AMENDMENT NO. 2 TO CONSENT TO SUPPLEMENTAL LOAN UNDER LOAN AND SECURITY AGREEMENT

As of May 18, 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 as of 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) to the Borrowers.

 

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. 2 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

 

(a)           Capitalized terms used and not otherwise defined herein shall have their respective meanings as defined in the Credit Agreement and the Consent.

 

2.  Amendments to Consent

 

(a)           Section 2.1 of the Consent is hereby amended and restated in its entirety as follows:

 

“2.1           Consent to Supplemental Loan.  Agent 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 the following amounts during the following periods: (a) from May 18, 2007 up to and including May 30, 2007, $2,500,000, (b) from May 31, 2007 up to and including June 6, 2007 2,250,000, (c) from June 7 2007 up to and including June 14, 2007, $2,000,000, (d) from June 15, 2007 up to and including June 21, 2007 $1,750,000, (e) from June 22, 2007 up to and including June 30, 2007 $1,500,000, (f) from July 1, 2007  up to and including July 7, 2007, $1,000,000, (g) from July 8, 2007  up to and including July 14, 2007, $500,000, and (h) from and after July 15, 2007, $0.  If the Supplemental Loan during any of the foregoing periods exceeds the applicable Supplemental Loan amount permitted for such period, such excess shall be immediately due and payable without demand.  If such excess is not repaid in full, Borrowers acknowledge that the failure to make such payment shall constitute an Event of Default under the Loan Agreement.”

 

(b)           Section 2.3 of the Consent is hereby deleted in its entirety.

 

3.  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.

 

4.  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; and

 

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

 

5.  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.

 

6.  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.

 

7.  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.

 

8.  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.

 

Very truly yours,

THE CIT GROUP/BUSINESS CREDIT, INC., as Agent

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                                                      

Read and Agreed to:

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

By: /s/                      Robert Mahoney                                                      

Name:                      Robert Mahoney                                                      

Title:                      Sr. Vice President