Amendment and Waiver Agreement
Exhibit
10.53
February
29, 2008
Modtech
Holdings, Inc.
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Attention:
Chief Financial Officer
Ladies
and Gentlemen:
Reference
is made to (a) the Securities Purchase Agreement dated as of October 31, 2006;
between Modtech Holdings, Inc. (the “Company”)
and
Laurus Master Fund, Ltd. (“Laurus”),
as
amended, modified and supplemented (the “First
Purchase Agreement”);
(b)
the Secured Term Note dated October 31, 2006 in the original principal amount
of
$13,000,000 made by the Company in favor of Laurus (the “First
Term Note”);
(c)
the Securities Purchase Agreement dated December 28, 2006 between the Company
and Laurus (the “Second
Purchase Agreement”
and
together with the First Purchase Agreement, the “Purchase
Agreements”);
(d)
the Secured Term Note dated December 28, 2006 in the original principal amount
of $5,000,000 made by the Company in favor of Laurus (the “Second
Term Note”
together with the First Term Note, the “Secured
Term Notes”);
and
(e) the Related Agreements (as such term is defined in the Purchase Agreements).
Laurus
has assigned a portion of its rights Purchase Agreements, the Secured Term
Notes
and the Related Agreements to Valens Offshore SPV I, Ltd. (“Valens
Offshore”)
and
Valens U.S. SPV I, LLC (“Valens
US”
together with Laurus and Valens Offshore each a “Lender”
and
collectively, the “Lenders”).
Certain
Events of Default (as such term is defined in the Secured Term Notes) have
occurred and are continuing and the Company has requested that the Lenders
waive
such Events of Default and make certain amendments to the Purchase Agreements
and the Secured Term Notes. The Lenders are willing to waive such Events of
Defaults and amend the Purchase Agreements and the Notes on the terms and
conditions specified herein.
Subject
to the satisfaction of the conditions precedent set forth in this letter
agreement and in reliance upon the representations, warranties and covenants
of
the Company contained in this letter agreement and any agreements documents
or
instruments executed in connection herewith, the Lenders agree to waive the
Event of Default arising as a result of the Company’s failure for the period
commencing on December 31, 2007 and ending on February 28, 2008 to comply with
the Availability Covenant (as such term is defined in the Purchase
Agreements).
Subject
to the satisfaction of the conditions precedent set forth in this letter
agreement and in reliance upon the representations, warranties and covenants
of
the Company contained in this letter agreement and any agreements documents
or
instruments executed in connection herewith:
1. The
Availability Covenant contained in the Purchase Agreements is amended to be
$5,400,000 for the period commencing on March 1, 2008 and ending on March 31,
2008, $6,600,000 for the period commencing on April 1, 2008 and ending on June
30, 2008 and $9,000,000 at all times on and after July 1, 2008.
2. In
addition to the reporting obligations contained in the Purchase Agreements,
the
Company shall abide by the following additional reporting obligations:
(a)
on
Wednesday of each week, the Company shall deliver to the Lenders a cash flow
projection prepared by the Company which includes the Company’s best estimate of
all cash requirements (including interest, fees and principal amortization),
projected sales and revenues, inventory, accounts payable and accounts
receivable positions for the period covered thereby together with all supporting
assumptions and schedules for the thirteen (13) week period covered thereby
for
the period commencing on Monday of the following week and for the thirteen
week
period thereafter together with a certificate of a responsible officer of the
Company which shall state that such rolling weekly cash flow projection is
based
upon estimates and assumptions all of which the Company believes to be
reasonable and fair in light of the conditions and facts known to the Company
as
of the date thereof and reflect the good faith estimate by the Company of the
working capital needs of the Company for such period;
(b)
on
Wednesday of each week, the Company shall deliver to the Lenders: (i) an
accounts receivable and accounts payable listing as of the close of business
of
the preceding week; (ii) collection reports for the preceding week; and (iii)
a
compliance report with respect to the rolling weekly cash flow projection for
the preceding week which includes a comparison of all categories in such
projection with actual levels of expenditures and revenues generated for the
preceding week together with an explanation of all variances from such
projection; and
(c)
no
later
than fifteen (15) days after the end of each month, the Company shall deliver
to
Lenders a report listing all projects of the Company and the profitability
/
loss of each such project as of the end of such month.
3. Principal
payments due under the Secured Term Notes on each of March 1, 2008, April 1,
2008, May 1, 2008 and June 1, 2008 shall not be required to be made with
principal payments resuming on July 1, 2008. Notwithstanding anything to the
contrary set forth in the Secured Term Notes, Section 2.1 of each Secured Term
Note shall be amended to provide that if the Company prepays fully (i) the
Secured Terms Notes, (ii) the Additional Secured Term Notes (as defined below)
and (iii) any other obligations in connection therewith within twelve (12)
months of the date hereof, the optional redemption rate set forth in Section
2.1
shall be reduced to one hundred five percent (105%).
4. No
later
than March 10, 2008, the Company shall receive proceeds of at least $1,500,000
from the issuance of preferred stock of the Company having a coupon not to
exceed eight percent (8%) per annum and having such other terms and conditions
acceptable to Lenders. The failure of the foregoing to occur shall constitute
an
Event of Default.
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5. In
consideration of the Lenders entering into this letter agreement, the Company
shall issue the Additional Term Notes (as defined below).
6. Each
reference to the term “Warrants” and “Warrant Shares” contained in the Purchase
Agreements shall include the Additional Warrants (as such term is defined below)
and shares of common stock of the Company to be issued to any Lender under
the
Additional Warrants (the “Additional
Warrant Shares”).
Each
representation, warranty and covenant relating to any Warrant and the Warrant
Shares contained in the Purchase Agreements shall apply as respects the
Additional Warrants and the Additional Warrant Shares as of the date of this
letter agreement and are true and correct as of the date of this letter
agreement.
7. The
notice address for each Lender contained in the Purchase Agreements and the
Related Agreements shall be changed to the notice address set forth below such
Lender’s signature page at the end of this letter agreement.
This
letter agreement shall become effective upon receipt by the Lenders, in form
and
substance satisfactory to Lenders of: (i) a Secured Term Note made by the
Company in favor of Valens US in the original principal amount of $48,983.58,
a
Secured Term Note made by the Company in favor of Valens Offshore in the
original principal amount of $66,602.06 and a Secured Term Note made by the
Company in favor of Laurus in the original principal amount of $634,414.36
(collectively, the “Additional
Secured Term Notes”);
(ii)
a Common Stock Warrant from the Company in favor of Laurus for 2,537,657 shares
of the Company’s common stock, a Common Stock Warrant from the Company in favor
of Valens US for 195,935 shares of the Company’s common stock and a Common Stock
Warrant from the Company in favor of Valens Offshore for 266,408 shares of
the
Company’s common stock (collectively, the “Additional
Warrants”);
(iii)
Registration Rights Agreements in favor of each Lender with respect to the
Additional Warrants (collectively, the “Additional
Registration Rights Agreements”);
(iv)
a Reaffirmation and Ratification Agreement duly executed by the Company; and
(v)
resolutions of the Company’s Board of Director approving and authorizing the
execution, delivery and performance of this letter agreement and all documents,
instruments and agreements to be executed and delivered in connection herewith
certified as of the date of this letter agreement by the Company’s corporate
secretary or an assistant secretary as being in full force and effect without
any modification or amendment.
The
parties hereto agree that the fair market value of the Additional Warrants
(as reasonably determined by the parties) received in consideration of the
consents and agreements made by Laurus under this letter agreement is hereby
designated as interest and, accordingly, shall be treated as a reduction of
the
remaining stated principal amount (which reduced principal amount shall be
treated as the issue price) of the Obligations for U.S. federal income tax
purposes under and pursuant to Treasury Regulation Sections 1.1001-3(e)(2)(iii),
1.1273-2(g)(2)(ii) and 1.1274-2(b)(1). The parties further agree to file all
applicable tax returns in accordance with such characterization and shall not
take a position on any tax return or in any judicial or administrative
proceeding that is inconsistent with such characterization. Notwithstanding
the
foregoing, nothing contained herein shall or shall be deemed to modify or impair
in any manner whatsoever the Obligations from time to time owing to Laurus
under the Purchase Agreements, the Secured Term Notes, the Additional
Secured Term Notes and the Related Agreement.
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The
Company hereby represents and warrants as follows:
(a) This
letter agreement, the Additional Secured Notes, the Additional Warrants, the
Additional Registration Rights Agreements, the Purchase Agreement and the
Related Agreements, as amended hereby, constitute legal, valid and binding
obligations of the Company and are enforceable against the Company in accordance
with their respective terms.
(b) Except
as
updated by the attached schedules, each of the representations and warranties
made by or on behalf of the Company and the Lenders in any of the Purchase
Agreements and the Related Agreements was true and correct when made and in
all
material respects is, to the extent not amended hereby, true and correct in
all
material respects on and as of the date of this letter agreement with the same
full force and effect as if each of such representations and warranties had
been
made by the Company on the date hereof and in this letter
agreement.
(c) Upon
the
effectiveness of this letter agreement, the Company hereby reaffirms all
covenants made in the Purchase Agreements and the Related Agreements to the
extent the same are not amended hereby and agree that all such covenants shall
be deemed to have been remade as of the effective date of this
letter.
(f) The
execution and delivery and performance of this letter agreement by the Company
will not conflict with or result in a breach of, or require any consent not
previously obtained under, the organization documents of the Company or any
applicable governmental rule or any agreement or instrument to which the Company
is a party or any of its property is bound or to which it is subject, or
constitute a default under, or result in the acceleration or mandatory
prepayment of, any indebtedness evidenced by or termination of any such
agreement or instrument or (except for the Liens created pursuant to the Related
Agreements) result in the creation or imposition of any Lien upon any property
of the Company pursuant to the terms of any such agreement or
instrument.
THIS
LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING
CONFLICTS OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
[REMAINER
OF PAGE INTENTIONALLY LEFT BLANK]
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This
letter agreement may be executed by the parties hereto in one or more
counterparts, each of which shall be deemed an original and all of which when
taken together shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
Very
truly yours,
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LAURUS
MASTER FUND, LTD.
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By:
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Laurus
Capital management, LLC, its
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investment
manager
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By:
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Name:
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Title:
Authorized Signatory
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Address
for Notice:
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c/o
Laurus Capital Management, LLC
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Attn:
Portfolio Services
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VALENS
U.S. SPV I, LLC
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By:
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Valens
Capital Management, LLC, its
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investment
manager
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By:
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Name:
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Title:
Authorized Signatory
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Address
for Notice:
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c/o
Valens Capital Management, LLC
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Attn:
Portfolio Services
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[ADDITIONAL
SIGNATURES FOLLOW]
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VALENS
OFFSHORE SPV I, LTD.
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By:
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Valens
Capital Management, LLC, its
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investment
manager
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By:
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Name:
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Title:
Authorized Signatory
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Address
for Notice:
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c/o
Valens Capital Management, LLC
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Attn:
Portfolio Services
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CONSENTED
AND AGREED TO:
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By:
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Title:
Chief Financial Officer
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