LIGHTPATH TECHNOLOGIES, INC. 8-K [lpth-8k_011618.htm] 

 

Exhibit 10.3

 

SECOND AMENDMENT
TO
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This Second Amendment to Second Amended and Restated Loan and Security Agreement
is entered into as of January 16, 2018 (the “Amendment”), by and between
AVIDBANK (“Bank”), and LIGHTPATH TECHNOLOGIES, INC. (“Borrower”).

 

RECITALS

 

Borrower and Bank are parties to that certain Second Amended and Restated Loan
and Security Agreement dated as of December 21, 2016 and as amended from time to
time, including pursuant to that certain First Amendment to Second Amended and
Restated Loan and Security Agreement dated as of December 20, 2017
(collectively, the “Agreement”). The parties desire to amend the Agreement in
accordance with the terms of this Amendment.

 

NOW, THEREFORE, the parties agree as follows:

 

1.            The following definitions in Section 1.1 of the Agreement are
hereby added or amended in their entirety to read as follows:

 

“Adjusted EBITDA” means Borrowers’ consolidated earnings before interest, taxes,
depreciation and amortization expenses, plus (i) stock–based compensation
expenses, (ii) non-cash expenses (income) related to change of fair value of
warrant liabilities or Subordinated Debt owing under the Seller Note, (iii)
foreign currency translation loss, and (iv) one-time transaction expenses in
connection with acquisition of Target (not to exceed $50,000 for the trailing
twelve month period ending in December 31, 2017).

 

“Credit Extension” means any Advance, Acquisition Term Loan, the Term II Loan,
or any other extension of credit by Bank for Borrowers’ benefit.

 

“Fixed Charge Coverage Ratio” means, as of any particular measurement date (the
“Measurement Date”), a ratio of (a) Borrowers’ consolidated Adjusted EBITDA for
the twelve month period ending on the Measurement Date to (b) the sum of (i) the
scheduled principal and interest payments to be made to Bank with respect to the
Term II Loan during the twelve month period immediately following the
Measurement Date, plus (ii) the interest payments paid or payable to Bank with
respect to the Advances during the twelve month period ending on the Measurement
Date, plus (iii) the scheduled principal and interest payments to be made on all
Subordinated Debt during the twelve month period immediately following the
Measurement Date plus (iv) the amount of non-financed capital expenditures made
during the twelve month period ending on the Measurement Date, plus (v) taxes
paid or payable during the twelve month period ending on the Measurement Date,
plus (vi) all the principal and interest payments on all capital lease
obligations during the during the twelve month period ending on the Measurement
Date, plus (vii) all dividends and distributions made during the twelve month
period ending on the Measurement Date.

 

“Term II Loan Prepayment Fee” means a cash fee in the amount equal to (i) 0.75%
of the Excess Prepayment Amount if such prepayment occurs on or prior to the
first anniversary of the Second Amendment Date, or (ii) 0.5% of the Excess
Prepayment Amount if such prepayment occurs after the first anniversary of the
Second Amendment Date but on or prior to the second anniversary of the Second
Amendment Date, or (iii) 0.25% of the Excess Prepayment Amount if such
prepayment occurs after the second anniversary of the Second Amendment Date but
on or prior to the third anniversary of the Second Amendment Date, or (iv) 0.10%
of Excess Prepayment Amount if such prepayment occurs after the third
anniversary of the Second Date but on or prior to the fourth anniversary of the
Second Amendment Date.

 

 

 

 

“Revolving Maturity Date” means December 21, 2018.

 

“Second Amendment Date” means January 16, 2018.

 

“Seller Note” means that certain Unsecured Promissory Note in the original
principal amount of $6,000,000 issued to Joseph Menaker and Mark Lifshotz in
connection with the acquisition of Target.

 

“Term II Loan Maturity Date” means the fifth anniversary of the Second Amendment
Date.

 

2.            The following is added as a new subsection (c) to the end of
Section 2.1:

 

(c)           Term II Loan.

 

(i)          Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make a single cash advance to Parent in an original principal
amount of $7,294,000 (the “Term II Loan”) on or around the Second Amendment
Date. The proceeds of the Term II Loan shall be used to repay all amounts owing
with respect to the Acquisition Term Loan (other than the Prepayment Fee, which
Bank hereby waives), with any remainder used to repay amounts owing under the
Seller Note. Thereafter, the Acquisition Term Loan shall be deemed satisfied in
full and terminated.

 

(ii)         Interest shall accrue from the date the Term II Loan is made to
Parent at the rate specified in Section 2.3. The Term II Loan shall be payable
in sixty (60) monthly installments of principal in the amount of $121,566.67
(each, a “Scheduled Payment”), plus all accrued interest, beginning on the tenth
day of the first month following the Second Amendment Date, and continuing on
the same day of each month thereafter for so long as the Term II Loan is
outstanding. On the Term II Loan Maturity Date, the Term Loan and all other
amounts related thereto shall be immediately due and payable.

 

(iii)        In addition to the foregoing, if Borrowers fail to timely comply
with Section 6.14 of this Agreement, then on January 31, 2018, Borrowers shall
make an additional principal payment on account of the Term II Loan in the
amount of $2,850,000, which shall be applied to the Scheduled Payments in
reverse order of due date.

 

(iv)       Borrowers shall have the option to prepay all but not less than all
of the Term II Loan provided that Borrowers provide written notice to Bank of
its election to prepay the Term II Loan at least ten (10) days prior to such
prepayment, and pays, on the date of such prepayment, (1) the outstanding
principal amount of the Term II Loan being repaid, plus (2) all accrued interest
thereon, plus (3) with respect to the amount of the Term II Loan being prepaid
that is in excess of $2,850,000 of the Term II Loan (the “Excess Prepayment
Amount”), the Term II Loan Prepayment Fee, plus (4) all other sums, if any, that
shall have become due and payable under the Loan Documents and relate to the
Term II Loan. The Term II Loan once repaid, may not be reborrowed.

 

 

3.            The following is added as a new subsection (iii) to the end of
Section 2.3(a):

 

(iii) Except as set forth in Section 2.3(b), the Term II Loan shall bear
interest, on the outstanding Daily Balance thereof, at a per annum rate equal to
two percent (2.00%) above the Prime Rate, provided however that at no time shall
the applicable rate be less than five and one half percent (5.50%) per annum.

 

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4.            Section 2.5(a) is amended and restated in its entirety to read as
follows:

 

(a)           Facility Fees. On the Second Amendment Date, Borrowers shall pay
to Bank: (i) a facility fee with respect to the Revolving Facility equal to
$3,749, and (ii) a facility fee with respect to the Term II Loan equal to
$20,000, each of which are fully earned and nonrefundable.

 

5.            Section 6.3(d) of the Agreement is amended and restated in its
entirety to read as follows:

 

(d) as soon as available, but in any event within ninety (90) days after the end
of a Borrower’s fiscal year, audited consolidated and consolidating financial
statements of such Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank;
provided, however that the filing of such financial statements and opinion of an
independent certified public accounting firm with the Securities and Exchange
Commission through EDGAR will satisfy such Borrower’s delivery obligations
hereunder upon notice to Bank of such filings;

 

6.            The following is added as a new Section 6.14 to the end of Section
6 of the Agreement:

 

6.14         ISP Acquisition Repayment. On or before January 31, 2018, Borrowers
shall provide evidence satisfactory to Bank of the satisfaction of all
obligations owing under the Seller Note (by way of repayment and conversion of
such Indebtedness into equity securities of Parent), including copies of the
fully executed, definitive documents evidencing the conversion of amounts owing
under the Seller Note that results in the full satisfaction of all amounts owing
under the Seller Note.

 

7.            Exhibit D to the Agreement is replaced in its entirety with the
Exhibit D attached hereto.

 

8.            Unless otherwise defined, all initially capitalized terms in this
Amendment shall be as defined in the Agreement. The Agreement, as amended
hereby, shall be and remain in full force and effect in accordance with its
respective terms and hereby is ratified and confirmed in all respects. Except as
expressly set forth herein, the execution, delivery, and performance of this
Amendment shall not operate as a waiver of, or as an amendment of, any right,
power, or remedy of Bank under the Agreement, as in effect prior to the date
hereof. Each Borrower ratifies and reaffirms the continuing effectiveness of all
agreements entered into in connection with the Agreement.

 

9.            Borrowers represent and warrant that the representations and
warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.

 

10.          This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original hereof. Notwithstanding the
foregoing, Borrowers shall deliver all original signed documents no later than
ten (10) Business Days following the date of execution.

 

11.          As a condition to the effectiveness of this Amendment, Bank shall
have received, in form and substance satisfactory to Bank, the following:

 

(a)           this Amendment, duly executed by Borrowers;

 

(b)           corporate resolutions and incumbency certificate executed by each
Borrower;

 

(c)           a Term II Loan Request Form in the form attached hereto as Exhibit
B-1;

 

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(d)           affirmation of guarantee duly executed by Geltech, Inc.;

 

(e)           payment of the fees set forth above plus all Bank Expenses
incurred through the date of this Amendment; and

 

(f)           such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first
date above written.

 

  LIGHTPATH TECHNOLOGIES, INC.               By: /s/ J. James Gaynor            
    Name: J. James Gaynor                 Title: President & CEO                
ISP OPTICS CORPORATION               By: /s/ J. James Gaynor                
Name: J. James Gaynor                 Title: President & CEO                
AVIDBANK                 By: /s/ Stephen Chen                 Name: Stephen Chen
                Title: AVP  

 

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EXHIBIT B-1
TERM II LOAN REQUEST FORM

 

To: Avidbank  

 

Fax/Email: (408) 200-7399 / (855) 208-1157
corpfinance@avidbank.com  

 

Date:    

 

From: LIGHTPATH TECHNOLOGIES, INC. et al.     Borrower’s Name  

 

 

        Authorized Signature  

 

        Authorized Signer’s Name (please print)  

 

        Phone Number  

 

To Account #    

 

LIGHTPATH TECHNOLOGIES, INC. (“Parent”) hereby requests funding of the Term II
Loan in the amount of $7,294,000 in accordance with Section 2.1(c) of the Second
Amended and Restated Loan and Security Agreement between Borrowers and Avidbank
(“Lender”), dated as of December 21, 2016 and as amended (the “Agreement”).

 

Each Borrower represents and warrants that it is in complete compliance with the
Agreement, including all covenants, and there are no Events of Default, and all
representations and warranties of Borrowers stated in the Agreement are true,
correct and complete in all material respects as of the date of this request;
provided that those representations and warranties expressly referring to
another date shall be true, correct and complete in all material respects as of
such date.

 

Capitalized terms used herein and not otherwise defined have the meanings set
forth in the Agreement.

 

 

 

 

Exhibit D
Compliance Certificate

 

TO:AVIDBANK (“Bank”)

 

FROM:LIGHTPATH TECHNOLOGIES, INC., ET AL

 

The undersigned authorized officer of LightPath Technologies, Inc. on behalf of
Borrowers hereby certifies that in accordance with the terms and conditions of
the Second Amended and Restated Loan and Security Agreement between Borrowers
and Bank (the “Agreement”), (i) each Borrower is in complete compliance for the
period ending _______________ with all required covenants except as noted below
and (ii) all representations and warranties of each Borrower stated in the
Agreement are true and correct as of the date hereof. Attached herewith are the
required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant Required Complies         A/R & A/P Agings Monthly within 30
days Yes No Deferred Revenue listing Monthly within 30 days Yes No Borrowing
Base Certificate Monthly within 30 days Yes No Compliance Certificate Monthly
within 30 days Yes No Bank statements for accounts outside of Bank Monthly
within 30 days Yes No Monthly consolidated financial statements Monthly within
30 days Yes No Monthly consolidating financial statements Monthly within 30 days
Yes No Annual financial statements (CPA Audited) Annually within 90 days of
fiscal year end Yes No Annual projections (board approved) Annually within 30
days following fiscal year beginning Yes No 10K and 10Q (as applicable) Yes No
A/R Audit Annually Yes No IP Notices As required under Section 6.10 Yes No      
  Financial Covenant Required Actual Complies           Fixed Charge Coverage
Ratio (quarterly) 1.15 : 1.00 ____: 1.00 Yes No           Minimum Asset coverage
ratio (monthly) 1.50 : 1.00 ____: 1.00 Yes No              

                  Comments Regarding Exceptions: See Attached.                  
    BANK USE ONLY                         Received by:         Sincerely,    
AUTHORIZED SIGNER                     Date:                           Verified:
        SIGNATURE     AUTHORIZED SIGNER                                 Date:  
      TITLE                 Compliance Status Yes No               DATE