k607ex10276.htm


    


    AMENDMENT
      NO. 3 TO CONSENT TO SUPPLEMENTAL LOAN

    UNDER
      LOAN AND SECURITY AGREEMENT

    


    


    As
      of
      July 24, 2007

    


    JACO
      ELECTRONICS, INC.

    145
      Oser
      Avenue

    Hauppauge,
      New York 11778

    


    


    Ladies
      and Gentlemen:

    


    The
      CIT
      Group/Business Credit, Inc. (“CIT”), in its capacity as agent pursuant to
      the Credit Agreement (as hereinafter defined) acting for and on behalf of the
      financial institutions which are parties thereto as lenders (in such capacity,
      “Agent”), and the financial institutions which are parties to the Credit
      Agreement as lenders (each a “Lender” and collectively, “Lenders”)
      have entered into certain financing arrangements pursuant to which Agent and
      Lenders may make loans and advances and provide other financial accommodations
      to Jaco Electronics, Inc., a New York corporation, and Interface Electronics
      Corp., a Massachusetts corporation (collectively, the “Borrowers”) as set
      forth in the Credit Agreement, dated as of December 22, 2006, by and among
      the
      Borrowers, Agent and Lenders (as the same now exists or may hereafter be
      amended, modified, supplemented, extended, renewed, restated or replaced, the
      “Credit Agreement”), and 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 now exist or may hereafter be amended, modified,
      supplemented, extended, renewed, restated or replaced, being collectively
      referred to herein as the “Loan Documents”).

     

    Agent
      and
      Borrowers executed a Consent to Supplemental Loan Under Loan and Security
      Agreement dated March 5, 2007(as amended, the “Consent”), pursuant to which
      Agent and Lenders agreed to extend to Borrowers a Supplemental Loan (as defined
      in the Consent).

     

    The
      Borrowers have requested that the Agent and Required Lenders agree to various
      amendments to the Consent, and Agent and Required Lenders are agreeable to
      all
      of the foregoing, on and subject to the terms and conditions set forth in this
      Amendment No. 3 to Consent to Supplemental Loan under Loan and Security
      Agreement (this “Amendment”).

     

    In
      consideration of the premises and the mutual covenants contained herein and
      in
      the Credit Agreement and the Consent, the parties hereto agree as
      follows:

     

    1.  Defined
      Terms

     

    .  Capitalized
      terms used and not otherwise defined herein shall have their respective meanings
      as defined in the Loan Agreement and the Consent.

     

    2.  Amendments
      to Consent

     

    .  Sections
      2.1, 2.2 and 2.3 of the Consent are hereby amended and restated in its entirety
      as follows:

     

    “2.1           Consent
      to Supplemental Loan.  Agent, for the sole account of The CIT
      Group/Business Credit, Inc. (“CIT”), as a Lender, hereby consents to extend to
      Borrowers a Supplemental Loan under the Loan Agreement (but in no event shall
      the Revolving Loans plus the Supplemental Loan exceed the Revolving Commitment)
      in an amount equal to $3,000,000 beginning on the date hereof and continuing
      up
      to April 1, 2009 (the “Supplemental Loan Repayment Date”).  If the
      Supplemental Loan is not repaid in full by the Supplemental Loan Repayment
      Date
      or if the Borrowers fail to make any payment required to be made under Section
      2.3 below, Borrowers acknowledge, confirm and agree that any such event shall
      constitute an Event of Default under the Loan Agreement.  The
      Supplemental Loan shall be for the sole account of CIT.

     

    2.2           Interest
      on Supplemental Loan.  Interest shall accrue on the Supplemental
      Loan at a rate equal to the LIBO Rate plus five percent (5%), and shall be
      paid
      in accordance with the terms of the Loan Agreement.

     

    2.3           Repayment
      of Supplemental Loan.

     

    (a)           The
      Supplemental Loan shall be repaid in seven (7) quarterly installments as
      follows:

     

    (i)           The
      first (1st)
      installment shall be payable on October 1, 2007 in the amount of
      $300,000;

     

    (ii)           The
      second (2nd)
      installment shall be payable on January 1, 2008 in the amount of
      $300,000;

     

    (iii)           The
      third (3rd)
      installment shall be payable on April 1, 2008 in the amount of
      $400,000;

     

    (iv)           The
      fourth (4th)
      installment shall be payable on July 1, 2008 in the amount of
      $500,000;

     

    (v)           The
      fifth (5th)
      installment shall be payable on October 1, 2008 in the amount of
      $500,000;

     

    (vi)           The
      sixth (6th)
      installment shall be payable on January 1, 2009 in the amount of $500,000;
      and

     

    (vii)           The
      seventh (7th)
      and last installment shall be payable on April 1, 2009 in the amount of
      $500,000.

     

    (b)           In
      addition to the scheduled installment payments as set forth in Section 2.3(a)
      above, Borrowers shall make the following mandatory prepayments in respect
      of
      the Supplemental Loan:

     

    (i)           For
      Borrowers’ Fiscal Year ending June 30, 2008 and for each fiscal year thereafter,
      Borrowers’ shall make a mandatory prepayment in respect of the Supplemental Loan
      in an amount equal to fifty percent (50%) of Excess Cash Flow (as defined in
      Section 2.3(b)(iii) below for each such Fiscal Year payable upon delivery of
      the
      annual financial statements required to be delivered under Section 5.01(a)
      of
      the Loan Agreement (the  “Audited Financial Statements”), but in any
      event not later than one hundred (100) days after the end of each such Fiscal
      Year (the “50% Excess Cash Flow Mandatory Prepayment”).  The 50%
      Excess Cash Flow Mandatory Prepayment shall be applied by Agent, for the account
      of the CIT, pro rata, against the principal installments of the Supplemental
      Loan in the inverse order of maturity thereof.  The Borrowers’
obligation to remit to Agent, for the account of CIT, any prepayments in respect
      of Excess Cash Flow shall terminate upon payment in full of the Supplemental
      Loan; and

     

    (ii)           Borrowers
      shall remit to Agent, for the benefit of CIT, and as a mandatory prepayment
      in
      respect of the Supplemental Loan, the net proceeds received by Borrowers (the
      “Designated Inventory Proceeds”) from the sale or disposition of the Designated
      Inventory (as defined below).  The Designated Inventory Proceeds shall
      be remitted to Agent, promptly upon receipt by the Borrowers, but no less
      frequently than monthly, and shall be applied by Agent, for the account of
      the
      CIT, pro rata, first, against the outstanding principal installments of the
      Supplemental Loan in the inverse order of maturity thereof, and second, the
      other Obligations as provided under the Loan Agreement.

     

    (iii)           As
      used in this Section 2.3(b):

     

    (A)  “Excess
      Cash Flow” shall mean, for any Fiscal Year, the sum for such Fiscal Year of: (1)
      EBITDA; minus (2) (w) Capital Expenditures made in cash by the Borrowers and
      their Subsidiaries not in excess of the amounts permitted by the Agreement;
      plus
      (x) all prepayments and repayments of  the Supplemental Loans; plus
      (y) all income taxes actually paid in cash during such Fiscal Year by the
      Borrowers and their Subsidiaries; plus (z) Interest Expense paid in cash;
      and

     

    (B)  “Designated
      Inventory” shall mean the Inventory set forth on Schedule A annexed to Amendment
      No. 3 to Consent to Supplemental Loan under Loan and Security Agreement among
      Borrowers, Lenders and Agent dated as of July 24, 2007.

     

    (c)           The
      prepayment of the Supplemental Loan, in whole or in part, shall be without
      premium or penalty.”

     

    3.  Increase
      in the Availability Block under Loan Agreement

     

    .  So
      long as the Supplemental Loan remains outstanding, notwithstanding anything
      to
      the contrary contained in the Loan Agreement, the Availability Block shall
      be
      increased from $500,000 to $750,000 or such lesser amount as Agent, in its
      Permitted Discretion, shall determine.  After payment in full of the
      Supplemental Loan, the Availability Block shall be as set forth in the Loan
      Agreement as in effect on the date hereof.

     

    4.  Amendment
      to Waterfall under Loan Agreement

     

    .  So
      long as the Supplemental Loan remains outstanding, notwithstanding anything
      to
      the contrary contained in Section 7.02 of the Loan Agreement, after (a) an
      Event
      of Default has occurred and is continuing and the Agent so elects or the
      Required Lenders so direct and (b) the exercise of remedies provided for in
      Article VII of the Loan Agreement (or after the Loans have automatically become
      immediately due and payable and the Letter of Credit Obligations have
      automatically been required to be cash collateralized as set forth in Section
      7.01), any amounts received on account of the Obligations shall be applied
      by
      the Agent in the following order:

     

    first,
      to pay any fees, indemnities, expense reimbursements or other Obligations then
      due to the Agent in its capacity as such,

     

    second,
      to pay all amounts then due and payable to the Agent on account of Protective
      Advances,

     

    third,
      to pay all amounts then owed to the Swingline Lender on account of Swingline
      Loans,

     

    fourth,
      to ratably pay all amounts owed to the Issuing Bank(s) on account of Letter
      of
      Credit Obligations,

     

    fifth,
      to ratably pay all interest and fees owed on account of the Revolving Loans
      (other than the Supplemental Loan),

     

    sixth,
      to ratably pay all principal amounts of the Revolving Loans (other than the
      Supplemental Loan) then outstanding,

     

    seventh,
      to provide cash collateral for any outstanding Letters of Credit,

     

    eighth,
      to ratably pay all interest and fees owed on account of the Supplemental
      Loan,

     

    ninth,
      to ratably pay all principal amounts of the Supplemental Loan then
      outstanding,

     

    tenth,
      to ratably pay any other expense reimbursements or other Obligations then due
      and payable to the Lenders (other than with respect to Banking Services
      Obligations and Swap Obligations), and

     

    eleventh,
      to ratably pay of any amounts owing by the Borrowers with respect to Banking
      Services Obligations and Swap Obligations.

     

    The
      Agent
      and the Lenders shall have the continuing and exclusive right to apply and
      reverse and reapply any and all such proceeds and payments to any portion of
      the
      Obligations owing to the Agent and Lenders.

     

    After
      payment in full of the Supplemental Loan, any amounts received on account of
      the
      Obligations shall be as set forth in Section 7.02 of the Loan Agreement as
      in
      effect on the date hereof.

     

    5.  Amendment
      Fee.  In addition to any other fees payable under the
      Loan Agreement, in consideration of the Supplemental Loan provided for
      hereunder, Borrowers shall jointly and severally pay to Agent, for the sole
      account of  The CIT Group/Business Credit, Inc., an amendment fee in
      the amount of $25,000.  The amendment fee shall be fully earned and
      payable as of the date hereof and may be charged by Agent to any account of
      Borrowers maintained by Agent.

     

    6.  Representations,
      Warranties and Covenants

     

    .  Each
      of the Borrowers represents, warrants and covenants with and to Agent and
      Lenders as follows, which representations, warranties and covenants are
      continuing and shall survive the execution and delivery hereof, the truth and
      accuracy of, or compliance with each, together with the representations,
      warranties and covenants in the other Loan Documents, being a condition of
      the
      effectiveness of this Amendment and a continuing condition of the making or
      providing of any Loans or other financial accommodations by Agent and Lenders
      to
      the Borrowers:

     

    (a)  This
      Amendment has been duly authorized, executed and delivered by all necessary
      action of each of the Borrowers and is in full force and effect, and the
      agreements and obligations of each of the Borrowers contained herein constitute
      legal, valid and binding obligations of each of the Borrowers, enforceable
      against each of the Borrowers in accordance with their terms; and

     

    (b)  All
      of
      the representations and warranties set forth in the Credit Agreement, as amended
      hereby, and in the other Loan Documents, are true and correct in all material
      respects after giving effect to the provisions of this Amendment, except to
      the
      extent any such representation or warranty is made as of a specified date,
      in
      which case such representation or warranty shall have been true and correct
      as
      of such date.

     

    7.  Conditions
      Precedent

     

    .  This
      Amendment shall not become effective unless all of the following conditions
      precedent have been satisfied in full, as determined by Agent:

     

    (a)  Agent
      shall have received an original of this Amendment (or an executed copy hereof
      by
      facsimile or by email), duly authorized, executed and delivered by each of
      the
      Borrowers;

     

    (b)  Agent
      shall have received the amendment fee payable under Section 5 above;
      and

     

    (c)  Agent
      shall have received all related agreements, documents and instruments as may
      be
      requested by Agent.

     

    8.  No
      Other Changes

     

    .  Except
      as specifically modified pursuant hereto, no other changes or modifications
      to
      the Consent are intended or implied and in all other respects, the Consent
      and
      other Loan Documents are hereby ratified, restated and confirmed by all parties
      hereto as of the date hereof.  To the extent of any conflicts between
      the terms of this Amendment and the Consent, the terms of this Amendment shall
      control.

     

    9.  Successors
      and Assigns

     

    .  This
      Amendment shall be binding upon and inure to the benefit of each of the parties
      hereto and its respective successors and assigns.

     

    10.  Counterparts

     

    .
      This Amendment may be executed in any number of counterparts, but
      all
      of such counterparts shall together constitute but one and the same
      agreement.

     

    11.  Required
      Lender Authorization

     

    .  Agent
      is executing this Amendment at the request and on behalf of Required Lenders
      in
      accordance with Section 9.03 of the Credit Agreement.

     

    [SIGNATURE
      PAGE FOLLOWS]

    Very
      truly yours,

    


    By:
      /s/
George Louis
      McKinley                                                                           

    


    Name:
      George Louis
      McKinley                                                                           

    


    Title:                      Vice
      President

    


    
      	
               

            	
              Read
                and Agreed to:

            


    

    


    
      	
               

            	
              JACO
                ELECTRONICS, INC.

            


    

    


    By:
      /s/ Jeffrey D.
      Gash                                                                

    


    Name:                      Jeffrey
      D.
      Gash                                                      

    


    Title:                      CFO                                                      

    


    
      	
               

            	
              INTERFACE
                ELECTRONICS CORP.

            


    

    


    By:
      /s/ Jeffrey D.
      Gash                                                                

    


    Name:                      Jeffrey
      D.
      Gash                                                      

    


    Title:                      CFO                                                      

    


    Acknowledged
      and Agreed to:

    


    
      	
               

            	
              BANK
                OF AMERICA, N.A., as a
                Lender

            


    

    


    By:
      /s/                      Robert
      Mahoney                                                      

    


    Name:                      Robert
      Mahoney                                                      

    


    Title:                      Sr.
      Vice
      President                                                      

    


    THE
      CIT GROUP/BUSINESS CREDIT, INC., as a Lender

    


    By:
      /s/
George Louis
      McKinley                                                                           

    


    Name:
      George Louis
      McKinley                                                                           

    


    Title:                      Vice
      President                                                                

    


    


    Schedule
      A

    


    


    Designated
      Inventory

    


    


    


    See
      Attached