Unassociated Document


    


    


    Exhibit
      10.1 

     

    SECOND
      AMENDMENT TO BUSINESS LOAN AGREEMENT

    


    THIS
      SECOND AMENDMENT TO BUSINESS LOAN AGREEMENT, dated as of June 30, 2008 (this
      "Amendment"), is between ADVANCED PHOTONIX, INC., a Delaware corporation (the
      "Borrower") and FIFTH THIRD BANK (the "Bank").

    


    RECITAL

    


    The
      Borrower and the Bank are parties to a Business Loan Agreement dated as of
      March
      6, 2007, as amended by a First Amendment to Business Loan Agreement dated as
      of
      November 13, 2007 (the "Loan Agreement"). The Borrower and the Bank desire
      to
      amend the Loan Agreement on the terms set forth herein. 

    


    TERMS

    


    In
      consideration of the premises and of the mutual agreements herein contained,
      the
      parties hereby agree as follows:

    


    ARTICLE
      I. AMENDMENTS TO LOAN AGREEMENT.

    


    The
      Loan
      Agreement shall be amended as follows:

    


    1.1 Section
      I
      shall be amended and restated in its entirety to read as follows: 

    


    A. Revolving
      Line of Credit to the Borrower in aggregate principal amount up to TWO MILLION
      FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) expiring October 1, 2008, upon the
      terms and conditions herein set forth.

    


    1.2 Section
      5.1 shall be amended (i) by deleting the reference therein to "THREE MILLION
      AND
      00/100 ($3,000,000)" and inserting "TWO MILLION FIVE HUNDRED THOUSAND AND 00/100
      ($2,500,000)" in place thereof and (ii) by amending and restating clause b.
      therein to read as follows:

    


    “b. 25%
      of
      Borrower’s and each Guarantor’s Eligible Inventory constituting finished goods
      or raw material at that time, not to exceed $500,000.”

    


    1.3 Section
      6.1A. shall be amended and restated in its entirety to read as
      follows:

    


    6.1A. Internally
      prepared consolidated financial statements for the Borrower and its Subsidiaries
      monthly, within 30 days after the end of each month, together with a comparison
      of such statements to forecasts.

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    1.4 Section
      6.11 shall be amended by deleting the reference to “$1,500,000” and inserting
“$500,000” in place thereof.

    


    1.5 Section
      7.1 shall be amended and restated in its entirety to read as follows:


    


    7.1 Permit
      the Debt Service Coverage Ratio at the end of any fiscal quarter, to be less
      than 1.2 to 1.0, commencing with the fiscal quarter ending June 30, 2008 and
      calculated (i) as of June 30, 2008 for such fiscal quarter, and (ii) as of
      September 30, 2008 for the two consecutive fiscal quarters then
      ending.

    


    1.6 The
      definitions of “Debt Service Coverage Ratio” and “EBITDA” set forth in Article
      XI. shall be amended and restated in their entirety to read as follows:


    


    “Debt
      Service Coverage Ratio” shall mean, for any period, the ratio of (a) the sum of
      (i) EBITDA for such period, plus any non-cash expenses for stock options, stock
      grants or warrants vesting during such period, plus (iii) any expenses
      associated with the convertible note discounts during such period, plus (iv)
      with respect to any calculation of this ratio during fiscal year 2007, any
      expenses related to the moving costs of the wafer consolidation, not to exceed
      $500,000, to (b) the sum of (i) all principal payments paid during such period
      on any Indebtedness plus (ii) all interest paid or payable during such period
      on
      any Indebtedness and any other interest expense during such period, all
      calculated on a consolidated basis for the Borrower and its Subsidiaries in
      accordance with generally accepted accounting principles. 

    


    “EBITDA”
      shall mean, for any period, the sum of (a) net income plus (b) all amounts
      deducted in determining such net income on account of (i) interest paid or
      payable during such period, (ii) taxes based on or measured by income, (iii)
      depreciation and amortization expense, and (iv) goodwill and intangibles
      impairments, all calculated on a combined basis for the Borrower and its
      Subsidiaries in accordance with generally accepted accounting
      principles.

    


    ARTICLE
      II. WAIVER

    


    2.1 The
      Borrower has informed the Bank that an Event of Default has occurred under
      the
      Loan Agreement due to the breach of Section 7.1 of the Loan Agreement as of
      the
      fiscal quarter ending March 31, 2008 (the "Existing Default"), and the Borrower
      has requested that the Bank waive the Existing Default, subject to the terms
      and
      conditions set forth herein. Pursuant to such request and subject to the other
      conditions described in this Amendment, the Bank hereby waives the Existing
      Default and any Event of Default caused by a breach of Section 7.1 for the
      period indicated above, but not at any time thereafter.

    


    2.2 The
      Borrower acknowledges and agrees that the waiver contained herein is a limited
      waiver, limited to the specific one time waiver described above. Such limited
      waiver (a) shall not waive any other term, covenant or agreement of the Loan
      Agreement or any other Loan Document, (b) shall not be deemed to be a waiver,
      or
      consent to any modification or amendment, of any other term, covenant or
      agreement of the Loan Agreement or any other Loan Document, and (c) shall not
      be
      deemed to prejudice any present or future right or rights which the Bank now
      has
      or may have thereunder. Additionally, this limited waiver shall not be deemed
      to
      waive any Event of Default, whether now existing or hereafter existing, whether
      known, unknown or otherwise, except as specifically set forth
      herein.

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    ARTICLE
      III. REPRESENTATIONS.

    


    The
      Borrower represents and warrants to the Bank that:

    


    3.1 The
      execution, delivery and performance of this Amendment and the new Note delivered
      pursuant to Article IV are within its powers, have been duly authorized and
      are
      not in contravention with any law, or the terms of its articles of incorporation
      or organization, or by-laws or operating agreement, or any undertaking to which
      it is a party or by which it is bound.

    


    3.2 The
      Amendment is, and the new Note when executed and delivered will be, valid and
      binding in accordance with their respective terms. 

    


    3.3 After
      giving effect to the amendments herein contained, the representations and
      warranties contained in the Loan Agreement and the other Loan Documents are
      true
      on and as of the date hereof with the same force and effect as if made on and
      as
      of the date hereof and, other than the Existing Default, no Event of Default
      or
      Default has occurred and is continuing.

    


    ARTICLE
      IV. CONDITIONS PRECEDENT.

    


    This
      Amendment shall not become effective until each of the following conditions
      are
      satisfied: 

    


    4.1 This
      Amendment shall be signed by the Borrower and the Bank and the Consent and
      Agreement at the end hereof shall be signed by each Guarantor.

    


    4.2 The
      Borrower shall have executed and delivered a new Note to the Bank, in form
      and
      substance satisfactory to the Bank. 

    


    4.3 The
      Borrower shall have paid an amendment fee to the Bank in the amount of $7,500
      and all other fees and expenses described in Section 5.1 below.

    


    4.4 The
      Bank
      shall have received an appraisal of all machinery and equipment of the Borrower
      [and the Guarantors], which appraisal shall be in form and substance
      satisfactory to the Bank.

    


    4.5 The
      Borrower shall have delivered such other certificates or agreements reasonably
      requested by the Bank in connection herewith. 

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    ARTICLE
      V. MISCELLANEOUS.

    


    5.1 The
      Borrower agrees to pay and to save the Bank harmless for the payment of all
      costs and expenses arising in connection with this Amendment, including the
      reasonable fees of counsel to the Bank in connection with preparing this
      Amendment and the related documents and all equipment appraisal
      fees.

    


    5.2 The
      Borrower acknowledges and agrees that the Bank has fully performed all of its
      obligations under all documents executed in connection with the Loan Agreement
      and all actions taken by the Bank are reasonable and appropriate under the
      circumstances and within its rights under the Loan Agreement and all other
      documents executed in connection therewith and otherwise available. The Borrower
      represents and warrants that it is not aware of any claims or causes of action
      against the Bank. 

    


    5.3 Except
      as
      expressly amended hereby, the Borrower agrees that the Loan Agreement, the
      other
      Loan Documents and all other documents and agreements executed by it in
      connection with the Loan Agreement in favor of the Bank are ratified and
      confirmed and shall remain in full force and effect and that it has no set
      off,
      counterclaim or defense with respect to any of the foregoing. Terms used but
      not
      defined herein shall have the respective meanings ascribed thereto in the Loan
      Agreement.

     

    5.4 This
      Amendment may be signed upon any number of counterparts with the same effect
      as
      if the signatures thereto and hereto were upon the same instrument and
      telecopied signatures shall be enforceable as originals.

     

    IN
      WITNESS WHEREOF, the parties have caused this Amendment to be executed and
      delivered as of the day and year first above written.

     

    
      	 	 	 
	 	ADVANCED
              PHOTONIX,
              INC.
	 
 	 
 	 
 
	 	By:  	/s/ Richard
              D. Kurtz
	 	
              
Richard
              D. Kurtz
	 	Its:
              Chief Executive Officer


    

     

    
      	 	 	 
	 	FIFTH
              THIRD BANK
              
	 
 	 
 	 
 
	 	By:  	/s/  J.
              Matthew Lowman
	 	
              
J.
              Matthew Lowman
	 	Its:
              Vice President