FIRST AMENDMENT TO CREDIT AGREEMENT (the “Amendment”)
Exhibit 10.35
WHEREAS,
DPAC TECHNOLOGIES CORP., a California corporation (the
“Company”), and QUATECH, INC. an Ohio corporation
(together with the Company herein collectively or individually, as the context
so requires, called the “Borrower” and together called the
“Borrowers”), and FIFTH THIRD BANK an Ohio banking corporation (“Bank”) entered into a certain Credit Agreement dated January 30, 2008
(the “Loan Agreement”), and
WHEREAS, Borrowers and Bank have agreed to amend the Loan Agreement to revise the credit
facilities and financial covenants thereunder.
NOW,
THEREFORE, for valuable consideration received to their satisfaction, Borrowers, jointly
and severally, and Bank hereby mutually agree as follows:
1. The Article I definition of “Termination Date” contained in Section 1.2. of the Loan
Agreement
is hereby amended to delete it in its entirety and substitute therefore the following:
““Termination
Date” means January 31, 2010, or such earlier date on which
the commitment of the Bank to make the Loans pursuant to Section 2.1 hereof
shall have been terminated pursuant to ARTICLE VIII. of this Agreement.”
2. Section 2.1. (a) of the Loan Agreement is hereby amended to delete it in its entirety and
substitute the following:
“(a) The Bank will, at the request of the Company, make one or more Revolver
Advances to the Borrowers from time to time on and after the date of this
Agreement through and including the Termination Date, in an aggregate principal
amount (outstanding at any one time) not to exceed the lesser of (i) from the
date hereof through and including December 31, 2009, Two Million Dollars
($2,000,000.00), and after December 31, 2009, through and including the
Termination Date, One Million Five Hundred Thousand Dollars ($
1,500,000.00),
or (ii) the Borrowing Base (the “Commitment”). Should the outstanding amount of
Loans at any time exceed such maximum amount available for Revolver Advances
under this Section 2.1., the Borrowers shall immediately repay such excess
amount. The Borrowers may borrow, repay, and reborrow the maximum amount of
such credit.”
3. Section 2.2. of the Loan Agreement is hereby amended to delete it in its entirety and
substitute
the following:
“Section 2.2.
Interest Rate.
(a) Each Revolver Advance shall bear interest prior to maturity at the Revolver
LIBOR Rate plus six and one half percent (6.50%), as determined in accordance
with the “Interest Rate Appendix”, which is attached hereto as Exhibit F, and
incorporated herein as if fully rewritten.
(b) Whenever the unpaid principal amount of the Loans, and accrued interest
thereon, or any fees or any other sum payable hereunder, shall become due and
payable and remain unpaid after the applicable grace period (whether by
acceleration or otherwise), the amount thereof shall thereafter until paid in
full bear interest at a rate per annum equal to the Revolver Libor Rate plus
eight and one half percent (8.50%) as
determined in accordance with the Interest Rate Appendix, except such interest
rate shall not exceed the highest rate permitted by law. In addition, prior to
maturity, for each payment of principal or interest not paid when due or within
any applicable grace period, the Company shall also pay a late fee equal to the
greater of $ 50.00 or 5.0% of the unpaid amount of such payment.
(c) Subject to the terms of the Interest Rate Appendix. Company shall pay to
the Bank interest on the unpaid principal balance of all Loans at the rate
provided for in Section 2.2. (a) above, starting on February 28, 2009, and
continuing on the last business day of each month thereafter until the final
payment is due and payable, which shall be made on the Termination Date.”
The
Loan Agreement is hereby amended to add attached new Exhibit F, which is incorporated
herein as if fully rewritten herein.
4. The Loan Agreement is hereby amended to add the following new Section 2.5. (d):
“(d) A commitment fee computed at a rate of three quarters of one percent
(.75%) per annum (calculated on the basis of a year of 360 days for the actual
number of days elapsed) on the average daily unused amount of the Commitment of
the Bank to make the Loans in accordance with Section 2.1.A. hereof during the
period from the date of this Agreement through and including the Termination
Date, payable starting on March 31, 2009, and continuing quarter annually
thereafter on the last day of each calendar quarter and on the Termination
Date, with respect to the portion of such preceding period as to which such fee
has accrued and remains unpaid.”
5. Sections 6.8 and 6.9. of the Loan Agreement are hereby amended to delete them in their
entirety
and substitute the following:
“Section 6.8.
Effective Tangible Net Worth. The Borrowers will not
permit its Consolidated Effective Tangible Net Worth to be less than a negative
$ 750,000.00 for the quarter ending March 31, 2009, or less than
$ 700,000.00 for the quarter ending June 30, 2009, and each quarter thereafter, tested at
the end of each fiscal quarter, beginning with the quarter ending
March 31, 2009.
Section 6.9.
Fixed Charge Coverage Ratio. The Borrower will not permit
the ratio of the sum of their Consolidated EBITDA plus rent and operating lease
expense, less the sum of dividends and distributions and Capital Expenditures
(other than Capital Expenditures financed with purchase money indebtedness or
capital leases to the extent permitted hereunder) to their Consolidated Total
Fixed Charges to be less than 1.00 to 1.00 for the twelve month period ending
March 31, 2009, or to be at any time less than 1.10 to 1.00 for the twelve
month period ending June 30, 2009, or any twelve month period thereafter, tested
at the end of each fiscal quarter for the preceding twelve month period, tested
at the end of each fiscal quarter, beginning with the quarter ending March
31, 2009.”
6. The parties acknowledge that Section 2.1. of the Agreement, as changed by this Amendment,
provides for a revolving credit facility to the Borrowers in the amount of Two Million
Dollars ($ 2,000,000.00)
to be evidenced by the Revolving Credit Promissory Note dated of even date herewith in the
form attached
hereto as Exhibit B-1. Exhibit B to the Loan Agreement is hereby amended in the form of
Exhibit B-1 in the
form attached hereto and incorporated herein as if fully rewritten herein. The Borrowers
hereby agrees that it
will, contemporaneous with the execution of this Amendment, execute and deliver to the Bank a
Revolving
Credit Promissory Note in the form of Exhibit B-1, representing the Borrowers’ borrowings under
the revolving credit facility set forth in Section 2.1. of the Agreement.
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7. This Amendment is effective as of January 31, 2009. Except as herein specifically amended,
directly or by reference, all provisions of the Loan Agreement and the Loan Documents are ratified
and confirmed and remain in full force and effect. The Borrowers and the Bank hereby agree to
continue all liens and security interests securing the indebtedness of the Borrowers under the
Loan Agreement and the Loan Documents, until such indebtedness as may be modified herein, and any
and all related promissory notes have been fully paid. The parties hereto further agree that this
Amendment shall in no manner affect or impair the liens and security interests evidenced by the
Loan Agreement and/or any other instruments evidencing, securing, or related to the Borrowers’
obligations to the Bank. The Borrowers hereby acknowledges that all liens and security interests
securing such obligations are valid and subsisting.
8. The Borrowers hereby represent and warrant to Bank that (a) each Borrower has the legal
power and authority to execute and deliver this Amendment; (b) the official(s) executing this
Amendment has been duly authorized to execute and deliver the same and bind Borrowers with respect
to the provisions hereof; (c) the execution and delivery hereof by Borrowers and the performance
and observance by Borrowers of the provisions hereof do not violate or conflict with the
organizational agreements of either Borrower or any law applicable to either Borrower or result in
a breach of any provisions of or constitute a default under any other agreement, instrument, or
document binding upon or enforceable against either Borrower; (d) this Amendment constitutes a
valid and binding obligation of the Borrowers in every respect.
9. In
consideration of this Amendment, Borrowers hereby releases and discharges the Bank and
its shareholders, directors, officers, employees, attorneys, affiliates, and subsidiaries from any
and all claims, demands, liability, and causes of action whatsoever, now known or unknown, arising
out of or in any way related to the extension or administration of the Loans, the Loan Agreement,
or any of the other Loan Documents, except for fraud, deceit or willful misconduct on the part of
Bank.
10. The Borrowers covenant and agree (a) to pay the balance of any principal, together with
all accrued interest, as specified above in connection with any promissory note executed and
evidencing any indebtedness incurred in connection with the Agreement, as modified by this
Amendment, and (b) to perform and observe covenants, agreements, stipulations, and conditions on
its part to be performed hereunder or under the Loan Agreement or any of the other Loan Documents.
11. The
Borrowers hereby declare that neither Borrower has no set offs, counterclaims,
defenses, or other causes of action against the Bank arising out of the Loan Agreement or any of
the other Loan Documents, and to the extent any such set offs, counterclaims, defenses, or other
causes of action may exist, whether known or unknown, such items are hereby waived by the
Borrowers.
12. In
consideration of this Amendment, Borrowers shall pay the Bank on or prior to the date
hereof a facility fee in the amount of $ 7,500.00 and pay the Bank’s outside legal fees in
connection herewith, all of which fees shall be payable upon the execution of this Amendment.
13. Each reference that is made in the Loan Agreement or any of the Loan Documents shall
hereafter be construed as a reference to the Loan Agreement as amended hereby. This Amendment is a
Loan Document as defined in the Loan Agreement.
14. All defined terms not otherwise defined herein shall have the meaning ascribed thereto in
the Loan Agreement.
15. This Amendment may be executed in any number of counterparts, by different parties hereto
in separate counterparts and by facsimile signature, each of which when so executed and delivered
shall be deemed to be an original and all of which taken together shall constitute but one and the
same agreement.
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16. The
rights and obligations of all parties hereto shall be governed by the laws of the
State of Ohio, without regard to principles of conflicts of laws. All obligations of the Borrowers
hereunder are joint and several.
17. JURY
TRIAL WAIVER, BORROWER AND BANK WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN BORROWER AND BANK,
OR ANY OF THEM, ARISING OUT
OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT, ANY AMENDMENT THERETO, OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY BANK’S ABILITY TO PURSUE
REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN A NOTE OR OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT BETWEEN BORROWER AND BANK.
IN
WITNESS WHEREOF, Borrowers and Bank have caused this Amendment to be executed by their duly
authorized officers as of January 31, 2009.
| BORROWERS: | QUATECH, INC. | |||||||
| DPAC TECHNOLOGIES CORP. | ||||||||
By
|
/s/ Sieve Xxxxxx | By: | /s/ Xxxxx Xxxxxx | |||||
| BANK: | ||||||||
| FIFTH THIRD RANK | ||||||||
By:
|
/s/ Xxxxxxx X. Xxxx | |||||||
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EXHIBIT -B1
REVOLVING CREDIT PROMISSORY NOTE
| $ 2,000,000.00 | January 31, 2009 |
For
value received, the undersigned, DPAC TECHNOLOGIES CORP., a California corporation, and
QUATECH, INC. an Ohio corporation (collectively, the “Borrowers”), jointly and severally, promise
to pay to the order of FIFTH THIRD BANK, an Ohio Banking corporation (the “Bank”), its successor
and assigns, at the office set forth in the Loan Agreement (as defined below), on the date or dates
and in the manner specified in ARTICLE II. of the Loan Agreement, the lesser of Two Million Dollars
($ 2,000,000.00) or the aggregate principal amount of the Revolver Advances as shown on any ledger
or other record of the Bank, which shall be rebuttably presumptive evidence of the principal amount
owing and unpaid on this Note.
The Borrowers promise, jointly and severally, to pay to the order of the Bank interest on the
unpaid principal amount of each Revolver Advance Loan made pursuant to the Loan Agreement from the
date of such Loan until such principal amount is paid in full at such interest rate(s) and at such
times as are specified in ARTICLE II. of the Loan Agreement.
This Note is the Revolving Credit Promissory Note referred to in, and is entitled to the
benefits of, Section 2.1 of the Credit Agreement by and between the Bank and the Borrowers dated
January 30, 2008, as amended, as the same may be hereafter amended from time to time (the “Loan
Agreement”). This Note may be declared forthwith due and payable in the manner and with the effect
provided in the Loan Agreement, which contains provisions for acceleration of the maturity hereof
upon the happening of any Event of Default and also for prepayment on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.
This Note is being executed and delivered pursuant to the Loan Agreement in replacement for an
existing Revolving Credit Promissory Note in the maximum principal
amount of $ 3,000,000.00,
executed by the Company and dated January 30, 2008, and the execution and delivery of this Note
shall not constitute a novation and shall not terminate or otherwise affect the first lien and
security interest of the Bank in the Company’s property.
Each defined term used in this Note shall have the meaning ascribed thereto in the Loan
Agreement.
Each Borrower expressly waives presentment, demand, protest, and notice of dishonor.
Each Borrower authorizes any attorney-at-law to appear in any court of record in the State of
Ohio or any other state or territory in the United States after this Note becomes due, whether by
lapse of time or acceleration, waive the issuance and service of process, admit the maturity of
this Note, confess judgment against the Borrower in favor of any holder of this Note for the amount
then appearing due hereon together with interest thereon and costs of suit, and thereupon release
all errors and waive all rights of appeal and stay of execution. The foregoing warrant of attorney
shall survive any judgment, and if any judgment be vacated for any reason, the holder hereof
nevertheless may thereafter use the foregoing warrant of attorney to obtain any additional judgment
or judgments against each such Borrower. Each Borrower agrees that the holder’s attorney may
confess judgment pursuant to the foregoing warrant of attorney. Each Borrower further agrees that
the attorney confessing judgment pursuant to the foregoing warrant of attorney may receive a legal
fee or other compensation from the holder.
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The Borrowers acknowledges that this Note was signed in Summit County, in the State of Ohio.
FOR THE PURPOSES OF THE BELOW NOTICE, “YOU” AND “YOUR” MEANS THE BORROWER AND EACH OF THEM AND
“HIS” AND “CREDITOR” MEANS THE BANK.
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY
ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A
COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR
WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
| DPAC TECHNOLOGIES CORP. | QUATECH, INC. | |||||||||||||||
By: |
Exhibit | By: | Exhibit | |||||||||||||
| Xxxxx Xxxxxx, Chief Executive Officer | Xxxxx Xxxxxx, Chief Executive Officer | |||||||||||||||
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EXHIBIT F
INTEREST RATE APPENDIX
TO CREDIT AGREEMENT
DATED JANUARY 31, 2008
BY AND AMONG
DPAC TECHNOLOGIES CORP. AND QUATECH, INC.
AND FIFTH THIRD BANK
AS AMENDED
INTEREST RATE APPENDIX
TO CREDIT AGREEMENT
DATED JANUARY 31, 2008
BY AND AMONG
DPAC TECHNOLOGIES CORP. AND QUATECH, INC.
AND FIFTH THIRD BANK
AS AMENDED
REVOLVING CREDIT LIBOR RATE PRICING TERMS
For the purposes of Revolver Advances, the following pricing terms and conditions will
apply:
Commencing
as of February 1, 2009, and continuing at all times thereafter through and
including the Termination Date (subject to the provisions herein regarding the Default Rate), the
principal balance of Revolver Advances outstanding hereunder from time to time shall bear interest
at a floating rate per annum equal to Six and One Half Percent (6.50%) in excess of the Revolver
LIBOR Rate (as hereinafter defined) (the “Interest Rate”). As used herein, the “Revolver LIBOR
Rate” is the rate of interest (rounded upwards, if necessary, to the next 1/8 of 1% and adjusted
for reserves if Bank is required to maintain reserves with respect to relevant advances) fixed by
the British Bankers’ Association at 11:00 a.m., London time, relating to quotations for one month
London InterBank Offered Rates on U.S. Dollar deposits as published on Bloomberg LP or, if no
longer provided by Bloomberg LP, such rate as shall be determined in good faith by the Bank from
such sources as it shall determine to be comparable to Bloomberg LP (or any successor) as
determined by Bank at approximately 10:00 a.m. Cincinnati, Ohio time, which in either case shall be
determined on the day that is two (2) Banking Days (as hereinafter defined) preceding the relevant
effective date of determination. The Interest Rate based on the Revolver LIBOR Rate shall be
initially determined effective as of March 1, 2009, in the manner herein provided, and shall
continue to be effective until the first Banking Day of the following month. The Interest Rate
shall be adjusted automatically on the first Banking Day of each and every succeeding calendar
month thereafter. Each determination by Bank of the Revolver LIBOR Rate shall be conclusive in the
absence of manifest error. Interest shall be calculated based on a 360-day year and charged for the
actual number of days elapsed.
In
addition, notwithstanding anything herein contained to the contrary, if, prior to or during
any period with respect to the Revolver LIBOR Rate, any change in any law, regulation or official
directive, or in the interpretation thereof, by any governmental body charged with the
administration thereof, shall make it unlawful for Bank to fund or maintain its funding in
Eurodollars of any portion of the advance subject to the Revolver LIBOR Rate or otherwise to give
effect to Bank’s obligations as contemplated hereby, or that one month is not readily available in
the London InterBank Offered Rate Market, or that, by reason of circumstances affecting the London
InterBank Offered Rate Market, adequate and reasonable methods do not exist for ascertaining the
rate of interest applicable to such deposits: (i) Bank may, by written notice to Company, declare
Bank’s obligations in respect of the Revolver LIBOR Rate to be terminated forthwith, and (ii) the
Revolver LIBOR Rate with respect to Bank shall forthwith cease to be in effect, and interest shall
from and after such date be calculated at the Prime Rate (as hereinafter defined) plus three
percent (3%) per annum. In the event of a change in the Prime Rate from time to time the Interest
Rate hereunder which is based on the Prime Rate shall change immediately and without notice to such
new Prime Rate plus three percent (3%). Company hereby agrees to reimburse and indemnify Bank from
all increased costs or fees incurred by Bank subsequent to the date hereof relating to the offering
of rates of interest based upon the Revolver LIBOR Rate. As used herein, “Prime Rate” is the rate
of interest per annum established from time to time by Fifth Third Bank at its principal office as
its “Prime Rate”, whether or not Fifth Third Bank shall at times lend to borrowers at lower rates
of interest and whether or not such rate is actually charged or, if there is no such prime rate,
then such other rate as may be substituted by Fifth Third Bank for the Prime Rate.
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