THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER
Exhibit 10.9
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this “Amendment”),
dated March 15, 2007, 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 and Lender
(“Agent”), and THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, as co-Lender
(“Co-Lender”).
RECITALS
A. Borrower, Parent and Agent 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”) and
the Second Amendment to Loan and Security Agreement and Waiver dated October 26, 2006 (the
“Second Amendment”), pursuant to which Agent and Co-Lender, as assignee of a portion of
Agent’s original rights and obligations under the Loan Agreement, 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:
(i) Parent and its Subsidiaries failed to maintain a Fixed Charge Coverage Ratio of not less than
1.1 to one for the period of nine (9) consecutive months ended November 30, 2006, as required by
Section 9.17 of the Loan Agreement (as amended by the Second Amendment); and (ii) during the period
from January 25, 2007 through January 31, 2007 (inclusive), Borrowers failed to maintain Excess
Availability of not less than $5,000,000 as required by Section 9.17.1 of the Loan Agreement (as
added by the Second Amendment). The foregoing Events of Default will collectively be referred to
herein as the “Known Existing Defaults”.
C. Borrower has requested that Agent and Co-Lender 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 and Co-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. Amendment to Loan Agreement. Section 9.17.1 of the Loan Agreement (as added by the
Second Amendment) is hereby amended and restated to read in its entirety as follows:
“9.17.1 Excess Availability. Borrowers shall, at all times during each of
the periods set forth below, maintain Excess Availability of not less than the
amount set forth opposite such period:
| Periods | Amounts | |
| 2/1/07 through 7/31/07 | $5,000,000 | |
| On and after 8/1/07 | $10,000,000” |
2. Consents.
(a) Sale/Leaseback Transaction. Borrower now desires to enter into a sale/leaseback
transaction for certain Equipment with a value of approximately $1,000,000 (the
“Sale/Leaseback”), which would be prohibited by Section 9.7(b) of the Loan Agreement (the
Borrower having already sold assets during the current fiscal year with a value of approximately
$900,000, which when added to the value of the Equipment in the Sale/Leaseback, would exceed the
maximum aggregate sum permitted in clause (vi) of Section 9.7(b) of the Loan Agreement). Agent and
Co-Lender hereby consent to the Sale/Leaseback and agree that the Sale/Leaseback will not
constitute a Default or Event of Default under the Loan Agreement.
(b) Bond Indemnity. Parent now desires to enter into an Agreement of Indemnity in
favor of International Fidelity Insurance Company (“Surety”), in the form previously
supplied to Agent, with respect to a certain bond to be issued by Surety in the amount of $300,000
(the “Indemnity Agreement”) and to grant Surety a security interest in the personal
property and fixtures of Parent as provided in the Indemnity Agreement, which would be prohibited
by Sections 9.8 and 9.9 of the Loan Agreement. Agent and Co-Lender hereby consent to the Indemnity
Agreement (including such security interest) and agree that the Indemnity Agreement (including such
security interest) will not constitute a Default or Event of Default under the Loan Agreement,
provided that Surety duly executes and delivers a subordination agreement in form and
substance satisfactory to Agent with respect to such security interest.
(c) Limitations on Consents. The foregoing consents shall apply only to the
Sale/Leaseback and the Indemnity Agreement as specifically described above, and in all other
respects, Agent and Co-Lender reserve and preserve their rights to require the strict compliance by
Borrower and Parent with Sections 9.7, 9.8, and 9.9 of the Loan Agreement and all of the other
terms and provisions of the Financing Agreements.
3. Waiver of Known Existing Defaults. Each of Agent and Co-Lender hereby waives the
Known Existing Defaults and waives enforcement of its rights against Borrower and Parent arising
from the Known Existing Defaults; provided, however, nothing herein shall be deemed
a waiver with respect to any failure of Borrower or Parent to comply fully with Section 9.17 of the
Loan Agreement as to periods ending after November 30, 2007 and Section 9.17.1 of the Loan
Agreement as modified by this Amendment. Subject to this Amendment becoming
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effective as set forth in Section 4 below, this waiver shall be deemed effective, as to each
Known Existing Default, on the date of the first occurrence of such Known Existing Default. 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 enforcement of Agent’s or Co-Lender’s
rights 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
Co-Lender shall be a waiver of any rights or remedies Agent or Co-Lender has or may have against
Borrower or Parent, except as specifically provided herein. Except as specifically provided
herein, Agent and Co-Lender hereby reserve and preserve all of their rights and remedies against
Borrower and Parent under the Loan Agreement and the other Financing Agreements.
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) Amendment Fee. Agent shall have received an amendment fee in the amount of
Thirty-Five Thousand Dollars ($35,000) for the benefit of Agent and Co-Lender based upon their
respective Pro Rata Shares, which fee is fully earned as of and due and payable on the date hereof.
(c) Representations and Warranties. The representations and warranties set forth
herein and in the Loan Agreement shall be true and correct.
(d) 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,
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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) 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.
(e) No Default. After giving effect to the waivers contained in this Amendment, 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 Co-Lender.
(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 Co-Lender 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
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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 Co-Lender 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 Co-Lender with respect to the Obligations.
10. Integration. This Amendment, together with the other Financing Agreements
(including the First Amendment), 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 or Co-Lender
to waive any of their 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.
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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/ XXXXXXXX XXXXXXX, XX. | |||
| Name: | Xxxxxxxx Xxxxxxx, Xx. | |||
| Title: | Chief Financial Officer | |||
| COMMERCE ENERGY GROUP, INC., a Delaware corporation |
||||
| By: | /s/ XXXXXXXX XXXXXXX, XX. | |||
| Name: | Xxxxxxxx Xxxxxxx, Xx. | |||
| Title: | Senior Vice President, Chief Financial Officer | |||
| WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN), a California corporation, as Agent and Lender |
||||
| By: | /s/ XXXXXX XXXXXX | |||
| Name: | Xxxxxx Xxxxxx | |||
| Title: | Director | |||
| THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, as Lender |
||||
| By: | /s/ XXXXXX XXXXXX | |||
| Name: | Xxxxxx Xxxxxx | |||
| Title: | Vice President | |||
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