SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER
SEVENTH
AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER
THIS
SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this "Amendment"), dated as
of March 12, 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") and
the Sixth Amendment to Loan and Security Agreement dated November 16, 2007
(the "Sixth
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: after Revolving Loans had been outstanding for more than
five (5) days, Borrower failed to transfer the funds deposited into the Lockbox
Accounts to the Blocked Accounts for application to the Obligations as provided
in Sections 6.3(a) and (c) of the Loan Agreement (as amended by Section 1(g) of
the Sixth Amendment) and instead transferred such funds to its operating
account; and Parent and its Subsidiaries failed to earn EBITDA of not less than
$3,500,000 during the six (6) months ended January 31, 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:
1. Amendments to Loan
Agreement.
(a) The
definition of “Interest Rate” in Section 1.58 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
“1.58. ‘Interest
Rate’ shall mean,
(a) Subject
to clause (b) of this definition below:
(i) as
to Prime Rate Loans, a rate equal to three-quarters of one (0.75%) percent per
annum in excess of the Prime Rate,
(ii) as
to Eurodollar Rate Loans, a rate equal to three and one-quarter (3.25%) percent
per annum in excess of the Adjusted Eurodollar Rate (in each case, based on the
London Interbank Offered Rate applicable for the Interest Period selected by a
Borrower, or by Administrative Borrower on behalf of such Borrower, as in effect
two (2) Business Days prior to the commencement of the Interest Period, whether
such rate is higher or lower than any rate previously quoted to any Borrower or
Guarantor);
provided that, if the
EBITDA of Parent and its Subsidiaries during any period of twelve (12)
consecutive months is equal to or greater than $7,000,000 and the Fixed Charge
Coverage Ratio of Parent and its Subsidiaries during the same period is equal to
or greater than 1.5 to one, then so long as no Default or Event of Default has
occurred and is continuing, and effective on the first day of the second month
following such period, the Interest Rates set forth above shall be reduced by
one-half of one (0.50%) percent per annum; and
(b) Notwithstanding
anything to the contrary contained in clause (a) of this definition, the
applicable Interest Rates set forth in such clause (a) shall be increased by two
(2.0%) percent per annum, at Agent's option, without notice, (i) either (A) for
the period on and after the date of termination or non-renewal hereof until such
time as all Obligations are indefeasibly paid and satisfied in full in
immediately available funds, or (B) for the period from and after the date of
the occurrence of any Event of Default, and for so long as such Event of Default
is continuing as reasonably determined by Agent or (ii) on the Revolving Loans
to any Borrower at any time outstanding in excess of the Borrowing Base of such
Borrower or the Revolving Loan Limit (whether or not such excess(es) arise or
are made with or without Agent's or any Lender’s knowledge or consent and
whether made before or after an Event of Default).”
(b) The
definition of “Letter of Credit Rate” in Section 1.66 of the Loan Agreement is
hereby amended and restated to read in its entirety as follows:
“1.66. ‘Letter
of Credit Rate’ shall mean, for any month, the following rates based upon the
average daily Excess Availability (calculated without giving effect to the
Revolving Loan Limit) during the immediately preceding
month: (a) two and one-quarter (2.25%) percent per annum if such
average daily Excess Availability is less than or equal to $25,000,000; and (b)
two (2.0%) percent per annum if such average daily Excess Availability is
greater than $25,000,000; provided that, if the
EBITDA of Parent and its Subsidiaries during any period of twelve (12)
consecutive months is equal to or greater than $7,000,000 and the Fixed Charge
Coverage Ratio of Parent and its Subsidiaries during the same period is equal to
or greater than 1.5 to one, then so long as no Default or Event of Default has
occurred and is continuing, and effective on the first day of the second month
following such period, the applicable Letter of Credit Rate set forth above
shall be reduced by one-half of one (0.50%) percent per annum; and provided, further, that, the Letter of
Credit Rate shall be two (2.0%) percent per annum higher than the applicable
rate set forth above, at Agent’s option, without notice, (i) either
(A) for the period on and after the date of termination or non-renewal
hereof until such time as all Obligations are indefeasibly paid and satisfied in
full in immediately available funds, or (B) for the period from and after
the date of the occurrence of any Event of Default, and for so long as such
Event of Default is continuing as reasonably determined by Agent or (ii) on the
Letter of Credit Obligations at any time outstanding in excess of the Borrowing
Base or the Revolving Loan Limit (whether or not such excess(es) arise or are
made with or without Agent’s or any Lender’s knowledge or consent and whether
made before or after an Event of Default).”
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(c) 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; provided, however, that such agreement
shall apply only if (i) any Revolving Loans have been outstanding for more
than fifteen (15) consecutive days, (ii) a Default or Event of Default has
occurred and is continuing or (iii) Agent in its sole and absolute
discretion gives written notice to Administrative Borrower to comply with such
agreement.
(d) Projections. The
phrase "forty-five (45) days after the end of each fiscal year" in
Section 9.6(a)(iii) of the Loan Agreement is hereby replaced with "thirty
(30) days after the end of each fiscal year".
(e) 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 of not less than 1.5 to one during each of the twelve (12)
consecutive month periods ending January 31, 2008 and April 30, 2008 and shall
thereafter maintain a Fixed Charge Coverage Ratio as of the last day of each
month after July 31, 2008, as determined for the period of twelve (12)
consecutive months then ending, of not less than the ratio established by Agent
for that period. 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 of
twelve (12) consecutive months ending during such fiscal year (it being
understood that such levels will be no less stringent than 1.5 to
one).”
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(f) 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 of the periods set forth
below of not less than the amount set forth opposite such period:
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Periods
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Amounts
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9
months ending 4/30/08
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$3,500,000
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12
months ending 7/31/08
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$3,600,000
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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 specified periods ending 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."
(g) Capital
Expenditures. Section 9.19 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
“9.19. Capital
Expenditures. Borrowers and Guarantors shall not make Capital
Expenditures (excluding acquisitions permitted under Section 9.10(i)
hereof) in excess of $6,000,000 in the aggregate during each fiscal
year.”
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 6.3(a) and (c) 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.
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3. 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
$50,000, which shall be due and payable by Borrower and fully earned by Lenders
on and as of the date of this Amendment.
4. 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) 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.
5. 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 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.
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(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.
6. 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.
7. 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.
8. 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.
9. 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.
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10. 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.
11. 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.
12. 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/XXXXXXX
FALLQUIST________
Name:_Michael
Fallquist_______________
Title: _Chief
Operating Officer_________
a
Delaware corporation
By: s/X. XXXXXXX
MITCHELL______
Name:_C. Xxxxxxx
Mitchell_____________
Title: __Interim Chief Financial
Officer___
WACHOVIA
CAPITAL FINANCE CORPORATION (WESTERN),
a
California corporation, as Agent and Lender
By: __s/XXXXXX
VALLES___________
Name: __Carlos
Valles_________________
Title: Director_____________________
THE CIT
GROUP/BUSINESS CREDIT, INC.,
as
Lender
By: s/XXXXXXXXXX
PICCIONE_______
Name:
__Jacqueline
Piccione____________
Title: Assistant Vice
President__________
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