Exhibit 10.3

 

PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS, WHICH ARE MARKED BY ASTERISKS (“***”).

 

FIFTEENTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

 

This Fifteenth Amendment to Loan and Security Agreement is entered into as of
January 15, 2016 (the “Amendment”), by and between AVIDBANK CORPORATE FINANCE, a
division of AVIDBANK (“Bank”), and USA TECHNOLOGIES, INC. (“Borrower”).

 

RECITALS

 

A.           Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of June 21, 2012 and that certain First Amendment to Loan and
Security Agreement dated as of January 1, 2013, that certain Second Amendment to
Loan & Security Agreement dated as of April 2, 2013, that certain Third
Amendment to Loan and Security Agreement dated as of April 11, 2013, that
certain Fourth Amendment to Loan and Security Agreement dated as of April 29,
2013, that certain Fifth Amendment to Loan and Security Agreement dated as of
September 26, 2013, that certain Sixth Amendment to Loan and Security Agreement
dated as of May 15, 2014, that certain Seventh Amendment to Loan and Security
Agreement dated as of June 17, 2014, that certain Eighth Amendment to Loan and
Security Agreement dated as of June 30, 2014, that certain Ninth Amendment to
Loan and Security Agreement dated as of September 30, 2014, that certain Tenth
Amendment to Loan and Security Agreement dated as of April 17, 2015, that
certain Eleventh Amendment to Loan and Security Agreement dated as of May 19,
2015, that certain Twelfth Amendment to Loan and Security Agreement dated as of
June 18, 2015, certain Thirteenth Amendment to Loan and Security Agreement dated
as of July 31, 2015 and certain Fourteenth Amendment to Loan and Security
Agreement dated as of August 14, 2015 (collectively, the “Agreement”). Borrower
and Bank desire to amend the Agreement in accordance with the terms set forth
herein.

 

B.           Borrower has also informed Bank that it intends to acquire
substantially all of the assets of Vendscreen, Inc. (“Seller”) on substantially
similar terms and conditions set forth in the Asset Purchase Agreement between
Borrower, Seller and the other parties named therein attached hereto as Exhibit
A (the “Proposed Transaction”). Borrowers have requested that Bank consent to
the Proposed Transaction, and Bank has agreed to provide its consent with
respect to the Proposed Transaction, in accordance with the terms set forth
herein.

 

 

 

  

AGREEMENT

 

NOW, THEREFORE, the parties agree as follows:

 

1.            Notwithstanding the prohibition set forth in Section 7.7 of the
Loan Agreement and subject to and upon the terms and conditions hereof, Bank
consents to the Proposed Transaction. Borrower (i) represents and warrants that
the assets being acquired from Seller (the “Assets”) shall be free and clear of
any Liens and Borrower shall provide evidence to Bank that the Lien on the
Assets in favor of 3X5 Special Opportunity Fund, L.P. has been terminated as of
the closing of the Proposed Transaction; (ii) acknowledges and agrees upon
consummation of the Proposed Transaction, the Assets shall automatically
constitute Collateral under the Loan Agreement; (iii) authorizes Bank to file
any financing statements in such jurisdictions and offices as the Bank deems
necessary in connection with the perfection of a security interest in such
Collateral.

 

2.            The foregoing consent from Bank is conditioned upon the following:
Borrower shall (x) within one (1) Business Day of execution, deliver to Bank the
fully executed copy of the Asset Purchase Agreement with respect to the Proposed
Transaction, together with all schedules, exhibits and ancillary documents
entered into in connection therewith, which shall be in form and substance
substantially similar to Exhibit A attached hereto, without any material
deviation, (y) within thirty (30) days following the closing of the Proposed
Transaction, deliver to Bank its annual operating projections (including income
statements, balance sheets and cash flow statements presented in a monthly
format) for 2016, in form and substance reasonably satisfactory to Bank; and (z)
promptly (within one (1) Business Day) of the consummation of the Proposed
Transaction, execute and deliver to Bank a short form intellectual property
security agreement with respect to the intellectual property (including all
patents, trademarks and copyrights) acquired from Seller. Failure to timely
comply with any of the foregoing shall constitute an immediate Event of Default
to which no cure period applies.

 

3.            The following definitions are hereby added to Section 1.1 of the
Agreement:

 

“Debt Service Coverage Ratio” means, as of the end of each quarter (the
“Measurement Period”), the product of (i) Adjusted EBITDA divided by (ii) the
interest owing on the Revolving Facility and Term Loan during the Measurement
Period plus the scheduled principal payments on the Term Loan during the
Measurement Period.

 

“VendScreen Asset Purchase” means Borrower’s acquisition of the assets of
Vendscreen, Inc. pursuant to that certain Asset Purchase Agreement between
Borrower and Vendscreen, Inc.

 

4.            The following definitions in Section 1.1 of the Agreement are
amended and restated in their entirety to read as follows:

 

“Adjusted EBITDA” means net income (loss) before interest income, interest
expense, income taxes, depreciation, amortization, rent/lease expense pursuant
to sale/leaseback equipment transaction that occurred in 2014, and change in
fair value of warrant liabilities and stock-based compensation expense, and the
one-time costs and expenses incurred or accrued by Borrower in connection with
the VendScreen Asset Purchase.

 

“Credit Extension” means each Advance, the Term Loan, or any other extension of
credit by Bank for the benefit of Borrower hereunder.

 

“Revolving Line” means, as of any measurement date, a credit extension of up to
Seven Million Five Hundred Thousand Dollars ($7,500,000) less the then
outstanding principal amount of the Term Loan.

 

 

 

  

5.           The following is added as a new subsection (b) following the end of
Section 2.1(a) of the Agreement:

 

(b)           Term Loan.

 

(i)           Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make a single term loan cash advance to Borrower (the “Term
Loan”) in an aggregate principal amount of Three Million Dollars ($3,000,000).
The Term Loan shall be made to Borrower on or prior to the closing of the
VendScreen Asset Purchase (the “Funding Date”), and the proceeds of the Term
Loan shall be used to repay an Advance of $3,000,000 currently outstanding under
the Revolving Facility drawn in December 2015 to finance the VendScreen Asset
Purchase.

 

(ii)         Interest shall accrue from the Funding Date at the rate specified
in Section 2.3, and shall be payable monthly on the tenth day of each month so
long as the Term Loan is outstanding, beginning with the tenth day of the first
month following the Funding Date. Beginning on the tenth day of the first month
following the first anniversary of the Funding Date and continuing on the tenth
day of each month thereafter for a period of twenty three (23) months, Borrower
shall make equal monthly payments of principal based on a five year (i.e. 60
month) amortization schedule. On the tenth day of the twenty forth (24th) month
following the first anniversary of the Funding Date (the “Term Loan Maturity
Date”), all amounts owing with respect to the Term Loan, including all
outstanding principal, accrued interest, and Bank Expenses, shall be immediately
due and payable.

 

(iii)        Borrower shall have the option to prepay any or all of the Term
Loan made by Bank under this Agreement without penalty or premium.

 

(iv)        When Borrower desires the Term Loan to be made, Borrower will notify
Bank no later than 3:00 p.m. Pacific Time, on the Business Day that is at least
one day prior to the date the Term Loan is requested to be made. Each such
notification shall be made by delivering to Bank a request form in substantially
the form of Exhibit B-1 attached hereto. Bank is authorized to make Term Loan
under this Agreement, based upon instructions received from a Responsible
Officer or a designee of a Responsible Officer; and Bank shall be entitled to
rely on any notice given by a person who Bank reasonably believes to be a
Responsible Officer or a designee thereof, and Borrower shall indemnify and hold
Bank harmless for any damages or loss suffered by Bank as a result of such
reliance.

 

6.            The following is added to the end of Section 2.3(a):

 

Except as set forth in Section 2.3(b), the Term Loan shall bear interest, on the
outstanding Daily Balance thereof, at a rate equal to 1.75% above the Prime
Rate; provided however that in no event shall the applicable interest rate be
less than five percent (5.0%).

 

 

 

  

7.            The first two sentences in Section 2.3(c) are amended and restated
in their entirety to read as follows:

 

Accrued interest with respect to the Revolving Facility shall be due and payable
in arrears on the first business day of each month during the term hereof. The
minimum interest payable with respect to the Revolving Facility for each six
month period, measured beginning with the period ending six months from the
Closing Date, and for each successive six month period thereafter, shall be
Twenty Thousand Dollars ($20,000).

 

8.            The following is added as a new Section 6.14 to the end of Section
6 of the Agreement:

 

6.14         Minimum Debt Service Coverage Ratio. Borrower shall achieve a
minimum Debt Service Coverage Ratio of at least ***, measured on a quarterly
basis.

 

9.           The Exhibit B-1 attached hereto is incorporated in its entirety as
Exhibit B-1 to the Agreement.

 

8.           Exhibits C and D to the Agreement is replaced in its entirety with
Exhibits C and D attached hereto.

 

9.           Unless otherwise defined, all initially capitalized terms in this
Amendment shall be as defined in the Agreement. The Agreement, as amended
hereby, shall be and remain in full force and effect in accordance with its
respective terms and hereby is ratified and confirmed in all respects. Except as
expressly set forth herein, the execution, delivery, and performance of this
Amendment shall not operate as a waiver of, or as an amendment of, any right,
power, or remedy of Bank under the Agreement, as in effect prior to the date
hereof. Borrower ratifies and reaffirms the continuing effectiveness of all
agreements entered into in connection with the Agreement.

 

10.         Borrower represents and warrants that the representations and
warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.

 

11.         This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original hereof. Notwithstanding the
foregoing, Borrower shall deliver all original signed documents no later than
ten (10) Business Days following the date of execution.

 

12.         As a condition to the effectiveness of this Amendment, Bank shall
have received, in form and substance satisfactory to Bank, the following:

 

 

 

  

(a)          this Amendment, duly executed by Borrower;

 

(b)          corporate resolution and incumbency certificate;

 

(c)          affirmation of guarantees; and

 

(d)          payment of a facility fee in the amount of $30,000 with respect to
the Term Loan, plus a prorated facility fee with respect to the Revolving
Facility in the amount of $1,667, plus all Bank Expenses incurred by Bank
through the date hereof.

 

[remainder of this page intentionally left blank]

 

 

 

  

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first
date above written.

  

  USA TECHNOLOGIES, INC.         By: /s/ Stephen P. Herbert         Name:
Stephen P. Herbert         Title: Chief Executive Officer         AVIDBANK
CORPORATE FINANCE,   a division of AVIDBANK         By: /s/ Jeffrey Javier      
  Name: Jeffrey Javier         Title: SVP, Head of Business Development

 

 

 

  

EXHIBIT A

 

ASSET PURCHASE AGREEMENT

 

 

 

  

EXHIBIT B-1
TERM LOAN REQUEST FORM

 

Date: _____________

Borrower: USA TECHNOLOGIES, INC.     Client ID: ____________

 

The undersigned hereby request a Term Loan in the amount of $3,000,000 in
accordance with the terms set forth in the Loan and Security Agreement between
the Borrower and Bank.

 

The undersigned also requests that the proceeds of the Term Loan are to be
applied to repay outstanding Advances under the Revolving Facility.

 

The undersigned represents and warrants, on behalf of Borrower that the
foregoing is true, complete and correct in all material respects, and that the
information reflected in this certificate complies with the representations and
warranties set forth in the Loan and Security Agreement between the Borrower and
Bank.

 

BORROWER:

 

USA Technologies, Inc.

 

By:       Authorized Signor  

 

Print Name:           Title:    

 

Bank Use Only            

Received by:

 

 

Date:

 

    AUTHORIZED SIGNER            

Approved by:

 

  Date:     AUTHORIZED SIGNER    

 

 

 

  

EXHIBIT C
BORROWING BASE CERTIFICATE

 

 

Borrower:  USA TECHNOLOGIES, INC. Lender:  Avidbank Corporate Finance,   a
division of Avidbank Commitment Amount:  $7,500,000  

 

REVENUES FROM NON-INVOICED ACCOUNTS RECEIVABLES

 

1.          Prior three-months networking service fees/transaction processing
revenues   $___________ 2.          Adjustments to Revenues, if any  
$___________ 3.          Total Processing Revenues (#1 minus #2)   $___________
4.          Loan Value of Processing Revenues (80% of #3)   $___________

 

BALANCES

 

 

5.          Maximum Loan Amount   $7,500,000 6.          Total Funds Available
[Lesser of #4 or (#5)]   $___________ 7.          Present balance owing on
Revolving Line   $___________ 8.          Present balance owing on Term Loan  
$___________ 9.          AVAILABLE BORROWING / RESERVE POSITION (#6 minus #7
minus #8)   $___________      

The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Avidbank Corporate Finance, a
division of Avidbank.

  

USA TECHNOLOGIES, INC.           By:       Authorized Signer    

 

 

 

 

EXHIBIT D
COMPLIANCE CERTIFICATE

 

TO: AVIDBANK CORPORATE FINANCE, A DIVISION OF AVIDBANK FROM: USA TECHNOLOGIES,
INC.

 

The undersigned authorized officer of USA TECHNOLOGIES, INC. hereby certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is in
complete compliance for the period ending _______________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct as of the date hereof.
Attached herewith are the required documents supporting the above certification.
The officer further certifies that these are prepared in accordance with
Generally Accepted Accounting Principles (GAAP) and are consistently applied
from one period to the next except as explained in an accompanying letter or
footnotes.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

  

Reporting Covenant   Required   Complies Schedule of Revenue Proceeds   Weekly  
Yes   No Transaction Report of Cash Disbursements &  Collections   Weekly   Yes
  No Trailing 3 months revenue report   Monthly within 20 days   Yes   No A/R &
A/P Agings   Monthly within 20 days   Yes   No Borrowing Base Certificate and
Compliance Certificate   Monthly within 20 days   Yes   No Monthly statements
from JPMorgan Chase   Monthly within 5 days of receipt   Yes   No Monthly bank
statements from Univest Bank and Trust Co.   Monthly within 20 days of receipt  
Yes   No Monthly financial statements   Monthly within 20 days   Yes   No Annual
Projections   Within 30 days of fiscal year beginning   Yes   No Quarterly
financial statements (Form 10Q)   Quarterly within 45 days   Yes   No Annual
financial statements (CPA Audited; Form 10K)   FYE within 120 days   Yes   No
A/R Audit   Semi-Annual   Yes   No IP Notices   As required under Section 6.11  
Yes   No

  

Financial Covenant   Required   Actual   Complies RML for month ended
_______________       $__________   Yes   No When RML is negative, Minimum
Liquidity of at least:   6 months RML   $__________   Yes   No When RML is
positive, ratio of Current Assets to Current Liabilities of at least:   1.00 to
1.00   ________ : 1.00   Yes   No Minimum Adjusted EBITDA for quarters ending:  
              December 31, 2015   $***   $__________   Yes   No March 31, 2016:
  $***   $__________   Yes   No June 30, 2016:   $***   $__________   Yes   No
Minimum Quarterly Debt Service Coverage Ratio:   ***   ________ : ***   Yes   No

  

 

 

  

Comments Regarding Exceptions:  See Attached. BANK USE ONLY       Received by:  
Sincerely, AUTHORIZED SIGNER       Date:         Verified:   SIGNATURE
AUTHORIZED SIGNER           Date:   TITLE     Compliance Status Yes No     DATE