Document:

Exhibit 10.10.3

 

THIRD AMENDMENT
 TO
  AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This Third Amendment to Amended and Restated Loan and Security Agreement is entered into as of December 6, 2010 (the “Amendment”), by and between APPLIED OPTOELECTRONICS, INC (“Borrower”) and EAST WEST BANK (“Bank”).

 

RECITALS

 

Borrower and Bank are parties to that certain Amended and Restated Loan and Security Agreement dated as of May 20, 2009, as amended from time to time including that certain First Amendment to Amended and Restated Loan and Security Agreement dated as of May 3, 2010 and that certain Second Amendment to Amended and Restated Loan and Security Agreement dated as of October 28, 2010 (collectively, the “Agreement”).  The parties desire to amend the Agreement in accordance with the terms of this Amendment.

 

AGREEMENT

 

NOW, THEREFORE, the parties agree as follows:

 

1.                                      The following defined terms set forth in Section 1.1 of the Agreement are added or amended in their entirety to read as follows:

 

“Credit Extension” means each Advance, Equipment Advance, Real Estate Advance, EXIM Advance, Line II Advance or any other extension of credit by Bank to or for the benefit of Borrower hereunder.

 

“Domestic Borrowing Base” means an amount equal to (i) 80% of Eligible Accounts plus (ii) the lesser of 30% of Eligible Inventory or $1,000,000, plus (iii) the lesser of the Maximum OLV or 50% of the Orderly Liquidation Value of domestic Equipment (as set forth in the appraisal completed in April 2009 and in the form previously provided to Bank), as determined by Bank with reference to the most recent Domestic Borrowing Base Certificate delivered by Borrower.  Notwithstanding the foregoing, Eligible Inventory shall not exceed 50% of the total Domestic Borrowing Base.

 

“Maximum OLV” means $1,600,000 minus fifty percent (50%) of the proceeds from the sale, disposal, lease, transfer or other disposition or liquidation of any domestic Equipment occurring on or after May 3, 2010.

 

“Line II Advance” or “Line II Advances” means a cash advance or cash advances under the Revolving Line II.

 

“Line II Borrowing Base” means an amount equal to up to $1,500,000 in excess of the available Domestic Borrowing Base, derived from the following: (i) 80% of Eligible Accounts plus (ii) the lesser of 30% of Eligible Inventory or $1,000,000, plus (iii) the lesser of the Maximum OLV or 50% of the Orderly Liquidation Value of domestic Equipment (as set forth in the appraisal completed in April 2009 and in the form previously provided to Bank), as determined by Bank with reference to the most recent Domestic Borrowing Base Certificate delivered by Borrower (without duplication of any Accounts included in the Domestic Borrowing Base).  Notwithstanding the foregoing, Eligible Inventory shall not exceed 50% of the total Line II Borrowing Base.

 

“Revolving Line II” means a Credit Extension of up to one million five hundred thousand dollars ($1,500,000).

 

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“Revolving Line II Maturity Date” means May 3, 2011.

 

2.                                      The following is added as a new section 2.1(f) of the Agreement as follows:

 

(f)                                   Line II Advances Under Revolving Line II.

 

(i) Amount.  Subject to and upon the terms and conditions of this Agreement and only when an aggregate of $3,500,000 in Advances are outstanding, Borrower may request Line II Advances in an aggregate outstanding amount not to exceed the lesser of (A) the Revolving Line II or (B) the Line II Borrowing Base.  Amounts borrowed pursuant to this Section 2.1(f) may be repaid and reborrowed at any time prior to the Revolving Line II Maturity Date without penalty or premium.  Borrower shall deliver to Bank a promissory note for the Line II Advances in substantially the form attached hereto as Exhibit B-5.  Bank may enforce its rights in respect of the Line II Advances under this Agreement without such note.

 

(ii) Borrowing Procedure.  Whenever Borrower desires a Line II Advance, Borrower will notify Bank by facsimile transmission of an advance request in substantially the form of Exhibit C hereto no later than noon Pacific Time on the Business Day that is one (1) Business Day prior to the Business Day on which a Line II Advance is made.  Bank is authorized to make Line II Advances under this Agreement, based upon instructions received from a Responsible Officer or a designee of a Responsible Officer.  Bank will credit the amount of Line II Advances made under this Section 2.1(f) to a Borrower’s deposit account, as specified by Borrower.

 

(iv) Payments.  Borrower shall pay interest on the aggregate outstanding principal amount of the Line II Advances on the fifth day of each month for so long as any Line II Advances are outstanding.  All Line II Advances shall be due and payable on the Revolving Line II Maturity Date.

 

3.                                      The following is added as a new subsection (g) to Section 2.1 of the Agreement as follows:

 

(g)                                  Priority.      Notwithstanding the foregoing provisions, any payments by Borrower to Bank following an Event of Default shall not be applied to any Line II Advance or any interest accrued thereon until all other Credit Extensions are fully repaid.

 

4.                                      Section 2.2 of the Agreement is amended to read as follows:

 

2.2                               Overadvances.  If the aggregate amount of the outstanding Advances exceeds the lesser of the Revolving Line or the Domestic Borrowing Base at any time, Borrower shall immediately pay to Bank, in cash, the amount of such excess.  If the aggregate amount of the outstanding Line II Advances exceeds the lesser of the Revolving Line II or the Line II Borrowing Base at any time, Borrower shall immediately pay to Bank, in cash, the amount of such excess.

 

5.                                      The following is added as a new subsection (h) to Section 6.2 of the Agreement as follows:

 

(h)                                 With respect to Accounts permitted in the Domestic Borrowing Base or the Line II Borrowing Base pursuant to subsections (a) and (b) of the defined term “Domestic Eligible Accounts” as set forth in Section 1.1 of the Agreement, upon Bank’s reasonable request, evidence of credit insurance claim compliance and all supporting documents with respect to such Accounts.

 

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6.                                      Section 2.3(a) of the Agreement is amended in its entirety to read as follows:

 

(a)                                 Interest Rates.  Except as set forth in Section 2.3(b), the outstanding principal balance of each Credit Extension shall bear interest (computed daily on the basis of a 360 day year and actual days elapsed), at a variable rate per annum equal to the Prime Rate plus 2.25%.  Notwithstanding the foregoing, at no time shall the interest rate applied to any Credit Extension be less than 5.375% per annum (computed daily on the basis of a 360 day year and actual days elapsed) (the “Floor Rate”).

 

7.                                      Exhibit B-5 attached hereto is incorporated in its entirety as Exhibit B-5 to the Agreement.

 

8.                                      Exhibit D-1 to the Agreement is replaced in its entirety with the Domestic Borrowing Base Certificate provided by Bank to Borrower.

 

9.                                      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 remains in full force and effect in accordance with its 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.  Borrower ratifies and reaffirms the continuing effectiveness of all instruments, documents and agreements entered into in connection with the Agreement.

 

10.                               Borrower represents and warrants 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.

 

11.                               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.

 

12.                               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 Borrower;

 

(a)                                 Corporate Resolutions and Incumbency Certification, duly executed by Borrower;

 

(b)                                 Line II Promissory Note, duly executed by Borrower;

 

(c)                                  an amendment fee of $1,875 to Bank, plus an amount equal to all Bank Expenses incurred through the date of this Amendment; and

 

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

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

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

 

	
 
    	
APPLIED   OPTOELECTRONICS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Chih-Hsiang (Thompson) Lin
    
	
 
    	
 
    	
 
    
	
 
    	
Title:   
    	
CEO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EAST   WEST BANK
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Lisa Chang
    
	
 
    	
 
    	
 
    
	
 
    	
Title:   
    	
AVP
    
				

 

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EXHIBIT B-5

 

LINE II PROMISSORY NOTE

 

	
$1,500,000
    	
 
    	
 
    	
 
    	
December 6, 2010
   Santa Clara, California
    

 

FOR VALUE RECEIVED, the undersigned, Applied Optoelectronics, Inc. (the “Borrower”), HEREBY PROMISES TO PAY to the order of East West Bank (the “Bank”) at its principal office located at 2350 Mission College Blvd., Suite 988, Santa Clara, California 95054, or at such other place as Bank may from time to time designate in writing, in lawful money of the United States and in immediately available funds, the principal amount of  ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) or so much of the Line II Advances (as defined in the Loan Agreement (defined below)) as may be advanced from time to time, together with interest from the date of disbursement computed on the principal balances hereof from time to time outstanding as set forth in the Amended and Restated Loan and Security Agreement dated as of May 20, 2009 by and between Bank and Borrower (the “Loan Agreement”).  The Loan Agreement is incorporated herein by this reference in its entirety.  Capitalized terms used but not otherwise defined herein are used in this Line II Promissory Note as defined in the Loan Agreement.

 

This Line II Promissory Note is entitled to the benefits of the Loan Agreement.  The Loan Agreement, among other things, contains provisions for acceleration of the maturity of this Line II Promissory Note upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity of this Line II Promissory Note upon the terms and conditions specified in the Loan Agreement.  This Line II Promissory Note is also secured by the Collateral described in the Loan Agreement, and reference to the Loan Agreement is hereby made for a description of the rights of Borrower and Bank in respect to such Collateral.

 

Borrower further promises to pay interest on the unpaid principal amount hereof outstanding from time to time from the date hereof until payment in full hereof at the rate (or rates) from time to time applicable to the Advances as determined in accordance with the Loan Agreement.  Interest shall be calculated on the basis of a three hundred sixty (360) day year for the actual days elapsed.

 

Borrower waives demand, presentment and protest, and notice of demand, presentment, protest and nonpayment.  Except as otherwise provided in the Loan Agreement or other Loan Documents, Borrower waives all rights to notice and hearing of any kind upon the occurrence of an Event of Default prior to the exercise by Bank of its rights to repossess the Collateral without judicial process or to replevy, attach or levy upon the Collateral without notice or hearing.

 

If this Line II Promissory Note is not paid when due, whether at its specified or accelerated maturity date, Borrower promises to pay all costs of collection and enforcement of this Line II Promissory Note, including, but not limited to, reasonable attorneys’ fees and costs, incurred by Bank hereof on account of such collection or enforcement, whether or not suit is filed hereon.

 

This Line II Promissory Note shall be governed and construed in accordance with the laws of the State of California.

 

IN WITNESS WHEREOF, the undersigned has executed and delivered this Line II Promissory Note as of the date and year first above written.

 

 

	
 
    	
APPLIED   OPTOELECTRONICS, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:Exhibit 10.10.4

 

FOURTH AMENDMENT
 TO
  AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This Fourth Amendment to Amended and Restated Loan and Security Agreement is entered into as of May 5th, 2011 (the “Amendment”), by and between APPLIED OPTOELECTRONICS, INC (“Borrower”) and EAST WEST BANK (“Bank”).

 

RECITALS

 

Borrower and Bank are parties to that certain Amended and Restated Loan and Security Agreement dated as of May 20, 2009, as amended from time to time including that certain First Amendment to Amended and Restated Loan and Security Agreement dated as of May 3rd, 2010, that certain Second Amendment to Amended and Restated Loan and Security Agreement dated as of October 28th, 2010 and that certain Third Amendment to Amended and Restated Loan and Security Agreement dated as of December 6th, 2010 (collectively, the “Agreement”).  The parties desire to amend the Agreement in accordance with the terms of this Amendment.

 

AGREEMENT

 

NOW, THEREFORE, the parties agree as follows:

 

1.                                      Borrower acknowledges that there are existing and uncured Events of Default arising from Borrower’s failure to comply with Sections 6.6 and 6.15 of the Agreement for the quarter ending December 31, 2010 (the “Existing Defaults”).  Subject to the conditions contained herein and performance by Borrower of all of the terms of the Agreement after the date hereof, Bank forbears from exercising its remedies arising out of the Existing Defaults until Borrower’s attainment of the Equity Event.  Bank does not forbear or waive Borrower’s obligations under such respective Sections for any event other than the Existing Defaults, Bank does not waive any other failure by Borrower to perform its Obligations under the Loan Documents.

 

2.                                      The following defined terms set forth in Section 1.1 of the Agreement are added or amended in their entirety to read as follows:

 

“Cash Secured Maturity Date” means May 5th, 2013

 

“Credit Extension” means each Advance, Equipment Advance, Real Estate Advance, EXIM Advance, Line II Advance, Cash-Secured Advance or any other extension of credit by Bank to or for the benefit of Borrower hereunder.

 

“Equity Event” means Borrower’s receipt of at least $5,000,000 in cash proceeds from the sale and issuance of Borrower’s equity or Subordinated Debt securities

 

“EXIM Maturity Date” means September 30, 2011.

 

“Revolving Line Maturity Date” means September 30, 2012.

 

“Revolving Line II Maturity Date” means September 30, 2012.

 

3.                                      Section 2.1(d)(ii) is amended in its entirety to read as follows:

 

(ii)                                  Payment.  Borrower shall repay the Real Estate Advance as follows: on the fifth day of each month until the Real Estate Maturity Date, Borrower shall pay $8,750 in fixed principal payments for each month, plus all accrued interest.  The entire principal balance and all accrued but unpaid interest on the Real Estate Advance shall be due and payable on the Real Estate Maturity Date.

 

 

4.                                      The following is added as a new Section 2.1(g) of the Agreement as follows:

 

(g)                                  Cash-Secured Advances.

 

(i)                               Amount.  Subject to and upon the terms and conditions of this Agreement, Borrower may request advances pursuant to this Section 2.1(g) (each, a “Cash Secured Advance”) in an aggregate outstanding principal amount not to exceed $60,000. Amounts borrowed pursuant to this Section 2.1(g) may be repaid and reborrowed at any time prior to the Cash Secured Maturity Date, at which time all Obligations under this Section 2.1(g) shall be immediately due and payable.  Borrower may prepay any Cash Secured Advances without penalty or premium.

 

(ii)                            Borrowing Procedure.  Whenever Borrower desires a Cash-Secured Advance, Borrower will notify Bank by facsimile transmission of an advance request in substantially the form of Exhibit C hereto no later than noon Pacific Time on the Business Day that is three (3) Business Days prior to the Business Day on which an Cash Secured Advance is made.  Bank is authorized to make Cash Secured Advances under this Agreement, based upon instructions received from a Responsible Officer or a designee of a Responsible Officer.  Bank will credit the amount of Cash Secured Advances made under this Section 2.1(g) to Borrower’s deposit account, as specified by Borrower.

 

(iii)                         Payments.  Borrower shall pay interest on the aggregate outstanding principal amount of the Cash Secured Advances on the fifth day of each month for so long as any Cash Secured Advances are outstanding. The entire principal balance and all accrued but unpaid interest on the Cash Secured Advances shall be due and payable on the Revolving Maturity Date; and Borrower authorizes Bank to apply the Cash Collateral towards the repayment of the Obligations under this Section 2.1(g) on the Revolving Maturity Date.

 

(iv)                        Security. Borrower shall provide to Bank cash collateral in an amount equal to all outstanding Cash Secured Advances (the “Cash Collateral”) to secure all of the Obligations relating to such Cash Secured Advances.  Borrower agrees to execute any further documentation in connection with the Cash Secured Advances as Bank may reasonably request.

 

5.                                      Section 2.3(a) of the Agreement is amended in its entirety to read as follows:

 

(a)                                 Interest Rates.  Except as set forth in Section 2.3(b), the outstanding principal balance of each Revolving Advance, Equipment Advance, EXIM Advance and Line II Advance shall bear interest at a variable rate per annum equal to the Prime Rate plus 1.75%, provided however, that at no time shall the interest rate applied to any such Credit Extension be less than 5.0% per annum. Except as set forth in Section 2.3(b), the outstanding principal balance of each Cash Secured Advance shall bear interest at a variable rate per annum equal to the Prime Rate minus 2.0%. Except as set forth in Section 2.3(b), the outstanding principal balance of each Real Estate Advance, shall bear interest at a variable rate per annum equal to the Prime Rate plus 0.90%, provided however, that at no time shall the interest rate applied to any Real Estate Advance be less than 5.375% per annum (the “Floor Rate”) unless Borrower has entered into an interest rate swap contract in form and substance satisfactory to Bank, upon which time the Floor Rate shall not apply.  Interest shall be computed daily on the basis of a 360 day year and actual days elapsed.

 

6.                                      Section 6.6 of the Agreement is amended in its entirety to read as follows:

 

 

6.6                               Minimum EBITDASO.  Borrower shall maintain a minimum quarterly EBITDASO of at least $275,000, measured on a rolling four quarter basis.  Notwithstanding the foregoing, Borrower’s failure to maintain the minimum quarterly EBITDASO set forth in the preceding sentence shall not constitute an Event of Default if, within 60 days after the reporting period of such failure, Borrower receives cash proceeds from the sale and issuance of its equity and/or Subordinated Debt securities in an amount no less than the shortfall amount that caused Borrower’s failure to attain such minimum EBITDASO amount.

 

7.                                      Section 6.15 of the Agreement is amended in its entirety to read as follows:

 

6.15                        Minimum Debt Service Coverage.  Borrower shall maintain a minimum ratio of EBITDASO on a consolidated basis for the trailing four quarter period to the sum of (x) all accrued interest payable in the same four quarter period plus (y) all principal payable in the same four quarter period on any Indebtedness (not including principal oustanding on any revolving lines of credit) owing by Borrower and its Subsidiaries to Bank or other financial institutions, of at least 1.35 to 1.00 (the “DSC Ratio”), measured on a quarterly basis. Notwithstanding the foregoing, Borrower’s failure to maintain the DSC Ratio shall not constitute an Event of Default if, within 60 days after the reporting period of such failure, Borrower receives cash proceeds from the sale and issuance of its equity and/or Subordinated Debt securities in an amount no less than the shortfall amount that caused Borrower’s failure to maintain the DSC Ratio.

 

8.                                      The following is added to the end of Section 7.9 of the Agreement:

 

Notwithstanding the foregoing, Borrower may pay to each of its shareholders who are holders of Subordinated Debt and who are party to a subordination agreement with Bank, in form and substance satisfactory to Bank (the “Subordination Agreement”), payments of principal and accrued interest on the Subordinated Debt, provided that (a) said payments are made using funds raised from the initial public offering or a private equity fundraising of Borrower, (b) no Event of Default has occurred under the Agreement which is continuing or would exist immediately after giving effect to such payment, (c) Borrower’s Cash maintained at Bank is at least equal to the amount as of the date hereof after each such payment, and (d) such payments are subject to the rights, if any, of Bank under any applicable Subordination Agreement.

 

9.                                      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 remains in full force and effect in accordance with its 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.  Borrower ratifies and reaffirms the continuing effectiveness of all instruments, documents and agreements entered into in connection with the Agreement.

 

10.                               Borrower represents and warrants 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.

 

11.                               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.

 

12.                               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 Borrower;

 

 

(b)                                 Corporate Resolutions and Incumbency Certification, duly executed by Borrower;

 

(c)                                  an amendment fee of $10,600 to Bank, plus an amount equal to all Bank Expenses incurred through the date of this Amendment; and

 

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

 

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

 

	
 
    	
APPLIED   OPTOELECTRONICS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Chih-Hsiang (Thompson) Lin
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
CEO,   President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
EAST   WEST BANK
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Lisa Chang
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
VP

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