EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND
WAIVER
THIS
EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER
(this " Amendment
"), dated as of June 11, 2008, is entered into among COMMERCE
ENERGY, INC., a California corporation (" Borrower
"), COMMERCE ENERGY GROUP, INC., a Delaware corporation ("
Parent
"), WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN), a
California corporation, as Agent (" Agent ")
and the financial institutions party to the below referenced
Loan Agreement as Lenders (collectively, " Lenders
").
RECITALS
A. Borrower,
Parent, Agent and Lenders have previously entered into that
certain Loan and Security Agreement dated June 8, 2006 (the "
Loan
Agreement ") as amended by the First Amendment to Loan
and Security Agreement and Waiver dated September 20,
2006 (the " First
Amendment "), the Second Amendment to Loan and Security
Agreement and Waiver dated October 26, 2006 (the "
Second
Amendment "), the Third Amendment to Loan and Security
Agreement and Waiver dated March 15, 2007 (the "
Third
Amendment "), the Fourth Amendment to Loan and Security
Agreement dated June 26, 2007 (the " Fourth
Amendment "), the Fifth Amendment to Loan and Security
Agreement dated August 1, 2007 (the " Fifth
Amendment "), the Sixth Amendment to Loan and Security
Agreement dated November 16, 2007 (the " Sixth
Amendment ") and the Seventh Amendment to Loan and
Security Agreement dated March 12, 2008 (the “
Seventh
Amendment ”) pursuant to which Agent and Lenders
have made certain loans and financial accommodations available
to Borrower. Terms used herein without definition
shall have the meanings ascribed to them in the Loan
Agreement.
B. The
following Events of Default have occurred and are continuing
under the Loan Agreement: (i) Borrower failed to
maintain a Fixed Charge Coverage Ratio of not less than 1.5 to
one for the twelve (12) consecutive month period ended April
30, 2008 as required in Section 9.17 of the Loan Agreement and
(ii) Borrower failed to earn EBITDA of not less
than $3,500,000 for the nine (9) consecutive month period
ended April 30, 2008 as required in Section 9.17.2 of the Loan
Agreement (collectively, the “ Known Existing
Defaults ”).
C. Borrower
and Parent have requested that Agent and Lenders waive the
Known Existing Defaults and amend the Loan Agreement on the
terms and conditions set forth herein.
D. Borrower
and Parent are entering into this Amendment with the
understanding and agreement that, except as specifically
provided herein, none of Agent's or any Lender's rights or
remedies as set forth in the Loan Agreement is being waived or
modified by the terms of this Amendment.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as
follows:
1.
Amendments to Loan Agreement .
(a)
Borrowing Base . The definition of
“Borrowing Base” in Section 1.11 of the Loan
Agreement is hereby amended and restated to read in its entirety as
follows:
“1.11 ‘Borrowing
Base’ shall mean, at any time, the difference of
(a) the lesser of (i) the sum of all collections received
on the Accounts of Borrowers during the immediately preceding
thirty (30) days, or (ii) the sum of (A) eighty-five
(85%) percent of the Eligible Billed Accounts, plus
(B) the lesser of $12,000,000 or sixty-five (65%) percent
of the Eligible Unbilled Accounts, plus (C) the lesser of
the Inventory Loan Limit or seventy (70%) percent multiplied
by the Value of the Eligible Inventory, plus (D) the lesser of
$35,000,000 or ninety-five (95%) percent of Eligible Cash
Collateral, minus (b) any Reserves.”
(b)
Excess Availability . The definition of
“Excess Availability” in Section 1.41 of the Loan
Agreement is hereby amended to insert the phrase “plus any
additional loans or other lines of credit arranged by Borrowers and
approved by the Agent that are subordinated in right of payment to
the Obligations on terms and conditions satisfactory to the
Agent” immediately after the phrase “in respect of
Letter of Credit Obligations)” in clause (a)
thereof.
(c)
Interest Rate .
(i)
The
phrase "three quarters of one (0.75%) percent" in the definition of
“Interest Rate” in Section 1.58(a)(i) of the Loan
Agreement is hereby replaced with "two and one-quarter (2.25%)
percent".
(ii)
The
phrase “three and one-quarter (3.25%) percent” in the
definition of “Interest Rate” in Section 1.58(a)(ii) of
the Loan Agreement is hereby replaced with “four and
three-quarters (4.75%) percent”.
(d)
Letter of Credit Rate .
(i)
The
phrase "two and one-quarter (2.25%) percent" in the definition of
“Letter of Credit Rate” in Section 1.66(a) of the
Loan Agreement is hereby replaced with "three and three-quarters
(3.75%) percent".
(ii)
The
phrase "two (2.00%) percent" in the definition of “Letter of
Credit Rate” in Section 1.66(b) of the Loan Agreement is
hereby replaced with "three and one-half (3.50%)
percent".
(e)
Collections . Notwithstanding any prior course of
conduct, Borrower acknowledges and reaffirms its agreement under
Sections 6.3(a) and (c) of the Loan Agreement to promptly
deposit into the Lockbox Accounts and to direct its account debtors
to directly remit into the Lockbox Accounts all payments on
Receivables and all payments constituting proceeds of Inventory or
other Collateral in the identical form in which such payments are
made, whether by cash, check or other manner, and to transfer the
funds deposited into the Lockbox Accounts to the Blocked Accounts
for application to the Obligations.
(f)
Access to Premises and Management
. Section 7.7 of the Loan Agreement is hereby
amended and restated to read in its entirety as
follows:
“7.7
Access to
Premises and Management . From time to time
as requested by Agent, at the cost and expense of Borrowers,
(a) Agent or its designee (which for purposes of this section
shall include Carl Marks Advisory Group LLC, and its
Affiliates, sucessors or assigns (collectively, the “
Consultant
”)) shall, at any time after notice to Parent, or at any
time without notice to Administrative Borrower if an Event of
Default exists or has occurred and is continuing, have (i)
complete access to and cooperation of management of each
Borrower and each Guarantor, and (ii) complete access to all
of each Borrower's and Guarantor’s premises during
normal business hours, each for the purposes of inspecting,
verifying and auditing the Collateral and all of each
Borrower's and Guarantor’s books and records (including
the Records), assessing each Borrower’s historic cash
flows, liquidity and financial controls and performance
generally, and the projected Borrowing Base and Excess
Availability, and (b) each Borrower and Guarantor shall
promptly furnish to Agent or its designee such copies of such
books and records or extracts therefrom as Agent or its
designee may request, and Agent or any Lender or Agent’s
designee may use during normal business hours such of any
Borrower's and Guarantor’s personnel, equipment,
supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred
and is continuing for the collection of Receivables and
realization of other Collateral; provided
that for
purposes of the performance of duties under this
section, the Consultant shall be deemed the agent and advisor
of Agent for the purposes of Section 11.5
hereof.”
(g)
Fixed Charge Coverage Ratio . Section 9.17 of the
Loan Agreement is hereby amended and restated to read in its
entirety as follows:
“9.17
Fixed Charge
Coverage Ratio . Parent and its Subsidiaries
shall maintain a Fixed Charge Coverage Ratio as of the last
day of each month beginning August 31, 2008, as determined for
the period of each month then ending, of not less than one to
one. Based upon the projected financial statements
furnished by Borrowers to Agent pursuant to Section
9.6(a)(iii) hereof for each fiscal year after July 31, 2008,
Agent shall reasonably establish minimum Fixed Charge Coverage
Ratio levels for Parent and its Subsidiaries for each period
beginning on August 1, 2008 and ending on the last day of each
of October, January, April and July during such fiscal year
(it being understood that such levels will be no less
stringent than one to one).”
(h)
Excess Availability . Section 9.17.1 of the Loan
Agreement is hereby amended and restated to read in its entirety as
follows:
“9.17.1
Excess
Availability . Borrowers shall maintain
Excess Availability of not less than $2,500,000 at
all
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