Exhibit 10.3
SIXTH AMENDMENT
TO LOAN AGREEMENT
THIS SIXTH AMENDMENT TO LOAN AGREEMENT is entered into as of the 31st
day of October, 2003, by and between AESP, INC., a Florida corporation (formerly
known as Advanced Electronic Support Products, Inc.), a Florida corporation (the
"Borrower") and COMMERCEBANK, N.A. (the "Bank").
RECITALS:
A. Borrower and Bank entered into that certain loan agreement (the "Loan
Agreement") dated September 23, 1999 under the terms of which Bank
agreed to lend Borrower $3,500,000.
B. Borrower and Bank executed and delivered that certain First Amendment
to Loan Agreement (the First Amendment") dated September 2, 2000
between them. In connection with the First Amendment, Borrower executed
and delivered to Bank that certain Renewal Promissory Note dated
September 2, 2000 (the "Renewal Note") in the original principal amount
of $3,500,000.
C. Borrower and Bank executed and delivered that certain Second Amendment
to Loan Agreement (the Second Amendment") dated March 16, 2001 between
them. In connection with the Second Amendment, Borrower executed and
delivered to Bank that certain Renewal Promissory Note dated March 16,
2001 (the "Second Renewal Note") in the original principal amount of
$4,000,000.
D. Borrower and Bank executed and delivered that certain Third Amendment
to Loan Agreement (the Third Amendment") dated September 21, 2001
between them. In connection with the Third Amendment, Borrower executed
and delivered to Bank that certain Renewal Promissory Note dated
September 21, 2001 (the "Third Renewal Note") in the original principal
amount of $4,000,000.
E. Borrower and Bank executed and delivered that certain Extension Letter
Agreement (the "Letter Agreement") dated September 18, 2002 between
them, which, among other things, extended the term of the Line of
Credit until January 23, 2003and reduced the Maximum Line of Credit
Amount to $1,900,000.
F. Borrower and Bank executed and delivered that certain Fourth Amendment
to Loan Agreement (the Fourth Amendment") dated January 17, 2003
between them. In connection with the Fourth Amendment, Borrower
executed and delivered to Bank that certain Renewal Promissory Note
dated January 17, 2003 (the "Fourth Renewal Note") in the original
principal amount of $1,900,000.
G. Borrower and Bank executed and delivered that certain Fifth Amendment
to Loan Agreement (the Fifth Amendment") dated August 15, 2003 between
them. In connection with the Fifth Amendment, Borrower executed and
delivered to Bank that certain Renewal Promissory Note dated August 15,
2003 (the "Fifth Renewal Note") in the original principal amount of
$1,900,000.
H. Borrower and Bank desire to amend certain terms of the Loan Agreement,
as amended, pursuant to the terms hereof to among other things extend
the term of the Line of Credit.
NOW, THEREFORE, in consideration of the agreements set forth herein and
other good and valuable consideration, the parties hereto hereby agree as
follows:
SECTION 1. DEFINITIONS. All capitalized terms used herein shall have
the same meanings as used in Section 1 of the Loan Agreement, unless otherwise
defined in this Sixth Amendment.
SECTION 2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended in the following respects:
(a) MANDATORY PREPAYMENT, RELEASE OF COLLATERAL, PERMANENT
REDUCTION AND TERMINATION OF LINE OF CREDIT. The existing section 2.9 of the
Loan Agreement shall be deleted and replaced by the following:
"2.9 MANDATORY PREPAYMENT, RELEASE OF COLLATERAL,
PERMANENT REDUCTION AND TERMINATION OF LINE OF CREDIT. (a)
Borrower shall close a new lending arrangement (the "KBK
Facility") with KBK Financial, Inc. ("KBK"), by October 31,
2003, the initial proceeds (the "Initial Proceeds") of which
shall be paid to Lender via wire transfer directly from KBK as
a prepayment of the Line of Credit. The Initial Proceeds of
the KBK Facility shall not be less than Nine Hundred Thousand
Dollars ($900,000). For purposes of the preceding sentence,
the amount of the Initial Proceeds shall be determined by
determining the difference of the (i) total amount of domestic
accounts receivable purchased by KBK, less (ii) direct
commissions and expenses in connection with obtaining the KBK
Facility of not more than $70,000. To the extent the Initial
Proceeds do not completely repay all amounts outstanding under
the Line of Credit, Borrower shall apply any additional
proceeds (the "Additional Proceeds") received from KBK under
the KBK Facility to repay the outstanding principal balance on
the Line of Credit until the total of the Initial Proceeds and
the Additional Proceeds equals One Million Two Hundred
Thousand Dollars ($1,250,000). All payments of Initial
Proceeds and Additional Proceeds shall permanently reduce the
Maximum Line of Credit Amount by the amount of such
prepayment. Borrower agrees to provides Bank with copies of
all documentation associated with the KBK Facility.
(b) KBK and Lender shall enter into an Intercreditor
Agreement (the "Intercreditor Agreement") in the form of the
attached Exhibit A, to which Borrower agrees to acknowledge
and consent. Subject to receipt of the Initial Proceeds and
all parties execution and delivery of the Intercreditor
Agreement, Lender hereby waives, releases and discharges any
security interest and all other claims or interest that
Creditor may have in all Purchased Accounts (as defined in the
Intercreditor Agreement), regardless of (a) when KBK's
security interest in the Purchased Accounts became perfected,
(b) when the Purchased Accounts were purchased, (C)) the value
of the Purchased Accounts, (d) the consideration given or
promised for the Purchased Accounts, or (e) the amount
Creditor is owed by AESP. Lender agrees to file amendments to
Lender's financing statements evidencing such release of
collateral. Notwithstanding any other provision of this Loan
Agreement or the Security Agreement, Lender consents to
Borrower's granting to KBK a security interest in all of it's
personal property provided that such security interest is
subordinated to Lender with respect to Creditor Primary
Collateral (as defined in the Intercreditor Agreement).
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(c) On or before April 20, 2004 Borrower shall
satisfy all outstanding Obligations to Lender under the Line
of Credit. On the earlier to occur of a prepayment of all
Obligations hereunder or April 20, 2004, the Lender's
obligations to make Advances under the Line of Credit shall be
terminated, the Maximum Line of Credit Amount shall be reduced
to zero ($0), and all of Borrower's Obligations under the Loan
Agreement shall be immediately due and payable. Borrower
acknowledges that Borrower's obligations under this section
are not dependent on the availability of any particular form
of credit or any other condition.
(b) OTHER CONFORMING CHANGES: The Loan Agreement is
amended as follows:
(i) DEFINITION OF ELIGIBLE RECEIVABLES. Item
(e) of the definition of eligible receivables shall be amended and restated to
read as follows:
"(e) The Receivable is not subject to any
Lien (subject only to Permitted Liens other than any superior liens in favor of
KBK), and Borrower has not made and will not make any further assignment thereof
or create any further security interest therein, nor permit Borrower's rights
therein to be breached by attachment, levy, garnishment or other judicial
process (a Receivable that is subject to a "price protection" or "stock rotation
agreement" shall be eligible but shall qualify only to the extent of the amount
actually owed at the applicable time under the terms os such agreements by the
applicable Receivable Debtor);"
(ii) DEFINITION OF LINE OF CREDIT NOTE. The
definition of Line of Credit Note shall be amended and restated to read as
follows:
"LINE OF CREDIT NOTE" shall mean that certain Sixth
Renewal Promissory Note, dated October 31, 2003, of
Borrower to Lender in the aggregate principal amount
of One Million Nine Hundred Thousand Dollars
($1,900,000) which Sixth Renewal Promissory Note
amended, renewed and updated that certain Fifth
Renewal Promissory Note, dated August 15, 2003
executed by Borrower, in favor of Lender.
(iii) DEFINITION OF LINE OF CREDIT MATURITY
DATE. The definition of Line of Credit Maturity Date shall be amended and
restated to read as follows:
"LINE OF CREDIT MATURITY DATE" shall mean April 20,
2004, or such earlier date as payment of the Line of
Credit shall be due and payable in full, whether by
mandatory prepayment, acceleration or otherwise.
(iv) DEFINITION OF LOAN DOCUMENTS. The
definition of the term "LOAN DOCUMENTS" in the Loan Agreement shall include this
Sixth Amendment, the Fifth Amendment, the Fourth Amendment, the Letter
Agreement, the Third
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Amendment, the Second Amendment, the First Amendment, the Line of Credit Note,
the Fifth Renewal Note, the Security Agreement, the Commitment Letter and all
other documents executed and delivered by the parties which evidence, secure or
otherwise relate to the transaction contemplated by this Sixth Amendment.
(v) DEFINITION OF MAXIMUM LINE OF CREDIT
AMOUNT. The definition of Maximum Line of Credit Amount shall be amended and
restated to read as follows:
"MAXIMUM LINE OF CREDIT AMOUNT" shall mean One
Million Nine Hundred Thousand Dollars ($1,900,000),
subject to reduction as described in Section 2.9 of
this Agreement".
(vi) DEFINITION OF PERMITTED LIENS. The
definition of permitted Liens in the Loan Agreement shall be amended by deleting
the and after (vi) replacing the period after item (vii) with "; and" and
inserting a new item (viii) which reads as follows: "(viii) any lien in favor of
KBK which conforms to the terms of the Intercreditor Agreement."
(vii) ADDITION TO EVENTS OF DEFAULT. Add the
following to Section 6.1 of the Loan Agreement:
"(m) Borrower's failure to make the prepayments
required under Section 2.9 of the Loan Agreement
SECTION 3. NO EVENT OF DEFAULT. Borrower hereby certifies to Bank that
(a) it has kept, observed, performed and fulfilled each and every covenant,
provision and condition of the Loan Agreement and the other Loan Documents on
its part to be performed, (b) that all representations and warranties of the
Borrower made in the Loan Agreement are true and correct as of the date hereof
EXCEPT FOR those representations and warranties which are made as of a
particular date, which such representations and warranties are true and correct
as of such date, (c) that no Event of Default or event which, with the passage
of time or the giving of notice or both, would constitute an Event of Default
has occurred and is continuing under the Loan Agreement, both before and after
giving effect to the amendment contemplated hereby, except any Event of Default
that has previously occurred and which has been specifically waived in writing
by the Bank, and (d) as of the date of this Sixth Amendment, Borrower has no
defenses or counterclaims with respect to Bank's rights to collect all amounts
due to it under the Loan Documents. Notwithstanding the preceding sentence, the
parties acknowledge that the Borrower is not in compliance with Sections 5.14(a)
& (b) of the Loan Agreement at the period ending September 30, 2003 ("9/30/03
Covenant Defaults"). Lender hereby waives any Event of Default relating to the
9/30/03 Covenant Default. Lender's waiver in the preceding sentence shall not
obligate Lender to waive similar defaults or Events of Default in the future, or
act as a waiver of any other default or Event of Default for which Lender may or
may not be aware.
SECTION 4. LOAN AGREEMENT CONFIRMED. The Loan Agreement, as amended
hereby, is reaffirmed and restated herein by Borrower and Bank, and said Loan
Agreement is hereby incorporated herein by reference as fully as if set forth in
its entirety in this Sixth Amendment.
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SECTION 5. CONDITIONS PRECEDENT TO BANK'S OBLIGATIONS. Banks
obligations under this Sixth Amendment shall be subject to the satisfaction of
each of the following conditions precedent:
(a) Borrower shall have executed and deliver this Sixth
Amendment, the Sixth Renewal Note, a consent and acknowledgment of the
Intercreditor Agreement and all other documents requested by Bank and all Loan
Documents shall be in full force and effect.
(b) Bank shall have received (i) a certificate of the
secretary of Borrower certifying that attached thereto are true and correct
copies of (A) the bylaws of Borrower, as amended through the date of such
certification and (B) resolutions duly adopted by Borrower's board of directors
authorizing the execution, delivery and performance of the Loan Documents to
which Borrower is a party, which resolutions have not been altered or amended in
any respect and remain in full force and effect, (ii) the names of each of the
officers of Borrower authorized to execute and deliver the Loan Documents; (iii)
a certificate of the applicable State authority, dated as of a recent date, as
to the good standing of Borrower; and (iv) a certificate of the Florida
Department of State, dated as of a recent date, certifying that attached are
true and correct copies of the articles of incorporation of the Borrower filed
with such agency.
(c) Borrower shall cause to be delivered to Bank such other
documents, certificates or affidavits as may be reasonably requested by Bank in
connection with consummating the transaction evidenced by this Sixth Amendment.
(d) An opinion of counsel from counsel to Borrower in a form
reasonably satisfactory to Lender.
(e) Borrower shall pay to lender an extension fee in the
amount of Twenty Five Thousand Dollars ($25,000) on the date of this Sixth
Agreement.
(f) Borrower shall pay Lender all of its costs and expenses
incurred in connection with this such Amendment, the Intercreditor Agreement and
th transactions contemplated herein, including, without limitation, Borrower's
attorneys fees.
SECTION 6. MISCELLANEOUS.
(a) INVALIDITY. In the event that any one or more of the
provisions contained in this Sixth Amendment 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 Sixth Amendment.
(b) COUNTERPARTS. This Sixth Amendment may be executed in
several counterparts, and it shall not be necessary that the signatures of all
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(c) REFERENCE. From and after the effective date hereof, all
references to the Loan Agreement shall be deemed to be references to the Loan
Agreement as amended by this Sixth Amendment.
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(d) GOVERNING LAW. THIS SIXTH AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF FLORIDA
WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAW PRINCIPLES.
(e) GOVERNING DOCUMENT. In the event of a conflict between the
terms and conditions of this Sixth Amendment and the Commitment Letter, the
terms and conditions of this Sixth Amendment shall control in all respects.
SIGNATURE PAGE TO FOLLOW
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IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment
to Loan Agreement to be duly executed and delivered by their respective
representatives thereunto duly authorized as of the date first above written.
BORROWER:
AESP, INC.
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxx Xxxxx
Its: President
BANK:
COMMERCEBANK, N.A.
By: /s/ Xxxx X. Hills
-------------------------------------
Name: Xxxx X. Hills
Its: Vice President
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