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Exhibit 10.22
EXECUTION
COPY
THIRD AMENDMENT TO REVOLVING LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO REVOLVING LOAN AND SECURITY AGREEMENT
(this "Third Amendment"), dated as of December 1, 1999, is entered into by and
between EMCORE CORPORATION, a New Jersey corporation (the "Borrower") and FIRST
UNION NATIONAL BANK (the "Bank").
RECITALS:
A. The Borrower and the Bank are parties to a certain Revolving Loan
and Security Agreement, dated as of March 31, 1997, as amended by a certain
Consent and Amendment Agreement, dated as of December 5, 1997 (the "First
Amendment"), as further modified pursuant to a certain Extension Letter dated
September 29, 1998 issued by the Bank and accepted by the Borrower (the "First
Extension Letter"), as further amended pursuant to a certain Second Amendment to
Revolving Loan and Security Agreement dated as of November 30, 1998 (the "Second
Amendment"), as further amended pursuant to a certain Waiver and Amendment
Letter Agreement dated as March 8, 1999 (the "First Amendment Letter"), as
further amended pursuant to a certain Acknowledgment, Consent and Amendment
Letter dated as of May 26, 1999 (the "Second Amendment Letter") and as further
modified pursuant to a certain letter of the Bank dated September 22, 1999 (the
"Second Extension Letter"). Said loan agreement, as amended by the First
Amendment, the First Extension Letter, the Second Amendment, First Amendment
Letter, the Second Amendment Letter and the Second Extension Letter is
hereinafter referred to as the "Loan Agreement".
B. The Revolving Loan Commitment (as defined in the Loan Agreement) is
due to expire on January 1, 2000 and, therefore, the Borrower has requested a
renewal and extension thereof to January 31, 2001.
C. The Bank is willing to amend the Loan Agreement to reflect the
parties understanding with respect to the renewal and extension of the Revolving
Loan Commitment to January 31, 2001 subject to, and in accordance with, the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements set forth herein, and for value received by each party, the parties
hereto agree as follows:
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SECTION 1. DEFINITIONS
1.1. EXISTING DEFINITIONS. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings set forth in the Loan Agreement. Upon
the effectiveness of this Third Amendment, the following defined terms shall be
amended as set forth herein and such amended definitions shall apply wherever
such defined terms are used in the Loan Documents.
(a) The defined term "Commitment Expiration Date" is hereby
amended and restated to read as follows:
"Commitment Expiration Date" means January 31, 2001,
unless extended in accordance with Section 2.5
hereof."
(b) The defined term "EBIT" is hereby amended and restated to
read as follows:
"EBIT" means, with respect to the Borrower, for any
period, the sum of (i) Net Income, (ii) Interest
Expense, (iii) depreciation and amortization, and
(iv) provisions for Federal, state and local income
taxes, of the Borrower, based on income, computed in
accordance with GAAP."
(c) The defined term "Eligible Accounts" is hereby amended and
restated to read as follows:
"Eligible Accounts" means, without limiting the Bank's sole
discretion to determine Eligible Accounts, those Accounts
created by the Borrower:
(i) which are genuine and not fraudulent;
(ii) which arise from undisputed, bona fide sales of goods
and/or services in the ordinary course of business completed
in accordance with the terms and provisions contained in any
documents related thereto;
(iii) as to which the amounts of such Accounts shown on any
schedule of Accounts provided to the Bank are actually and
absolutely owing to Borrower, are not contingent for any
reason and have not remained unpaid for more than 90 days
after the invoice date thereof;
(iv) which do not arise from sales on consignment, guaranteed
sale or other terms under which payment by the Account debtor
may be conditional;
(v) which, in the case of Accounts where the Account debtor is
a non-resident of the
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United States or Canada, are secured by a letter of credit
issued by a bank that is reasonably acceptable to Bank,
provided, however, that Accounts where the Account Debtor is
any one of Hakuto Co., Ltd., S&T Enterprises, Ltd., a
wholly-owned subsidiary of Hakuto Co., Ltd., Siemens AG, D.I.
Systems, Philips AG, Xxxxxxx, X.X. Ericsson AB, Samsung Co.,
L.G. Semiconductor Corporation, Hyundai Electronics, Daewoo
Co. or Azea, Xxxxx and Bavari (ABB) need not be secured by a
letter of credit;
(vi) which do not consist of "xxxx and hold" invoices or
retainage invoices;
(vii) with respect to which there are no set-offs,
counterclaims or disputes existing and there are no facts,
events or occurrences which in any manner would impair the
validity or enforceability or collectibility of such Accounts
or reduce the amount payable or delay payment thereunder;
(viii) as to which goods giving rise thereto are not, and were
not, at the time of the sale thereof, subject to any Liens
except those permitted by the Bank under this Agreement;
(ix) which are not Accounts with respect to which the Account
debtor is:
i. an officer, employer or agent of the
Borrower;
ii. the United States or any of its departments
or instrumentalities unless the Assignment
of Claims Act has been complied with;
iii. a Subsidiary or an Affiliate of the
Borrower;
iv. a Division of the Borrower (including, but
not limited to, the so-called "EMCORE West"
division); or
v. an Unconsolidated Affiliate;
(x) as to which there are no proceedings or actions which are
threatened or pending against the Account debtor of any such
Account which is reasonably likely to result in any material
adverse change in the Account debtor's financial condition;
(xi) which are owed by Account debtors deemed creditworthy and
acceptable at all times by the Bank in exercise of its
reasonable discretion; and
(xii) which otherwise constitute Collateral acceptable for
lending purposes in the sole discretion of the Bank."
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(d) The defined term "Eligible Inventory" is hereby amended
and restated to read as follows:
""Eligible Inventory" means Inventory located at
Borrower's facilities at 000 Xxxxxxxxx Xxxxxx,
Xxxxxxxx, Xxx Xxxxxx and the NM Facility and
comprising only raw materials. Specifically excluded
from the term "Eligible Inventory" shall be
work-in-process, finished goods, supplies, packing
materials, Inventory in transit and Inventory located
in any location other than the locations specified
above (unless the Bank is satisfied it has a
perfected first priority security interest in such
Inventory)."
(e) The defined term "Fixed Charge Coverage Ratio" is hereby
amended and restated to read as follows:
"Fixed Charge Coverage Ratio" shall mean, with
respect to the Borrower for the applicable period of
determination, the ratio of (A) the sum of (i) EBIT
for the period of determination, PLUS (ii) Imputed
Warrant Interest Expense for the period of
determination, PLUS Net Loss In Unconsolidated
Affiliates determined as of the end of the period of
determination TO (B) the sum of (i) the aggregate of
payment of principal with respect to Indebtedness of
the Borrower during the period of determination, PLUS
(ii) Capitalized Lease obligations during the period
of determination, PLUS (iii) Interest Expense during
the period of determination."
(f) The defined term "Imputed Warrant Interest Expense" is
hereby amended and restated to read as follows:
""Imputed Warrant Interest Expense" means, for any
period of determination, the non-cash interest
expense of the Borrower in respect of the Warrants
determined in accordance with GAAP."
(g) The defined term "Warrants" is hereby amended and restated
to read as follows:
"Warrants" means collectively, (i) the warrants
listed on SCHEDULE A attached to the Third Amendment
hereto dated as of December 1, 1999, and (ii) up to
300,000 warrant having exercise price of at least $15
per share to be issued to Xxxxxx X. Xxxxxxx in
consideration for his past guaranty of the Revolving
Loans.
1.2. ADDITIONAL DEFINITIONS. For purposes of the Loan
Agreement and the other Loan Documents, the following terms are hereby
incorporated into Section 1 of the Loan Agreement in their respective
appropriate alphabetical order:
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"Net Loss In Unconsolidated Affiliates" means, with respect to
the Borrower, for the relevant period the net loss appearing
as an expense on an income statement of the Borrower prepared
in accordance with GAAP, consistently applied, attributable to
its investment in Unconsolidated Affiliates.
"Unconsolidated Affiliates" means UMcore LLC, the Borrower's
joint venture with Union Miniere Inc., GELCORE LLC, the
Borrower's joint venture with General Electric Company, and
Uniroyal Optoelectronics LLC, the Borrower's joint venture
with Uniroyal Technology Corporation, in each case so long as
the Borrower's investment in each such joint venture can be
accounted for using the equity method of accounting as a
result of the Borrower's inability to directly or indirectly
control economic and voting interests in said joint ventures.
SECTION 2. EXISTING OBLIGATIONS
2.1. ACKNOWLEDGMENT OF EVENTS OF DEFAULT, WAIVER, AMOUNTS OUTSTANDING.
(a) The Borrower acknowledges that it has failed to comply
with certain of the terms and conditions of the Loan Agreement, specifically the
Fixed Charge Ratio set forth in Section 10.14(a) of the Loan Agreement (all as
more particularly described on SCHEDULE I annexed hereto (the "Specified
Default") and that, as a result of the Borrower's failure to perform and satisfy
its obligations under the Loan Agreement, an Event of Default existed
thereunder. The Borrower represents and warrants to the Bank that no Events of
Default or Unmatured Events of Default (other than the Specified Default) have
occurred and are continuing.
(b) The Bank agrees that, upon the satisfaction of the
conditions precedent set forth in Section 4 of this Third Amendment and the
execution of this Third Amendment by all parties, the Specified Default shall be
waived. Such waiver shall be effective only with respect to the Specified
Default and only as said default relates to the Borrower's failure to comply
with the provisions related to such default as of September 30, 1999 and shall
not affect or be deemed to relate to any other Events of Default which have
occurred and are continuing as of the date hereof or which may occur after the
date hereof. No course of dealing or custom shall be implied or construed with
respect to any other instance of non-compliance with any term or provision of
the Loan Documents occurring in the past, existing at present, or arising in the
future by virtue of the waiver contained herein. This waiver shall not
constitute a waiver of any of the rights and remedies available to the Bank
elsewhere in the Loan Documents, all of which are specifically reserved.
(c) The Borrower further acknowledges that, as of the date
hereof, the aggregate principal amount outstanding under the Revolving Loans is
$0.
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2.2. WAIVER OF CLAIMS AND DEFENSES; RELEASE.
(a) The Borrower agrees that, as of the date hereof, it has no
claim, counterclaim, cause of action or defense of any kind by way of offset or
otherwise to the payment and satisfaction in full of the Revolving Loans. The
foregoing notwithstanding, to the extent that any such a claim or defense may or
does exist, as of the date hereof, the Borrower waives and releases any and all
such claims, counterclaims, causes of action and defenses.
(b) The Borrower further waives and releases and affirmatively
agrees not to allege or otherwise pursue, in any manner, any and all defenses,
affirmative defenses, counterclaims, claims, causes of action, set-offs or other
rights that it may have as of the date hereof to contest: (i) the Specified
Default; (ii) any provisions of the Loan Agreement and other Loan Documents;
(iii) the rights of the Bank to all rents, issues, profits, products and
proceeds of the Collateral for the Revolving Loans; (iv) the liens for the
benefit of the Bank in any property (whether real or personal, tangible or
intangible), right or other interest, now or hereafter arising in connection
with the Collateral for the Revolving Loans; and (v) any and all acts or
omissions of the Bank in administering the amounts outstanding under the Loan
Agreement or otherwise; and the Borrower fully and forever releases and
discharges the Bank from any and all claims or liability of any kind or nature
with respect to the foregoing.
2.3 REAFFIRMATION OF SECURITY INTEREST AND LIENS. The Borrower
acknowledges and agrees that the security interests and other liens granted to
the Bank in the Collateral described in Section 7 of the Loan Agreement are and
remain valid and first priority liens on the assets subject thereto. The
Borrower further represents and warrants that (i) such collateral includes, but
is not limited to, all such Collateral located, or arising as a result of
operations, at the NM Facility and (ii) there are no claims, set-offs or
defenses to the Bank's exercise of any rights or remedies available to it as a
creditor in realizing upon such collateral under the terms and conditions of the
Loan Documents. The Borrower further acknowledges that the obligations secured
by and under the Loan Agreement include, but are not limited to, all such
obligations of the Borrower related to the Revolving Loans as modified hereby.
SECTION 3. LOANS
3.1 RENEWAL OF REVOLVING LOAN COMMITMENT. Upon satisfaction of the
conditions to effectiveness set forth in Section 4 of this Third Amendment, the
Revolving Loan Commitment made available by the Bank to the Borrower pursuant to
the Loan Agreement shall be extended and renewed through and including January
31, 2001. The Borrower and the Bank hereby acknowledge that interest shall
accrue on the unpaid principal amount of each Revolving Credit Loan at a PER
ANNUM ratio equal to the Prime Rate PLUS fifty basis points (.50%), subject to
increase to the Default Rate in accordance with the terms of the Loan Documents.
In consideration of the renewal and extension of the Revolving Loan Commitment,
the Borrower shall pay to the Bank a non-refundable renewal fee in the amount of
$50,000 of which shall be due and payable upon execution and delivery of this
Third Amendment.
SECTION 4. CONDITIONS PRECEDENT
4.1. CONDITIONS TO THIS THIRD AMENDMENT. This Third Amendment shall
become effective
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as of the date first written above upon fulfilment of the following conditions
precedent, all as determined by the Bank, in its sole and absolute discretion:
(a) The Borrower shall have paid and/or reimbursed the Bank for all
costs and expenses incurred in connection with the extension herein
contemplated, including, without limitation, the reasonable fees and
disbursements of the Bank's outside counsel, Windels, Marx, Davies & Ives;
(b) The Borrower shall have caused to be delivered by the Guarantor a
Guarantor Agreement, in substantially the form of EXHIBIT "A" attached hereto,
duly executed and delivered by the Guarantor to the Bank;
(c) The Borrower shall have provided to the Bank resolutions of the
boards of directors of the Borrower and the Guarantor, certified by the
secretary of each of them as of the date hereof to be duly adopted and in full
force and effect on such date, authorizing the consummation of each of the
transactions contemplated by this Third Amendment;
(d) The Borrower shall have provided to the Bank certificates of the
appropriate governmental authorities, dated the most recent practicable date
prior to the date hereof, showing that Borrower and the Guarantor are in good
standing in the States of New Jersey and New Mexico, and in such other
jurisdictions as the Bank shall reasonably request;
(e) The Borrower shall have caused to be delivered to the Bank an
opinion of counsel to the Borrower and the Guarantor, in form and substance
satisfactory to the Bank and its counsel, regarding such matters as the Bank may
reasonable request in connection with the transactions contemplated in this
Third Amendment;
(f) The Borrower shall have caused to be delivered to the Bank evidence
that the insurance policies provided for in Section 10.7 of the Loan Agreement
are in full force and effect, with appropriate loss payee and additional insured
clauses in favor of the Bank, certified by the insurer;
(g) The Borrower shall have caused to be delivered to the Bank payment
of the renewal fee referenced in Section 3.1 hereof; and
(h) Such additional information and documents as the Bank may request.
SECTION 5. RATIFICATION AND AMENDMENT OF REPRESENTATIONS, WARRANTIES AND
COVENANTS
5.1. RATIFICATION. Borrower hereby ratifies, confirms and restates, as
if set forth herein in their entirety, all representations, warranties,
covenants, acknowledgments and agreements set forth in Section 8 of the Loan
Agreement, as amended prior the date hereof, at and as of the date hereof (other
than representations, warranties and covenants which expressly speak only as of
a different date), and
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affirmatively states that all of the same are true and accurate and shall be and
remain in full force and effect, subject only to changes effected by this Third
Amendment and/or changes previously disclosed to the Bank in writing. In
addition, Borrower represents and warrants to the Bank that:
(a) the Borrower has the power and authority to enter into
this Third Amendment;
(b) the Borrower's unaudited consolidated financial statements
as of June 30, 1999, which were furnished previously to the Bank, were prepared
in accordance with GAAP consistently applied throughout the period involved, and
present fairly the financial position of the Borrower as at the date thereof and
the results of operations and cash flows of the Borrower for the period then
ended;
(c) no changes having a material adverse effect have occurred
since the date of such financial statements referred to in Section 5.1(b) above;
(d) the execution, delivery and performance of this Third
Amendment and the instruments and agreements executed and delivered in
connection herewith by the Borrower have been duly authorized by all requisite
corporate action and this Third Amendment and the instruments and agreements
executed and delivered in connection herewith constitute the legal, valid and
binding obligations of the Borrower, enforceable against it in accordance with
their terms;
(e) the Borrower is not in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court or other
governmental authority which would have a material adverse effect;
(f) there have been no changes to the certificate of
incorporation or by-laws of any of the Borrower or the Guarantor since March 31,
1999; and
(g) no Event of Default or Unmatured Event of Default has
occurred and is continuing or will result from the execution, delivery and
performance of this Third Amendment and the instruments and agreements executed
and delivered in connection herewith.
5.2. AMENDMENT OF CERTAIN PROVISIONS OF LOAN AGREEMENT.
(a) The last paragraph of Section 2.2 of the Loan Agreement
(which was added to the Loan Agreement pursuant to Section 1(d) of the First
Amendment) is hereby deleted in its entirety.
(b) Section 6.2 of the Loan Agreement is hereby deleted in its
place there shall appear the following:
"6.2 COMMITMENT FEE. [INTENTIONALLY DELETED]"
(c) There shall be added to Section 10.1 of the Loan
Agreement, the following new reporting requirements:
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"(i) In addition to, and not in lieu of, the
information required pursuant to clauses (d) and (f) above, by
no later than the date that is 7 Business Days following the
end of the Borrower's fiscal quarter ending March 31, 2000,
(x) a completed Borrowing Base Certificate (in the form
annexed hereto as Exhibit 10.1 (E)) for the quarter then
ended, signed by the Chief Financial Officer of the Borrower,
detailing the Borrower's availability under the Borrowing Base
and (y) a certificate of the Chief Financial Officer or
President of the Borrower stating that such officer has
obtained no knowledge of any Unmatured Event of Default or
Event of Default except as specified in such certificate and
showing in detail the calculations supporting such statement
in respect of Section 10.14."
"(j) By no later than 15 Business Days following the
end of each fiscal quarter of the Borrower, commencing with
the fiscal quarter ending December 31, 1999, detailed
management-prepared financial projections for the next four
(4) succeeding fiscal quarters, in substantially the same
format previously furnished to the Bank."
(d) Clause (b) of Section 10.14 of the Loan Agreement is
hereby amended and restated in its entirety to read as follows:
"(b) EFFECTIVE TANGIBLE NET WORTH. The Borrower shall
maintain an Effective Tangible Net Worth all times of not
less than $65,000,000.00. "Effective Tangible Net Worth"
means total assets MINUS total liabilities, PLUS the
accumulated Net Loss In Unconsolidated Affiliates from
October 1, 1999 through the time of computation of Effective
Tangible Net Worth (to the extent that such accumulated Net
Loss. In Unconsolidated Affiliates has been substracted from
the retained earnings of the Borrower's for the purpose of
calculation of said Effective Tangible Net Worth) in each case
determined in accordance with GAAP, applied on a consistent
basis. For purposes of this computation, the aggregate amount
of any assets classified as Intangibles shall be subtracted
from total assets and total liabilities shall not include the
Borrower's obligations with respect to the New Preferred Stock
to the extent that such obligations are otherwise classified
as liabilities of the Borrower in accordance with GAAP. "
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(e) Section 10.17 of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"LIMITATION ON INVESTMENTS. The Borrower shall not
purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting a business
unit of any Person, except (i) investments in direct
Obligations of the United States government and
certificates of deposit of United States commercial
banks having a tier 1 capital ratio of not less than
6%, and then in an amount not to exceed 10% of the
issuing bank's unimpaired capital and surplus and
(ii) investments in the form of capital contributions
in the amount of $6,000,000 to Uniroyal
Optoelectronics LLC, a capital contribution of
$600,000 to UMCORE LLC and the initial capital
contribution of $15,680,00 to GELCORE LLC". The
foregoing shall not, however, be construed as an
express or implied consent by the Bank to any
transaction otherwise prohibited or restricted by
this Agreement undertaken by the Borrower to obtain
the funds for any such investment.
(f) Section 10.27 of the Loan Agreement (which was added to
the Loan Agreement pursuant to Section 1(q) of the First Amendment) is hereby
deleted and in its place there shall appear the following:
"10.27. [INTENTIONALLY DELETED]"
SECTION 6. MISCELLANEOUS.
6.1. CONTINUED EFFECTIVENESS. Except as specifically amended by and/or
inconsistent with this Third Amendment, all of the terms and conditions of the
Loan Agreement shall remain unchanged and in full force and effect and are
hereby ratified, adopted and confirmed in all respects. All references to the
Loan Agreement in any Loan Document shall hereafter be deemed to refer to the
Loan Agreement as amended prior to the date hereof and by this Third Amendment.
This Third Amendment is a Loan Document.
6.2. PAYMENT OF EXPENSES. Borrower shall pay the reasonable fees and
expenses (including, but not limited to, reasonable attorneys' fees and
expenses) incurred by the Bank in connection with the preparation, negotiation,
execution and delivery and enforcement of this Third Amendment and the documents
executed and delivered in connection herewith and any and all renewals,
modifications, amendments and waivers hereof and hereunder.
6.3. ENTIRE AGREEMENT. This Third Amendment, together with the other
Loan Documents, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes any prior agreements,
written or oral, with respect to such subject matter.
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6.4. COUNTERPARTS. This Third Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same agreement, and any party may execute
this Third Amendment by signing any such counterpart.
6.5. GOVERNING LAW. This Third Amendment shall be interpreted, and the
rights and liabilities of the parties hereto, whether arising in contract or
tort and howsoever pertaining to the parties' relationship, shall be determined
in accordance with the laws of the State of New Jersey.
6.6. HEADINGS. The section titles contained in this Third Amendment
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreement between the parties.
SECTION 7. RELEASE OF GUARANTY OF XXXXXX X. XXXXXXX AND TJR HOLDING TRUST.
7.1 RELEASE. Upon the satisfaction of the condition precedent to the
effectiveness of this Third Amendment set forth in Section 4 hereof, the
unconditional guaranty of Xxxxxx X. Xxxxxxx and TJR Holding Trust (together, the
"Guarantors") as provided in that certain Amended and Restated Unconditional
Guaranty dated April 29, 1999 (the "Guaranty") and the collateral securing such
Guarantors' obligations thereunder provided in that certain Amended and Restated
Pledge and Assignment Agreement dated April 29, 1999 (the "Pledge") are hereby
released, terminated and of no further in force and effect. The release herein
provided is intended to be self-operative and the Guarantors may present this
Third Amendment to any interested party to evidence the Guarantors' complete
release from all obligations to guaranty and provide collateral for the
Revolving Loans under the Loan Documents pursuant to the Guaranty and the
Pledge, respectively. The Bank shall execute any further instruments of release
or termination statements as the Guarantors may reasonably request, all at
Guarantors' sole cost and expense.
IN WITNESS WHEREOF, the parties have executed this Third Amendment the day and
year first above-written.
EMCORE CORPORATION,
a New Jersey corporation
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: CFO & Vice President
FIRST UNION NATIONAL BANK
By: /s/ Xxxxxx X. Xxxxxx, Xx.
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Name: Xxxxxx X. Xxxxxx, Xx.
Title: Vice President
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SCHEDULE I
SPECIFIED DEFAULT
1. Failure to comply with the Fixed Charge Ratio covenant set forth in
Section 10.14(a) of the Loan Agreement for the fiscal period ending September
30, 1999.
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EXHIBIT A
GUARANTOR AGREEMENT OF
MICROOPTICAL DEVICES, INC.
