SECOND AMENDMENT AND WAIVER TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (Non-Guaranteed Line)
EXHIBIT 10.5
SECOND AMENDMENT AND WAIVER
TO
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(Non-Guaranteed Line)
(Non-Guaranteed Line)
This Second Amendment and Waiver to Amended and Restated Loan and Security Agreement is
entered into as of February 28, 2008 (the “Amendment”), by and between COMERICA BANK (“Bank”),
ALLIANCE CONSULTING GROUP ASSOCIATES, INC. (“Consulting”) and ALLIANCE HOLDINGS, INC., (“Holdings”;
Consulting and Holdings are referred to herein individually as a “Borrower” and collectively, the
“Borrowers”).
RECITALS
Borrowers and Bank are parties to that certain Amended and Restated Loan and Security
Agreement dated as of February 28 , 2007, as amended by that certain First Amendment and Waiver to
Amended and Restated Loan and Security Agreement dated as of May 2, 2007, and as amended by those
certain Waivers to Amended and Restated Loan and Security Agreement dated as of August 1, 2007 and
October 31, 2007 (collectively, the “Agreement”). The parties desire to amend the Agreement in
accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. The following defined terms are amended to read as follows:
“Borrowing Base” means an amount equal to the sum of (i) eighty percent (80%) of
Eligible Accounts plus (ii) the lesser of eighty percent (80%) of Eligible Unbilled Accounts
or Two Million Dollars ($2,000,000), in each case as determined by Bank with reference to
the most recent Borrowing Base Certificate delivered by Borrowers.
“Eligible Unbilled Accounts” means Accounts that would otherwise be Eligible Accounts
but have not yet been billed, except for Unbilled Accounts arising from fixed fee contracts
with milestone-based payments where the deliverable milestone has not been achieved. An
Unbilled Account shall be ineligible if not billed by a Borrower within 30 days.
“Letter of Credit Sublimit” means a sublimit for Letters of Credit under the Revolving
Line of $500,000.
“Revolving Line” means a credit extension of up to Nine Million Five Hundred Thousand
Dollars ($9,500,000).
“Revolving Maturity Date” means February 25, 2009.
2. The following defined terms are added to the Agreement to read as follows:
“Consolidated Net Income (or Deficit)” means the consolidated net income (or deficit)
of any Person and its Subsidiaries, after deduction of all expenses, taxes, and other proper
charges, determined in accordance with GAAP, after eliminating therefrom all extraordinary
nonrecurring items of income.
“Consolidated Total Interest Expense” means with respect to any Person for any period,
the aggregate amount of interest required to be paid or accrued by a Person and its
Subsidiaries during such period on all Indebtedness of such Person and its Subsidiaries
outstanding during all or any part of such period, whether such interest was or is required
to be reflected as an item of expense or capitalized, including payments consisting of
interest in respect of any capitalized lease or any synthetic lease, and including
commitment fees, agency fees, facility fees, balance deficiency fees and similar fees or
expenses in connection with the borrowing of money.
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“EBITDA” means with respect to any fiscal period an amount equal to the sum of (a)
Consolidated Net Income of the Borrowers and their Subsidiaries for such fiscal period, plus
(b) in each case to the extent deducted in the calculation of the Borrowers’ Consolidated
Net Income and without duplication, (i) depreciation and amortization for such period, plus
(ii) income tax expense for such period, plus (iii) Consolidated Total Interest Expense paid
or accrued during such period, plus (iv) non-cash expense associated with granting stock
options, and minus, to the extent added in computing Consolidated Net Income, and without
duplication, all extraordinary and non-recurring revenue and gains (including income tax
benefits) for such period, all as determined in accordance with GAAP.
3. Section 2.3(a) is amended to read as follows:
(a) Interest Rates. Except as set forth in Section 2.3(b), the Advances shall
bear interest, on the outstanding daily balance thereof, at a variable rate equal to one and
one-quarter percent (1.25%) above the Prime Rate; provided, however, that if Borrowers are
in compliance with this Agreement and maintain at least ninety-five percent (95%) of
projected EBITDA as outlined in the Borrowers’ board-approved plan provided to Bank for the
first six (6) months of fiscal year 2008, then Advances shall bear interest, on the
outstanding daily balance thereof, at a variable rate equal to three-quarters of one percent
(0.75%) above the Prime Rate.
4. Section 2.5(d) is added to the Agreement to read as follows:
(d) Unused Line Fee. A per annum fee equal to 0.25% of the difference between
(1) the amount of the Revolving Line available on each date of determination, and (2) the
average daily balance owing on account of the Revolving Line during the term hereof, paid
quarterly in arrears, which shall be nonrefundable.
5. Section 6.8 of the Agreement is amended and restated in its entirety to read as follows:
6.8 EBITDA. An EBITDA, on a trailing three (3) month basis, as indicated
for the months set forth below;
| Date of Measurement | EBITDA | |||
Three Months ended 03/31/08
|
$ | (560,000 | ) | |
Three Months ended 04/30/08
|
$ | (60,000 | ) | |
Three Months ended 05/31/08
|
$ | 145,000 | ||
Three Months ended 06/30/08
|
$ | 265,000 | ||
Three Months ended 07/31/08
|
$ | 350,000 | ||
Three Months ended 08/31/08
|
$ | 465,000 | ||
Three Months ended 09/30/08
|
$ | 715,000 | ||
Three Months ended 10/31/08
|
$ | 825,000 | ||
Three Months ended 11/30/08
|
$ | 900,000 | ||
Three Months ended 12/31/08
|
$ | 735,000 | ||
Thereafter to be determined by Bank based on Borrowers’ Fiscal Year 2009 Plan.
6. Section 6.9 of the Agreement is amended and restated in its entirety to read as follows:
6.9 Minimum Cash/Excess Billed Eligible Accounts. Borrowers shall maintain
at all times, on a consolidated basis, measured on Friday of each week, a balance of
Cash at Bank and Cash at
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Bank’s Affiliates covered by a control agreement plus excess billed Eligible
Accounts of not less than $1,500,000.
7.
Bank waives Borrower’s failure to comply with Sections 6.8 (Profitability) and 6.9 (Current
Ratio) of the Agreement for the months ended October 31, 2007; November 30, 2007; December 31,
2007; and January 31, 2008.
8. The Borrowing Base Certificate is amended to be in substantially the form of attached
Exhibit C.
9. The Compliance Certificate is revised to be in substantially the form of attached Exhibit
D.
10. Unless otherwise defined, all initially capitalized terms in this Amendment shall be as
defined in the Agreement. The Agreement, as amended hereby, shall be and remains in full force and
effect in accordance with its terms and hereby is ratified and confirmed in all respects. Except
as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not
operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the
Agreement, as in effect prior to the date hereof. Each Borrower ratifies and reaffirms the
continuing effectiveness of all instruments, documents and agreements entered into in connection
with the Agreement.
11. Except as set forth in the Schedule of Exceptions originally provided by Borrowers to Bank
in connection with the Agreement and any updated Schedule of Exceptions provided by Borrowers to
Bank, each Borrower represents and warrants that the representations and warranties contained in
the Agreement are true and correct as of the date of this Amendment, and that no Event of Default
has occurred and is continuing.
12. Borrowers are parties to certain documents, instruments and/or agreements (collectively,
the “Documents”) with or between the undersigned and Comerica Bank, a Michigan banking corporation
(the “Merged Bank”). The Merged Bank has merged with and into Comerica Bank, a Texas banking
association (the “Surviving Bank”). Borrowers hereby acknowledge and agree that any reference in
the Documents to Comerica Bank shall mean Comerica Bank, a Texas banking association, as successor
by merger to the Merged Bank.
13. This Amendment may be executed in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one instrument.
14. As a condition to the effectiveness of this Amendment, Bank shall have received, in form
and substance satisfactory to Bank, the following:
(a) this Amendment, duly executed by Borrowers;
(b) a renewal fee equal to $35,000 plus an amount equal to all Bank Expenses incurred through
the date of this Amendment;
(c) Affirmation of Subordination (Safeguard Scientifics, Inc.); and
(d) such other documents, and completion of such other matters, as Bank may reasonably deem
necessary or appropriate.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above
written.
| ALLIANCE HOLDINGS, INC. |
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| By: | /s/ Xxxxx Xxxxx | |||
| Title: | Signer | |||
| ALLIANCE CONSULTING GROUP ASSOCIATES, INC. |
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| By: | /s/ Xxxxx Xxxxx | |||
| Title: | Vice President, Finance | |||
| COMERICA BANK |
||||
| By: | /s/ Xxxxx Xxxxxxxx | |||
| Title: | Vice President | |||
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