FIFTH MODIFICATION AGREEMENT
Exhibit
10.3
FIFTH
THIS FIFTH MODIFICATION AGREEMENT
(“AGREEMENT”) is made as of August 17, 2010, by and among AVATECH SOLUTIONS,
INC., a Delaware corporation (“AVATECH”), and AVATECH SOLUTIONS SUBSIDIARY,
INC., a Delaware corporation, jointly and severally (“AVATECH SUBSIDIARY”), and
PNC BANK, NATIONAL ASSOCIATION, successor by merger to Mercantile-Safe Deposit
and Trust Company (“LENDER”). AVATECH and AVATECH SUBSIDIARY are
collectively referred to herein as the “BORROWERS”.
RECITALS
In accordance with the terms and
conditions set forth in a Loan and Security Agreement dated as of January 27,
2006 between the BORROWERS and the LENDER (“ORIGINAL LOAN AGREEMENT”), the
LENDER extended to the BORROWERS a revolving line of credit in the maximum
principal amount outstanding at any one time of Five Million Dollars
($5,000,000.00) (the “LOAN”). Pursuant to the ORIGINAL LOAN
AGREEMENT, the BORROWERS’ obligations to the LENDER are secured by all of the
BORROWERS’ tangible and intangible assets.
Pursuant to a Modification Agreement
dated as of May 30, 2006 (the “FIRST MODIFICATION”), the LENDER extended to the
BORROWERS a short term bridge loan, in the amount of Six Million Five Hundred
Thousand ($6,500,000.00) (“BRIDGE LOAN”), and the terms of the ORIGINAL LOAN
AGREEMENT were modified in certain respects. All sums due in
connection with the BRIDGE LOAN have been repaid by the BORROWERS.
Pursuant to a Second Modification
Agreement dated as of December 31, 2006, a Third Modification Agreement dated as
of December 31, 2008, and a Fourth Modification Agreement dated as of December
31, 2009 (collectively with the ORIGINAL LOAN AGREEMENT and the FIRST
MODIFICATION, the “LOAN AGREEMENT”), the terms of the ORIGINAL LOAN AGREEMENT
were modified in certain additional respects.
The BORROWERS have requested that the
LENDER consent to the creation by AVATECH of a new subsidiary, and the entry by
such subsidiary into a merger transaction with Rand Worldwide, Inc. (“RAND”),
which merger transaction will also result in a CHANGE IN CONTROL, as that term
is defined in the LOAN AGREEMENT. The LENDER has agreed to the
BORROWERS’ request, but only in accordance with the terms and conditions set
forth herein. As used herein, the term “LOAN DOCUMENTS” shall
collectively mean the LOAN AGREEMENT and all other documents and agreements
evidencing or securing the LOAN. Unless otherwise defined herein, any
terms appearing in all capital letters in this AGREEMENT shall have the
respective meanings ascribed to such terms in the LOAN AGREEMENT.
NOW, THEREFORE, in consideration of
the foregoing premises, the terms and conditions set forth herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Representations And
Warranties Of Borrowers. To induce the LENDER to enter into
this AGREEMENT and to provide the BORROWERS with the accommodations described
herein, the BORROWERS make the representations and warranties set forth below
and acknowledge the LENDER’S justifiable right to rely upon these
representations and warranties.
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a. No
Litigation. There is no action, suit, investigation, or
proceeding pending against either of the BORROWERS or any other assets of either
of the BORROWERS, except for those proceedings previously disclosed to the
LENDER in writing.
b. Organization; Good Standing;
Authorization. Each of the BORROWERS: (a) has the power to
enter into this AGREEMENT and all other documents, and agreements required to be
executed pursuant to this AGREEMENT, and has the power to perform all of its
obligations hereunder and thereunder; (b) has duly authorized the entry into and
performance of this AGREEMENT and all other documents and agreements required to
be executed by such BORROWER; and (c) is in good standing in the state of its
incorporation or organization, as applicable, and is in good standing and
qualified as a foreign corporation or limited liability company, as applicable,
in all other states in which such qualification is required.
c. Valid, Binding And
Enforceable. This AGREEMENT and all of the other documents and
agreements executed pursuant to this AGREEMENT are the valid and binding
obligations of the BORROWERS and are fully enforceable against each of the
BORROWERS in accordance with their terms.
d. Subsidiaries. AVATECH
SOLUTIONS SUBSIDIARY, INC. is a wholly-owned subsidiary of AVATECH SOLUTIONS,
INC. Except as described in Section 2 below, the BORROWERS have no
other subsidiaries.
2. Consent to Creation of
Subsidiary and Merger Transaction. Subject to the satisfaction
by the BORROWERS of the conditions set forth in this AGREEMENT, the LENDER
consents to the creation of ASRW ACQUISTION SUB, INC., a Delaware corporation
(“MERGER SUB”), as a wholly-owned subsidiary of AVATECH. Pursuant to
Section 6.1 and 6.8 of the LOAN AGREEMENT, the LENDER consents to the entry by
AVATECH and MERGER SUB into the transactions described in that certain Agreement
and Plan of Merger dated as of August 17, 2010 (“MERGER AGREEMENT”) by and
between AVATECH, MERGER SUB, RAND WORLDWIDE, INC., a Delaware corporation
(“MERGER PARTNER”), and RWWI HOLDINGS LLC, a Delaware limited liability company
and the sole stockholder of MERGER PARTNER (“DESIGNATOR”). In
accordance with the terms of the MERGER AGREEMENT, AVATECH and MERGER PARTNER intend to
enter into a business combination transaction pursuant to which: (a) MERGER SUB
will merge with and into MERGER PARTNER (the “MERGER”); (b) the separate existence of MERGER SUB shall cease and MERGER PARTNER shall continue as the surviving
corporation in the MERGER, as a result of which MERGER PARTNER
will become a wholly-owned subsidiary of AVATECH. In addition,
pursuant to 7.16 of the LOAN AGREEMENT, the LENDER consents to the CHANGE OF
CONTROL which will result from the consummation of the transactions described in
the MERGER AGREEMENT, pursuant to which AVATECH will acquire one hundred
percent (100%) of the issued and outstanding shares of MERGER PARTNER, in
exchange for which the DESIGNATOR shall receive shares in AVATECH in an amount
not to exceed sixty-seven (67%) of the issued and outstanding shares of
AVATECH.
3. Amendments To Loan
Agreement. The LOAN AGREEMENT is hereby modified and amended as
follows:
a. Amendments to
Definitions. The definitions set forth in Article 1 of the
LOAN AGREEMENT are hereby modified as follows:
i. The
definition of “LOAN DOCUMENTS” contained in Section 1.66 of the LOAN AGREEMENT
shall also include, without limitation, this AGREEMENT.
ii. The
following definitions are added to Article 1:
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Section
1.95. Merger
Partner. The term “MERGER PARTNER” means RAND WORLDWIDE, INC.,
a Delaware corporation.
Section
1.96. Rand
PNC Loan. The term “RAND PNC LOAN” means, collectively, those
credit accommodations owed to the LENDER, as agent, by MERGER
PARTNER.
b. Extension of Maturity
Date. The definition of “MATURITY DATE” contained in Section
1.70 of the LOAN AGREEMENT is modified by replacing the existing provision with
the following:
Section
1.70. Maturity
Date. The term “MATURITY DATE” means the earlier of (i) that
date which is one hundred twenty (120) days after the effective date of the
MERGER and (ii) December 31, 2010, as such date may be extended by written
agreement of the LENDER
c. Separate
Operations. The following additional provision is added to
Article 5 of the LOAN AGREEMENT:
Section
5.24. Separate
Operations. Subject to the immediately following sentence, the
BORROWERS shall at all times maintain MERGER PARTNER as a separate legal entity,
which shall constitute a wholly-owned SUBSIDIARY of AVATECH. Until
such time as the BORROWERS and MERGER PARTNER have established a single credit
facility consolidating the LOAN and the RAND PNC LOAN, the BORROWERS and MERGER
PARTNER shall: (a) maintain separate books and records and bank
accounts, including separate accounts receivable and accounts payable records;
(b) prepare separate financial statements; (c) maintain their respective assets
in such a manner that it is not costly or difficult to segregate, identify
or ascertain such assets; (d) allocate and charge fairly and reasonably any
shared employee or overhead costs; (e) not extend any intercompany loans,
advances, transfers, capital transactions or similar transactions; and (f) not
commingle their respective assets or funds.
d. Changes to
Management. The following additional provision is added to
Article 6 of the LOAN AGREEMENT:
Section
6.15. No
Changes To Management. The BORROWERS shall not have any
changes to the individuals holding key management positions with the BORROWERS
immediately after the effective time of the Merger, including without limitation
Chairman, Chief Executive Officer, President and Chief Financial Officer;
provided however, that the LENDER acknowledges that upon the effective time of
the merger of ASRW Acquisition Sub, Inc. into MERGER PARTNER, Xxxxxx Xxxxx’ role as Chief Executive
Officer will terminate.
e. Cross-Default. Section
7.5 of the LOAN AGREEMENT is modified by replacing the existing provision with
the following:
Section
7.5. Cross-Default. A
breach of or default under the terms, covenants, or conditions of any agreement,
loan, guaranty, or other transaction of any or all of the BORROWERS or any
GUARANTOR with the LENDER or with any other lender, or a breach of or default
under the terms, covenants, or conditions of any agreement, loan, guaranty, or
other transaction of MERGER PARTNER with the LENDER or with any other
lender.
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f. Financial
Covenants. Until such time as the BORROWERS and MERGER PARTNER
have established a single credit facility consolidating the LOAN and the RAND
PNC LOAN, the financial covenants contained in the LOAN AGREEMENT shall apply
only to the BORROWERS, exclusive of the operations of MERGER PARTNER, and the
BORROWERS shall continue to provide financial information to the LENDER with
respect to the financial matters of the BORROWERS only, exclusive of the
operations of MERGER PARTNER.
4. No Novation; No Refinance; No
Adverse Effect On Liens. The parties hereto do not intend that
a novation of the LOAN or any of the LOAN DOCUMENTS shall be created or effected
because of the modification of the LOAN AGREEMENT, as described
herein. The parties hereto do not intend that the execution of this
AGREEMENT, and the amendments and modifications to be made to the LOAN
AGREEMENT, as described herein, shall: (a) constitute a refinance of the LOAN;
or (b) affect or impair the validity, enforceability, or priority of any of the
liens or security interests imposed by or granted in the LOAN
DOCUMENTS.
5. Other Terms; Confirmation Of
Obligations. Other than the foregoing, all other terms and
conditions of the LOAN DOCUMENTS shall remain in full force and effect and are
incorporated herein by reference. The BORROWERS acknowledge, ratify
and confirm their respective obligations under the LOAN DOCUMENTS and further
acknowledge and confirm that the BORROWERS are and shall remain absolutely and
unconditionally obligated to pay the LENDER all present and future indebtedness
that is owed to the LENDER under the LOAN DOCUMENTS, as modified hereby, in the
manner provided therein, notwithstanding the LENDER’S execution of this
AGREEMENT and any documents to be executed pursuant to this AGREEMENT, and
notwithstanding the various agreements the LENDER has set forth herein and
therein.
6. Security. The
BORROWERS’ obligations under the LOAN DOCUMENTS, as modified hereby, shall
continue to be secured by all of the liens, assignments, and security interests
provided in the LOAN DOCUMENTS.
7. Miscellaneous.
a. Incorporation. The
terms and conditions of the LOAN DOCUMENTS are incorporated herein by reference
and made a part hereof as if fully set forth herein. In the event of
any inconsistencies between the terms and conditions of this AGREEMENT and any
of the terms and conditions of the other LOAN DOCUMENTS (except as to the
specific modifications contained herein), the LENDER shall determine, in its
sole discretion, which of the terms and conditions shall control.
b. Integration. This
AGREEMENT, the LOAN DOCUMENTS (as modified), and any other documents executed
pursuant to or in connection with this AGREEMENT, if any, constitute the entire
agreement between the LENDER and the BORROWERS with respect to the subject
matter hereof, and any term or condition not expressed therein does not
constitute a part of the agreement of the LENDER and the BORROWERS with respect
to such subject matter.
c. Severability. If
any provision or part of any provision of this AGREEMENT shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
AGREEMENT and this AGREEMENT shall be construed as if such invalid, illegal or
unenforceable provision or part thereof had never been contained herein, but
only to the extent of its invalidity, illegality, or
unenforceability.
d. Number, Gender, And
Captions. As used herein, the singular shall include the
plural and the plural may refer to only the singular. The use of any
gender shall be applicable to all genders. The captions contained
herein are for purposes of convenience only and are not a part of this
AGREEMENT.
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e. Further Assurances. As
part of this AGREEMENT, and in consideration for the agreements of the LENDER as
set forth therein, each BORROWER agrees to execute and deliver to the LENDER
such other and further documents as may, from time to time, in the sole opinion
of the LENDER and the LENDER’S counsel, be necessary or appropriate to carry out
the terms and conditions of this AGREEMENT and the LOAN DOCUMENTS. If
either BORROWER fails to execute any such documents within ten (10) days of
being requested to do so by the LENDER, such BORROWER hereby appoints the LENDER
or any officer of the LENDER as the attorney in fact for such BORROWER for
purposes of executing such documents in the name, place and stead of such
BORROWER, which power of attorney shall be considered as coupled with an
interest and irrevocable.
f. Waivers. No
failure or delay by the LENDER in the exercise or enforcement of any of its
rights under any LOAN DOCUMENT shall be a waiver of such right or remedy, nor
shall a single or partial exercise or enforcement thereof preclude any other or
further exercise or enforcement thereof or the exercise or enforcement of any
other right or remedy. The LENDER may at any time or from time to
time waive all or any rights under this AGREEMENT or any of the LOAN DOCUMENTS,
but any such waiver must be specific and in writing and no such waiver shall
constitute, unless specifically so expressed by the LENDER in writing, a future
waiver of performance or exact performance by either BORROWER. No
notice to or demand upon either BORROWER in any instance shall entitle such
BORROWER (or the other BORROWER) to any other or further notice or demand in the
same, similar or other circumstance.
g. Choice Of
Law. The laws of the State of Maryland (excluding, however,
conflict of law principles) shall govern and be applied to determine all issues
relating to this AGREEMENT and the rights and obligations of the parties hereto,
including the validity, construction, interpretation, and enforceability of this
AGREEMENT and its various provisions and the consequences and legal effect of
all transactions and events which resulted in the execution of this AGREEMENT or
which occurred or were to occur as a direct or indirect result of this AGREEMENT
having been executed.
h. Consent To Jurisdiction; Agreement As
To Venue. Each BORROWER irrevocably consents to the
non-exclusive jurisdiction of the courts of the State of Maryland and of the
United States District Court For The District Of Maryland, if a basis for
federal jurisdiction exists. Each BORROWER agrees that venue shall be
proper in any circuit court of the State of Maryland selected by the LENDER or
in the United States District Court For The District Of Maryland if a basis for
federal jurisdiction exists and waive any right to object to the
maintenance of a suit in any of the state or federal courts of the State of
Maryland on the basis of improper venue or of inconvenience of
forum.
i. Binding Effect; No Oral
Modification. This AGREEMENT shall be binding upon and shall
inure to the benefit of the parties and their respective personal
representatives, successors and assigns. This AGREEMENT may not be
altered, modified or amended unless such alteration, modification or amendment
is in writing and executed by the LENDER.
j. Time. Time
is of the essence with respect to all of the obligations of the BORROWERS under
this AGREEMENT and the LOAN DOCUMENTS.
k. Costs Of
Transaction. All costs of the transactions contemplated by
this AGREEMENT, including without limitation all of attorneys’ fees and expenses
incurred by the LENDER, shall be paid by the BORROWER, regardless of whether
such costs are incurred before or after the execution and delivery of this
AGREEMENT.
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8. Release;
Waiver. As part of the agreements set forth herein, and in
consideration of the same, each BORROWER hereby releases the LENDER and all of
the LENDER’S past, present and future directors, officers, employees, agents and
attorneys from any and all claims, causes of action, suits and damages
(including claims for attorneys’ fees) which either of the BORROWERS, jointly or
severally or otherwise, ever had or now have against the LENDER or any of the
LENDER’S past, present and future directors, officers, employees, agents or
attorneys. Without limiting the generality of the foregoing,
each BORROWER acknowledges and agrees that there exists no offset or defense to
the obligations of any BORROWER as stated in the LOAN DOCUMENTS.
9. Waiver Of Jury
Trial. The parties hereto agree that any suit, action, or
proceeding, whether claim or counterclaim, brought or instituted by any party to
this AGREEMENT, or any of their successors or assigns, on or with respect to
this AGREEMENT or any LOAN DOCUMENT or which in any way relates, directly or
indirectly, to the obligations of the BORROWERS to the LENDER under this
AGREEMENT or any LOAN DOCUMENT, or the dealings of the parties with respect
thereto, shall be tried only by a court and not by a jury. THE PARTIES EXPRESSLY WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY SUCH ACTION OR
PROCEEDINGS. The parties acknowledge and agree that this
provision is a specific and material aspect of the agreement between the parties
and that the parties would not enter into this AGREEMENT if this provision were
not contained herein.
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IN
WITNESS WHEREOF, the parties have executed this AGREEMENT as of the date first
above
written
with the specific intention of creating a document under seal.
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WITNESS/ATTEST:
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BORROWERS:
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AVATECH
SOLUTIONS, INC.,
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A
Delaware Corporation
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/s/
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By:
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/s/ Xxxxxxxx Xxxxxxx
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(SEAL)
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Xxxxxxxx
Xxxxxxx,
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President
and Chief Financial Officer
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AVATECH
SOLUTIONS SUBSIDIARY, INC.,
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A
Delaware Corporation
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/s/
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By:
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/s/ Xxxxxxxx Xxxxxxx
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(SEAL)
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Xxxxxxxx
Xxxxxxx,
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President
and Chief Financial Officer
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LENDER:
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PNC
BANK, NATIONAL ASSOCIATION
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/s/
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By:
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/s/ Xxxxxxx X. Xxxxxx
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(SEAL)
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Xxxxxxx
X. Xxxxxx, Senior Vice President
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