EXHIBIT 10.3
FIFTH AMENDMENT TO
LOAN AGREEMENT,
SECURED PROMISSORY NOTE
AND
SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO LOAN AGREEMENT, SECURED PROMISSORY NOTE AND
SECURITY AGREEMENT ("this Fifth Amendment"), is made and effective as of
February __, 2004 (the "Effective Date), by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), and
ADVANCED LIGHTING TECHNOLOGIES, INC. ("ADLT").
BACKGROUND
▇. ▇▇▇▇▇▇▇ and ADLT entered into a Loan Agreement dated as of
October 8, 1998 (the "Original Loan Agreement"), pursuant to which ADLT advanced
▇▇▇▇▇▇▇ $9,000,000 (the "Original Advance").
B. Pursuant to the Original Loan Agreement, the Original Advance
was evidenced by a Secured Promissory Note dated October 8, 1998 (the "Original
Note") and secured pursuant to (i) a Security Agreement dated as of October 8,
1998 (the "Original Security Agreement"), (ii) the Real Estate Mortgages
recorded as follows: June 30, 1999 Geauga County Ohio No 1245 page 39, June 30,
1999 Portage County Ohio No. 441 Page 202 and No. 441 Page 214, and August 24,
1999 ▇▇▇ County Florida Book 3160 Page 1096 (the "Mortgages"), (iii) the
Collateral Assignment of Contract dated as of October 8, 1998 (the
"Assignment"), and (iv) Allonge No. 2 to Promissory Note From ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
Inc. with delivery of the referenced note the (the "Karat Note").
C. Effective November 22, 2000, the Loan, the Note and the
Security Agreement were amended pursuant to the First Amendment to Loan
Agreement, Secured Promissory Note and Security Agreement ("First Amendment") to
provide for additional loans, up to a maximum additional principal amount of
$1,900,000, for the purpose of reducing the Margin Loans held by Bear ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇▇, the then current Margin Lenders, in satisfaction of
then-existing margin calls.
D. Effective March 15, 2001, the Loan, the Note and the Security
Agreement were amended pursuant to the Second Amendment to Loan Agreement,
Secured Promissory Note and Security Agreement ("Second Amendment") to provide
for additional loans, for the purpose of reducing the Margin Loans held by Bear
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇, in satisfaction of then-existing margin calls.
E. On March 15, 2001 and thereafter, Advanced Lighting made
Additional Advances pursuant to the Second Amendment in the aggregate principal
amount of $1,889,350.
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F. Effective April 25, 2002, the Loan, the Note and the Security
Agreement were amended pursuant to the Third Amendment to Loan Agreement,
Secured Promissory Note and Security Agreement ("Third Amendment") to prohibit
any pledge of shares of ADLT stock owned by ▇▇▇▇▇▇▇ without consent of ADLT as
long as the Loan was outstanding, to amend the interest rate payable on the Loan
and to provide adequate time for ▇▇▇▇▇▇▇ to pay the principal of, and interest
on, the Loan.
G. The Loan, the Note and the Security Agreement were amended
pursuant to the Fourth Amendment to Loan Agreement, Secured Promissory Note and
Security Agreement dated as of January 5, 2004 ("Fourth Amendment") to reflect
the Settlement Agreement, as defined below. The Original Loan Agreement, the
Original Note and the Original Security Agreement, each as amended by the First
Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment,
are referred to herein as the Loan Agreement, the Note and the Security
Agreement, respectively.
H. The Loan Agreement, the Note, the Security Agreement, the
Mortgages, the Assignment and the Karat Note are included in the "Loan
Documents" as defined in the Loan Agreement. For purposes of this Fifth
Amendment, the term "Loan Documents" also includes the First, Second, Third, and
Fourth Amendments, and the Settlement Agreement, as defined below. All initially
capitalized terms that are used but not defined herein have the meaning ascribed
to them in the Loan Documents.
▇. ▇▇▇▇▇▇▇ has demonstrated that the total value of his personal
assets is inadequate to satisfy the outstanding principal and interest on the
Loan and the other obligations secured by interests in his assets with priority
over the security interests of ADLT. ADLT has, in accordance with generally
accepted accounting principles, recognized this situation by impairing, from
time to time, the value of the Loan on the balance sheet of ADLT. ▇▇▇▇▇▇▇ has
advised ADLT, and ADLT's bankruptcy counsel has confimed, that ADLT would not
recover an amount in excess of the value of ▇▇▇▇▇▇▇'▇ assets, less the amount
obligations secured by security interests senior to ADLT's interests (to the
extent of the value of the property securing such obligations), if ▇▇▇▇▇▇▇ were
to file a bankruptcy proceeding. In recognition of (i) the difficulty and cost
of instituting a collection proceeding against ▇▇▇▇▇▇▇, (ii) the complexity of
such a proceeding, (iii) the fact that such proceeding would likely be followed
by a bankruptcy petition by ▇▇▇▇▇▇▇, and (iv) that the costs entailed in any
such proceeding would reduce the amounts available to ADLT for satisfaction of
the Loan, the independent members of the board of directors of ADLT determined
it to be in the best interests of ADLT to enter into the Fourth Amendment to
resolve these issues concurrently with the emergence of ADLT from its bankruptcy
proceedings and the independent members of the board of directors of ADLT
established following emergence from its bankruptcy proceedings have detemined
it to be in the best interests of ADLT to enter into this Fifth Amendment to
correct the Designated Amount, as defined in the Settlement Amendment.
J. On February 5, 2003, ADLT and various of its affiliates
(collectively, the "Debtors") each filed a voluntary petition for relief under
chapter 11 of title 11 of the
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United States Code. The Debtors' bankruptcy cases are jointly administered in
the United States Bankruptcy Court for the Northern District of Illinois,
Eastern Division (the "Bankruptcy Court") under Case ▇▇. ▇▇ ▇ ▇▇▇▇▇.
▇. ▇▇▇▇▇▇▇, ADLT and Saratoga Lighting Holdings LLC ("Saratoga")
have entered into that certain Settlement Agreement dated as of January 5, 2003
(the " Original Settlement Agreement"), and that certain First Amendment to
Settlement Agreement of even date herewith (the "Settlement Amendment"; the
Original Settlement Agreement and the Settlement Amendment are hereinafter
referred to collectively as the "Settlement Agreement"), following approval of
separate orders by the Bankruptcy Court pursuant to separate motions by ADLT for
authority to enter into the Original Settlement Agreement and the Fourth
Amendment and to enter into the Settlement Amendment and this Fifth Amendment .
AGREEMENT
NOW THEREFORE, as an inducement to and in consideration of the
agreement by ADLT to eliminate the outstanding interest on and to reduce the
outstanding principal of the Loan and the other agreements made herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the express approval by the Bankruptcy Court
of this Fifth Amendment, ▇▇▇▇▇▇▇ and ADLT agree as follows:
1. The Loan Agreement is hereby amended to provide that the
principal amount of the Loan is reduced to the Designated Amount as set forth on
Exhibit 6 to this Fifth Amendment, which Exhibit 6 is amended by this Fifth
Amendment to reflect the Designated Amount in the Settlement Agreement, as
amended by the Settlement Amendment (the "Designated Amount"). The parties
expressly acknowledge that the effectiveness of this Fifth Amendment is subject
to approval by the Bankruptcy court and that it will not be valid or enforceable
againxt any party absent such approval.
2. ▇▇▇▇▇▇▇ acknowledges and agrees that (i) (a) the Security
Interest granted in the Security Agreement, (b) the liens granted in the
Mortgages, (c) the rights of ADLT under the Assignment and Karat Note and (d)
all other rights and instruments that now or hereafter secure the Loan and
▇▇▇▇▇▇▇'▇ Obligations with respect thereto, secure the Additional Advances as
amounts advanced to ▇▇▇▇▇▇▇ under the Loan Documents, (ii) the aggregate
outstanding principal amount of the Loan and Additional Advances prior to the
effect of the Fourth Amendment was $12,789,350 and (iii) in addition to, and
without limiting the descriptions of Collateral contained in any of the Loan
Documents, the Collateral includes all choses in action in which ▇▇▇▇▇▇▇ is
directly or indirectly the plaintiff and the proceeds from all choses in action,
and ▇▇▇▇▇▇▇ shall immediately notify ADLT of any such choses in action and take
all necessary action to enable ADLT to perfect its interest in such choses in
action. ▇▇▇▇▇▇▇ expressly acknowledges, agrees and reaffirms the validity and
enforceability of all of the Loan Documents as modified by this Fifth Amendment
and the Settlement Agreement, and waives any and all defenses that he has
asserted or could assert to defeat ADLT's right to enforce the Loan Documents,
as so modified.
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3. ▇▇▇▇▇▇▇ represents and warrants to ADLT that on the date
hereof (i) he is not in breach of any covenant in any Loan Document, (ii) all
representations and warranties in the Loan Documents are true and correct except
as has been disclosed to ADLT in writing, (iii) that the assets included in the
calculation of the Designated Amount, a description of which has been provided
to the ADLT Board of Directors and their advisors, constitute all of his assets
available for the payment of the Loan on the Effective Date and (iv) that
▇▇▇▇▇▇▇ has no reason to believe that the valuation of such assets used in the
calculation of the Designated Amount is not correct in all material respects and
confirms his representations in Paragraph 5 of the Original Settlement
Agreement.
4. ▇▇▇▇▇▇▇ acknowledges and agrees that he shall not directly or
indirectly, in one or a series of transactions, obtain loans directly or
indirectly secured by the Margin Shares, until the Loan and Additional Advances,
together with all accrued interest thereon, shall have been paid in full,
without the prior written consent of the ADLT Board of Directors or its
designee(s).
5. ▇▇▇▇▇▇▇ acknowledges and agrees that he will make immediate
payments of the outstanding principal and interest on the Loan in the amount of
(i) the after-tax proceeds of any bonuses payable by ADLT or any affiliate,
which after-tax proceeds will be subject to an express right of offset by ADLT,
(ii) the after-tax proceeds of any sales of any and all Collateral and any other
amounts received by ▇▇▇▇▇▇▇ in respect of such Collateral and (iii) the
after-tax proceeds of any Margin Shares.
6. ▇▇▇▇▇▇▇ acknowledges and agrees that he will use his best
efforts to sell such items of Collateral as may be designated by the Board of
Directors, or its designee(s), from time to time, provided that, unless ▇▇▇▇▇▇▇
shall be in default of his prepayment obligations pursuant to paragraph 5 of
this Fifth Amendment or his obligations to sell Collateral pursuant to this
paragraph 6, the Board of Directors may not require the sale of the residence
located in ▇▇▇ County, Florida. Nothing in this paragraph 6 shall prevent ADLT
from exercising any and all of its rights under its Mortgage on such Florida
property, in accordance with the terms of such mortgage, in the event of a
default by Hellman on any obligations under the Loan Documents or in case any
voluntary or involuntary case in bankruptcy filed by or against ▇▇▇▇▇▇▇.
7. ▇▇▇▇▇▇▇ agrees that to the extent ▇▇▇▇▇▇▇'▇ interests in and
to (a) H&F V LLC, (b) the proceeds from his settlement with Prudential of
approximately $1,354,000 and (c) his rights under a loan owed to ▇▇▇▇▇▇▇ by
▇▇▇▇▇ ▇▇▇▇ have not occurred prior to the effective date of this Fifth
Amendment, ▇▇▇▇▇▇▇ will promptly take all steps reasonably necessary to effect
the transfers of such interests.
8. ▇▇▇▇▇▇▇ will take all actions and execute all instruments as
requested by ADLT , in order to perfect, and keep perfected, all liens in any of
the Collateral granted to ADLT, including in any after acquired Collateral and
to perfect rights with respect to the Additional Advances.
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9. This Fifth Amendment shall be governed by and construed in
accordance with the laws of Ohio without regard to conflict of laws principles
(except to the extent the Collateral is situated in a state other than Ohio and
in that case any laws of such state which are required to control mortgages
granted on such property shall apply).
10. This Fifth Amendment inures to the benefit of and is binding
upon ▇▇▇▇▇▇▇, and his estate, heirs, executors, administrators and personal
representatives, successors and assigns and ADLT and its successors and assigns.
▇▇▇▇▇▇▇ may not assign or delegate this Amendment, any Loan Document or any of
his rights or obligations thereunder.
11. This Fifth Amendment may be executed in any number of
counterparts, each of which shall be regarded as an original and all of which
shall constitute but one and the same instrument; it shall not be necessary in
proving this Agreement to produce or account for more than one such counterpart.
A faxed executed counterpart of this Amendment will be considered an original
for evidentiary purposes.
12. This Fifth Amendment only modifies the Loan Documents to the
extent provided for herein, and the Loan Documents otherwise remain in full
force and effect without interruption. This Fifth Amendment may not be amended,
changed, modified, altered or terminated and no performance may be waived except
in writing executed by both parties.
13. This Fifth Amendment and the Loan Documents, including,
without limitation, the Settlement Agreement, constitute the entire agreement
between the parties with respect to the Loan Documents and all prior and
contemporaneous agreements or discussions, written or oral, with respect thereto
have no force or effect whatsoever. If any amendment of the terms of the Loan
Documents contained in this Fifth Amendment shall be contrary to applicable law,
such amendment shall be of no force or effect and the Loan Documents shall
remain in full force and effect without any such amendment.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇ and ADLT have caused this Fifth Amendment
to be duly executed and delivered as of the Effective Date.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
ADVANCED LIGHTING TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Its : Executive Vice President and Treasurer
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EXHIBIT 6
DESIGNATED AMOUNT
The Designated Amount as determined by the Independent Directors and set forth
in Settlement Agreement is $4,023,500.00.
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