Exhibit 10.14
SECOND RENEWAL AND MODIFICATION AGREEMENT
-----------------------------------------
THIS SECOND RENEWAL AND MODIFICATION AGREEMENT (this "Modification") is
made by and between UNIVERSAL POWER GROUP, INC., a Texas corporation
("Borrower"), and COMPASS BANK ("Lender"), to be effective as of the 18th day of
April, 2006.
RECITALS:
WHEREAS, Borrower executed and delivered to Lender that certain
Revolving Credit and Security Agreement, dated December 14, 2004 (the "Security
Agreement"), covering among other items of collateral certain Accounts, Accounts
Receivable, Inventory, and other Collateral (each as defined in such Security
Agreement), both tangible and intangible, together with all other collateral and
property described in the Security Agreement (all of such property being
hereinafter collectively referred to as the "Property"); and
WHEREAS, the Security Agreement secures in part the indebtedness
evidenced by that certain Revolving Note, dated of even date with the Security
Agreement, in the original stated principal amount of Twelve Million and No/100
Dollars ($12,000,000.00), executed by Borrower and payable to Lender (as may
have been heretofore renewed, extended, and/or modified, the "Note"); and
WHEREAS, the Borrower has obligations (collectively, the "Obligations")
under the Note, Security Agreement, and other Loan Documents (as defined below),
which Obligations, Note, Security Agreement and other Loan Documents were
modified, renewed and/or extended, as the case may be, pursuant to that certain
Renewal and Modification Agreement, dated March 23, 2006 (the "First
Modification") (the indebtedness evidenced by the Note is referred to herein as
the "Loan", and the Note, Security Agreement, First Modification, and all
documents evidencing the Loan are herein collectively, the "Loan Documents");
and
WHEREAS, the parties desire to increase the principal amount under the
Loan from Twelve Million and No/100 Dollars ($12,000,000.00) to Sixteen Million
and No/100 Dollars ($16,000,000.00), all in accordance with the terms and
conditions herein contained; and
WHEREAS, the parties desire to further modify the terms of the Loan as
the same relate to certain of Borrower's covenants, agreements, duties and
obligations under the Security Agreement and other terms and conditions of the
Loan.
AGREEMENTS:
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower and Lender
hereby agree as follows:
1. The parties desire to increase the original principal amount of the
Note from Twelve Million and No/100 Dollars ($12,000,000.00) to Sixteen Million
10.14-1
and No/100 Dollars ($16,000,000.00) (hereinafter, the "Principal Amount"),
Borrower's duties and obligations under the Note (as hereby modified, extended,
and renewed) to repay the Principal Amount (as herein defined) shall be included
within the definition of the Obligations as herein specified, all in accordance
with the terms and conditions herein contained.
2. From the date hereof, Borrower promises to pay to Lender the
Principal Amount (as herein modified), together with interest thereon, and to
perform all of the Obligations under the Loan Documents (as hereby modified)
including, without limitation the payment of all outstanding principal together
with all accrued but unpaid interest on the Maturity Date (as defined in both
the Note and Security Agreement). The Principal Amount shall accrue interest and
be due and payable in accordance with and as specified within the Promissory
Note; provided, however, that, contemporaneously upon the execution of this
Modification, Borrower and Lender shall execute that certain First Amendment to
Master Revolving Promissory Note (the "First Amendment"), reflecting, among
other revised terms, the increase of the Principal Amount as specified in
Section 1 above, as well as the increase in the sub-limit upon letters of credit
(defined as L/C's under the Security Agreement) from Seven Hundred Fifty
Thousand and No/100 Dollars ($750,000.00) in the aggregate to Eight Hundred
Seventy Five Thousand and No/100 Dollars ($875,000.00). By this reference, the
First Amendment is hereby incorporated into this Modification for all purposes.
3. In addition to the foregoing, the parties hereby further agree that
certain sections of the Security Agreement shall be modified and/or amended, all
in accordance with the following:
(a) Any and all references to (i) "Twelve Million and No/100 Dollars
($12,000,000.00)" or "$12,000,000.00" in the Security Agreement
with respect to the amount of the Revolving Line shall be deleted
and replaced in their entirety by "Sixteen Million and No/100
Dollars ($16,000,000.00)" or "$16,000,000.00," respectively, as
appropriate; and (ii) "Seven Hundred Fifty Thousand and No/100
Dollars ($750,000.00)" or "$750,000.00" in the Security Agreement
with respect to the sub-limit on the aggregate amount of L/C's (as
defined in the Security Agreement in respect of letters of credit)
shall be deleted and replaced in their entirety by "Eight Hundred
Seventy Five Thousand and No/100 Dollars ($875,000.00)" or
"$875,000.00," respectively, as appropriate, all in accordance with
the terms and conditions of the Security Agreement (as modified
hereby) and as further set forth in the First Amendment.
(b) The advance formula referenced in the Security Agreement, Section
1.1, and defined as the "Borrowing Base" therein shall be and
hereby is modified as follows: "eighty-five percent (85.0%) of the
outstanding value of Borrower's Eligible Accounts Receivable (as
defined in the Security Agreement and modified hereby), plus fifty
percent (50.0%) of the value of Borrower's Eligible Inventory (as
hereinafter defined). Advances against Borrower's Eligible
Inventory shall not to exceed the lesser of (a) $8,500,000.00, or
(b) an amount equal to the product of (i) one and one-half (1.5),
multiplied by (ii) eight-five percent (85%) of the outstanding
value of Borrower's Eligible Accounts Receivable at any one time
outstanding; provided, however, that in no event shall the
aggregate sum of all principal advances made by Bank to Borrower at
10.14-2
any one time outstanding hereunder exceed the sum of
$16,000,000.00." From and after the date of this Modification, all
references to the term "Borrowing Base" in the Security Agreement
and other Loan Documents shall refer to the advance formula defined
above.
(c) Section 2.9 of the Security Agreement shall be and hereby is
amended to read in its entirety as follows:
"Section 2.9 Location of Collateral. Except for Inventory sold in
the ordinary course of business, all Inventory and other tangible
Collateral have always been, are and shall continue to be kept at
Borrower's locations as reflected in Schedule 2.9 of this
Agreement."
(d) Section 6.1 (ii) of the Security Agreement shall be and hereby is
amended to read in its entirety as follows: "(ii) Borrower's
audited fiscal year-end financial statements (in form, preparation
and substance acceptable to Bank) within one hundred fifty (150)
days after the close of each of its year-end, including a balance
sheet as of the close of such period, an income statement, a
reconciliation of stockholders' equity, and a statement of cash
flows, all certified by an independent certified public accountant
acceptable to Bank and analyzed in accordance with generally
accepted accounting principles;"
(e) Section 7.2 of the Security Agreement shall be and hereby is
amended to read in its entirety as follows:
"7.2 Borrowings; Permitted Indebtedness. Except for borrowings
under the Revolving Line, Borrower shall not borrow any money other
than (i) Subordinated Debt (but only to the extent such borrowings
and loans shall be fully subordinated hereto), without Bank's prior
written consent, or (ii) for trade credit and to finance the
purchase of equipment in the ordinary course of business, not to
exceed $50,000.00 in the aggregate at any given time, without
Bank's prior written consent. Except in favor of Bank, Borrower
shall not guarantee, endorse or assume, either directly or
indirectly, any indebtedness of any other corporation, person, or
entity."
(f) Section 7.3 of the Security Agreement shall be and hereby is
amended to read in its entirety as follows:
"Section 7.3 Dividends. Borrower shall not pay, make or declare any
dividends, distributions, or other similar payments, or make any
other advances of any nature whatoseover, to Borrower's directors,
managers, officers, employees, owners, parent, members, affiliates,
subsidiaries or other related persons or entities, without Bank's
prior written consent. Notwithstanding anything herein to the
contrary, Bank agrees that Borrower may pay a monthly management
fee to Zunicom of up to $40,000.00 per month and quarterly
dividends equal to 50% of Borrower's net income for any fiscal
quarter for cash, taxes, or other Zunicom expenses, provided that
(a) no Default of Event of Default exists as of the date any such
10.14-3
payment is to be made or such payment would cause or result in a
Default or Event of Default, (b) there is at least $500,000.00 of
borrowing availability under the Revolving Line after the making of
any such payment, (c) no more than one dividend is paid per fiscal
quarter of Borrower, and (d) any such dividend is paid no sooner
than thirty (30) days from Bank's receipt of the financial
statements delivered by Borrower for the end of the month that
coincides with the end of such fiscal quarter of Borrower. Borrower
shall not redeem, purchase or in any manner acquire any of its
outstanding shares without Bank's prior written consent."
(g) Section 7 (g) in Addendum A attached to the Security Agreement
shall be and hereby is amended to read in its entirety as follows:
"(g) it is located at one of Borrower's places of business in (i)
Carrollton, Texas, (ii) Oklahoma City, Oklahoma, (iii) Overland
Park, Kansas, or (iv) Las Vegas, Nevada;"
(h) Schedule 2.9 of the Security Agreement is hereby deleted in its
entirety and replaced by the attached Schedule 2.9 (attached hereto
as Exhibit A) which shall be incorporated into the Security
Agreement (as hereby modified) for all purposes.
(i) Except as specifically set forth in the Security Agreement (as
hereby modified), the parties acknowledge and agree that all
financial covenants of Borrower and/or any guarantor set forth in
the Security Agreement (including, without limitation, Sections
6.5, 6.6, 7.9. and 7.11 of the Security Agreement) shall be
measured based upon information contained in Borrower's
internally-prepared financial statements, including, without
limitation, such statements as are required to be delivered to
Lender pursuant to clauses (i), (iii), (iv), and (viii) of Section
6.1 of the Security Agreement or as otherwise may be reasonably
requested from Lender from time to time.
4. Borrower hereby conveys and/or re-conveys, grants and/or re-grants,
and makes and/or re-makes, each as applicable, to Lender the security interests
and liens upon the Property remaining subject to the Loan Documents and securing
the Obligations. Further, Borrower hereby covenants and agrees that Borrower
shall not sell, transfer, convey or otherwise dispose of any of the Property
without Lender's prior written consent (except as otherwise permitted under the
Security Agreement), and, in the event such consent by Lender is given, Borrower
shall provide Lender with such additional security with respect to the
Obligations as Lender shall require in its sole and absolute discretion.
5. Borrower hereby renews, but does not extinguish, the Note, Loan, and
the liens and security interests created and evidenced by the Security Agreement
and all other liens and security interests securing the Note (including, without
limitation, any vendor's lien), and Borrower promises to pay to the order of
Lender, the principal sum of the Loan evidenced by the Note, or so much thereof
as may be advanced and outstanding, together with interest at the rate and in
the manner specified in the Note, as modified herein, and to observe, comply
with and perform each and every of the terms and provisions of the Loan
Documents as herein modified.
6. Borrower hereby reaffirms the liens on the Property and any other
10.14-4
liens securing the Note and/or Loan until the indebtedness and the Note and Loan
as modified and renewed hereby has been fully paid, and agrees that the
modification set forth herein shall in no manner affect or impair the Note,
Loan, or the liens securing the same, and that said liens shall not in any
manner be waived, the purpose of this instrument being simply to modify the
Security Agreement (and other Loan Documents, as appropriate) and to carry
forward all liens securing the same, which are acknowledged by Borrower to be
valid and subsisting. Borrower further agrees that all terms and provisions of
the Note and of the instrument or instruments creating or fixing the liens
securing the same shall be and remain in full force and effect as therein
written, except as otherwise expressly provided herein. All liens are hereby
carried forward from the original inception thereof, and Borrower hereby
ratifies, reaffirms and confirms all of said liens from the original inception
thereof. Except as otherwise specified herein, the terms and provisions hereof
shall in no manner impair, limit, restrict, or otherwise affect the obligations
of Borrower or any guarantor under the Loan Documents. As a material inducement
to Lender to execute and deliver this Modification, Borrower hereby acknowledges
and agrees that Borrower is well and truly indebted to Lender in the amount set
forth hereinabove, and that the liens, security interests and assignments
created by the Security Agreement and any other Loan Documents are,
respectively, valid and subsisting liens, security interests, and assignments,
and, to the best of Borrower's knowledge, are of the validity and priority
recited in the Security Agreement and the other Loan Documents. As a further
material inducement to Lender to execute and deliver this Modification, Borrower
hereby acknowledges that there are no claims or offsets against, or defenses or
counterclaims to, the terms or provisions or other obligations created or
evidenced by the Loan Documents, and represent that, after modification of the
Security Agreement and other Loan Documents hereunder, no event has occurred,
and no condition exists which would constitute a default, either with or without
notice or lapse of time, or both, under the Loan Documents.
7. Borrower reaffirms and remakes, as of the date hereof, all
representations and warranties contained in the Note, Security Agreement, and
other Loan Documents. Borrower further represents and warrants that, except as
disclosed in writing to Lender, it has done nothing, nor has allowed anything,
to adversely affect title to or encumber the Property or any other property of
Borrower in which Lender has a security interest. Borrower further represents
and warrants to Lender that it is aware of no condition or fact, which has not
been disclosed in writing to Lender, which would materially adversely affect the
repayment to Lender of all sums due under the Note, Security Agreement, and
other Loan Documents.
8. Borrower, for it and its successors, assigns, and representatives
does hereby waive, release, and discharge Lender and its agents, employees,
officers, directors, and attorneys (collectively, the "Released Parties") from
any and all of Lender's duties, obligations, and liabilities arising under,
based upon or associated with, directly or indirectly, the Loan, the Note,
Security Agreement, First Modification, and any Loan Documents, existing as of
the date of this Modification, and further does hereby waive any and all claims
and causes of action of any kind or character, arising under, based upon, or
associated with, directly or indirectly, the Loan Documents or the acts,
actions, or omissions of the Released Parties in connection therewith, existing
as of the date hereof, whether known or unknown, asserted or unasserted,
equitable or at law, arising under or pursuant to common or statutory law,
rules, or regulations.
10.14-5
9. Borrower hereby ratifies, reaffirms and confirms any and all
covenants, agreements, or promises heretofore made by Borrower to Lender in
connection with the Loan, Note, Security Agreement, or other Loan Documents, and
all renewals thereof, including as hereby modified.
10. Borrower agrees, simultaneously with and as a condition precedent
to the execution hereof, to pay to Lender a non-refundable credit facility fee
in the amount of $5,000.00 (representing 0.125% of the $4,000,000.00 amount of
the increased availability under the Revolving Line [as defined in the Security
Agreement]), as well as all costs and expenses of Lender incurred in connection
with the preparation and administration of this Modification, including, the
cost of any recording fees and charges associated with the Security Agreement
and/or other Loan Documents, and Lender's attorneys' fees and expenses.
11. It is hereby agreed and acknowledged that other parties, if any,
who are liable in any part for the Obligations, including, without limitation,
Zunicom, Inc., a Texas corporation, in its capacity as guarantor of the Loan and
Obligations, are in no way released or discharged from such Obligations, nor are
Lender's rights against such persons or entities waived or negatively impacted
by the execution of this Modification.
12. The parties agree that all clauses contained in the Loan Documents
which relate to the payment, application, and spreading of interest received by
Lender which may be greater than the maximum amount allowed by applicable law,
shall remain in full force and effect and by this reference be fully
incorporated herein.
13. If any provision of this Modification or application to any party
or circumstance shall be determined by any court of competent jurisdiction to be
invalid and unenforceable to any extent, the remainder of this Modification or
the application of such provision to such person or circumstances, other than
those as to which it is so determined invalid or unenforceable, shall not be
affected thereby, and each provision hereof shall be valid and shall be enforced
to the fullest extent permitted by law.
14. Except as amended hereby, the Note, Security Agreement, First
Modification, and other Loan Documents remain unmodified and in full force and
effect.
15. THE LOAN, NOTE, SECURITY AGREEMENT, FIRST MODIFICAITON, AND OTHER
WRITTEN LOAN DOCUMENTS, AS MODIFIED BY THIS MODIFICATION, REPRESENT THE FINAL
AGREEMENT BETWEEN BORROWER AND LENDER, AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BORROWER AND LENDER.
[remainder of page intentionally left blank]
10.14-6
EXECUTED to be effective as of the date first above written.
BORROWER:
---------
UNIVERSAL POWER GROUP, INC.,
a Texas corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
LENDER:
COMPASS BANK
By: ______________________________
Name: ______________________________
Title: ______________________________
[remainder of page intentionally left blank]
10.14-7
ACCEPTED, AGREED, AND ACKNOWLEDGED:
----------------------------------
ZUNICOM, INC., a Texas corporation ("Guarantor"), as guarantor of the
Obligations herein specified pursuant to its execution of that certain Guaranty
Agreement dated of even date with the Security Agreement (the "Guaranty"), is
executing below to evidence (a) its consent to this Modification and (b) its
agreement that (i) this Modification does not void, invalidate, create a defense
to the enforcement of, or otherwise negatively impact the Guaranty and (ii) the
Guaranty shall continue in full force and effect and cover all of the
Obligations (as herein modified); provided, however, that, upon Lender's
request, Guarantor shall execute a new Guaranty Agreement, to be dated of even
date herewith to further evidence its duties and obligations as a principal
obligor with respect to the Obligations (as herein modified).
GUARANTOR:
---------
ZUNICOM, INC.,
a Texas corporation
By: ______________________
Name: ______________________
Title: ______________________
187052.1/2995.101
[acknowledgments on following page]
10.14-8
STATE OF TEXAS ss.
ss.
COUNTY OF DALLAS ss.
The foregoing instrument was acknowledged before me this day of
------
April, 2006, by , as of Universal Power
----------------- --------------------
Group, Inc., a Texas corporation, on behalf of such entity.
-------------------------------------------
Notary Public in and for the State of Texas
STATE OF TEXAS ss.
ss.
COUNTY OF DALLASss.
This instrument was acknowledged before me on the _____ day of April,
2006, by ______________________, as __________________ of Zunicom, Inc., a Texas
corporation, on behalf of said corporation in its capacity as guarantor.
-------------------------------------------
Notary Public in and for the State of Texas
STATE OF TEXAS ss.
ss.
COUNTY OF DALLAS ss.
This instrument was acknowledged before me on the day of April,
-----
2006, by , of COMPASS BANK.
---------------------- ----------------------
-------------------------------------------
Notary Public in and for the State of Texas
10.14-9
EXHIBIT A
---------
Schedule 2.9
------------
Places of Business
------------------
Business Locations
Universal Power Group
1) Main Warehouse and Corporate Offices
0000 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxx 00000
2) Oklahoma City Retail Store and Wholesale Warehouse
00000 X. Xxxxx Xx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
3) Kansas City Customer Service Center
00000 Xxxxxxx, Xxx. #000
Xxxxxxxx Xxxx, Xxxxxx 00000
4) South Tech-Diablo Business Center, LLC
0000 Xxxxx Xxxxxx Xxxx Xxxxxxxxx
Xxx Xxxxx, Xxxxxx 00000
10.14-10
