EXHIBIT
10.4(y)
SECOND WAIVER AND AMENDMENT
AGREEMENT
THIS
SECOND WAIVER AND AMENDMENT AGREEMENT (
hereinafter referred to as this
“Agreement”) is made and entered into as of April 16,
2007, by and between INNOTRAC CORPORATION , a
Georgia corporation (hereinafter referred to as
“Borrower”), and WACHOVIA BANK, NATIONAL
ASSOCIATION (hereinafter referred to as
“Bank”).
BACKGROUND
STATEMENT
A.
Borrower and Bank are parties to
that certain Third Amended and Restated Loan and Security Agreement
dated March 28, 2006 (as previously amended by that certain Waiver
and Amendment Agreement dated as of November 14, 2006, the
“Loan Agreement”). Capitalized terms used herein,
unless otherwise defined, shall have the meanings ascribed to them
in the Loan Agreement.
B.
Borrower has informed Bank that the
Borrower has failed to comply with, or a default has occurred
under, the following sections of the Loan Agreement: (i) Section
7(a) as a result of Borrower's failure to maintain the required
Fixed Charge Coverage Ratio for the month of December 2006, (ii)
Section 5.6(i) as a result of Borrower's failure to provide Bank on
or before February 9, 2007, with Borrower's forecasted balance
sheet, cash flow statement, Borrowing Base projection and financial
covenant compliance on a month by month basis for Borrower's 2007
fiscal year and (iii) Section 8.1(f) as a result of Borrower's
failure to make the $800,000 payment described in the definition of
"Fixed Charge Coverage Ratio" in Section 7(a). Such defaults are
referred to herein as the "Existing Defaults" and constitute Events
of Default under Section 8.1(b) of the Loan Agreement. In addition,
the Borrower's income statement projections for fiscal year 2007
delivered to Bank under Section 5.6(i) of the Loan Agreement (the
"2007 Projections") indicate that Borrower will be unable to
maintain the required Fixed Charge Coverage Ratio for any period
during Borrower's 2007 fiscal year.
C.
The Borrower has requested that the
Bank waive the Existing Defaults and amend the Loan Agreement as
hereinafter set forth and the Bank has agreed, subject to all of
the terms and conditions set forth below.
AGREEMENT
FOR AND IN
CONSIDERATION of the sum of Ten and No/100 Dollars ($10.00), the
foregoing recitals, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower
and Bank do hereby agree as follows:
1.
Waiver of the Existing
Defaults . Bank
hereby waives the Existing Defaults and Borrower agrees to strictly
comply with the Loan Agreement hereafter, the Borrower hereby
ratifying and affirming the Loan Agreement and the other Loan
Documents. Borrower hereby agrees that nothing herein shall
constitute a waiver by Bank of any Default or Event of Default
(except as expressly provided in this paragraph 1 with respect to
the Existing Defaults), whether known or unknown, which may exist
under the Loan Agreement or any other Loan Document. Borrower
hereby further agrees that no action, inaction or agreement by
Bank, including, without limitation, any extension, indulgence,
waiver, consent or agreement of modification which may have
occurred or have been granted or entered into (or which may be
occurring or be granted or entered into hereunder or otherwise)
with respect to nonpayment of the Loans or other Obligations or any
portion thereof, or with respect to matters involving collateral
security for the Loans or other Obligations, or with respect to any
other matter relating to the Loans or other Obligations, shall
require or imply any further extension, indulgence, waiver, consent
or agreement by Bank. Except as expressly provided in this
paragraph 1, Borrower hereby acknowledges and agrees that Bank has
not made any agreement, and is in no way obligated, to grant any
further extension, indulgence, waiver or consent with respect to
the Loans, the other Obligations, the Loan Agreement or any other
Loan Document.
2.
Amendments
. The Loan Agreement is amended as
set forth below.
(a) The following new definitions are hereby added
to Section 1.1 of the Loan Agreement in alphabetical order as
follows:
" ClientLogic Acquisition " means the
Borrower's acquisition of ClientLogic’s fulfillment and
reverse logistics business in 2006.
" ClientLogic Deferred Payments " means
all cash payments made by Borrower at any time consisting of the
following consideration paid for the ClientLogic Acquisition: (1)
the $800,000 deferred purchase payment due in February 2007, (2)
the earn-out payment due on or before April 2008, and (3) any other
consideration paid in connection with the ClientLogic
Acquisition.
" Control Agreement " means an agreement
providing Bank with control (as defined in the applicable Uniform
Commercial Code) over Pledged Securities Collateral, in form and
substance satisfactory to the Bank in all respects, as amended or
otherwise modified from time to time.
" Dorfman Security Agreement " means the
Security Agreement executed and delivered by Scott D. Dorfman in
favor of the Bank, in form and substance satisfactory to the Bank
in all respects, as amended or otherwise modified from time to
time.
" Eligible Pledged Securities Collateral
" means Pledged Securities Collateral acceptable to Bank in its
sole discretion from time to time.
" Fair Market Value " means, at the time
of determination, the fair market value of the Pledged Securities
Collateral set forth on the most recent statement issued by the
relevant securities intermediary with respect to the Pledged
Securities Collateral delivered in accordance with the terms of the
Dorfman Security Agreement, provided, however, in the event that
such statement is not received by the Bank in a timely fashion,
"Fair Market Value" means the fair market value of the Pledged
Securities Collateral as reasonably determined by the
Bank.
" Pledged Securities Collateral " has the
meaning set forth in the Dorfman Security Agreement and includes,
without limitation, the securities accounts, marketable securities,
investment property and all other property described
therein.
(b) The definition of "Availability Reserve"
contained in Section 1.1 of the Loan Agreement is hereby amended
and restated in its entirety as follows:
" Applicable Margin " means, at any time
of determination by Bank, as to any Base Rate Loan or LMIR Loan,
the relevant percentage below corresponding to the Borrower's
Average Excess Availability (90) set forth below:
|
Average
Excess
Availability
(90)
|
Base Rate
Loans
|
LMIR
Loans
|
|
< $5,000,000
|
0.00%
|
2.00%
|
|
> $5,000,000
but <
$7,500,000
|
0.00%
|
1.50%
|
|
> $7,500,000
but <
$10,000,000
|
0.00%
|
1.25%
|
|
> $10,000,000
|
0.00%
|
1.00%
|
Provided, however, notwithstanding the text in
this paragraph above, at all times during which the Fixed Charge
Coverage Ratio is less than 1.00 to 1.00, the Applicable Margin for
(x) Base Rate Loans then in effect shall be 1.00% and the
Applicable Margin for LMIR Loans then in effect shall be 2.85%. In
order for Bank to determine the Fixed Charge Coverage Ratio under
this definition, Borrower agrees to deliver the compliance
certificate described in Section 5.6(d) certifying the Fixed Charge
Coverage Ratio for each month notwithstanding any period during
which the Fixed Charge Coverage Ratio may not be tested under
Section 7(a). Nothing in this paragraph shall limit Bank's rights
to impose the Default Rate under Section 2.8 of this Agreement, if
applicable.
Solely for the purposes of the definition of
"Applicable Margin," the Borrowing Base shall be calculated without
subtracting (i) the Target Reserve when in effect or (ii) the
Availability Reserve when in effect.
" Availability Reserve " means, during
any period following a month in which the Borrower's Fixed Charge
Coverage Ratio for such previous month was less than 1.15 to 1.00,
then, during such period, an amount equal to $2,000,000.
(c) The definition of "Borrowing Base" contained in
Section 1.1 of the Loan Agreement is hereby amended and restated in
its entirety as follows:
" Borrowing Base " means, on any date of
determination thereof, an amount equal to:
(i) up to 85% of the total amount of Eligible
Accounts, plus
(ii) up to 75% of the Fair Market Value of the
Eligible Pledged Securities Collateral, plus
(iii) the lesser of (a) $1,000,000 or (b) up to 50%
of the total amount of Eligible Inventory; minus
(d) Section 2.13 of the Loan Agreement is hereby
amended and restated in its entirety as follows:
2.13 Termination . Upon at least thirty (30) days prior written
notice to Bank, Borrower may, at its option, upon payment of the
Early Termination Fee (defined below), terminate this Agreement and
the Revolver Commitment in its entirety but not partially; provided
however, no such termination by Borrower shall be effective until
the full, final and indefeasible payment of the Obligations and
Early Termination Fee in cash or immediately available funds and in
the case of any Obligations consisting of contingent obligations,
Bank's receipt of either cash or a direct pay letter of credit
naming Bank as beneficiary and in form and substance and from an
issuing bank acceptable to Bank, in each case in an amount not less
than 105% of the aggregate amount of all such contingent
obligations. Any notice of termination given by Borrower shall be
irrevocable unless Bank otherwise agrees in writing. "Early
Termination Fee" means an amount equal to (i) 1.00% of the Revolver
Commitment in the event of termination of the Revolver Commitment
on or before November 14, 2007, and (ii) 0.25% of the Revolver
Commitment in the event of termination of the Revolver Commitment
after November 14, 2007, but before November 14, 2008. Bank may
terminate this Agreement and the Revolver Commitment at any time,
without notice, upon or after the occurrence of a Default or Event
of Default.
(e) Section 5.1 of the Loan Agreement is hereby
amended and restated in its entirety as follows:
5.1 Use of Loan Proceeds . Shall use the proceeds of Loans solely for
the following purposes and shall furnish Bank all evidence that
Bank may require with respect to such uses: (i) for the payment of
ClientLogic Deferred Payments and (ii) otherwise solely for the
Borrower's working capital and general corporate purposes to be
used in the ordinary course of the Borrower's business.
(f) Section 5.5 of the Loan Agreement is hereby
amended and restated in its entirety as follows:
5.5 Inspections of Books and Records and Field
Examinations; Bank's Consultant . Shall permit inspections of the Collateral and
the records of such Person pertaining thereto and verification of
the Accounts, at such times and in such manner as may be required
by Bank and shall further permit such inspections, reviews and
field examinations of its other books and records and properties
(with such frequency and at such times as Bank may desire) by Bank
as Bank may deem necessary or desirable from time to time. The cost
of all such field examinations, reviews, verifications and
inspections shall
