Document:

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 PresidentUnassociated Document

     

    Exhibit
      10.2

     

    

      
        	
                Promissory
                  Note

              	
                Fifth
                  Third Bank 

              
	 	
                Address:
                  1000 Town Center, Suite J300

              
	 	
                City:
                  Southfield State: Michigan Zip:
                  48075

              

      

    

    

      
        	
                Obligor
                  No. ________________

              	
                June
                  30, 2008            

              
	
                Obligation
                  No. ______________

              	 

      

    

     

    FOR
      VALUE
      RECEIVED, the undersigned (the "Obligor") promises to pay to the order of the
      bank named above ("Bank") the principal amount of TWO MILLION FIVE HUNDRED
      THOUSAND AND NO/100 Dollars ($2,500,000.00) and interest (computed on the basis
      of a 360-day year for the actual number of days elapsed) on the unpaid principal
      balance at a rate per annum of: 

    

    Interest
      shall be payable on this Note at a rate per annum equal to 2% above Index Rate,
      floating (the “Note Rate”) from time to time in effect until Maturity and 2%
      above the Note Rate from time to time in effect after Maturity. The interest
      rate on this Note shall be adjusted on the same day that the change occurs
      to
      the specified percentage above the Index Rate in effect on the date of
      adjustment. 

    

    INDEX
      RATE: As used in this Note, "Index Rate means:

    

    The
      rate
      of interest announced from time to time by Bank as its "prime" interest rate.
      The Index Rate is a variable rate and each change in the Index Rate is effective
      from and including the date the change in the "prime" interest rate is announced
      as being effective. 

    

    The
      rate
      announced by Bank as its "prime" interest rate at any given time may not
      necessarily be the lowest rate of interest available to commercial customers
      of
      Bank at that time. 

    

    The
      principal and interest on this Note shall be paid as follows: 

    

    Principal
      shall be paid in full on October 1, 2008 or at Maturity (as defined in paragraph
      11 of Schedule A), if earlier. Accrued interest shall be paid on July 1, 2008
      and on the first day of each month thereafter until the principal balance shall
      be paid in full. 

    

    LATE
      PAYMENTS; FEES: If any payment is not paid when due (whether by acceleration
      or
      otherwise) or within 10 days thereafter, each of the undersigned agrees, jointly
      and severally, to pay to Bank a late payment fee as provided for in any loan
      agreement or 5% of the payment amount, whichever is greater with a minimum
      fee
      of $20.00. Bank may impose a non-sufficient funds fee for any check that is
      presented for payment that is returned for any reason. This is in addition
      to
      Bank's other rights and remedies for default in payment of an installment of
      principal or interest when due. 

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    EXPENSES
      AND LOAN PROCESSING FEE: Obligor shall reimburse Bank for all out-of-pocket
      expenses heretofore or hereafter incurred by Bank in connection with making
      the
      loan evidenced by this Note and any renewals, extensions or modifications of
      the
      loan and in connection with taking any security for the loan, including, without
      limitation, filing and recording fees, attorneys' fees and expenses, and costs
      of credit reports, surveys, appraisals, title work and mortgagee's title
      insurance. Each out-of-pocket expense (if not reimbursed to Bank on or before
      the date of this Note) shall be reimbursed to Bank at the time of the first
      required interest payment under this Note after the expense is incurred.

    

    REVOLVING
      CREDIT: This Note is issued in exchange and substitution for a Promissory Note
      dated November 13, 2007 given by the Borrower in favor of the Bank, which was
      issued in exchange and substitution for a Promissory Note dated March 6, 2007
      given by Borrower in favor of Bank. The principal of this Note may be borrowed,
      repaid and reborrowed by any Obligor from time to time, subject to the
      provisions of any written agreement among Bank and Obligor, as heretofore or
      hereafter amended, extended or replaced. Bank's records shall be prima facie
      evidence of all loans and repayments and of the indebtedness outstanding under
      this Note at any time. 

    

    THE
      ADDITIONAL PROVISIONS PRINTED ON SCHEDULE A ATTACHED TO THIS NOTE ARE PART
      OF
      THIS NOTE AND ARE INCORPORATED IN THIS NOTE BY REFERENCE. 

     

    
      	Accepted:	 	 	 Obligor(s):
              
	 	 	 	 
	Fifth Third Bank 	 	 	Advanced
              Photonix, Inc., 
	 	 	 	a Delaware corporation
	 	 	 	 
	 	 	 	 
	By: 
              /s/  J.
              Matthew Lowman 	 	 	By: 
              /s/  Richard
              D. Kurtz
	
              
                
  J.
                Matthew
                Lowman 

            	 	 	
              
                
  Richard
                D.
                Kurtz

            
	
                Its:
                Vice
                President

            	 	 	
                Its:
                Chief Executive
                Officer

            
	 	 	 	 
	 	 	 	
              Address:
                

            
	 	 	 	
            
	 	 	 	
              2925
                Boardwalk

              Ann
                Arbor, MI 48104

            

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    SCHEDULE
      A

    ADDITIONAL
      PROVISION OF PROMISSORY NOTE

     

    1. Prepayments.
      Obligor may prepay all or part of the principal of this Note at any time, unless
      prepayment is prohibited, limited or conditioned in any Rider to this Note
      or in
      any other agreement signed by Obligor. 

    

    2. Security.
      This Note and all obligations of Obligor hereunder are secured by any and all
      security agreements, guaranties, mortgages, assignments and all other agreements
      and instruments heretofore or hereafter given by Obligor or any third party
      to
      Bank ("Security Documents"). As additional security for the payment of Obligor's
      obligations under this Note, Obligor grant(s) to Bank a security interest in
      all
      tangible and intangible property of Obligor now or hereafter in the possession
      of Bank, including, without limitation, all deposit accounts. Obligor grants
      the
      foregoing security interests to Bank for itself and as agent for all affiliates
      of Fifth Third Bancorp for all obligations of Obligor to such affiliates.

    

    3. Acceleration
      (Non-Demand Note). Upon the occurrence of any Event of Default (as defined
      in
      the Loan Agreement), all or any part of the indebtedness evidenced hereby and
      all or any part of all other indebtedness and obligations then owing by Obligor
      to Bank shall, at the option of Bank or any affiliate of Fifth Third Bancorp,
      become immediately due and payable without notice or demand. All or any part
      of
      the indebtedness evidenced hereby also may become, or may be declared to be,
      immediately due and payable under the terms and conditions contained in any
      loan
      agreement, Security Document or other agreement heretofore or hereafter entered
      into between Obligor and Bank or any affiliate of Fifth Third Bancorp.

    

    4. Bankruptcy.
      If a voluntary or involuntary case in bankruptcy, receivership or insolvency
      shall at any time be begun by or against Obligor or any Guarantor or any of
      Obligor's or any Guarantor's partners (if Obligor or Guarantor is a
      partnership), or if any attachment, garnishment, execution, levy or similar
      process shall at any time be placed upon any deposit account at any time
      maintained with Bank by Obligor or any Guarantor, then the indebtedness
      evidenced by this Note and all other indebtedness and obligations then owing
      by
      Obligor to Bank shall automatically become immediately due and payable.

    

    5. Place
      and
      Application of Payments. Each payment upon this Note shall be made at any of
      Bank's offices or such other place as the holder hereof may direct in writing.
      Any payment upon this Note shall be applied first to any accrued and unpaid
      interest, then to the unpaid principal balance, then to any expenses or loan
      processing fee then due and payable to Bank and then to any unpaid late charges,
      except that after Maturity of this Note, Bank may apply any payment or
      collection to any such amounts owing under this Note in such manner as Bank
      shall determine in its sole discretion. If Obligor at any time owes Bank any
      indebtedness or obligation in addition to the indebtedness evidenced by this
      Note, and if any indebtedness owed by Obligor to Bank is then in default,
      Obligor shall not have, and hereby waives, any right to direct or designate
      the
      particular indebtedness or obligation upon which any payment made by, or
      collected from, Obligor or from any Guarantor or other security shall be
      applied. The manner of application of any such payment, as between or amount
      of
      such indebtedness and obligations, shall be determined by Bank in its sole
      discretion. 

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    6. Minimum
      Interest Rate. Notwithstanding any other provision of this Note, Bank shall
      never be entitled to charge, take or receive as interest on this Note any amount
      in excess of simple interest calculated at the lesser of (a) a rate of
      thirty-five percent (35%) per year or (b) the highest rate to which Obligor
      may
      lawfully agree in writing ("Maximum Rate"). If Bank ever receives interest
      in
      excess of the Maximum Rate, the excess shall be considered a partial prepayment
      of the principal of the Note or, if the principal has been paid in full, shall
      be refunded to Obligor. 

    

    7. Setoff.
      At any time after the occurrence and during the continuance of an Event of
      Default (as defined in the Loan Agreement), Bank shall have the right to set
      off
      any indebtedness that Bank then owes to Obligor (including any deposit account)
      against any indebtedness evidenced by this Note that is then due and payable.
      

    

    8. Remedies.
      Bank shall have all rights and remedies provided by law and by agreement of
      Obligor. Any requirement of reasonable notice with respect to any sale or other
      disposition of collateral shall be met if Banks sends the notice at least five
      (5) days before the date of sale or other disposition. Obligor agrees to pay
      any
      and all expenses, including reasonable attorneys' fees and legal expenses,
      paid
      or incurred by Bank in protection and enforcing the right of and obligations
      to
      Bank under any provisions of this Note or any Security Document. 

    

    9. Environmental
      Compliance. Obligor represents and warrants to, and agrees with, Bank that,
      to
      Obligor's knowledge: (a) none of Obligor's real or personal property is, and
      Obligor will not permit it to become, contaminated by any substance that is
      now
      or hereafter regulated by or subject to any present or future law or regulation
      that establishes liability for the removal or clean-up of, or damage caused
      by,
      any environmental contamination; (b) Obligor's operations, activities, and
      real
      and personal properties are, and Obligor shall cause them to continue to be,
      in
      compliance with each such law and regulation; (c) if the indebtedness evidenced
      by this Note is not paid at Maturity, then at any time thereafter Bank may,
      but
      shall not be obligated to, conduct or obtain an environmental investigation
      or
      audit of any or all of Obligor's properties, and Obligor shall reimburse Bank
      for all costs and expenses incurred by Bank in connection with any such
      investigation or audit; and (d) Obligor shall indemnify and, at Bank's option,
      defend Bank with respect to all claims, damages, losses, liabilities and
      expenses (including attorneys' fees) asserted against or incurred by Bank by
      reason of any failure to comply with, or any inaccuracy in, any of the
      agreements, representations and warranties contained in this paragraph.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    10. Waivers.
      No delay by Bank in the exercise of any right or remedy shall operate as a
      waiver thereof. No single or partial exercise by Bank of any right or remedy
      shall preclude any other or future exercise thereof or the exercise of any
      other
      right or remedy. No waiver by Bank of any default or of any provisions hereof
      shall be effective unless in writing and signed by Bank. No waiver of any right
      or remedy on one occasion shall be waiver of that right or remedy on any future
      occasion. The modification or waiver of any of Obligor's obligations or Bank's
      rights under this Note must be contained in a writing signed by Bank. Bank
      may
      perform Obligor's obligations without causing a waiver of those obligations
      or
      rights. Obligor's obligations under this Note shall not be affected if Bank
      amends, compromises, exchanges, fails to exercise, impairs or releases and
      of
      the following obligations under this Note and the documents referred to herein:
      (i) any of the obligations belonging to any co-obligor, endorser or guarantor,
      (ii) any of its rights against any co-obligor, guarantor or endorser, or (iii)
      any interest in the collateral securing the obligations. 

    

    Obligor
      waives demand for payment, presentment, notice of dishonor and protest of this
      Note and consents to any extension or postponement of time of its payment to
      any
      substitution, exchange or release of all or any part of any security given
      to
      secure this Note, to the addition of any hereto, and to the release, discharge,
      waiver, modification, or suspension of any rights and remedies against any
      person who may be liable for the indebtedness evidenced by this Note. Obligor,
      including but not limited to all co-makers and accommodation makers of this
      Note, hereby waives all suretyship defenses including but not limited to all
      defenses based upon impairment of collateral and all suretyship defenses
      described in Section 3-605 of the Uniform Commercial Code (the "UCC"). Such
      waiver is entered to the full extent permitted by Section 3-605(i) of the UCC.
      

    

    11. General.
      If Obligor is more than one person, firm or corporation, (a) each of them is
      primarily liable on this Note, (b) receipt of value by any one of them
      constitutes receipt of value by both or all of them, (c) their liability on
      this
      Note is joint and several, and (d) the term "Obligor" means each of them and
      all
      of them. In this Note, "Maturity" means such time as the entire remaining unpaid
      principal balance shall be or shall become due and payable for any reason,
      including acceleration under paragraph 3 or paragraph 4 hereof. 

    

    12. Applicable
      Law and Jurisdiction. This Note shall be governed by and interpreted according
      to the laws of the State of Michigan without giving effect to principles of
      conflict of laws. Obligor irrevocably agrees and consents that any action
      against Obligor for collection or enforcement of this Note may be brought in
      any
      state or federal court that has subject matter jurisdiction and is located
      in,
      or whose district includes, any county in which Bank has an office and that
      any
      such court shall have personal jurisdiction over Obligor for purposes of the
      action. 

    

    13. JURY
      WAIVER. OBLIGOR, AND ANY ENDORSER OR GUARANTOR HEREOF, WAIVE THE RIGHT TO A
      TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE OR THE TRANSACTIONS
      CONTEMPLATED HEREBY. 

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    14. Entire
      Agreement. Obligor acknowledges and confirms that this Note and the documents
      referred to herein constitute the entire agreement between Obligor and Bank,
      and
      that there are no conditions or understandings between the parties that are
      not
      expressed therein. 

    

    15. Severability.
      The declaration of invalidity or unenforceability of any provision of this
      Note
      or the documents referred to herein shall not affect the validity or
      enforceability of the remaining provisions of any of the foregoing.

    

    16. Assignment.
      Obligor agrees not to assign any of Obligor's rights, remedies or obligations
      described in this Note without the prior written consent of Bank, which consent
      may be withheld in Bank's sole discretion. Obligor agrees that Bank may assign
      some or all of its rights and remedies described in this Note without notice
      to,
      or prior consent from, the Obligor. 

    

    17. Financial
      Statements. Obligor shall maintain a standard and modern system for accounting
      in conformance with generally accepted accounting principles and will furnish
      to
      Bank all financial statements as described in Section VI of the Loan Agreement.

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