SECOND AMENDMENT TO REVOLVING LOAN AGREEMENT,
PROMISSORY NOTE AND OTHER LOAN DOCUMENTS
THIS AGREEMENT made as of this 29th day of September 2006 between SYNERGX
SYSTEMS INC. ("Borrower"), a corporation organized and existing pursuant to the
laws of the State of Delaware, having an address at 000 Xxxxxxxxx Xxxxx,
Xxxxxxx, Xxx Xxxx 00000, and TD BANKNORTH, N.A., successor by merger to XXXXXX
UNITED BANK ("Lender"), a New Jersey corporation, with a place of business at
0000 XxxXxxxxx Xxxxxxxxx, Xxxxxx, Xxx Xxxxxx 00000.
W I T N E S S E T H:
WHEREAS:
A. Borrower entered into a revolving loan agreement with Xxxxxx United Bank
("Xxxxxx") on October 9, 2003 and pursuant to such revolving loan agreement,
Borrower executed and delivered to Lender its promissory note in the original
principal amount of THREE MILLION AND NO/100 (3,000,000.00) DOLLARS (the
Revolving Note);
B. Borrower subsequently requested that Xxxxxx continue to provide financing
under the Revolving Loan and otherwise modify the terms and conditions of the
aforementioned revolving loan agreement;
C. Lender agreed to continue to provide financing under the Revolving Loan and
to otherwise modify certain other terms and conditions of the aforementioned
revolving loan agreement strictly in accordance with the terms and conditions of
a first amendment to revolving loan agreement, promissory note and other loan
documents dated April 11, 2005 (the revolving loan agreement dated October 9,
2003 as amended by the first amendment to revolving loan agreement, promissory
note and other loan documents dated April 11, 2005 are hereinafter collectively
referred to as, the "Loan Agreement");
D. Borrower has now requested that Lender extend the maturity date of the
Revolving Loan and the Revolving Note, release General Sound (Texas) Company
from its guaranty of the obligations of Borrower to Lender and make certain
other modifications and changes to the terms and conditions of the Loan
Agreement; and
E. Lender has agreed to extend the maturity date of the Revolving Loan and the
Revolving Note, to release General Sound (Texas) company from its guaranty of
the obligations of Borrower to Lender and to make certain other modifications
and changes to the terms and conditions of the Loan Agreement strictly as set
forth in this Agreement.
NOW THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned hereto agree as follows:
1. Section 1.24 of the Loan Agreement is deleted in its entirety and replaced
with the following:
"1.24 "Guarantor" shall mean Xxxxx Systems Inc. and any other Person who
shall, at any time, agree to be a guarantor surety for Borrower."
2. Section 1.28 of the Loan Agreement is amended to read as follows:
"1.28 "Loan Interest Rate" shall mean the Prime Rate plus one-quarter of
one (1/4) percent per annum until January 31, 2006 and thereafter the "Base
Rate" (as hereinafter defined) of Lender plus one-quarter of one (1/4) percent
per annum. The "Base Rate" shall mean the fluctuating rate of interest announced
from time to time by Lender as its "Base Rate." Any interest that has the Base
Rate as a factor will change immediately upon Lender's announcement of its new
rate. The Base Rate is not necessarily the lowest rate charged by Lender on its
loans and is set by Lender in its sole discretion. If the Base Rate index
becomes unavailable during the term of the Loan, Lender may designate a
substitute index. Interest shall be computed by the Bank on the basis of actual
days elapsed, divided by a 360-day year."
3. Section 1.39 of the Loan Agreement is amended to read as follows:
"1.39. "Prime Rate" means the fluctuating rate of interest, which is
determined periodically, announced from time to time by Xxxxxx United Bank as
its "Prime Rate."
4. Section 1.45 of the Loan Agreement is amended to read as follows:
"1.45 "Termination Date" shall mean the earlier of January 31, 2008, or the
date on which Lender terminates this Agreement pursuant to Section 12.1 of this
Agreement."
5. Section 14.3 of the Loan Agreement is amended by changing the name and
address for notice to Lender to read as follows:
"If to Lender: TD Banknorth, N.A.
0000 XxxXxxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxxx
Senior Vice President
Tel: (000)000-0000
Fax: (000)000-0000"
6. Section 9.19 of the Loan Agreement is amended to read as follows:
"9.19. Effective Tangible Net Worth. Permit Borrower's Effective Tangible
Net Worth, to be tested quarterly, to be less than:
Amount Time Period
$5,232,000.00* September 29, 2006 to
January 31, 2008
*which number shall increase effective as of September 30, 2006
and each fiscal year thereafter by an amount equal to
twenty-five (25) percent of Borrower's net profit as set forth
in the financial statements referred to in Article 6."
7. Section 9.20 of the Loan Agreement is amended to read as follows:
"9.20. Debt to Effective Tangible Net Worth. Cause, suffer or permit
Borrower's Debt to Effective Tangible Net Worth Ratio for the period set forth
below to be greater than the levels set forth below, tested quarterly:
Ratio Time Period
1.5 to 1.0 October 2003 to
January 31, 2008"
8. The Loan Agreement is further amended by adding a new Section 9.21 to read as
follows:
"9.21 Debt Service Coverage Ratio. Cause, suffer or permit Borrower's Debt
Service Coverage Ratio (as hereinafter defined) to be less than 1.20 to 1.0,
tested annually commencing September 30, 2006. Debt Service Coverage Ratio is
defined as net income plus depreciation plus amortization expense plus interest
expense less distribution to shareholders and unfinanced capital expenditures to
the current maturities of long term debt plus capital leases payments and
interest payments."
9. Borrower acknowledges that in the event Lender agrees to renew the Revolving
Loan beyond the Termination Date of the Revolving Loan, Lender reserves the
right to impose revised, new and/or additional financial covenants relating to
the Revolving Loan.
10. Borrower has provided satisfactory proof to Lender that General Sound
(Texas) Company has been sold. Upon execution of this Agreement by Borrower,
Lender will release General Sound (Texas) Company from its guaranty of the
Obligations of Borrower to Lender and release any security interest granted by
such entity in favor of Lender. Upon execution of this Agreement by Borrower,
Lender undertakes to discharge all UCC-1 financing statements that have been
filed against the assets of such entity by Lender.
11. In order to induce Lender to continue to provide financing under the
Revolving Loan and to extend the revolving credit facility, Borrower represents
and warrants to Lender that since June 30, 2006, there has been (1) no material
adverse change in the financial condition, assets, liabilities, business or
operation (financial or otherwise) of Borrower or any Guarantor, other than the
financial conditions and business of General Sound (Texas) Company; and (2) no
damage, destruction or loss of any of Borrower's or any Guarantor's property,
whether or not covered by insurance, materially and adversely affecting
Borrower's or any Guarantor's business or property.
12. In order to induce Lender to continue to provide financing under the
Revolving Loan and extend the revolving credit facility, Borrower shall have
paid to Lender on or before the date of this Agreement a Three Thousand and
00/100 (3,000.00) Dollar commitment and closing fee, receipt of which is
confirmed.
13. In order to induce Lender to enter into this Agreement, and pursuant to the
existing terms and conditions of the Loan Agreement, Borrower acknowledges that
it is responsible for all fees, disbursements and expenses incurred by Lender
including, without limitation, all legal fees and disbursements incurred by
Lender in connection with the obligations of Borrower and/or any guarantor to
Lender.
14. Any reference in any document executed and/or delivered in connection with
the Loan Agreement to the "Agreement" or the "Loan Agreement" shall mean the
revolving loan agreement dated October 9, 2003 as amended by the first amendment
dated April 11, 2005 and this Agreement. All of the provisions of the Revolving
Note, the Loan Agreement and the other Loan Documents (as hereinafter defined)
are amended so that such terms shall be consistent with the provisions of this
Agreement. Notwithstanding the foregoing, and to the extent that there is any
inconsistency between the provisions of those agreements and this Agreement, the
provision which gives Lender the greatest rights or protection shall govern
except as specifically modified by this Agreement.
15. Lender's agreement to continue to provide financing under the Revolving
Loan, to release General Sound (Texas) Company from its guaranty of the
obligations of Borrower to Lender and to otherwise modify the terms and
conditions of the Loan Agreement and the other Loan Documents is not and shall
not be construed as a waiver of any current or future default under the
Revolving Note, the Loan Agreement or any other document executed and/or
delivered in connection with the Revolving Note or the Loan Agreement
(collectively, the "Loan Documents"), nor shall it preclude Lender from
proceeding against Borrower on any such default. This Agreement is also not a
relinquishment of any rights or remedies Lender may have in connection with the
Revolving Note, the Loan Agreement or any other Loan Document.
16. As a material condition to Lender entering into this Agreement, Borrower and
the Guarantor, by executing this Agreement voluntarily and expressly waive any
and all rights to assert a claim, counterclaim or defense which now exists
against Lender arising out of or in any way connected with the Revolving Note,
the Loan Agreement, or any other Loan Document. The foregoing waiver shall apply
to any action instituted by any of the undersigned and to any action or
proceeding brought against any of the undersigned by Lender.
17. Borrower and the Guarantor by executing this Agreement acknowledges that
there is due and owing on the Revolving Note as of September 29, 2006 the
principal sum of $922,428.96 which sum is not subject to any defense,
counterclaim or set-off.
18. Borrower and the Guarantor by executing this Agreement confirm that all of
the representations and warranties set forth in the Loan Agreement are true and
correct, and that all covenants of Borrower described therein have been
performed. As of the date hereof, there have been no changes to the information
set forth in Schedules 5.2, 5.3, 5.8, 5.9, 5.13, 5.14, 5.15, 5.16, 5.17, 5.18
and 5.23 of the Loan Agreement, copies of which are annexed hereto except as set
forth in such schedules.
19. BORROWER AND THE GUARANTOR BY EXECUTING THIS AGREEMENT ACKNOWLEDGES THAT IT
HAS HAD A FULL AND FAIR OPPORTUNITY TO REVIEW THIS AGREEMENT AND THE DOCUMENTS
REFERRED TO HEREIN WITH COUNSEL OF ITS CHOICE AND THAT IT HAS BEEN ADVISED AS TO
THEIR TERMS AND CONDITIONS, WHICH ARE ACCEPTABLE TO IT. FURTHER, BORROWER AND
THE GUARANTOR CONFIRMS THAT IN DELIVERING THIS AGREEMENT TO LENDER, IT IS NOT
RELYING ON ANY PROMISE, COMMITMENT, REPRESENTATION OR UNDERSTANDING, EITHER
EXPRESS OR IMPLIED, MADE BY OR ON BEHALF OF LENDER THAT IS NOT EXPRESSLY SET
FORTH HEREIN, OR IN THE LOAN AGREEMENT, THE REVOLVING NOTE, OR ANY OTHER LOAN
DOCUMENT. BORROWER AND THE GUARANTOR BY EXECUTING THIS AGREEMENT ACKNOWLEDGE AND
UNDERSTAND THAT ALL OBLIGATIONS UNDER THE REVOLVING NOTE ARE DUE AND PAYABLE ON
THE TERMINATION DATE, UNLESS LENDER IN ITS SOLE AND ABSOLUTE DISCRETION EXTENDS
THE MATURITY DATE OF SUCH OBLIGATION AND THAT LENDER HAS NOT MADE ANY
REPRESENTATION THAT IT WILL EXTEND THE MATURITY DATE OF SUCH OBLIGATIONS.
20. Borrower acknowledges that discussions may take place between itself and
Lender concerning additional modifications of the Revolving Note and the Loan
Agreement after the date hereof. Lender in its sole and absolute discretion may
terminate any such discussions at any time and for any reason or no reason and
Lender shall have no liability for failing to engage in or terminating any such
discussions. While the parties hereto may reach preliminary agreement as to the
modification of one or more provisions of the Loan Agreement and/or the
Revolving Note, none of the undersigned shall be bound by any agreement on any
individual point until agreement is reached on every issue and the agreement on
all such issues has been reduced to a written agreement signed by Lender and
Borrower. Further, the Loan Agreement may only be amended by a written agreement
executed by Borrower and Lender and no negotiations or other actions undertaken
by Lender shall constitute a waiver of Lender's rights under this Agreement
and/or the Revolving Note except to the extent specifically set forth in a
written agreement complying with the provisions of this paragraph.
21. This document may be executed in one or more counterparts and all such
documents taken together shall be considered one original document.
IN WITNESS WHEREOF, the undersigned have executed this Agreement the day
and year first above written.
WITNESS: SYNERGX SYSTEMS INC.
by
------------------------- ---------------------------------------
Xxxx X. Xxxxxxxx Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
WITNESS: TD BANKNORTH, N.A.
by
----------------------------- ------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: Senior Vice President
The undersigned guarantor of performance and payment do hereby approve
all of the terms of this Agreement, does hereby approve the execution and
delivery of this Agreement and does hereby acknowledge and confirm its
continuing liability and responsibility to TD Banknorth, N.A., successor by
merger to Xxxxxx United Bank with respect to the debts referred to in this
Agreement and the Loan Agreement including, without limitation, advances in
connection with the Revolving Note.
WITNESS: Xxxxx Systems, Inc.
______________________ by___________________________
Xxxxxx X. Xxxxxx Xx Xxxxxx, President
