EXHIBIT 10.1
AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") dated
as of December 10, 2004, by and between BANK OF AMERICA BUSINESS CAPITAL
CORPORATION (successor by merger to Fleet Capital Corporation formerly known as
Summit Business Capital Corporation) ("Lender") and EMTEC, INC. ("Borrower").
BACKGROUND
A. Borrower and Lender executed a Loan and Security Agreement dated as
of November 21, 2001 (the "Original Loan Agreement") pursuant to which Lender
made available to Borrower a revolving credit facility in the maximum principal
amount of Ten Million Dollars ($10,000,000.00) (the "Revolving Credit"). The
Original Loan Agreement as amended prior to the date hereof, as amended hereby
and from time to time hereafter shall be referred to herein as the "Loan
Agreement."
B. The Revolving Credit was and is evidenced by a certain amended and
restated revolving credit note executed by Borrower amended and restated as of
June 17, 2003, payable to the order of Lender in the maximum principal amount of
$11,500,000.00 (the "Note").
C. Pursuant to an Amendment to Loan and Security Agreement dated as of
June 17, 2003 between Borrower and Lender, the Revolving Credit was increased on
a temporary basis from $10,000,000 to $11,500,000. Pursuant to an Amendment to
Loan and Security Agreement dated as of October 17, 2003 between Borrower and
Lender, the Revolving Credit was decreased to $10,000,000, the advance rate on
Eligible Advances was decreased to 80%, the Loan Agreement was otherwise amended
and certain Events of Defaults were waived as set forth therein. Pursuant to an
Amendment to Loan and Security Agreement dated as of April 16, 2004 between
Borrower and Lender, Lender permitted Borrower to enter into a $1,000,000 bond
indemnity agreement for issuance of a bid bond line (the "Surety Bond Line")
secured by a second lien on all assets of Borrower. Pursuant to an Amendment to
Loan and Security Agreement dated as of November 21, 2004, Lender agreed to,
among other things, extend the Termination Date to January 21, 2005.
E. At Borrowers' request, Lender is willing to extend the Termination
Date to November 21, 2006, increase the Revolving Credit to $12,000,000,
increase the advance rate on Eligible Advances to 85% and otherwise amend the
Loan Agreement subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties agree as
follows:
1. Borrower and Lender agree to modify the terms and conditions of
Borrower's obligations to Lender and Lender's obligations to Borrower under the
Loan Agreement in accordance with the terms and conditions set forth herein. The
parties hereto agree that all the terms and conditions of the Loan Agreement
shall continue unchanged and remain in full force and effect except as amended
herein as follows:
(A) The first sentence of Section 1.1.1 of the Loan Agreement
is hereby amended to read as follows:
Lender agrees, for so long as no Default or Event of Default exists,
(1) to make Revolving Credit Loans to Borrower from time to time, as
requested or as deemed requested by Borrower in the manner set forth in
subsection 3.1.1 hereof, up to a maximum principal amount at any time
outstanding equal to the Borrowing Base at such time minus reserves, if
any, and (2) issue Letters of Credit for the account of Borrower in
accordance with subsection 1.2.1 hereof, from time to time in an
aggregate face amount not to exceed the Letter of Credit Sublimit.
(B) From and after the date hereof, Section 1.1.2 of the Loan
Agreement is hereby deleted.
(C) The Loan Agreement is hereby amended to incorporate
Section 1.2 which shall read as follows:
1.2 Letters of Credit.
1.2.1 Letter of Credit Cash Collateral Account. Cash
collateral delivered to Lender in accordance with subsections
1.2.2(iii) and 3.2.1 of this Agreement shall be maintained in a deposit
account of Borrower to be established with Lender at the time such cash
collateral is first created, over which Lender shall have sole control
(the "Letter of Credit Cash Collateral Account"). Borrower hereby
grants, bargains, conveys and sets over to Lender a security interest
in and lien upon the Letter of Credit Cash Collateral Account and all
cash and any other assets at any time hereafter contained therein as
security for the payment and performance of all of Borrower's
obligations now or hereafter incurred hereunder, under the Note or
otherwise in connection herewith. Borrower shall take such action and
execute and deliver such documents, including financing statements, as
Lender may determine necessary or desirable to further the security
interest hereby created. After the occurrence of an Event of Default
and acceleration of the Revolving Credit Loans, or if Borrower shall
have failed to pay all amounts which have come due on or prior to such
applicable due date, Lender shall apply all funds held in the Letter of
Credit Cash Collateral Account in such manner as Lender may deem
advisable.
-2-
1.2.2 Letters of Credit.
(i) Letters of Credit. Borrower may request, in
accordance with the provisions of this subsection, that through but not
including the Termination Date, subject to the terms and conditions
hereof, Lender issue Letters of Credit for the account of Borrower in
an aggregate amount up to the Letter of Credit Sublimit; provided, that
(1) in no event shall any Letter of Credit have an expiration date
later than the Termination Date, and (2) Borrower shall not request any
Letter of Credit if, after giving effect to such issuance, the Letter
of Credit Obligations would exceed the Letter of Credit Sublimit. The
issuance of any Letter of Credit in accordance with the provisions of
this Section shall require the satisfaction of each condition set forth
in Sections 9.7 and 9.8.
(ii) Evergreen Letters of Credit. Notwithstanding the
provisions of subsection 1.2.2(i), above, Lender hereby agrees to issue
upon Borrower's request, one or more Letter(s) of Credit which by its
terms may be extended for additional periods of up to one (1) year each
provided that (1) the expiration date of each such Letter of Credit
(whether the initial expiration date or extended expiration date) would
not be later than the Termination Date, and (2) renewal of such Letters
of Credit, at Lender's discretion, shall be available upon written
request from Borrower to Lender at least sixty (60) days before the
date upon which notice of renewal is otherwise required.
(iii) Notice of Issuance or Amendment. Whenever
Borrower desires the issuance of a Letter of Credit or the amendment of
a Letter of Credit, it shall deliver to Lender a written notice no
later than 11:00 A.M. at least two (2) Business Days, or in each case
such shorter period as may be agreed to by Lender in any particular
instance, in advance of the proposed date of issuance. That notice
shall specify (1) the proposed date of issuance (which shall be a
Business Day), (2) the face amount of the Letter of Credit, (3) the
expiration date of the Letter of Credit, (4) the purpose of the Letter
of Credit and (5) the name and address of the beneficiary. On the
proposed date of issuance of any Letter of Credit, Lender shall
determine to the best of its knowledge whether the proposed Letter of
Credit, when added to the then outstanding Letter of Credit
Obligations, would be within the Letter of Credit Sublimit and, when
added to the then outstanding Letter of Credit Obligations and
Revolving Credit Loans, would be within the Borrowing Base. Unless both
such criteria are satisfied, Lender shall not issue or cause to be
issued the requested Letter of Credit. Borrower shall hold Lender
harmless for any miscalculations or other errors in making such
determinations. In the event that, upon issuance of such proposed
Letter of Credit, (a) the Letter of Credit Sublimit is exceeded,
Borrower shall immediately establish with Lender, if not already so
established, and deposit into the Letter of Credit Cash Collateral
Account the amount of such excess; and (b) the Borrowing Base is
exceeded, Borrower shall repay the Overadvance in accordance with
Section 3.4 hereof. Prior to the date of issuance, Borrower shall
deliver to Lender an executed application for such
-3-
Letter of Credit in the form customarily required by Lender for the
issuance of letters of credit and specify a precise description of the
documents and the verbatim text of any certificate to be presented by
the beneficiary which, if presented by the beneficiary prior to the
expiration date of the Letter of Credit, would require Lender to make
payment under the Letter of Credit; provided, that Lender may require
reasonable changes in any such documents and certificates; and
provided, further, that no Letter of Credit shall require payment
against a conforming draft to be made hereunder on the same Business
Day that such draft is presented if such presentation is made after
11:00 A.M. on such Business Day. In determining whether to pay under
any Letter of Credit, Lender shall be responsible only to determine
that the documents and certificates required to be delivered under the
Letter of Credit have been delivered and that they comply on their face
with the requirements of that Letter of Credit.
(iv) Payment of Amounts Drawn Under Letters of
Credit. In the event of any request for drawing under any Letter of
Credit by the beneficiary thereof, Lender shall notify Borrower and
Borrower shall reimburse Lender on the day on which such drawing is
honored in an amount in same day funds equal to the amount of such
drawing; provided that (a) if sufficient funds are then in the Letter
of Credit Cash Collateral Account to reimburse Lender in full for the
amount of such drawing, Lender shall reimburse itself by debiting such
amount necessary to reimburse Lender from the Letter of Credit Cash
Collateral Account, (b) if the funds then in the Letter of Credit Cash
Collateral Account are insufficient to reimburse Lender in full for the
amount of such drawing, Lender shall debit the Letter of Credit Cash
Collateral Account in the amount thereof and the unreimbursed balance
of such drawing shall be reimbursed in accordance with clause (c)
below, and (c) if there are no funds (or insufficient funds) then in
the Letter of Credit Cash Collateral Account then unless Borrower shall
have notified Lender prior to 11:00 A.M. on the date of such drawing
that Borrower intends to reimburse Lender for the amount of such
drawing with funds other than the proceeds of a Revolving Credit Loan,
Borrower shall be deemed to have given notice to Lender requesting it
to make a Revolving Credit Loan in accordance with Section 3.1 on the
day on which such drawing is honored (the "Reimbursement Date") in an
aggregate amount equal to the amount of such drawing less the amount,
if any, remitted to Lender pursuant to clause (b) above.
(v) Compensation. Borrowers agree to pay Lender the
compensation set forth in Section 2.8 hereof.
(vi) Obligations Absolute. The obligation of Borrower
to reimburse Lender for drawings made under the Letters of Credit
issued by it shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all
circumstances including, without limitation, the following
circumstances:
-4-
(a) any lack of validity or enforceability
of any Letter of Credit;
(b) the existence of any claim, set-off,
defense or other right which Borrower may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any persons
or entities for whom any such transferee may be acting), Lender, any
Affiliate of Lender, or any other Person, whether in connection with
this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Borrower and
the beneficiary for which the Letter of Credit was procured);
(c) any draft, demand, certificate or any
other document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(d) payment by Lender under any Letter of
Credit against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of Credit;
provided, that such payment does not constitute willful misconduct or
gross negligence on the part of Lender;
(e) any breach of this Agreement or any
document delivered in connection herewith by any party hereto or
thereto; and
(f) the fact that an Event of Default or an
event which, but for the giving of notice, the passage of time or both,
would constitute an Event of Default shall have occurred and be
continuing.
(vii) Indemnification; Nature of Lender's Duties. In
addition to amounts payable as elsewhere provided in this subsection,
Borrower hereby agrees to protect, indemnify and save Lender harmless
from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys'
fees and allocated costs of internal counsel) which Lender may incur or
be subject to as a consequence, direct or indirect, to the extent not
caused by the gross negligence, bad faith or willful misconduct of
Lender, its directors, officers, employees, agents or attorneys, of (1)
the issuance of any Letter of Credit, or (2) the failure of Lender to
honor a drawing under any Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de
jure or de facto government or governmental authority. Without limiting
the foregoing, Lender shall not have any obligation to ascertain
whether the stated purpose of any requested Letter of Credit is
permitted by this Agreement and shall not be liable for Borrower's use
of a Letter of Credit issued pursuant to the terms hereof in violation
of Borrower's covenants contained herein.
-5-
As among Borrower on one hand and Lender on the other
hand, Borrower assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by Lender by the respective
beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, Lender shall not be responsible for: (a)
the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the
application for and issuance of such Letters of Credit, even if it
should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (b) the validity or
sufficiency of any instrument transferring or assigning or purporting
to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason; (c) failure of the
beneficiary of any such Letter of Credit to comply fully with
conditions required in order to draw upon such Letter of Credit, unless
(i) such failure is material and substantive, and (ii) Lender's payment
on such Letter of Credit constitutes gross negligence or willful
misconduct; (d) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (e) errors in
interpretation of technical terms; (f) any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any such Letter of Credit or of the proceeds thereof; (g)
the misapplication by the beneficiary of any such Letter of Credit; or
(h) any consequences arising from causes beyond the control of Lender.
None of the above shall affect, impair, or prevent the vesting of any
of Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or
omitted by Lender under or in connection with the Letters of Credit
issued by it or the related certificates, if (i) taken or omitted in
good faith and (ii) substantially in accordance with the terms thereof,
shall not put Lender under any resulting liability to Borrower.
(D) From and after the date hereof, Section 2.1.1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
2.1.1 Rates of Interest. Interest shall accrue on the
Revolving Credit Loans in accordance with the terms of the Revolving
Credit Note. Interest shall accrue on the principal amount of the Base
Rate Advances outstanding at the end of each day at a fluctuating rate
per annum equal to .25% plus the Base Rate. Interest shall accrue on
the principal amount of each of the LIBOR Advances outstanding at the
end of each day at a fixed rate per annum equal to 2.75% plus LIBOR for
the applicable Interest Period. The rate of interest applicable to Base
Rate Advances shall increase or decrease by an amount equal to any
increase or decrease in the Base Rate, effective as of the opening of
business on the day that any such change in the Base Rate occurs.
-6-
(E) Section 2.8 of the Loan Agreement is hereby amended in its
entirety to read as follows from and after January 1, 2005:
2.8 Letter of Credit Fee. From and after January 1, 2005,
Borrower shall pay to Lender a letter of credit fee calculated at a
rate per annum equal to 1.5% of the face amount of the Letter of Credit
payable on March 31, 2004 for the period then ending and thereafter
quarterly in arrears on the last day of each calendar quarter, and on
the Termination Date. With respect to the issuance, amendment,
transfer, administration or cancellation of the Letter of Credit and
each drawing made thereunder, documentary and processing charges in
accordance with the Bank's standard schedule for such charges in effect
at the time of such issuance, amendment, transfer, administration,
cancellation or drawing, as the case may be, or as otherwise agreed to
by Lender.
(F) The Loan Agreement is hereby amended to incorporate
Sections 9.7 and 9.8 which shall read as follows:
9.7 Conditions Precedent to All Revolving Credit Loans. The
obligation of Lender to disburse each Revolving Credit Loan or issue
any Letter of Credit is subject to the further conditions precedent
that:
9.7.1 the representations and warranties contained in
this Agreement and in the other Loan Documents shall be correct and
accurate on and as of the date of such issuance or disbursement as
though made on and as of such date; and
9.7.2 no Default or Event of Default shall have
occurred and be continuing or will result from the making of such
Revolving Credit Loan or issuance of such Letter of Credit.
9.8 Conditions to Issuance of Letters of Credit. The
obligation of Lender to issue any Letter of Credit hereunder is subject
to the prior or concurrent satisfaction of all of the following
conditions:
9.8.1 On or before the date of issuance of each
Letter of Credit, Lender in respect of such Letter of Credit shall have
received in accordance with the provisions of subsection 1.2.2, a
notice requesting the issuance of such Letter of Credit, an executed
application for such Letter of Credit in the form customarily required
by Lender for the issuance of letters of credit, all other information
specified in subsection 1.2.2, and such other documents as Lender may
reasonably require in connection with the issuance of such Letter of
Credit;
9.8.2 On the date of issuance of each Letter of
Credit, all conditions precedent described in Section 9.7 shall be
satisfied to the same extent as though the issuance of such Letter of
Credit were the making of a Revolving Credit Loan, and each request by
Borrower to Lender to issue a Letter of Credit shall constitute a
representation by Borrower that at the time thereof (i)
-7-
all conditions precedent described in Section 9.7 have been satisfied
and (2) the sum of the proposed Letter of Credit plus the Letter of
Credit Obligations plus the Revolving Credit Loans then outstanding
would not exceed the Credit Limit; and
9.8.3 On or before the date of issuance of such
Letter of Credit, Borrower shall have paid the fees therefor required
under Section 2.8.
(G) The following definitions contained in Appendix A of the
Loan Agreement are hereby amended to read as follows:
(H) The following definitions contained in Appendix A of the
Loan Agreement are hereby amended to read as follows:
Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(i) $12,000,000.00 minus the Letter of Credit
Obligations; or
(ii) 85% of Eligible Accounts outstanding at such
date minus the Letter of Credit Obligations.
For purposes hereof, the net amount of Eligible Accounts at
any time shall be the face amount of such Eligible Accounts less any
and all returns, rebates, discounts (which may, at Lender's option, be
calculated on shortest terms), credits, allowances or excise taxes of
any nature at any time issued, owing, claimed by Account Debtors,
granted, outstanding or payable in connection with such Accounts at
such time.
Revolving Credit Note - the Revolving Credit Note to be
executed by Borrower on or about the Closing Date in favor of Lender to
evidence the Revolving Credit Loan, which shall be in the form of
Exhibit A to the Agreement, and any amendment, restatement, extension
or modification thereof, including without limitation the Amended and
Restated Revolving Credit Note dated as of December __, 2004 by
Borrower in favor of Lender.
Termination Date - the earlier of (a) November 21, 2006 or (b)
the date on which the obligation of Lender to make Loans hereunder is
terminated whether pursuant to Section 4.2 of this Agreement or
otherwise.
Total Credit Facility - means $12,000,000.00.
(I) Appendix A of the Loan Agreement is hereby amended to
incorporate the following definitions which shall read as follows:
Letter of Credit - any Letter of Credit issued by Lender
pursuant to subsection 1.2.2 of the Agreement.
-8-
Letter of Credit Cash Collateral Account - has the meaning
given to such term in subsection 1.2.1 of the Agreement.
Letter of Credit Liability - means, at any date of
determination, the amount of all unreimbursed draws under any Letters
of Credit issued by Lender in connection with the Agreement.
Letter of Credit Obligations - means, at any date of
determination, the sum of the maximum aggregate amount which is or at
any time thereafter may become available for drawing under all Letters
of Credit then outstanding and the Letter of Credit Liability. For
purposes hereof, Letters of Credit on which a draw has not been
received shall be deemed outstanding until the earlier of the date on
which the Letter of Credit is returned to Issuer, undrawn, for
cancellation, or that date which is thirty (30) Business Days after the
expiration date thereof.
[Letter of Credit Sublimit - One Million One Hundred Fifty
Thousand Dollars ($1,150,000.00).
Reimbursement Date - has the meaning given to such term in
subsection 1.2.2 of the Agreement.
(J) From and after the date hereof, Exhibit P to the Loan
Agreement is hereby replaced with Exhibit P attached hereto.
2. Lender's obligations hereunder and under the Loan Agreement are
conditioned upon:
(A) the representations and warranties of Borrower contained
in the Loan Agreement being true and correct in all material respects as of the
date hereof after giving effect hereto and as of the date of each Revolving
Credit Loan;
(B) Borrower's compliance with the covenants contained in the
Loan Documents;
(C) Borrower's satisfaction of the conditions precedent set
forth in the Loan Agreement; and
(D) satisfaction of the following additional conditions
precedent:
(1) Documents to be Delivered by Borrower. Borrower
shall deliver or cause to be delivered to Lender this Amendment and the Amended
and Restated Revolving Credit Note duly executed by Borrower;
(2) Payment of Certain Costs by Borrower. Borrower
shall pay to Lender:
-9-
(a) an amendment fee of $10,000 which shall
be due and payable and fully earned and non-refundable upon execution of this
Amendment; and
(b) all costs and out-of-pocket expenses
(including, without limitation, reasonable attorneys' fees and costs) of Lender
in connection with the amendment which includes, among other things, the
preparation of this Amendment, all related filings and recordation fees and
taxes, and the enforcement of the Loan Agreement and all costs and expenses
incurred in connection with the above.
3. The parties agree that except as expressly amended hereby, the Loan
Agreement shall remain in full force and effect; and that the Collateral granted
therein or in connection therewith shall continue to secure Borrower's
obligations to Lender as therein stated.
4. Borrower reaffirms its obligation under the Loan Agreement and all
of the documents executed in connection therewith and/or securing Borrower's
obligations thereunder.
5. This Amendment shall become effective upon execution hereof by
Lender and Borrower.
-10
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
executed as of the date first above written.
BANK OF AMERICA BUSINESS CAPITAL CORPORATION
By: /s/ Charles Kirschner
---------------------
Name: Charles Kirschner
Title: VP
EMTEC, INC.
By: /s/ John Howlett
----------------
Name: John Howlett
Title: CEO
EXHIBIT P
FORM OF BORROWING BASE CERTIFICATE
[Current Date]
Bank of America Business Capital Corporation
4 Penn Center
1600 JFK Boulevard
Philadelphia, Pennsylvania 19103
Attention: Mr. Charles Kirschner
At the close of business on [insert date], the amount equal to the
lesser of (a) $12,000,000.00 minus the Letter of Credit Obligations; or (b) 85%
of the aggregate amount of all accounts receivable meeting the requirements of
"Eligible Accounts" under the Agreement (as hereinafter defined) owing to EMTEC,
INC. (the "Borrower") minus the face amount of the Letter of Credit, is as set
forth below. Capitalized terms used herein without otherwise being defined shall
have the meanings ascribed to such terms in the Loan and Security Agreement
dated as of November 21, 2001 (as amended, modified or extended from time to
time, the "Agreement") among the Borrower and Bank of America Business Capital
Corporation.
A. The calculation of Eligible Accounts is as follows:
1. Aggregate amount of Eligible Accounts is: $_________
2. 85% of Eligible Accounts is: $_________
B. The Letter of Credit Obligations are: $_________
C. The calculation of the Borrowing Base is an amount equal to the
lesser of (a) $12,000,000.00 minus the Letter of Credit Obligations
or (b) 85% of Eligible Accounts outstanding minus the Letter of
Credit Obligations: $_________
D. Present aggregate amount of Revolving Credit Loans is: $_________
E. Shortage or Availability remaining under the Revolving Credit
(the difference between items "C" and "D") is: $_________
F. Ineligible Accounts secured by surety bond issued by
Selective Insurance Company [attach schedule listing such ineligible
accounts: $_________
Very truly yours,
EMTEC, INC.
By: /s/ John Howlett
-----------------
Name: John Howlett
Title: CEO