Exhibit 10.3
THIRD LOAN MODIFICATION
AGREEMENT
This Third Loan Modification
Agreement (this “Loan Modification Agreement’) is
entered into as of November 16, 2006, by and between
SILICON VALLEY BANK , a California-chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054 and with a loan production office located at One
Newton Executive Park, Suite 200, 2221 Washington Street,
Newton, Massachusetts 02462 (“Bank”) and AMERICAN
SCIENCE AND ENGINEERING, INC, a Massachusetts corporation with
its chief executive office located at 829 Middlesex Turnpike,
Billerica, Massachusetts 01821 (“Borrower”).
1.
DESCRIPTION OF
EXISTING INDEBTEDNESS AND OBLIGATIONS . Among other indebtedness
and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of
August 11, 2003, evidenced by, among other documents, a
certain Loan and Security Agreement dated as of August 11,
2003, between Borrower and Bank, as amended by a certain First Loan
Modification Agreement dated as of June 30, 2004, between
Borrower and Bank, and as further amended by a certain Second Loan
Modification Agreement dated as of November 30, 2004, between
Borrower and Bank (as amended, the “Loan
Agreement”). Capitalized terms used but not otherwise
defined herein shall have the same meaning as in the Loan
Agreement.
2.
DESCRIPTION OF
COLLATERAL .
Repayment
of the Obligations is secured by the Collateral as described in the
Loan Agreement and the Intellectual Property Collateral as
described in a certain Intellectual Property Security Agreement
dated as of August 11, 2003, as amended by a certain First
Amendment to Intellectual Property Security Agreement dated as of
August 23, 2004 (as amended, the “IP Security
Agreement”) (together with any other collateral security
granted to Bank, the “Security Documents”).
Hereinafter, the Security Documents, together
with all other documents evidencing or securing the Obligations
shall be referred to as the “Existing Loan
Documents”.
3.
DESCRIPTION OF
CHANGE IN TERMS .
1.
Modifications to
Loan Agreement.
1.
The Loan
Agreement shall be amended by deleting the following subsection
(a) appearing in Section 2.1.1 thereof:
“
(a)
Availability
. Bank
shall make Advances not exceeding (i) the lesser of
(A) the Revolving Line or (B) the Borrowing Base minus
(ii) the amount of all outstanding Letters of Credit
(including drawn butunreimbursed Letters of Credit), minus
(iii) the FX Reserve, and minus (iv) the aggregate
outstanding Advances hereunder (including any Cash Management
Services). Amounts borrowed under this Section may be
repaid and reborrowed during the term of this
Agreement.”
and inserting in lieu thereof the
following:
“
(a)
Availability
. Subject to the terms and
conditions of this Agreement, Bank shall make Advances not
exceeding the Availability Amount. Amounts borrowed under the
Revolving Line may be repaid and, prior to the Revolving Maturity
Date, reborrowed, subject to the applicable terms and conditions
precedent herein.”
2.
The Loan
Agreement shall be amended by deleting the following subsection
(a) appearing in Section 2.1.2 thereof:
“
(a)
Bank shall issue
or have issued Letters of Credit for Borrower’s account not
exceeding (i) the lesser of the Revolving Line or the
Borrowing Base minus (ii) the outstanding principal balance of
any Advances (including any Cash Management Services), minus
(iii) the amount of all Letters of Credit (including drawn but
unreimbursed Letters of Credit), plus an amount equal to any Letter
of Credit Reserves. The face amount of outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve) may not exceed $5,000,000.00. Each
Letter of Credit shall have an expiry date no later than 180 days
after the Revolving Maturity Date provided Borrower’s Letter
of Credit reimbursement obligation shall be secured by cash on
terms acceptable to Bank on and after (i) the Revolving
Maturity Date of the Revolving Line if the Revolving Maturity Date
of the Revolving Line is not extended by Bank, or (ii) the
occurrence of an Event of Default hereunder. All Letters of
Credit shall be, in form and substance, acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of
Bank’s form of standard Application and Letter of Credit
Agreement. Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may
reasonably request”.
and inserting in lieu thereof the
following:
“
(a)
As part of the Revolving Line, Bank
shall issue or have issued Letters of Credit for Borrower’s
account. The face amount of outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter
of Credit Reserve) may not exceed Twenty Million Dollars
($20,000,000.00). Such aggregate amounts utilized hereunder
shall at all times reduce the amount otherwise available for
Advances under the Revolving Line. If, on the Revolving
Maturity Date, there are any outstanding Letters of Credit, then on
such date Borrower shall provide to Bank cash collateral in an
amount equal to 105% 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
said Letters of Credit. All Letters of Credit shall be in
form and substance acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank’s
standard Application and Letter of Credit Agreement (the “
Letter of Credit Application ”). Borrower agrees
to execute any further documentation in connection with the Letters
of Credit as Bank may reasonably request. Borrower further
agrees to be bound by the regulations and interpretations of the
issuer of any Letters of Credit guarantied by Bank and opened for
Borrower’s account or by Bank’s interpretations of any
Letter of Credit issued by Bank for Borrower’s account, and
Borrower understands and agrees that Bank shall not be liable for
any error, negligence, or mistake, whether of omission or
commission, in following Borrower’s instructions or those
contained in the Letters of Credit or any modifications,
amendments, or supplements thereto.”
3.
The Loan
Agreement shall be amended by deleting Section 2.2 in its
entirety, and inserting in lieu thereof the following:
“
2.2
Overadvances . If, at any time
Borrower’s Unrestricted Cash is less than Thirty Million
Dollars ($30,000,000.00) for a period of thirty (30) consecutive
days, and the Credit Extensions under Sections 2.1.1, 2.1.2, 2.1.3
and 2.1.4 exceed the lesser of either (a) the Revolving Line
or (b) the Borrowing Base, Borrower shall immediately pay to
Bank in cash such excess.”
4.
The Loan
Agreement shall be amended by deleting the following appearing as
Section 2.4(b) thereof:
“
(b)
Unused Line Fee
. In the
event, in any calendar quarter, the average daily principal balance
of the Credit Extensions outstanding during the quarter is less
than $5,000,000.00, Borrower shall pay Bank an unused line fee in
an amount equal to 0.50% per annum on the difference between
$5,000,000.00 and the average daily principal balance of the Credit
Extensions outstanding during the quarter, which unused line fee
shall be computed and paid quarterly, in arrears, on the first day
of the following quarter.
and inserting in lieu
thereof:
“
(b)
Unused Revolving Line Facility
Fee . A fee
(the “ Unused Revolving Line Facility Fee ”),
payable quarterly, in arrears, on a calendar year basis, in an
amount equal to one-half of one percent (0.50%) per annum of the
average unused portion of the Revolving Line, as determined by
Bank. For purposes hereof, any Letter of Credit
Reserve, any F/X Reserve, or Cash Management Services held or in
place for any calendar year shall constitute a utilization of the
Revolving Line. Borrower 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.”
5.
The Loan
Agreement shall be amended by deleting the following appearing as
Section 6.2 thereof:
“
6.2
Financial Statements, Reports,
Certificates .
(a)
Borrower shall deliver to
Bank: (i) as soon as available, but no later than thirty
(30) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering
Borrower’s consolidated operations during the period
certified by a Responsible Officer and in a form acceptable to
Bank; (ii) as soon as available, but no later than ninety (90)
days after the last day of Borrower’s fiscal year, audited
consolidated financial statements prepared under GAAP, consistently
applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm
reasonably acceptable to Bank; (iii) within five (5) days
of filing, copies of all statements, reports and notices made
available to Borrower’s security holders or to any holders of
Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission; (iv) a prompt
report of any legal actions pending or threatened against Borrower
or any Subsidiary that is reasonably likely to result in damages or
costs to Borrower or any Subsidiary of One Hundred Thousand Dollars
($100,000.00) or more; (v) prompt notice of any material
change in the composition of the Intellectual Property, or the
registration of any copyright, including any subsequent ownership
right of Borrower in or to any Copyright, Patent or Trademark not
shown in any intellectual property security agreement between
Borrower and Bank or knowledge of an event that materially
adversely affects the value of the Intellectual Property; and
(vi) budgets, sales projections, operating plans or other
financial information reasonably requested by Bank.
(b)
Within thirty (30) days after the
last day of each month, Borrower shall deliver to Bank a Borrowing
Base Certificate signed by a
Responsible Officer in the form of
Exhibit C , with aged listings of accounts
receivable (by invoice date).
(c)
Within thirty (30) days after the
last day of each month, Borrower shall deliver to Bank with the
monthly financial statements a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit D
.
(d)
Within thirty (30) days after the
last day of each month, Borrower shall deliver to Bank Deferred
Revenue Schedules.
(e)
Allow Bank to audit Borrower’s
Collateral at Borrower’s expense. Such audits shall be
conducted no more often than once every six (6) months unless
an Event of Default has occurred and is continuing. Notwithstanding
the foregoing, no Credit Extensions shall be made prior to the
completion of the initial audit (the “Initial
Audit”).
Notwithstanding the above financial
reporting requirements, in the event that Borrower has no Advances
or Credit Extensions in an amount equal to or greater than Five
Hundred Thousand Dollars ($500,000.00) outstanding during any
month, the monthly financial reporting requirements set forth in
subsections (a), (b), (c) and (d) above shall be
delivered on a quarterly basis, within forty five (45) days after
the end of each fiscal quarter of Borrower.”
and inserting in lieu thereof the
following:
“
6.2
Financial Statements, Reports,
Certificates .
(a)
Borrower shall deliver to
Bank: (i) as soon as available, but no later than
forty-five (45) days after the last day of each quarter, a company
prepared consolidated balance sheet and income statement covering
Borrower’s consolidated operations during the period
certified by a Responsible Officer and in a form acceptable to
Bank; (ii) as soon as available, but no later than ninety (90)
days after the last day of Borrower’s fiscal year, audited
consolidated financial statements prepared under GAAP, consistently
applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm
reasonably acceptable to Bank; (ii
