AMENDMENT NO. 3 TO CONSENT TO SUPPLEMENTAL LOAN UNDER LOAN AND SECURITY AGREEMENT
AMENDMENT
NO. 3 TO CONSENT TO SUPPLEMENTAL LOAN
As
of
July 24, 2007
JACO
ELECTRONICS, INC.
000
Xxxx
Xxxxxx
Xxxxxxxxx,
Xxx Xxxx 00000
Ladies
and Gentlemen:
The
CIT
Group/Business Credit, Inc. (“CIT”), in its capacity as agent pursuant to
the Credit Agreement (as hereinafter defined) acting for and on behalf of the
financial institutions which are parties thereto as lenders (in such capacity,
“Agent”), and the financial institutions which are parties to the Credit
Agreement as lenders (each a “Lender” and collectively, “Lenders”)
have entered into certain financing arrangements pursuant to which Agent and
Lenders may make loans and advances and provide other financial accommodations
to Jaco Electronics, Inc., a New York corporation, and Interface Electronics
Corp., a Massachusetts corporation (collectively, the “Borrowers”) as set
forth in the Credit Agreement, dated as of December 22, 2006, by and among
the
Borrowers, Agent and Lenders (as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, the
“Credit Agreement”), and other agreements, documents and instruments
referred to therein or at any time executed and/or delivered in connection
therewith or related thereto (all of the foregoing, together with the Credit
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the “Loan Documents”).
Agent
and
Borrowers executed a Consent to Supplemental Loan Under Loan and Security
Agreement dated March 5, 2007(as amended, the “Consent”), pursuant to which
Agent and Lenders agreed to extend to Borrowers a Supplemental Loan (as defined
in the Consent).
The
Borrowers have requested that the Agent and Required Lenders agree to various
amendments to the Consent, and Agent and Required Lenders are agreeable to
all
of the foregoing, on and subject to the terms and conditions set forth in this
Amendment No. 3 to Consent to Supplemental Loan under Loan and Security
Agreement (this “Amendment”).
In
consideration of the premises and the mutual covenants contained herein and
in
the Credit Agreement and the Consent, the parties hereto agree as
follows:
1. Defined
Terms
. Capitalized
terms used and not otherwise defined herein shall have their respective meanings
as defined in the Loan Agreement and the Consent.
2. Amendments
to Consent
. Sections
2.1, 2.2 and 2.3 of the Consent are hereby amended and restated in its entirety
as follows:
“2.1 Consent
to Supplemental Loan. Agent, for the sole account of The CIT
Group/Business Credit, Inc. (“CIT”), as a Lender, hereby consents to extend to
Borrowers a Supplemental Loan under the Loan Agreement (but in no event shall
the Revolving Loans plus the Supplemental Loan exceed the Revolving Commitment)
in an amount equal to $3,000,000 beginning on the date hereof and continuing
up
to April 1, 2009 (the “Supplemental Loan Repayment Date”). If the
Supplemental Loan is not repaid in full by the Supplemental Loan Repayment
Date
or if the Borrowers fail to make any payment required to be made under Section
2.3 below, Borrowers acknowledge, confirm and agree that any such event shall
constitute an Event of Default under the Loan Agreement. The
Supplemental Loan shall be for the sole account of CIT.
2.2 Interest
on Supplemental Loan. Interest shall accrue on the Supplemental
Loan at a rate equal to the LIBO Rate plus five percent (5%), and shall be
paid
in accordance with the terms of the Loan Agreement.
2.3 Repayment
of Supplemental Loan.
(a) The
Supplemental Loan shall be repaid in seven (7) quarterly installments as
follows:
(i) The
first (1st)
installment shall be payable on October 1, 2007 in the amount of
$300,000;
(ii) The
second (2nd)
installment shall be payable on January 1, 2008 in the amount of
$300,000;
(iii) The
third (3rd)
installment shall be payable on April 1, 2008 in the amount of
$400,000;
(iv) The
fourth (4th)
installment shall be payable on July 1, 2008 in the amount of
$500,000;
(v) The
fifth (5th)
installment shall be payable on October 1, 2008 in the amount of
$500,000;
(vi) The
sixth (6th)
installment shall be payable on January 1, 2009 in the amount of $500,000;
and
(vii) The
seventh (7th)
and last installment shall be payable on April 1, 2009 in the amount of
$500,000.
(b) In
addition to the scheduled installment payments as set forth in Section 2.3(a)
above, Borrowers shall make the following mandatory prepayments in respect
of
the Supplemental Loan:
(i) For
Borrowers’ Fiscal Year ending June 30, 2008 and for each fiscal year thereafter,
Borrowers’ shall make a mandatory prepayment in respect of the Supplemental Loan
in an amount equal to fifty percent (50%) of Excess Cash Flow (as defined in
Section 2.3(b)(iii) below for each such Fiscal Year payable upon delivery of
the
annual financial statements required to be delivered under Section 5.01(a)
of
the Loan Agreement (the “Audited Financial Statements”), but in any
event not later than one hundred (100) days after the end of each such Fiscal
Year (the “50% Excess Cash Flow Mandatory Prepayment”). The 50%
Excess Cash Flow Mandatory Prepayment shall be applied by Agent, for the account
of the CIT, pro rata, against the principal installments of the Supplemental
Loan in the inverse order of maturity thereof. The Borrowers’
obligation to remit to Agent, for the account of CIT, any prepayments in respect
of Excess Cash Flow shall terminate upon payment in full of the Supplemental
Loan; and
(ii) Borrowers
shall remit to Agent, for the benefit of CIT, and as a mandatory prepayment
in
respect of the Supplemental Loan, the net proceeds received by Borrowers (the
“Designated Inventory Proceeds”) from the sale or disposition of the Designated
Inventory (as defined below). The Designated Inventory Proceeds shall
be remitted to Agent, promptly upon receipt by the Borrowers, but no less
frequently than monthly, and shall be applied by Agent, for the account of
the
CIT, pro rata, first, against the outstanding principal installments of the
Supplemental Loan in the inverse order of maturity thereof, and second, the
other Obligations as provided under the Loan Agreement.
(iii) As
used in this Section 2.3(b):
(A) “Excess
Cash Flow” shall mean, for any Fiscal Year, the sum for such Fiscal Year of: (1)
EBITDA; minus (2) (w) Capital Expenditures made in cash by the Borrowers and
their Subsidiaries not in excess of the amounts permitted by the Agreement;
plus
(x) all prepayments and repayments of the Supplemental Loans; plus
(y) all income taxes actually paid in cash during such Fiscal Year by the
Borrowers and their Subsidiaries; plus (z) Interest Expense paid in cash;
and
(B) “Designated
Inventory” shall mean the Inventory set forth on Schedule A annexed to Amendment
No. 3 to Consent to Supplemental Loan under Loan and Security Agreement among
Borrowers, Lenders and Agent dated as of July 24, 2007.
(c) The
prepayment of the Supplemental Loan, in whole or in part, shall be without
premium or penalty.”
3. Increase
in the Availability Block under Loan Agreement
. So
long as the Supplemental Loan remains outstanding, notwithstanding anything
to
the contrary contained in the Loan Agreement, the Availability Block shall
be
increased from $500,000 to $750,000 or such lesser amount as Agent, in its
Permitted Discretion, shall determine. After payment in full of the
Supplemental Loan, the Availability Block shall be as set forth in the Loan
Agreement as in effect on the date hereof.
4. Amendment
to Waterfall under Loan Agreement
. So
long as the Supplemental Loan remains outstanding, notwithstanding anything
to
the contrary contained in Section 7.02 of the Loan Agreement, after (a) an
Event
of Default has occurred and is continuing and the Agent so elects or the
Required Lenders so direct and (b) the exercise of remedies provided for in
Article VII of the Loan Agreement (or after the Loans have automatically become
immediately due and payable and the Letter of Credit Obligations have
automatically been required to be cash collateralized as set forth in Section
7.01), any amounts received on account of the Obligations shall be applied
by
the Agent in the following order:
first,
to pay any fees, indemnities, expense reimbursements or other Obligations then
due to the Agent in its capacity as such,
second,
to pay all amounts then due and payable to the Agent on account of Protective
Advances,
third,
to pay all amounts then owed to the Swingline Lender on account of Swingline
Loans,
fourth,
to ratably pay all amounts owed to the Issuing Bank(s) on account of Letter
of
Credit Obligations,
fifth,
to ratably pay all interest and fees owed on account of the Revolving Loans
(other than the Supplemental Loan),
sixth,
to ratably pay all principal amounts of the Revolving Loans (other than the
Supplemental Loan) then outstanding,
seventh,
to provide cash collateral for any outstanding Letters of Credit,
eighth,
to ratably pay all interest and fees owed on account of the Supplemental
Loan,
ninth,
to ratably pay all principal amounts of the Supplemental Loan then
outstanding,
tenth,
to ratably pay any other expense reimbursements or other Obligations then due
and payable to the Lenders (other than with respect to Banking Services
Obligations and Swap Obligations), and
eleventh,
to ratably pay of any amounts owing by the Borrowers with respect to Banking
Services Obligations and Swap Obligations.
The
Agent
and the Lenders shall have the continuing and exclusive right to apply and
reverse and reapply any and all such proceeds and payments to any portion of
the
Obligations owing to the Agent and Lenders.
After
payment in full of the Supplemental Loan, any amounts received on account of
the
Obligations shall be as set forth in Section 7.02 of the Loan Agreement as
in
effect on the date hereof.
5. Amendment
Fee. In addition to any other fees payable under the
Loan Agreement, in consideration of the Supplemental Loan provided for
hereunder, Borrowers shall jointly and severally pay to Agent, for the sole
account of The CIT Group/Business Credit, Inc., an amendment fee in
the amount of $25,000. The amendment fee shall be fully earned and
payable as of the date hereof and may be charged by Agent to any account of
Borrowers maintained by Agent.
6. Representations,
Warranties and Covenants
. Each
of the Borrowers represents, warrants and covenants with and to Agent and
Lenders as follows, which representations, warranties and covenants are
continuing and shall survive the execution and delivery hereof, the truth and
accuracy of, or compliance with each, together with the representations,
warranties and covenants in the other Loan Documents, being a condition of
the
effectiveness of this Amendment and a continuing condition of the making or
providing of any Loans or other financial accommodations by Agent and Lenders
to
the Borrowers:
(a) This
Amendment has been duly authorized, executed and delivered by all necessary
action of each of the Borrowers and is in full force and effect, and the
agreements and obligations of each of the Borrowers contained herein constitute
legal, valid and binding obligations of each of the Borrowers, enforceable
against each of the Borrowers in accordance with their terms; and
(b) All
of
the representations and warranties set forth in the Credit Agreement, as amended
hereby, and in the other Loan Documents, are true and correct in all material
respects after giving effect to the provisions of this Amendment, except to
the
extent any such representation or warranty is made as of a specified date,
in
which case such representation or warranty shall have been true and correct
as
of such date.
7. Conditions
Precedent
. This
Amendment shall not become effective unless all of the following conditions
precedent have been satisfied in full, as determined by Agent:
(a) Agent
shall have received an original of this Amendment (or an executed copy hereof
by
facsimile or by email), duly authorized, executed and delivered by each of
the
Borrowers;
(b) Agent
shall have received the amendment fee payable under Section 5 above;
and
(c) Agent
shall have received all related agreements, documents and instruments as may
be
requested by Agent.
8. No
Other Changes
. Except
as specifically modified pursuant hereto, no other changes or modifications
to
the Consent are intended or implied and in all other respects, the Consent
and
other Loan Documents are hereby ratified, restated and confirmed by all parties
hereto as of the date hereof. To the extent of any conflicts between
the terms of this Amendment and the Consent, the terms of this Amendment shall
control.
9. Successors
and Assigns
. This
Amendment shall be binding upon and inure to the benefit of each of the parties
hereto and its respective successors and assigns.
10. Counterparts
.
This Amendment may be executed in any number of counterparts, but
all
of such counterparts shall together constitute but one and the same
agreement.
11. Required
Lender Authorization
. Agent
is executing this Amendment at the request and on behalf of Required Lenders
in
accordance with Section 9.03 of the Credit Agreement.
[SIGNATURE
PAGE FOLLOWS]
Very
truly yours,
By:
/s/
Xxxxxx Xxxxx
XxXxxxxx
Name:
Xxxxxx Xxxxx
XxXxxxxx
Title: Vice
President
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Read
and Agreed to:
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JACO
ELECTRONICS, INC.
|
By:
/s/ Xxxxxxx X.
Xxxx
Name: Xxxxxxx
X.
Xxxx
Title: CFO
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INTERFACE
ELECTRONICS CORP.
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By:
/s/ Xxxxxxx X.
Xxxx
Name: Xxxxxxx
X.
Xxxx
Title: CFO
Acknowledged
and Agreed to:
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BANK
OF AMERICA, N.A., as a
Lender
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By:
/s/ Xxxxxx
Xxxxxxx
Name: Xxxxxx
Xxxxxxx
Title: Sr.
Vice
President
THE
CIT GROUP/BUSINESS CREDIT, INC., as a Lender
By:
/s/
Xxxxxx Xxxxx
XxXxxxxx
Name:
Xxxxxx Xxxxx
XxXxxxxx
Title: Vice
President
Schedule
A
Designated
Inventory
See
Attached
