EXHIBIT 10.1
LOAN DOCUMENTS MODIFICATION AGREEMENT
(May 31, 2002)
THIS LOAN DOCUMENTS MODIFICATION AGREEMENT (hereinafter referred to as
this "Amendment") is made and entered into as of the 31st day of May, 2002, by
and among INNOTRAC CORPORATION, a Georgia corporation (hereinafter referred to
as "Borrower"), SOUTHTRUST BANK, an Alabama banking corporation, successor by
conversion to SouthTrust Bank, N.A., a national banking association (hereinafter
referred to as "Lender"), and iFULFILLMENT, INC., a Georgia corporation
(hereinafter referred to as "Guarantor").
BACKGROUND STATEMENT
Borrower and Lender are parties to that certain Amended and Restated
Loan and Security Agreement dated January 25, 1999, as previously amended
pursuant to that certain First Amendment to Amended and Restated Loan and
Security Agreement dated April 29, 1999, that certain letter (the "2000 Letter")
from Lender to Borrower dated August 9, 2000, and that certain letter (the "2001
Letter") from Lender to Borrower dated September 10, 2001 (hereinafter
collectively referred to as the "Agreement"). All capitalized terms used herein
shall have the same meanings as are ascribed to them in the Agreement unless
otherwise herein defined. Borrower and Lender are also parties to that certain
Amended and Restated Revolving Credit Note dated April 29, 1999, made by
Borrower to the order of Lender in the original principal amount of Forty
Million and No/100 Dollars ($40,000,000.00), which evidences the indebtedness of
the Revolving Line of Credit (hereinafter referred to as the "Revolving Note").
Borrower and Lender have agreed to extend the maturity date of the Revolving
Note, Guarantor has agreed to guaranty the Obligations of Borrower, and the
parties are entering into this Amendment to evidence their agreement.
AGREEMENT
FOR AND IN CONSIDERATION of the sum of Ten and No/100 Dollars ($10.00),
the foregoing recitals, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Borrower, Lender and
Guarantors do hereby agree as follows:
1. LOAN BALANCES. The foregoing recitals are true and correct and
are incorporated herein by reference. Borrower and Lender acknowledge and agree
that as of May 28, 2002, the outstanding principal balance of the Revolving Note
is Three Million Five Hundred Ninety-Seven Thousand and No/100 Dollars
($3,597,000.00).
2. MODIFICATION OF AGREEMENT. The Agreement is hereby modified
and amended, effective as of the date hereof, as follows:
(a) By Borrower and Lender acknowledging and agreeing that,
notwithstanding the terms and conditions of the 2001 Letter, the Margin
Requirement [as defined in Section 2.1(a) of the Agreement] is in full force and
effect.
(b) By inserting the following definitions into Section 1.1 of the
Agreement:
"Average Quarterly Loan Balance" - shall mean the amount
obtained by adding the unpaid balance of the Revolving Line of
Credit owing by Borrower to Lender at the
end of each day for each day during the calendar quarter in
question and by dividing such sum by the number of days in
such calendar quarter."
"Material Subsidiaries" - shall mean each Subsidiary of
Borrower, now existing or hereafter established or acquired,
that at any time prior to the Termination Date has or acquires
total assets in excess of $100,000, or that holds any assets
material to the operations or business of Borrower or another
Material Subsidiary."
(c) By deleting the definition of "Margin" contained in Section
1.1 of the Agreement and substituting in lieu thereof the following new
definition of "Margin":
"Margin" shall mean an amount equal to the sum of (i) ninety
percent (90%) of the face dollar amount, as of the date of
determination, of Eligible Accounts of Borrower, plus (ii)
sixty-five percent (65%) of the net book value of Eligible
Inventory purchased for resale to customers of BellSouth
Corporation, its affiliates or subsidiaries, plus (iii) fifty
percent (50%) of the net book value of other Eligible
Inventory."
(d) By deleting the present definition of "Termination Date"
contained in Section 1.1 of the Agreement and substituting in lieu thereof the
following new definition of "Termination Date":
"Termination Date" shall mean June 1, 2005, or any later date
to which such date is extended by Lender in its sole
discretion in writing."
(e) By inserting the following provision as Section 2.2 (c) of the
Agreement:
"(c) Unused Revolver Fee. Borrower agrees that, beginning
with the calendar quarter ending September 30, 2000, if during
the term hereof the Average Quarterly Loan Balance outstanding
for any calendar quarter shall be less than the amount of the
Revolving Line of Credit (the "Minimum Loan Balance"), then
Borrower shall immediately pay to Lender, in addition to any
interest and other fees and sums due under this Agreement and
under the Loan Documents, an amount equal to the product of
(a) the Minimum Loan Balance less the actual amount of the
Average Quarterly Loan Balance so calculated; times (b)
one-quarter of one percent (.25%); times (c) that fraction,
the numerator of which shall be 90 and the denominator of
which shall be 360. The charge due pursuant to the terms of
this paragraph shall be payable quarterly, in arrears, on the
first (1st) day of each April, July, October, and January,
commencing October 1, 2000, and on the Termination Date."
(f) By deleting the text of Section 10.16 of the Agreement, which
presently states "Borrower has no Subsidiaries," and replacing it with the
following:
"Borrower has no Material Subsidiaries other than
iFulfillment, Inc., a Georgia corporation. Return.Com Online,
LLC, a Georgia limited liability company, is not a one of
Borrower's Material Subsidiaries."
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(g) By deleting the text of Section 12.1 of the Agreement, which
presently states "Borrower shall have at all times a Leverage Ratio of not more
than 2.5:1," and replacing it with the following:
"Borrower shall have at all times a Leverage Ratio of not more
than 2.0:1."
(h) By deleting the text of Section 12.2 of the Agreement, which
presently states "The Tangible Net Worth of Borrower shall be at least Thirty
Million Dollars ($30,000,000), all as determined under GAAP, and shall annually
increase over the amount as of the end of the prior Fiscal Year," and replacing
it with the following:
"The Tangible Net Worth of Borrower shall be at least
Thirty-Five Million Dollars ($35,000,000), all as determined
under GAAP and as adjusted with respect to any repurchase by
Borrower of its equity securities approved by Lender, and
shall annually increase over the amount as of the end of the
prior Fiscal Year."
(i) By deleting the text of Section 12.3 of the Agreement, which
presently states "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," and replacing it
with the following:
"Borrower shall maintain as of the end of each fiscal quarter
in each Fiscal Year a Fixed Charge Coverage Ratio of at least
1.50:1, as determined under GAAP on a rolling four (4)
quarters basis."
(j) By deleting the notice address of Lender's counsel, Smith,
Gambrell & Russell, LLP set forth in Section 16.9 of the Agreement, and
replacing it with the following:
"Arnall Golden Gregory LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attn: Steven A. Pepper, Esq."
(k) By adding the following Collateral Locations to Exhibit "A"
attached to the Agreement:
"3. 605 Crossroads Parkway, Bolingbrook, Illinois 60440
4. 4910 Longley Lane, Suite 101, Reno, Nevada 89502
5. 5 William White Boulevard, Pueblo, Colorado 81001"
3. MODIFICATION OF LOAN DOCUMENTS. As of the date hereof,
Borrower hereby reaffirms and restates each and every warranty and
representation set forth in the Loan Documents. The terms of the Loan Documents
are hereby modified and amended, effective as of the date hereof, so that any
reference in any of the Loan Documents (including, without limitation, the
Agreement) to the Termination Date applicable to the Revolving Note or the
Revolving Line of Credit Note shall refer to the Termination Date as herein
amended, and any reference in any of the Loan Documents (including, without
limitation, the Agreement) to the Revolving Note shall refer to the Revolving
Note as herein amended.
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4. GUARANTY OF OBLIGATIONS. By execution of that certain Guaranty
of even date herewith (the "Guaranty"), Guarantor has guaranteed the Obligations
of Borrower to Lender. The Guaranty is secured by that certain Security
Agreement of even date herewith, pursuant to which Guarantor has granted to
Lender a security interest in all of its assets. In consideration for the
execution and delivery by Guarantor of the Guaranty, Borrower agrees to make the
benefit of all Revolving Advances under the Agreement available to Guarantor.
Borrower and Guarantor acknowledge and agree that Guarantor is one hundred
percent (100%) owned by Borrower and is under common management and control with
Borrower and will benefit directly and materially by the extension of the
Revolving Line of Credit under the Agreement. Guarantor is executing this
Amendment for the limited purpose of acknowledging that it is one hundred
percent (100%) owned by Borrower and is under common management and control with
Borrower and that it will benefit directly and materially by the extension of
all Revolving Advances under the Agreement.
5. RATIFICATION; FEES AND EXPENSES. Except as herein expressly
modified or amended, all the terms and conditions of the Agreement, the
Revolving Note, and the other Loan Documents are hereby ratified, affirmed, and
approved. In consideration of Lender agreeing to this Amendment as herein
provided, Borrower agrees to pay Lender a loan extension fee in the amount of
Fifty Thousand and No/100 Dollars ($50,000.00) and further agrees to pay all
fees and expenses incurred in connection with this Amendment. Borrower
acknowledges and agrees that once paid, the loan extension fee shall be fully
earned and shall not be refundable or rebatable in whole or in part.
6. NO DEFENSES; RELEASE. For purposes of this Paragraph 6, the
terms "Borrower Parties" and "Lender Parties" shall mean and include Borrower
and Lender, respectively, and each of their respective predecessors, successors
and assigns, and each past and present, direct and indirect, parent, subsidiary
and affiliated entity of each of the foregoing, and each past and present
employee, agent, attorney-in-fact, attorney-at-law, representative, officer,
director, shareholder, partner and joint venturer of each of the foregoing, and
each heir, executor, administrator, successor and assign of each of the
foregoing; references in this paragraph to "any" of such parties shall be deemed
to mean "any one or more" of such parties; and references in this sentence to
"each of the foregoing" shall mean and refer cumulatively to each party referred
to in this sentence up to the point of such reference. Borrower hereby
acknowledges, represents and agrees: that Borrower has no defenses, setoffs,
claims, counterclaims or causes of action of any kind or nature whatsoever with
respect to the Agreement, the other Loan Documents or the Obligations, or with
respect to any other documents or instruments now or heretofore evidencing,
securing or in any way relating to the Obligations or with respect to any other
transaction, matter or occurrence between any of the Borrower Parties and any
Lender Parties or with respect to any acts or omissions of any Lender Parties
(all of said defenses, setoffs, claims, counterclaims or causes of action being
hereinafter referred to as "Loan Related Claims"); that, to the extent that
Borrower may be deemed to have any Loan Related Claims, Borrower does hereby
expressly waive, release and relinquish any and all such Loan Related Claims,
whether or not known to or suspected by Borrower; that Borrower shall not
institute or cause to be instituted any legal action or proceeding of any kind
based upon any Loan Related Claims; and that Borrower shall indemnify, hold
harmless and defend all Lender Parties from and against any and all Loan Related
Claims and any and all losses, damages, liabilities, costs and expenses suffered
or incurred by any Lender Parties as a result of any assertion or allegation by
any Borrower Parties of any Loan Related Claims or as a result of any legal
action related thereto. Borrower hereby reaffirms and restates, as of the date
hereof, all covenants, representations and warranties set forth in the
Agreement.
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7. NO NOVATION. Borrower hereby acknowledges and agrees that this
Amendment shall not constitute a novation of the indebtedness evidenced by the
Revolving Note.
8. NO WAIVER OR IMPLICATION. Borrower hereby agrees that nothing
herein shall constitute a waiver by Lender of any default, whether known or
unknown, which may exist under the Agreement or any other Loan Document.
Borrower hereby further agrees that no action, inaction or agreement by Lender,
including, without limitation, any extension, indulgence, waiver, consent or
agreement of modification which may have occurred or have been granted or
entered into (or which may be occurring or be granted or entered into hereunder
or otherwise) with respect to nonpayment of the Obligations or any portion
thereof, or with respect to matters involving security for the Obligations, or
with respect to any other matter relating to the Obligations, shall require or
imply any future extension, indulgence, waiver, consent or agreement by Lender.
Borrower hereby acknowledges and agrees that Lender has made no agreement, and
is in no way obligated, to grant any future extension, indulgence, waiver or
consent with respect to the Obligations or any matter relating to the
Obligations.
9. NO RELEASE OF COLLATERAL. Borrower further agrees that this
Amendment shall in no way occasion a release of any collateral held by Lender as
security to or for the Obligations, and that all collateral held by Lender as
security to or for the Obligations shall continue to secure the Obligations.
10. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon
and inure to the benefit of Borrower and Lender and their respective successors
and assigns, whether voluntary by act of the parties or involuntary by operation
of law.
11. AUTHORITY. By executing this Amendment as hereinafter
provided, Scott Dorfman hereby certifies that he is the President of Borrower
and is duly authorized to execute this Amendment on behalf of Borrower.
IN WITNESS WHEREOF, this Amendment has been duly executed under seal by
Borrower, Lender, and Guarantor as of the day and year first above written.
BORROWER:
INNOTRAC CORPORATION, a Georgia corporation
By /s/ SCOTT DORFMAN
-----------------------------------
Scott Dorfman
President
[CORPORATE SEAL]
LENDER:
SOUTHTRUST BANK, an Alabama banking
corporation
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By: /s/ KENNETH W. DEERE
-----------------------------------
Kenneth W. Deere
Senior Vice President
GUARANTOR:
iFULFILLMENT, INC., a Georgia corporation
By: /s/ SCOTT DORFMAN
-----------------------------------
Scott Dorfman
President
[CORPORATE SEAL]
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