LOAN AND SECURITY AGREEMENT by ADVANCED PHOTONIX INC
Submitted by system on Sat, 02/04/2012 - 3:50pm
Company: ADVANCED PHOTONIX INC
SEC CIK: 869986
SEC Type: EX-10.1
SIC Code: 3674
SIC Industry: SEMICONDUCTORS & RELATED DEVICES
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of January __, 2012 (the "Effective Date") between SILICON VALLEY BANK ("Bank"), ADVANCED PHOTONIX, INC. and PICOMETRIX, LLC (individually, a "Borrower" and collectively, the "Borrowers"), provides the terms on which Bank shall lend to Borrowers and Borrowers shall repay Bank. The parties agree as follows:
1. ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.
2. LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrowers hereby unconditionally promise to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.
2.1.1 Revolving Advances.
(a) Availability. Subject to the terms and conditions of this Agreement and to deduction of Reserves, Bank shall make Advances not exceeding the Availability Amount. Amounts borrowed hereunder may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein. The aggregate EX-IM Advances under the Exim Loan Agreement and Advances under this Agreement may not in any case exceed the lesser of (a) $5,000,000 or (b) the sum of the Borrowing Base under the this Agreement and the Foreign Borrowing Base under the Exim Loan Agreement. If at any time such aggregate exceeds such lesser amount, Borrowers shall immediately pay Bank the amount of such excess.
(b) Termination; Repayment. The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount of all Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable.
2.1.2 Term Loan.
(a) Availability. Bank shall make one (1) term loan available to Borrower in an amount up to $1,000,000 on Effective Date subject to the satisfaction of the terms and conditions of this Agreement. Borrower shall use the first proceeds of the Term Loan to repay all Indebtedness that Borrower owes to Robin Risser and Steve Williamson.
(b) Repayment. Borrower shall repay the Term Loan in (i) thirty six (36) equal installments of principal, plus (ii) monthly payments of accrued interest (the "Term Loan Payment"). Beginning on the last day of the month following the month in which the Funding Date occurs, each Term Loan Payment shall be payable on the last day of each month. Borrower's final Term Loan Payment, due on the third anniversary of the Effective Date, shall include all outstanding principal and accrued and unpaid interest under the Term Loan. Once repaid, no part of the Term Loan may be reborrowed.
(c) Prepayment. Borrower may elect to prepay all, but not less than all, of the Term Loan by paying a prepayment premium equal to 1.0% of the outstanding Term Loan principal if prepayment occurs before the first anniversary of the Effective Date, 0.5% of the outstanding Term Loan principal if prepayment occurs after the first, but before the second anniversary of the Effective Date, and 0.25% of the outstanding Term Loan principal if prepayment occurs after the second anniversary of the Effective Date. If the Term Loan has become due and payable according to the terms hereof because of the occurrence and continuance of an Event of Default, Borrower shall pay to Bank on the date that the Term Loan has become due and payable according to the terms hereof, in addition to any other sums owing, a termination fee equal to 1.0% of the outstanding Term Loan principal, and such fee shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations.
2.2 Overadvances. If, at any time, the outstanding principal amount of any Advances (such sum being an "Overadvance") exceeds the lesser of either the Revolving Line or the Borrowing Base, Borrowers shall immediately pay to Bank in cash such Overadvance. Without limiting Borrowers' obligation to repay Bank any amount of the Overadvance, Borrowers agree to pay Bank interest on the outstanding amount of any Overadvance, on demand, at the Default Rate if not repaid within three business days.
2.3 Payment of Interest on the Credit Extensions.
(a) Interest Rates. Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the Prime Rate plus the Revolving Margin. Subject to Section 2.3(b), the principal amount outstanding on the Term Loan shall accrue interest at a floating per annum rate equal to the Prime Rate plus the Term Margin.
(b) Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is up to five percentage points (5.00%) above the rate that is otherwise applicable thereto (the "Default Rate") unless Bank otherwise elects from time to time in its sole discretion to impose a smaller increase. Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations. Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.
(c) Adjustment to Interest Rate. Changes to the interest rate of any Credit Extension based on changes to the Prime Rate shall be effective on the effective date of any change to the Prime Rate and to the extent of any such change.
(d) Debit of Accounts. Bank may debit any of a Borrower's deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts a Borrower owes Bank when due. These debits shall not constitute a set-off.
(e) Payment; Interest Computation. Interest is payable monthly on the last calendar day of each month and shall be computed on the basis of a 360-day year for the actual number of days elapsed. In computing interest, (i) all Payments received after 12:00 p.m. Pacific time on any day shall be deemed received at the opening of business on the next Business Day, and (ii) the date of the making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension. Bank shall not, however, be required to credit a Borrower's account for the amount of any item of payment which is unsatisfactory to Bank in its good faith business judgment, and Bank may charge Borrower's Designated Deposit Account for the amount of any item of payment which is returned to Bank unpaid.
2.4 Fees. Borrowers shall pay to Bank:
(a) Commitment Fee. A fully earned, non-refundable commitment fee of $25,000, on the Effective Date and each anniversary of the Effective Date;
(b) Unused Revolving Line Facility Fee. A fee (the "Unused Revolving Line Facility Fee"), payable monthly, in arrears, on a calendar year basis, in an amount equal to 0.25% per annum of the average unused portion of the Revolving Line, as determined by Bank. Borrowers shall not be entitled to any credit, rebate or repayment of any Unused Revolving Line Facility Fee previously earned by Bank pursuant to this Section notwithstanding any termination of the Agreement or the suspension or termination of Bank's obligation to make loans and advances hereunder;
(c) Term Loan Commitment Fee. A fully earned, non-refundable commitment fee of $5,000, on the Effective Date;
(d) Collateral Monitoring Fee. Collateral Monitoring Fee. A monthly collateral monitoring fee of Five Hundred Fifty Dollars ($500), payable in arrears on the last day of each month (prorated for any partial month at the beginning and upon termination of this Agreement); provided that during a Streamline Period, such monthly collateral monitoring fee shall be Zero Dollars ($0.00); and
(e) Bank Expenses. All Bank Expenses (including reasonable attorneys' fees and expenses for documentation and negotiation of this Agreement incurred through and after the Effective Date, when due.
2.5 Payments; Application of Payments.
(a) All payments (including prepayments) to be made by a Borrower under any Loan Document shall be made in immediately available funds in U.S. Dollars, without setoff or counterclaim, before 12:00 p.m. Pacific time on the date when due. Payments of principal and/or interest received after 12:00 p.m. Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.
(b) All payments with respect to the Obligations may be applied in such order and manner as Bank shall determine in its sole discretion. Borrowers shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required to be made by a Borrower to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified elsewhere in this Agreement.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Bank's obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:
(a) duly executed original signatures to the Loan Documents;
(b) duly executed original signatures to the Control Agreement[s];
(c) each Borrower's Operating Documents and a good standing certificate of each Borrower certified by the Secretary of State of the State of Delaware as of a date no earlier than thirty (30) days prior to the Effective Date;
(d) duly executed original signatures to the completed Borrowing Resolutions for Borrowers;
(e) the Subordination Agreement by Michigan Economic Development Corporation in favor of Bank, together with the duly executed original signatures thereto;
(f) certified copies, dated as of a recent date, of financing statement searches, as Bank shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;
(g) the Perfection Certificate(s) of each Borrower, together with the duly executed original signature[s] thereto;
(h) a payoff letter from Private Bank;
(i) a payoff letter from Robin Risser and Steve Williamson;
(j) the insurance policies and/or endorsements required pursuant to this Agreement; and
(k) payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof.
3.2 Conditions Precedent to all Credit Extensions. Bank's obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:
(a) timely receipt of an executed Transaction Report;
(b) the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the date of the Transaction Report and on the Funding Date of each Credit Extension; 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, and no Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower's representation and warranty on that date that the representations and warranties in this Agreement remain true, accurate, and complete in all material respects; 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; and
(c) in Bank's sole discretion, any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations, or any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank.
3.3 Covenant to Deliver.
Borrowers agree to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition precedent to any Credit Extension. Borrowers agree that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of a Borrower's obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Bank's sole discretion. Any Intellectual Property of Picometrix in which a third party has a security interest as of the Effective Date shall be made subject to Bank's first priority security interest within sixty days after the Effective Date.
3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this Agreement, to obtain an Advance, a Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m. Pacific time on the Funding Date of the Advance. Together with such notification, Borrower must promptly deliver to Bank by electronic mail or facsimile a completed Transaction Report executed by a Responsible Officer or his or her designee. Bank shall credit Advances to the Designated Deposit Account. Bank may make Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Advances are necessary to meet Obligations which have become due. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Each Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that may have superior priority to Bank's Lien in this Agreement).
4.2 Priority of Security Interest. Each Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that may have superior priority to Bank's Lien under this Agreement). If a Borrower shall acquire a commercial tort claim, such Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
If this Agreement is terminated, Bank's Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are satisfied in full, and at such time, Bank shall, at Borrower's sole cost and expense, terminate its security interest in the Collateral and all rights therein shall revert to Borrower. In the event (x) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (y) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for Bank Services, if any. In the event such Bank Services consist of outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to 105% of the Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such Letters of Credit.
4.3 Authorization to File Financing Statements. Each Borrower hereby authorizes Bank to file financing statements, without notice to such Borrower, with all appropriate jurisdictions to perfect or protect Bank's interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank under the Code. Such financing statements may indicate the Collateral as "all assets of the Debtor" or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Bank's discretion.
5. REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants as follows:
5.1 Due Organization, Authorization; Power and Authority. Borrower is duly existing and in good standing as a Registered Organization in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower's business. In connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower, entitled "Perfection Certificate". Borrower represents and warrants to Bank that (a) Borrower's exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower's organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrower's place of business, or, if more than one, its chief executive office as well as Borrower's mailing address (if different than its chief executive office); (e) Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement). If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence and provide Bank with Borrower's organizational identification number.
The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower's organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority except for filings under the Uniform Commercial Code, or (v) constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrower's business.
5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each item
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