EXHIBIT 4(a)
SECOND AMENDMENT TO REVOLVING LOAN AGREEMENT,
PROMISSORY NOTE AND OTHER LOAN DOCUMENTS
AGREEMENT, made this 5th day of May 2005 (this "Agreement") between
XXXXXX, INC. ("Borrower"), a corporation organized and existing pursuant to the
laws of the State of Delaware, having an address at 000 00xx Xxxxxx, Xxxx Xxx
Xxxx, Xxx Xxxxxx 00000 (hereinafter referred to as, "Borrower") and XXXXXX
UNITED BANK, a New Jersey corporation, (hereinafter referred to as, "Bank"),
located 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 Bank on
December 23, 2002 and pursuant to such revolving loan agreement, Borrower
executed and delivered to Bank its promissory note in the original principal
amount of THIRTY-TWO MILLION AND 00/100 (32,000,000.00) DOLLARS dated December
23, 2002 (the "Revolving Note");
B. Borrower subsequently requested that Bank increase the amount of
funds available under the Revolving Loan from "THIRTY-TWO MILLION AND 00/100
(32,000,000.00) DOLLARS" to "FORTY MILLION AND 00/100 (40,000,000.00) DOLLARS,"
extend the maturity date of the Revolving Loan and Revolving Note from "December
1, 2004" to "December 1, 2005," increase the amount of the direct debt sub-limit
under the Revolving Loan from "$22,000,000.00" to "$25,000,000.00," increase the
over-advance limit from "$5,000,000.00" to "$8,000,000.00" for the period July
31st through November 30th and make certain other modifications and changes to
the terms and conditions of the revolving loan agreement;
C. Bank agreed to increase the amount of funds available under the
Revolving Loan from "THIRTY-TWO MILLION AND 00/100 (32,000,000.00) DOLLARS" to
"FORTY MILLION AND 00/100 (40,000,000.00) DOLLARS," to extend the maturity date
of the
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Revolving Loan and Revolving Note from "December 1, 2004" to "December 1, 2005,"
to increase the amount of the direct debt sub-limit under the Revolving Loan
from "$22,000,000.00" to "$25,000,000.00," to increase the over-advance limit
from "$5,000,000.00" to "$8,000,000.00" for the period July 31st through
November 30th and to make certain other modifications and changes to the terms
and conditions of the 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 October 23, 2003 (the revolving
loan agreement dated December 23, 2002 as amended by the first amendment to
revolving loan agreement, promissory note and other loan documents dated October
23, 2003 are hereinafter collectively referred to as, the "Loan Agreement");
D. In connection with the first amendment, Borrower executed and
delivered to Bank its promissory note dated October 23, 2003 in the original
principal amount of $40,000,000.00 (the "Restated Secured Revolving Note");
E. Borrower has again requested that Bank continue to provide
financing under the Revolving Loan, extend the maturity date of the Revolving
Loan and Restated Secured Revolving Note from "December 1, 2005" to "December 1,
2007," modify the interest rate on Advances and otherwise modify the terms and
conditions of the Loan Agreement; and
F. Bank has agreed to continue to provide financing under the
Revolving Loan, to extend the maturity date of the Revolving Loan and Restated
Secured Revolving Note from "December 1, 2005" to "December 1, 2007," to modify
the interest rate on Advances and to otherwise modify the terms and conditions
of the Loan Agreement in accordance with the terms and conditions of 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. Sections 1.9, 1.10 and 1.11 of the Loan Agreement are
amended to read as follows:
"1.9. "Code" shall mean the Internal Revenue Code of the
United States.
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1.10. "Collateral" shall mean all of the Property and
interests in Property described in the General Security Agreement, and all other
personal property of Borrower and interests of Borrower in personal property
that now or hereafter secures the payment and performance of any of the
Obligations pursuant to any of the Loan Documents or otherwise including,
without limitation, any proceeds and insurance proceeds of the foregoing.
1.11. "Debt" shall mean Borrower's total liabilities
determined in accordance with GAAP excluding loans which have been subordinated
in writing to the Revolving Loan."
2. Any reference in the Loan Agreement to Section 1.11
shall hereinafter refer to Section 1.10.
3. Section 1.47 of the Loan Agreement is amended to read as
follows:
"1.47. "Termination Date" shall mean the earlier of
December 1, 2007, or the date on which Lender terminates this Agreement pursuant
to Section 12.1 of this Agreement."
4. Section 2.1 of the Loan Agreement is amended to read as
follows:
"2.1. Advances. Subject to the terms and conditions of
this Agreement including, without limitation, the Maximum Facility and relying
upon the representations and warranties set forth in this Agreement, for so long
as no Default or Event of Default shall have occurred and shall be continuing,
Lender shall make Advances to Borrower on its request, from time to time during
the term of this Agreement in an amount ("Borrowing Capacity") not to exceed at
any one time outstanding the lesser of:
(a) TWENTY-FIVE MILLION and 00/100 (25,000,000.00)
Dollars, or
(b) the sum of (i) eighty-five (85) percent of the face
amount of Borrower's Eligible Receivables, (ii) fifty (50) percent of the Value
of Borrower's Eligible Inventory, and (iii) fifty (50) percent of the
outstanding face amount of Letters of Credit issued under this Agreement, plus
in each case, for the period from June 30th through October 31st only
$8,000,000.00, provided an officer of Borrower submits
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to Lender an Authenticated Record within twenty (20) days of the end of June,
July, August, September and October stating that sixty-five (65) percent of the
value of all Eligible Inventory is subject to confirmed bona fide purchase
orders with unrelated third parties. Value shall mean the lower of cost or the
fair market value of such Inventory, as reflected on the books and records of
Borrower.
For the purpose of calculating the Borrowing Capacity
under Subsection 2.1(b), the face amount of all Letters of Credit shall be
deducted from such sum. Within the limits of the Borrowing Capacity, and subject
to the limitations set forth in this Agreement, Borrower may borrow, repay and
reborrow Advances."
5. Section 3.1 of the Loan Agreement is amended to read as
follows:
"3.1. Interest on Advances. Except as provided below,
Borrower shall pay interest monthly, in arrears, on the first day of each month,
commencing January 1, 2003 on the average daily unpaid principal amount of the
Revolving Loan at a fluctuating rate which is equal to the Loan Interest Rate
or, as provided below, the LIBOR rate. Notwithstanding the foregoing, on and
after the occurrence and during the continuance of an Event of Default, Borrower
shall pay interest on the Revolving Loan at a rate which is three (3) percent
per annum above the Prime Rate; provided, however, in no event shall any
interest to be paid under this Agreement or under any Loan Document exceed the
maximum rate permitted by law.
Notwithstanding the foregoing, Borrower, at any time
shall be permitted to fix the interest rate payable on all or any portion of the
Revolving Loan for a period of one, two or three months based on the
corresponding LIBOR rate for such time period plus two hundred fifty (250) basis
points for the period from December 23, 2002 until October 22, 2003, plus two
hundred twenty-five (225) basis points from October 23, 2003 until May 5, 2005
and plus two hundred (200) basis points thereafter. The interest on any such
fixed rate Advance shall be due and payable on the maturity date of such
Advance."
6. Section 9.6 of the Loan Agreement is amended to read as
follows:
"9.6. Distributions. Make any capital distribution in
Property or return of capital, or purchase or
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redeem any of its stock or other securities, or retire any of its stock, or take
any action which would have an effect equivalent to any of the foregoing;
provided, however, that (i) so long as no Event of Default shall have occurred
and be continuing or would result from Borrower taking the following action,
Borrower may purchase or redeem its stock or other securities or retire its
stock up to an aggregate amount of $1,000,000.00 from and including May 5, 2005
through the end of the term of this credit facility, (ii) in connection with the
termination of Borrower's employee stock ownership plan, Borrower may purchase
shares of its stock from employees or former employees of Borrower who receive
distributions of stock in connection with such termination, and may transfer to
treasury all shares of stock so purchased and (iii) Borrower may purchase shares
of its stock owned by Xxxx Xxxxxxxx, and may transfer to treasury all shares of
stock so purchased.
7. 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 less than the amounts set forth below, tested
quarterly, during the periods set forth below:
Amount Time Period
------ -----------
10,500,000.00 Fiscal Year ending June 30, 2002
11,000,000.00 Fiscal Year ending June 30, 2003
12,000,000.00* Fiscal Year ending June 30, 2004
**
---------------------
*For the Fiscal Year ending June 30, 2005 and each Fiscal Year
thereafter, the minimum Effective Tangible Net Worth (ETNW) for such Fiscal Year
shall be the minimum ETNW for the for the immediately preceding Fiscal Year
increased by fifty (50) percent of the net profits of the Fiscal Year being
tested, determined in accordance with the financial statements to be submitted
to Bank pursuant to Article 6, and reduced as permitted by the next two
paragraphs.
**In the event Borrower shall use an actuarial table that is different
than the one it presently uses in calculating its pension liability, and such
use shall result in a reduction to Borrower's net worth, the ETNW requirement
for the Fiscal
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Year ending June 30, 2005 shall $11,000,000. Borrower has also terminated its
employee stock ownership plan (ESOP) and is contemplating purchasing from
employees of Borrower who receive distributions from the ESOP up to 90,000
shares of Borrower's common stock at a cost of approximately $500,000.00. If
Borrower, in fact, purchases some or all such shares of common stock, the ETNW
requirement commencing with the Fiscal Year in which the first such purchase
occurs shall be further reduced by $500,000.00.
Borrower is contemplating purchasing shares of common stock owned by
Xxxx Xxxxxxxx. Borrower estimates that the cost of this common stock will be
approximately $1,000,000.00. If Borrower acquires all or some of Xxxx Xxxxxxxx'x
common stock during the Fiscal Year ending June 30, 2006, the ETNW requirement
for the Fiscal Year ending June 30, 2006 shall be reduced by $1,000,000.00."
In the event Borrower, in fact, makes the adjustment to its financial
statements, as described in the preceding paragraph, the ETNW requirement for
the Fiscal Year ending June 30, 2005 shall be $11,000,000.00. Borrower is also
contemplating terminating its employee stock ownership plan (ESOP) and
purchasing from such ESOP approximately 90,000 shares of Borrower's common stock
at a cost of approximately $500,000.00 and converting such common stock into
Treasury Stock. If Borrower, in fact, terminates its ESOP during the Fiscal Year
ending June 30, 2005 and purchases some or all of the common stock of the
Company held by such ESOP during such Fiscal Year, the ETNW requirement for the
Fiscal Year ending June 30, 2005, shall be further reduced to $10,500,000.00.
For its Fiscal Year ending June 30, 2006, Borrower is contemplating
purchasing the common stock owned by Xxxx Xxxxxxxx and converting such common
stock into Treasury Stock. Borrower estimates that the cost of this common stock
will be approximately $1,000,000.00. If Borrower acquires all or some of Xxxx
Xxxxxxxx'x common stock during the Fiscal Year ending June 30, 2006, the ETNW
requirement for the Fiscal Year ending June 30, 2006 shall be reduced by
$1,000,000.00."
8. Article 9 of the Loan Agreement is amended by adding a new
Section 9.20 to read as follows:
"9.20 Debt to Effective Tangible Net Worth. On and after June
30, 2005, permit the ratio of Borrower's Debt to ETNW to be no greater than 2.25
to 1.0, which ratio shall change
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to be no greater than 2.50 to 1.0 on and after June 30, 2006, tested annually."
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. In order to induce Bank to continue to provide financing under
the Revolving Loan and extend the revolving credit facility, Borrower represents
and warrants to Bank that except as disclosed in Borrower's Annual Report on
Form 10-K for the Fiscal Year ended June 30, 2004, Borrower's Quarterly Reports
on Form 10-Q for the quarterly periods ended September 30, 2004, December 31,
2004, press releases, and except as disclosed to Bank, since June 30, 2004,
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 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.
11. 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 December 23, 2002 as amended by
the first amendment dated October 23, 2003 and this Agreement. All of the
provisions of the Restated Secured Revolving Note, the Loan Agreement or any
other document executed or delivered in connection with the Loan Agreement
(collectively, the "Loan Documents") 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 provisions of this Agreement shall
govern.
12. Bank's agreement to continue to provide financing under the
Revolving Loan, to extend the maturity date of the Revolving Loan and Restated
Secured Revolving Note from "December 1, 2005" to "December 1, 2007," to modify
the interest rate on Advances and to otherwise modify 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 Restated Secured Revolving Note, the Loan
Agreement or any other Loan Document nor shall it preclude Bank from proceeding
against Borrower on any
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such default. This Agreement is also not a relinquishment of any rights or
remedies Bank may have in connection with the Restated Secured Revolving Note,
the Loan Agreement or any other Loan Document.
13. As a material condition to the entering into of this Agreement,
Borrower and each Guarantor by executing this Agreement voluntarily and
expressly waive any and all rights to assert a claim, counterclaim or defense
which now exists of which they have actual knowledge against Bank arising out of
or in any way connected with the Restated Secured 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 Bank. The term "actual knowledge"
means the conscious awareness of those officers of Borrower and the Guarantors
who have given substantive attention to this Agreement, of facts or information
relating to such a claim, counterclaim or defense, without undertaking any
investigation to determine the existence or absence of any such facts or
information, either within Borrower or any of the Guarantors or otherwise.
14. Borrower and each Guarantor by executing this Agreement
acknowledge that there is due and owing on the Restated Secured Revolving Note
as May 4, 2005 the principal sum of $-0-.
15. Borrower and each Guarantor by executing this Agreement confirms
that all of the representations and warranties set forth in the Loan Agreement
are true and correct in all material respects, and that no default in the
performance by Borrower of the covenants therein has occurred and is continuing
on the date hereof. As of the date hereof, to Borrower's actual knowledge (as
such term is defined in paragraph 12 of this Agreement), 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, except as set forth
in the copies of such schedules annexed hereto.
16. BORROWER AND EACH GUARANTOR BY EXECUTING THIS AGREEMENT
ACKNOWLEDGE 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, EACH CONFIRMS THAT IN DELIVERING THIS AGREEMENT TO BANK, IT IS NOT
RELYING ON ANY PROMISE, COMMITMENT, REPRESENTATION OR UNDERSTANDING, EITHER
EXPRESS OR IMPLIED, MADE
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BY OR ON BEHALF OF BANK THAT IS NOT EXPRESSLY SET FORTH HEREIN, OR IN THE LOAN
AGREEMENT, THE RESTATED SECURED REVOLVING NOTE OR ANY OTHER LOAN DOCUMENT.
BORROWER AND EACH GUARANTOR BY EXECUTING THIS AGREEMENT AND THE RESTATED SECURED
REVOLVING NOTE ACKNOWLEDGE AND UNDERSTAND THAT ALL OBLIGATIONS UNDER THE
RESTATED SECURED REVOLVING NOTE ARE DUE AND PAYABLE IN ACCORDANCE WITH THE LOAN
AGREEMENT AS AMENDED BY THIS AGREEMENT, UNLESS BANK IN ITS SOLE AND ABSOLUTE
DISCRETION EXTENDS THE MATURITY DATE OF SUCH OBLIGATION AND THAT BANK HAS NOT
MADE ANY REPRESENTATION THAT IT WILL EXTEND THE MATURITY DATE OF SUCH
OBLIGATION.
17. This document may be executed in one or more counterparts and
all such documents taken together shall be considered one original document.
Capitalized terms used but not defined herein shall have the meanings assigned
to those terms in the Loan Agreement (as such term is defined in recital
paragraph C above).
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers thereunto duly authorized on the day
and year first above written
WITNESS: XXXXXX, INC.
/s/ XXXX XXXXXX by: /s/ XXXXXXX XXXXXXXX
-------------------------- -------------------------------
-------------------------- Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Financial
Officer & Treasurer
WITNESS: XXXXXX UNITED BANK
/s/ XXXX XXXXXX by: /s/ XXXXX XXXXXXXXXX
-------------------------- -------------------------------
Xxxxx X. Xxxxxxxxxx
Senior Vice President
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For valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, each Guarantor of the performance and payment of
Borrower, does hereby approve all of the terms and conditions of this Agreement,
does hereby approve the execution and delivery of this Agreement by Xxxxxx,
Inc., does hereby acknowledge and confirm its continuing liability and
responsibility to Xxxxxx United Bank with respect to the debts referred to in
this Agreement and the Loan Agreement including, without limitation, the
Restated Secured Revolving Note.
WITNESS: Xxxxxx International
(Hong Kong) Limited
/s/ XXXX XXXXXX by /s/ XXXXXXX XXXXXXXX
------------------------------ ---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
WITNESS: JLN, Inc.
/s/ XXXX XXXXXX by /s/ XXXXXXX XXXXXXXX
------------------------------ ---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
WITNESS: Josell Global Sourcing Ltd.
/s/ XXXX XXXXXX by /s/ XXXXXXX XXXXXXXX
------------------------------ ---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
WITNESS: Investments (JLN) Ltd.
/s/ XXXX XXXXXX by /s/ XXXXXXX XXXXXXXX
------------------------------ ---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
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