EXHIBIT 10.15
SECOND AGREEMENT OF
AMENDMENT
TO
REVOLVING LOAN AND SECURITY
AGREEMENT
This Second Agreement of Amendment
to Revolving Loan and Security Agreement ("Second Amendment") is
effective September 22, 2008 by and among SOVEREIGN BANK, a
federal savings bank, having an address of 101 Wood Avenue South,
Iselin NJ 08830 ( "Lender" ), MEDIA SCIENCES
INTERNATIONAL, INC., a Delaware corporation, MEDIA SCIENCES,
INC., a New Jersey corporation, and CADAPULT GRAPHIC
SYSTEMS, INC ., a New Jersey corporation, having their chief
executive office at 8 Allerman Road, Oakland NJ 07436 (either
separately, jointly, or jointly and severally, "Borrower
").
RECITALS
A. Borrower
has executed and delivered a certain (i) Secured Revolving Note
dated February 12, 2008, in the original maximum principal sum of
Eight Million Dollars ($8,000,000.00), and a certain (ii) Term Loan
Note in the original maximum principal sum of One Million Five
Hundred Thousand Dollars ($1,500,000.00) payable to the order of
Lender (collectively, "Note").
B. In
connection with the execution and delivery of the Note and to
secure payment and performance of the Note and other obligations of
Borrower to Lender, the Lender and Borrower have executed, among
other things, a Revolving Loan and Security Agreement dated
February 12, 2008, as amended ("Loan Agreement").
C. In
addition to the foregoing documents, Media Sciences International,
Inc. and Media Sciences, Inc. (jointly and severally, "Pledgor")
have executed certain Pledge and Control Agreements dated February
12, 2008 ("Pledge Agreement"). For purposes of convenience, the
Borrower and Pledgor are jointly and severally referred to as
"Obligors."
D. In
addition to the foregoing documents, the Obligors and Lender have
executed or delivered other collateral agreements, certificates and
instruments perfecting or otherwise relating to the security
interests created. For purposes of convenience, the Note, Loan
Agreement, Pledge Agreement and related collateral agreements,
certificates and instruments are collectively referred to as the
"Loan Documents.”
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E.
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Borrower has requested a modification of the
Loan Documents.
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F. Lender and
Obligors wish to clarify their rights and duties to one another as
set forth in the Loan Documents.
NOW, THEREFORE,
in consideration of the promises,
covenants and understandings set forth in this Second Amendment and
the benefits to be received from the performance of such
promises, covenants and
understandings, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
AGREEMENTS
1.
Lender and Obligors reaffirm, consent and agree to all of the terms
and conditions of the Loan Documents as binding, effective and
enforceable according to their stated terms, except to the extent
that such Loan Documents are hereby expressly modified by this
Second Amendment.
2.
In the case of any ambiguity or
inconsistency between the Loan Documents and this Second Amendment,
the language and interpretation of this Second Amendment is to be
deemed binding and paramount.
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3.
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The Loan Agreement is hereby amended as
follows:
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A. The
following is added as a DEFINITION:
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“Dilution” – as defined in Section 1.1(f)
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B. Section 1.1(b) is hereby amended to read as follows:
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1.1(b) The term "Advance Limit" means the loans or
advances which Lender may make to the Borrower pursuant to this
Agreement which are not in the aggregate at any time outstanding to
exceed the lesser of Eight Million ($8,000,000.00) Dollars
or the sum of (A), (B) and (C) below:
(A) Up to eighty (80%) percent of
the face amount of the Borrower's "Qualified Accounts" as that term
is defined in this Agreement; plus
(B) up to the lesser of (i)
$3,000,000.00, or (ii) fifty (50%) percent of the "Net Value of
Qualified Inventory" as that term is defined in this Agreement,
with a sub-limit not to exceed the lesser of $1,000,000.00 or the
sum of (x) the full unpaid and outstanding balance of any standby
letters of credit or bankers acceptances which Lender in its sole
and absolute discretion may issue on account of the Borrower plus
(y) fifty (50%) percent of the unpaid and outstanding balance of
any documentary letters of credit issued on account of the Borrower
for the purchase of Inventory in the ordinary course of business
which Lender in its sole and absolute discretion may issue on
account of the Borrower, with a further sub-limit not to exceed
$250,000.00 of the “Net Value of Qualified In-Transit
Inventory” as that term is defined in this Agreement, or
(iii) sixty (60%) percent of the maximum amount available to be
loaned or advanced pursuant to Section 1.1(b); less
(C) any reserves established by
Lender pursuant to Section 1.1(f ) hereof.
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C .
Section 1.1(f) is hereby amended to read as
follows:
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1.1(f) Without limiting any other
rights, terms, conditions or remedies of Lender, all loans,
advances or financial accommodations made or otherwise available to
Borrower is subject to Lender’s continuing right, in its
reasonable discretion, to withhold from Borrower a reserve, and to
increase and decrease such reserve from time to time, if and to the
extent that, in Lender’s sole judgment, such reserve is
necessary to protect the interests of Lender against (i) possible
non-payment of Accounts for any reason by account debtors, (ii) for
decreases in value of Collateral, (iii) for goods held on
consignment, (iv) possible non-payment by Borrower of any
indebtedness owed to, or liens held by, third parties, (v) if
Dilution is in excess of ten (10%) percent at any time determined
by Lender following a field examination or other appraisal of
Collateral, or (vi) to protect the interests of Lender against the
possible adverse effect of any state of facts which does or would,
with or without notice or passage of time, or both, constitute a
Default hereunder. “Dilution,” as of any determination
thereof, is defined as the sum of (a) bad debt -writedowns,
discounts, allowances, credits, or other items determined by Lender
to be dilutive, divided by (b) Borrower’s net sales
during such period of determination (excluding extraordinary
items).
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D. Section 7.16 is hereby amended to read as
follows:
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Section 7.16 Fixed Charge
Coverage Ratio
The Borrower is not to cause or
permit its Fixed Charge coverage ratio, tested quarterly, on a
rolling three month basis for the quarter ended September 30, 2008,
on a rolling six, nine and twelve month basis for each quarter
ending thereafter, and thereupon based on a trailing twelve month
basis, to be less than 1.05:1. Fixed Charge is defined as earnings
before interest, taxes, depreciation and am
