NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
NINTH
AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS
NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment"), dated as
of July 21, 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"), the Seventh Amendment to Loan and Security Agreement dated
March 12, 2008 (the “Seventh Amendment”)
and the Eighth Amendment to Loan and Security Agreement and Waiver dated June
11, 2008 (the “Eighth
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. 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 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. Clause (i) in the definition of “Borrowing Base” in
Section 1.11(a) of the Loan Agreement is hereby amended and restated to
read in its entirety as follows:
“(i) the
sum of all collections received on the Accounts of Borrowers during the
immediately preceding forty-five (45) days”
(b) Revolving Loan
Limit. The definition of “Revolving Loan Limit” in Section
1.95 of the Loan Agreement is hereby amended and restated to read in its
entirety as follows:
“1.95 ‘Revolving
Loan Limit’ shall mean the amount of $45,000,000.”
(c) 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; provided that, for up to five
days per calendar month, in each case upon written notice of at least one
Business Day to the Agent, the Borrowers shall not be required to comply with
this Section 9.17.1.”
(d) Compliance with Liquidity
Forecast. Section 9.18 of the Loan Agreement is hereby amended
and restated to read in its entirety as follows:
“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 July 18, 2008, Borrowers shall maintain
aggregate Liquidity (defined below):
(x)
measured for each day from and including the 26th day of
each calendar month to and including the seventh day of each succeeding calendar
month, of no less than 65% of the projected aggregate Liquidity for such day as
calculated in the most recent applicable Forecast;
(y)
measured for each day from and including the eighth day of each calendar month
to and including the 14th day of
each calendar month,
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of no
less than 75% of the projected aggregate Liquidity for such day as calculated in
the most recent applicable Forecast; and
(z)
measured for each day from and including the 15th day of
each calendar month to and including the 25th day of
each calendar month, of no less than 85% of the projected aggregate Liquidity
for such day 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.”
2. Amendment
Fee. Borrower shall pay Agent, for the benefit of Lenders
based upon their respective Pro Rata Shares, an amendment fee in the amount of
$250,000, which shall be fully earned as of and due and payable by Borrower in
advance on the date hereof.
3. Subordinated
Financing. Borrower hereby acknowledges and agrees that on or
before July 25, 2008, Borrowers shall obtain subordinated financing in the form
of loans, letters of credit or both (collectively the “Subordinated
Financing”) in an amount of no less than $10,000,000, subject to a
subordination agreement satisfactory to the Agent in its sole discretion and
otherwise on terms and conditions reasonably satisfactory to the Agent; provided that failure to
comply with this section shall constitute an Event of Default under the Loan
Agreement and nothing herein shall operate to limit any rights or remedies the
Agent may have under the Loan Agreement or any other Loan Document.
4. Reporting
Requirements. Borrower hereby acknowledges and agrees that,
until the Loan Agreement is terminated, it shall provide to the Agent a report
on the first Business Day of each calendar week, providing the following
information as of the last Business Day of the previous calendar week: (a) the
sum of all amounts owing to all trade suppliers, (b) the amounts of all Letters
of Credit issued and outstanding to all trade suppliers, (c) the sum of cash on
deposit with all trade suppliers, and (d) the amount of trade credit
then-provided to the Borrowers; provided that all of the above
information shall be provided on a supplier-by-supplier basis and otherwise in
form and substance satisfactory to the Agent in its sole
discretion.
5. Termination of Loan
Agreement. Borrower hereby acknowledges and agrees that on or
before October 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.
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6. Effectiveness of this
Amendment. The effectiveness of this Amendment is 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) Representations and
Warranties. The representations and warranties set forth
herein and in the Loan Agreement shall be true and correct.
(c) 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. 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.
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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.
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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/ X. Xxxxxxx
Mitchell______________
Name: X. Xxxxxxx
Mitchell______________
Title: Chief
Financial Officer____________
a
Delaware corporation
By: _/s/ X. Xxxxxxx
Mitchell____________
Name: /s/ X. Xxxxxxx
Mitchell___________
Title: __Chief Financial
Officer__________
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WACHOVIA
CAPITAL FINANCE CORPORATION (WESTERN),
a
California corporation, as Agent and Lender
By: /s/ Xxxxxx
Valles___________________
Name: _Carlos
Valles__________________
Title:
Director, Capital
Finance___________
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XXXXX
FARGO FOOTHILL, LLC
as
Lender
By: /s/ Rina
Shinoda__________________
Name: Rina
Shinoda__________________
Title: Vice
President__________________
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