FIFTH AMENDMENT AND WAIVER AGREEMENT
THIS FIFTH AMENDMENT AND WAIVER AGREEMENT (this "Fifth Amendment") is
entered into as of September 18, 2006 by and among Xxxxxx Electronics, Inc., a
New York corporation ("Borrower"), and Xxxxxxx Business Credit Corporation
("Lender").
Introduction
Borrower and Lender are parties to a Loan and Security Agreement dated as
of November 21, 2003 (as amended through the date hereof and as further amended,
restated, supplemented or otherwise modified from time to time, the "Loan
Agreement") pursuant to which Lender has agreed to make revolving credit loans
and to provide certain other financial accommodations to Borrower.
Borrower has requested certain amendments and waivers to the Loan
Agreement. Lender is willing to effect the amendments and waivers of the Loan
Agreement requested by Borrower on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender agree as
follows:
1. Amendments to the Loan Agreement. Upon the date that this Fifth
Amendment shall have been executed by each of the parties hereto and all
conditions set forth in Section 3 of this Fifth Amendment have been satisfied,
Borrower and Lender agree that the Loan Agreement shall be amended as follows:
(a) Section 7.21 of the Loan Agreement is hereby amended by deleting such
Section 7.21 in its entirety and inserting in lieu thereof the following new
Section 7.21:
"7.21 Financial Covenants.
(a) Minimum EBITDA. Fail to achieve EBITDA, measured on a
month-end basis, of at least the required amount set forth in the
following table for the month set forth opposite thereto:
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Applicable Amount Applicable Month
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$(60,000) October 2006
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(b) Excess Availability. Borrower shall be required to
maintain Excess Availability of at least (i) $500,000 at all
times during the period from November 1, 2006 through November
30, 2006 and (ii) $750,000 at all times after November 30, 2006.
(c) Business Plan and Projections. Within 30 days after the
Closing (as defined in the Securities Purchase Agreement dated
April 17, 2006 among the Borrower and the other parties named
therein (as amended, the "Purchase Agreement")) the Borrower
shall deliver a Business Plan and Projections, in form and
substance (including as to scope and underlying assumptions)
satisfactory to Lender, in its sole discretion, for the
forthcoming 12 month period, on a month by month basis, certified
by the chief financial officer of Borrower as being such
officer's good faith best estimate of the financial performance
of Borrower during the period covered thereby. Covenant levels
with respect to EBITDA and Excess Availability set forth in the
foregoing subsections (a) and (b) will be reset within 30 days of
receipt and approval of the Business Plan and Projections and be
based upon the Business Plan and Projections approved by Lender."
(b) Article 8 of the Loan Agreement is hereby amended by adding the
following Sections 8.14 and 8.15:
"8.14 If (a) the Borrower shall have failed to obtain all
Shareholder Approvals (as defined in the Purchase Agreement)
required by the Purchase Agreement by October 27, 2006, (b) the
Borrower shall have failed to prepare and deliver to each of the
Purchasers, Trinity (as defined in the Purchase Agreement) and
the Lender by October 27, 2006 an operational and financial
restructuring plan acceptable to each of the Purchasers, Trinity
and the Lender in their sole discretion, (c) the Purchase
Agreement shall have terminated prior to the Closing (as defined
in the Purchase Agreement) or (d) the Closing shall not have
occurred by November 10, 2006.
8.15 If the Borrower shall fail to employ a management consultant
reasonably acceptable to the Lender on terms and conditions
reasonably acceptable to the Lender by October 15, 2006.
2. Lender's Rights. Lender expressly reserves the full extent of its rights
under the Loan Agreement, the other Loan Documents and applicable law with
respect to any Default or Event of Default existing on the date hereof, other
than the Identified Events of Default (defined below).
3. Conditions Precedent to Fifth Amendment. The satisfaction of each of the
following, unless waived or deferred by Lender in its Permitted Discretion
constitute conditions precedent to the effectiveness of this Fifth Amendment:
(a) Lender shall have received this Fifth Amendment, duly executed by
Borrower;
(b) the representations and warranties in this Fifth Amendment, the Loan
Agreement, as amended hereby, and the other Loan Documents shall be true and
correct in all respects on and as of the date hereof, as though made on such
date (except to the extent that such representations and warranties relate
solely to an earlier date);
(c) after giving effect to this Fifth Amendment, no Default or Event of
Default shall have occurred and be continuing on the date hereof, and no Default
or Event of Default shall result from the consummation of the transactions
contemplated herein;
(d) no injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any court or
other governmental authority against Borrower or Lender;
(e) Lender shall have received payment in full of $7,500 upon the effective
date of this Fifth Amendment and its out-of-pocket expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the Loan
Agreement and this Fifth Amendment; and
(f) receipt by Lender of the Amendment No. 1 to Securities Purchase
Agreement in the form attached hereto as Exhibit A duly executed and delivered
by the Borrower and Purchasers.
4. Waiver. Lender hereby waives the Events of Default arising under
Sections 7.21(a) and (b) of the Loan Agreement solely to the extent resulting
from the Borrower having allowed EBITDA for the (i) one month period ended July
31, 2006 to vary negatively by more than $165,000 from the EBITDA projected for
such one month period in the Business Plan in effect on the date thereof, (ii)
three month period ended July 31, 2006 to vary negatively by more than $330,000
from the EBITDA projected for such three month period in the Business Plan in
effect on the date thereof, and (iii) three month period ended August 31, 2006
to vary negatively by more than $330,000 from the EBITDA projected for such
three month period in the Business Plan in effect on the date thereof
(collectively, the "Identified Events of Default"). The foregoing provisions of
this Section 4 relate solely to the Identified Events of Default and shall in no
way be deemed or construed as a waiver by Lender of any other Default or Event
of Default under the Loan Agreement or any other Loan Document, known or
unknown, now existing or occurring subsequent to the date of this Fifth
Amendment. Lender expressly reserves the full extent of its rights under the
Loan Agreement, the other Loan Documents and applicable law with respect to any
Default or Event of Default existing on the date hereof and not specified herein
as an Identified Event of Default.
5. Representations and Warranties. Borrower hereby represents and warrants
to the Lender that:
(a) the execution, delivery, and performance of this Fifth Amendment, the
Loan Agreement and the other Loan Documents (i) are within Borrower's corporate
powers, (ii) have been duly authorized by all necessary corporate action, (iii)
do not require any approval or consent of any Person under any contractual
obligation of the Borrower and (iv) do not contravene (A) any law, rule, or
regulation, or any order, judgment, decree, writ or injunction, or award of any
arbitrator, court, or Governmental Authority, (B) the terms of its charter,
bylaws or other operative or formative documents or (C) any contract or
undertaking to which it is a party or by which any of its properties may be
bound or affected;
(b) this Fifth Amendment has been duly executed and delivered by Borrower;
(c) this Fifth Amendment and the Loan Agreement and the other Loan
Documents, each as previously amended and as amended hereby, constitute
Borrower's legal, valid, and binding obligations, enforceable against Borrower
in accordance with their respective terms;
(d) Borrower is in compliance with all of the terms and provisions set
forth in the Loan Agreement and each of the other Loan Documents, each as
previously amended and as amended hereby, on its part to be observed or
performed on or prior to the date hereof; and
(e) after giving effect to this Fifth Amendment, no Default or Event of
Default has occurred and is continuing under the Loan Agreement or any other
Loan Document.
6. Reaffirmation. Borrower further reaffirms all of its obligations under
the Loan Agreement and the other Loan Documents, each as previously amended and
as amended hereby.
7. Effect on Loan Agreement. Except as expressly provided herein, the
execution, delivery, and performance of this Fifth Amendment shall not operate
as a waiver or an amendment of any right, power, or remedy of the Lender under
the Loan Agreement or any other Loan Document. Except to the extent expressly
amended hereby, the Loan Agreement and all other Loan Documents shall be
unaffected hereby, shall continue in full force and effect, are hereby in all
respects ratified and confirmed, and shall constitute the legal, valid, binding
and enforceable obligations of Borrower to the Lender.
8. No Novation; Entire Agreement. This Fifth Amendment evidences solely the
amendment of certain terms and provisions of Borrower's obligations under the
Loan Agreement expressly set forth herein and is not a novation or discharge
thereof. There are no other understandings, express or implied, between Lender
and Borrower regarding the subject matter hereof.
9. Choice of Law. The validity of this Fifth Amendment, its construction,
interpretation and enforcement, and the rights of the parties hereunder, shall
be determined under, governed by, and construed in accordance with the laws of
The Commonwealth of Massachusetts without regard to conflicts of laws
principles.
10. Definitions and Construction.
(a) Capitalized terms used but not otherwise defined herein shall have the
respective meanings given to such terms in the Loan Agreement, as amended
hereby.
(b) Upon and after the effectiveness of this Fifth Amendment, each
reference in the Loan Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Loan Agreement, and each
reference in the other Loan Documents to "the Loan Agreement", "thereunder",
"therein", "thereof", or words of like import referring to the Loan Agreement,
shall mean and be a reference to the Loan Agreement as amended hereby.
11. Counterparts; Telefacsimile Execution. This Fifth Amendment may be
executed in any number of counterparts and by different parties in separate
counterparts, each of which when so executed and delivered, shall be deemed an
original, and all of which, when taken together, shall constitute one and the
same instrument. Delivery of an executed counterpart of a signature page to this
Fifth Amendment by facsimile shall be as effective as delivery of a manually
executed counterpart of this Fifth Amendment. Any party delivering an executed
counterpart of this Fifth Amendment by facsimile also shall deliver a manually
executed counterpart of this Fifth Amendment but the failure to deliver a
manually executed counterpart shall not affect the validity, enforceability, and
binding effect of this Fifth Amendment.
[Signatures appear on the following page.]
IN WITNESS WHEREOF, Borrower and Lender caused this Fifth Amendment to be
executed as of the date first above written.
BORROWER:
XXXXXX ELECTRONICS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx
Executive Vice President and
Chief Financial Officer
LENDER:
XXXXXXX BUSINESS CREDIT CORPORATION
By: /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
Exhibit A
Form of Amendment No. 1 to Securities Purchase Agreement
