SECOND AMENDMENT TO REVOLVING LOAN AGREEMENT, PROMISSORY NOTE AND OTHER LOAN DOCUMENTS

 

                                                                    EXHIBIT 4(a)

 

 

 

 

 

                  SECOND AMENDMENT TO REVOLVING LOAN AGREEMENT,

                    PROMISSORY NOTE AND OTHER LOAN DOCUMENTS

 

 

        AGREEMENT, made this 5th day of May 2005 (this "Agreement") between

JACLYN, INC. ("Borrower"), a corporation organized and existing pursuant to the

laws of the State of Delaware, having an address at 635 59th Street, West New

York, New Jersey 07093 (hereinafter referred to as, "Borrower") and HUDSON

UNITED BANK, a New Jersey corporation, (hereinafter referred to as, "Bank"),

located at 1000 MacArthur Boulevard, Mahwah, New Jersey 07430.

 

 

                              W I T N E S S E T H:

 

        WHEREAS:

 

        A.       Borrower entered into a revolving loan agreement with Bank on

December 23, 2002 and pursuant to such revolving loan agreement, Borrower

executed and delivered to Bank its promissory note in the original principal

amount of THIRTY-TWO MILLION AND 00/100 (32,000,000.00) DOLLARS dated December

23, 2002 (the "Revolving Note");

 

        B.       Borrower subsequently requested that Bank increase the amount of

funds available under the Revolving Loan from "THIRTY-TWO MILLION AND 00/100

(32,000,000.00) DOLLARS" to "FORTY MILLION AND 00/100 (40,000,000.00) DOLLARS,"

extend the maturity date of the Revolving Loan and Revolving Note from "December

1, 2004" to "December 1, 2005," increase the amount of the direct debt sub-limit

under the Revolving Loan from "$22,000,000.00" to "$25,000,000.00," increase the

over-advance limit from "$5,000,000.00" to "$8,000,000.00" for the period July

31st through November 30th and make certain other modifications and changes to

the terms and conditions of the revolving loan agreement;

 

        C.       Bank agreed to increase the amount of funds available under the

Revolving Loan from "THIRTY-TWO MILLION AND 00/100 (32,000,000.00) DOLLARS" to

"FORTY MILLION AND 00/100 (40,000,000.00) DOLLARS," to extend the maturity date

of the

 

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Revolving Loan and Revolving Note from "December 1, 2004" to "December 1, 2005,"

to increase the amount of the direct debt sub-limit under the Revolving Loan

from "$22,000,000.00" to "$25,000,000.00," to increase the over-advance limit

from "$5,000,000.00" to "$8,000,000.00" for the period July 31st through

November 30th and to make certain other modifications and changes to the terms

and conditions of the revolving loan agreement strictly in accordance with the

terms and conditions of a first amendment to revolving loan agreement,

promissory note and other loan documents dated October 23, 2003 (the revolving

loan agreement dated December 23, 2002 as amended by the first amendment to

revolving loan agreement, promissory note and other loan documents dated October

23, 2003 are hereinafter collectively referred to as, the "Loan Agreement");

 

        D.       In connection with the first amendment, Borrower executed and

delivered to Bank its promissory note dated October 23, 2003 in the original

principal amount of $40,000,000.00 (the "Restated Secured Revolving Note");

 

        E.       Borrower has again requested that Bank continue to provide

financing under the Revolving Loan, extend the maturity date of the Revolving

Loan and Restated Secured Revolving Note from "December 1, 2005" to "December 1,

2007," modify the interest rate on Advances and otherwise modify the terms and

conditions of the Loan Agreement; and

 

        F.       Bank has agreed to continue to provide financing under the

Revolving Loan, to extend the maturity date of the Revolving Loan and Restated

Secured Revolving Note from "December 1, 2005" to "December 1, 2007," to modify

the interest rate on Advances and to otherwise modify the terms and conditions

of the Loan Agreement in accordance with the terms and conditions of this

Agreement.

 

                NOW THEREFORE, in consideration of the foregoing, and for other

good and valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, the undersigned hereto agree as follows:

 

                1.       Sections 1.9, 1.10 and 1.11 of the Loan Agreement are

amended to read as follows:

 

                        "1.9. "Code" shall mean the Internal Revenue Code of the

United States.

 

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                        1.10. "Collateral" shall mean all of the Property and

interests in Property described in the General Security Agreement, and all other

personal property of Borrower and interests of Borrower in personal property

that now or hereafter secures the payment and performance of any of the

Obligations pursuant to any of the Loan Documents or otherwise including,

without limitation, any proceeds and insurance proceeds of the foregoing.

 

                        1.11. "Debt" shall mean Borrower's total liabilities

determined in accordance with GAAP excluding loans which have been subordinated

in writing to the Revolving Loan."

 

                2.       Any reference in the Loan Agreement to Section 1.11

shall hereinafter refer to Section 1.10.

 

                3.       Section 1.47 of the Loan Agreement is amended to read as

follows:

 

                        "1.47. "Termination Date" shall mean the earlier of

December 1, 2007, or the date on which Lender terminates this Agreement pursuant

to Section 12.1 of this Agreement."

 

                4.       Section 2.1 of the Loan Agreement is amended to read as

follows:

 

                        "2.1. Advances. Subject to the terms and conditions of

this Agreement including, without limitation, the Maximum Facility and relying

upon the representations and warranties set forth in this Agreement, for so long

as no Default or Event of Default shall have occurred and shall be continuing,

Lender shall make Advances to Borrower on its request, from time to time during

the term of this Agreement in an amount ("Borrowing Capacity") not to exceed at

any one time outstanding the lesser of:

 

                        (a) TWENTY-FIVE MILLION and 00/100 (25,000,000.00)

Dollars, or

 

                         (b) the sum of (i) eighty-five (85) percent of the face

amount of Borrower's Eligible Receivables, (ii) fifty (50) percent of the Value

of Borrower's Eligible Inventory, and (iii) fifty (50) percent of the

outstanding face amount of Letters of Credit issued under this Agreement, plus

in each case, for the period from June 30th through October 31st only

$8,000,000.00, provided an officer of Borrower submits

 

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to Lender an Authenticated Record within twenty (20) days of the end of June,

July, August, September and October stating that sixty-five (65) percent of the

value of all Eligible Inventory is subject to confirmed bona fide purchase

orders with unrelated third parties. Value shall mean the lower of cost or the

fair market value of such Inventory, as reflected on the books and records of

Borrower.

 

                        For the purpose of calculating the Borrowing Capacity

under Subsection 2.1(b), the face amount of all Letters of Credit shall be

deducted from such sum. Within the limits of the Borrowing Capacity, and subject

to the limitations set forth in this Agreement, Borrower may borrow, repay and

reborrow Advances."

 

                5.       Section 3.1 of the Loan Agreement is amended to read as

follows:

 

                        "3.1. Interest on Advances. Except as provided below,

Borrower shall pay interest monthly, in arrears, on the first day of each month,

commencing January 1, 2003 on the average daily unpaid principal amount of the

Revolving Loan at a fluctuating rate which is equal to the Loan Interest Rate

or, as provided below, the LIBOR rate. Notwithstanding the foregoing, on and

after the occurrence and during the continuance of an Event of Default, Borrower

shall pay interest on the Revolving Loan at a rate which is three (3) percent

per annum above the Prime Rate; provided, however, in no event shall any

interest to be paid under this Agreement or under any Loan Document exceed the

maximum rate permitted by law.

 

                         Notwithstanding the foregoing, Borrower, at any time

shall be permitted to fix the interest rate payable on all or any portion of the

Revolving Loan for a period of one, two or three months based on the

corresponding LIBOR rate for such time period plus two hundred fifty (250) basis

points for the period from December 23, 2002 until October 22, 2003, plus two

hundred twenty-five (225) basis points from October 23, 2003 until May 5, 2005

and plus two hundred (200) basis points thereafter. The interest on any such

fixed rate Advance shall be due and payable on the maturity date of such

Advance."

 

                6.       Section 9.6 of the Loan Agreement is amended to read as

follows:

 

                        "9.6. Distributions. Make any capital distribution in

Property or return of capital, or purchase or

 

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redeem any of