SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER
Exhibit 10.91
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this “Amendment”),
dated October 26, 2006, 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”),
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 five (5) consecutive months ended July 31, 2006, as required by
Section 9.17 of the Loan Agreement (the average daily sum of the Excess Availability plus the
amount of Eligible Cash Collateral in excess of $35,000,000 having been less than $15,000,000
during the month then ended); and (ii) on and after October 20, 2006, Borrowers failed to maintain
Excess Availability of not less than $10,000,000 as required by Section 9.17 of the Loan Agreement
(as modified by the First 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. Amendments to Loan Agreement.
(a) Clause (ii) of Section 7.1(a) of the Loan Agreement is hereby amended and restated in its
entirety to read as follows:
“(ii) on a weekly basis or if Excess Availability equals or exceeds $10,000,000 for
ninety (90) consecutive days and for so long thereafter as Excess Availability
continues to equal or exceed $10,000,000, then on a monthly basis (no later than the
tenth (10th) Business Day after the end of each month), a certificate of
the Borrowing Base;”
(b) Fixed Charge Coverage Ratio. Section 9.17 of the Loan Agreement (as modified by
the First Amendment) is hereby amended in its entirety to read as follows:
“9.17 Fixed Charge Coverage Ratio. Parent and its Subsidiaries shall
maintain a Fixed Charge Coverage Ratio of not less than 1.1 to one as of the last
day of each month commencing with November 30, 2006, as determined for the period of
twelve (12) consecutive months then ending, or, in the case of Parent and any
Subsidiary that is not a Target acquired after the date of this Agreement, such
lesser number of months that have elapsed from and including March 2006.”
(c) Excess Availability. A new Section 9.17.1 is hereby added to the Loan Agreement
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 | |||
9/20/06 through 12/31/06
|
$ | 2,000,000 | ||
1/1/07 through 2/28/07
|
$ | 5,000,000 | ||
3/1/07 through 4/30/07
|
$ | 7,500,000 | ||
On and after 5/1/07
|
$ | 10,000,000 | ” |
2. Financial Consultant. Agent, through its legal counsel, will engage Xxxx Xxxxx
Advisory Group LLC as financial consultant (the “Consultant”) to assess the Borrower’s
historic and projected cash flows, liquidity and financial controls and performance generally, and
the projected Borrowing Base and Excess Availability, it being understood that the precise scope of
the Consultant’s assessment and services will be reasonably determined by Agent. The term of such
engagement shall not extend beyond May 1, 2007 unless Borrower otherwise agrees in writing. Agent
shall cause the Consultant to agree to confidentiality provisions reasonably acceptable to
Borrower. Borrower shall, upon Agent’s demand, pay any reasonable fees, expenses and other charges
of the Consultant in connection with such engagement, and shall reasonably cooperate with the
Consultant and provide such documents, records, financial statements, projections and further
information as the Consultant may reasonably request. Borrower and Parent acknowledge and agree
that the Consultant shall be deemed the agent and advisor of Agent for the purposes of Section 11.5
of the Loan Agreement.
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
2
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 Sections 9.17 and 9.17.1 of the Loan Agreement as modified or added by this Amendment.
Subject to this Amendment becoming 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 Fifty
Thousand Dollars ($50,000) 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.
3
(c) Representations and Warranties. The representations and warranties contained in
each Financing Agreement (other than any such representations or warranties that, 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.
4
(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 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.
5
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/ XXXXXX X. BOSS | |||
| Xxxxxx X. Boss | ||||
| President | ||||
| COMMERCE ENERGY GROUP, INC., a Delaware corporation |
||||
| By: | /S/ XXXXXX X. BOSS | |||
| Xxxxxx X. Boss | ||||
| Chief Executive Officer | ||||
| WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN), a California corporation |
||||
| By: | /S/ XXXX XXXXX | |||
| Xxxx Xxxxx | ||||
| Vice President | ||||
| THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation |
||||
| By: | /S/ XXXXX X. XXXXXX | |||
| Xxxxx X. Xxxxxx | ||||
| Senior Vice President | ||||
6
