FIFTH AMENDMENT AND WAIVER dated as of September 23, 1997 to the Revolving
Credit Loan Agreement dated January 31, 1995, as amended by the FIRST AMENDMENT
dated as of August 3, 1995, the SECOND AMENDMENT AND WAIVER dated as of November
10, 1995, and AMENDMENT OF REVOLVING CREDIT LOAN AGREEMENT dated December 27,
1995 and the FOURTH AMENDMENT AND WAIVER dated as of May 2, 1997 (the "Loan
Agreement") among TII INTERNATIONAL, INC., a Delaware corporation with offices
located at 1385 Akron Street Copiague, New York 11726 (the "Borrower"), TII
INDUSTRIES, INC., a Delaware corporation with offices at 1385 Akron Street
Copiague, New York 11726 ("Industries") and THE CHASE MANHATTAN BANK (formerly
known as Chemical Bank), a New York State banking corporation with offices at
395 North Service Road, Suite 302, Melville, New York 11747 (the "Bank") and to
the Master Lease Purchase Agreement Number 00009 dated January 12, 1996, as
amended by a letter dated February 1, 1996 (collectively, the "Lease Agreement")
by and between the Borrower and CHASE EQUIPMENT LEASING, INC. (formerly known as
ChemLease Worldwide, Inc.) ("Leasing"). Capitalized terms used but not otherwise
defined herein shall have the meanings set forth in the Loan Agreement.
WHEREAS, the Lease Agreement provides that the financial covenants contained in
any credit facility provided by the Bank to the Borrower shall apply to the
Lease Agreement as continuing covenants; and
WHEREAS, the Borrower and Industries have requested and the Bank and Leasing
have each agreed, subject to the terms and conditions of this FIFTH AMENDMENT
AND WAIVER, to amend and waive compliance with certain provisions of the Loan
Agreement and the Lease Agreement (by incorporation) to reflect the requests
made by the Borrower to the Bank and Leasing in the manner hereafter set forth;
NOW, THEREFORE, in consideration of the premises and of other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Waiver of Article VII. Negative Covenants. Section 7.09. Capital
Expenditures.
Compliance with Section 7.09 of the Loan Agreement is hereby waived
for the fiscal year ended June 30, 1997 to permit the Borrower to
incur consolidated capital expenditures in excess of $3,500,000,
provided, however, that consolidated capital expenditures did not
exceed $4,850,000 for the fiscal year ended June 27, 1997.
2. Waiver of Article VII. Negative Covenants. Section 7.13. Tangible Net
Worth.
Compliance with Section 7.13 of the Loan Agreement, as amended by the
Amendment of Revolving Credit Loan Agreement dated December 27, 1995,
is hereby waived for the fiscal year ended June 27, 1997 to permit the
Consolidated Tangible Net Worth of Industries and its Subsidiaries to
fall below $34,000,000, provided, however, that Consolidated Tangible
Net Worth did not fall below $31,700,000 for such fiscal year end.
3. Amendment to Article VII. Negative Covenants. Section 7.13. Tangible
Net Worth.
Section 7.13 of the Loan Agreement, as amended by the Amendment of
Revolving Credit Loan Agreement dated December 27, 1995, is hereby
further amended by replacing the Periods and Amounts therein with the
following:
"Period Amount
6/27/97 - 6/25/98 $31,200,000
6/26/98 - 6/24/99 $33,700,000
and for each comparable fiscal period thereafter commencing with the
fiscal year ending 6/25/99 through the day before the following fiscal
year end date, the sum of the prior year's required Consolidated
Tangible Net Worth plus $2,000,000."
4. Waiver of Article VII. Negative Covenants. Section 7.16. Consolidated
Net Loss.
Compliance with Section 7.16 of the Loan Agreement is hereby waived to
permit the Borrower to incur a Consolidated Net Loss for the Fiscal
Quarters ended March 28, 1997 and June 27, 1997, provided, however,
that such losses did not exceed $2,326,000 and $200,000 for the
respective fiscal periods.
5. Waiver of Article VII. Negative Covenants. Section 7.17. Debt Service
Ratio.
Compliance with Section 7.17 of the Loan Agreement is hereby waived
for the Fiscal Quarter ended June 27, 1997 to permit the Debt Service
Ratio to be less than 1.35 to 1.0, provided, however, that such ratio
did not fall below 0.05 to 1.0 for such period.
6. Waiver of Article VI. Affirmative Covenants. Section 6.01. Corporate
Existence, Solvency, Properties, Etc.
Compliance with Section 6.01 of the Loan Agreement is hereby waived to
permit TII-Ditel, Inc. (formerly known as Ditel, Inc.) to be insolvent
as of the Fiscal Year ended June 30, 1997.
Compliance with Section 6.01 of the Loan Agreement is hereby further
waived to permit the dissolution of TII Industries NC, Inc. and TII
Electronics, Inc.
7. Amendment to Article VI. Affirmative Covenants. Section 6.01.
Corporate Existence, Solvency, Properties, Etc.
Section 6.01 of the Loan Agreement is hereby amended by deleting the
phrase "and further provided that Ditel, Inc. may be insolvent from
the Closing Date through January 31, 1996, at which time it must be
solvent and continue to be solvent" and substituting therefor the
following:
"and further provided that TII-Ditel, Inc. may be insolvent from
the Closing Date through July 1, 1998, at which time it must be
solvent and continue to be solvent."
8. Amendment to Article VI. Affirmative Covenants.
Article VI of the Loan Agreement is hereby amended by the addition of
the following Section:
"Section 6.15. TII-Ditel, Inc. Not later than 60 days from the date
hereof, Industries shall provide the Bank with all of the capital
stock of TII-Ditel, Inc. owned by Industries, (which shall constitute
not less than 99.6% of the outstanding capital stock of TII-Ditel,
Inc.), together with executed but undated stock powers, stock pledge
agreement, legal opinion, and such other corporate documentation as
shall be required by the Bank."
9. Waiver of Article VII. Negative Covenants. Section 7.01. Indebtedness.
Compliance with Section 7.01 of the Loan Agreement is hereby waived to
permit the Borrower to enter into a certain Master Lease Purchase
Agreement dated January 12, 1996 by and between the Borrower and
ChemLease Worldwide, Inc. (now known as Chase Equipment Leasing,
Inc.).
10. Other Waivers - Loan Agreement.
(a) Compliance with the Loan Agreement is hereby waived to permit the
restatement of Industries' charter documents prior to the date hereof;
and
(b) Compliance with the Loan Agreement is hereby waived to permit the
change of name of the corporation formerly known as Ditel, Inc. to
TII-Ditel, Inc.
11. Waiver of Article VI. Affirmative Covenants. Section 6.11. Notices.
Compliance with Section 6.11 of the Loan Agreement is hereby waived to
permit the Borrower's failure to promptly notify the Bank of the
occurrence of the breaches, defaults or Events of Default described in
paragraphs 1 through 6 above.
12. Waivers - Lease Agreement.
The Bank's waivers of compliance with the financial covenants
described above granted in this FIFTH AMENDMENT AND WAIVER are hereby
granted by Leasing with respect to the Borrower's compliance with the
terms and provisions of the Lease Agreement.
This FIFTH AMENDMENT AND WAIVER shall be construed and enforced in accordance
with the laws of the State of New York.
Except as expressly amended or waived hereby, the Loan Agreement and the Lease
Agreement shall remain in full force and effect in accordance with the original
terms thereof. This FIFTH AMENDMENT AND WAIVER herein contained is limited
specifically to the matters set forth above and does not constitute directly or
by implication a waiver or amendment of any other provision of the Loan
Agreement or the Lease Agreement or any breach, default or Event of Default
which may occur or may have occurred under the Loan Agreement or the Lease
Agreement.
The Company and Industries hereby represent and warrant that, after giving
effect to this FIFTH AMENDMENT AND WAIVER, no Event of Default or default exists
under the Loan Agreement, the Lease Agreement or any other related documents.
This FIFTH AMENDMENT AND WAIVER may be executed in any number of counterparts,
each of which shall constitute an original but all of which, when taken
together, shall constitute but one FIFTH AMENDMENT AND WAIVER. This FIFTH
AMENDMENT AND WAIVER shall become effective when duly executed counterparts
hereof which, when taken together, bear the signatures of each of the parties
hereto shall have been delivered to the Bank and Leasing.
IN WITNESS WHEREOF, the Borrower, Industries, the Bank and Leasing have caused
this FIFTH AMENDMENT AND WAIVER to be duly executed by their duly authorized
officers all as of the day and year first above written.
TII INTERNATIONAL, INC. TII INDUSTRIES, INC.
By: /s/ Paul Sebetic By: /s/ Paul Sebetic
-------------------------- --------------------------
Name: Paul Sebetic Name: Paul Sebetic
Title: Vice President Title: Vice President
THE CHASE MANHATTAN BANK CHASE EQUIPMENT LEASING, INC.
By: /s/ Christopher Zimmerman By:
-------------------------- --------------------------
Name: Christopher Zimmerman Name:
Title: Vice President Title:
CONSENT
The undersigned, as Guarantors of the obligations of TII International, Inc.
hereby consent to the execution and delivery by TII International, Inc. and TII
Industries, Inc. of this FIFTH AMENDMENT AND WAIVER and hereby confirm that they
remain fully bound by the terms of the Joint and Several Guaranty of Payment
dated January 31, 1995 to which they are a party.
TII INDUSTRIES, INC. TII CORPORATION
By: /s/ Paul Sebetic By: /s/ Paul Sebetic
-------------------------- --------------------------
Name: Paul Sebetic Name: Paul Sebetic
Title: Vice President Title: Vice President
TII-DITEL, INC. TELECOMMUNICATIONS
INDUSTRIES, INC.
By: /s/ Paul Sebetic By: /s/ Paul Sebetic
-------------------------- --------------------------
Name: Paul Sebetic Name: Paul Sebetic
Title: Vice President Title: Vice President
TII DOMINICANA, INC.
By: /s/ Paul Sebetic
--------------------------
Name: Paul Sebetic
Title: Vice President