acme_10k123109ex109.htm


    Exhibit
10.9

    
 

    FIFTH
MODIFICATION TO REVOLVING PROMISSORY NOTE AND

    REVOLVING
CREDIT AND SECURITY AGREEMENT,

    AND
REAFFIRMATION OF GUARANTY

    


    


    Acme
United Corporation

    60 Round
Hill Road

    Fairfield,
Connecticut 06824

    (Hereinafter
referred to as
"Borrower")

    


    Acme
United Limited

    351
Foster Street

    Mount
Forest, Ontario, Canada, NOG 2LO

    (Individually
and collectively "Guarantor")

    


    Wachovia
Bank, National Association

    50 Main
Street

    White
Plains, New York 10606

    (Hereinafter
referred to as "Bank")

    


    THIS
AGREEMENT is entered into as of January 25, 2010 by and between Bank, Borrower
and Guarantor.

    


    RECITALS

    


    Bank is
the holder of a certain Amended and Restated Revolving Promissory Note dated
June 23, 2008 in the principal amount of up to $20,000,000.00 (the "Amended
Note"), which Amended Note amended and restated a certain Revolving Promissory
Note in the principal amount of up to $10,000,000.00 dated August 2, 2002 (the
“Original Note”);

    


    The
Original Note was previously amended pursuant to the Second Modification
Agreement, as defined below, to be in the principal amount of up to
$15,000,000.00;

    


    The
Amended Note evidences a certain revolving loan from Bank to Borrower (the
"Loan"), which Loan is made pursuant to the terms of a certain Revolving Credit
And Security Agreement dated August 2, 2002 (as modified from time to time, the
"Loan Agreement”);

    


    The
Original Note and Loan Agreement were modified pursuant to the terms of a
certain Modification to Revolving Promissory Note and Revolving Credit and
Security Agreement and Reaffirmation of Guaranty dated September 30, 2004 (the
“First Modification Agreement”), further amended by a Second Modification to
Revolving Promissory Note and Revolving Credit and Security Agreement and
Reaffirmation of Guaranty dated as of March 6, 2006 (the “Second Modification
Agreement”), further amended by a Third Modification to Revolving Promissory
Note and Revolving Credit and Security Agreement and Reaffirmation of Guaranty
dated as of August 22, 2007 (the “Third Modification Agreement”), and further
amended by a Fourth Modification to Revolving Promissory Note and Revolving
Credit and Security Agreement and Reaffirmation of Guaranty dated as of June 23,
2008 (the “Fourth Modification Agreement” and collectively with this Agreement,
the First Modification Agreement, the Second Modification Agreement, the Third
Modification Agreement, the Fourth Modification Agreement, the Original Note,
the Amended Note, the Loan Agreement, the Guaranty as hereafter defined, and all
of the other documents which evidence or secure the Loan, the "Loan
Documents");

    


    
      
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    Borrower
and Bank have agreed to decrease the principal amount of the Loan, extend the
maturity date of the Loan, modify the interest rate payable under the Amended
Note, and have further agreed to certain other modifications to the Loan
Documents;

    


    Pursuant
to its Unconditional Guaranty dated August 2, 2002 (the “Guaranty”), Guarantor
unconditionally agreed to the full payment and performance of all Guaranteed
Obligations, as defined in the Guaranty, and has agreed to the modifications set
forth herein and to reaffirm its Guaranty;

    


    In
consideration of Bank's agreement to such modifications and the other agreements
contained herein, the parties agree as follows:

    


    


    AGREEMENT

    


    ACKNOWLEDGMENT OF
BALANCE.  Borrower acknowledges that the most recent Commercial
Loan Invoice sent to Borrower with respect to the Indebtedness, as that term is
defined in the Loan Agreement, is correct.

    


    MODIFICATIONS.

    


    1.  The
Amended Note is hereby modified as follows:

    


    a.  The
principal amount of Twenty Million and 00/100 dollars ($20,000,000.00) set forth
in the caption and in the first paragraph of the Amended Note is hereby modified
to be Eighteen Million and 00/100 dollars ($18,000,000.00).  Any other
reference in the Amended Note or in any other Loan Documents to the principal
amount of the Amended Note is hereby modified to be Eighteen Million and 00/100
dollars ($18,000,000.00).

    


    b.  The
section of the Amended Note entitled “INTEREST RATE DEFINITIONS” set forth on
the second page thereof is hereby deleted in its entirety and the following
paragraphs are substituted therefor:

    


    INTEREST
RATE DEFINITIONS.

    


    LIBOR-Based
Rate.  “LIBOR-Based Rate” means 1-month LIBOR plus
2.0%.

    


    LIBOR.  "LIBOR"
means, with respect to each Interest Period, the rate for U.S. dollar deposits
with a maturity equal to the number of months specified above, as reported on
Telerate Successor Page 3750 as of 11:00 a.m., London time, on the second London
business day before such Interest Period begins, or, in the case of the first
Interest Period, the second London business day before the first day of the
calendar month during which such Interest Period begins (or if not so reported,
then as determined by Bank from another recognized source or interbank
quotation).

    


    Interest
Period.  “Interest Period” means, when interest accrues at the
LIBOR-Based Rate, each period commencing on the first day of the calendar month
and ending on the first day of the next succeeding calendar month; provided that
any Interest Period that would otherwise extend past the maturity date of this
Note shall end on the maturity date of this Note.

    


    LIBOR Market Index-Based
Rate.  1-month LIBOR Market Index Rate plus 2.0%, as 1-month
LIBOR Market Index Rate may change from day to day.

    


    LIBOR Market Index
Rate.  1-month "LIBOR Market Index Rate", for any day, means
the rate for 1 month U.S. dollar deposits as reported on Telerate Successor Page
3750 as of 11:00 a.m., London time, on such day, or if such day is not a London
business day, then the immediately preceding London business day (or if not so
reported, then as determined by Bank from another recognized source or interbank
quotation).

    


    
      
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    Except as
set forth above with respect to the modification of such Interest Rate
Definitions, the provisions of the Amended Note specifying the application of
the Interest Rate shall remain unmodified and in full force and
effect.

    


    c.  The
paragraph entitled “REPAYMENT TERMS” set forth on the second page of the Amended
Note is hereby deleted in its entirety and the following paragraph is
substituted therefor:

    


    REPAYMENT
TERMS.  This Note shall be due and payable in consecutive
monthly payments of accrued interest only commencing February 1, 2010 and
continuing on the first Business Day of each month thereafter, until fully
paid.  All outstanding principal will be repaid in accordance with the
Loan Agreement, as hereinafter defined, and, if Borrower subscribes to Bank's
cash management services and such services are applicable to this line of
credit, the terms of such services.  In any event, this Note shall be
due and payable in full, including all principal and accrued interest, on
January 31, 2012, the maturity date of this Note.


    


    2.  The
Loan Agreement is hereby modified as follows:

    


    a.  Section
5.6(e) of the Loan Agreement, entitled “Payables Report”, is hereby deleted in
its entirety and the following is substituted therefor: “Intentionally
Deleted.”

    


    b.  Section
7.4 of the Loan Agreement, entitled “Fixed Charge Coverage
Ratio”, is hereby deleted in its entirety and the following paragraph is
substituted therefor:

    


    7.4.  Fixed Charge Coverage
Ratio.  Borrower, on a consolidated basis, shall maintain a
Fixed Charge Coverage Ratio of not less than 2.0 to 1.0, to be calculated at the
end of each fiscal quarter on a rolling four quarter basis.  “Fixed
Charge Coverage Ratio” shall mean the sum of earnings before interest, taxes,
depreciation and amortization, less Unfinanced Capital Expenditures, dividends,
and funds used for stock repurchases, divided by the sum of interest expense
plus current maturities of long-term debt paid during the prior four
quarters.  “Unfinanced Capital Expenditures” shall mean increases in
fixed assets at fiscal year end as compared to the prior year, less financing
associated with the purchase of such fixed assets.

    


    c.  The
definition of “Maximum Loan Amount” set forth in Exhibit 1 to the Loan
Agreement, as previously modified, is hereby deleted in its entirety and the
following is substituted therefor:

    


    "’Maximum Loan Amount’
means: $18,000,000.00.”

    


    d.  The
definition of “Termination Date” set forth in the Loan Agreement is hereby
deleted in its entirety, and the following is substituted therefor:

    
 

    “’Termination Date’
means January 31, 2012.

    


    3.  Except
as modified herein, all other terms, covenants and conditions set forth in any
Loan Document shall remain unmodified and in full force and effect.

    


    ACKNOWLEDGMENTS AND
REPRESENTATIONS.  Borrower and Guarantor acknowledge and
represent that the Amended Note, the Loan Agreement, the Guaranty and all other
Loan Documents, as amended hereby, are in full force and effect without any
defense, counterclaim, right or claim of set-off; that, after giving effect to
this Agreement, no default or event that with the passage of time or giving of
notice would constitute a default under the Loan Documents has occurred; that
all representations and warranties contained in the Loan Documents are true and
correct as of this date; that all necessary action to authorize the execution
and delivery of this Agreement has been taken; and that this Agreement is a
modification of an existing obligation and is not a novation.

    


    
      
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    COLLATERAL.  Borrower
and Guarantor acknowledge and confirm that there have been no changes in the
ownership of the collateral pledged to secure the Loan (the "Collateral") since
the Collateral was originally pledged; that the Bank has existing, valid first
priority security interests and liens in the Collateral; and that such security
interests and liens shall secure Borrower’s and Guarantor’s obligations to Bank,
including without limitation the Note as amended hereby, and all future
modifications, extensions, renewals and/or replacements of the Loan
Documents.

    


    REAFFIRMATION OF
GUARANTY.  Guarantor hereby consents to the modifications
contained herein and hereby ratifies and confirms: (a) that it unconditionally
guarantees to Bank the payment and performance from and by Borrower of the
Guaranteed Obligations, as defined in the Guaranty, upon the terms and
conditions set forth in the Guaranty and (b) such Guaranteed Obligations
include, without limitation, the Amended Note and Loan Agreement as modified
hereby.  Guarantor acknowledges that its reaffirmation and
ratification of the Guaranty is a material inducement for Bank to enter into
this Agreement and that Bank would not do so without said reaffirmation and
ratification.  This Agreement and the Guaranty are Guarantor’s valid
and binding obligation enforceable against it in accordance with their
terms.

    


    MISCELLANEOUS
PROVISIONS.  Assignment.  This Agreement and the
other Loan Documents shall inure to the benefit of and be binding upon the
parties and their respective heirs, legal representatives, successors and
assigns.  Bank's interests in and rights under this Agreement and the
other Loan Documents are freely assignable, in whole or in part, by
Bank.  In addition, nothing in this Agreement or any of the other Loan
Documents shall prohibit Bank from pledging or assigning this Agreement or any
of the other Loan Documents or any interest therein to any Federal Reserve
Bank.  Borrower shall not assign its rights and interest hereunder or
under any of the other Loan Documents without the prior written consent of Bank,
and any attempt by Borrower to assign without Bank's prior written consent is
null and void.  Any assignment shall not release Borrower from the
Obligations. Applicable Law;
Conflict Between
Documents. This Agreement and, unless otherwise provided in any
other Loan Document, the other Loan Documents shall be governed by and
interpreted in accordance with federal law and, except as preempted by federal
law, the laws of the state named in Bank's address on the first page hereof
without regard to that state's conflict of laws principles.  If the
terms of this Agreement should conflict with the terms of any loan agreement or
any commitment letter that survives closing, the terms of this Agreement shall
control.  Borrower's
Accounts.  Except as prohibited by law, Borrower grants Bank a
security interest in all of Borrower's deposit accounts and investment property
with Bank and any of its affiliates. Swap
Agreements.  All swap agreements (as defined in 11 U.S.C. §
101, as in effect from time to time), if any, between Borrower and Bank or its
affiliates are independent agreements governed by the written provisions of said
swap agreements, which will remain in full force and effect, unaffected by any
repayment, prepayment, acceleration, reduction, increase or change in the terms
of the Amended Note, except as otherwise expressly provided in said written swap
agreements, and any payoff statement from Bank relating to the Amended Note
shall not apply to said swap agreements except as otherwise expressly provided
in such payoff statement.  Jurisdiction.  Borrower
irrevocably agrees to non-exclusive personal jurisdiction in the state named in
the Bank’s address on the first page hereof.  Severability.  If
any provision of this Agreement or of the other Loan Documents shall be
prohibited or invalid under applicable law, such provision shall be ineffective
but only to the extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of this Agreement or
other such document.  Payments.  All
payments shall be mailed to Bank at Commercial Loan Services, P. O. Box 740502,
Atlanta, GA  30374-0502; or other such address as provided by Bank in
writing.  Notices.  Any
notices to Borrower shall be sufficiently given, if in writing and mailed or
delivered to the Borrower's address shown above or such other address as
provided hereunder, and to Bank, if in writing and mailed or delivered to
Wachovia Bank, National Association, Mail Code MAC J0528-110, 50 Main Street,
White Plains, NY 10606 or such other address as Bank may specify in writing from
time to time.  Notices to Bank must include the mail
code.  In the event that Borrower changes Borrower's address at any
time prior to the date the obligations under the Amended Note are paid in full,
Borrower agrees to promptly give written notice of said change of address by
registered or certified mail, return receipt requested, all charges
prepaid.  Plural;
Captions.  All references in the Loan Documents to Borrower,
guarantor, person, document or other nouns of reference mean both the singular
and plural form, as the case may be, and the term "person" shall mean any
individual, person or entity.  The captions contained in the Loan
Documents are inserted for convenience only and shall not affect the meaning or
interpretation of the Loan Documents.  Advances. Bank in its sole
discretion may make other advances and readvances under the Amended Note
pursuant to its terms.  Posting of
Payments.  All payments received during normal banking hours
after 2:00 p.m. local time at the office of Bank first shown above shall be
deemed received at the opening of the next banking day.  Unless
otherwise permitted by Bank, any repayments of the Amended Note, other than
immediately available U.S. currency, will not be credited to the outstanding
loan balance until Bank receives collected funds. Joint and Several
Obligations. If there is more than one Borrower, each is jointly and
severally obligated together with all other parties obligated for the
Obligations.  Fees
and Taxes.  Borrower shall promptly pay all documentary,
intangible recordation and/or similar taxes on this transaction whether assessed
at closing or arising from time to time.  Patriot Act
Notice.  To help fight the funding of terrorism and money
laundering activities, Federal law requires all financial institutions to
obtain, verify, and record information that identifies each person who opens an
account.  For purposes of this section, account shall be understood to
include loan accounts.  Telephone Communication
Monitoring.  Borrower agrees that Borrower’s telephone
communications with Bank may be monitored and/or recorded to improve customer
service and security.  Final
Agreement.  This Agreement and the other Loan Documents
represent the final agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous or subsequent agreements of the
parties.  There are no unwritten agreements between the
parties.

    


    
      
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    LIMITATION ON LIABILITY; WAIVER OF
PUNITIVE DAMAGES. EACH OF THE PARTIES HERETO, INCLUDING BANK BY
ACCEPTANCE HEREOF, AGREES THAT IN ANY JUDICIAL, MEDIATION OR ARBITRATION
PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN OR AMONG THEM THAT MAY ARISE OUT
OF OR BE IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
OTHER AGREEMENT OR DOCUMENT BETWEEN OR AMONG THEM OR THE OBLIGATIONS EVIDENCED
HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF, OR BE
LIABLE TO THE OTHER FOR, (1) INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR (2)
PUNITIVE OR EXEMPLARY DAMAGES.   EACH OF THE PARTIES HEREBY
EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY
HAVE OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY SUCH PROCEEDING,
CLAIM OR CONTROVERSY, WHETHER THE SAME IS RESOLVED BY ARBITRATION, MEDIATION,
JUDICIALLY OR OTHERWISE.

    


    CONNECTICUT PREJUDGMENT REMEDY
WAIVER.  BORROWER ACKNOWLEDGES THAT THE TRANSACTIONS
REPRESENTED BY THIS AGREEMENT ARE COMMERCIAL TRANSACTIONS AND HEREBY VOLUNTARILY
AND KNOWINGLY WAIVE ANY RIGHTS TO NOTICE OF AND HEARING ON PREJUDGMENT REMEDIES
UNDER CHAPTER 903A OF THE CONNECTICUT GENERAL STATUTES OR OTHER STATUTES
AFFECTING PREJUDGMENT REMEDIES, AND AUTHORIZE THE BANK'S ATTORNEY TO ISSUE A
WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER, PROVIDED THE COMPLAINT SHALL
SET FORTH A COPY OF THIS WAIVER.

    


    WAIVER OF JURY
TRIAL.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER BY
EXECUTION HEREOF AND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE LOAN DOCUMENTS OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONNECTION WITH THIS AGREEMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY WITH RESPECT HERETO.  THIS PROVISION IS A
MATERIAL INDUCEMENT TO BANK TO ACCEPT THIS AGREEMENT.  EACH OF THE
PARTIES AGREES THAT THE TERMS HEREOF SHALL SUPERSEDE AND REPLACE ANY PRIOR
AGREEMENT RELATED TO ARBITRATION OF DISPUTES BETWEEN THE PARTIES CONTAINED IN
ANY LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT HERETOFORE EXECUTED IN
CONNECTION WITH, RELATED TO OR BEING REPLACED, SUPPLEMENTED, EXTENDED OR
MODIFIED BY, THIS AGREEMENT.

    


    
      
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    BORROWER
HEREBY REPRESENTS AND WARRANTS TO BANK THAT THE WITHIN WAIVERS ARE THEIR FREE
ACT AND DEED MADE KNOWINGLY AND VOLUNTARILY FOLLOWING CONSULTATION WITH
INDEPENDENT COUNSEL OF THEIR CHOICE.

    


    PLACE OF EXECUTION AND
DELIVERY.  Borrower hereby certifies that this Agreement and
the Loan Documents were executed in the State of Connecticut and delivered to
Bank in the State of Connecticut.

    


    IN WITNESS WHEREOF, the
undersigned have signed and sealed this Agreement as of the day and year first
above written.

    


    


    WITNESSES:

    


     

    
      	 	 	Acme United
      Corporation	 
	 	 	 	 
	 	 By:  
      	/s/ Walter C.
      Johnsen	 
	 	 	Walter C.
      Johnsen	 
	 	 	Its: Chairman of the
      Board and	 
	 	 	     Chief
      Executive Officer	 
	 	 	 	 
	 	 	 	 
	 	 	 Acme United
      Limited	 
	 	 	 	 
	 	 By:  
      	/s/ Walter C.
      Johnsen	 
	 	 	Walter C.
      Johnsen	 
	 	 	Its: Chairman of the
      Board	 


    

     

    
    

     

    
      	STATE
      OF CONNECTICUT 	)	 
	                                                  
      	) ss:
      Fairfield            	January
      25, 2010
	 COUNTY OF
      FAIRFIELD	)	 


    

     

    


    Personally appeared this date, Walter
C. Johnsen, Chairman of the Board and Chief Executive Officer of Acme United
Corporation, a Connecticut corporation, signer and sealer of the
foregoing instrument and acknowledged the same to be his free act and deed as
such officer, and the free act and deed of said corporation, before
me.

     

    


     

    
      	 	 	 
	 	Notary
      Public	 
	 	My
      Commission Expires:	 
	 	Commissioner
      of the Superior Court	 


    

     

     

    
      
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        	STATE
      OF CONNECTICUT	)	 
	                                                  
      	) ss:
      Fairfield               	      
                January
      25, 2010

              
	COUNTY OF
      FAIRFIELD	)	 


      

       

    

    Personally appeared this date, Walter
C. Johnsen, Chairman of the Board of Acme United
Limited, a Canadian corporation, signer and sealer of the foregoing
instrument and acknowledged the same to be his free act and deed as such
officer, and the free act and deed of said corporation, before me.

    


    

       

      
        	 	 	 
	 	      
                Notary
      Public

              	 
	 	      
                My
      Commission Expires:

              	 
	 	      
                Commissioner
      of the Superior Court

              	 


      

       

    

     

    
       

      
        	 	 	 WACHOVIA BANK,
      NATIONAL ASSOCIATION
	 	 	 	 
	 	 By:  
      	/s/ Annette
      Herber	 
	 	 	      
                Annette
      Herber

              	 
	 	 	      
                Its:
      Vice President, Duly Authorized

              	 


      

       



    
      
         

        
          	      
                  STATE
      OF NEW YORK 

                	)	 
	                                                  
      	) ss:
      Fairfield            	      
                        
                    January
      26, 2010

                  

                
	COUNTY
      OF                          
      	)	 


        

      

    

     

     

    Personally appeared this date, Annette
Herber, Vice President of Wachovia Bank, National Association, a National
Banking Association, signer and sealer of the foregoing instrument and
acknowledged the same to be his/her free act and deed as such officer, and the
free act and deed of said banking association, before me.

    


    
      

         

        
          	 	 	 
	 	      
                        
                    Notary
      Public

                  

                	 
	 	      
                        
                    My
      Commission Expires:

                  

                	 


        

         

         

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