EXHIBIT 10.36
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BETWEEN
TEKGRAF, INC., AS BORROWER
ALL THOSE SUBSIDIARIES OF BORROWER IDENTIFIED
AS "SUBSIDIARY GUARANTORS" HEREUNDER
AND
WACHOVIA BANK, NATIONAL ASSOCIATION, AS LENDER
CLOSING DATE: JUNE 9, 2000
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TABLE OF CONTENTS
1. DEFINITIONS, TERMS AND REFERENCES...........................................................................2
1.1. CERTAIN DEFINITIONS......................................................................................2
1.2. USE OF DEFINED TERMS....................................................................................12
1.3. ACCOUNTING TERMS........................................................................................12
1.4. UCC TERMS...............................................................................................12
2. THE FINANCING..............................................................................................12
2.1. EXTENSIONS OF CREDIT....................................................................................12
2.2. INTEREST AND OTHER FEES AND CHARGES.....................................................................13
2.3. GENERAL PROVISIONS AS TO PAYMENTS.......................................................................16
2.4. SUBSIDIARY GUARANTY.....................................................................................17
3. SECURITY INTEREST..........................................................................................20
4. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO ACCOUNTS RECEIVABLE
COLLATERAL.................................................................................................20
4.1. BONA FIDE ACCOUNTS......................................................................................20
4.2. GOOD TITLE..............................................................................................20
4.3. RIGHT TO GRANT SECURITY INTEREST........................................................................20
4.4. COLLATERAL RESERVE ACCOUNT..............................................................................20
4.5. TRADE STYLES............................................................................................21
4.6. LIMITED POWER OF ATTORNEY...............................................................................21
5. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO INVENTORY
COLLATERAL.................................................................................................21
5.1. SALE OF INVENTORY COLLATERAL............................................................................21
5.2. INSURANCE...............................................................................................21
5.3. GOOD TITLE..............................................................................................22
5.4. RIGHT TO GRANT SECURITY INTEREST........................................................................22
5.5. LOCATION OF INVENTORY COLLATERAL........................................................................22
6. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO EQUIPMENT
COLLATERAL.................................................................................................22
6.1. SALE OF EQUIPMENT COLLATERAL............................................................................22
6.2. INSURANCE...............................................................................................22
6.3. GOOD TITLE..............................................................................................23
6.4. RIGHT TO GRANT SECURITY INTEREST........................................................................23
6.5. LOCATION................................................................................................23
7. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO BALANCES
COLLATERAL.................................................................................................23
7.1. OWNERSHIP...............................................................................................23
7.2. REMEDIES................................................................................................23
7.3. LIENS...................................................................................................23
8. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO INTANGIBLES
COLLATERAL.................................................................................................23
8.1. OWNERSHIP...............................................................................................23
8.2. LIENS...................................................................................................24
8.3. PRESERVATION............................................................................................24
9. GENERAL REPRESENTATIONS AND WARRANTIES.....................................................................24
9.1. EXISTENCE AND QUALIFICATION.............................................................................24
9.2. AUTHORITY; AND VALIDITY AND BINDING EFFECT..............................................................24
9.3. INCUMBENCY AND AUTHORITY OF SIGNING OFFICERS............................................................24
9.4. NO MATERIAL LITIGATION..................................................................................24
9.5. TAXES...................................................................................................25
9.6. CAPITAL.................................................................................................25
9.7. ORGANIZATION............................................................................................25
9.8. INSOLVENCY..............................................................................................25
9.9. TITLE...................................................................................................25
9.10. MARGIN STOCK.........................................................................................25
9.11. NO VIOLATIONS........................................................................................25
9.12. FINANCIAL STATEMENTS.................................................................................26
9.13. PURCHASE OF COLLATERAL...............................................................................26
9.14. POLLUTION AND ENVIRONMENTAL CONTROL..................................................................26
9.15. POSSESSION OF PERMITS................................................................................26
9.16. SUBSIDIARIES.........................................................................................26
9.17. FEDERAL TAXPAYER IDENTIFICATION NUMBER...............................................................26
9.18. EMPLOYEE BENEFIT PLANS...............................................................................27
10. AFFIRMATIVE COVENANTS......................................................................................27
10.1. RECORDS RESPECTING COLLATERAL........................................................................27
10.2. FURTHER ASSURANCES...................................................................................27
10.3. RIGHT TO INSPECT AND CONDUCT AUDITS..................................................................27
10.4. COLLATERAL REPORTS...................................................................................27
10.5. SETTLEMENT REPORTS...................................................................................28
10.6. PERIODIC FINANCIAL STATEMENTS........................................................................28
10.7. ANNUAL FINANCIAL STATEMENTS..........................................................................28
10.8. SEC REPORTS..........................................................................................28
10.9. PAYMENT OF TAXES.....................................................................................28
10.10. MAINTENANCE OF INSURANCE.............................................................................29
10.11. MAINTENANCE OF PROPERTY AND MANAGEMENT...............................................................29
10.12. COMPLIANCE CERTIFICATE...............................................................................29
10.13. CHANGE OF PRINCIPAL PLACE OF BUSINESS, ETC...........................................................29
10.14. WAIVERS..............................................................................................29
10.15. PRESERVATION OF EXISTENCE............................................................................30
10.16. COMPLIANCE WITH LAWS.................................................................................30
10.17. SUBORDINATIONS.......................................................................................30
10.18. CERTAIN REQUIRED NOTICES.............................................................................30
11. NEGATIVE COVENANTS.........................................................................................30
11.1. ENCUMBRANCES.........................................................................................30
11.2. DEBT.................................................................................................30
11.3. CONTINGENT LIABILITIES...............................................................................31
11.4. DIVIDENDS............................................................................................31
11.5. REDEMPTION...........................................................................................31
11.6. INVESTMENTS..........................................................................................31
11.7. MERGERS..............................................................................................31
11.8. BUSINESS LOCATIONS...................................................................................32
11.9. AFFILIATE TRANSACTIONS...............................................................................32
11.10. SUBSIDIARIES.........................................................................................32
11.11. FISCAL YEAR..........................................................................................32
11.12. DISPOSITION OF ASSETS................................................................................32
11.13. FEDERAL TAXPAYER IDENTIFICATION NUMBER...............................................................32
11.14. EMPLOYEE BENEFIT PLANS...............................................................................32
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12. FINANCIAL COVENANTS........................................................................................32
13. EVENTS OF DEFAULT..........................................................................................33
13.1. OBLIGATIONS..........................................................................................33
13.2. MISREPRESENTATIONS...................................................................................33
13.3. CERTAIN COVENANTS....................................................................................33
13.4. OTHER COVENANTS......................................................................................33
13.5. OTHER DEBTS..........................................................................................33
13.6. VOLUNTARY BANKRUPTCY.................................................................................33
13.7. INVOLUNTARY BANKRUPTCY...............................................................................34
13.8. DAMAGE, LOSS, THEFT OR DESTRUCTION OF COLLATERAL.....................................................34
13.9. JUDGMENTS............................................................................................34
13.11. MATERIAL ADVERSE CHANGE..............................................................................34
13.12. CHANGE OF CONTROL, ETC...............................................................................34
14. REMEDIES...................................................................................................35
14.1. ACCELERATION OF THE OBLIGATIONS......................................................................35
14.2. DEFAULT..............................................................................................35
14.3. REMEDIES OF A SECURED PARTY..........................................................................35
14.4. REPOSSESSION OF THE COLLATERAL.......................................................................36
14.5. DIRECT NOTIFICATION..................................................................................36
14.6. OTHER REMEDIES.......................................................................................36
14.7. SET OFF..............................................................................................36
15. MISCELLANEOUS..............................................................................................36
15.1. WAIVER...............................................................................................36
15.2. GOVERNING LAW........................................................................................37
15.3. SURVIVAL.............................................................................................37
15.4. ASSIGNMENTS..........................................................................................37
15.5. COUNTERPARTS.........................................................................................37
15.6. REIMBURSEMENT........................................................................................37
15.7. SUCCESSORS AND ASSIGNS...............................................................................38
15.8. SEVERABILITY.........................................................................................38
15.9. NOTICES..............................................................................................38
15.10. ENTIRE AGREEMENT: AMENDMENTS.........................................................................38
15.11. TIME OF ESSENCE......................................................................................38
15.12. INTERPRETATION.......................................................................................38
15.13. LENDER NOT A JOINT VENTURER..........................................................................38
15.14. JURISDICTION.........................................................................................39
15.15. ACCEPTANCE...........................................................................................39
15.16. PAYMENT ON NON-BUSINESS DAYS.........................................................................39
15.17. CURE OF DEFAULTS BY LENDER...........................................................................39
15.18. RECITALS.............................................................................................39
15.19. ATTORNEY-IN-FACT.....................................................................................39
15.20. SOLE BENEFIT.........................................................................................40
15.21. INDEMNIFICATION......................................................................................40
15.22. JURY TRIAL WAIVER....................................................................................40
15.23. TERMINOLOGY..........................................................................................40
15.24. EXHIBITS.............................................................................................41
16. CONDITIONS PRECEDENT.......................................................................................41
16.1. SECRETARY'S CERTIFICATE..............................................................................41
16.2. GOOD STANDING CERTIFICATES...........................................................................41
16.3. LOAN DOCUMENTS.......................................................................................41
16.4. INSURANCE............................................................................................41
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16.5. FINANCING STATEMENTS.................................................................................41
16.6. OPINION OF COUNSEL...................................................................................41
16.7. LANDLORD AGREEMENTS..................................................................................42
16.8. NO DEFAULT...........................................................................................42
16.9. TELEPHONE INSTRUCTION LETTER.........................................................................42
16.10. NO MATERIAL ADVERSE CHANGE...........................................................................42
16.11. STOCK PLEDGE AGREEMENT...............................................................................42
16.12. OTHER................................................................................................42
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
PREAMBLE. THIS AGREEMENT, made, entered into and effective as of June 9,
2000, by and among TEKGRAF, INC., a Georgia corporation ("BORROWER");
CALGRAPH TECHNOLOGY SERVICES, INC., a Georgia corporation ("CALGRAPH";
Calgraph, together with those Subsidiaries (as hereinafter defined) of
Borrower identified hereinbelow as "Subsidiary Guarantors," herein called,
collectively, "SUBSIDIARY GUARANTORS" and, individually, a "SUBSIDIARY
GUARANTOR"); and WACHOVIA BANK, NATIONAL ASSOCIATION, a national bank
("LENDER").
W I T N E S S E T H :
WHEREAS, Borrower and its Subsidiaries are engaged in a common
business enterprise in which any extensions of credit to Borrower will result
in direct and indirect, substantive economic benefit to its Subsidiaries; and
WHEREAS, heretofore, Tekgraf, Inc., a Delaware corporation and
predecessor-in-interest to Borrower ("OLD TEKGRAF"), and certain Subsidiaries
of Old Tekgraf (the "FORMER SUBSIDIARIES"; such term being more particularly
described hereinbelow), applied to Lender for a certain extension of credit,
as more particularly described hereinbelow, consisting of a $7,500,000 line
of credit for their mutual use and benefit, all pursuant to a certain Loan
and Security Agreement, dated as of June 2, 1998, made among Old Tekgraf, the
Former Subsidiaries and Lender (which, as it may have been amended or
modified to date, is herein called the "OLD LOAN AGREEMENT"); and
WHEREAS, Borrower, as successor-in-interest to Old Tekgraf and
successor-by-merger to the Former Subsidiaries, and its Subsidiary Guarantors
(as defined below) have applied to Lender for an increase in such line of
credit to $12,500,000, and for certain related modifications to the Old Loan
Agreement; and
WHEREAS, Lender is willing to extend such increased financing to
Borrower in accordance with the terms hereof upon the execution of this
Agreement by Borrower and each Subsidiary Guarantor (Borrower and each
Subsidiary Guarantor are herein collectively called "OBLIGORS" and
individually called an "OBLIGOR"), amending and restating, in its entirety,
the Old Loan Agreement; compliance by each Obligor with all of the terms and
provisions of this Agreement relevant thereto; and fulfillment of all
conditions precedent to Lender's obligations herein contained;
NOW, THEREFORE, to induce Lender to extend the financing provided
for herein, and for other good and valuable consideration, the sufficiency
and receipt of all of which are acknowledged by Obligors, Lender agrees with
Obligors as follows:
1. DEFINITIONS, TERMS AND REFERENCES.
1.1. CERTAIN DEFINITIONS. In addition to such other
terms as elsewhere defined herein, as used in this Agreement and in any
Exhibit or Schedule attached hereto, the following terms shall have the
following meanings:
"ACCOUNTS RECEIVABLE COLLATERAL" shall mean and include all
accounts, accounts receivable, contract rights, instruments, chattel paper
and general intangibles in the nature of payment obligations owing to each
Obligor, including, without limitation, all rights of each Obligor to 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, together with
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 and howsoever arising.
"ACCOUNT DEBTOR" shall mean any Person who is obligated on any of
the Accounts Receivable Collateral or otherwise is obligated as a purchaser
or lessee of any of the Inventory Collateral.
"ADVANCE" shall mean an advance of borrowed funds made by Lender to
or on behalf of Borrower pursuant to this Agreement.
"AFFILIATE" shall mean, with respect to any Person, any other Person
Controlling, Controlled by or under common Control with such Person.
"AGREEMENT" shall mean this Amended and Restated Loan and Security
Agreement, as it may be modified, amended or supplemented from time to time;
together with any and all Schedules or Exhibits attached hereto.
"APPLICABLE RATE" shall mean the interest rate per annum payable on
the Advances, as is defined and more particularly described in Section 2.2.1.
"ASSIGNMENT OF CLAIMS ACT" shall mean the federal Assignment of
Claims Act of 1940, as it may be amended from time to time; together with all
regulations promulgated from time to time in respect thereof.
"AVERAGE EXCESS AVAILABILITY" shall mean that amount, determined as
of the last day of each Fiscal Month, equal to the excess (if any) of (i) the
LESSER of (A) the Commitment or (B) the Receivables Margin, over (ii) the
mean daily average amount for such Fiscal Month of (A) outstanding Advances
under the Line of Credit PLUS (B) outstanding Letter of Credit Obligations.
"BALANCES COLLATERAL" shall mean all property of each Obligor left
with Lender or in Lender's possession, custody or control now or hereafter,
all deposit accounts of each Obligor now or hereafter opened with Lender, all
certificates of deposit now or hereafter issued by Lender to each Obligor,
and all drafts, checks and other items deposited in or with Lender by each
Obligor for collection now or hereafter.
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"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
it may be amended from time to time.
"BOOKED COST," in respect of Inventory Collateral, shall mean the
inventory cost accounting method employed by each Obligor as of the Closing
Date, which, unless otherwise designated on the Obligor Information Schedule
attached hereto, is "FIFO".
"BORROWER" shall have the meaning given to such term in the preamble
to this Agreement.
"BORROWINGS" shall mean Advances of borrowed funds made hereunder to
or on behalf of Borrower pursuant to this Agreement.
"BUSINESS DAY" shall mean a day on which Lender is open for the
conduct of banking business at its principal office in Atlanta, Georgia;
PROVIDED, HOWEVER, that, for purposes of determining the timing of requests
for, and establishing the Applicable Rate on, LIBOR Borrowings, "BUSINESS
DAY" shall mean, additionally, any day on which dealings in United States
Dollar deposits are also being carried out by Lender in the London interbank
Eurodollar market.
"CALGRAPH" shall have the meaning given to such term in the initial
recitals to this Agreement.
"CLOSING DATE" shall mean the date set forth on the cover page as
the "Closing Date."
"COLLATERAL" shall mean the property, or interests in property, of
each Obligor described as such in Article 3 plus any other property, or
interests in property, of each Obligor in which Lender has, or hereafter
obtains or claims, a Lien as security for the payment of the Obligations.
"COLLATERAL LOCATIONS" shall mean the Executive Office and those
additional locations, if any, set forth and described on the Obligor
Information Schedule.
"COLLATERAL RESERVE ACCOUNT" shall mean a demand deposit account
which one or more of the Obligors may be required to open and maintain with
Lender pursuant to the requirements of Section 4.4 for the concentration and
collection of proceeds of certain Collateral.
"COMPLIANCE CERTIFICATE" shall mean a certificate to be signed by a
duly authorized officer of Borrower pursuant to Section 10.12 in
substantially the form of EXHIBIT "B" attached hereto (unless otherwise
required or approved by Lender).
"COMMITMENT" shall mean the maximum amount which is available for
borrowing under the Line of Credit (considered without regard to the Margin)
which, as of the Closing Date, shall be increased to Twelve Million Five
Hundred Thousand Dollars ($12,500,000).
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"CONSOLIDATED SUBSIDIARIES" shall mean those Subsidiaries of
Borrower (if any) existing from time to time which, for purposes of GAAP, are
required to be consolidated for financial reporting purposes.
"CONTROL," "CONTROLLED" or "CONTROLLING" shall mean, with respect to
any Person, the power to direct the management and policies of such Person,
directly, indirectly, whether through the ownership of voting securities or
otherwise; PROVIDED, HOWEVER, that, in any event, any Person which owns
directly or indirectly ten percent (10%) or more of the securities having
ordinary voting power for the election of directors or other governing body
of an entity shall be deemed to "Control" such entity for purposes of this
Agreement.
"DEBT" means all liabilities, obligations and indebtedness of a
Person, of any kind or nature, whether now or hereafter owing, arising, due
or payable, howsoever evidenced, created, incurred, acquired or owing, and
whether primary, secondary, direct, contingent, fixed or otherwise,
including, without in any way limiting the generality of the foregoing: (i)
all obligations, liabilities and indebtedness secured by any Lien on a
Person's property, even though such Person shall not have assumed or become
liable for the payment thereof; (ii) all obligations or liabilities created
or arising under any capital lease, conditional sale or other title retention
agreement; (iii) all accrued pension fund and other employee benefit plan
obligations and liabilities; (iv) all Guaranteed Obligations; (v) any
liabilities under, or associated with, interest rate protection agreements;
and (vi) any deferred taxes.
"DEFAULT CONDITION" shall mean the occurrence of any event which,
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
percent (2%) per annum in excess of the otherwise Applicable Rate payable on
any Obligation.
"DOLLARS" or "$" shall mean United States Dollars.
"ELIGIBLE ACCOUNTS" shall mean that portion of an Obligor's Accounts
Receivable Collateral consisting of trade accounts receivable actually billed
to, and owing to such Obligor by, its Account Debtors in the ordinary course
of its business, EXCLUDING, HOWEVER, in any event, any such account: (i) with
respect to which any portion thereof is more than ninety (90) days past
invoice date; (ii) which is owing by any Affiliate of such Obligor; (iii)
which is owing by any Account Debtor having fifty percent (50%) or more in
face value of its then existing accounts with such Obligor ineligible
hereunder pursuant to the operation and effect of clause (i) above; (iv)
which arises from any contract on which such Obligor's performance is assured
by a performance, completion or other bond; (v) constituting retainage which
has been withheld from such Obligor pending contract completion, to the
extent thereof; (vi) constituting a service, warranty or similar charge, to
the extent thereof; (vii) which is evidenced by a promissory note, other
instrument or chattel paper; (viii) which represents an accord and
satisfaction in respect of any prior account receivable; (ix) the assignment
of which is subject to any requirements set forth in the Assignment of Claims
Act (unless and except to the extent that an Obligor has complied therewith
to Lender's satisfaction); (x) which does not conform in any respect to the
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warranties and representations set forth in the Loan Documents in respect of
Accounts Receivable Collateral; (xi) which is owing by any Account Debtor
whose accounts in face amount with all Obligors exceed ten percent (10%) of
total Eligible Accounts, but only to the extent of such excess; (xii) which
is owing by, billed to or paid by any Account Debtor not located in the
United States of America (unless and except to the extent that it is backed
by a letter of credit issued to such Obligor as beneficiary by or through a
bank headquartered in the United States which is acceptable to Lender);
(xiii) as to which a duly perfected, first priority security interest does
not exist at any time in favor of Lender; (xiv) as to which any counterclaim,
defense, setoff, deduction or contra-account exists, to the extent thereof;
(xv) which represents a progress billing, to the extent that the Account
Debtor has not received and accepted the underlying goods or services; or
(xvi) which has otherwise been determined by Lender in its good faith
discretion not to be an "Eligible Account" for purposes hereof.
Notwithstanding the clauses (vi) and (xv) above, trade accounts receivable
owing to Calgraph arising from its provision of services to its Account
Debtors from time to time in the ordinary course of its business shall be
Eligible Accounts if otherwise in compliance with this definition, even if
pre-billed, in whole or in part.
"ELIGIBLE INVENTORY" shall mean that portion of an Obligor's
Inventory Collateral consisting of unopened boxed goods inventory of such
Obligor subject to an existing repurchase agreement from the manufacturer,
but in any event, no more than ninety (90) days old, which (i) is at all
times subject to a duly perfected, first priority security interest in favor
of Lender; (ii) is in good and saleable condition; (iii) is not on
consignment from, or subject to, any repurchase agreement with any supplier;
(iv) does not constitute returned, repossessed, damaged or slow-moving goods;
(v) conforms in all respects to the warranties and representations set forth
in the Loan Documents in respect of Inventory Collateral; (vi) is not subject
to a negotiable document of title (unless issued or endorsed to Lender);
(vii) is not subject to any license or other agreement that limits or
restricts such Obligor's or Lender's right to sell or otherwise dispose of
such inventory; (viii) is located only at a Collateral Location within the
United States of America or Canada, with respect to which, if leased by such
Obligor, Lender has received from the landlord at such location a Landlord's
Agreement; and (ix) which has not otherwise been determined by Lender in its
good faith discretion to be excluded from "Eligible Inventory" for purposes
hereof.
"EMPLOYEE BENEFIT PLAN" shall mean any "employee welfare benefit
plan," as that term is defined in Section 3(1) of ERISA, any "employee
pension benefit plan," as that term is defined in Section 3(2) of ERISA, or
any other plan which is subject to the provisions of Title IV of ERISA which
is for the benefit of any 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.
"ENVIRONMENTAL LAWS" shall mean all federal, state and local laws,
rules, regulations, ordinances, programs, permits, guidances, orders and
consent decrees relating to health, safety and environmental matters, whether
now or hereafter existing, including, but not limited to state and federal
superlien and environmental cleanup laws and U.S. Department of
Transportation regulations and any other state or local law or regulation
relating to pollution, reclamation, or protection of the environment,
including laws relating to emissions, discharges, releases or
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threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into air, water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling or pollutants, contaminants or hazardous or toxic
materials or wastes.
"EQUIPMENT COLLATERAL" shall mean all equipment and fixtures of each
Obligor, whether now owned or hereafter acquired, wherever located,
including, without limitation, all machinery, furniture, furnishings,
leasehold improvements, computer hardware, motor vehicles, forklifts, rolling
stock, dies and tools used or useful in such Obligor's business operations.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as may be amended from time to time.
"EVENT OF DEFAULT" shall mean any of the events or conditions
described in Article 13, provided that any requirement for the giving of
notice or the lapse of time, or both, set forth in Article 13 has been
satisfied.
"EXECUTIVE OFFICE" shall mean the address of each Obligor's chief
executive office and principal place of business, as designated on the
Obligor Information Schedule.
"FISCAL YEAR", in respect of a Person, shall mean the fiscal year of
such Person, as employed by such Person as of the Closing Date, and
designated as such on the Obligor Information Schedule, as to Borrower and
its Consolidated Subsidiaries. The terms "FISCAL QUARTER" and "FISCAL MONTH",
if used herein, shall correspond accordingly thereto.
"FORMER SUBSIDIARIES" shall mean all those Subsidiaries of Old
Tekgraf identified as "Subsidiary Guarantors" in the Old Loan Agreement.
"GAAP" shall mean generally accepted accounting principles
consistently applied for the fiscal period(s) in question.
"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 to assure or in effect assure the holder of any such obligations
against loss in respect thereof.
"GUARANTOR" shall mean, individually and collectively, any and all
accommodation makers, endorsers, guarantors or sureties from whom Lender may
require, either on or after the Closing Date, the endorsement of any Note or
the execution of any contract of guaranty or suretyship guaranteeing payment
of any of the Obligations. As of the Closing Date, the Subsidiary Guarantors
are the only Guarantors.
"GUARANTY" shall mean any agreement or other writing executed by a
Guarantor guaranteeing payment of any of the Obligations which has been
accepted and approved by
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Lender for such purpose. In the case of the Subsidiary Guarantors, Section
2.4 below shall constitute their Guaranty.
"INTANGIBLES COLLATERAL" shall mean all general intangibles of an
Obligor, whether now existing or hereafter acquired or arising, including,
without limitation, all copyrights, royalties, tax refunds, rights to tax
refunds, trademarks, trade names, service marks, patent and proprietary
rights, blueprints, drawings, designs, trade secrets, plans, diagrams,
schematics and assembly and display materials relating thereto, all customer
lists, all books and records, all computer software and programs, and all
rights of an Obligor as purchaser, lessee, licensee or indemnitee under any
contract.
"INVENTORY COLLATERAL" shall mean all inventory of an Obligor,
whether now owned or hereafter acquired, wherever located, including, without
limitation, all goods of an Obligor 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, spare parts, repair parts,
returned and repossessed goods, all raw materials, work-in-process, finished
goods, catalysts and supplies used or consumed in an Obligor'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.
"LANDLORD'S AGREEMENT" shall mean an agreement from the landlord of
any Collateral Location pursuant to which such landlord has waived, released
or subordinated in favor of Lender any rights it has in respect of the
Collateral, to be substantially in the form of EXHIBIT "C" attached hereto
(unless otherwise approved by Lender).
"LENDER" shall have the meaning given to such term in the preamble
to this Agreement.
"LETTER OF CREDIT" shall have the meaning given to such term in
Section 2.1.2.
"LETTER OF CREDIT OBLIGATIONS" shall mean all Obligations of
Borrower arising in respect of Letters of Credit, including, without
limitation, (i) all contingent liabilities arising in respect of Letters of
Credit issued, but not drawn upon, and (ii) all reimbursement liabilities
arising in respect of drawings made under Letters of Credit.
"LEVERAGE RATIO" shall mean, at any time, the ratio of (i) all Debts
of Borrower and its Consolidated Subsidiaries, to (ii) Tangible Net Worth.
"LIBOR BORROWINGS" shall mean those Borrowings which bear interest
at a rate per annum determined by reference to the LIBOR Index Rate.
"LIBOR INDEX RATE" shall mean that interest rate per annum
determined monthly by Lender on that day which is two (2) Business Days prior
to the first day of each calendar month by dividing: (x) the offered rate for
deposits in Dollars in the London interbank borrowing market of amounts equal
to or comparable to the maximum amount of the Line of Credit for a period of
one (1) month, which rate appears on the display designated as page "3750" of
the Telerate Service (or such other page as may replace page "3750" of that
service or such other
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service or services as may be nominated by the British Bankers' Association
for the purpose of displaying London interbank offered rates for U.S. dollar
deposits) as of 11:00 a.m., London time, on such date (which rate shall be
rounded upward, if necessary, to the next higher 1/10,000 of 1%); PROVIDED,
HOWEVER, that if more than one such offered rate appears on such service on
such date, the offered rate shall be deemed to be the arithmetic average
(rounded upward, if necessary, to the next higher of 1/100 of 1%) of such
offered rates; by (y) the number 1 MINUS any then applicable percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or its successor) for
determining the maximum reserve requirement for a member of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or any other
category of liabilities which includes deposits by reference to which the
interest rate on such borrowings is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office
of Lender to United States residents). The LIBOR Index Rate shall be adjusted
automatically on and as of the effective date of any change in the percentage
described in the foregoing clause (y).
"LIEN" shall mean any deed to secure debt, deed of trust, mortgage
or 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.
"LIEN SUBORDINATION AGREEMENT" shall mean an agreement from any
vendor or distributor of inventory to Borrower pursuant to which such Person
has waived, released or subordinated in favor of Lender any rights it has in
respect of such inventory and any proceeds thereof, to be substantially in
the form of EXHIBIT "K" attached hereto (unless otherwise approved by Lender).
"LINE OF CREDIT" shall refer to the line of credit in the maximum
principal amount of Twelve Million Five Hundred Thousand Dollars
($12,500,000) opened by Lender in favor of Borrower pursuant to the
provisions of Section 2.1.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, any financing
statements covering portions of the Collateral, and any and all other
documents, instruments, certificates and agreements executed and/or delivered
by any Obligor in connection herewith, or any one, more, or all of the
foregoing, as the context shall require.
"MARGIN" shall mean a sum determined by adding (i) an amount equal
to eighty percent (80%), or such lesser or greater percentage which Lender
may elect to establish from time to time by written notice to Borrower in its
good faith discretion, of the net dollar amount of Eligible Accounts as at
the date of determination to (ii) an amount equal to forty percent (40%), or
such lesser or greater percentage which Lender may elect to establish from
time to time by written notice to Borrower in its good faith discretion, of
the dollar amount of the Eligible Inventory, valued at the lower of its
Booked Cost or market value, as at the date of determination, not to exceed,
in any event, as to Eligible Inventory, the LESSER of (A) Four Million
Dollars ($4,000,000) or (B) then current borrowing availability under the
Line of Credit determined by reference to Eligible Accounts without regard to
Eligible Inventory. Lender shall
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be entitled to impose such reserves against the Margin and borrowing
availability under the Line of Credit as it may elect from time to time in
its good faith discretion, by written notice to Borrower.
"MARGIN REQUIREMENT" shall have the meaning ascribed to such term in
Section 2.1.1.
"MASTER NOTE" shall mean the master promissory note, dated of even
date herewith, as amended or supplemented from time to time, in a principal
amount equal to the maximum amount of the Line of Credit, evidencing Advances
to be obtained by Borrower under the Line of Credit, together with any
renewals or extensions thereof in whole or in part. The Master Note shall be
substantially in the form of EXHIBIT "D".
"MATERIAL ADVERSE CHANGE" shall mean with respect to any event, act,
condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, occurrence or occurrences, whether or
not related, a material adverse change in, or a material adverse effect upon,
any of (a) the financial condition, operations, business, properties or
prospects of the Borrower and its Consolidated Subsidiaries, taken as a
whole, or any Guarantor (other than a Subsidiary Guarantor), (b) the rights
and remedies of the Lender under any of the Loan Documents or any documents,
instruments or agreements executed and/or delivered by any Person other than
an Obligor in conjunction with the Loan Documents, or the ability of any
Obligor to perform its obligations under any of the Loan Documents or of any
Guarantor to perform Guarantor's obligations under any Guaranty or any
documents, instruments or agreements executed by any Guarantor in conjunction
with such Guaranty, or (c) the legality, validity or enforceability of any of
the Loan Documents or any documents, instruments or agreements executed
and/or delivered by any Person other than an Obligor in conjunction with the
Loan Documents.
"NOTE" shall mean any instrument at any time evidencing all or any
portion of any Obligations.
"OBLIGATIONS" shall mean any and all Debts of each Obligor to
Lender, including without limiting the generality of the foregoing, any Debt
of any Obligor to Lender under any loan made to such Obligor by Lender prior
to the date hereof and any and all extensions or renewals thereof in whole or
in part; any Debt of Borrower to Lender arising hereunder or as a result
hereof, whether evidenced by any Note, or constituting Advances, Letter of
Credit Obligations or otherwise, and any and all extensions or renewals
thereof in whole or in part; the Debt of each Subsidiary Guarantor under its
Guaranty; any Debt of any Obligor to Lender under any later or future
advances or loans made by Lender to such Obligor, and any and all extensions
or renewals thereof in whole or in part; and any and all future or additional
Debts of any Obligor to Lender whatsoever and in any event, whether existing
as of the date hereof or hereafter arising, whether arising under a loan,
lease, credit card arrangement, 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, ▇▇▇▇ of exchange, check,
draft, bond, letter of credit, guaranty agreement, bankers' acceptance,
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foreign exchange contract, interest rate protection agreement, derivative
product or contract, commitment fee, service charge or otherwise.
"OBLIGOR" and "OBLIGORS" shall have the meanings given to such terms
in the preamble to this Agreement.
"OBLIGOR INFORMATION SCHEDULE" shall mean an information schedule,
to be completed by Borrower for itself and each other Obligor, in
substantially the form of EXHIBIT "A" attached hereto.
"PERMITTED ENCUMBRANCES" shall mean: (i) Liens for taxes not yet due
and payable or being actively contested as permitted by this Agreement, but
only if such Liens do not adversely affect Lender's rights or the priority of
Lender's security interest in the Collateral; (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 actively contested in good faith and by appropriate, lawful
proceedings, but only if such liens are and remain junior to liens granted in
favor of Lender; (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 arising by statute or under customary terms regarding depository
relationships on deposits held by financial institutions with whom an Obligor
has a banker-customer relationship; (v) typical restrictions imposed by
licenses and leases of software (including location and transfer
restrictions); (vi) Liens in favor of Lender; (vii) Liens granted by any
Obligor to vendors or financiers of fixed assets to secure the payment of
Purchase Money Debt so long as (A) such Debt is permitted to be incurred
hereunder, (B) such Liens extend only to the specific assets so purchased,
secure only such deferred payment obligation and related interest, fees and
charges and no other Debt, and (C) such Liens are promptly released upon the
payment in full of such Debt; (viii) Liens existing on the Closing Date in
Inventory Collateral (including proceeds thereof) granted by an Obligor in
favor of any vendor or distributor of inventory, provided that such Person
has executed in Lender's favor a Lien Subordination Agreement; (ix) any Lien
existing on any specific fixed asset of any Person at the time such Person
becomes an Obligor and not created in contemplation of such event; (x) any
Lien on any specific fixed asset of any Person existing at the time such
Person is merged or consolidated with or into one of the Obligors and not
created in contemplation of such event; (xi) any Lien existing on any
specific fixed asset prior to the acquisition thereof by one of the Obligors
and not created in contemplation of such acquisition; (xii) any Lien arising
out of the refinancing, extension, renewal or refunding of any Debt secured
by any Lien permitted by any of the foregoing paragraphs of this Section,
provided that (A) such Debt is not secured by any additional assets, and (B)
the amount of such Debt secured by any such Lien is not increased; and (xiii)
Liens incidental to the conduct of its business or the ownership of its
assets which (A) do not secure Debt and (B) do not in the aggregate
materially detract from the value of its assets or materially impair the use
thereof in the operation of its business.
"PERSON" shall mean any individual, partnership, corporation,
limited liability company, joint venture, joint stock company, trust,
governmental unit or other entity.
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"PRIME BORROWINGS" shall mean those Borrowings which, pursuant to
the operation and effect of Section 2.2.1(c), are required to bear interest
at a rate per annum equal to the Prime Rate.
"PRIME RATE" refers to that interest rate so denominated and set by
Lender from time to time as an interest rate basis for borrowings. The Prime
Rate is but one of several interest rate bases used by Lender. Lender extends
credit at interest rates equal to, above and below the Prime Rate.
"PURCHASE MONEY DEBT" shall mean Debt incurred by Borrower or any
Subsidiary in connection with the acquisition of fixed assets for the cost
thereof (including any for the deferred payment of any purchase price).
"RECEIVABLES MARGIN" shall mean that portion of the Margin which,
pursuant to clause (i) of the definition thereof, is determined solely by
reference to Eligible Accounts (less any reserves imposed by Lender relative
thereto).
"SETTLEMENT REPORT" shall mean a report submitted by Borrower to
Lender demonstrating compliance with the Margin Requirement, to be
substantially in the form of EXHIBIT E attached hereto (unless otherwise
required or approved by Lender).
"SUBORDINATED DEBT" shall mean any unsecured Debt of Borrower or any
Subsidiary to any Person for borrowed funds or for the deferred payment of
any purchase price which, by written agreement in form and substance
satisfactory to Lender, has been subordinated in right of payment and claim,
to the rights and claims of Lender in respect of the Obligations, on terms
and conditions otherwise accepted and approved by Lender.
"SUBSIDIARY" shall mean any corporation, partnership, business
association or other entity (including any Subsidiary of any of the
foregoing) of which Borrower owns, directly or indirectly through one or more
Subsidiaries, fifty percent (50%) or more of the capital stock or other
equity interest having ordinary power for the election of directors or others
performing similar functions.
"SUBSIDIARY GUARANTOR" shall mean each Subsidiary of Borrower which
either on or subsequent to the Closing Date becomes a party to this Agreement
as a "Subsidiary Guarantor." As of the Closing Date, Calgraph is the only
Subsidiary Guarantor.
"TANGIBLE NET WORTH" shall mean Borrower's book net worth,
determined on a consolidated basis for Borrower and its Consolidated
Subsidiaries in accordance with GAAP, MINUS all assets of Borrower and such
Subsidiaries constituting (i) goodwill, patents, copyrights, trademarks,
trade names and other intangible assets, (ii) write-ups of assets, (iii)
unamortized debt discount and expense, (iv) deferred charges, (v) any Debts
owing to such Person from any shareholders, officers or directors of such
Person, or from any Affiliates or Subsidiaries of such Person, and (vi) any
permitted Restricted Investments. For purposes hereof, any minority interest
in any Subsidiary shown on Borrower's balance sheet shall be excluded from
its net worth and be included in its total liabilities.
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"TELEPHONE INSTRUCTIONS LETTER" shall mean a letter from Borrower to
Lender, dated as of the Closing Date, indicating to Lender the Person(s)
authorized to request Advances pursuant hereto, to be substantially in the
form of EXHIBIT "F" attached hereto (unless otherwise required or approved by
Lender).
"TERMINATION DATE" shall mean the EARLIEST to occur of the following
dates: (i) that date on which, pursuant to Section 14, Lender terminates the
Line of Credit (or the Line of Credit is deemed automatically terminated)
subsequent to the occurrence of an Event of Default; (ii) that date which is
June 30, 2002; or (iii) such later date as to which Lender may agree in
writing from time to time hereafter.
"UCC" shall mean the Uniform Commercial Code- Secured Transactions
of Georgia (OCGA Art. 11-9), as in effect on the Closing Date.
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" and
"fixtures", as and when used in the Loan Documents, shall have the same
meanings given to such terms under the UCC.
2. THE FINANCING.
2.1. EXTENSIONS OF CREDIT.
2.1.1. LINE OF CREDIT. On the Closing Date,
subject to fulfillment of all conditions precedent set forth in Section 16,
Lender agrees to open the Line of Credit in favor of Borrower so that, during
the period from the Closing Date to, but not including, the Termination Date,
so long as there is not in existence any Default Condition or Event of
Default and the requested Borrowing, if made, will not cause a Default
Condition or Event of Default to exist, Borrower may borrow and repay and
reborrow Advances in up to a maximum aggregate principal amount outstanding
at any one time equal to the original principal amount of the Line of Credit;
SUBJECT, HOWEVER, to the requirement that at no time shall the aggregate
principal amount of (i) outstanding Advances under the Line of Credit, PLUS
(ii) the aggregate amount of all Letter of Credit Obligations, exceed the
LESSER of: (A) the Commitment or (B) the Margin (such requirement being
referred to herein as the "MARGIN REQUIREMENT"); and SUBJECT, FURTHER, to the
requirement that if, at any time, the Margin Requirement is not satisfied,
Borrower will immediately repay the then principal balance of the Master Note
by that amount necessary to satisfy the Margin Requirement. The initial
Advance under the Line of Credit shall be made on the Closing Date, shall be
in that amount necessary to pay in full all outstanding Obligations under the
Old Loan Agreement, and shall be used by Borrower on the Closing Date to
retire all
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such Obligations. All proceeds obtained under the Line of Credit
subsequent to the Closing Date may be used by Borrower for working capital in
such manner as Borrower may elect in the ordinary course of its business
operations. The Debts arising from Advances made to or on behalf of Borrower
under the Line of Credit shall be evidenced by the Master Note, which shall
be executed by Borrower and delivered to Lender on the Closing Date. The
outstanding principal amount of the Master Note may fluctuate from time to
time, but shall be due and payable in full on the Termination Date, and shall
bear interest from the date of each disbursement of principal until paid in
full at the Applicable Rate, payable in the manner described in Section
2.2.1. Subject to any contrary provisions of Section 2.2.1 in respect of
LIBOR Borrowings, Borrower shall have the option to request Advances under
the Line of Credit by telephone pursuant to the Telephone Instructions Letter
or in a writing delivered to Lender not later than 11:00 a.m. (Atlanta,
Georgia time) on the date of the requested Advance; PROVIDED, HOWEVER, that
any telephone requests shall be made in accordance with the Telephone
Instructions Letter and, unless otherwise approved by Lender, confirmed in
writing not later than the Business Day following the disbursement of the
requested Advance.
2.1.2. LETTERS OF CREDIT. In addition to the
foregoing, so long as the Line of Credit remains open, Borrower shall have
the further right to apply for, and obtain commercial or standby letters of
credit ("LETTERS OF CREDIT") to be issued by Lender for Borrower for use by
Borrower in the ordinary course of its business operations pursuant to a
separate application and agreement (one per each Letter of Credit) to be
executed at time of issuance between Lender and Borrower, which shall set
forth, among other things, the purpose, beneficiary, the expiry date and
credit limit, together with the fees and charges imposed by Lender for the
issuance and administration thereof. All outstanding Letter of Credit
Obligations shall be reserved by Lender against borrowing availability under
the Line of Credit and be included as outstanding Debt for purposes of
determining the Margin Requirement. Lender shall have the continuing right to
charge as Advances any outstanding Letter of Credit Obligations, and any fees
and charges associated therewith, which have become due and payable. Lender
shall have the further right from time to time to impose sublimits on the
aggregate amounts of Letters of Credit and Letter of Credit Obligations which
at any one time may be outstanding.
2.2. INTEREST AND OTHER FEES AND CHARGES.
2.2.1. INTEREST AT APPLICABLE RATE. Lender and
Borrower agree that the interest rate payable on the Borrowings (herein
called the "APPLICABLE RATE") shall be determined as follows:
(1) LINE OF CREDIT. Outstanding Advances under the
Line of Credit shall bear interest at the LIBOR Index Rate PLUS 6.64125% per
annum; SUBJECT, HOWEVER, to subsequent adjustment as provided in subsection
(2) below.
(2) SUBSEQUENT ADJUSTMENTS. The Applicable Rate
described in subsection (1) above shall be subject to subsequent adjustment,
up or down, based on Borrower's financial performance, determined by
reference to the Leverage Ratio, measured monthly; that is, if the Leverage
Ratio, measured as of the end of each Fiscal Month of Borrower, commencing
with the
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Fiscal Month ending closest to, but occurring after, the Closing Date, is as
described below, the Applicable Rate shall be the interest rate appearing
opposite said Leverage Ratio:
Applicable Rate
---------------
Leverage Ratio (LIBOR Index Rate Plus)
-------------- -----------------------
GREATER THAN 2.50:1 3.00%
GREATER THAN OR EQUAL TO 2.00; LESS THAN 2.50:1 2.75%
GREATER THAN OR EQUAL TO 1.50:1; LESS THAN 2.00:1 2.50%
GREATER THAN OR EQUAL TO 1.00:1; LESS THAN 1.50:1 2.25%
LESS THAN 1.00:1 2.00%
Lender shall determine whether any adjustment to the Applicable Rate is to be
made monthly, based on Borrower's financial statements as of and for each
Fiscal Month end delivered to Lender pursuant to Section 10.6, PROVIDED,
HOWEVER, that if such financial statements are not timely delivered to
Lender, then an adjustment to the Applicable Rate shall be made based on an
assumed delivery of said financial statements reflecting a Leverage Ratio of
greater than 2.00:1; and, PROVIDED, FURTHER, that no downward adjustment
shall be made if an Event of Default or Default Condition then exists. Each
such adjustment to the Applicable Rate shall become effective as of the first
day of the calendar month following the date on which such financial
statements are delivered (or deemed delivered) to Lender, and shall remain
effective unless and until any subsequent adjustment becomes effective in
accordance with the terms of this subsection (2). Each such adjustment shall
apply to all LIBOR Borrowings then existing and any made during the period
for which such adjustment becomes effective. In the event that the annual
audit report of Borrower for any Fiscal Year shall require restatement of
financial statements of Borrower and such restatement shall affect the
Leverage Ratio and would have required a different Applicable Rate to be in
effect for prior periods, then Lender at its option, may require Borrower to
make additional payments of interest or rebate interest for such prior
periods.
(3) SPECIAL CONDITIONS AND LIMITATIONS ON LIBOR
BORROWINGS. If at any time, a change of law, or compliance by Lender with any
request or directive (whether or not having the force of law) of any
governmental authority shall make it unlawful or impracticable for Lender to
make available, maintain or fund any LIBOR Borrowings, Lender shall forthwith
give notice to such effect to Borrower, whereupon, until Lender notifies
Borrower that the circumstances giving rise to such suspension no longer
exist, the obligation of Lender to make such borrowings available to Borrower
shall be suspended and if Lender shall determine that it may not lawfully
continue to maintain and fund any then outstanding borrowings to maturity and
shall so specify in such notice, each Borrowing so affected shall be
converted into a Prime Borrowing, effective immediately, and any subsequent
Borrowings shall be made, instead, as Prime Borrowings.
(4) PAYMENT OF INTEREST. Accrued interest on any
Borrowings at the Applicable Rate shall be due and payable monthly in
arrears, on the first day of each calendar month, for the preceding calendar
month (or portion thereof), commencing on the first day of the first calendar
month following the Closing Date, and at maturity.
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(5) CALCULATION OF INTEREST AND FEES. Interest on
Borrowings and any fees described in Section 2.2.2 computed on a per annum
basis shall be calculated on the basis of a 360-day year and actual days
elapsed. The Applicable Rate on any Prime Borrowings shall change with each
change in the Prime Rate, effective as of the opening of business on the
Business Day of such change. The Applicable Rate on LIBOR Borrowings shall
change with each monthly adjustment of the LIBOR Index Rate, effective on the
first day of each calendar month.
(6) CHARGING OF INTEREST AND FEES. Accrued and unpaid
interest on any Borrowings (and any outstanding fees described in Section
2.2.2) may, when due and payable, be paid, at Lender's option (without any
obligation to do so), either (i) by Lender's charging the Line of Credit for
an Advance in the amount thereof; or (ii) by Lender's debiting any deposit
account constituting Balances Collateral for the amount thereof; but,
notwithstanding the foregoing, Borrower shall be and remain responsible for
the payment of such sums.
(7) RATE ON OTHER OBLIGATIONS. To the extent that, at
any time, there are other Obligations besides Advances which are outstanding
and unpaid, such Obligations shall, unless and except to the extent that this
Agreement, any Note or any other Loan Document evidencing such Obligations
provides otherwise, bear interest at the same rate per annum as is then and
thereafter payable on Prime Borrowings under the Line of Credit.
2.2.2. FEES. In addition to the payment of
interest at the Applicable Rate, Borrower shall also be obligated to pay
Lender the following fees and charges:
(1) LOAN ORIGINATION FEE. On the Closing Date, a fully
earned, non-refundable loan origination fee of Twenty-Five Thousand Dollars
($25,000).
(2) NON-USAGE FEE. Quarterly, on the first day of each
calendar quarter, commencing on the first of such dates following the Closing
Date, Borrower shall pay to Lender a fee equal to (x) one-fourth of one
percent (1/4%) per annum, TIMES (y) the difference between (A) the
Commitment, and (B) the sum, without duplication, of the following,
determined on a daily average basis for the immediately preceding calendar
quarter (or portion thereof, as the case may be): (i) all Advances under the
Line of Credit PLUS (ii) all outstanding Letter of Credit Obligations.
(3) AUDIT FEES. For Collateral audits performed by
Lender pursuant to Section 10.3, Lender's standard audit fee for each audit
performed by Lender (or its designee), which, as of the Closing Date, equals
Two Thousand Five Hundred Dollars ($2,500) plus expenses; PROVIDED, HOWEVER,
that Borrower shall not have to pay for more than two (2) such audits in any
one Fiscal Year so long as no Event of Default exists.
2.2.3. CAPITAL ADEQUACY. If, after the Closing
Date, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any
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change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the administration
thereof, or compliance by Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, affects or might affect the
amount of capital required or expected to be maintained by Lender or any
corporation in control of Lender and Lender determines that the amount of
such capital is increased by or based upon Lender's obligations hereunder,
then from time to time, within thirty (30) days after demand by Lender, which
demand shall include the change which has occurred and an explanation of such
other request, direction or requirement that is necessitating such change,
Borrower shall pay to Lender such additional amount or amounts as will
compensate Lender in light of such circumstances, to the extent that Lender
reasonably determines such increase in capital is allocable to Lender's
obligations hereunder, and such payment, as and when received, shall be
applied by Lender in reimbursement of Lender's increased costs in regard to
such obligations.
2.2.4. USURY SAVINGS PROVISIONS. Lender and
Borrower hereby further agree that the only charge imposed by Lender upon
Borrower for the use of money in connection herewith is and shall be interest
at the Applicable Rate, and that all other charges imposed by Lender upon
Borrower in connection herewith, are and shall be deemed to be charges made
to compensate Lender for underwriting and administrative services and costs,
and other services and costs performed and incurred, and to be performed and
incurred, by Lender in connection with making credit available to Borrower
hereunder, and shall under no circumstances be deemed to be charges for the
use of money. In no contingency or event whatsoever shall the aggregate of
all amounts deemed interest hereunder or under the Notes and charged or
collected pursuant to the terms of this Agreement or pursuant to the Notes
exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that Lender has charged or received
interest hereunder in excess of the highest applicable rate, the rate in
effect hereunder shall automatically be reduced to the maximum rate permitted
by applicable law and Lender shall promptly refund to Borrower any interest
received by Lender in excess of the maximum lawful rate or, if so requested
by Borrower, shall apply such excess to the principal balance of the
Obligations. 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.
2.3. GENERAL PROVISIONS AS TO PAYMENTS.
2.3.1. METHOD OF PAYMENT. All payments of
interest, fees and principal pursuant to this Agreement must be received by
Lender no later than 2:00 p.m. (Atlanta, Georgia time) on the date when due,
in federal or other funds immediately available to Lender in Atlanta, Georgia.
2.3.2. APPLICATION OF PAYMENT. Except as
otherwise expressly set forth herein, all payments received by Lender
hereunder shall be applied, in accordance with the then current billing
statement applicable to the Borrowing, first to accrued interest, then to
fees, then to principal due and then to late charges. Any remaining funds
shall be applied to the further reduction of principal. In the event more
than one Borrowing shall be outstanding hereunder,
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and no designation is made by Borrower, Lender, in its discretion, may
determine to which Borrowing(s) each payment shall be applied.
Notwithstanding the foregoing, upon the occurrence of a Default Condition or
Event of Default, payments shall be applied to the Obligations in such order
as Lender, in its sole discretion, may elect.
2.3.3. PREPAYMENT. Obligors may prepay any
Obligations, in whole or in part, at any time by paying the principal amount
to be prepaid together with accrued interest thereon to date of prepayment,
but without any premium or penalty.
2.4. SUBSIDIARY GUARANTY.
2.4.1. THE GUARANTY. The Subsidiary Guarantors
hereby jointly and severally guarantee to Lender and its successors and
assigns the prompt payment in full when due, whether at stated maturity, by
acceleration or otherwise of all Obligations of Borrower to Lender (such
Obligations herein called, collectively, the "GUARANTEED OBLIGATIONS"), in
each case strictly in accordance with the terms thereof. The Subsidiary
Guarantors hereby further jointly and severally agree that if Borrower shall
fail to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Guaranteed Obligations, the Subsidiary Guarantors will
promptly pay the same, on demand, and that in the case of any extension of
time of payment or renewal of any of the Guaranteed Obligations, the same
will be promptly paid in full when due (whether at extended maturity, by
acceleration or otherwise) in accordance with the terms of such extension or
renewal.
2.4.2. OBLIGATIONS UNCONDITIONAL. The
obligations of the Subsidiary Guarantors hereunder are absolute and
unconditional, joint and several, irrespective of the value, genuineness,
validity, regularity or enforceability of the obligations of Borrower under
this Agreement, the Notes or any other Loan Document or any substitution,
release or exchange of any other guarantee of or security for any of the
Guaranteed Obligations, and, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section that the obligations of the
Subsidiary Guarantors hereunder shall be absolute and unconditional, joint
and several, under and all circumstances. Without limiting the generality of
the foregoing, it is agreed that the occurrence of any one or more of the
following shall not alter or impair the liability of the Subsidiary
Guarantors hereunder which shall remain absolute and unconditional as
described above:
(i) at any time or from time to time, without notice to
any of the Subsidiary Guarantors, the time for any performance of or
compliance with any of the Guaranteed Obligations shall be extended,
or such performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions
of this Agreement or the Notes or any other agreement or instrument
referred to herein or therein shall be done or omitted;
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(iii) the maturity of any of the Guaranteed Obligations
shall be accelerated, or any of the Guaranteed Obligations shall be
modified, supplemented or amended in any respect, or any right under
this Agreement or the Notes or any other Loan Document shall be waived
or any other guarantee of any of the Guaranteed Obligations or any
security therefor shall be released or exchanged in whole or in part
or otherwise dealt with; or
(iv) any lien or security interest granted to, or in
favor of, Lender as security for any of the Guaranteed Obligations
shall fail to be perfected.
The Subsidiary Guarantors hereby expressly waive diligence, presentment,
demand of payment, protest and all notices whatsoever, and any requirement
that Lender exhaust any right, power or remedy or proceed against Borrower
under this Agreement or the Notes or any other Loan Document, or against any
other Person under any other Guaranty of, or security for, any of the
Guaranteed Obligations.
2.4.3. REINSTATEMENT. The obligations of the
Subsidiary Guarantors hereunder shall be automatically reinstated if and to
the extent that for any reason any payment by or on behalf of Borrower in
respect of the Guaranteed Obligations is rescinded or must be otherwise
restored by any holder of any of the Guaranteed Obligations, whether as a
result of any proceedings in bankruptcy or reorganization or otherwise and
the Subsidiary Guarantors jointly and severally agree that they will
indemnify Lender on demand for all reasonable costs and expenses (including,
without limitation, fees of counsel) incurred by Lender in connection with
such rescission or restoration, including any such costs and expenses
incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
2.4.4. SUBROGATION. Each Subsidiary Guarantor
hereby waives all rights of subrogation or contribution, whether arising by
contract or operation of law (including, without limitation, any such right
arising under the Bankruptcy Code) or otherwise by reason of any payment by
it pursuant to the provisions hereof until all Guaranteed Obligations are
fully paid and satisfied, and further agrees with the Borrower for the
benefit of each of its creditors (including, without limitation, Lender) that
any such payment by it shall constitute a contribution of capital by such
Subsidiary Guarantor to the Borrower (or an investment in the equity capital
of the Borrower by such Subsidiary Guarantor).
2.4.5. REMEDIES. The Subsidiary Guarantors
jointly and severally agree that, as between the Subsidiary Guarantors and
Lender, the Guaranteed Obligations may be declared to be forthwith due and
payable as provided herein (and shall be deemed to have become automatically
due and payable in the circumstances provided herein) for purposes hereof,
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable)
as against Borrower and that, in the event of such declaration (whether or
not due and payable by the Borrower) shall forthwith become due and payable
by the Subsidiary Guarantors for purposes hereof.
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2.4.6. CONTINUING GUARANTY. The Guaranty set
forth herein is a continuing Guaranty, and shall apply to all Guaranteed
Obligations, whenever and howsoever arising.
2.4.7. RIGHTS OF CONTRIBUTION. The Subsidiary
Guarantors hereby agree, as between themselves, that if any Subsidiary
Guarantor shall become an "Excess Funding Guarantor" (as defined below) by
reason of the payment by Subsidiary Guarantor of any Guaranteed Obligations,
each other Subsidiary Guarantor shall, on demand of such Excess Funding
Guarantor (but subject to the next sentence), pay to such Excess Funding
Guarantor an amount equal to such Subsidiary Guarantor's "Pro Rata Share" (as
defined below and determined, for this purpose, without reference to the
properties, debts and liabilities of such Excess Funding Guarantor) of the
"Excess Payment" (as defined below) in respect of such Guaranteed
Obligations. The payment obligation of a Subsidiary Guarantor to any Excess
Funding Guarantor under this Section shall be subordinate and subject in
right of payment to the prior payment in full of the obligations of such
Subsidiary Guarantor under the other provisions of this Section 2.4 and such
Excess Funding Guarantor shall not exercise any right or remedy with respect
to such excess until payment and satisfaction in full of all such
obligations. For purposes hereof, (i) "EXCESS FUNDING GUARANTOR" means, in
respect of any guaranteed Obligations, a Subsidiary Guarantor that has paid
an amount in excess of its Pro Rata Share of such Guaranteed Obligations,
(ii) "EXCESS PAYMENT" means, in respect of any guaranteed Obligations, the
amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of
such Guaranteed Obligations (iii) "PRO RATA SHARE" means, for any Subsidiary
Guarantor, the ratio (express as a percentage) of (x) the amount by which the
aggregate present fair saleable value of all Properties of such Subsidiary
Guarantor (excluding any shares of stock of any other Subsidiary Guarantor)
exceeds the amount of all the debts and liabilities of such Subsidiary
Guarantor (including contingent, subordinated, unmatured and unliquidated
liabilities, but excluding the obligations of such Subsidiary Guarantor
hereunder and any obligations of any other Subsidiary Guarantor that have
been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which the
aggregate fair saleable value of all Properties of all of the Subsidiary
Guarantors exceeds the amount of all the debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities, but
excluding the obligations of the Subsidiary Guarantor hereunder) of the
Subsidiary Guarantors, determined (A) with respect to any Subsidiary
Guarantor that is a party hereto on the Closing Date, as of the Closing Date,
and (B) with respect to any other Subsidiary Guarantor, as of the date such
Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder.
2.4.8. GENERAL LIMITATION ON GUARANTEED
OBLIGATIONS. In any action or proceeding involving any state corporate law,
or any state of Federal bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if the obligations of the
Subsidiary Guarantors hereunder would otherwise, be held or determined to be
void, invalid or unenforceable, or subordinated to the claims of any other
creditors, on account of the amount of its liability hereunder, then,
notwithstanding any other provision hereof to the contrary, the amount of
such liability shall, without any further action by any Subsidiary Guarantor,
Lender or any other Person, be automatically limited and reduced to the
highest amount that is valid and enforceable and not subordinated to the
claims of other creditors a determined in such action or proceeding.
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3. SECURITY INTEREST. As security for the payment of all
Obligations owing by it from time to time, each Obligor hereby grants to
Lender a continuing, general Lien upon and security interest and security
title in and to the following described property, or interests in property,
of such Obligor, wherever located, whether now existing or hereafter acquired
or arising (herein collectively called the "COLLATERAL"), namely: (a) all of
its Accounts Receivable Collateral; (b) all of its Inventory Collateral; (c)
all of its Equipment Collateral; (d) all of its Intangibles Collateral; (e)
all of its Balances Collateral; and (f) all products and/or proceeds of any
and all of the foregoing, including, without limitation, insurance proceeds.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
ACCOUNTS RECEIVABLE COLLATERAL. With respect to its Accounts Receivable
Collateral, each Obligor hereby represents, warrants and covenants to Lender
as set forth below.
4.1. BONA FIDE ACCOUNTS. Each item of its Accounts
Receivable Collateral arises or will arise under a contract between an
Account Debtor and it, or from the bona fide sale or delivery of goods to or
performance of services for, an Account Debtor.
4.2. GOOD TITLE. It has good title to its Accounts
Receivable Collateral free and clear of all Liens other than any Permitted
Encumbrances, and no financing statement covering its Accounts Receivable
Collateral is on file in any public office other than any evidencing
Permitted Encumbrances.
4.3. RIGHT TO GRANT SECURITY INTEREST. It has full
right, power and authority to grant this security interest in its Accounts
Receivable Collateral and hereafter will not pledge, hypothecate, grant a
security interest in, sell, assign, transfer, or otherwise dispose of its
Accounts Receivable Collateral, or any interest therein.
4.4. COLLATERAL RESERVE ACCOUNT. If requested by Lender
to do so at any time hereafter, it shall establish as soon as practicable but
in any event within sixty (60) days thereafter and thereafter maintain with
Lender, either individually or in combination with one or more other
Obligors, a Collateral Reserve Account into which it shall transfer and
deliver all cash, checks, drafts, items and other instruments for the payment
of money which it now has 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, pending such transfer and delivery, it
shall be deemed to hold same in trust for the benefit of Lender. Such Obligor
shall not be entitled to withdraw funds on deposit in such Collateral Reserve
Account after its inception without the prior written consent of Lender;
PROVIDED, HOWEVER, that, at any time during which collected funds exist on
deposit in such Collateral Reserve Account, Lender may withdraw such
deposits, or any portion thereof, therefrom, for application against the
Obligations in such manner as Lender, in its sole discretion, may determine.
Notwithstanding the foregoing, however, so long as no Event of Default
exists, Lender agrees to settle with each Obligor as to any funds which may
exist in its Collateral Reserve Account opened by it, after the foregoing
application, on a daily basis, on each Business Day.
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4.5. TRADE STYLES. Except as may be set forth on the
Obligor Information Schedule attached hereto, it uses no trade names or trade
styles in its business operations (herein, "TRADE STYLES"), and it covenants
with Lender not to use any Trade Styles in its business operations hereafter,
except as so specified on the Obligor Information Schedule prior to having
given Lender at least thirty (30) days prior written notice thereof. In any
event, to the extent that, now or hereafter, it uses any Trade Styles, it
hereby certifies and agrees with Lender that: (i) all of the accounts
receivable and proceeds thereof arising out of sales under the Trade Styles
shall be the property of, and belong to, it; (ii) each of the Trade Styles is
a trade name and trade style (and not an independent corporation or other
legal entity) by which it identifies and sells certain of its products or
services and under which it may conduct a portion of its business; (iii) all
accounts receivable, proceeds thereof, and returned merchandise which arise
from the sale of products invoiced under the names of any of the Trade Styles
shall be owned solely by it and shall be subject to the terms of this
Agreement as they relate to its Accounts Receivable Collateral; and (iv) each
Obligor hereby appoints Lender as its attorney-in-fact to file such
certificates disclosing its use of the Trade Styles and to take such other
actions on its behalf as are necessary to comply with the statutes of any
states relating to the use of fictitious or assumed business names, to the
extent that it fails to do so.
4.6. LIMITED POWER OF ATTORNEY. It irrevocably
designates and appoints Lender as its true and lawful attorney-in-fact to
endorse for collection any checks, drafts, notes or other instruments
received in payment of or on account of any of its Collateral hereafter
coming into Lender's possession and control, whether pursuant to the
Collateral Reserve Account or otherwise, 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 any such Collateral.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
INVENTORY COLLATERAL. With respect to its Inventory Collateral, each Obligor
hereby represents, warrants and covenants to Lender as set forth below:
5.1. SALE OF INVENTORY COLLATERAL. It will not sell,
lease, exchange, or otherwise dispose of any of its 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, exchange or other disposition of
its Inventory Collateral, the security interest and lien created and provided
for herein, without break in continuity and without further 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 noncash proceeds (subject to any Permitted Encumbrances), and in the
event of any unauthorized sale, shall continue in its Inventory Collateral
itself.
5.2. INSURANCE. It will continue to maintain insurance
on its Inventory Collateral with the same, or substantially the same,
companies, in the same, or substantially the same, relative amounts and
against the same, or substantially the same, risks as is maintained by
Borrower on the Closing Date, with loss payable to Lender as its interests
may appear. Such insurance shall not be cancellable by it, unless with the
prior written consent of Lender, or by its insurer, unless with at least
thirty (30) days (or any lesser number of days otherwise approved by
-▇▇-
▇▇▇▇▇▇) advance written notice to Lender. In addition, it shall cause insurer
to provide Lender with at least thirty (30) days advance written notice prior
to insurer's nonrenewal of such insurance. Borrower shall provided to Lender
a copy of each such policy.
5.3. GOOD TITLE. Except with respect to any Permitted
Encumbrances, it owns its Inventory Collateral free and clear of any Lien,
and no financing statements or other evidences of the grant of a security
interest respecting its Inventory Collateral exist on the public records as
of the date hereof other than any evidencing any Permitted Encumbrances.
5.4. RIGHT TO GRANT SECURITY INTEREST. It has the
right to grant a security interest in its Inventory Collateral. It will pay
all taxes and other charges against its Inventory Collateral, and it will not
use its Inventory Collateral illegally or allow its Inventory Collateral to
be encumbered except for the security interest in favor of Lender granted
herein and except for any Permitted Encumbrances.
5.5. LOCATION OF INVENTORY COLLATERAL. It hereby
represents and warrants to Lender that, as of the date hereof, its Inventory
Collateral is situated only at one or more of the Collateral Locations, and
it covenants with Lender not to locate the Inventory Collateral at any
location other than a Collateral Location without at least thirty (30) days
prior written notice to Lender.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
EQUIPMENT COLLATERAL. With respect to its Equipment Collateral, each Obligor
hereby represents, warrants and covenants to Lender as set forth below:
6.1. SALE OF EQUIPMENT COLLATERAL. It will not sell,
lease, exchange, or otherwise dispose of any of its Equipment Collateral
without the prior written consent of Lender; provided, however, that, with
notice to, but without the necessity of consent of, Lender, from time to time
hereafter, in the ordinary course of its business, it may sell, exchange or
otherwise dispose of portions of the Equipment Collateral which are obsolete,
worn-out or unsuitable for continued use if such Equipment Collateral is
replaced promptly upon its disposition with equipment constituting Equipment
Collateral having a market value equal to or greater than the Equipment
Collateral so disposed of and in which Lender shall obtain and have a first
priority security interest pursuant hereto.
6.2. INSURANCE. It agrees that it will continue to
maintain insurance on its Equipment Collateral with the same, or
substantially the same, companies, in the same, or substantially the same,
relative amounts and against the same, or substantially the same, risks as is
maintained by Borrower on the Closing Date, with loss payable to Lender as
its interests may appear. Such insurance shall not be cancellable by it,
unless with the prior written consent of Lender, or by its insurer, unless
with at least thirty (30) days (or such lesser number of days otherwise
approved by Lender) advance written notice to Lender. In addition, it shall
cause insurer to provide to Lender at least thirty (30) days advance written
notice prior to insurer's nonrenewal of such insurance. It shall provide to
Lender a copy of each such policy on the Closing Date.
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6.3. GOOD TITLE. It owns its Equipment Collateral free
and clear of any prior Lien 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.
6.4. RIGHT TO GRANT SECURITY INTEREST. It has the
right to grant a security interest in its Equipment Collateral. It will pay
all taxes and other charges against its Equipment Collateral. It will not use
the Equipment Collateral illegally or allow its Equipment Collateral to be
encumbered except for the security interest in favor of Lender granted herein
and except for any Permitted Encumbrances.
6.5. LOCATION. As of the Closing Date, its Equipment
Collateral is located only at one or more of the Collateral Locations and,
hereafter, it covenants with Lender not to locate its Equipment Collateral at
any location other than a Collateral Location without at least thirty (30)
days written notice to Lender.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
BALANCES COLLATERAL. With respect to its Balances Collateral, each Obligor
hereby represents, warrants and covenants to Lender as set forth below:
7.1. OWNERSHIP. It owns its Balances Collateral free
and clear of any liens, mortgages, security interests or encumbrances
thereon, except for any Permitted Encumbrances.
7.2. REMEDIES. In addition to such other rights and
remedies with respect to its Balances Collateral as may exist from time to
time hereafter in favor of Lender, whether by way of set-off, banker's lien,
consensual security interest or otherwise, Lender may charge any part or all
of the obligations of Lender to an Obligor represented by items constituting
its Balances Collateral in the possession and control of Lender against the
Obligations.
7.3. LIENS. Hereafter, it will not incur, create or
suffer to Lien upon its Balances Collateral, except for Permitted
Encumbrances, or sell, convey, hypothecate, pledge or assign its right, title
or interest therein, without the prior written consent of Lender thereto.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
INTANGIBLES COLLATERAL. With respect to its Intangibles Collateral, it hereby
represents, warrants and covenants to Lender as set forth below:
8.1. OWNERSHIP. It owns its Intangibles Collateral
free and clear of any Liens other than with respect to any Permitted
Encumbrances, and no financing statements or other evidences of the grant of
a security interest respecting its Intangibles Collateral exist on the public
records as of the date hereof other than any evidencing any Permitted
Encumbrances.
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8.2. LIENS. Hereafter, it will not incur, create or
suffer to exist any lien, security interest or encumbrance upon its
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.
8.3. PRESERVATION. Hereafter, it will take all
necessary and appropriate measures to obtain, maintain, protect and preserve
its Intangibles Collateral including, without limitation, registration
thereof with the appropriate state or federal governmental agency or
department.
9. GENERAL REPRESENTATIONS AND WARRANTIES. In order to induce
Lender to enter into this Agreement, each Obligor hereby represents and
warrants to Lender (which representations and warranties, together with any
other representations and warranties of each Obligor contained elsewhere in
this Agreement, shall be deemed to be renewed as of the date of each Advance
and the issuance of each Letter of Credit), as set forth below:
9.1. EXISTENCE AND QUALIFICATION. It is a corporation
duly organized, validly existing and in good standing under the laws of the
State of its incorporation, as designated on the Obligor Information
Schedule, with its principal place of business, chief executive office and
office where it keeps all of its books and records being located at the
Executive Office and is duly qualified as a foreign corporation in good
standing in each other state in which a Collateral Location of that Obligor
is situated or wherein the failure to so qualify could not reasonably be
expected to result in a Material Adverse Change. It has as its corporate
name, as registered with the secretary of state of the state of its
incorporation, the words first inscribed hereinabove as its name, and, except
as may be described on the Obligor Information Schedule, it has not done
business under any other name.
9.2. AUTHORITY; AND VALIDITY AND BINDING EFFECT. It
has the corporate power to make, deliver and perform under the Loan Documents
to which it is party, and, in the case of Borrower, to borrow hereunder, and
has taken all necessary and appropriate corporate action to authorize the
execution, delivery and performance of the Loan Documents. This Agreement
constitutes, and the remainder of the Loan Documents, as and when executed
and delivered for value received, will constitute, the valid obligations of
each Obligor, legally binding upon it and enforceable against it in
accordance with their respective terms.
9.3. INCUMBENCY AND AUTHORITY OF SIGNING OFFICERS. The
undersigned officers of each Obligor hold the offices specified hereinbelow
and, in such capacities, are duly authorized and empowered to execute, attest
and deliver this Agreement and the remainder of the Loan Documents for and on
behalf of such Obligor, and to bind it accordingly thereby.
9.4. NO MATERIAL LITIGATION. Except as may be set
forth on the Obligor Information Schedule, to the best of such Obligor's
knowledge, there are no legal proceedings pending before any court or
administrative agency which, if adversely determined, could reasonably be
expected to result in a Material Adverse Change.
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9.5. TAXES. It has filed or caused to be filed all tax
returns required to be filed by it and has paid all taxes shown to be due and
payable by it on said returns or on any assessments made against it wherein
the failure to so qualify could not reasonably be expected to result in a
Material Adverse Change.
9.6. CAPITAL. All capital stock, debentures, bonds,
notes and all other securities of each Obligor presently issued and
outstanding are validly and properly issued in accordance with all applicable
laws, including, but not limited to, the "blue sky" laws of all applicable
states and the federal securities laws. Unless otherwise set forth on the
Obligor Information Schedule, Borrower owns all issued and outstanding
capital stock of each Subsidiary Guarantor.
9.7. ORGANIZATION. The articles of incorporation of
and bylaws of each Obligor are in full force and effect under the law of the
state of its incorporation and all amendments to said articles of
incorporation and bylaws have been duly and properly made under and in
accordance with all applicable laws.
9.8. INSOLVENCY. After giving effect to the execution
and delivery of the Loan Documents and the extension of any credit or other
financial accommodations hereunder, no Obligor will be "insolvent", within
the meaning of such term as used in O.C.G.A. Section 18-2-22 or as defined in
Section 101(32) of the Bankruptcy Code; or be unable to pay its debts
generally as such debts become due; or have an unreasonably small capital.
9.9. TITLE. It has good and marketable title to all of
its properties subject to no Lien of any kind except for Permitted
Encumbrances.
9.10. MARGIN STOCK. It is not engaged principally, or
as one of its important activities, in the business of purchasing or carrying
any "margin stock", as that term is defined in Section 221.2(h) of Regulation
U of the Board of Governors of the Federal Reserve System, and no part of the
proceeds of any borrowing made pursuant hereto will be used to purchase or
carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock, or be used for any purpose
which violates, or which is inconsistent with, the provisions of Regulation X
of said Board of Governors. In connection herewith, if requested by Lender,
each Obligor will furnish to Lender a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in said Regulation U to
the foregoing effect.
9.11. NO VIOLATIONS. The execution, delivery and
performance by it of each of the Loan Documents to which it is party have
been duly authorized by all necessary corporate action and do not and will
not require any consent or approval of the shareholders of any Obligor,
violate any provision of any 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 any Obligor or of the charter or
bylaws of any Obligor, or, to the best of its knowledge, 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 any Obligor is a party or
by which it or its properties may be bound or affected; and, to the best of
its knowledge, no Obligor is in default under any such law, rule,
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regulation, order, writ, judgment, injunction, decree, determination or award
or any such indenture, agreement, lease or instrument.
9.12. FINANCIAL STATEMENTS. The financial statements of
Borrower and its Consolidated Subsidiaries (if any) for its most recently
completed Fiscal Year and for that portion of its current Fiscal Year ended
with that Fiscal Month ended closest to the Closing Date for which financial
statements have been prepared, including balance sheet, income statement and,
if available, statement of changes in cash flow, copies of which heretofore
have been furnished to Lender, are complete and accurately and fairly
represent the financial condition of Borrower and its Consolidated
Subsidiaries (if any), the results of its operations and the transactions in
its equity accounts as of the dates and for the periods referred to therein,
and have been prepared in accordance with GAAP. There are no material
liabilities, direct or indirect, fixed or contingent, of Borrower or any such
Consolidated Subsidiaries as of the date of such financial statements which
are not reflected therein or in the notes thereto. No Material Adverse Change
has occurred since the date of the balance sheet contained in the annual
financial statement described hereinabove.
9.13. PURCHASE OF COLLATERAL. Within the twelve (12)
months period preceding the Closing Date, no Obligor has 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.
9.14. POLLUTION AND ENVIRONMENTAL CONTROL. Each Obligor
and each of its Subsidiaries have obtained all permits, licenses and other
authorizations which are required under, and is in material compliance with,
all Environmental Laws.
9.15. POSSESSION OF PERMITS. Each Obligor and each of
its Subsidiaries possess 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, similar rights, free from burdensome
restrictions, that are necessary for the ownership, maintenance and operation
of any of its properties and assets, and no Obligor or any such Subsidiary is
in violation of any thereof. A complete and accurate list of all such
patents, trademarks, service marks, trade names, copyrights, licenses and
other, similar rights owned by each Obligor in existence on the Closing Date
is set forth on the Obligor Information Schedule attached hereto.
9.16. SUBSIDIARIES. As of the Closing Date, no Obligor
has any Subsidiaries, except that Calgraph is a Subsidiary of Borrower.
Heretofore, in one or a series of transactions, Borrower merged with each of
the Former Subsidiaries, with Borrower remaining as the sole surviving
corporation.
9.17. FEDERAL TAXPAYER IDENTIFICATION NUMBER. Each
Obligor's federal taxpayer identification number (to the extent available on
the Closing Date) is as indicated on the Obligor Information Schedule.
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9.18. EMPLOYEE BENEFIT PLANS. As of the Closing Date,
no Obligor has any Employee Benefit Plans except as may be described on the
Obligor Information Schedule.
10. AFFIRMATIVE COVENANTS. Each Obligor covenants to Lender
that from and after the date hereof, and so long as any amounts remain unpaid
on account of any of the Obligations or this Agreement remains effective
(whichever is the last to occur), such Obligor will comply (and cause each of
its Subsidiaries to comply) with the affirmative covenants set forth below:
10.1. RECORDS RESPECTING COLLATERAL. All records with
respect to its Collateral will be kept at its Executive Office and will not
be removed from such address without the prior written consent of Lender,
except that Borrower may retain portions of its books and records at its
Tekgraf Systems Division headquarters, which is located at ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
10.2. FURTHER ASSURANCES. It 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, ▇▇▇▇ 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 its
Collateral, the proceeds thereof, and any other property at any time
constituting security to Lender. It shall perform or cause to be performed
such acts as Lender may request to establish and maintain for Lender a valid
and perfected security interest in and security title to its Collateral, free
and clear of any liens, encumbrances or security interests other than
Permitted Encumbrances.
10.3. RIGHT TO INSPECT AND CONDUCT AUDITS. Lender (or
any Person or Persons designated by it) shall have the continuing right to
call at any Executive Office or any Collateral Location at any reasonable
time, upon reasonable advance notice, and without hindrance or delay,
inspect, audit, check and make extracts from an Obligor's books, records,
journals, orders, receipts and any correspondence and other data relating to
the Collateral, to an Obligor's business or to any other transactions between
the parties hereto.
10.4. COLLATERAL REPORTS. Borrower shall, as soon as
practicable, and in any event on or before ten (10) days after the end of
each Fiscal Month, assemble or cause to be assembled, and furnish or cause to
be furnished to Lender, a status report, certified by a duly authorized
officer of Borrower, showing the aggregate dollar value of the items
comprising the Obligors' Accounts Receivable Collateral and the age of each
individual item thereof as of the last day of the preceding Fiscal Month
(segregating such items in such manner and to such degree as Lender may
request), plus the type, dollar value and location of the Obligors' Inventory
Collateral as at the end of the preceding Fiscal Month, valued at the lower
of its Booked Cost or market value, plus an accounts payable aging.
Additionally, Lender may, at any time in its sole discretion, require each
Obligor to permit Lender to verify the individual account balances of any
individual Account Debtors. Further, upon request from Lender, made at any
time hereafter, and, in any event, with the above-described status report for
the month of
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December in each year, each Obligor shall furnish Lender with a then current
customer and Account Debtor name and address list.
10.5. SETTLEMENT REPORTS. Borrower shall, as soon as
practicable, and in any event within twenty (20) days after the end of each
Fiscal Month, through its Fiscal Year ending December 31, 2000, and
thereafter within ten (10) days after the end of each Fiscal Month, if
Average Excess Availability as of any Fiscal Month end is at least Five
Hundred Thousand Dollars ($500,000) and on or before the second Business Day
following each calendar week end if as of any Fiscal Month end Average Excess
Availability is less than Five Hundred Thousand Dollars ($500,000), prepare
and deliver to Lender a settlement report with respect to satisfaction of the
Margin Requirement as of the date of report submission, to be substantially
in the form of EXHIBIT "F" attached hereto or in such form as Lender may
deliver for such purpose to Borrower from time to time hereafter (herein, a
"SETTLEMENT REPORT"), the statements in which, in each instance, shall be
certified as to truth and accuracy by a duly authorized officer of Borrower.
10.6. PERIODIC FINANCIAL STATEMENTS. Borrower shall, as
soon as practicable, and in any event within thirty (30) days after the end
of each Fiscal Month, and within forty-five (45) days after each Fiscal
Quarter, furnish to Lender unaudited financial statements of Borrower and
each Consolidated Subsidiary (if any), including balance sheets, income
statements and statements of cash flow, for the Fiscal Month or Fiscal
Quarter then ended, and for the Fiscal Year to date, on a consolidated and,
if requested by Lender, consolidating basis. Such financial statements shall
also be prepared on an unaudited consolidating basis for such Subsidiaries of
Borrower (if any) which accounted for more than ten percent (10%) of the
gross revenues of Borrower for that year. All such financial statements shall
be certified by a duly authorized officer of Borrower to present fairly the
financial position and results of operations of Borrower for the period
involved in accordance with GAAP (but for the omission of footnotes and
subject to year-end audit adjustments).
10.7. ANNUAL FINANCIAL STATEMENTS. 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 (if any), certified without
material qualification by independent certified public accountants selected
by Borrower and acceptable to Lender, and prepared in accordance with GAAP,
together with relevant financial statements of Borrower and such Subsidiaries
for the Fiscal Year then ended, on a consolidating and a consolidated basis,
if applicable.
10.8. SEC REPORTS. So long as Borrower is subject to
reporting requirements of the Securities and Exchange Commission ("SEC"),
Borrower shall submit to Lender copies of its quarterly 10-Q reports, annual
10-K reports and any other, similar or supplemental reports which Borrower
must issue to the SEC promptly, but in any event within ten (10) days after,
its delivery of such reports to the SEC; PROVIDED, HOWEVER, that if and so
long as any such reports are accessible by the internet, then, Borrower may
comply herewith by notifying Lender of the posting of such reports thereon.
10.9. PAYMENT OF TAXES. Each Obligor shall pay and
discharge all taxes, assessments and governmental charges upon it, its income
and its properties prior to the date on
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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 it, (y) it maintains reasonable reserves on
its books therefor and (z) the payment of such taxes does not result in a
Lien upon any of the Collateral other than a Permitted Encumbrance.
10.10. MAINTENANCE OF INSURANCE. In addition to and
cumulative with any other requirements herein imposed on an Obligor with
respect to insurance, each Obligor shall maintain insurance with responsible
insurance companies on such of its properties, 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 loss, damage, flood,
windstorm, fire, theft, extended coverage, business interruption, freight
insurance and product liability insurance in relative amounts which are the
same, or substantially the same, as in existence on the Closing Date, which
such insurance shall not be cancellable by it, unless with the prior written
consent of Lender, or by its insurer, unless with at least thirty (30) days
advance written notice to Lender thereof (or such lesser or greater time
period as shall be accepted or required by Lender from time to time). Each
Obligor shall file with Lender upon its request a detailed list 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,
together with a copy of each such policy and, within thirty (30) days after
notice in writing from Lender, obtain such additional insurance as Lender may
reasonably request.
10.11. MAINTENANCE OF PROPERTY AND MANAGEMENT. Each
Obligor shall maintain its property in good working condition and its
executive management reasonably satisfactory to Lender.
10.12. COMPLIANCE CERTIFICATE. 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 a duly authorized Officer of Borrower in the form of
EXHIBIT "G" attached hereto (herein, a "COMPLIANCE CERTIFICATE") that no
Event of Default and no Default Condition exists or has occurred, or, if an
Event of Default or Default Condition exists, specifying the nature and
period of existence thereof. Such Compliance Certificate shall also set
forth, in reasonable detail, evidence of Borrower's, compliance with all
financial covenants set forth in SCHEDULE "I" attached hereto for the
immediately preceding Fiscal Month or Fiscal Quarter, as applicable.
10.13. CHANGE OF PRINCIPAL PLACE OF BUSINESS, ETC. Each
Obligor hereby understands and agrees that if, at time hereafter, it elects
to move its Executive Office, or if Borrower elects to change its name,
identity or its organization structure to other than a corporate structure,
it must notify Lender in writing at least thirty (30) days prior thereto.
10.14. WAIVERS. With respect to each of the Collateral
Locations, each Obligor will obtain such waivers of lien, estoppel
certificates or subordination agreements as Lender may reasonably require
(including Landlord Agreements, as applicable) to insure the priority of its
security interest in that portion of its Collateral situated at such
locations. Upon failure by
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Borrower to obtain such waivers within sixty (60) days after the Closing
Date, for all such locations existing on the Closing Date, but otherwise upon
relocation, for all such locations not in existence on the Closing Date,
Lender shall be entitled to impose a reserve on borrowing availability under
the Line of Credit in respect, which, in the case of landlords, shall include
up to three (3) months' rent per leased location so affected.
10.15. PRESERVATION OF EXISTENCE. Each Obligor shall
preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and
operations or the ownership of its properties.
10.16. COMPLIANCE WITH LAWS. Each Obligor and each of
its Subsidiaries shall comply with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority, noncompliance
with which would or could materially adversely affect their respective
financial condition or the ownership, maintenance or operation of any
material portion of any of their respective properties. Without limiting the
foregoing, each Obligor and each of its Subsidiaries shall obtain and
maintain all permits, licenses and other authorizations which are required
under, and otherwise comply with, all federal, state, and local laws and
regulations.
10.17. SUBORDINATIONS. At Lender's request, which may be
made at any time on or after the Closing Date, Borrower shall provide Lender
with a Subordination Agreement executed by any Person who is an Affiliate of
Borrower or any Guarantor to whom Borrower or any Subsidiary Guarantor is or
hereafter owes any Debt, subordinating in right of payment and claim on terms
acceptable to Lender all of such Debt to the claims of Lender in respect of
the Obligations.
10.18. CERTAIN REQUIRED NOTICES. Promptly, upon its
receipt of notice or knowledge thereof, Borrower will report to Lender: (i)
any lawsuit or administrative proceeding in which Borrower or any Subsidiary
is a defendant which, if decided adversely to Borrower or such Subsidiary,
could reasonably be expected to result in a Material Adverse Change; or (ii)
the existence and nature of any Default Condition or Event of Default.
11. NEGATIVE COVENANTS. Each Obligor covenants to Lender that
from and after the date hereof and so long as any amount remains unpaid on
account of any of the Obligations or this Agreement remains effective
(whichever is the last to occur), it will not do (and will not permit any of
its Subsidiaries to do), without the prior written consent of Lender, any of
the things or acts set forth below:
11.1. ENCUMBRANCES. Create, assume, or suffer to exist
any Lien, EXCEPT FOR Permitted Encumbrances.
11.2. DEBT. Incur, assume, or suffer to exist any Debt,
EXCEPT FOR: (i) Debt to Lender or any Affiliate of Lender; (ii) Debt to
Persons other than Lender existing on the date of this Agreement; (iii)
Subordinated Debt; (iv) trade payables and contractual obligations to
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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) accruals arising in
the ordinary course of business; (viii) Purchase Money Debt; and (ix) Debt
resulting from endorsements of negotiable instruments received in the
ordinary course of its business.
11.3. 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, firm,
or corporation, EXCEPT FOR endorsements of negotiable instruments for
collection in the ordinary course of business.
11.4. DIVIDENDS. Declare or pay any dividends on, or
make any distribution with respect to, its shares of any class of capital
stock.
11.5. REDEMPTION. Purchase, redeem, or otherwise
acquire for value any shares of any class of its capital stock; PROVIDED,
HOWEVER, that, notwithstanding the foregoing, Borrower may purchase or redeem
the shares of capital stock of certain dissident shareholders with whom
Borrower is in litigation on the Closing Date, as more particularly described
on the Obligor Information Schedule, so long and provided that: (i) the
aggregate cash consideration paid in respect thereof, to all such dissident
shareholders, does not exceed $5,000,000; (ii) no Event of Default or Default
Condition then exists or would be caused by the making of any such payment;
(iii) each such payment, if deemed made as of the last day of the last fiscal
quarter for which reported financial statements of Borrower then exist, would
not cause Borrower to be in default with any financial covenants set forth in
SCHEDULE "I" annexed hereto; and (iv) after the making of any such payment,
net borrowing availability under the Line of Credit (considered in light of
compliance with the Margin Requirement at such time) must equal at least
$500,000.
11.6. INVESTMENTS. Make any investment in cash or by
delivery of property to any Person, whether by acquisition of stock,
indebtedness or other obligation or security, or by loan, advance or capital
contribution, or otherwise, in any Person or property of a Person, EXCEPT
FOR: (i) fixed assets acquired from time to time in the ordinary course of
business; (ii) current assets arising from the sale of goods or the provision
of services in the ordinary course of business; (iii) loans or advances to
employees for salary, commissions, travel or the like, made in the ordinary
course of business; (iv) investments in direct obligations of the United
States of America, or any agency thereof or obligations guaranteed by the
United States of America, PROVIDED that such obligations mature within one
(1) year from the date of acquisition thereof; (v) investments in time
deposits, demand deposits and certificates of deposit maturing within one
year from the date of acquisition issued by a bank or trust company organized
under the laws of the United States or any state thereof having capital
surplus and undivided profits aggregating at least $500,000,000; and (vi)
investments in 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; and (vii) loans and advances between or among
Obligors.
11.7. MERGERS. Dissolve or otherwise terminate its
corporate status or enter into any merger or consolidation or make any
substantial change in the basic type of business
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conducted by Borrower and its Subsidiaries, as of the Closing Date, EXCEPT
that any of Borrower's Subsidiaries may merge or consolidate with each other
or with Borrower, so long as Borrower is the surviving corporation in such
merger.
11.8. BUSINESS LOCATIONS. Transfer its principal place
of business or Executive Office, or open new store locations or warehouses,
or transfer existing store locations or warehouses or maintain records with
respect to its Collateral, to or at any locations other than those at which
the same are presently kept or maintained as set forth on the Obligor
Information Schedule, except upon at least twenty-one (21) days prior written
notice to Lender and after the delivery to Lender of financing statements, if
required by Lender, in form satisfactory to Lender, to perfect or continue
the perfection of Lender's Lien.
11.9. AFFILIATE TRANSACTIONS. Enter into, or be a party
to, or permit any Subsidiary to enter into or be a party to, any transaction
with any Affiliate, except in the ordinary course of and pursuant to the
reasonable requirements of its or such Subsidiary's business and upon fair
and reasonable terms which are fully disclosed to Lender and are no less
favorable to it or such Obligor than would be obtained in a comparable arm's
length transaction with a Person not an Affiliate.
11.10. SUBSIDIARIES. Acquire or create any Subsidiary
unless (i) Lender receives at least ten (10) days advance written notice
thereof, (ii) such Subsidiary executes a joinder agreement, in substantially
the form of EXHIBIT "J" attached hereto, binding itself to be a Subsidiary
Guarantor; and (iii) all capital stock of such Subsidiary is pledged to
Lender pursuant to a Stock Pledge Agreement in substantially the form of
EXHIBIT "I".
11.11. FISCAL YEAR. Change its Fiscal Year, or permit
any Subsidiary to have a fiscal year different from the Fiscal Year of
Borrower.
11.12. DISPOSITION OF ASSETS. Sell, lease or otherwise
dispose of any of its properties, including any disposition of property as
part of a sale and leaseback transaction, to or in favor of any person,
except (i) sales of Inventory Collateral in the ordinary course of an
Obligor's business or (ii) such other dispositions as otherwise may be
expressly authorized by this Agreement.
11.13. FEDERAL TAXPAYER IDENTIFICATION NUMBER. Change or
permit any Subsidiary to change its federal taxpayer identification number
without prior written notice to Lender.
11.14. EMPLOYEE BENEFIT PLANS. Permit an Employee
Benefit Plan to become materially underfunded or create any Employee Benefit
Plan without prior written notice to Lender and upon such notification this
Agreement shall be amended as determined necessary by Lender in its
discretion as a result of the creation of such Plan.
12. FINANCIAL COVENANTS. Borrower covenants to Lender that,
from and after the date hereof and so long as any amount remains on account
of any of the Obligations or
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this Agreement remains effective (whichever is the last to occur), it will
comply with the financial covenants set forth below on SCHEDULE "I" attached
hereto.
13. EVENTS OF DEFAULT. The occurrence of any events or
conditions set forth below 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:
13.1. OBLIGATIONS. Any Obligor shall fail to make any
payment on any of its Obligations, when due, and such failure to pay shall
continue without waiver or cure for a period of three (3) Business Days.
13.2. MISREPRESENTATIONS. Any Obligor, any Subsidiary
of an Obligor or any Guarantor shall make any representation or warranty of a
material fact in any of the Loan Documents or in any Guaranty or in any other
certificate or statement furnished at any time hereunder or in connection
with any of the Loan Documents or any Guaranty which proves to have been
false or misleading in any material respect when made or furnished.
13.3. CERTAIN COVENANTS. Any Obligor shall default in
the observance or performance of any covenant or agreement contained in
Sections 10.3 through 10.8, 10.12, 10.14 or 10.19 of Article 10, in any
Section of Article 11 or of any Section in SCHEDULE "I".
13.4. OTHER COVENANTS. Any Obligor, any Subsidiary of
an Obligor or any Guarantor shall default in the observance or performance of
any covenant or agreement contained herein, in any of the other Loan
Documents or any Guaranty (other than a default the performance or observance
of which is dealt with specifically elsewhere in this Section) UNLESS (i)
with respect to this Agreement, such default is cured to Lender's
satisfaction within twenty (20) days after the sooner to occur of receipt of
notice of such default from Lender or the date on which such default first
becomes known to Borrower and (ii) with respect to any other Loan Document or
Guaranty, such default is cured within any applicable grace, cure or notice
and cure period contained therein.
13.5. OTHER DEBTS. Any Obligor, any Subsidiary or any
Guarantor shall default in connection with any agreement for Debt exceeding,
individually, or in aggregate amount, Two Hundred Fifty Thousand Dollars
($250,000) with any creditor, including Lender, which entitles said creditor
to accelerate the maturity thereof, and any grace or cure period with respect
thereto elapses without such default being cured or waived.
13.6. VOLUNTARY BANKRUPTCY. Any Obligor, any Subsidiary
of an Obligor or any Guarantor 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;
any Obligor, any Subsidiary of an Obligor or any Guarantor shall enter into
any agreement indicating its consent to, approval of, or acquiescence in, any
such petition or proceeding; any Obligor, any Subsidiary of an Obligor or any
Guarantor shall apply for or permit the appointment by consent or
acquiescence of a receiver, custodian or trustee of any Obligor, any
Subsidiary of an Obligor or any Guarantor
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for all or a substantial part of its property; any Obligor, any Subsidiary of
an Obligor or any Guarantor shall make an assignment for the benefit of
creditors; or any Obligor, any Subsidiary of an Obligor or any Guarantor
shall be unable or shall fail to pay its debts generally as such debts become
due, or any Obligor, any Subsidiary of an Obligor or any Guarantor shall
admit, in writing, its inability or failure to pay its debts generally as
such debts become due.
13.7. INVOLUNTARY BANKRUPTCY. There shall have been
filed against any Obligor, any Subsidiary of an Obligor or any Guarantor 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;
any Obligor, any Subsidiary of an Obligor or any Guarantor shall suffer or
permit the involuntary appointment of a receiver, custodian or trustee of any
Obligor, any Subsidiary or any Guarantor or for all or a substantial part of
its property; or any Obligor, any Subsidiary of an Obligor or any Guarantor
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 any
Obligor, any Subsidiary of an Obligor or any Guarantor; or any motion,
complaint or other pleading is filed in any bankruptcy case of any person or
entity other than any Obligor, any Subsidiary of an Obligor or any Guarantor
and such motion, complaint or pleading seeks the consolidation of any such
Obligor's, Subsidiary's or Guarantor's assets and liabilities with the assets
and liabilities of such person or entity.
13.8. DAMAGE, LOSS, THEFT OR DESTRUCTION OF COLLATERAL.
There shall have occurred material uninsured damage to, or uninsured loss,
theft or destruction of, any Collateral having a value, based on the lower of
its depreciated cost or market value, exceeding Two Hundred Fifty Thousand
Dollars ($250,000).
13.9. JUDGMENTS. A final judgment or order for the
payment of money is rendered against any Obligor, any Subsidiary of an
Obligor or any Guarantor in the amount of One Hundred Thousand Dollars
($100,000) or more (exclusive of amounts covered by insurance) and either (x)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order, or (y) a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect for any
period of thirty (30) consecutive days.
13.10. DISAVOWAL OF CERTAIN OBLIGATIONS. Any Person
(other than Lender) party to a Guaranty or Subordination Agreement shall
disavow its obligations thereunder; or any such Guaranty or Subordination
Agreement is alleged to be, or determined by any governmental authority to
be, invalid, unenforceable or otherwise not binding on any Person party
thereto (other than Lender), in whole or in part.
13.11. MATERIAL ADVERSE CHANGE. There shall occur any
Material Adverse Change.
13.12. CHANGE OF CONTROL, ETC. Either (a) a change in
Control shall occur in respect of Borrower; or (b) Borrower shall fail to
own, beneficially and of record, with power, all issued and outstanding
capital stock of each Subsidiary Guarantor having voting power or shall
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enter into, consent to, or acquiesce in, any sale, assignment, transfer,
pledge, hypothecation or other disposition of any such shares of capital
stock.
14. REMEDIES. 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 any Obligor for damages for failure by any
Obligor 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
set forth below, and it may exercise any one, more, or all of such remedies,
in its sole discretion, without thereby waiving any of the others; PROVIDED,
HOWEVER, that, in addition to the foregoing, if the Event of Default is in
respect of Section 13.6 or 13.7, then, automatically, immediately upon such
Event of Default occurring, without necessity of any further action on
Lender's part, all commitments of Lender hereunder and under all other Loan
Documents shall terminate, and all Obligations shall be immediately due and
payable.
14.1. ACCELERATION OF THE OBLIGATIONS. Lender, at its
option, may terminate all commitments of Lender hereunder and under all other
Loan Documents, and declare all of the Obligations to be immediately due and
payable, 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
each Obligor, anything contained herein to the contrary notwithstanding. If
any promissory note of any Obligor to Lender constituting Obligations,
including, without limitation, any of the Notes, shall be a demand
instrument, however, the recitation of the right of Lender to declare any and
all Obligations to be immediately due and payable, whether such recitation is
contained in such note or in this Agreement, as well as the recitation of the
above events permitting Lender to declare all Obligations due and payable,
shall not constitute an election by Lender to waive its right to demand
payment under a demand at any time and in any event, as Lender in its
discretion may deem appropriate. 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 or under all other Loan Documents.
14.2. DEFAULT. If Lender so elects, by further written
notice to Borrower, Lender may increase the rate of interest charged on the
Notes then outstanding for so long thereafter as Lender further shall elect
by an amount not to exceed the Default Rate.
14.3. 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 whether the same has been enacted in
the jurisdiction where the rights or remedies are asserted), including,
without limitation, the right to take possession of any of the Collateral or
the proceeds thereof, to sell or otherwise dispose of the same, to apply the
proceeds therefrom to any of the Obligations in such order as Lender, in its
sole discretion, may elect. Lender shall give Borrower in behalf of all
Obligors, 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. The requirement of sending reasonable notice shall be met if such
notice is given to Borrower at least ten (10) days
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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.
14.4. REPOSSESSION OF THE COLLATERAL. Lender may 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
at a place or places and in such manner as 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 and each Obligor
hereby waives all rights which it has or may have under and by virtue of OCGA
Ch. 44-14, including, without limitation, the right of each Obligor to notice
and to a judicial hearing prior to seizure of any of its Collateral by Lender.
14.5. DIRECT NOTIFICATION. Lender may, additionally, in
its sole discretion, at any time that an Event of Default exists, direct
Account Debtors to make payments on the Accounts Receivable Collateral, or
portions thereof, of any Obligor directly to Lender, and the Account Debtors
are hereby authorized and directed to do so by such Obligor upon Lender's
direction, and the funds so received shall be also deposited in the
Collateral Reserve Account, if then opened, or, at the election of Lender,
upon its receipt thereof, be applied directly to repayment of the Obligations
in such order as Lender, in its sole discretion, shall determine.
14.6. 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.
14.7. SET OFF. Lender may set off any or all of the
Balances Collateral against the Obligations.
15. MISCELLANEOUS.
15.1. 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.
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15.2. GOVERNING LAW. 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.
15.3. SURVIVAL. All representations, warranties and
covenants made herein and in the Loan Documents shall survive the execution
and delivery hereof and thereof. The terms and provisions of this Agreement
shall continue in full force and effect, notwithstanding the payment of one
or more of the Notes or the termination of the Line of Credit, until all of
the Obligations have been paid in full and Lender has terminated this
Agreement in writing.
15.4. ASSIGNMENTS. No assignment hereof or of any Loan
Document shall be made by Borrower without the prior written consent of
Lender. Lender may assign, or sell participations in, its right, title and
interest herein and in the Loan Documents at any time hereafter without
notice to or consent of Borrower.
15.5. 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.
15.6. REIMBURSEMENT. Each Obligor binds itself to pay
to Lender on demand all out-of-pocket costs and expenses that Lender pays or
actually incurs in connection with the negotiation, preparation,
consummation, enforcement and termination of this Agreement and the other
Loan Documents, including, without limitation: (a) commercially reasonable
attorneys' fees and paralegals' fees and disbursements of outside counsel;
(b) commercially reasonable costs and expenses (including outside attorneys'
and paralegals' fees and disbursements) for any amendment, supplement,
waiver, consent or subsequent closing in connection with the Loan Documents
and the transactions contemplated thereby; (c) commercially reasonable costs
and expenses of lien and title searches and title insurance; (d) actual
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) commercially reasonable sums paid or incurred to pay for any
amount or to take any action required of any Obligor under the Loan Documents
that it fails to pay or take; (f) commercially reasonable costs of
appraisals, inspections, field audits and verifications of the Collateral,
including, without limitation, costs of travel, for inspections of the
Collateral and an Obligor's operations by Lender; (g) costs and expenses of
preserving and protecting the Collateral; and (h) after an Event of Default,
commercially reasonable costs and expenses (including commercially 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 claim made or threatened against
Lender arising out of the transactions contemplated hereby (including,
without limitation, preparations for and consultations concerning any such
matters). The foregoing shall not be construed to limit any other provisions
of the Loan Documents regarding costs and expenses to be paid to Borrower.
All of the foregoing costs and expenses may, in the discretion of Lender, be
charged to the Master Note. Obligors will pay all
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expenses incurred by them in this transaction. In the event any Obligor
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 provided for herein (including, without limitation, reasonable
attorneys' fees actually incurred) all for the extent allowed by the
Bankruptcy Code.
15.7. SUCCESSORS AND ASSIGNS. This Agreement and Loan
Documents shall be binding upon and inure to the benefit of the successors
and permitted assigns of the parties hereto and thereto.
15.8. SEVERABILITY. If any provision this Agreement or
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 circumstance shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.
15.9. NOTICES. All notices, requests and demands to or
upon the respective parties hereto shall be deemed to have been given or made
when personally delivered or deposited in the mail, registered or certified
mail, postage prepaid, addressed as follows: (i) for Lender, care of the
address of Lender inscribed beneath its signature hereinbelow and (ii) for
any Obligor, care of the address set forth as its Executive Office on the
Obligor Information Schedule (or to such other address as may be designated
hereafter in writing by the respective parties hereto) 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.
15.10. ENTIRE AGREEMENT: AMENDMENTS. This Agreement,
together with the remaining Loan Documents, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof. Without
limiting of the foregoing, this Agreement amends and restates, in its
entirety, and supersedes and replaces, the Old Loan Agreement. Neither this
Agreement nor any Loan Document 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.
15.11. TIME OF ESSENCE. Time is of the essence in this
Agreement and the other Loan Documents.
15.12. INTERPRETATION. No provision of this Agreement or
any Loan Document 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.
15.13. LENDER NOT A JOINT VENTURER. Neither this
Agreement nor any Loan Document 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 Lender and Borrower.
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15.14. JURISDICTION. EACH OBLIGOR 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 OF
AMERICA FOR THE NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION, ALL AS LENDER
MAY ELECT. BY EXECUTION OF THIS AGREEMENT, EACH OBLIGOR 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.
15.15. ACCEPTANCE. This Agreement, together with the
other Loan Documents, shall not become effective unless and until delivered
to Lender at its principal office in Atlanta, ▇▇▇▇▇▇ County, Georgia and
accepted in writing by Lender at such office as evidenced by its execution
hereof (notice of which delivery and acceptance are hereby waived by each
Obligor).
15.16. PAYMENT ON NON-BUSINESS DAYS. Whenever any
payment to be made hereunder or under the Notes shall be stated to be due on
a Saturday, Sunday or any other day in which national banks within the State
of Georgia are legally authorized to close, 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.
15.17. CURE OF DEFAULTS BY LENDER. If, hereafter, any
Event of Default occurs, Lender may, at its option, but without obligation,
cure such Event of Default itself 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 advances against the Master Note,
whether or not this creates an overadvance thereunder, and shall be payable
in accordance with its terms.
15.18. RECITALS. All recitals contained herein are
hereby incorporated by reference into this Agreement and made part thereof.
15.19. ATTORNEY-IN-FACT. Each Obligor hereby designates,
appoints and empowers Lender irrevocably as its attorney-in-fact, effective
during any time that an Event of Default exists, either in its name or the
name of Lender, at such Obligor's cost and expense, (i) to do any and all
actions which Lender may deem necessary or advisable to carry out the terms
of this Agreement or any other Loan Document upon the failure, refusal or
inability of an Obligor to do so and (ii) to ask for, demand, ▇▇▇ for,
collect, compromise, compound, receive, receipt for and give acquittances for
any and all sums owing or which may become due upon any of the Collateral
and, in connection therewith, to take any and all actions as Lender may deem
necessary or desirable to realize upon any Collateral; and each Obligor
hereby agrees to indemnify and hold Lender harmless from any costs, damages,
expenses or liabilities arising against or incurred by Lender in connection
therewith.
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15.20. SOLE BENEFIT. The rights and benefits set forth
in this Agreement and the other Loan Documents are for the sole and exclusive
benefit of the parties hereto and thereto and may be relied upon only by them.
15.21. INDEMNIFICATION. Each Obligor will hold Lender,
its respective directors, officers, employees, agents, Affiliates, successors
and assigns harmless from and indemnify Lender, its respective directors,
officers, employees, agents, Affiliates, successors and assigns against, all
loss, damages, costs and expenses (including, without limitation, reasonable
attorney's fees, costs and expenses) actually 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 and shall include, particularly, but
without limitation, any actions concerning Environmental Laws. At the request
of Lender, each Obligor will 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 shall
survive the termination of this Agreement and payment of the Obligations.
15.22. JURY TRIAL WAIVER. EACH OBLIGOR AND LENDER HEREBY
WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO ANY OF THE LOAN DOCUMENTS, OBLIGATIONS OR THE COLLATERAL.
15.23. 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. Wherever in this Agreement
reference is made to any instrument, agreement or other document, including,
without limitation, any of the Loan Documents, such reference shall be
understood to mean and include any and all amendments thereto or
modifications, restatements, renewals or extensions thereof. Wherever in this
Agreement reference is made to any statute, such reference shall be
understood to mean and include any and all amendments thereof and all
regulations promulgated pursuant thereto. Whenever any matter set forth
herein or in any Loan Document is to be consented to or be satisfactory to
Lender, or is
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to be determined, calculated or approved by Lender, then,
unless otherwise expressly set forth herein or in any such Loan Document,
such consent, satisfaction, determination, calculation or approval shall be
in Lender's sole discretion, exercised in good faith and, where required by
law, in a commercially reasonable manner, and shall be conclusive absent
manifest error.
15.24. EXHIBITS. All Exhibits attached hereto are by
reference made a part hereof.
16. CONDITIONS PRECEDENT. Unless waived in writing by Lender at
or prior to the execution and delivery of this Agreement, the conditions set
forth below shall constitute express conditions precedent to any obligation
of Lender hereunder.
16.1. SECRETARY'S CERTIFICATE. Receipt by Lender of a
certificate from the Secretary (or Assistant Secretary) of each Obligor, to
be in form and substance substantially similar to the secretary's certificate
set forth on EXHIBIT "G", certifying to Lender (i) that appropriate
resolutions have been entered into by its Board of Directors incident hereto
and that its officers whose signatures appear hereinbelow, on the other Loan
Documents, and on any and all other documents, instruments and agreements
executed in connection herewith, are duly authorized by its Board of
Directors for it and on its behalf to execute and deliver this Agreement, the
other Loan Documents and such other documents, instruments and agreements,
and to bind it accordingly thereby, and (ii) as to its existence and the
status of its articles of incorporation and by-laws.
16.2. GOOD STANDING CERTIFICATES. Receipt by Lender of
a certificate of good standing with respect to each Obligor from the
secretaries of state of the state of its incorporation and of any state in
which a Collateral Location of its is situated, dated within thirty (30) days
of the Closing Date.
16.3. LOAN DOCUMENTS. Receipt by Lender of all the
other Loan Documents, including any Notes, together with any Guaranty and any
Subordination Agreement, each duly executed in form and substance acceptable
to Lender.
16.4. INSURANCE. Receipt by Lender of a certificate
respecting all insurance required to be maintained hereunder, together with
appropriate loss payee and additional insured endorsements thereto, favoring
Lender, all in form acceptable to Lender.
16.5. FINANCING STATEMENTS. Receipt by Lender of
Uniform Commercial Code financing statements respecting the Collateral, duly
executed by each Obligor in form and substance acceptable to Lender.
16.6. OPINION OF COUNSEL. Receipt by Lender of an
opinion of counsel from independent legal counsel to Obligors in
substantially the form of EXHIBIT "H".
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16.7. LANDLORD AGREEMENTS. Except as otherwise provided
in Section 10.14, Landlord's Agreements with respect to each Collateral
Location leased by an Obligor as of the Closing Date.
16.8. NO DEFAULT. No Default Condition or Event of
Default shall exist and each Obligor shall in all respects be in compliance
with all of the terms of the Loan Documents, as evidenced by its delivery of
a Compliance Certificate to such effect.
16.9. TELEPHONE INSTRUCTION LETTER. Receipt by Lender of
the Telephone Instruction Letter.
16.10. NO MATERIAL ADVERSE CHANGE. Lender shall have
determined that no Material Adverse Change shall have occurred.
16.11. STOCK PLEDGE AGREEMENT. Receipt by Lender of a
Stock Pledge Agreement from Borrower in respect of each Subsidiary
Guarantor's capital stock and/or any other equity securities described
therein, to be substantially in the form of EXHIBIT "I" attached hereto.
16.12. OTHER. Receipt by Lender of such other documents,
certificates, instruments and agreements as shall be required hereunder or
provided for herein or as Lender or Lender's counsel may require in
connection herewith.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and each Obligor has caused its seal to be affixed hereto, as of
the day and year first above written.
"LENDER"
WACHOVIA BANK, NATIONAL
ASSOCIATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------
Title: Vice President
-----------------
Address for Notices:
Wachovia Bank, N.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Leveraged Finance
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"BORROWER"
TEKGRAF, INC., A (SEAL)
GEORGIA CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Financial Officer
"SUBSIDIARY GUARANTORS"
CALGRAPH TECHNOLOGY SERVICES,
INC., a Georgia corporation (SEAL)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Financial Officer
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SCHEDULE "I"
This SCHEDULE "I" is attached to, and made an integral part of, that
certain Amended and Restated Loan and Security Agreement, dated as of June 9,
2000 (herein as it may be amended or modified, called the Loan Agreement),
among TEKGRAF, INC. ("Borrower"), its Subsidiary Guarantors (as identified
therein), and WACHOVIA BANK, NATIONAL ASSOCIATION ("Lender"). Capitalized
terms used herein shall have the meanings given to such terms in the Loan
Agreement. The initial version of this Schedule is dated the Closing Date.
The initial or any subsequent versions of this Schedule may be amended or
modified from time to time by Lender and Borrower, as evidenced by their
mutual execution of a replacement Schedule, to be dated subsequent to the
Closing Date, which henceforth shall be SCHEDULE "I" to the Loan Agreement
for all purposes thereof.
1. LEVERAGE RATIO. Borrower shall maintain a Leverage Ratio of
not more than 3.50:1 at all times.
2. FIXED CHARGE COVERAGE RATIO. Borrower shall maintain as of
the end of each Fiscal Quarter of Borrower a Fixed Charge Coverage Ratio (as
that term is hereinafter defined), equal to at least: (i) 1.00:1, as of the
Fiscal Quarters ending June 30, 2000 and September 30, 2000; (ii) 1.50:1, as
of the Fiscal Quarters ending December 31, 2000 and March 31, 2001; and (iii)
2.00:1, as of the Fiscal Quarter ending June 30, 2001, and each subsequent
Fiscal Quarter. For purposes hereof, "FIXED CHARGE COVERAGE RATIO" shall
mean, the ratio of (i) Borrower's net income for the period in question
before provision for interest expense, lease expense, depreciation,
amortization and income tax expense to (ii) Borrower's interest expense and
operating lease expense for such period, all as determined on a consolidated
basis for Borrower and its Consolidated Subsidiaries in accordance with GAAP.
The Fixed Charge Coverage Ratio for each Fiscal Quarter shall cover (i) for
the Fiscal Quarter ending June 30, 2000, the three (3) preceding Fiscal
Quarters ending on such date; and (ii) for each subsequent Fiscal Quarter,
the preceding four (4) Fiscal Quarters.
IN WITNESS WHEREOF, the parties hereto have caused this SCHEDULE "I"
to be executed and Borrower has caused its seal to be affixed hereto, as of
the day and year first above written.
"LENDER"
WACHOVIA BANK, NATIONAL
ASSOCIATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------
Title: Vice President
--------------------
"BORROWER"
TEKGRAF, INC., Individually and (SEAL)
on behalf of all Subsidiary Guarantors
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Financial Officer
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EXHIBITS
Exhibit A Obligor Information Schedule
Exhibit B Compliance Certificate
Exhibit C Landlord's Agreement
Exhibit D Master Note
Exhibit E Settlement Report
Exhibit F Telephone Instructions Letter
Exhibit G Secretary's Certificate
Exhibit H Opinion of Counsel
Exhibit I Stock Pledge Agreement
Exhibit J Joinder Agreement
Exhibit K Lien Subordination Agreement