EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

THIS EIGHTH AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into this June 20, 2014, by and between Silicon Valley Bank (“Bank”) and ADVANCED PHOTONIX, INC., PICOMETRIX, LLC and ADVANCED PHOTONIX CANADA, INC. (individually, a “Borrower” and, collectively, the “Borrowers”).

 

 

A.           Bank and Borrowers 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 and a Second Amendment to Loan and Security Agreement dated as of February 8, 2013, a Third Amendment to Loan and Security Agreement dated as of March 1, 2013, a Fourth Amendment to Loan and Security Agreement dated as of January 22, 2014, a Fifth Amendment and Forbearance to Loan and Security Agreement dated as of February 10, 2014, a Sixth Amendment and Waiver to Loan and Security Agreement dated as of March 5, 2014, and a Seventh Amendment to Loan and Security Agreement dated as of April 30, 2014 (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.

 

 

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.

 

2.1           Section 12.1 Termination Prior to Revolving Line Maturity Date is amended to read as follows:

 

This Agreement may be terminated prior to the Revolving Line Maturity Date by Borrower, effective three (3) Business Days after written notice of termination is given to Bank.  Notwithstanding and such termination, Bank’s lien and security interest in the collateral shall continue until Borrower fully satisfies its Obligations.  If such termination is at Borrower’s election or at Bank’s election due to the occurrence and continuance of an Event of Default, Borrowers shall pay to Bank, in addition to the payment of any other expenses or fees then owing, a termination fee in an amount equal to 0.5% of the Revolving Line if terminated before the first anniversary of the Eighth Amendment Date, 0.25% of the Revolving Line if payment occurs after the first anniversary of the Eighth Amendment Date provided that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from another division of the Bank.

2.2           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 1.30 to 1.00 through May 31, 2014, and not less than 2.00 to 1.00 thereafter.

 

(b)            EBITDA.  Measured as of the end of each fiscal month, on a trailing 6-month basis, EBITDA of at least the following:

 

Period	Minimum EBITDA
Through fiscal month ending June 30, 2014	($850,000)
July 31, 2014 through fiscal month ending September 30, 2014	($300,000)
October 31, 2014 through fiscal month ending December 31, 2014	$1.00
January 31, 2015 through fiscal month ending March 31, 2015	$100,000
Covenant for periods ending each month thereafter to be based on updated projections, but  will not be less than $100,000.

2.3          Section 13 (Definitions).

 

(a)           The following terms in Section 13.1 are amended and restated in their entirety to read as follows:

 

“Eighth Amendment Date” means June 20, 2014.

 

“Revolving Line Maturity Date” means June 20, 2016.

 

“Revolving Margin” is 0.5% when the Liquidity Ratio is greater than or equal to 3.0 and trailing 6 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 6 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 6 month EBITDA is less than negative $500,000 but greater than or equal to negative $850,000; 1.25% when the Liquidity Ratio is greater than or equal to 2.5 but less than 3.0 and trailing 6 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 6 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 6 month EBITDA is less than negative $500,000 but greater than or equal to negative $850,000; and 1.75% when the Liquidity Ratio is less than 2.5 and trailing 6 month EBITDA is greater than or equal to $1.00, 2.75% when the Liquidity Ratio is less than 2.5 and trailing 6 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 6 month EBITDA is less than negative $500,000 but greater than or equal to negative $850,000.

 

“Streamline Period” is, on and after the Effective Date, provided no Default or Event of Default has occurred and is continuing, the period beginning on the first (1st) day of the month following the month in which Borrower has more than $1,500,000 of availability remaining 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.

 

 

“Term Margin” is 1.0% when the Liquidity Ratio is greater than or equal to 3.0 and trailing 6 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 6 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 6 month EBITDA is less than negative $500,000 but greater than or equal to negative $850,000; 1.75% when the Liquidity Ratio is greater than or equal to 2.5 but less than 3.0 and trailing 6 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 6 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 6 month EBITDA is less than negative $500,000 but greater than or equal to negative $850,000; and 2.25% when the Liquidity Ratio is less than 2.5 and trailing 6 month EBITDA is greater than or equal to $1.00, 3.25% when the Liquidity Ratio is less than 2.5 and trailing 6 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 6 month EBITDA is less than negative $500,000 but greater than or equal to negative $850,000.

 

 

2.5          Exhibits.  Exhibit D (Compliance Certificate) and Schedule 1 attached to the Loan Agreement are replaced with Exhibit D and Schedule 1 attached hereto.

 

 

 

 

 

[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.

 

 

 

The undersigned authorized officer of ADVANCED PHOTONIX INC., ADVANCED PHOTONIX CANADA and PICOMETRIX, LLC (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.

 

 

 

 

Trailing 6 month EBITDA
	≥$1 EBITDA	If <$1, but ≥ -$500k EBITDA		If <-$500k, but ≥       -$850,000         EBITDA
LQR≥3.0	P+50 bps	P+150 bps		P+300 bps
LQR <3.0≥2.50	P+125 bps	P+225 bps		P+350 bps
LQR <2.5	P+175 bps	P+275 bps		P+400 bps

 

Term Loan

 

Trailing 6 month EBITDA
	≥$1 EBITDA	If <$1, but ≥ -$500k EBITDA		If <-$500k, but ≥       -$850,000         EBITDA
LQR≥3	P+100 bps	P+200 bps		P+350 bps
LQR <3≥2.50	P+175 bps	P+275 bps		P+400 bps
LQR <2.5	P+225 bps	P+325 bps		P+450 bps

 

ADVANCED PHOTONIX INC.			ADVANCED PHOTONIX CANADA, INC.
By:			By:
Name:			Name:
Title:			Title:
PICOMETRIX, LLC
By:
Name:
Title:

 

 

 

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:                      1.30:1.0 through 5/31/14, 2.0:1.0 thereafter

 

Actual:

 

Is line C equal to or greater than 2.00 to1:00 (1.30:1.0 through 5/31/14)?

 

Required:                      Monthly, on trailing 6 month basis

 

	Period		EBITDA
	Closing through June 30, 2014		($850,000)
	July 31, 2014 through September 30, 2014		($300,000)
	October 31, 2014 through December 31, 2014		$1
	Thereafter		$100,000
	FY 2016 to be set based on updated projections, but not less than $100,000

 

Actual: