EXHIBIT 4(b)(5)
GMAC COMMERCIAL CREDIT LLC
1290 Avenue of the Americas
New York, New York 10104
June 7, 2002
TII NETWORK TECHNOLOGIES, INC.
1385 Akron Street
Copiague, New York 11726
Re: Amendment to Loan Documents
---------------------------
Gentlemen:
Reference is made to certain financing arrangements by and among GMAC
COMMERCIAL CREDIT LLC, formerly known as BNY FACTORING LLC, as successor by
merger to BNY Financial Corporation ("Lender"), TII Industries, Inc., now known
as TII Network Technologies, Inc. ("Borrower"), and TII Corporation (which was
subsequently dissolved), pursuant to certain financing agreements, including
that certain Revolving Credit, Term Loan and Security Agreement dated April 30,
1998 (the "Credit Agreement"), together with various 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 has been, is hereby being, and may hereafter be
amended, restated, renewed, extended, supplemented, substituted or otherwise
modified, collectively, the "Loan Documents").
Borrower has requested that Lender agree to amend certain provisions of the
Loan Documents, all as more fully set forth herein. Lender has agreed to
accommodate Borrower's request subject to the terms and conditions hereof.
I. Amendments.
(1) Section 2.1(a)(ii) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"(ii) fifty percent (50%) of Eligible Inventory (the "Inventory
Advance Rate"; together with the Receivables Advance Rate,
collectively the "Advance Rates"), provided, however, that
the maximum amount of outstanding Revolving Advances
against Eligible Inventory to Borrower hereunder shall not
exceed $2,000,000 at any one time, less"
(2) Section 3.5 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
"3.5 Unused Facility Fees. Borrower shall pay to Lender monthly, on
the first day of the month for the immediately preceding month, if the
average combined closing daily balance of all Revolving Advances and
amounts due under Letters of Credit outstanding during any such
calendar month (for each month, collectively, the "Average Daily
Closing Revolver Balances") is, in the aggregate, less than the
Maximum Revolving Advance Amount (such difference for each month, the
"Applicable Revolver Amount"), an unused facility fee at a rate equal
to three eighths of one percent (.375%) per annum of the Applicable
Revolver Amount."
(3) Section 6.5 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
"6.5 Net Worth. Cause to be maintained at all times a consolidated Net
Worth in an amount (the "Minimum Net Worth") not less than (a) for
Borrower's fiscal quarter ending March 29, 2002, $17,750,000, (b) for
Borrower's fiscal quarter ending June 29, 2002, $17,500,000 less a
one-time charge not exceeding $1,000,000 for writeoffs of intangibles
and certain equipment related to the consolidation of Borrower's
facilities in the Commonwealth of Puerto Rico, and (c) for each of
Borrower's fiscal quarters thereafter, an amount equal to the sum of
the Minimum Net Worth required for the immediately previous fiscal
quarter plus fifty percent (50%) of Net Income (to the extent Net
Income is positive) for such immediately previous fiscal quarter.
Notwithstanding anything in this Agreement to the contrary, Borrower
shall be deemed to be in compliance with this Section 6.5 at all times
during any fiscal quarter other than the last day of such fiscal
quarter (each such time hereinafter an "Interim Date") if, as of any
Interim Date, Borrower's consolidated Net Worth is not more than
$150,000 less than the applicable Minimum Net Worth required hereunder
as of the last day of such fiscal quarter. Nothing herein shall
release Borrower from its obligation to maintain the requisite Minimum
Net Worth as of the last day of each fiscal quarter."
(4) Section 7.4 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
"7.4. Investments. Purchase or acquire obligations or stock of, or any
other interest in, any Person, except (a) obligations issued or
guaranteed by the United States of America or any agency thereof, (b)
commercial paper with maturities of not more than 180 days and a
published rating of not less than A-1 or P-1 (or the equivalent
rating), (c) certificates of time deposit and bankers' acceptances
having maturities of not more than 180 days and repurchase agreements
backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least
$500,000,000, or (ii) its debt obligations, or those of a holding
company of which it is a Subsidiary, are rated not less than A (or the
equivalent rating) by a nationally recognized investment rating
agency,
-2-
(d) U.S. money market funds that invest solely in obligations issued
or guaranteed by the United States of America or an agency thereof,
and (e) in one transaction or a series of transactions to be
consummated not later than June 21, 2002, all of the issued and
outstanding shares of Series C Convertible Preferred Stock of Borrower
for total consideration of cash in the amount of not more than
$1,200,000 plus the issuance of a warrant, in form and content
satisfactory to Lender, for not more than 750,000 shares of common
stock of Borrower at an exercise price of not less than $1.00 per
share (such number of shares and exercise price being subject to
potential anti-dilution adjustment)."
(e) Section 10 of the Credit Agreement is hereby amended by: (i)
deleting the semi-colon (;) and the word "or" at the end of Section 10(o); (ii)
inserting a period in lieu thereof; and (iii) deleting Section 10(p) in its
entirety.
II. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore made by Borrower
to Lender pursuant to the Loan Documents, Borrower hereby represents, warrants
and covenants with and to Lender as follows (which representations, warranties
and covenants are continuing and shall survive the execution and delivery hereof
and shall be incorporated into and made a part of the Loan Documents):
A. No Event of Default exists or has occurred and is continuing on the
date of this amendment upon giving effect to the terms of this amendment.
B. This amendment has been duly executed and delivered by Borrower and
is in full force and effect as of the date hereof, and the agreements and
obligations of Borrower contained herein constitute the legal, valid and binding
obligations of Borrower enforceable against Borrower in accordance with its
terms.
C. Except as specifically set forth herein, no other changes or
modifications to the Loan Documents are intended or implied, and in all other
respects, the Loan Documents shall continue to remain in full force and effect
in accordance with their respective terms as of the date hereof. Except as
specifically set forth herein, nothing contained herein shall evidence a waiver
or amendment by Lender of any other provision of the Loan Documents nor shall
anything contained herein be construed as a consent by Lender to any transaction
other than that specifically consented to herein.
D. The terms and provisions of this amendment shall be for the benefit
of the parties hereto and their respective successors and assigns; no other
person, firm, entity or corporation shall have any right benefit or interest
under this amendment. This amendment may be signed in counterparts, each of
which shall be an original and all of which when taken together shall constitute
one amendment. In making proof of this amendment, it shall not be necessary to
produce or account for more than one counterpart signed by the party to be
charged.
-3-
E. This amendment sets forth the entire agreement and understanding of
the parties with respect to the matter set forth herein. This amendment cannot
be changed, modified, amended or terminated except in writing executed by the
party to be charged.
III. Amendment Fee. In consideration of the amendments to the Loan
Documents set forth herein Borrower unconditionally agrees to pay an amendment
fee in the amount of $15,000, which amendment fee shall be fully earned as of
the effective date of this amendment, shall not be subject to refund, rebate or
proration for any reason whatsoever, and shall be charged by Lender to Borrower
as of the date hereof.
[SIGNATURES ON FOLLOWING PAGE]
-4-
IN WITNESS WHEREOF, Lender and Borrower have executed this amendment as of
the day and year first above written.
GMAC COMMERCIAL CREDIT LLC
By: /s/ David Duffy
-------------------------------------
Title: Vice President
ACKNOWLEDGED AND AGREED:
TII NETWORK TECHNOLOGIES, INC.
By: /s/ Kenneth A. Paladino
-------------------------------
Title: Vice President Finance
-5-