SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
Exhibit 10.3
SECOND AMENDMENT
TO
THIS SECOND AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into as of February __, 2013, by and between Silicon Valley Bank (“Bank”) and ADVANCED PHOTONIX, INC., and PICOMETRIX, LLC (individually, a “Borrower” and, collectively, the “Borrowers”).
Recitals
A. Bank, Advanced Photonix, Inc. and Picometrix, LLC are parties to that certain Loan and Security Agreement dated as of January 31, 2012, as amended by a First Amendment to Loan and Security Agreement dated as of October 25, 2012 (as the same may from time to time be further amended, modified, supplemented or restated, collectively, the “Loan Agreement”).
B. Borrowers have requested that Bank amend the Loan Agreement.
C. In reliance upon the representations and warranties set forth below, Bank has agreed to so amend certain provisions of the Loan Agreement in accordance with the terms and subject to the conditions set forth herein.
Agreement
Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.
2. Amendments to Loan Agreement.
2.1 Section 6.9 (Financial Covenants). Section 6.9 of the Loan Agreement is amended and restated in its entirety to read as follows:
6.9 Financial Covenants. Maintain at all times, to be tested as of the last day of each fiscal month, unless otherwise noted, on a consolidated basis with respect to Borrowers:
(a) Liquidity Ratio. Borrowers’ unrestricted cash and Cash Equivalents at Bank plus the net balance sheet billed Accounts divided by Borrowers’ Indebtedness to Bank of not less than 2.25: 1.00.
(b) EBITDA. Maintain, measured as of the end of each fiscal month, on a trailing 3-month basis, EBITDA of at least the following:
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Period
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Minimum EBITDA
|
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January 31, 2013 through fiscal month ending
June 30, 2013
|
($750,000)
|
|
July 31, 2013 through fiscal month ending
October 31, 2013
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($300,000)
|
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November 30, 2013 through fiscal month
ending February 28, 2014
|
$1.00
|
| March 31, 2014 | $100,000 |
| April 30, 2014 and thereafter | To be agreed upon by Borrowers and Bank,
based on Board approved plan, but no rolling
3 month period to be set lower than
$100,000
|
2.2 Section 13 (Definitions).
(a) The following terms in Section 13.1 are amended and restated in their entirety to read as follows:
“Streamline Period” is, on and after the Effective Date, provided no Default or Event of Default has occurred and is continuing, the period (i) beginning on the first (1st) day of the month following the month in which Borrower has, as of the last day of the immediately preceding Subject Month, both (a) maintained a balance of unrestricted cash plus availability under the Revolving Line of at least $3,000,000, and (b) maintained a balance of Zero Dollars ($0) outstanding on the Revolving Line, in each case as determined by Bank, in its sole discretion (the “Streamline Threshold”); and (ii) ending on the earlier to occur of (A) the occurrence of a Default or an Event of Default; and (B) the first day thereafter in which Borrower fails to maintain the Streamline Threshold, as determined by Bank, in its sole discretion. Upon the termination of a Streamline Period, Borrower must maintain the Streamline Threshold for one (1) month, as determined by Bank, in its sole discretion, prior to entering into a subsequent Streamline Period. Borrower shall give Bank prior-written notice of Borrower’s intention to enter into any such Streamline Period.
“Revolving Margin” is 0.5% when the Liquidity Ratio is greater than or equal to 3.0 and trailing 3 month EBITDA is greater than or equal to $1.00, 1.5% when the Liquidity Ratio is greater than or equal to 3.0 and trailing 3 month EBITDA is less than $1.00, but greater than or equal to negative $500,000, 3.0% when the Liquidity Ratio is greater than or equal to 3.0 and trailing 3 month EBITDA is less than negative $500,000 but greater than or equal to negative $750,000; 1.25% when the Liquidity Ratio is greater than or equal to 2.5 but less than 3.0 and trailing 3 month EBITDA is greater than or equal to $1.00, 2.25% when the Liquidity Ratio is greater than or equal to 2.5 but less than 3.0 and trailing 3 month EBITDA is less than $1.00 but greater than or equal to negative $500,000, 3.50% when the Liquidity Ratio is greater than or equal to 2.5 but less than 3.0 and trailing 3 month EBITDA is less than negative $500,000 but greater than or equal to negative $750,000; and 1.75% when the Liquidity Ratio is less than 2.5 and trailing 3 month EBITDA is greater than or equal to $1.00, 2.75% when the Liquidity Ratio is less than 2.5 and trailing 3 month EBITDA is less than $1.00 but greater than or equal to negative $500,000, 4.00% when the Liquidity Ratio is less than 2.5 and trailing 3 month EBITDA is less than negative $500,000 but greater than or equal to negative $750,000.
“Revolving Line Maturity Date” is January 31, 2014.
“Term Margin” is 1.0% when the Liquidity Ratio is greater than or equal to 3.0 and trailing 3 month EBITDA is greater than or equal to $1.00, 2.0% when the Liquidity Ratio is greater than or equal to 3.0 and trailing 3 month EBITDA is less than $1.00, but greater than or equal to negative $500,000, 3.5% when the Liquidity Ratio is greater than or equal to 3.0 and trailing 3 month EBITDA is less than negative $500,000 but greater than or equal to negative $750,000; 1.75% when the Liquidity Ratio is greater than or equal to 2.5 but less than 3.0 and trailing 3 month EBITDA is greater than or equal to $1.00, 2.75% when the Liquidity Ratio is greater than or equal to 2.5 but less than 3.0 and trailing 3 month EBITDA is less than $1.00 but greater than or equal to negative $500,000, 4.0% when the Liquidity Ratio is greater than or equal to 2.5 but less than 3.0 and trailing 3 month EBITDA is less than negative $500,000 but greater than or equal to negative $750,000; and 2.25% when the Liquidity Ratio is less than 2.5 and trailing 3 month EBITDA is greater than or equal to $1.00, 3.25% when the Liquidity Ratio is less than 2.5 and trailing 3 month EBITDA is less than $1.00 but greater than or equal to negative $500,000, 4.50% when the Liquidity Ratio is less than 2.5 and trailing 3 month EBITDA is less than negative $500,000 but greater than or equal to negative $750,000.
2.3 PFG. Bank (A) consents to (i) Borrowers’ incurrence of Indebtedness of up to $2,500,000 from Partners for Growth and (ii) Borrowers’ grant of a security interest in substantially all of their respective assets to secure performance under the loan and security agreement and/or other documents entered into in connection with the incurrence of such indebtedness, and (B) acknowledges such indebtedness is “Subordinated Debt” and such security interest is a “Permitted Lien” under the Loan Agreement.
2.4 Exhibits. Exhibit D (Compliance Certificate) and Schedule 1 attached to the Loan Agreement are replaced with Exhibit D and Schedule 1 attached hereto.
3. Limitation of Amendments.
3.1 The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.
3.2 This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.
4. Representations and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:
4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;
4.2 Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;
4.3 Except with respect to Borrower’s By-Laws, which were amended on October 16, 2012, the organizational documents of Borrower delivered to Bank on the Effective Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;
4.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;
4.5 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;
4.6 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and
4.7 This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.
5. Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.
6. Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, (b) Borrower’s payment of a fee of $10,000, plus the Bank Expenses incurred in connection with this Amendment, (c) Bank’s receipt of evidence that Borrower has received at least $2,500,000 of proceeds of Subordinated Debt from Partners for Growth, (d) Bank’s receipt of an Intellectual Property Security Agreement, and (e) and such other documents as Bank may reasonably request.
[Signature page follows.]
In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.
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BANK
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BORROWER
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SILICON VALLEY BANK
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ADVANCED PHOTONIX, INC.
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| By: | |||||
| By: | Name: | ||||
| Name: | Title: | ||||
| Title: | |||||
| PICOMETRIX, LLC | |||||
| By: | |||||
| Name: | |||||
| Title: | |||||
EXHIBIT D
COMPLIANCE CERTIFICATE
| TO: SILICON VALLEY BANK | Date: ______________ |
| FROM: ADVANCED PHOTONIX INC., PICOMETRIX, LLC |
The undersigned authorized officer of ADVANCED PHOTONIX INC., on behalf of the Borrowers (collectively, “Borrowers”) certifies that under the terms and conditions of the Amended and Restated Loan and Security Agreement between Borrowers and Bank (the “Agreement”):
(1) Borrowers are in complete compliance for the period ending _______________ with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; (4) Borrowers, and each of their Subsidiaries, have timely filed all required tax returns and reports, and Borrowers have timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrowers except as otherwise permitted pursuant to the terms of Section 5.8 of the Agreement; and (5) no Liens have been levied or claims made against Borrowers or any of their Subsidiaries relating to unpaid employee payroll or benefits of which Borrowers have not previously provided written notification to Bank.
Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrowers are not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
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Please indicate compliance status by circling Yes/No under “Complies” column.
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Reporting Covenant
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Required
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Complies
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Transaction Report, A/R & A/P Agings
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monthly within 15 days and with each Advance Request when in Streamline (weekly when not in Streamline)
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Yes No
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Board projections
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30 days prior to FYE
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Yes No
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Monthly financial statements with Compliance Certificate
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Within 30 days of fiscal month ends except for quarter ends which have 45 days
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Yes No
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Annual financial statement (CPA Audited) with Compliance Certificate
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FYE within 120 days
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Yes No
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10-Q, 10-K and 8-K
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Within 5 days after filing with SEC
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Yes No
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| The following Intellectual Property was registered (or a registration application submitted) after the Effective Date (if no registrations, state “None”) | ||
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Financial Covenant
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Required
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Actual
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Complies
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Maintain on a Monthly Basis:
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|||
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Minimum Liquidity Ratio
Minimum EBITDA, monthly on trailing 3 month basis
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2.25:1.0
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___:1.0_______
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Yes No
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($750,000) through 6/13
($300,000) from 7/13 to 10/13
$1.00 from 11/13 to 2/14
$100,000 for 3/14
TBD for 4/14 and thereafter
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The following financial covenant analys[is][es] and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.
The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)
API Pricing Matrix
Revolver
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Trailing 3 month EBITDA
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|||||
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≥$1 EBITDA
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If <$1, but ≥
-$500k EBITDA
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If <-$500k, but ≥
-$750k EBITDA
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|||
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LQR≥3.0
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P+50 bps
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P+150 bps
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P+300 bps
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LQR <3.0≥2.50
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P+125 bps
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P+225 bps
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P+350 bps
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LQR <2.5
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P+175 bps
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P+275 bps
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P+400 bps
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Term Loan
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Trailing 3 month EBITDA
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|||||
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≥$1 EBITDA
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If <$1, but ≥
-$500k EBITDA
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If <-$500k, but ≥
-$750k EBITDA
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|||
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LQR≥3
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P+100 bps
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P+200 bps
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P+350 bps
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LQR <3≥2.50
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P+175 bps
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P+275 bps
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P+400 bps
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LQR <2.5
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P+225 bps
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P+325 bps
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P+450 bps
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||
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ADVANCED PHOTONIX, INC.
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||
| By: | ||
| Name: | ||
| Title: | ||
Schedule 1 to Compliance Certificate
Financial Covenant of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated: ____________________
I. Liquidity Ratio (Section 6.9(a))
Required: 2.25:1.0
Actual:
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A.
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Unrestricted cash and Cash Equivalents at Bank
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$
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|
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B.
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Net balance sheet billed A/R
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$
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C.
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Liquidity (line A plus line B)
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$
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|
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D.
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Total Indebtedness to Bank
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$
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E.
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Liquidity Ratio (line C divided by line D)
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Is line C equal to or greater than 2.00 to1:00?
| _______ No, not in compliance | _______Yes, in compliance |
II. EBITDA (Section 6.9(b))
Required: Monthly, on trailing 3 month basis
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Period
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EBITDA
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January 31, 2013 through June 30, 2013
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($750,000)
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July 31, 2013 through October 31, 2013
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($300,000)
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November 30, 2013 through Feb 28, 2014
March 2014
April 1, 2014 and thereafter
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$1.00
$100,000
TBD
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Actual:
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A.
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Net Income
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$
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|
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B.
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To the extent included in the determination of Net Income
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||
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1. The provision for income taxes
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$
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||
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2. Depreciation expense
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$
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||
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3. Amortization expense
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$
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|
4. Net Interest Expense
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$
|
||
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5. Non-cash stock compensation plus All other non-cash items including intangible asset writeoffs
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$
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||
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6. Non-cash Warrant (income) or expense
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($
|
) | |
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7. The sum of lines 1 through 5 plus or minus line 6
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$
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||
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C.
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EBITDA (line A plus line B.7)
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Is line C equal to or greater than the amount specified in the chart?
| _______ No, not in compliance | _______Yes, in compliance |
PRO FORMA INVOICE FOR LOAN CHARGES
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BORROWER:
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ADVANCED PHOTONIX, INC.
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(Second Amendment)
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LOAN OFFICER:
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Xxx Xxxxxxxxx
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DATE:
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February __, 2013
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|||
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Loan Fee
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$
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10,000
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||
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Legal Fees
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$
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TOTAL FEE DUE
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$
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Please indicate the method of payment:
{ } A check for the total amount is attached.
{ } Debit DDA #________________ for the total amount.
{ } Loan proceeds
Borrower: ADVANCED PHOTONIX, INC.
| By: | ||
| (Authorized Signer) | ||
| Silicon Valley Bank (Date) | ||
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Account Officer's Signature
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