EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER
EIGHTH
AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER
THIS
EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this "Amendment"), dated as
of June 11, 2008, is entered into among COMMERCE ENERGY, INC., a California
corporation ("Borrower"), COMMERCE
ENERGY GROUP, INC., a Delaware corporation ("Parent"), WACHOVIA
CAPITAL FINANCE CORPORATION (WESTERN), a California corporation, as Agent
("Agent") and
the financial institutions party to the below referenced Loan Agreement as
Lenders (collectively, "Lenders").
RECITALS
A. Borrower,
Parent, Agent and Lenders have previously entered into that certain Loan and
Security Agreement dated June 8, 2006 (the "Loan Agreement") as
amended by the First Amendment to Loan and Security Agreement and Waiver dated
September 20, 2006 (the "First Amendment"),
the Second Amendment to Loan and Security Agreement and Waiver dated
October 26, 2006 (the "Second Amendment"),
the Third Amendment to Loan and Security Agreement and Waiver dated
March 15, 2007 (the "Third Amendment"),
the Fourth Amendment to Loan and Security Agreement dated June 26, 2007 (the
"Fourth
Amendment"), the Fifth Amendment to Loan and Security Agreement dated
August 1, 2007 (the "Fifth Amendment"),
the Sixth Amendment to Loan and Security Agreement dated November 16, 2007
(the "Sixth
Amendment") and the Seventh Amendment to Loan and Security Agreement
dated March 12, 2008 (the “Seventh Amendment”)
pursuant to which Agent and Lenders have made certain loans and financial
accommodations available to Borrower. Terms used herein without
definition shall have the meanings ascribed to them in the Loan
Agreement.
B. The
following Events of Default have occurred and are continuing under the Loan
Agreement: (i) Borrower failed to maintain a Fixed Charge Coverage
Ratio of not less than 1.5 to one for the twelve (12) consecutive month period
ended April 30, 2008 as required in Section 9.17 of the Loan Agreement and (ii)
Borrower failed to earn EBITDA of not less than $3,500,000 for the
nine (9) consecutive month period ended April 30, 2008 as required in Section
9.17.2 of the Loan Agreement (collectively, the “Known Existing
Defaults”).
C. Borrower
and Parent have requested that Agent and Lenders waive the Known Existing
Defaults and amend the Loan Agreement on the terms and conditions set forth
herein.
D. Borrower
and Parent are entering into this Amendment with the understanding and agreement
that, except as specifically provided herein, none of Agent's or any Lender's
rights or remedies as set forth in the Loan Agreement is being waived or
modified by the terms of this Amendment.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
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1. Amendments to Loan
Agreement.
(a) Borrowing
Base. The definition of “Borrowing Base” in Section 1.11
of the Loan Agreement is hereby amended and restated to read in its entirety as
follows:
“1.11 ‘Borrowing
Base’ shall mean, at any time, the difference of (a) the lesser of (i) the
sum of all collections received on the Accounts of Borrowers during the
immediately preceding thirty (30) days, or (ii) the sum of
(A) eighty-five (85%) percent of the Eligible Billed Accounts, plus
(B) the lesser of $12,000,000 or sixty-five (65%) percent of the Eligible
Unbilled Accounts, plus (C) the lesser of the Inventory Loan Limit or
seventy (70%) percent multiplied by the Value of the Eligible Inventory, plus
(D) the lesser of $35,000,000 or ninety-five (95%) percent of Eligible Cash
Collateral, minus (b) any Reserves.”
(b) Excess
Availability. The definition of “Excess Availability” in
Section 1.41 of the Loan Agreement is hereby amended to insert the phrase “plus
any additional loans or other lines of credit arranged by Borrowers and approved
by the Agent that are subordinated in right of payment to the Obligations on
terms and conditions satisfactory to the Agent” immediately after the phrase “in
respect of Letter of Credit Obligations)” in clause (a) thereof.
(c) Interest
Rate.
(i) The
phrase "three quarters of one (0.75%) percent" in the definition of “Interest
Rate” in Section 1.58(a)(i) of the Loan Agreement is hereby replaced with
"two and one-quarter (2.25%) percent".
(ii) The
phrase “three and one-quarter (3.25%) percent” in the definition of “Interest
Rate” in Section 1.58(a)(ii) of the Loan Agreement is hereby replaced with “four
and three-quarters (4.75%) percent”.
(d) Letter of Credit
Rate.
(i) The
phrase "two and one-quarter (2.25%) percent" in the definition of “Letter of
Credit Rate” in Section 1.66(a) of the Loan Agreement is hereby replaced
with "three and three-quarters (3.75%) percent".
(ii) The
phrase "two (2.00%) percent" in the definition of “Letter of Credit Rate” in
Section 1.66(b) of the Loan Agreement is hereby replaced with "three and
one-half (3.50%) percent".
(e) Collections. Notwithstanding
any prior course of conduct, Borrower acknowledges and reaffirms its agreement
under Sections 6.3(a) and (c) of the Loan Agreement to promptly deposit
into the Lockbox Accounts and to direct its account debtors to directly remit
into the Lockbox Accounts all payments on Receivables and all payments
constituting proceeds of Inventory or other Collateral in the identical form in
which such payments are made, whether by cash, check or other manner, and to
transfer the funds deposited into the Lockbox Accounts to the Blocked Accounts
for application to the Obligations.
(f) Access to Premises and
Management. Section 7.7 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
“7.7 Access to Premises and
Management. From time to time as requested by Agent, at the
cost and expense of Borrowers, (a) Agent or its designee (which for purposes of
this section shall include Xxxx Xxxxx Advisory Group LLC, and its Affiliates,
sucessors or assigns (collectively, the “Consultant”)) shall,
at any time after notice to Parent, or at any time without notice to
Administrative Borrower if an Event of Default exists or has occurred and is
continuing, have (i) complete access to and cooperation of management of each
Borrower and each Guarantor, and (ii) complete access to all of each Borrower's
and Guarantor’s premises during normal business hours, each for the purposes of
inspecting, verifying and auditing the Collateral and all of each Borrower's and
Guarantor’s books and records (including the Records), assessing each Borrower’s
historic cash flows, liquidity and financial controls and performance generally,
and the projected Borrowing Base and Excess Availability, and (b) each Borrower
and Guarantor shall promptly furnish to Agent or its designee such copies of
such books and records or extracts therefrom as Agent or its designee may
request, and Agent or any Lender or Agent’s designee may use during normal
business hours such of any Borrower's and Guarantor’s personnel, equipment,
supplies and premises as may be reasonably necessary for the foregoing and if an
Event of Default exists or has occurred and is continuing for the collection of
Receivables and realization of other Collateral; provided that for purposes of
the performance of duties under this section, the Consultant shall be
deemed the agent and advisor of Agent for the purposes of Section 11.5
hereof.”
(g) Fixed Charge Coverage
Ratio. Section 9.17 of the Loan Agreement is hereby amended
and restated to read in its entirety as follows:
“9.17 Fixed Charge Coverage
Ratio. Parent and its Subsidiaries shall maintain a Fixed
Charge Coverage Ratio as of the last day of each month beginning August 31,
2008, as determined for the period of each month then ending, of not less than
one to one. Based upon the projected financial statements furnished
by Borrowers to Agent pursuant to Section 9.6(a)(iii) hereof for each fiscal
year after July 31, 2008, Agent shall reasonably establish minimum Fixed Charge
Coverage Ratio levels for Parent and its Subsidiaries for each period beginning
on August 1, 2008 and ending on the last day of each of October, January, April
and July during such fiscal year (it being understood that such levels will be
no less stringent than one to one).”
(h) Excess
Availability. Section 9.17.1 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
“9.17.1 Excess
Availability. Borrowers shall maintain Excess Availability of
not less than $2,500,000 at all times prior to November 1, 2008 and $10,000,000
at all times on and after November 1, 2008.”
(i) EBITDA. Section 9.17.2
of the Loan Agreement is hereby amended and restated to read in its entirety as
follows:
"9.17.2 EBITDA. Parent
and its Subsidiaries shall earn EBITDA during each month, measured on the last
day of such month beginning August 31, 2008 and as determined for the period of
such month then ending, of not less than $500,000. Based upon the
projected financial statements furnished by Borrowers to Agent pursuant to
Section 9.6(a)(iii) hereof for each fiscal year after July 31, 2008, Agent
shall reasonably establish minimum EBITDA levels for Parent and its Subsidiaries
for each period beginning on August 1, 2008 and ending on the last day of each
of October, January, April and July during such fiscal year (it being understood
that such levels will be no less stringent than those set forth above), and
Parent and its Subsidiaries shall earn EBITDA during each such period of not
less than the applicable minimum EBITDA level so established by
Agent."
(j) Compliance with Liquidity
Forecast. The following Section 9.18 (previously reserved in
the Sixth Amendment) is hereby added to the Loan Agreement:
“9.18 Compliance with Liquidity
Forecast. Borrowers shall, until the last day of any month in
which the Borrowers shall (a) have earned at least $7,000,000 in EBITDA as
determined for a period of twelve (12) consecutive months then ending and (b)
have maintained a Fixed Charge Coverage Ratio of not less than 1.5 to one as
determined for a period of twelve (12) consecutive months then ending, provide
to the Agent, on the last Business Day of each week beginning June 6, 2008, a
projected daily Liquidity (defined below) forecast (each such document a “Forecast”) for the
next succeeding eight weeks, at a minimum in the form and substance of Exhibit D hereto, but
the contents of which shall be more fully agreed upon among the Borrowers and
Agent and in any case in form and substance satisfactory to the Agent, for each
Borrower and Guarantor, and each of their respective
Subsidiaries. Beginning on June 13, 2008, Borrowers shall maintain
aggregate Liquidity (defined below), measured weekly for each preceding week, of
no less than 65% of the projected aggregate Liquidity for such week as
calculated in the most recent applicable Forecast; provided that an additional
Forecast, in form and substance satisfactory to the Agent, shall be provided to
the Agent on the 15th day of
each month, and if such Forecast projects that the aggregate Liquidity of the
Borrowers will be less than zero as of the 20th and/or
25th
days of each month, after the payment by the Borrowers of all payables to
suppliers, Borrowers shall have a cure period of five (5) Business Days from the
delivery of such Forecast to ensure forecasted Liquidity as of the 20th and
25th
days of such month shall not be less than zero; provided further that
regardless of any cure period and until any such Liquidity deficit is cured, the
Borrowers shall be deemed to be in non-compliance with this section and nothing
herein shall operate to limit any rights or remedies the Agent may have under
this Agreement or any other Loan Document. For purposes of this
section, “Liquidity” shall mean
the sum of unencumbered available cash, plus Cash
Equivalents, plus Excess
Availability.”
(k) Early Termination
Fee. Section 13.1(c) of the Loan Agreement is hereby deleted
in its entirety.
2. Waiver of Known Existing
Defaults. Agent and Lenders hereby waive enforcement of their
rights and remedies arising from the Known Existing Defaults; provided, however,
nothing herein shall be deemed a waiver with respect to any failure to comply
fully with Sections 9.17 and 9.17.2 of the Loan Agreement (as amended or
modified by this Amendment) at any time hereafter or with respect to any period
ending after the date hereof. This waiver shall be effective only for
the specific defaults comprising the Known Existing Defaults, and in no event
shall this waiver be deemed to be a waiver of Agent’s or any Lender’s rights and
remedies with respect to any other Defaults or Events of Default now existing or
hereafter arising. Nothing contained in this Amendment nor any
communications between Borrower or Parent and Agent or any Lender shall be a
waiver of any rights or remedies Agent and Lenders have or may have, except as
specifically provided herein. Except as specifically provided herein,
Agent and Lenders hereby reserve and preserve all of their rights and remedies
under the Loan Agreement and the other Financing Agreements.
3. Amendment
Fee. Until the termination of the Loan Agreement, Borrower
shall pay Agent, for the benefit of Lenders based upon their respective Pro Rata
Shares, a monthly service fee in the amount of $35,000, the first payment of
which shall be fully earned as of and due and payable by Borrower in advance on
the date hereof and on the first day of each month hereafter; provided that the service fees
to be paid by the Borrower under this section shall be no less than $140,000 in
the aggregate.
4. Delivery of Annual
Budget. Pursuant to the request of Agent under Section 9.6(d)
of the Loan Agreement, Borrower shall deliver to Agent the 2009 fiscal year
budget of each Borrower, in form and substance satisfactory to the Agent, on or
before July 15, 2008.
5. Termination of Loan
Agreement. Borrower hereby acknowledges and agrees that on or
before November 1, 2008, Borrower shall terminate the Loan Agreement pursuant to
the terms of Section 13 thereof (as amended by this Amendment), and on other
terms and conditions satisfactory to the Agent to the extent not prescribed by
such section.
6. Effectiveness of this
Amendment. The effectiveness of this Amendment, and the
waivers provided herein, are conditioned upon the occurrence of each of the
following:
(a) Amendment. Agent
shall have received this Amendment, fully executed in a sufficient number of
counterparts for distribution to all parties.
(b) Fee
Letter. Agent shall have received a fully-executed copy of the
fee letter agreement, dated as of the date hereof, between Agent and
Borrower.
(c) Representations and
Warranties. The representations and warranties set forth
herein and in the Loan Agreement shall be true and correct.
(d) Other Required
Documentation. All other documents and legal matters in
connection with the transactions contemplated by this Amendment shall have been
delivered or executed or recorded and shall be in form and substance
satisfactory to Agent.
7. Representations and
Warranties. Each of Borrower and Parent represents and
warrants as follows:
(a) Authority. Such
party has the requisite corporate power and authority to execute and deliver
this Amendment, and to perform its obligations hereunder and under the Financing
Agreements (as amended or modified hereby) to which it is a
party. The execution, delivery and performance by such party of this
Amendment have been duly approved by all necessary corporate action and no other
corporate proceedings are necessary to consummate such
transactions.
(b) Enforceability. This
Amendment has been duly executed and delivered by such party. This
Amendment and each Financing Agreement (as amended or modified hereby) is the
legal, valid and binding obligation of such party, enforceable against such
party in accordance with its terms, and is in full force and
effect.
(c) Representations and
Warranties. The representations and warranties contained in
each Financing Agreement (other than any such representations or warranties
that, by their terms, are specifically made as of a date other than the date
hereof) are correct on and as of the date hereof as though made on and as of the
date hereof.
(d) Material Adverse
Effect. There has been no Material Adverse
Effect.
(e) Due
Execution. The execution, delivery and performance of this
Amendment are within the power of such party, have been duly authorized by all
necessary corporate action, have received all necessary governmental approval,
if any, and do not contravene any law or any material contractual restrictions
binding on such party.
(f) No
Default. After giving effect to the waivers contained herein,
no event has occurred and is continuing that constitutes a Default or Event of
Default.
8. Governing
Law. The validity, interpretation and enforcement of this
Amendment and any dispute arising out of the relationship between the parties
hereto, whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of California but excluding any principles of
conflicts of law or other rule of law that would cause the application of the
law of any jurisdiction other than the laws of the State of
California.
9. Counterparts. This
Amendment may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Amendment by
telefacsimile or other electronic method of transmission shall have the same
force and effect as the delivery of an original executed counterpart of this
Amendment. Any party delivering an executed counterpart of this
Amendment by telefacsimile or other electronic method of transmission shall also
deliver an original executed counterpart, but the failure to do so shall not
affect the validity, enforceability or binding effect of this
Amendment.
10. Reference to and Effect on
the Financing Agreements.
(a) Upon and
after the effectiveness of this Amendment, each reference in the Loan Agreement
to "this Agreement", "hereunder", "hereof" or words of like import referring to
the Loan Agreement, and each reference in the other Financing Agreements to "the
Loan Agreement", "thereof" or words of like import referring to the Loan
Agreement, shall mean and be a reference to the Loan Agreement as modified and
amended hereby.
(b) Except as
specifically amended above, the Loan Agreement and all other Financing
Agreements, are and shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed and shall constitute the legal, valid,
binding and enforceable obligations of Borrower or Parent (as applicable) to
Agent and Lenders.
(c) The
execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
Agent or Lenders under any of the Financing Agreements, nor constitute a waiver
of any provision of any of the Financing Agreements.
(d) To the
extent that any terms and conditions in any of the Financing Agreements shall
contradict or be in conflict with any terms or conditions of the Loan Agreement,
after giving effect to this Amendment, such terms and conditions are hereby
deemed modified or amended accordingly to reflect the terms and conditions of
the Loan Agreement as modified or amended hereby.
11. Estoppel. To
induce Agent and Lenders to enter into this Amendment and to continue to make
advances to Borrower under the Loan Agreement, Borrower hereby acknowledges and
agrees that, as of the date hereof, there exists no right of offset, defense,
counterclaim or objection in favor of Borrower as against Agent or Lenders with
respect to the Obligations.
12. Integration. This
Amendment, together with the other Financing Agreements, incorporates all
negotiations of the parties hereto with respect to the subject matter hereof and
is the final expression and agreement of the parties hereto with respect to the
subject matter hereof.
13. Severability. In
case any provision in this Amendment shall be invalid, illegal or unenforceable,
such provision shall be severable from the remainder of this Amendment and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
14. Submission of
Amendment. The submission of this Amendment to the parties or
their agents or attorneys for review or signature does not constitute a
commitment by Agent to waive any of its rights and remedies under the Financing
Agreements, and this Amendment shall have no binding force or effect until all
of the conditions to the effectiveness of this Amendment have been satisfied as
set forth herein.
[signature
to follow on next page]
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IN
WITNESS WHEREOF, the parties have entered into this Amendment as of the date
first above written.
COMMERCE
ENERGY, INC.,
a
California corporation
By: /s/ C. Xxxxxxx
Xxxxxxxx
Name:
/s/ X. Xxxxxxx
Mitchell______________
Title: Interim Chief Financial
Officer
a
Delaware corporation
By: /s/ C. Xxxxxxx
Xxxxxxxx
Name:
X. Xxxxxxx
Mitchell______________
Title: Interim Chief Financial
Officer
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WACHOVIA
CAPITAL FINANCE CORPORATION (WESTERN),
a
California corporation, as Agent and Lender
By: /s/ Xxxxxx
Xxxxxx
Name:
Xxxxxx
Xxxxxx
Title:
Director
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XXXXX
FARGO FOOTHILL, LLC
as
Lender
By: /s/ Xxxx
Xxxxxxx
Name:
Xxxx
Xxxxxxx
Title:
Vice
President
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EXHIBIT
D
TO THE
LOAN AGREEMENT
SAMPLE LIQUIDITY
FORECAST
See
attached.
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