Exhibit 10.50
First Amendment of Second Amended and Restated Loan Agreement
This is an agreement between Viisage Technology, Inc., a Delaware
corporation ("Borrower"), and Commerce Bank & Trust Company, a Massachusetts
trust company ("Lender").
1. Circumstances of the agreement. Lender and Borrower entered into a
Second Amended and Restated Loan Agreement dated December 12, 2002 ("Loan
Agreement"). Borrower recently requested (i) that Lender modify the Loan
Agreement in certain respects and (ii) that Lender consent to Borrower's
borrowing from Lau Acquisition Corp., a Massachusetts corporation ("Lau"), of
certain sums needed by Borrower (a) to perform its new contracts with the states
of Georgia and Oklahoma and (b) to refinance its contracts with the states of
Arkansas and Wisconsin, as more fully described on the attached Schedule 1 ("Lau
Loans"). Lender has approved Borrower's requests on the terms and conditions
stated in this agreement.
2. Actions in conjunction with this agreement. On or about the date of
this agreement, the parties shall proceed as follows.
A. KEF. Viisage shall (i) pay in full its indebtedness to Key
Equipment Finance, a division of Key Corporate Capital, Inc. ("KEF"), (ii)
obtain from KEF in a form satisfactory to Lender a release of all collateral
held by KEF to secure such indebtedness, (iii) cause KEF to terminate all of its
Uniform Commercial Code financing statements against Borrower, and (iv) assist
Lender in obtaining from KEF a termination acknowledgment regarding a certain
Intercreditor Agreement dated July 13, 2001, among Lender, KEF, and another
party ("2001 ICA").
B. IP security agreement and filings. Borrower and Lender shall sign
and deliver to one another a new agreement concerning Lender's security interest
in Borrower's intellectual property ("New IP Security Agreement"). The New IP
Security Agreement shall constitute a replacement for a comparable agreement
dated June 15, 2000. Borrower shall assist Lender in perfecting to Lender's
satisfaction within thirty days after the date of this agreement the security
interests created by the New IP Security Agreement and shall reimburse Lender
for all costs and expenses (including reasonable legal fees) incurred by Lender
in connection with such agreement and such perfection.
C. Account Control and Servicing Agreement. Lender, Borrower, and Lau
shall enter into an Account Control and Servicing Agreement ("ACSA") governing
the handling of payments and related matters affecting the Lau Loans.
D. Omnibus amendment. Lender and Borrower shall enter into two omnibus
amendment agreements relating to certain other loan documents.
3. Financial covenants. Sections 18A and 18B of the Loan Agreement are
deleted, and in their place are inserted the following new sections:
"A. Profitability.
(1) Identification Division.
(a) Full fiscal year profitability. In each fiscal year of
Borrower, the Identification Division shall have positive net
income, excluding consideration of income taxes.
(b) Quarterly profitability. In at least three quarters of
each fiscal year, the Identification Division shall have positive
net income, excluding consideration of income taxes; if the
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Identification Division has negative net income in any quarter of
a fiscal year, the amount of such negative net income shall not
exceed $200,000.
(2) Borrower.
(a) Last three quarters of FY 2003. Borrower's negative net
income for the last three quarters of its fiscal year ending in
2003 (excluding consideration of income taxes) shall not exceed
the following amounts:
second quarter $2,000,000;
third quarter $2,000,000; and
fourth quarter $1,500,000.
(b) First three quarters of FY 2004. Borrower's negative
net income for the first three quarters of its fiscal year ending
in 2004 (excluding consideration of income taxes) shall not
exceed the following amounts:
first quarter $1,500,000;
second quarter $1,000,000; and
third quarter $500,000.
(c) Final quarter of FY 2004. Borrower's net income
(excluding consideration of income taxes) during the final
quarter of its fiscal year ending in 2004 shall be not less than
$100,000.
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(d) FY 2005 and thereafter. Beginning with its fiscal year
ending in 2005, Borrower shall have positive net income (excluding
consideration of income taxes) in every fiscal year.
B. Tangible Net worth. As of the end of each fiscal quarter beginning
with the second quarter of the fiscal year ending in 2003,
Borrower's Tangible Net Worth shall be at least Thirty Million
Dollars ($30,000,000). "Tangible Net Worth" means (a) Borrower's
net worth, less (b) the value of Borrower's intangible assets,
plus (c) the amount of Borrower's Subordinated Debt. "Subordinated
Debt" means the outstanding principal balance of all loans which
are subordinated to the Obligations pursuant to subordination
agreements to which Lender is a party."
4. Intercreditor matters. Section 14 of the Loan Agreement is deleted, and
in its place is inserted the following new section:
"14. Intercreditor Matters.
A. Before the parties entered into this agreement, Borrower had
obtained financing for specific contracts (1) from Key Equipment
Finance, a division of Key Corporate Capital, Inc. ("KEF")
pursuant to a Master Equipment Lease Agreement dated July 13,
2001, as amended on that date and on October 21, 2002 ("KEF
Agreement") and (2) from Fleet Business Credit, LLC ("FBC")
pursuant to a Purchase Agreement dated September 12, 1996 between
Borrower and FBC's predecessor, as amended
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December 9, 1997, November 20, 1998 (twice), April 26, 1999, June
15, 2000, September 30, 2002, February 7, 2003, and of even date
herewith("FBC Agreement").
B. On or about the date of the first amendment of this agreement,
Borrower (1) has paid in full its indebtedness to KEF and (2) has
taken loans from Lau Acquisition Corp., a Massachusetts
corporation ("Lau"), to finance contracts with the states of
Georgia and Oklahoma and to refinance contracts with the states of
Wisconsin and Arkansas ("Lau Loans"). In that connection, Borrower
and Lau have entered into a loan agreement and various other loan
documents (respectively "Lau Loan Agreement" and "Lau Loan
Documents").
C. Borrower covenants and agrees with Lender not to amend, modify,
or otherwise change the terms and conditions of the Lau Loan
Agreement, the Lau Loan Documents, or the FBC Agreement in any way
that is reasonably likely to have a materially adverse effect upon
the value of Lender's security interest in Borrower's assets.
Without limiting the generality of the preceding sentence,
Borrower shall not modify the FBC Agreement so as to reduce or
diminish the value of those rights of Borrower that are described
in the FBC Agreement as "Lease Residual Rights". Borrower (1)
shall notify Lender in writing before signing any amendment,
modification, or other document
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that materially affects the Lau Loan Agreement, the Lau Loan
Documents, or the FBC Agreement, (2) shall notify Lender in
writing before signing any new agreement with Lau or FBC,and (3)
within five business days after such signing shall deliver to
Lender a copy of all such instruments and all related documents.
D. From time to time both Lau and FBC may hold a security interest
in certain of Borrower's assets and/or may acquire certain of
Borrower's assets, as contemplated by a certain Intercreditor
Agreement dated as of May 30, 2003 among Lender, Lau, and FBC
("Intercreditor Agreement"). Any material violation of Lender's
rights under the Intercreditor Agreement by Lau or FBC shall
constitute an Event of Default under this agreement. Borrower
covenants and agrees to notify Lender in writing immediately of
any circumstance or occurrence that constitutes such a violation.
E. From and after the date of the first amendment of this
agreement, (1) each reference in this agreement to "KEF" and the
"KEF Agreement" shall be taken respectively as a reference to
"Lau" and the "Lau Loan Agreement," and (2) each reference to the
"Intercreditor Agreement" shall be taken as a reference to the
intercreditor agreement identified in the preceding Section 14D."
5. Consents involving Lau. The following new section is inserted into the
Loan Agreement between Section 15 and Section 16:
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"15A. Consent to Lau Loans. Notwithstanding any provision in
this agreement or in the other Loan Documents, Lender hereby
(i) consents to the Lau Loans and to the transactions
contemplated and effected by the Lau Loan Documents, (ii)
consents to the establishment of a separate lockbox and bank
account under Lau's control for use in connection with the
Lau Loans, and (iii) waives any prohibitions in the Loan
Documents relating to such matters. The foregoing consents
and waivers are limited to this occasion and these
circumstances, however; Lender undertakes no obligation to
grant any further consents or waivers. All waived provisions
of this agreement and of the other Loan Documents shall
remain in full force and effect as to all future matters."
6. Terminology. Without limiting the generality of the definitions set
forth in the Loan Agreement, Lender and Borrower agree that in the Loan
Agreement from and after the date of this agreement (a) the term "Loan
Documents" shall include (i) this agreement, (ii) a certain omnibus amendment
agreement of even date between Lender and Borrower, and (iii) the New IP
Security Agreement; (b) the term "Related Documents" shall include the ACSA and
the new Intercreditor Agreement; and (c) the term "Third-Party Loans" shall
include lease financing extended and to be extended to Borrower by
Hewlett-Packard Financial Services Company, by Indigo America, Inc., a
wholly-owned subsidiary of Hewlett-Packard Company and by Dell Financial
Services L.P., as more fully identified on the attached Schedule 2 ("HP/Dell
Financing").
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7. Exhibits. Borrower and Lender agree as follows regarding the
exhibits attached to the Loan Agreement:
A. Exhibit G is hereby replaced by the correspondingly titled
document attached to this agreement.
B. Exhibits H-1 and H-2 are hereby replaced by the
correspondingly titled documents attached to this agreement.
8. Fee. In consideration of Lender's willingness to enter into this
agreement, Borrower agrees to pay Lender One Hundred Thousand Dollars ($100,000)
in seven equal consecutive monthly installments commencing June 1, 2003, each in
the amount of $14,285.71.
9. Affirmation and acknowledgment. Borrower and Lender hereby
ratify and affirm the Loan Agreement (as amended by this agreement) and the
other Loan Documents. Without limiting any provision of the Loan Documents,
Borrower acknowledges that in each of the Loan Documents, every reference to the
Loan Agreement shall include this agreement.
10. Costs. Within ten days after a written request by Lender,
Borrower shall reimburse Lender for all costs and expenses (including reasonable
legal fees) incurred by Lender in connection with this agreement.
Signed as a sealed instrument as of May 30, 2003.
Viisage Technology, Inc.
By: /s/ William K. Aulet
-------------------------
Commerce Bank & Trust Company
By: /s/ Jerome L. Olin
-------------------------
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Schedule 1
Lau Loans
State Amount
Georgia $3,000,000.00
Oklahoma $2,500,000.00
Wisconsin $ 287,431.31
Georgia $1,562,307.92
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Schedule 2
HP/Dell Financing
Date of Lease Lessor Identifying Data Amount
February 19, Dell Financial Services Lease No. 001- $202,297
2003 L.P. 006207285-001
February 19, Dell Financial Services Lease No. 001- $130,073
2003 L.P. 006207285-002
March 31, Hewlett-Packard Advantage Master $250,000
2003 Financial Services Lease and Financing
Company Agreement No.
102131
February 20, Indigo America, Inc., a Purchase and Sale Included in
2003 wholly-owned Agreement agreement 102131
subsidiary of Hewlett-
Packard Company
to be entered Dell Georgia $667,630
into Workstations
To be entered Dell Georgia Up to $250,000
into Workstations without additional
approval from
Commerce
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Exhibit H-1
Quarterly Compliance Certificate (Revised)
Pursuant to Section 18 of a certain Second Amended and Restated Loan
Agreement ("Loan Agreement") dated December 12, 2002, as amended, between
Viisage Technology, Inc. ("Borrower") and Commerce Bank & Trust Company
("Lender"), I certify to Lender as follows:
A. Profitability.
(1) For the quarter of Borrower's fiscal year ending
______________, _______ ("Quarter End"), the Identification Division's
net income, excluding consideration of income taxes, was $__________.
(2) For the quarter of Borrower's fiscal year ending __________,
_______, Borrower's net income, excluding consideration of income
taxes, was $________.
B. Net worth. At Quarter End, Borrower's Tangible Net Worth was
$_____________.
C. Debt to worth. At Quarter End, the ratio of Borrower's
Indebtedness to its Tangible Net Worth was ________ to ___________.
D. Debt service coverage. At Quarter End, the ratio of the
Identification Division's Adjusted Operating Cash Flow to its Debt Service
Liability, for the four most recent quarters, was ____________ to ____________.
E. Capital expenditures. During Borrower's current year to date
through Quarter End, Borrower's internally financed capital expenditures total
$____________.
F. Cash. As of Quarter End, Borrower had $_________ of unencumbered
cash for purposes of Section 18F of the Loan Agreement.
Borrower is in compliance with the covenants referenced in paragraphs
________ of this certificate. Borrower is not in compliance with the covenants
referenced in paragraphs _________ of this certificate.
I further certify that in calculating the figures stated above I have
followed all applicable provisions of the Loan Agreement and have interpreted
all capitalized terms in accordance with the applicable provisions of the Loan
Agreement.
Viisage Technology, Inc.
Date: ____________ By:_________________________
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Exhibit H-2
Annual Compliance Certificate (Revised)
Pursuant to Section 18 of a certain Second Amended and Restated Loan
Agreement ("Loan Agreement") dated December 12, 2002, as amended, between
Viisage Technology, Inc. ("Borrower") and Commerce Bank & Trust Company
("Lender"), I certify to Lender as follows:
A. Annual Profitability. For the fiscal year ending ______________,
_______ ("Year End"), Borrower's net income, excluding consideration of income
taxes, was $___________.
B. Net worth. At Year End, Borrower's Tangible Net Worth was
$_____________.
C. Debt to worth. At Year End, the ratio of Borrower's Indebtedness
to its Tangible Net Worth was ________ to __________.
D. Debt service coverage. At Year End, the ratio of the
Identification Division's Operating Cash Flow to its Debt Service Liability, for
the entire fiscal year, was ____________ to ____________.
E. Capital expenditures. During the fiscal year just ended,
Borrower's internally financed capital expenditures totaled $____________.
Borrower is in compliance with the covenants referenced in paragraphs
________ of this certificate. Borrower is not in compliance with the covenants
referenced in paragraphs _________ of this certificate.
I further certify that in calculating the figures stated above I have
followed all applicable provisions of the Loan Agreement and have interpreted
all capitalized terms in accordance with the applicable provisions of the Loan
Agreement.
Viisage Technology, Inc.
Date: ____________ By:_________________________
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