EXHIBIT 10.14
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BETWEEN
INNOTRAC CORPORATION,
AS BORROWER,
AND
SOUTHTRUST BANK, N.A.
AS LENDER
DATED AS OF JANUARY 25, 1999
TABLE OF CONTENTS
Page
1. DEFINITIONS, TERMS AND REFERENCES............................................................2
1.1 Certain Definitions....................................................................2
1.2 Use of Defined Terms...................................................................9
1.3 Accounting Terms.......................................................................9
1.4 UCC Terms.............................................................................10
1.5 Terminology...........................................................................10
1.6 Exhibits..............................................................................10
2. THE FINANCING...............................................................................10
2.1 Revolving Line of Credit..............................................................10
2.2 Interest and Fees.....................................................................11
2.3 Method of Making Payments.............................................................12
2.4 Prepayments; Early Termination........................................................12
2.5 Use of Proceeds.......................................................................12
2.6 Increased Costs or Reduced Return.....................................................13
2.7 Indemnification of Lender.............................................................13
3. COLLECTIONS.................................................................................13
3.1 Collateral Reserve Account; Lockbox Accounts..........................................13
4. SECURITY INTEREST -- COLLATERAL.............................................................14
5. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
ACCOUNTS RECEIVABLE COLLATERAL..............................................................14
5.1 Bona Fide Accounts....................................................................14
5.2 Good Title; No Existing Encumbrances..................................................15
5.3 Right to Assign; No Further Encumbrances..............................................15
5.4 Power of Attorney.....................................................................15
6. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
INVENTORY COLLATERAL........................................................................15
6.1 Sale of Inventory Collateral..........................................................15
6.2 Insurance.............................................................................16
6.3 Good Title; No Existing Encumbrances..................................................16
6.4 Right to Grant Security Interest; No Further Encumbrances.............................16
6.5 Location of Inventory Collateral......................................................16
7. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
EQUIPMENT COLLATERAL........................................................................16
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7.1 Sale of Equipment Collateral..........................................................17
7.2 Insurance.............................................................................17
7.3 Good Title; No Existing Encumbrances..................................................17
7.4 Right to Grant Security Interest; No Further Encumbrances.............................17
7.5 Location..............................................................................17
8. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
BALANCES COLLATERAL............................................................................17
8.1 Ownership.............................................................................18
8.2 Liens.................................................................................18
9. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
INTANGIBLES COLLATERAL.........................................................................18
9.1 Ownership.............................................................................18
9.2 Liens.................................................................................18
9.3 Preservation..........................................................................18
10. GENERAL REPRESENTATIONS AND WARRANTIES.........................................................18
10.1 Existence and Qualification...........................................................19
10.2 Authority; Validity and Binding Effect................................................19
10.3 No Material Litigation................................................................19
10.4 Taxes.................................................................................19
10.5 Organization..........................................................................19
10.6 Insolvency............................................................................19
10.7 Title.................................................................................20
10.8 Margin Stock..........................................................................20
10.9 No Violations.........................................................................20
10.10 ERISA.................................................................................21
10.11 Financial Statements..................................................................21
10.12 Purchase of Collateral................................................................21
10.13 Pollution and Environmental Control...................................................22
10.14 Possession of Franchises, Licenses, Etc...............................................22
10.15 Disclosure............................................................................22
10.16 Subsidiaries..........................................................................22
10.17 Year 2000 Readiness...................................................................22
11. GENERAL AFFIRMATIVE COVENANTS..................................................................23
11.1 Records Respecting Collateral.........................................................23
11.2 Further Assurances....................................................................23
11.3 Right to Inspect......................................................................23
11.4 Reports...............................................................................23
11.5 Settlement Sheets.....................................................................24
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11.6 Periodic Financial Statements of Borrower.............................................24
11.7 Annual Financial Statements of Borrower...............................................24
11.8 Payment of Taxes......................................................................24
11.9 Maintenance of Insurance..............................................................25
11.10 Maintenance of Property...............................................................25
11.11 Certificate of No Event of Default; Compliance Certificate;
Notice of Default.....................................................................25
11.12 Change of Principal Place of Business, Etc............................................25
11.13 Waivers...............................................................................26
11.14 Preservation of Corporate Existence...................................................26
11.15 Compliance with Laws..................................................................26
11.16 ERISA.................................................................................26
11.17 Litigation............................................................................27
11.18 Environmental Compliance..............................................................27
12. FINANCIAL COVENANTS............................................................................29
12.1 Debt/Tangible Net Worth Ratio.........................................................29
12.2 Tangible Net Worth....................................................................29
12.3 Fixed Charge Coverage Ratio...........................................................29
13. NEGATIVE COVENANTS.............................................................................29
13.1 No Liens..............................................................................29
13.2 Debt..................................................................................29
13.3 Contingent Liabilities................................................................30
13.4 Distributions.........................................................................30
13.5 Stock Redemptions, Etc................................................................30
13.6 Restricted Investment.................................................................30
13.7 Merger, Transfer, Etc.................................................................30
13.8 ERISA.................................................................................30
13.9 Transactions with Affiliates..........................................................30
13.10 Fiscal Year...........................................................................31
14. EVENTS OF DEFAULT..............................................................................31
14.1 Notes.................................................................................31
14.2 Obligations...........................................................................31
14.3 Misrepresentations....................................................................31
14.4 Covenants.............................................................................31
14.5 Damage, Loss, Theft or Destruction of Collateral......................................32
14.6 Other Debts...........................................................................32
14.7 Voluntary Bankruptcy..................................................................32
14.8 Involuntary Bankruptcy................................................................32
14.9 Judgments.............................................................................32
14.10 ERISA.................................................................................33
14.11 Change of Control.....................................................................33
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14.12 Material Adverse Change...............................................................33
14.13 Change of Management..................................................................33
15. REMEDIES.......................................................................................33
15.1 Acceleration of the Obligations.......................................................34
15.2 Remedies of a Secured Party...........................................................34
15.3 Set Off...............................................................................35
15.4 Other Remedies........................................................................35
16. MISCELLANEOUS..................................................................................35
16.1 Waiver................................................................................35
16.2 Governing Law.........................................................................35
16.3 Survival..............................................................................35
16.4 No Assignment by Borrower.............................................................35
16.5 Counterparts..........................................................................36
16.6 Reimbursement.........................................................................36
16.7 Successors and Assigns................................................................36
16.8 Severability..........................................................................37
16.9 Notices...............................................................................37
16.10 Entire Agreement; Amendments..........................................................38
16.11 Time of the Essence...................................................................38
16.12 Interpretation........................................................................38
16.13 Lender Not Joint Venturer.............................................................38
16.14 Jurisdiction..........................................................................39
16.15 Acceptance............................................................................39
16.16 Payment on Non-Business Days..........................................................39
16.17 UCC Terminations......................................................................39
16.18 Cure of Default by Lender.............................................................39
16.19 Recitals..............................................................................40
16.20 Attorney-in-Fact......................................................................40
16.21 Sole Benefit..........................................................................40
16.22 Termination of this Agreement.........................................................40
16.23 Acknowledgment by Borrower............................................................40
17. CONDITIONS PRECEDENT...........................................................................41
17.1 Conditions to Initial Revolving Advance...............................................41
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EXHIBIT DOCUMENT
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A........................................ Collateral Locations
B........................................ Additional Permitted Encumbrances
C........................................ Form of Revolving Note
D........................................ Trade Names and Trade Styles
E........................................ Form of Secretary's Certificate
v
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
------------------------------------------------
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (hereinafter, as it
may be modified, amended or supplemented from time to time, and together with
all Exhibits attached hereto, called this "AGREEMENT"), made, entered into and
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effective as of the 25th day of January, 1999, by and between INNOTRAC
CORPORATION, a Georgia corporation ("BORROWER"); as borrower; and SOUTHTRUST
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BANK, N.A., a national banking association ("LENDER"), as lender;
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W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower and Lender are parties to that certain Amended and
Restated Loan and Security Agreement, dated as of December 5, 1997, as
heretofore amended (the "PRIOR LOAN AGREEMENT"), pursuant to which Lender has
--------------------
established for the benefit of the Borrower a revolving line of credit in the
maximum aggregate principal amount of Twenty-Five Million Dollars ($25,000,000);
and
WHEREAS, Borrower has requested that Lender increase the maximum aggregate
principal amount of such revolving line of credit to Thirty-Five Million Dollars
($35,000,000);
WHEREAS, Borrower has also requested Lender to extend the maturity date of
the revolving line of credit and to make certain other modification to the Prior
Loan Agreement, and subject to the terms and conditions set forth herein, Lender
is willing to do so; and
WHEREAS, Borrower and Lender wish to enter into this Agreement in order to
memorialize their mutual understandings in respect to such revolving line of
credit increase and the other financial accommodations made by Lender to the
Borrower;
WHEREAS, Lender is willing to extend such financial accommodations to
Borrower in accordance with the terms hereof upon the execution of this
Agreement by Borrower, compliance by Borrower with all of the terms and
provisions of this Agreement, and fulfillment by Borrower of all conditions
precedent to Lender's obligations herein contained; and
NOW, THEREFORE, in consideration of the sum of TEN DOLLARS ($10.00), the
foregoing premises, to induce Lender to extend the financial accommodations
provided for herein, and for other good and valuable consideration, the
sufficiency and receipt of all of which are acknowledged, Borrower and Lender
agree as follows:
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1. DEFINITIONS, TERMS AND REFERENCES.
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1.1 Certain Definitions.
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In addition to such other terms as elsewhere defined herein, as used in
this Agreement and in any Exhibits, the following capitalized terms shall have
the following meanings, unless the context requires otherwise:
"Accounts Receivable Collateral" shall mean all rights of Borrower to
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payment for goods sold or leased, or to be sold or to be leased, or for services
rendered or to be rendered, howsoever evidenced or incurred, including, without
limitation, all accounts, all contract rights, all instruments, all leases,
rental contracts and other chattel paper and all general intangibles arising
therefrom or relating thereto, all sales orders, all returned or repossessed
goods and all books, records, computer tapes, programs and ledger books arising
therefrom or relating thereto, all whether now owned or hereafter acquired or
arising.
"Account Debtor" shall mean any Person who is or may become obligated
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on any of the Accounts Receivable Collateral of Borrower.
"Affiliate" shall mean, with respect to any Person, any other Person
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Controlling, Controlled by or under common Control with, such Person.
"Agreement" shall have the meaning given to such term in the foregoing
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recitals to this Agreement.
"Balances Collateral" shall mean all property of Borrower left with
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Lender or in its possession now or hereafter, all deposit accounts of Borrower
now or hereafter opened with Lender, including, particularly, but without
limitation, any Collateral Reserve Account required to be established with
Lender pursuant to Section 3.1 hereof, all certificates of deposit issued by
Lender to Borrower, and all drafts, checks and other items deposited in or with
Lender by Borrower for collection now or hereafter.
"Bankruptcy Code" shall mean Title 11 of the United States Code, as
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amended from time to time.
"Base Rate" shall mean that interest rate so denominated and set by
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Lender from time to time as an interest rate basis for borrowings from Lender.
The Base Rate is one of several interest rate bases which may be used by Lender.
Lender lends at interest rates above and below the Base Rate. Any change in any
rate of interest charged hereunder as a result of any change in the Base Rate
shall become effective as of the opening of business on each date on which such
change in the Base Rate occurs.
2
"Business Day" shall mean any day on which Lender is open for the
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conduct of banking business at its main office in Atlanta, Georgia.
"Capital Expenditures" shall have the meaning given to such term in
--------------------
accordance with GAAP, and shall specifically include, in any event, any current
expenditure made by Borrower for the acquisition, construction, repair,
maintenance or replacement of fixed or capital assets which, under GAAP, would
be expected to be capitalized on the books of Borrower; provided, however, that
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the purchase or other acquisition of caller identification equipment or other
telecommunications equipment used for sale, rental or lease purposes shall not
be considered a Capital Expenditure for any purpose whatsoever under this
Agreement or any of the other Loan Documents.
"Closing Date" shall mean that date on which the initial disbursement
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of funds being made available to Borrower under the Revolving Line of Credit.
"Collateral" shall mean the property of Borrower described in Article
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4, or any part thereof, as the context shall require, in which Lender has, or is
to have, a security interest pursuant hereto, as security for payment of the
obligations.
"Collateral Locations" shall mean (i) the Executive Office, (ii) those
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locations specified in Exhibit "A" attached hereto and (iii) such other
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locations of Collateral as to which Lender shall be notified hereafter by
Borrower pursuant to Section 11.12.
"Collateral Reserve Account" shall mean, individually and
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collectively, any non-interest bearing, demand deposit account (or series of
such accounts, as the case may be) which is or may be required to open and
maintain with Lender pursuant to the requirements of Section 3.1.
"Control," "Controlled," or "Controlling" shall mean, with respect to
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any Person, the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities or
otherwise; provided, however, that, in any event, any Person who owns directly
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or indirectly twenty percent (20%) or more of the securities having ordinary
voting power for the election of directors or other governing body of a
corporation shall be deemed to "control" such corporation for purposes of this
Agreement.
"Debt" means all liabilities, obligations and indebtedness of Borrower
----
and its consolidated Subsidiaries to any Person, of any kind or nature, now or
hereafter owing, arising, due or payable, howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct, contingent,
fixed or otherwise, and including, without in any way limiting the generality of
the foregoing: (i) Borrower's or any such Subsidiary's liabilities and
obligations to trade creditors; (ii) all Debt for borrowed funds; (iii) all
obligations and liabilities of any Person secured by any Lien on Borrower's or
any such Subsidiary's Property, even though Borrower or such Subsidiary shall
not have assumed or become liable for the payment thereof; (iv) all accrued
pension fund and other employee benefit plan obligations and liabilities; (v)
all Guaranteed Obligations; and (vi) deferred taxes.
3
"Default Condition" shall mean the occurrence of any event which,
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after satisfaction of any requirement for the giving of notice or the lapse of
time, or both, would become an Event of Default.
"Default Rate" shall mean that interest rate per annum equal to two
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percent (2%) plus the stated interest rate effective under each Note from time
to time.
"EBITDA" shall mean the net earnings of Borrower and its consolidated
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Subsidiaries for any fiscal period before interest, income taxes, depreciation
and amortization expense for such period, determined under GAAP.
"Eligible Accounts" shall mean that portion of the Accounts Receivable
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Collateral of Borrower consisting of the net billed dollar amount of accounts
owing to Borrower by its Account Debtors subject to no counterclaim, defense,
setoff or deduction, excluding, however, in any event, but without limitation,
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unless otherwise waived in writing by Lender, any account: which is owing by any
Account Debtor having any past due accounts with Borrower, except for commercial
accounts of Borrower, and, in the case of commercial accounts of Borrower, any
account of an Account Debtor which is either more than ninety (90) days past
invoice date or as to which twenty-five percent (25%) or more of the accounts of
any Account Debtor are more than ninety (90) days past invoice date; (ii) as to
which Lender does not have a first priority security interest; or (iii) which
has been excluded by Lender for purposes hereof, which it reserves the right to
do, in its sole discretion, exercised in a commercially reasonable manner.
"Eligible Installment Sales Orders" shall mean that portion of
---------------------------------
Borrower's Accounts Receivable Collateral consisting of the net unbilled dollar
amount of installment sales made by Borrower for its products or services to its
Account Debtors subject to no counterclaim, defense, setoff or deduction,
excluding, however, in any event, but without limitation, unless otherwise
- ------------------
waived in writing by Lender, any such purchase order: (i) which is owing by any
Account Debtor having any past due accounts with Borrower, except for commercial
accounts of Borrower, and, in the case of commercial accounts of Borrower, any
account of an Account Debtor which is either more than ninety (90) days past
invoice date or as to which twenty-five percent (25%) or more of the accounts of
any Account Debtor are more than ninety (90) days past invoice date; (ii) as to
which Lender does not have a first priority security interest; or (iii) which
has been excluded by Lender for purposes hereof, which it reserves the right to
do, in its sole discretion, exercised in a commercially reasonable manner.
"Eligible Inventory" shall mean the Inventory Collateral of Borrower,
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provided that such Inventory Collateral (i) is located at one of the locations
set forth on Exhibit A; (ii) is subject to a valid and perfected first priority
security interest in favor of Lender; and (iii) is not obsolete, slow moving, a
custom item, defective, irregular, discontinued good or "seconds."
"Employee Benefit Plan" shall mean any employee welfare benefit plan
---------------------
or any employee pension benefit plan, as those terms are defined in Section 3(l)
and 3(2) of ERISA, for the benefit of employees of Borrower or any Subsidiary or
any other entity which is a member of a "controlled group" or under "common
control" with Parent, as such terms are defined in Section 4001(a)(14) of ERISA.
4
"Equipment Collateral" shall mean all equipment of Borrower, or in
--------------------
which it has rights, whether now owned or hereafter acquired, wherever located,
including, without limitation, all machinery, fixtures, furniture, furnishings,
leasehold improvements, rolling stock, motor vehicles, plant equipment,
computers and other office equipment and office furniture, together with any and
all attachments and accessions, substitutes and replacements, and tools, spare
parts, and repair parts used or useful in connection therewith.
"ERISA" shall mean the Employee Retirement Income Security Act of
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1974, as may be amended from time to time.
"Event of Default" shall mean any of the events or conditions
----------------
described in Article 14, provided that any requirement for the giving of notice
or the lapse of time, or both, has been satisfied.
"Executive Office" shall mean the chief executive office of Borrower
----------------
which is located at 6655 Sugarloaf Parkway, Duluth, Gwinnett County, Georgia
30097.
"Fiscal Year" shall mean the fiscal year of Borrower concluding as of
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December 31 in each calendar year.
"Fixed Charge Coverage Ratio" shall mean, for any fiscal period, on a
---------------------------
combined basis, the ratio which the sum of Net Income of Borrower and its
consolidated Subsidiaries for such period plus total depreciation and
----
amortization expense, lease expense and interest expense of Borrower and its
consolidated Subsidiaries for such period bears to the sum of total lease
expense, interest expense, capitalized interest and the current maturities of
the long-term debt of Borrower and its consolidated Subsidiaries for such
period, all as determined under GAAP.
"GAAP" shall mean generally accepted accounting principles,
----
consistently applied.
"Guaranteed Obligations" shall mean, with respect to any Person, all
----------------------
obligations of such Person which in any manner directly or indirectly guarantee
or assure, or in effect guarantee or assure, the payment or performance of any
indebtedness, dividend or other obligation of any other Person or assure or in
effect assure the holder of any such obligations against loss in respect
thereof, including, without limitation, any such obligations incurred through an
agreement, contingent or otherwise: (a) to purchase such obligations or any
property constituting security therefor; (b) to advance or supply funds for the
purchase or payment of such obligations or to maintain a working capital or
other balance sheet condition; or (c) to lease Property or to purchase any debt
or equity securities or other Property or services.
"Intangibles Collateral" shall mean all general intangibles of
----------------------
Borrower, whether now existing or hereafter acquired or arising, including,
without limitation, all copyrights, royalties, trademarks, trade names, tax
refunds, rights to tax refunds, service marks, patent and
5
proprietary rights, permits, licenses, sublicenses, leases, subleases,
usufructs, trade secrets, diagrams and all customer lists.
"Interest Expense" for any fiscal period of Borrower, shall mean
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interest expense of Borrower during such period on that portion of the Debt of
Borrower consisting of Debt for borrowed funds, including, without limitation,
the Obligations.
"Interest Period" shall mean, in the case of the determination of any
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LIBOR-based rate, a one-, two- or three-month period as determined by Borrower.
"Inventory Collateral" shall mean all inventory of Borrower, or in
--------------------
which it has rights, whether now owned or hereafter acquired, wherever located
including goods in transit, including, without limitation, all goods of Borrower
held for sale or lease or furnished or to be furnished under contracts of
service, all goods held for display or demonstration, goods on lease or
consignment, returned or repossessed goods, all raw materials, work-in-process,
finished goods and supplies used or consumed in Borrower's business, together
with all documents, documents of title, dock warrants, dock receipts, warehouse
receipts, bills of lading or orders for the delivery of all, or any portion, of
the foregoing.
"Leverage Ratio" shall mean, for any fiscal period, as to the Borrower
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on a consolidated basis, the ratio of the sum of total Debts minus Subordinated
Debt to the sum of combined Tangible Net Worth plus Subordinated Debt, all as
determined under GAAP.
"LIBOR" shall mean, for any Interest Period, the rate per annum at
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which deposits in United States dollars for such Interest Period, and for the
amount of the requested LIBOR Advance, are offered in the London interbank
market at approximately 11:00 a.m. (London time) two Business Days before the
first day of such Interest Period, as published or reprinted through the
Reuter's Screen or such other recognized quote service as is acceptable to the
Lender; provided, that, at the Lender's sole option, such rate may be adjusted
by dividing such rate by a percentage equal to one (1) minus the then average
stated maximum rate (stated as a decimal) of all reserve requirements applicable
to any member of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D of the Board of Governors of the Federal
Reserve System (or any successor categories for such liabilities under such
Regulation D).
"LIBOR Advance" shall mean any borrowing hereunder which bears
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interest based on LIBOR.
"Lien" shall mean any deed to secure debt, deed of trust, mortgage or
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similar instrument, and any lien, security interest, preferential arrangement
which has the practical effect of constituting a security interest, security
title, pledge, charge, encumbrance or servitude of any kind, whether by
consensual agreement or by operation of statute or other law, and whether
voluntary or involuntary, including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof.
6
"Loan Documents" shall mean this Agreement, any Notes, any financing
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statements covering the Collateral, and any and all other documents,
instruments, certificates and agreements executed and/or delivered by a Borrower
in connection herewith, or any one, more, or all of the foregoing, as the
context shall require.
"Margin" shall mean an amount equal to the sum of (i) eighty-five
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percent (85%) of the face dollar amount, as at the date of determination, of
Eligible Accounts of Borrower, plus (ii) seventy percent (70%) of the face
----
dollar amount, as at the date of determination, of Eligible Installment Sales
Orders of Borrower, plus (iii) the lesser of forty percent (40%) of the net book
----
value of Eligible Inventory of Borrower or $2,500,000.
"Margin Requirement" shall have the meaning ascribed to such term in
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Section 2.1(a).
"Margin Stock" shall have the meaning ascribed to such term in Section
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221.2(h) (or any successor provision) of Regulation U of the Board of Governors
of the Federal Reserve System.
"MPPAA" shall mean the Multiemployer Pension Plan Amendments Act of
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1980, amending Title IV of ERISA.
"Multiemployer Plan" shall have the meaning set forth in Section
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4001(a)(3) of ERISA.
"Net Income" shall mean, for any fiscal period of any Person, the net
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income (or loss), after provisions for taxes (either actual, accrued or deemed,
in the case of a pass-through entity determined as if the highest marginal
individual income tax rate were applicable), of such Person on a consolidated
basis for such period (taken as a single accounting period) determined in
conformity with GAAP, minus (to the extent otherwise included therein and
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without duplication) (i) any gains or losses, together with any related
provisions for taxes, realized by such Person upon any sale of its assets other
than in the ordinary course of business, (ii) any other non-recurring gains or
losses, and (iii) any income or loss of any other Person acquired prior to the
date such other Person becomes a Subsidiary of the Person whose "Net Income" is
being measured or is merged into or consolidated with the Person whose "Net
Income" is being measured or all or substantially all of such other Person's
assets are acquired by the Person whose "Net Income" is being measured.
"Notes" shall mean, collectively, the Revolving Note and any other
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promissory notes or other instruments at an time or from time to time evidencing
any Obligations.
"Obligations" shall mean any and all Debts, liabilities and
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obligations of Borrower to Lender, including without limiting the generality of
the foregoing, any indebtedness, liability or obligation of Borrower to Lender
arising hereunder or as a result hereof, whether evidenced by the Notes, the
other Loan Documents or otherwise, any and all extensions or renewals thereof in
whole or in part; any indebtedness, liability or obligation of Borrower to
Lender under any later or future advances or loans made by Lender to Borrower,
and any and all extensions or renewals thereof in whole or in part; any and all
present and future indebtedness of Borrower to other creditors which is
purchased by Lender from such other creditors; and any and all future or
additional indebtedness, liabilities or obligations of Borrower to
7
Lender whatsoever and in any event, whether existing as of the date hereof or
hereafter arising, whether arising under a loan, lease, credit card
arrangements, line of credit, letter of credit or other type of financing, and
whether direct, indirect, absolute or contingent, as maker, endorser, guarantor,
surety or otherwise, and whether evidenced by, arising out of, or relating to, a
promissory note, bill of exchange, check, draft, bond, letter of credit,
guaranty agreement, bankers, acceptance, foreign exchange contract, commitment
fee, service charge or otherwise.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
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"Permitted Encumbrances"shall mean (i) Liens for taxes not yet due and
----------------------
payable or being contested as permitted by Section 11.8; (ii) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other, like Liens
arising in the ordinary course of business, payment for which is not yet due or
which are being contested in good faith and by appropriate proceedings; (iii)
pledges or deposits in connection with worker's compensation, unemployment
insurance and other social security legislation; (iv) deposits to secure the
performance of utilities, leases, statutory obligations and surety and appeal
bonds and other obligations of a like nature incurred in the ordinary course of
business; (v) bankers, Liens arising by statute or under customary terms
regarding depository relationships on deposits held by financial institutions;
(vi) restrictions imposed by licenses and leases; (vii) any Liens in favor of
Lender, whether in respect of the Collateral or otherwise; (viii) rights of
rental and lease customers; (ix) purchase money Liens on purchase money Debt
permitted hereunder; and (x) those other Liens (if any) described on Exhibit "B"
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attached hereto.
"Person" shall mean any individual, sole proprietorship, partnership,
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joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, party or government (whether
territorial, national, federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"Plan" shall mean any employee benefit plan or other plan for any
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employees of Borrower and any employees of any Subsidiary or any other entity
which is a member of a controlled group or under common control with Borrower,
as such terms are defined in Section 4001(a)(14) of ERISA, and which is subject
to the provisions of Title IV of ERISA.
"Property" shall mean any interest in any property or asset of any
--------
kind, whether real, personal or mixed, or tangible or intangible.
"Reportable Event" shall mean any of the events described in Section
----------------
4043(b) of ERISA.
8
"Restricted Investment" means any acquisition of Property by Borrower
---------------------
in exchange for cash or other Property, whether in the form of an acquisition of
stock, debt security, or other indebtedness or obligation, or the purchase or
acquisition of any other Property, or by loan, advance, capital contribution, or
subscription, except acquisitions of the following: (a) fixed assets to be used
------
in the business of Borrower so long as the costs thereof constitute Capital
Expenditures permitted hereunder; (b) goods held for sale or rental or to be
used in the provision of services by Borrower in the ordinary course of
business; (c) current assets arising from the sale or rental of goods or the
rendition of services in the ordinary course of business of Borrower; (d) direct
obligations of the United States of America, or any agency thereof, or
obligations guaranteed by the United States of America, provided, however, that
-----------------
such obligations mature within one (1) year from the date of acquisition
thereof; (e) certificates of deposit maturing within one (1) year from the date
of acquisition, or overnight bank deposits, in each case issued by, created by,
or with a bank or trust company organized under the laws of the United States or
any state thereof having capital and surplus aggregating at least One Hundred
Million Dollars ($100,000,000); and (f) commercial paper given the highest
rating by a national credit rating agency and maturing not more than two hundred
seventy (270) days from the date of creation thereof.
"Revolving Advance" shall mean an advance made to Borrower by Lender
-----------------
under the Revolving Line of Credit, which shall be evidenced by the Revolving
Note.
"Revolving Line of Credit" shall refer to the committed revolving line
------------------------
of credit opened by the Lender in favor of Borrower, pursuant to the provisions
of Section 2.1.
"Revolving Note" shall mean the Amended and Restated Revolving
--------------
Promissory Note, dated of even date herewith, made by Borrower to the order of
Lender, in the principal amount of the Revolving Line of Credit, evidencing the
Revolving Line of Credit, together with any renewals or extensions thereof, in
whole or in part, and any amendments, supplements, replacements or substitutions
thereof. The Revolving Note shall be substantially in the form of Exhibit "C"
-----------
attached hereto.
"Subsidiary" shall mean any corporation, partnership, business
----------
association or other entity (including any Subsidiary of any of the foregoing)
of which Borrower owns at any time during the term of this Agreement, directly
or indirectly, fifty percent (50%) or more of the capital stock or equity
interest having ordinary power for the election of directors or others
performing similar functions. Any representation, warranty or covenant contained
in this Agreement which includes the term "Subsidiaries" shall mean and refer to
any Subsidiary which was such as of the date of determination for purposes of
such representation, warranty or covenant.
"Subordinated Debt" shall mean any Debt which has been subordinated,
-----------------
in right of payment and claim, to the rights and claims of Lender in respect of
the obligations in a form and substance satisfactory to Lender.
"Tangible Net Worth" shall mean the consolidated net worth of Borrower
------------------
and its consolidated Subsidiaries, determined as of the end of any fiscal period
of Borrower under
9
GAAP, minus, any and all assets, on a combined basis, of Borrower constituting
(i) goodwill, patents, copyrights, trademarks, trade names and other intangible
assets, (ii) write-ups of assets, (iii) unamortized debt discount and expense,
(iv) long-term deferred charges, (v) any Debt owing by any Affiliate to Borrower
(excluding, for this purpose, any Debt owing by Borrower to any other Borrower).
"Termination Date" shall mean May 1, 2000; provided, however, that, at
---------------- -------- -------
Lender's election, by the giving of written notice to Borrower to such effect
prior to such termination date or, if such termination date is extended pursuant
hereto, any subsequent anniversary of such termination date, Lender may extend
the "Termination Date" from year-to-year, in which case the "Termination Date"
shall be the termination date then in effect.
"UCC" shall mean the Uniform Commercial Code--Secured Transactions of
---
Georgia (O.C.G.A. Title 11, Article 9), as amended.
1.2 Use of Defined Terms.
---------------------
All terms defined in this Agreement and the Exhibits shall have the same
defined meanings when used in any other Loan Documents, unless the context shall
require otherwise.
1.3 Accounting Terms.
----------------
All accounting terms not specifically defined herein shall have the
meanings generally attributed to such terms under GAAP.
1.4 UCC Terms.
---------
The terms "accounts", "chattel paper", "instruments", "general
intangibles", "inventory", "equipment", "fixtures", "documents", "products" and
"proceeds", as and when used in the Loan Documents, shall have the same meanings
given to such terms under the UCC.
1.5 Terminology.
-----------
All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural, and the plural shall include the singular.
Titles of Articles and Sections in this Agreement are for convenience only, and
neither limit nor amplify the provisions of this Agreement, and all references
in this Agreement to Articles, Sections, Subsections, paragraphs, clauses,
subclauses or Exhibits shall refer to the corresponding Article, Section,
Subsection, paragraph, clause, subclause of, or Exhibit attached to, this
Agreement, unless specific reference is made to the articles, sections or other
subdivisions divisions of, or Exhibit to, another document or instrument. Each
reference to any document, agreement, instrument or other paper shall be a
reference to each such document, agreement, instrument or paper as it shall be
amended, modified, supplemented, extended, renewed or replaced from time to
time.
10
1.6 Exhibits.
--------
All Exhibits attached hereto are by reference made a part hereof.
2. THE FINANCING.
-------------
Upon execution of this Agreement and compliance with its terms, including,
without limitation, the conditions precedent set forth in Section 17.1 hereof,
Lender agrees to make available to Borrower the Revolving Line of Credit on the
following terms and conditions:
2.1 Revolving Line of Credit.
------------------------
(a) Lender agrees to open a committed revolving line of credit (the
"REVOLVING LINE OF CREDIT" or "REVOLVING CREDIT") in favor of Borrower in the
- ------------------------- ----------------
maximum aggregate principal amount of Thirty-Five Million Dollars ($35,000,000)
so that during the period commencing on the date hereof and ending on the
Termination Date or the earlier termination of the Revolving Line of Credit
pursuant to Section 2.4 or Article 15 below, Borrower may borrow and repay and
re-borrow Revolving Advances up to a maximum aggregate principal amount equal,
in the aggregate, to Thirty-Five Million Dollars ($35,000,000); subject,
-------
however, to the further requirement that at no time shall the aggregate
- -------
principal amount of Revolving Advances owing by Borrower under the Revolving
Line of Credit exceed the Margin (such requirement being referred to herein as
the "MARGIN REQUIREMENT"). If at any time hereafter the Margin Requirement is
------------------
not satisfied by Borrower, then Borrower agrees to repay im mediately the then
principal balance of the Revolving Advances owing by it by that amount necessary
to satisfy the Margin Requirement applicable to it. The Debt arising from the
disbursement of any and all Revolving Advances shall be evidenced by the
Revolving Note, which shall be executed and delivered by Borrower simultaneously
herewith. Each request for a Revolving Advance shall be made by Borrower to
Lender in such manner as Lender may request from time to time hereafter
(including, without limitation, by telephone or facsimile transmission), or, as
Lender and Borrower, may mutually agree hereafter, by pre-approved automatic
disbursement. Without limitation of the preceding provi sions, the principal
amount of the Revolving Note shall be due and payable from collections and other
proceeds of Collateral in accordance with the provisions of Article 3 below and
shall be due and payable in full on the Termination Date or on the date of any
earlier termination of the Revolving Line of Credit pursuant to Section 2.4 or
Article 15 below.
2.2 Interest and Fees.
-----------------
Subject to Section 15.1 of this Agreement, interest and fees shall be
charged on Revolving Advances (in each case computed based on a 360-day year and
the actual number of days elapsed) in accordance with the following provisions:
(a) Interest. (i) All Revolving Advances shall bear interest at
--------
a fluctuating rate per annum equal to the Base Rate, as in effect from time to
time, calculated on the basis of a 360-day year and actual days elapsed;
provided, however, that, so long as no Event of Default
- -------- -------
11
then exists, Borrower may, by a written notice delivered to Lender not later
than 10:00 a.m. (Atlanta, Georgia time) on the second (2nd) Business Day prior
to the first (1st) day of each calendar month (commencing in January 1999)
direct that interest accrue on the principal of any particular Revolving Advance
outstanding from time to time during the Interest Period designated by the
Borrower in such notice at a rate per annum equal to LIBOR plus the number of
----
basis points in excess thereof set forth below corresponding to the applicable
Leverage Ratio requirement (the "LIBOR MARGIN") and for such Interest Period as
-------------
is selected by Borrower with respect to each such Revolving Advances:
If Leverage Ratio Is: Then the LIBOR Margin Is:
-------------------- ------------------------
Greater than 1.75 to 1.0 but not greater than 2.0 to 1.0 200 basis points
Greater than 1.50 to 1.0 but not greater than 1.75 to 1.0 175 basis points
Greater than 1.25 to 1.0 but not greater than 1.5 to 1.0 150 basis points
Greater than 1.0 to 1.0 but not greater than 1.25 to 1.0 125 basis points
Up to 1.0 to 1.0 100 basis points
Each such designation by Borrower of the interest rate based on LIBOR and of an
Interest Period shall be irrevocable and shall remain in effect throughout such
Interest Period. In the event Borrower selects an Interest Period in excess of
one (1) month in length, such Interest Period and the interest rate based on
LIBOR related thereto shall remain in effect hereunder for each full calendar
month thereafter which is covered by such Interest Period. Upon determining the
interest rate based on LIBOR for an Interest Period requested by Borrower,
Lender shall promptly notify Borrower by telephone (confirmed in writing) of
such determination, and such determination shall, absent manifest error, be
final, conclusive and binding for all purposes. Borrower's selection of the
interest rate based on LIBOR for a particular Interest Period shall not affect
Borrower's ability to borrow hereunder during such Interest Period, subject to
the terms of this Agreement. Upon the expiration of an applicable Interest
Period, the applicable Revolving Advance bearing a LIBOR-based rate shall
thereafter bear interest at the Base Rate unless the Borrower provides other
instructions to the Lender in accordance herewith.
(b) Payment of Interest. All interest payable on the Revolving
-------------------
Advances shall be payable monthly in arrears on the first day of each month
hereafter (for the preceding calendar month or portion thereof, as the case may
be).
2.3 Method of Making Payments.
-------------------------
All payments owing under or pursuant to this Agreement, whether of
principal, interest, fees or otherwise, shall be made without defense, set-off
or counterclaim to Lender not later than 2:00 p.m. Atlanta, Georgia time on the
date when due and shall be made in lawful money of the United States of America
in immediately available funds at the head office of Lender in Atlanta, Georgia.
If and to the extent that any such payment is not made by a Borrower when due or
if Borrower and Lender then have mutually agreed to a pre-approved automatic
advance to make such payment, Borrower hereby authorizes and directs Lender to
charge any demand deposit account maintained by Borrower with Lender for the
amount of such payment or, in lieu thereof or in addition thereto, as necessary,
to debit any such payment as a Revolving Advance (whether
12
or not an over-advance is created thereby). Whenever any payment to be made
hereunder or pursuant hereto shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest thereon shall
be payable at the applicable rate during such extension.
2.4 Prepayments; Early Termination.
------------------------------
(a) Revolving Advances may be repaid and, subject to borrowing
availability, re-borrowed at any time and from time to time by Borrower up to,
but not including, the Termination Date; provided, however, that if any
-------- -------
Revolving Advance is prepaid at a time when it bears interest at a LIBOR-based
rate before the expiration of the applicable Interest Period, Borrower shall pay
to Lender any and all reasonable costs which Lender must pay as a result of such
prepayment which the Lender would not otherwise have paid if the Revolving
Advance, as the case may be, were paid at the end of the applicable Interest
Period.
(b) In addition to the foregoing, Borrower may at any time prior
to the Termination Date, and whether or not a Default Condition or Event of
Default then exists, terminate this Agreement; provided however, that: (1) any
-------- -------
such termination must be preceded by at least three (3) days written notice to
the Lender; (2) Borrower shall be required to pay in full both (A) all
outstanding Revolving Advances owing by it, together with all accrued and unpaid
interest thereon and all accrued and unpaid fees and expense which are then due
and payable by Borrower hereunder and under any other Loan Document and (3)
notwithstanding such termination, no Collateral of Borrower shall be released
and all Collateral of Borrower shall continue to secure all Obligations of
Borrower then and thereafter outstanding unless and until all such Obligations
of Borrower are fully paid and satisfied.
2.5 Use of Proceeds.
---------------
All proceeds of Revolving Advances shall be used for working capital
purposes in the ordinary course of Borrower's business.
2.6 Increased Costs or Reduced Return.
---------------------------------
If, due to either (a) the introduction of or any change in or in the
interpretation of any U.S. law or regulation, or (b) the compliance with any
guideline or request from any governmental authority, there shall be any
increase in the cost to Lender of maintaining its commitments hereunder or
agreeing to make or making, funding or maintaining Revolving Advances to
Borrower, or any reduction in the rate of return on Lender's capital as a
consequence of its obligations hereunder to a level below that which Lender
would have achieved but for such events described in clauses (a) and (b) above,
Borrower shall, from time to time, upon demand by Lender, pay to Lender
additional amounts sufficient to compensate Lender for such increased costs or
reduced return within ten (10) Business Days of receipt of the receipt of the
certificate referred to below. A certificate identifying with reasonable
specificity the basis for and the amount of such increased costs or reduced
return shall be submitted to
13
Borrower by Lender and shall be conclusive and binding for all purposes, absent
manifest error. In determining such amount, Lender shall use reasonable
averaging and attribution methods.
2.7 Indemnification of Lender.
-------------------------
At all times prior to and after the consummation of the transactions
contemplated by this Agreement, Borrower agrees to hold Lender, its directors,
officers, employees, agents, Affiliates, successors and assigns harmless from
and to indemnify Lender and its directors, officers, employees, agents,
Affiliates, successors and assigns against, any and all losses, damages, costs
and expenses (including, without limitation, attorney's fees, costs and
expenses) incurred by any of the foregoing, whether direct, indirect or
consequential, as a result of or arising from or relating to any "Proceedings"
(as defined below) by any Person, whether threatened or initiated, asserting a
claim for any legal or equitable remedy against any Person under any statute,
case or regulation, including, without limitation, any federal or state
securities laws or under any common law or equitable case or otherwise, arising
from or in connection with this Agreement, and any other of the transactions
contemplated by this Agreement except to the extent such losses, damages, costs
or expenses are due to the wilful misconduct or gross negligence of Lender. As
used herein, "Proceedings" shall mean actions, suits or proceedings before any
-----------
court, governmental or regulatory authority. Borrower further agrees to
indemnify any Person to whom Lender transfers or sells all or any portion of its
interest in the Obligations or participations therein on terms substantially
similar to the terms set forth above. Lender shall not be responsible or liable
to any Person for consequential damages which may be alleged as a result of this
Agreement or any of the transactions contemplated hereby. The obligations of
Borrower under this Section 2.7 shall survive the termination of this Agreement
and payment of the Obligations but shall terminate upon expiration of the
applicable statute or period of limitations.
3. COLLECTIONS.
-----------
3.1 Collateral Reserve Account; Lockbox Accounts.
--------------------------------------------
To the extent such has not been done prior to the Closing Date, then on the
Closing Date, Borrower shall establish, and thereafter shall maintain, with
Lender, a separate Collateral Reserve Account, or series thereof, as Lender may
permit or require, into which Borrower shall be obliged to transfer and deliver
all cash, checks, drafts, items and other instruments for the payment of money
which Borrower has received or may at any time hereafter receive in full or
partial payment for its Inventory Collateral or otherwise as proceeds of its
Accounts Receivable Collateral and any other Collateral; and pending such
transfer and delivery, Borrower shall be deemed to hold any such funds in trust
for the benefit of Lender. All collected balances in Borrower's Collateral
Reserve Account shall be applied by Lender on a daily basis in payment of
Borrower's Revolving Advances. Borrower shall not be entitled to draw on its
Collateral Reserve Account without the prior written consent of Lender;
provided, however, that, at any time during which collected balances exist in
- -------- -------
the Collateral Reserve Account, if there are no Revolving Advances then owing by
Borrower and no other Obligations are then due and payable
14
by Borrower, and provided that no Default Condition or Event of Default is in
existence, Borrower may withdraw such collected balances, or any portion
thereof, therefrom for use in its business operations. Lender may, additionally,
at any time after the occurrence and during the continuance of an Event of
Default, in its sole discretion, direct Account Debtors to make payments on the
Accounts Receivable Collateral, or portions thereof, of one, or more, or
Borrower directly to Lender, and the Account Debtors are hereby authorized and
directed to do so by Borrower upon Lender's direction, and the funds so received
shall also be deposited in Borrower's Collateral Reserve Account, and applied as
aforesaid.
4. SECURITY INTEREST -- COLLATERAL.
-------------------------------
As security for the payment of the Revolving Advances owing by it and all
other obligations whatsoever of Borrower to Lender and the performance by
Borrower of all covenants and requirements hereunder and under the other Loan
Documents, Borrower hereby grants to Lender a continuing, general lien upon and
security interest and title in and to the following described Property, wherever
located, whether now existing or hereafter acquired or arising (herein, the
"COLLATERAL"), namely: (a) the Accounts Receivable Collateral; (b) the Inventory
- -----------
Collateral; (c) the Equipment Collateral; (d) the Intangibles Collateral; (e)
the Balances Collateral; and (f) all products and/or proceeds of any and all of
the foregoing, including, without limitation, insurance or condemnation
proceeds, all Property received wholly or partly in trade or exchange for any of
the foregoing, and all rents, revenues, issues, profits and proceeds arising
from the sale, lease, license, encumbrance, collection or any other temporary or
permanent disposition of any of the foregoing or any interest therein.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO ACCOUNTS
------------------------------------------------------- --------
RECEIVABLE COLLATERAL.
---------------------
With respect to the Accounts Receivable Collateral, Borrower hereby
represents, warrants and covenants to Lender as set forth in Section 5.1 through
5.4, inclusive.
5.1 Bona Fide Accounts.
------------------
Each item of the Accounts Receivable Collateral arises or will arise under
a contract between Borrower and the Account Debtor, or from the bona fide sale,
rental or delivery of goods to or performance of services for, the Account
Debtor.
15
5.2 Good Title; No Existing Encumbrances.
------------------------------------
Borrower has good title to its Accounts Receivable Collateral free and
clear of all Liens thereon other than any Permitted Encumbrances, and no
financing statement covering the Accounts Receivable Collateral is on file in
any public office other than any evidencing Permitted Encumbrances.
5.3 Right to Assign; No Further Encumbrances.
----------------------------------------
Borrower has full right, power and authority to make this assignment of the
Accounts Receivable Collateral and hereafter will not pledge, hypothecate, grant
a security interest in, sell, assign, transfer, or otherwise dispose of the
Accounts Receivable Collateral, or any interest therein.
5.4 Power of Attorney.
-----------------
Borrower irrevocably designates and appoints Lender its true and lawful
attorney either in the name of Lender or in the name of Borrower to ask for,
demand, sue for, collect, compromise, compound, receive, receipt for and give
acquittances for any and all sums owing or which may become due upon any items
of the Accounts Receivable Collateral and, in connection therewith, to take any
and all actions as Lender may deem necessary or desirable in order to realize
upon the Accounts Receivable Collateral, including, without limitation, power to
endorse in the name of Borrower, any checks, drafts, notes or other instruments
received in payment of or on account of the Accounts Receivable Collateral, but
Lender shall not be under any duty to exercise any such authority or power or in
any way be responsible for the collection of the Accounts Receivable Collateral.
Lender hereby agrees that it will not exercise the foregoing power of attorney
except after the occurrence of, and during the continuation of, an Event of
Default.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO INVENTORY
-----------------------------------------------------------------
COLLATERAL.
-----------
With respect to the Inventory Collateral, Borrower hereby represents,
warrants and covenants to Lender as set forth in Sections 6.1 through 6.5,
inclusive.
6.1 Sale of Inventory Collateral.
----------------------------
Borrower will not sell, lease, rent, exchange, or otherwise dispose of any
of the Inventory Collateral without the prior written consent of Lender, except
in the ordinary course of business for cash or on open account or on terms of
payment ordinarily extended to its customers. Upon the sale, lease, exchange,
rental or other disposition of any Inventory Collateral, the security interest
and lien created and provided for herein, without break in continuity and
without further
16
formality or act, shall continue in and attach to any proceeds thereof,
including, without limitation, accounts, contract rights, shipping documents,
documents of title, bills of lading, warehouse receipts, dock warrants, dock
receipts and cash or non-cash proceeds, and in the event of any unauthorized
sale, shall continue in the Inventory Collateral itself.
6.2 Insurance.
---------
Borrower agrees that it will obtain and maintain insurance on the Inventory
Collateral, in such amounts and against such risks as Lender may reasonably
request, with insurers having a Best's rating of at least "A-" (unless otherwise
approved by Lender), with loss payable to Lender and reflecting Lender as an
additional insured as its interest may appear. Such insurance shall not be
cancelable by Borrower, unless with the prior written consent of Lender, or by
Borrower's insurer, unless with at least thirty (30) days advance written notice
to Lender.
6.3 Good Title; No Existing Encumbrances.
------------------------------------
Except with respect to any Permitted Encumbrances, Borrower owns the
Inventory Collateral free and clear of any Lien, and no financing statements or
other evidences of the grant of a security interest respecting the Inventory
Collateral exist on the public records as of the date hereof other than any
evidencing any Permitted Encumbrances.
6.4 Right to Grant Security Interest; No Further Encumbrances.
---------------------------------------------------------
Borrower has the right to grant a security interest in the Inventory
Collateral. Borrower will pay all taxes and other charges against the Inventory
Collateral, and Borrower will not use the Inventory Collateral illegally or
allow the Inventory Collateral to be encumbered except for the security interest
in favor of Lender granted herein and except for any Permitted Encumbrances.
6.5 Location of Inventory Collateral.
--------------------------------
Borrower hereby represents and warrants to Lender that, as of the date
hereof, the Inventory Collateral (except for certain portions thereof in transit
or located upon the premises of a rental or lease customer) of Borrower is
situated only at one or more of the Collateral Locations and Borrower covenants
with Lender not to locate the Inventory Collateral at any location other than a
Collateral Location or the premises of a rental or lease customer without at
least thirty (30) days prior written notice to Lender. In addition, to the
extent Borrower should warehouse any of the Inventory Collateral at any time
hereafter, Borrower acknowledges and agrees that such warehousing may be
conducted only by Borrower or warehousemen who have been pre-approved by Lender
and who, in any event, shall issue non-negotiable warehouse receipts in Lender's
name to evidence any such warehousing of goods constituting Inventory
Collateral. In any event, Borrower will not consign any Inventory Collateral to
any Person other than Borrower except upon first obtaining Lender's prior
written consent thereto.
17
7. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO EQUIPMENT
------------------------------------------------------- ---------
COLLATERAL.
----------
With respect to the Equipment Collateral, Borrower hereby represents,
warrants and covenants to Lender as set forth in Section 7.1 through 7.5,
inclusive.
7.1 Sale of Equipment Collateral.
----------------------------
Borrower will not sell, lease, rent, exchange, or otherwise dispose of any
of the Equipment Collateral other than in the ordinary course of Borrower's
business without the prior written consent of Lender.
7.2 Insurance.
---------
Borrower agrees that it will obtain and maintain insurance on its Equipment
Collateral with such companies and in such amounts and against such risks as
Lender may reasonably request, with loss payable to Lender and reflecting Lender
as an additional insured as its interests may appear. Such insurance shall not
be cancelable by Borrower, unless with the prior written consent of Lender, or
by Borrower's insurer, unless with at least thirty (30) days advance written
notice to Lender.
7.3 Good Title; No Existing Encumbrances.
------------------------------------
Borrower owns its Equipment Collateral free and clear of any prior Lien
thereon other than with respect to any Permitted Encumbrances and no financing
statements or other evidences of the grant of a security interest respecting the
Equipment Collateral exist on the public records as of the date hereof other
than any evidencing any Permitted Encumbrances.
7.4 Right to Grant Security Interest; No Further Encumbrances.
---------------------------------------------------------
Borrower has the right to grant a security interest in its Equipment
Collateral. Borrower will pay all taxes and other charges against its Equipment
Collateral. Borrower will not use any Equipment Collateral illegally or allow
any Equipment Collateral to be encumbered except for the security interest in
favor of Lender granted herein and except for any Permitted Encumbrances.
7.5 Location.
--------
As of the date hereof, the Equipment Collateral is located only at one or
more of the Collateral Locations or the premises of a rental or lease customer
and, hereafter, Borrower
18
covenants with Lender not to locate Equipment Collateral at any location other
than a Collateral Location without at least thirty (30) days advance written
notice to Lender.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO BALANCES
----------------------------------------------------------------
COLLATERAL.
----------
With respect to the Balances Collateral, Borrower hereby represents,
warrants and covenants to Lender as set forth in Section 8.1 through 8.2,
inclusive.
8.1 Ownership.
---------
Borrower owns its Balances Collateral free and clear of any Liens, except
in favor of Lender and except for Permitted Encumbrances.
8.2 Liens.
-----
Borrower will not incur, create or suffer to exist any Lien upon its
Balances Collateral or sell, convey, hypothecate, pledge or assign its right,
title or interest therein, without the prior written consent of Lender thereto
other than for the Lien created hereunder and the Permitted Encumbrances.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO INTANGIBLES
-------------------------------------------------------------------
COLLATERAL.
----------
With respect to the Intangibles Collateral, Borrower hereby represents,
warrants and covenants to Lender as set forth in Sections 9.1 through 9.3,
inclusive.
9.1 Ownership.
---------
Borrower owns its Intangibles Collateral free and clear of any Liens
thereon other than with respect to any Permitted Encumbrances and no financing
statements or other evidences of the grant of a security interest respecting the
Intangibles Collateral exist on the public records as of the date hereof other
than any evidencing any Permitted Encumbrances.
9.2 Liens.
-----
Hereafter, Borrower will not incur, create or suffer to exist any Lien upon
the Intangibles Collateral, except for the security interest granted herein and
except for any Permitted Encumbrances, or sell, convey, hypothecate, pledge or
assign its right, title or interest therein.
9.3 Preservation.
------------
19
Hereafter, Borrower will take all necessary and appropriate measures to
obtain, maintain, protect and preserve the Intangibles Collateral including,
without limitation, registration thereof with the appropriate state or federal
governmental agency or department.
10. GENERAL REPRESENTATIONS AND WARRANTIES.
--------------------------------------
In order to induce Lender to enter into this Agreement, Borrower hereby
represents and warrants to Lender (which representations and warranties,
together with the representations and warranties of Borrower contained in
Articles 5, 6, 7, 8 and 9 shall be deemed to be renewed as of the date of the
making of each Revolving Advance and after giving effect to all transactions and
actions permitted by this Agreement as set forth in Sections 10.1 through 10.17,
inclusive.
10.1 Existence and Qualification.
---------------------------
Borrower is a corporation duly organized and validly existing under, and
has filed (or will file prior to the due date therefor) its certified statement
of annual registration and paid all fees due for the current year under, the
laws of the State of Georgia. Borrower has its principal place of business,
chief executive office and office where it keeps all of its books and records at
the Executive Office and is duly qualified as a foreign corporation in good
standing in any other state wherein the conduct of its business or the ownership
of its Property requires such qualification and the failure to so qualify would
result in a material forfeiture. Except as may be set forth on Exhibit "D"
-----------
attached hereto, Borrower does not do business under any name or trade style
other than the name first inscribed hereinabove in the recitals hereto.
10.2 Authority; Validity and Binding Effect.
--------------------------------------
Borrower has the power to make, deliver and perform under the Loan
Documents, and to borrow hereunder, and has taken all necessary and appropriate
corporate or partnership action to authorize the execution, delivery and
performance of the Loan Documents. This Agreement constitutes, and the
remainder of the Loan Documents, when executed and delivered for value received,
will constitute, the valid obligations of Borrower, legally binding upon it and
enforceable against it in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency or other, similar laws affecting the
enforcement of creditor's rights generally. The undersigned officers or
representatives of Borrower are duly authorized and empowered to execute, attest
and deliver this Agreement and the remainder of the Loan Documents for and on
behalf of Borrower, and to bind Borrower accordingly thereby.
10.3 No Material Litigation.
-----------------------
There are no proceedings pending or, so far as Borrower or its officers
know, threatened, before any court or administrative agency which in Borrower's
present opinion could reasonably be expected to materially and adversely affect
the financial condition or operations of Borrower.
10.4 Taxes.
-----
20
Borrower has filed or caused to be filed all tax returns required to be
filed by it and have paid all taxes shown to be due and payable by it on said
returns or on any assessments made against them.
10.5 Organization.
------------
The articles of incorporation of and bylaws of Borrower are in full force
and effect under the laws of the State of Georgia and all amendments (if any)
thereto have been duly and properly made under and in accordance with all
applicable laws.
10.6 Insolvency.
----------
After giving effect to the funding of the initial Revolving Advances to be
made on the Closing Date, and the other transactions contemplated by this
Agreement and the uses by Borrower of the proceeds of the such loans and
advances as provided hereunder, (a) the fair value and present fair saleable
value of Borrower's assets are in excess of the total amount of Borrower's
liabilities, including known contingent liabilities; (b) Borrower will not have
incurred debts, nor will it intend to incur debts, beyond its ability to pay
such debts as they mature; and (c) Borrower does not have unreasonably small
capital to carry on Borrower's business as theretofore operated and all
businesses in which Borrower is about to engage. As used in this Section 10.7,
"debt" means any liability on a claim, and "claim" means (i) the right to
payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, or (ii) the right to an equitable remedy
for breach of performance if such breach gives rise to a right to payment,
whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured.
10.7 Title.
-----
Borrower owns all of its Properties subject to no Lien of any kind except
as otherwise disclosed in writing to Lender and, as to the Collateral, except
------
for the Permitted Encumbrances.
10.8 Margin Stock.
------------
No Borrower is engaged principally, or as one of its important activities,
in the business of purchasing or carrying any Margin Stock and no part of the
proceeds of any borrowing made pursuant hereto will be used to purchase or carry
any Margin Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock, or be used for any purpose which violates, or which
is inconsistent with, the provisions of Regulation X of the Board of Governors
of the Federal Reserve System. In connection herewith, if requested by Lender,
Borrower will furnish to each Lender a statement in conformity with the
requirements of Federal Reserve Form F.R. U-1 referred to in Regulation U of
said Board to the foregoing effect.
21
10.9 No Violations.
-------------
The execution, delivery and performance by Borrower of this Agreement and
the Loan Documents have been duly authorized by all necessary corporate or
partnership action and do not and will not require any consent or approval of
the shareholders or any partner of Borrower which will not have been obtained
prior to the Closing Date, violate any provision of any material law, rule,
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to
Borrower or of the articles of incorporation or bylaws of Borrower, or result in
a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which Borrower is a
party or by which it or its properties may be bound or affected; and Borrower is
not in default under any such material law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease or instrument.
10.10 ERISA.
-----
Borrower is in substantial compliance with the requirements of ERISA with
respect to each Employee Benefit Plan. No fact, including, but not limited to,
any Reportable Event exists in connection with any Plan which, more likely than
not, would constitute grounds for the termination of any such Plan by the PBGC
or for the appointment by the appropriate United States district court of a
trustee to administer any such Plan. Borrower does not maintain or contribute to
any Plan which has an "accumulated funding deficiency" (as defined in Section
412 of the Internal Revenue Code). Borrower does not maintain or contribute to
any Plan which has incurred any material liability to the PBGC (other than for
premium payments due in the ordinary course of business, which premiums will be
paid when due and payable). Borrower does not maintain or contribute to any
Plan which has insufficient assets to qualify for a standard termination
pursuant to Section 4041 of ERISA. Borrower is not required pursuant to the
terms of any applicable collective bargaining agreement to pay or accrue any
contributions with respect to any Plan which is a Multiemployer Plan and there
has been no complete or partial withdrawal by Borrower from any such
Multiemployer Plan within the contemplation of MPPAA. Except as concurrently
herewith disclosed to Lender in writing, (A) Borrower does not maintain or
contribute to any Employee Benefit Plan which provides medical benefits, life
insurance benefits or other welfare benefits as defined in Section 3(1) of ERISA
(excluding severance pay and benefits required under Section 601 of ERISA) for
former employees of Borrower, and (B) Borrower does not maintain or contribute
to any non-qualified, unfunded deferred compensation plan. Neither Borrower nor
any fiduciary with respect to any Employee Benefit Plan has engaged in a
"Prohibited transaction" within the meaning of Section 4975 of the Internal
Revenue Code or Section 406 of ERISA with respect to any Employee Benefit Plan.
10.11 Financial Statements.
--------------------
The audited financial statements of Borrower for its most recently
completed fiscal year and the unaudited financial statements of Borrower for the
most recently completed fiscal quarter, copies of which have heretofore been
furnished to Lender, are complete and accurately
22
and fairly represent the financial condition of Borrower, the results of its
operations and the transactions in its equity accounts as of the date and for
the periods referred to therein, and have been prepared in accordance with GAAP
throughout the period involved. There is no material Debt of Borrower as of the
date of such financial statements which is not reflected therein or in the notes
thereto. There has been no material adverse change in the financial conditions
or operations of Borrower since the respective dates of the balance sheets
contained in such financial statements.
10.12 Purchase of Collateral.
----------------------
Borrower has not purchased any of the Collateral in a bulk transfer or in a
transaction which was outside the ordinary course of the business of Borrower's
seller.
10.13 Pollution and Environmental Control.
-----------------------------------
Borrower has obtained all permits, licenses and other authorizations which
are required under, and is in material compliance with all Environmental Laws
the noncompliance with which would or might have a material adverse effect on
its business, financial condition or Property.
10.14 Possession of Franchises, Licenses, Etc.
---------------------------------------
Borrower possesses all franchises, certificates, licenses, permits and
other authorizations from governmental political subdivisions or regulatory
authorities, and all patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the ownership, maintenance and operation of any of its
material Property and assets, and Borrower is not in violation of any thereof
which would or might have a material adverse effect on its business, financial
condition or Property.
10.15 Disclosure.
----------
To Borrower's knowledge, neither this Agreement nor any other document,
certificate or statement furnished to Lender by or on behalf of Borrower in
connection herewith contain any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. To Borrower's knowledge, there is no fact peculiar
to Borrower which materially adversely affects or in the future may (so far as
Borrower can now reasonably foresee) materially adversely affect the business,
Property or assets, or financial condition of Borrower which has not been set
forth in this Agreement or in the other documents, certificates and statements
furnished to Lender by or on behalf of Borrower prior to the date hereof in
connection with the transactions contemplated hereby, when taken as a whole.
10.16 Subsidiaries.
------------
23
Borrower has no Subsidiaries.
10.17 Year 2000 Readiness.
-------------------
Borrower represents and warrants that it has developed, or will have
developed by June 30, 1999, a comprehensive plan (the "Y2K Plan") for insuring
that Borrower's computer hardware, software and related systems will be Y2K
compliant. Borrower represents and warrants that it has taken or will take all
required actions to meet each Y2K Plan milestone such that all computer
hardware, software and related systems will be Year 2000 compliant in accordance
with its Y2K Plan. "Y2K compliant" shall mean that all applicable computer
hardware, software and related systems used by Borrower in its business
operations will (i) handle date information involving any and all dates before,
during or after January 1, 2000, including accepting input, providing output and
performing date calculations in whole or in part, (ii) operate accurately
without interruption on or in respect of any and all dates before, during or
after January 1, 2000 and without any change in performance, (iii) respond to
and process two digit year input without creating any ambiguity as to the
century, and (iv) store and provide date input information without creating any
ambiguity as to the century.
11. GENERAL AFFIRMATIVE COVENANTS.
-----------------------------
Borrower covenants to Lender that from and after the date hereof, and until
such time as Lender shall have terminated this Agreement in writing, Borrower
will comply with and cause each Subsidiary to comply with the covenants set
forth in Sections 11.1 through 11.18, inclusive.
11.1 Records Respecting Collateral.
-----------------------------
All records of Borrower with respect to the Collateral will be kept at the
Executive Office (as it may be changed pursuant to Section 11.12) and will not
be removed from such address without the prior written consent of Lender.
11.2 Further Assurances.
------------------
Borrower shall duly execute and/or deliver (or cause to be duly executed
and/or delivered) to Lender any instrument, invoice, document, document of
title, dock warrant, dock receipt, warehouse receipt, bill of lading, order,
financing statement, assignment, waiver, consent or other writing which may be
reasonably necessary to Lender to carry out the terms of this Agreement and any
of the other Loan Documents and to perfect its security interest in and
facilitate the collection of the Collateral, the proceeds thereof, and any other
property at any time constituting security to Lender. Borrower shall perform or
cause to be performed such acts as Lender may reasonably request to establish
and maintain for Lender a valid and perfected Lien on the Collateral, free and
clear of any Liens other than in favor of Lender and other than the Permitted
Encumbrances.
24
11.3 Right to Inspect.
----------------
Lender (or any person or persons designated by it) shall, in its sole
discretion, have the right to call at any place of business of Borrower or any
of its Subsidiaries at any reasonable time during normal business hours upon
advance notice reasonable under the circumstances), and, without hindrance or
delay, inspect the Collateral and inspect, audit, check and make extracts from
Borrower's or such Subsidiary's books, records, journals, orders, receipts and
any correspondence and other data relating to the Collateral, to Borrower's or
its Subsidiaries, business or to any other transactions between the parties
hereto. Without limiting the foregoing, Lender shall be entitled to perform
periodic field audits of Borrower's operations. Lender shall hold in confidence
Borrower's and its Subsidiaries' confidential or proprietary information
obtained pursuant to this Agreement and shall not disclose the same to any third
party, except: (i) as required by law or by judicial or administrative process
-------
or to appropriate regulatory authorities and (ii) to Lender's attorneys and
accountants, who have previously or contemporaneously therewith been advised of
the confidential and proprietary nature of such information, and who have agreed
to maintain the confidential nature thereof.
11.4 Reports.
-------
Borrower shall within forty-five (45) days after the end of each fiscal
quarter furnish or cause to be furnished to Lender a status report concerning
Borrower's Accounts Receivable, certified by a duly authorized officer on behalf
of Borrower in such form as is reasonably acceptable to Lender. Additionally,
Lender may, at any time, request that Borrower verify the individual account
balances of the individual Account Debtors by such means as Borrower and Lender
then mutually agree, provided that, after any Event of Default has continued and
while it is continuing Lender shall have the further right to verify such
balances directly. In any event, upon request from Lender, made at any time
hereafter, Borrower shall furnish Lender with a then current Account Debtor
address list.
11.5 Settlement Sheets.
-----------------
To the extent requested by Lender, by the twentieth (20th) day of each
calendar month for the calendar month just ended, or more frequently if
requested by Lender, Borrower shall prepare and deliver to Lender a settlement
report with respect to satisfaction of the Margin Requirement as of the date of
report submission (to include a calculation of Eligible Accounts) to be in such
form as Lender may deliver for such purpose to Borrower from time to time
hereafter, the statements in which, in each instance, shall be certified as to
truth and accuracy by a duly authorized officer on behalf of Borrower.
25
11.6 Periodic Financial Statements of Borrower.
-----------------------------------------
Borrower shall, as soon as practicable, and in any event within forty-five
(45) days after the end of each fiscal quarter, furnish to Lender, unaudited
financial statements of Borrower and its consolidated Subsidiaries, on a
consolidating basis, including balance sheets and income statements, for the
fiscal quarter then ended, and for the fiscal year to date, certified as to
truth and accuracy by Borrower's chief executive officer or chief financial
officer.
11.7 Annual Financial Statements of Borrower.
---------------------------------------
Borrower shall, as soon as practicable, and in any event within one hundred
twenty (120) days after the end of each Fiscal Year, furnish to Lender the
annual audit report of Borrower and its consolidated Subsidiaries, on a combined
basis, including a balance sheet, and statement of cash flow, as appropriate
(but, for the current fiscal year being a balance sheet only), certified without
material qualification, by Arthur Andersen, LLP or such other independent
certified public accountants selected by Borrower but acceptable to Lender, and
prepared in accordance with GAAP. Borrower shall cause said accountants to
furnish Lender, together with the aforesaid audit report, a statement that, in
the normal course of making their examination of such financial statements, they
obtained no knowledge of any Event of Default or Default Condition relating to
this Agreement or the Notes, or, in lieu thereof, a statement specifying the
nature and period of existence of any such Event of Default or Default Condition
disclosed by their examination.
11.8 Payment of Taxes.
----------------
Borrower shall pay and discharge all taxes, assessments and governmental
charges upon its income and its Property the non-payment of which could
reasonably be expected to have a material adverse effect on Borrower's financial
condition or business operations prior to the date on which penalties attach
thereto, unless and to the extent only that (x) such taxes, assessments and
governmental charges are being contested in good faith and by appropriate
proceedings by Borrower or its applicable Subsidiary and (y) Borrower maintains
reasonable reserves on its books therefor in accordance with GAAP.
11.9 Maintenance of Insurance.
------------------------
In addition to and cumulative with any other requirements imposed herein or
in any Loan Document on Borrower with respect to insurance, Borrower shall
maintain insurance with responsible insurance companies on such of its Property,
in such amounts and against such risks as is customarily maintained by similar
businesses operating in the same vicinity, but in any event to include public
liability, worker's compensation, loss, damage, flood, windstorm, fire, theft,
extended coverage and product liability insurance in amounts reasonably
satisfactory to Lender, which such insurance shall not be cancellable by
Borrower, unless with the prior written consent of Lender, or by Borrower's
insurer, unless with at least thirty (30) days advance written
26
notice to Lender thereof. Borrower shall file with Lender on or before the
Closing Date and annually upon Lender's request thereafter copies of insurance
policies, certified by an officer of Borrower's insurance company, to Lender's
satisfaction, of such insurance then in effect stating the names of the
insurance companies, the amounts and rates of insurance, the date of expiration
thereof, the properties and risks covered thereby and the insured with respect
thereto, and, within thirty (30) days after notice in writing from Lender,
obtain such additional insurance as Lender may reasonably request.
11.10 Maintenance of Property.
-----------------------
Borrower shall maintain its Properties in good working condition, ordinary
wear and tear excepted.
11.11 Certificate of No Event of Default; Compliance Certificate;
-----------------------------------------------------------
Notice of Default.
- -----------------
Borrower shall, on a quarterly basis not later than forty-five (45) days
after the close of each of its first three (3) fiscal quarters and not later
than one hundred twenty (120) days after the close of its Fiscal Year, certify
to Lender, in a statement executed by Borrower's chief executive officer or
chief financial officer, as appropriate, that no Event of Default and no Default
Condition exists or has occurred and is existing, or, if an Event of Default or
Default Condition exists, specifying the nature and period of existence thereof
and setting forth the action which Borrower proposes to take with respect
thereto. Such certificate shall be accompanied by the certificate of such
officer on behalf of Borrower showing, in reasonable detail, compliance with
Sections 12.1 through 12.3, inclusive, by Borrower for the immediately preceding
fiscal quarter. In addition, promptly upon its becoming aware of the occurrence
of any Default Condition or Event of Default, Borrower will notify Lender
thereof in writing, specifying the nature and period of existence thereof and
the action which Borrower proposes to take with respect thereto.
11.12 Change of Principal Place of Business, Etc.
------------------------------------------
Borrower hereby understands and agrees that if, at any time hereafter, it
elects either (i) to move its Executive Office, (ii) to change its name,
identity or its structure to other than a corporate structure, or (iii) to add
any Collateral Location, Borrower will notify Lender in writing at least thirty
(30) days prior thereto and take such action in regard thereto as Lender may
reasonably request to continue the perfection of the Lender's security interest
in the Collateral in respect of such change.
11.13 Waivers.
-------
With respect to each of the Collateral Locations, Borrower will obtain such
waivers of lien, estoppel certificates or subordination agreements as Lender may
reasonably require to insure the priority of its security interest in that
portion of the Collateral situated at such locations.
27
11.14 Preservation of Corporate Existence.
-----------------------------------
Borrower shall preserve and maintain its corporate existence, rights,
franchises and privileges in its jurisdiction of incorporation, and qualify and
remain qualified as a foreign corporation or partner ship (if applicable) in
each Collateral Location state and each jurisdiction in which such qualification
is necessary or desirable in view of its business and operations or the
ownership of its Property to avoid a material forfeiture.
11.15 Compliance with Laws.
--------------------
Borrower shall comply in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority,
noncompliance with which would materially adversely affect its business or
credit. Without limiting the foregoing, Borrower shall obtain and maintain all
permits, licenses and other authorizations which are required under, and
otherwise comply with, all Environmental Laws (as defined in Section
11.18(a)(i)), and all laws pertaining to consumer credit, privacy and telephonic
transmissions.
11.16 ERISA.
-----
Borrower shall: (i) make prompt payments of contributions required by the
terms of each Employee Benefit Plan or to meet the minimum funding standards set
forth under ERISA with respect to each Employee Benefit Plan to which such
standards apply; (ii) notify Lender immediately of any fact, including, but not
limited to, any Reportable Event, arising in connection with any Plan which,
more likely than not, would constitute grounds for the termination thereof by
the PBGC or for the appointment by the appropriate United States district court
of a trustee to administer the Plan; (iii) notify Lender immediately of
Borrower's or any Subsidiary's intent to terminate any Plan; (iv) notify Lender
immediately of the adoption of an amendment to any Plan (or of any other Event)
which causes any Plan to fail to have sufficient assets to qualify for a
standard termination under Section 4041 of ERISA; (v) notify Lender immediately
if the aggregate unfunded liability with regard to all Plans increases to an
amount in excess of One Hundred Thousand Dollars ($100,000); (vi) notify Lender
immediately such if Borrower obtains information indicating that the aggregate
withdrawal liability with regard to all Plans increases to an amount in excess
of One Hundred Thousand Dollars ($100,000); (vii) notify Lender immediately of
any filing of a request for a waiver of the minimum funding standard with regard
to any Employee Benefit Plan to which such standard applies; (viii) promptly
after receipt thereof, furnish to Lender a copy of any notice received by
Borrower or any of its Subsidiaries from the PBGC relating to the intention of
the PBGC to terminate any Plan or to appoint a trustee to administer any Plan;
(ix) promptly after receipt thereof furnish to Lender a copy of any notice
received by Borrower or any Subsidiary of Borrower from the Internal Revenue
Service relating to the intention of the Internal Revenue Service to disqualify
any Employee Benefit Plan or to refuse to grant a favorable determination letter
with regard to any Employee Benefit Plan; (x) notify Lender immediately of any
lawsuit, claim for damages or administrative proceeding in which an Employee
Benefit Plan or a fiduciary with respect thereto is a defendant, wherein the
amount of damages claimed exceeds, either alone or in the aggregate with all
other such lawsuits, claims and administrative proceedings, One Hundred Thousand
28
Dollars ($100,000); and (xi) furnish to Lender, promptly upon its request
therefor, such additional information concerning each and every Employee Benefit
Plan, including, but not limited to, the annual report required to be filed
under ERISA, as may be reasonably requested.
11.17 Litigation.
----------
Promptly, upon its receipt of notice or knowledge thereof, Borrower will
report to Lender any lawsuit or administrative proceeding in which Borrower or
any of its Subsidiaries is a defendant wherein the amount of damages claimed
against Borrower or any of its Subsidiaries exceeds One Hundred Thousand Dollars
($100,000).
11.18 Environmental Compliance.
------------------------
(a) Definitions. The following definitions shall apply for
-----------
purposes of this Section 11.18:
(i) "Environmental Law" shall mean any federal, state or local
-----------------
statute, regulation or ordinance or any judicial or administrative decree
or decision now or hereafter promulgated with respect to any "Hazardous
Substance" (as hereinafter defined), drinking water, ground water,
landfills, open dumps, storage tanks, underground storage tanks, solid
waste, waste water, storm water runoff, waste emissions, or wells. Without
limiting the generality of the foregoing, the term Environmental Law shall
encompass each of the following statutes, as may be amended from time to
time, and all regulations from time to time promulgated thereunder: the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (codified in scattered sections of 26 U.S.C.; 33 U.S.C.; 42 U.S.C. and
42 U.S.C. (S) 9601 et seq.), the Clean Water Act of 1977 (33 U.S.C. (S)
-------
1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et seq.), the Resource
------- -------
Conservation and Recovery Act of 1976 (42 U.S.C. 9 6901 et seq.), the Safe
-------
Drinking Water Act (21 U.S.C. (S) 349; 42 U.S.C. (S)(S) 201 and 300f
through 300j-9) and the Toxic Substances Control Act (15 U.S.C. (S) 2601 et
--
seq.).
----
(ii) "Release" shall mean any spilling, leaking, pumping,
-------
emitting, emptying, discharging, injecting, storing, escaping, leaching,
dumping, or discharging, burying, abandoning, or disposing into the
environment by Borrower or any Subsidiary or any predecessor in interest of
Borrower.
(iii) "Hazardous Substance" shall mean each and every element,
-------------------
compound, chemical mixture, petroleum and gas product, substance,
contaminant, pollutant including, without limitation, substances which are
toxic, carcinogenic, ignitable, corrosive or otherwise dangerous to human,
plant or animal health or well-being, and any other substance defined as a
"hazardous substance," "hazardous waste," "hazardous material," "toxic
material," "toxic waste," or "special waste" under any Environmental Law
and any other substance which by law requires special handling in its
collection, storage, treatment or disposal.
29
(b) Indemnity for Liabilities. Borrower shall indemnify Lender and
-------------------------
hold Lender harmless from and against any and all claims, demands, losses,
liabilities, strict liabilities, damages, sanctions, penalties, fines, injuries,
expenses, costs (including attorney's fees), settlements, or judgments of any
and every kind whatsoever paid incurred or suffered by, or asserted against,
Lender by any Person arising out of, in connection with or related in any way to
(a) the Release or presence at, from, on, in or under any Collateral Location of
any Hazardous Substance, or (b) any act, omission, condition, conduct,
transaction or occurrence at, from, on or under any Collateral Location in
violation of any Environmental Law, in each case, if and to the extent caused by
or within the control of Borrower or any Subsidiary.
(c) Notice to Lender. If Borrower receives any notice of (i) Release
----------------
of any Hazardous Substance, notification of which must be given to any
governmental agency under any Environmental Law, or notification of which has,
in fact, been given to any governmental agency, or (ii) any complaint, order,
citation or notice with regard to air emissions, water discharges, or any other
environmental health or safety matter affecting Borrower or any Collateral
Location from any person or entity (including, without limitation, the
Environmental Protection Agency), then Borrower shall immediately notify Lender
orally and in writing of said Release, complaint, order, citation or notice.
(d) Environmental Audit. Lender shall have the right, after the
-------------------
occurrence of any event required to be reported to Lender pursuant to Section
11.18(c) hereof which is caused by or within the control of Borrower, in its
sole discretion, exercised in a commercially reasonable manner, to require
Borrower to perform, at Borrower's expense using an environmental consultant
selected by Borrower and acceptable to Lender, an environmental audit and, if
deemed necessary by Lender, an en vironmental risk assessment, each of which
must be satisfactory to Lender. Should Borrower fail to order any such
environmental audit or risk assessment within thirty (30) days after Lender's
written request, Lender shall have the right but not the obligation to retain an
environmental consultant to perform any such environmental audit or risk
assessment. All costs and expenses incurred by Lender in the exercise of such
rights may be charged by Lender as Revolving Advances.
(e) Survival. Assignability, and Transferability. The indemnity set
---------------------------------------------
forth in subsection (a) of this Section 11.18 shall survive any exercise by
Lender or Lender of any remedies under this Agreement or any Loan Document,
including without limitation any power of sale, and shall not merge with any
deed or bill of sale given by Borrower to Lender in lieu of foreclosure or any
deed or bill of sale given pursuant to a foreclosure. It is agreed and intended
by Borrower and Lender that the indemnity set forth above in subsection (a) of
this Section 11.18 may be assigned or otherwise transferred by Lender to its
successors and assigns and to any subsequent purchasers of all or any portion of
any Collateral by, through or under Lender, without notice to Borrower and
without any further consent of any other Person. To the extent consent to any
such assignment or transfer is required by applicable law, advance consent to
any such assignment or transfer is hereby given by Borrower in order to maximize
the extent and effect of the warranties, representations, and indemnity given
hereby.
12. FINANCIAL COVENANTS.
--------------------
30
From and after the date hereof, and until such time as Lender shall have
terminated this Agreement in writing, the covenants set forth in Sections 12.1
and 12.3, inclusive, shall apply to Borrower on a consolidated basis in respect
of its financial condition and performance.
12.1 Debt/Tangible Net Worth Ratio.
-----------------------------
Borrower shall have at all times a Leverage Ratio of not more than 2.5:1.
12.2 Tangible Net Worth.
------------------
The Tangible Net Worth of Borrower shall at all times be at least Thirty
Million Dollars ($30,000,000), all as determined under GAAP, and shall annually
increase over the amount as of the year end of the prior Fiscal Year.
12.3 Fixed Charge Coverage Ratio.
---------------------------
Borrower shall maintain as of the end of each fiscal quarter in each Fiscal
Year a Fixed Charge Coverage Ratio of at least 1.2:1, as determined under GAAP
on a rolling four (4) quarters' basis.
13. NEGATIVE COVENANTS.
------------------
Borrower covenants to Lender that from and after the date hereof and until
such time as Lender shall have terminated this Agreement in writing, Borrower
will not, without the prior written consent of Lender, do or permit to be done
by any Subsidiary any of the things or acts set forth in Sections 13.1 through
13.11, inclusive.
13.1 No Liens.
--------
Create, assume, or suffer to exist any Lien of any kind in or on any of its
Property except for Permitted Encumbrances.
------ ---
13.2 Debt.
----
Incur, assume, or suffer to exist any Debt, except for: (i) the Obligations
------ ---
and any other Debt for borrowed funds existing on the date of this Agreement;
(ii) Debt for borrowed funds incurred pursuant to financial contractual
agreements made and entered into, and disclosed in writing to Lender, prior to
the date of this Agreement; (iii) Debt for borrowed funds owing to Lender,
whether hereunder or otherwise; (iv) trade payables and contractual obligations
to suppliers and customers incurred in the ordinary course of business; (v)
accrued pension fund and other employee benefit plan obligations and liabilities
(provided, however, that such Debt does not result in the existence of any Event
of Default or Default Condition under any other provision of this Agreement);
(vi) deferred taxes; (vii) Debt resulting from endorsements of negotiable
instruments received in the ordinary course of its business; (viii) Debt arising
in respect of "Permitted Encumbrances"; (ix) Debt arising from the receipt of
intercompany loans
31
or advances from any Subsidiary; and (x) purchase money Debt not exceeding at
any one time, in the aggregate, Five Hundred Thousand Dollars ($500,000).
13.3 Contingent Liabilities.
----------------------
Guarantee, endorse, become surety with respect to or otherwise become
directly or contingently liable for or in connection with the obligations of any
other Person, except guarantees in favor of Lender and endorsements of
negotiable instruments for collection in the ordinary course of business.
13.4 Distributions.
-------------
Except as otherwise provided herein, pay any dividend, make any
distribution or take any action which would have an effect equivalent to any of
the foregoing; provided, however, that, notwithstanding the foregoing so long as
-------- -------
no Event of Default then exists or would be caused by or result from the making
of such payment, Borrower may pay dividends and make distributions from time to
time in an amount not in excess of forty percent (40%) of Borrower's Net Income.
13.5 Stock Redemptions, Etc.
----------------------
Purchase, redeem, or otherwise acquire for value any shares of any class of
capital stock if (i) any Event of Default then exists or would be caused by or
result from the making of such payment or (ii) Borrower is then prohibited from
doing so by applicable law.
13.6 Restricted Investment.
---------------------
Make any Restricted Investment, except that Borrower may make loans and
advances to any of its Subsidiaries at any time or from time to time.
13.7 Merger, Transfer, Etc.
---------------------
Dissolve or otherwise terminate its corporate status; or enter into any
merger, reorganization or consolidation; make any substantial change in the
basic type of business conducted by it as of the date hereof; or sell, assign,
lease or otherwise dispose of (whether in one transaction or a series of
transactions) all, substantially all or a substantial part of its property or
assets, other than sales in the ordinary course of business.
13.8 ERISA.
-----
Permit any Plan to become underfunded such that it would not have
sufficient assets in order to quality for a standard termination under Section
4041 of ERISA.
13.9 Transactions with Affiliates.
----------------------------
32
Enter into, or be a party to, any transaction with any Affiliate of
Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of its business and upon fair and reasonable terms that are no less
favorable to Borrower or such Subsidiary than would be obtained in a comparable
arm's length transaction with a Person not an Affiliate or as otherwise may be
approved in writing by Lender from time to time hereafter, upon full disclosure
to Lender, or has been disclosed to Lender on or before the date hereof.
13.10 Fiscal Year.
-----------
Change its Fiscal Year end from that in effect on the Closing Date, except
that Borrower may change its Fiscal Year to December 31.
14. EVENTS OF DEFAULT.
-----------------
The occurrence of any events or conditions described in Sections 14.1
through 14.14 shall constitute an Event of Default hereunder, provided that any
requirement for the giving of notice or the lapse of time, or both, has been
satisfied.
14.1 Notes.
-----
Borrower shall fail to make any payment of principal of or interest on the
Revolving Note within five (5) calendar days after the date when due.
14.2 Obligations.
-----------
Borrower shall fail to make any payments of principal of or interest on any
of the Obligations (other than the Notes) or any other Obligations to Lender,
within five (5) calendar days after receipt of notice from Lender of such
failure to make payment (or after satisfaction of any shorter or longer
requirement for the giving of notice or the lapse of time, or both, contained in
the applicable agreement pertaining to such Obligations).
14.3 Misrepresentations.
------------------
Borrower shall make any representations or warranties in any of the Loan
Documents or in any certificate or statement furnished at any time hereunder or
in connection with any of the Loan Documents which, when taken as a whole,
proves to have been untrue or misleading in any material respect when made or
furnished.
14.4 Covenants.
---------
Borrower shall default in the observance or performance of any covenant or
agreement contained herein or in any of the other Loan Documents (other than a
failure described in Sections 14.1 or 14.2), unless such default is cured within
ten (10) calendar days after Borrower's receipt of notice from Lender of such
Default Condition.
33
14.5 Damage, Loss, Theft or Destruction of Collateral.
------------------------------------------------
There shall have occurred material uninsured damage to, or loss, theft or
destruction of, any part of the Collateral of Borrower, or Borrower considered
as a whole, having a then current value in excess of One Hundred Thousand
Dollars ($100,000), unless such default is cured within ten (10) days after
Borrower, receipt of notice from Lender of such Default Condition.
14.6 Other Debts.
-----------
Borrower shall default in connection with any agreement evidencing,
securing or relating to any other Debt to, or under any operating lease with,
either Lender or, with respect to any Debt of One Hundred Thousand Dollars
($100,000) or more with any creditor other than a Lender, unless such default is
cured within thirty (30) days after Borrower's receipt of notice from Lender of
such Default Condition.
14.7 Voluntary Bankruptcy.
--------------------
Borrower shall file a voluntary petition in bankruptcy or a voluntary
petition or answer seeking liquidation, reorganization, arrangement,
readjustment of its debts, or for any other relief under the Bankruptcy Code, or
under any other act or law pertaining to insolvency or debtor relief, whether
state, federal, or foreign, now or hereafter existing; Borrower, shall enter
into any agreement indicating its consent to, approval of, or acquiescence in,
any such petition or proceeding; Borrower shall apply for or permit the
appointment by consent or acquiescence of a receiver, custodian or trustee of
Borrower for all or a substantial part of its Property; Borrower shall make an
assignment for the benefit of creditors; or Borrower shall be unable or shall
fail to pay its debts generally as such debts become due; or Borrower shall
admit, in writing, its inability or failure to pay its debts generally as such
debts become due.
14.8 Involuntary Bankruptcy.
----------------------
There shall have been filed against Borrower an involuntary petition in
bankruptcy or seeking liquidation, reorganization, arrangement, readjustment of
its debts or for any other relief under the Bankruptcy Code, or under any other
act or law pertaining to insolvency or debtor relief,, whether state, federal or
foreign, now or hereafter existing, which has not been dismissed within ninety
(90) days of the date the petition is filed; Borrower shall suffer or permit the
involuntary appointment of a receiver, custodian or trustee of Borrower or for
all or a substantial part of its Property; or Borrower shall suffer or permit
the issuance of a warrant of attachment, execution or similar process against
all or any substantial part of the Property of Borrower.
14.9 Judgments.
---------
Final judgments or orders for the payment of money are rendered against
Borrower the aggregate amount of One Hundred Thousand Dollars ($100,000) or more
(exclusive of amounts covered by insurance) which are not satisfied within sixty
(60) days after their being rendered.
34
14.10 ERISA.
-----
The occurrence of any of the following events: (i) the termination of any
Plan in a distress termination under Section 4041(c) of ERISA or an involuntary
termination under Section 4042 of ERISA; (ii) the filing of a request for a
waiver of the minimum funding standard with regard to any Employee Benefit Plan:
(iii) the occurrence of any event which causes any Plan to cease to have
sufficient assets at all times so as to qualify for a standard termination under
Section 4041 of ERISA; (iv) the occurrence of any event which causes the
unfunded liability with regard to all such Plans in the aggregate to become an
amount in excess of One Hundred Thousand Dollars ($100,000); (v) the occurrence
of any event which causes the withdrawal liability with regard to all Plans to
become an amount in excess of One Hundred Thousand Dollars ($100,000); (vi) the
appointment of a trustee by an appropriate United States district court to
administer any Plan; or (vii) the institution of any proceedings by the PBGC to
terminate any such Plan or to appoint a trustee to administer any such Plan;
unless, in each case, such default is cured within thirty (30) days after
Borrower's receipt of notice from Lender of such Default Condition.
14.11 Change of Control.
-----------------
Scott Dorfman shall cease to own, beneficially and of record, with
unlimited power to vote, at least fifty percent (50%) of the issued and
outstanding capital stock of Borrower.
14.12 Material Adverse Change.
-----------------------
The occurrence of any material change in the business, financial condition
or results of operations of Borrower which Lender reasonably determines, in good
faith, materially and adversely affects the ability of Borrower to pay and
perform its Obligations to Lender unless such default is cured within thirty
(30) days after Borrower's receipt of notice from Lender of such Default
Condition.
14.13 Change of Management.
--------------------
If Scott Dorfman shall cease to serve as the Chief Executive Officer of
Borrower or, if another officer of Borrower is given such title, to hold a
position with Borrower in which he would nevertheless be entitled to exercise
the authority of the highest executive officer of Borrower.
15. REMEDIES.
--------
35
Upon the occurrence and during the continuation of any Default Condition or
Event of Default, Lender's obligation to extend financing under the Revolving
Line of Credit shall immediately cease and the Revolving Line of Credit shall
terminate; provided, however, that if such obligations have ceased and
-------- -------
commitments terminated due to the occurrence of a Default Condition, and such
Default Condition does not become an Event of Default due to its having been
cured or waived before it has matured into an Event of Default, then such
obligation shall be reinstated as of the date such Default Condition is cured or
waived. Upon the occurrence or existence of any Event of Default, or at any
time thereafter, without prejudice to the rights of Lender to enforce its claims
against Borrower for damages for failure by Borrower to fulfill any of its
obligations hereunder, subject only to prior receipt by Lender of payment in
full of all Obligations then outstanding in a form acceptable to Lender, Lender
shall have all of the rights and remedies described in Sections 15.1 through
15.4, inclusive, and Lender may exercise any one, more, or all of such remedies,
in its sole discretion, without thereby waiving any of the others.
15. Acceleration of the Obligations.
-------------------------------
Lender, at its option, may by written notice, effective upon receipt,
declare all of the obligations (including but not limited to that portion
thereof evidenced by any Notes) to be immediately due and payable (and in the
event a voluntary or involuntary case is commenced under the Bankruptcy Code by
or against Borrower as a debtor, all Obligations automatically will be due and
payable without any notice or declaration by Lender), whereupon the same shall
become immediately due and payable without presentment, demand, protest, notice
of nonpayment or any other notice required by law relative thereto, all of which
are hereby expressly waived by Borrower, anything contained herein to the
contrary notwithstanding and, in connection therewith, Lender shall have the
right to increase the rate of interest charged on the Notes, without further
notice, to a rate per annum equal to the Default Rate. Thereafter, Lender, at
its option, may, but shall not be obligated to, accept less than the entire
amount of Obligations due, if tendered, provided, however, that unless then
agreed to in writing by Lender, no such acceptance shall or shall be deemed to
constitute a waiver of any Event of Default or a reinstatement of any
commitments of Lender hereunder.
15.2 Remedies of a Secured Party.
---------------------------
Lender shall thereupon have the rights and remedies of a secured party
under the UCC in effect on the date thereof (regardless of whether the same has
been enacted in the jurisdiction where the rights or remedies are asserted),
including, without limitation, the right to take the Collateral or any portion
thereof into its possession, by such means (without breach of the peace) and
through agents or otherwise as it may elect (and, in connection therewith,
demand that Borrower assemble the Collateral owned by it at a place or places
and in such manner as the Lender shall prescribe), and sell, lease or otherwise
dispose of the Collateral or any portion thereof in its then condition or
following any commercially reasonable preparation or processing, which
disposition may be by public or private proceedings, by one or more contracts,
as a unit or in parcels, at any time and place and on any terms, so long as the
same are commercially reasonable. Lender may apply the proceeds of any such
sale or disposition of Borrower's
36
Collateral to any of the obligations of Borrower in such order as Lender, in its
sole discretion, may elect. Lender shall give the affected Borrower written
notice of the time and place of any public sale of the Collateral or the time
after which any other intended disposition thereof is to be made, except where
the Collateral is perishable or threatens to decline speedily in value or is of
a type customarily sold on a recognized market. The requirement of sending
reasonable notice shall be met if such notice is given to Borrower pursuant to
Section 16.9 at least ten (10) calendar days before such disposition. Expenses
of retaking, holding, insuring, preserving, protecting, preparing for sale or
selling or the like with respect to the Collateral shall include, in any event,
reasonable attorneys' fees and other legally recoverable collection expenses,
all of which shall constitute Obligations.
15.3 Set Off.
-------
In addition to such other rights and remedies with respect to the Balances
Collateral as may exist from time to time hereafter in favor of Lender, whether
by way of setoff, banker's lien, consensual security interest or otherwise, upon
the occurrence of any Event of Default hereunder, each Lender may charge any
part or all of the obligations of such Lender to Borrower represented by items
constituting the Balances Collateral in the possession and control of Lender
against the Obligations of Borrower without prior notice to or demand upon
Borrower.
15.4 Other Remedies.
--------------
Unless and except to the extent expressly provided for to the contrary
herein, the rights of Lender specified herein shall be in addition to, and not
in limitation of, Lender's rights under the UCC, as amended from time to time,
or any other statute or rule of law or equity, or under any other provision of
any of the Loan Documents, or under the provisions of any other document,
instrument or other writing executed by Borrower or any third party in favor of
Lender, all of which may be exercised successively or concurrently.
16. MISCELLANEOUS.
-------------
16.1 Waiver.
------
Each and every right granted to Lender under this Agreement, or any of the
other Loan Documents, or any other document delivered hereunder or in connection
herewith or allowed it by law or in equity, shall be cumulative and may be
exercised from time to time. No failure on the part of Lender to exercise, and
no delay in exercising, any right shall operate as a waiver thereof, nor shall
any single or partial exercise by Lender of any right preclude any other or
future exercise thereof or the exercise of any other right. No waiver by Lender
of any Default Condition or Event of Default shall constitute a waiver of any
subsequent Default Condition or Event of Default.
16.2 Governing Law.
-------------
37
This Agreement and the other Loan Documents, and the rights and obligations
of the parties hereunder and thereunder, shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Georgia.
16.3 Survival.
--------
All representations, warranties and covenants made herein shall survive the
execution and delivery of all of the Loan Documents.
16.4 No Assignment by Borrower.
-------------------------
No assignment hereof shall be made by Borrower without the prior written
consent of Lender. Lender may assign, or sell participations and undivided
ownership interests in, its rights, title and interest herein and in the Loan
Documents at any time hereafter with written notice to, but without necessity of
consent from, Borrower.
16.5 Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of which
when fully executed shall be an original, and all of said counterparts taken
together shall be deemed to constitute one. and the same agreement.
38
16.6 Reimbursement.
-------------
Borrower agrees pay to the Lender on demand all reasonable out-of-pocket
costs and expenses that Lender may pay or incur in connection with the
negotiation, preparation, consummation, enforcement and termination of this
Agreement and the other Loan Documents, including, without limitation: (a)
reasonable attorneys, fees and disbursements; (b) costs and expenses (including
reasonable attorneys, fees and disbursements) for any amendment, supplement,
waiver, consent or subsequent closing in connection with the Loan Documents and
the transactions contemplated thereby; (c) costs and expenses of lien and title
searches and title insurance; (d) taxes, fees and other charges for recording
any deeds to secure debt, deeds of trust, mortgages,, filing financing
statements and continuations, and other actions to perfect, protect and continue
the Lien of Lender in the Collateral; (e) sums paid or incurred to pay for any
amount or to take any action required of Borrower under the Loan Documents that
Borrower fails to pay or take; (f) costs of appraisals, inspections, and
verifications of the Collateral, including, without limitation, reasonable costs
of travel, lodging, and meals for inspections of the Collateral and Borrower's
operations by Lender; (g) costs and expenses of preserving and protecting the
credit or the Collateral; and (h) costs and expenses (including reasonable
attorneys, and paralegals, fees and disbursements) paid or incurred to obtain
payment of the Obligations, enforce the Lien in the Collateral, sell or
otherwise realize upon the Collateral, and otherwise enforce the provisions of
the Loan Documents or to defend any claims made or threatened against Lender or
either Lender arising out of the transactions contemplated hereby. Borrower
further agrees to reimburse Lender for its actual out-of-pocket costs and
expenses incurred in conducting field examinations and inspections of Borrower
and its Properties in addition to the foregoing. The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by Borrower. All of the foregoing costs and expenses
may, in the discretion of Lender, be charged to Borrower's loan account as
Revolving Advances. Borrower will also pay all expenses incurred by them in
this transaction. In the event Borrower becomes a debtor under the Bankruptcy
Code, Lender's secured claim in such case shall include interest on the
Obligations and all fees, costs and charges pro vided for herein (including,
without limitation, reasonable attorneys' fees) all for the extent allowed by
the Bankruptcy Code.
16.7 Successors and Assigns.
----------------------
This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties hereto.
16.8 Severability.
------------
If any provision of any of the Loan Documents or the application thereof to
any party thereto or circumstances shall be invalid or unenforceable to any
extent, the remainder of such Loan Documents and the application of such
provisions to any other party thereto or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
39
16.9 Notices.
-------
All notices, requests and demands to or upon the respective parties hereto
shall be deemed to have been properly given or made when personally delivered or
five (5) calendar days after being deposited in the mail, registered or
certified mail, return receipt requested, with sufficient postage prepaid,
addressed as follows or to such other address as may be designated hereafter in
writing by the respective parties hereto:
Borrower:
Innotrac Corporation
6655 Sugarloaf Parkway
Duluth, Georgia 30097
Attn: Scott Dorfman, President
With a copy to:
Kilpatrick Stockton LLP
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309-4530
Attn: Gregory K. Cinnamon, Esq.
Lender:
SouthTrust Bank, N.A.
One Georgia Center
27th Floor
600 West Peachtree Street
Atlanta, Georgia 30308
Attn: Noble Jones, Vice President
With a copy to:
Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street, N.E.
Atlanta, Georgia 30326
Attn: L. Brett Lockwood, Esq.
except in cases where it is expressly provided herein or by applicable law that
such notice, demand or request is not effective until received by the party to
whom it is addressed in which instance rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice was given
shall be deemed to be receipt of the notice, demand or request sent. By giving
at least thirty (30) days written notice thereof, Borrower or Lender shall have
the right
40
time to time and at any time to change their respective addresses and each shall
have the right to specify any other address within the continental United States
of America.
16.10 Entire Agreement; Amendments.
----------------------------
This Agreement, together with the Loan Documents executed in connection
therewith, collectively constitute the entire agreement between the parties
hereto with respect to the subject matter hereof. Neither this Agreement or any
Loan Document nor any provision hereof or thereof may be changed, waived,
discharged, modified or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement is sought.
16.11 Time of the Essence.
-------------------
Time is of the essence in this Agreement and the other Loan Documents.
16.12 Interpretation.
--------------
No provision of this Agreement shall be construed against or interpreted to
the disadvantage of any party hereto by any court or other governmental or
judicial authority by reason of such party having or being deemed to have
structured or dictated such provision.
16.13 Lender Not Joint Venturer.
-------------------------
Neither this Agreement nor any agreements, instruments, documents or
transactions contemplated hereby (including the Loan Documents) shall in any
respect be interpreted, deemed or construed as making Lender a partner or joint
venturer with Borrower or as creating any similar relationship or entity, and
Borrower agrees that it will not make any contrary assertion, contention, claim
or counterclaim in any action, suit or other legal proceeding involving either
Lender or Borrower.
16.14 Jurisdiction.
------------
Borrower agrees that any legal action or proceeding with respect to this
Agreement or any Loan Document may be brought in the courts of the State of
Georgia or the United States District Court, Northern District of Georgia,
Atlanta Division. By execution of this Agreement, Borrower hereby submits to
each such jurisdiction, hereby expressly waiving whatever rights may correspond
to it by reason of its present or future domicile. Nothing herein shall affect
the right of Lender to commence legal proceedings or otherwise proceed against
Borrower in any other jurisdiction or to serve process in any manner permitted
or required by law.
16.15 Acceptance.
----------
This Agreement, together with the other Loan Documents, shall not become
effective unless and until delivered to Lender at its office in Atlanta, Georgia
and accepted in writing by
41
Lender thereafter at such office as evidenced by its execution hereof (notice of
which delivery and acceptance is hereby waived by Borrower).
16.16 Payment on Non-Business Days.
----------------------------
Whenever any payment to be made hereunder or under any Note shall be stated
to be due on a day which is not a Business Day, such payment may be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest hereunder or under the Notes.
16.17 UCC Terminations.
----------------
Borrower agrees that Lender shall not be required to execute any such UCC
termination statements with respect to any Collateral unless and until all
Obligations have been paid in full and Lender shall have terminated this
Agreement in writing, which Lender shall do within a reasonable amount of time
after the Obligations have been paid in full.
16.18 Cure of Default by Lender.
-------------------------
If, hereafter, Borrower defaults in the performance of any duty or
obligation to Lender hereunder or under any Loan Document or to any other Person
(including, without limitation, any lessor, licensor, vendor, processor,
shipper, carrier or warehouseman), Lender may, at its option, but without
obligation, in order to protect or preserve Lender's credit or the Collateral,
Cure such default and any costs, fees and expenses incurred by Lender in
connection therewith including, without limitation, for the purchase of
insurance, the payment of taxes and the removal or settlement of liens and
claims, shall be deemed to be Revolving Advances, made to Borrower, whether or
not this creates an over-advance hereunder, and shall be payable in accordance
with its terms.
16.19 Recitals.
--------
All recitals contained herein are hereby incorporated by reference into
this Agreement and made part thereof.
16.20 Attorney-in-Fact.
----------------
Borrower hereby designates, appoints and empowers Lender irrevocably as its
attorney-in-fact, at Borrower's cost and expense, to do in the name of Borrower
from and after the occurrence of, and during the continuation of, any Event of
Default, any and all actions which Lender may deem reasonably necessary or
advisable to carry out the terms hereof upon the failure, refusal or inability
of Borrower to do so, and Borrower hereby agrees to indemnify and hold Lender
harmless from any costs., damages, expenses or liabilities arising against or
actually incurred by Lender in connection therewith, except those arising from
the willful misconduct or gross negligence of Lender. This power of attorney,
being coupled with an interest, shall be irrevocable, shall continue until all
obligations have been satisfied in full and this Agreement has
42
been terminated by Lender in writing and shall be in addition to Lender's other
rights, powers and remedies.
16.21 Sole Benefit.
------------
The rights and benefits set forth in this Agreement and in all the other
Loan Documents are for the sole and exclusive benefit of the parties thereto and
may be relied upon only by them.
16.22 Termination of this Agreement.
-----------------------------
This Agreement, together with all Loan Documents, shall continue in full
force and effect as to Borrower notwithstanding (i) the passage of the
Termination Date, (ii) the early termination of this Agreement by any one
Borrower pursuant to Section 2.4(b) or (iii) the termination of the Revolving
Line of Credit pursuant to Article 15, unless and until Borrower has complied
fully and in all respects with Section 2.4(b), in the case of any voluntary
early termination of this Agreement by Borrower, or Borrower has made full
payment and satisfaction of all Obligations of Borrower to Lender after
termination of the Revolving Line of Credit, on or after the Termination Date or
prior thereto in the case of any early involuntary termination. When Borrower
has so complied with this Section, this Agreement will terminate.
16.23 Acknowledgment by Borrower. Borrower hereby acknowledges and
--------------------------
agrees that this Agreement is intended to be an integrated amendment and
restatement of the Prior Loan Agreement, and this Agreement is not intended as a
forgiveness or novation of the indebtedness heretofore outstanding under the
Prior Loan Agreement, and that the Obligations under this Agreement are entitled
in all respects to the benefit of the security intended to be afforded by the
Collateral and the other Loan Documents whether heretofore executed or otherwise
executed in connection with this Agreement.
17. CONDITIONS PRECEDENT.
--------------------
17.1 Conditions to Initial Revolving Advance.
---------------------------------------
The conditions precedent set forth below shall constitute express
conditions precedent to any obligation of Lender to make Revolving Advance
hereunder.
(a) Resolutions and Incumbency Certificate of Borrower. Receipt by
--------------------------------------------------
Lender of resolutions and incumbency certificates from the Secretary or
Assistant Secretary of Borrower, to be substantially in the form of Exhibit "E"
-----------
attached hereto.
(c) Opinion of Counsel. Receipt by Lender of an opinion of counsel
------------------
from legal counsel to Borrower, in form and substance acceptable to Lender.
(d) Loan Documents. Receipt by Lender of any and all other Loan
--------------
Documents, duly executed in form and substance acceptable to Lender.
43
(e) Other Documents. Receipt by Lender of any and all other
---------------
documents, agreements and instructs that Lender may reasonably request in
connection with the transactions contemplated by this Agreement.
(f) No Default. No Default Condition or Event of Default shall have
----------
occurred and be continuing.
(g) Representations and Warranties. All representations and
------------------------------
warranties contained in the Agreement shall be true and correct in all material
respects on the date of each Revolving Advance.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
44
IN WITNESS WHEREOF, Borrower and Lender have set their hands, and
Borrower has affixed its seal, all as of the day and year first above
written.
"BORROWER"
INNOTRAC CORPORATION (SEAL)
By: /s/ S. Dorfman
-----------------------------------
Name: Scott Dorfman
---------------------------------
Title: President
--------------------------------
Attest: /s/ John H. Nichols III
-------------------------------
Name: John H. Nichols III
---------------------------------
Title: Vice President and Chief
Financial Officer
--------------------------------
"LENDER"
SOUTHTRUST BANK, N.A.
By: /s/ Noble Jones
-----------------------------------
Noble Jones, Vice President
45
Exhibit "A" - Collateral Locations [omitted]
Exhibit "B" - Additional Permitted Encumbances [omitted]
Exhibit "C" - Form of Revolving Note
Exhibit "D" - Trade Names and Trade Styles [omitted]
Exhibit "E" - Form of Secretary's Certificate [omitted]
EXHIBIT "C"
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FORM OF REVOLVING NOTE
COUNTY OF FULTON $35,000,000
STATE OF GEORGIA January 25, 1999
AMENDED AND RESTATED
REVOLVING PROMISSORY NOTE
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1. FOR VALUE RECEIVED, INNOTRAC CORPORATION ("Borrower" OR THE
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"BORROWER") promises to pay to the order of SOUTHTRUST BANK, N.A., ("Lender"),
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at the principal office of Lender in Atlanta, Georgia, or at such other place as
Lender hereafter may direct in writing, in legal tender of the United States of
America, the principal sum of Thirty-Five Million Dollars ($35,000,000), or so
much thereof as may be disbursed to Borrower and remains outstanding from time
to time hereafter under that certain "Revolving Line of Credit" opened by Lender
in favor of Borrower pursuant to the terms of that certain Amended and Restated
Loan and Security Agreement, dated as of January 25, 1999, as amended, between
Lender and Borrower (hereinafter, as it may be further amended or supplemented
from time to time, called the "Loan Agreement"), the terms and provisions of
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which are hereby incorporated herein by reference and made a part hereof, on the
"Termination Date" (as defined in the Loan Agreement), with interest thereon
(computed on the daily outstanding principal balance, for the actual number of
days outstanding, on the basis of a 360 day year) on each advance evidenced
hereby from date of advance until paid in full at the rate per annum prescribed
therefor in the Loan Agreement. Accrued interest on the unpaid principal
balance hereof from time to time outstanding shall be due and payable monthly,
commencing on the first day of the calendar month succeeding the date hereof and
continuing on the same day of each succeeding calendar month thereafter and at
maturity. This Note does not represent a novation or forgiveness of any prior
indebtedness evidenced by the Note.
2. Borrower agrees, in the event that this Note or any portion hereof is
collected by law or through an attorney at law, to pay all costs of collection,
including, without limitation, reasonable attorneys' fees.
3. This Note evidences borrowing under, is subject to and secured by, and
shall be paid and enforced in accordance with, the terms of the Loan Agreement,
and is the "Revolving Note" defined in Section 1.1 thereof.
4. Nothing herein shall limit any right granted to Lender by any other
instrument or by law or equity.
5. Borrower hereby waives demand, protest, notice of demand, protest and
nonpayment and any other notice required by law relative hereto, except to the
extent as otherwise may be provided for in the Loan Agreement.
6. In no contingency or event whatsoever, whether by reason of
advancement of the proceeds hereof or otherwise, shall the amount paid or agreed
to be paid to Lender for the use,
forbearance or detention of money advanced hereunder exceed the highest lawful
rate permissible under any law which a court of competent jurisdiction may deem
applicable hereto; and, in the event any such payment is inadvertently paid by
Borrower or inadvertently received by Lender, such excess sum shall be, at
Borrower's option, returned to Borrower forthwith or credited as a payment of
principal, but shall not be applied to the payment of interest. It is the intent
hereof that Borrower not pay or contract to pay, and that Lender not receive or
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by Borrower under applicable law.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed and sealed
as of the day and year first above written.
INNOTRAC CORPORATION (SEAL)
By: /s/ Scott Dorfman
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Name: Scott Dorfman
Title: President
Attest: /s/ John H. Nichols III
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Name: John H. Nichols III
Title: Vice President and Chief
Financial Officer