EXHIBIT 10.4
ADVANCED PHOTONIX, INC.
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
March 9, 2005
VIA FACSIMILE
Smithfield Fiduciary LLC
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxx
Xxxx X. Chill
Facsimile: (000) 000-0000
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Securities Purchase Agreement"), dated as of October 11, 2004, by and among
Advanced Photonix, Inc. (the "Company"), you and the other investors party
thereto, pursuant to which you purchased, and the Company issued, the Initial
Notes, Initial Warrants and the Additional Investment Rights. Capitalized terms
used but not otherwise defined shall have the meanings assigned to such terms in
the Securities Purchase Agreement.
The Company hereby requests that you consent to the following:
1. Amendment to Definitions in Notes.
(a) Section 30 of the Notes is amended to include the following definition
of "Permitted Bank Debt" in alphabetical order:
"Permitted Bank Debt" means (i) the Current Credit Facility or (ii)
any Indebtedness incurred by the Company from a commercial banking
institution as a replacement of the Current Credit Facility; provided,
however, that the aggregate amount of all Permitted Bank Debt shall not
exceed $6,000,000 of which (A) the aggregate amount of all Permitted Bank
Debt (other than Permitted Bank Debt incurred to fund the acquisition of
Picotronix, Inc.) shall not exceed $3,000,000 and (B) the aggregate amount
of any Permitted Bank Debt incurred to fund the acquisition of Picotronix,
Inc. shall not exceed $3,000,000.
(b) The definitions of "Interest Rate", "Permitted Acquisition
Indebtedness" and "Permitted Indebtedness" in Section 30 of the Notes are hereby
amended and restated to read as follows:
"Interest Rate" means the Prime Rate plus one percent (1.0%) as of the
first Business Day of each Calendar Quarter, or if prior to the first full
Calendar Quarter hereunder, as of the Issuance Date, subject to periodic
adjustment pursuant to Section 2; provided, however, that such rate shall
not at any time be less than six and one-half percent (6.5%).
"Permitted Acquisition Indebtedness" means the incurrence by the
Company of Indebtedness in an amount not to exceed at any one time in the
aggregate, $3,000,000; provided that such Permitted Acquisition
Indebtedness is (i) incurred in connection with the Permitted Acquisition
and the Permitted Acquisition is a bona fide purchase of a product, product
line, business or assets not for purposes of incurrence of Indebtedness
(the "Acquired Assets"), (ii) on terms reasonably satisfactory to the
Required Holders and (iii) not secured by or involving any Lien other than
solely on the Acquired Assets.
"Permitted Indebtedness" means (A) Permitted Bank Debt and (B)
Permitted Acquisition Indebtedness.
2. Subordination. You agree, that if in connection with funding the acquisition
of Picotronix, Inc. the Company is required to incur Permitted Bank Debt in
excess of $3,000,000, to subordinate, pursuant to a form of subordination
agreement in form and substance reasonably satisfactory to you, (i) payments of
principal and interest under the Notes (other than any interest payments made on
regularly scheduled interest dates and interest which is paid-in-kind) to
Permitted Bank Debt and (ii) your lien in the assets of the Company to any lien
granted by the Company as security in connection with Permitted Bank Debt.
3. Amendment to Section 4(p)(ii)(1) of the Securities Purchase Agreement.
Section 4(p)(ii)(1) of the Securities Purchase Agreement is amended and restated
to read as follows:
"(1) If the Agreement Condition (as defined below in Section
4(p)(iii)) is satisfied on or before March 11, 2005, then on the third
Business Day after the date the Agreement Condition is satisfied, the
Collateral Agent shall deliver written instructions to the Cash Collateral
Bank directing the release of $1,250,000 less any amount previously
released pursuant to Section 4(p)(ii)(4) from the Cash Collateral Account
to the Company;"
4. Amendment to Section 4(p)(ii)(2)of the Securities Purchase Agreement. Section
4(p)(ii)(2) of the Securities Purchase Agreement is amended and restated to read
as follows:
"(2) If the Transaction Condition (as defined below in Section
4(p)(iii)) is satisfied on or before May 1, 2005, then on the third
Business Day after the date the Transaction Condition is satisfied, the
Collateral Agent shall deliver written instructions to the Cash Collateral
Bank directing the release of the balance of any amount remaining in the
Cash Collateral Account to the Company;"
5. Amendment to Section 1(b) of the Initial Warrants. Section 1(b) of the
Initial Warrants is amended and restated to read as follows:
"(b) Exercise Price. For purposes of this Warrant, "Exercise Price"
means $1.78, subject to adjustment as provided herein."
6. Amendment to Section 1(b) of the Additional Warrants. Section 1(b) of the
Additional Warrants is amended and restated to read as follows:
"(b) Exercise Price. For purposes of this Warrant, "Exercise Price"
means $1.78, (subject to appropriate adjustments for stock splits, stock
dividends, stock combinations and other similar transactions after the
Subscription Date)."
7. Expense Reimbursement. The Company shall pay upon execution of this letter an
expense allowance not to exceed $7,500 for reimbursement of reasonable legal and
due diligence expenses incurred in connection with entering into this letter.
Except as amended or modified by this letter, all other terms and
conditions of the Securities Purchase Agreement, Notes and Warrants shall remain
in full force and effect. If the foregoing amendments are acceptable to you,
please sign in the space indicated below. This letter may be executed in
counterparts.
Sincerely,
ADVANCED PHOTONIX, INC.
By: /s/ Xxxxxxx Xxxxx
--------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Executive Officer
Agreed and Accepted:
SMITHFIELD FIDUCIARY LLC
By: /s/ Xxxx X. Chill
---------------------------------
Name: Xxxx X. Chill
Title: Authorized Signatory
cc: Xxxxxxx Xxxxx, Esq.
(000) 000-0000
