November 14, 2001
JACO ELECTRONICS, INC. ("Jaco")
145 Oser Avenue
Hauppauge, NY 11788
NEXUS CUSTOM ELECTRONICS, INC. ("Nexus")
Prospect Street
Brandon, VT 05733
INTERFACE ELECTRONICS CORP. ("Interface")
124 Grove Street
Franklin, MA 02028
Gentlemen:
Reference is made to the Second Restated and Amended Loan and Security
Agreement in effect between us as successor by merger to BNY Financial
Corporation which was merged into GMAC Commercial Credit LLC ("GMAC"), as Agent
and Lender, and Fleet Bank, N.A., f/k/a Natwest Bank, N.A ("Fleet") as Lender,
dated September 13, 1995, as supplemented and amended from time to time, (the
"Agreement"). Both GMAC and Fleet may hereinafter be referred to jointly as the
"Lenders", and individually, as a "Lender". Initially capitalized terms not
defined herein shall have the meanings ascribed to such terms in the Agreement.
WHEREAS, you have requested that we amend the Agreement as follows below;
and
WHEREAS, the Lenders are willing to agree to such amendments, subject to
the terms and conditions hereof.
NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:
1. The definition of "Contract Rate" as set forth in paragraph
1 of the Agreement, as amended by an Amendment letter dated
August 1, 1997, and by an Amendment letter dated June 6, 2000
is hereby deleted and replaced with the following:
" 'Contract Rate' means an interest rate per
annum equal to (i) the applicable LIBO Rate, plus one
and three quarter percent (1.75%) in the case of LIBO
Rate Loans first continued or converted thereto prior
to June 30, 2000, (ii) in the case of LIBO Rate Loans
first continued or converted thereto, in the quarter
ending September 30, 2000 or thereafter, the
applicable LIBO Rate plus the margin ("LIBO Margin")
stated opposite the ratio range of Funded Debt to net
earnings before interest, taxes, depreciation,
amortization, extraordinary gains and non cash losses
and all other non-cash charges on a consolidated
basis ("EBITDA") during the immediately preceding
four fiscal quarters as stated in the table
immediately below:
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Funded Debt/EBITDA LIBO Margin
greater than 3.5 to 1 2 1/4%
3.0 to 3.5 to 1 2%
2.5 to 3.0 to 1 1 3/4%
2.0 to 2.5 to 1 1 1/2%
1.5 to 2.0 to 1 1 1/4%
less than 1.5 to 1 1%
The Contract Rate applicable to LIBO Rate Loans shall
be adjusted quarterly."
2. The definition of "Inventory Borrowing Base" appearing in
Section 1 of the Agreement, shall be amended at the end of the
Temporary Increase Period (as defined below) so that the
percentage of "60%" appearing in the first line of such
definition, shall be replaced with the percentage "55%".
3. Effective as of September 30, 2001, ("the "Amendment
Effective Date") hereof, and only for the period commencing on
the Amendment Effective Date and ending on June 29, 2002 (the
"Temporary Increase Period"), the phrase "$30,000,000"
appearing on the eighth line of Section 4(a) of the Agreement
shall be deleted in its entirety and replaced with the phrase
"$35,000,000". At the end of the Temporary Increase Period,
the Debtor shall repay any excess amounts outstanding with
respect to the Inventory Borrowing Base, so as to reflect that
the loan amounts outstanding with respect to inventory shall
not exceed the maximum amount allowed to be outstanding with
respect to inventory under the terms of the Agreement at such
time, and the amended figure stated above shall at such time
revert back to the amount of "$30,000,000".
4.Section 17(e) of the Agreement shall be deleted in its
entirety and replaced with the following:
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"(e) Maintain at all times, from and after the
Amended Effective Date, a consolidated net worth (all
amounts which would be included under shareholder's
equity on a consolidated balance sheet of Debtor,
determined in accordance with generally accepted
accounting principles), in an amount not less than
$47,000,000, which amount shall be increased at the
end of each quarter on a cumulative basis by an
amount equal to 50% of the consolidated net profit
after taxes, if any, for such quarter. For purposes
of calculating this covenant, any writedown for
impairment of goodwill, will not be taken into
account in making the calculation under this
covenant."
5.Section 18(e) of the Agreement shall be deleted in its entirety
and replaced with the following:
"(e) Permit at any time, from and after the Amended
Effective Date, the ratio of Indebtedness to Tangible
Net Worth to be more than 3.0 to 1.0 for purposes of
this Paragraph 18(e), "Indebtedness" shall mean
consolidated total liabilities of Debtor and its
Subsidiaries determined in accordance with generally
accepted accounting principles consistently applied.
"Tangible Net Worth" shall mean the excess of
consolidated total assets of Debtor and its
Subsidiaries over consolidated total liabilities of
Debtor and its Subsidiaries, each to be determined in
accordance with generally accepted accounting
principles consistently applied, excluding however,
from the determination of consolidated total assets,
all assets which would be classified as intangible
assets under generally accepted accounting
principles, including without limitation, goodwill,
patents, trademarks, trade names, copyrights and
franchises."
6. Section 17(d) of the Agreement shall be deleted in its
entirety and replaced by the following section 17(d):
"17(d) Debtor shall maintain at all times, on a
consolidated basis, a ratio of EBIT to total interest charges
due during any quarter of no less than 1.5 to 1 calculated on
rolling four quarter basis, beginning on
September 30, 2002. "EBIT" shall mean earnings before
interest, taxes, extraordinary gains, and extraordinary non
cash losses."
7. Section 17(f) of the Agreement shall be deleted in its
entirety and replaced with the following Section 17(f).
"17(f) Maintain at all times a ratio of the sum of
(i) cash and cash equivalents, plus (ii) accounts receivable
to Current Liabilities of not less than .40 to 1 as of 6/30/00
and at all times thereafter. For purposes of this paragraph
"Current Liabilities" shall mean all liabilities treated as
current liabilities in accordance with generally accepted
accounting principles consistently applied, including without
limitation, all obligations payable on demand or within one
year after the date on which the determination is made,
together with Obligations under this Agreement exclusive of
any amounts outstanding under the Term Loans Notes."
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8. Section 17(h) of the Agreement, as amended by a certain
amendment dated June 6, 2000, in effect between you and us
(the "Amendment"), shall be deleted in its entirety and
replaced by the following Section 17(h):
"17(h) Maintain at all times the insurance required
by the Agreement and cause each Subsidiary to maintain
insurance with responsible insurance companies on such of its
properties in such amounts and against such risks as is
customarily maintained by similar businesses."
9. Section 18(d) of the Agreement is hereby amended by
deleting the following language from the first sentence of
such Section 18(d):
"(III) liability or indebtedness incurred
by Debtor in a public offering of debt
securities by the Debtor, (iv) liability or
indebtedness incurred by the Debtor in a
private offering of debt securities by the
Debtor".
The said deleted language appeared on the second and
third lines on page 18 of the Agreement.
10. Section 18(g) of the Agreement shall be deleted in its
entirety and replaced by the following:
"The Debtors shall attain at the end of each quarter,
on a consolidated basis, EBITDA for such quarter, in
amounts of no less than the amounts stated opposite
the fiscal quarters stated below:
Fiscal Quarter Minimum EBIDTA Amount
1 quarter ended 9/30/01 ($1,000,000)
1 quarter ended 12/31/01 ($500,000)
1 quarter ended 3/31/02 $1,100,000
1 quarter ended 6/30/02 $1,800,000
11. In consideration for the amendments stated herein,
Debtor shall pay Agent for the pro rata share of each Lender
an amendment fee of $20,000. Jaco, Nexus and Interface
hereby authorize the Agent to automatically charge the
Debtors' account with the amount of such fee on the date of
execution of this Letter Agreement.
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12. Not withstanding anything contrary to the Agreement, or
elsewhere you hereby agree that the Agent on behalf of the
Lenders may audit each or all of you at any time it so
determines provided however that while no Event of Default
has occurred under the Agreement you shall only be liable
for expenses in connection of three such audits per year and
hereby agree that we may charge your account with a per diem
charge per auditor of $750.00 up to a maximum amount for
each calendar year of $25,000.00. After the occurrence of an
Event of Default under the Agreement the forgoing
limitations shall not be applicable.
13. By their signatures below, Jaco, Nexus and Interface
hereby ratify the Agreement and agree to be jointly and
severally liable for all Obligations under the Agreement and
agree that all of the outstanding amounts of the Loans under
the Agreement, as of the date hereof, shall be valid and
binding Obligations of each of them, and shall be deemed
Obligations outstanding under the Agreement, and hereby
agree and promise to repay to the Agent, for the benefit of
the Lenders, such Obligations (including but not limited to
all applicable interest) in accordance with the terms of the
Agreement, but in no event, later than the Termination Date
(for purposes hereof, "Termination Date" shall mean
September 14, 2003, or any extended termination date, or any
earlier termination date, whether by acceleration or
otherwise).
14. By their signatures below, Jaco, Nexus and Interface
hereby ratify and affirm to the Agent that as of the date
hereof, they are in full compliance with all covenants under
the Agreement and certify that all representations and
warranties of the Agreement are true and accurate as of the
date hereof, with the same effect as if they had been made
as of the date hereof.
Except as herein specifically amended, the Agreement shall
remain in full force and effect in accordance with its original terms, except as
previously amended.
If the foregoing accurately reflects our understanding, kindly
sign the enclosed copy of this letter and return it to our office as soon as
practicable.
Very truly yours,
GMAC COMMERCIAL CREDIT LLC,
(as Agent and Lender)
By:/s/Peter D. Brady
--------------------
Title:Senior Vice President
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AGREED AND ACCEPTED:
JACO ELECTRONICS, INC. FLEET BANK, N.A.
By: /s/Jeffrey D. Gash By: /s/Kevin Brown
------------------- ----------------------
Title: Vice President Title: Senior Vice President
NEXUS CUSTOM ELECTRONICS, INC. INTERFACE ELECTRONICS CORP.
By: /s/Jeffrey D. Gash By: /s/Jeffrey D. Gash
---------------------- -------------------------
Title: Vice President Title: Vice President
RATIFICATION OF GUARANTOR
By its signature below, Jaco Overseas, Inc. hereby ratifies its guaranty of the
Agreement, as such Agreement has been amended from time to time, including but
not limited to a certain amendment dated June 6, 2000, (the "Amendment") and
hereby agrees to be liable for all of the Obligations under the Guaranty with
respect to the Agreement as amended from time to time, including but not limited
to by this amendment and the Amendment, and hereby agrees that the said Guaranty
shall continue to apply and remain in full force and effect with respect to the
amended Agreement and hereby agrees and consents that a certain General Loan and
Security Agreement dated January 20, 1989, shall continue to be in full force
and effect and apply to the amended Agreement, and it further hereby agrees to
make all payments of all its Obligations under the said Guaranty and General
Loan and Security Agreement to GMAC Commercial Credit LLC as Agent and Lender,
and to Fleet Bank, N.A. as Lender, as successors in interest to the previous
Agent and Lenders respectively.
RATIFIED, ACCEPTED AND CONSENTED:
JACO OVERSEAS, INC.
By: /s/Jeffrey D. Gash
------------------------------
Title: Vice President
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