercise period
expiring 5:00 p.m., Los Angeles time, on May 5, 2000, and shall be in form
of the Warrant previously issued by Borrower to Coast and shall otherwise
be in form and substance satisfactory to Coast;
(d) Amendment. Coast shall have received this Amendment duly
executed by Borrower; and
(e) Loan Fee. Coast shall have received the $20,000 Loan Fee.
Section 7. ENTIRE AGREEMENT.
The Loan Agreement, as amended hereby, embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings, relating to the subject matter thereof. Borrower represents,
warrants and agrees that in entering into the Loan Agreement and consenting to
this Amendment, it has not relied on any representation, promise, understanding
or agreement, oral or written, of, by or with, Coast or any of its agents,
employees, or counsel, except the representations, promises, understandings and
agreements specifically contained in or referred to in the Loan Agreement, as
amended hereby.
Section 8. CONFLICTING TERMS.
In the event of a conflict between the terms and provisions of this Amendment
and the terms and provisions of the Loan Agreement, the terms of this Amendment
shall govern. In all other respects, the Loan Agreement, as amended and
supplemented hereby, shall remain in full force and effect.
Section 9. MISCELLANEOUS.
This Amendment shall be governed by and construed in accordance with the laws of
the State of California. This Amendment may be
executed in any number of counterparts, all of which taken together shall
constitute one agreement and any party hereto may execute this Amendment
by signing such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed by their respective officers thereunto duly authorized
as of the date first above written.
BORROWER:
ON-POINT TECHNOLOGY SYSTEMS, INC., dba
Lottery, Enterprises a Nevada Corporation
By:/s/ Xxxxxxxxx Xxxxxxxx
Chief Executive Officer
By:/s/ Xxx Xxxxx
Secretary
COAST:
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
By:/s/ Xxxx Xxxxxx
Title: Vice President
