ELEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

THIS ELEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is
made and entered into on March 13, 2014, by and among SED INTERNATIONAL
HOLDINGS, INC., a Georgia corporation (“Parent”), SED INTERNATIONAL, INC., a
Georgia corporation (“SED”; Parent and SED are collectively referred to herein
as “Borrowers” and each individually as “Borrower”), the parties to the Loan
Agreement (as hereinafter defined) from time to time as lenders (collectively,
“Lenders” and each individually, a “Lender”) and WELLS FARGO BANK, NATIONAL
ASSOCIATION, a national banking association and successor-by-merger to Wachovia
Bank, National Association, in its capacity as agent for Lenders (together with
its successors in such capacity, “Agent”).

 

Recitals:

 

WHEREAS, Borrowers, Agent and Lenders are parties to that certain Loan and
Security Agreement dated September 21, 2005 (as at any time amended, restated,
modified or supplemented, the “Loan Agreement”), pursuant to which Lenders have
made certain revolving credit loans and other financial accommodations to
Borrowers; and

 

WHEREAS, as of the date hereof, Borrowers each acknowledge and agree that the
Existing Specified Defaults (as such term is defined in the Notice of Default)
have occurred and are continuing.

 

NOW, THEREFORE, the parties desire to amend the Loan Agreement as hereinafter
set forth.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby severally acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:

 

1.              Definitions. All capitalized terms used in this Amendment,
unless otherwise defined herein, shall have the meaning ascribed to such terms
in the Loan Agreement.

 

2.              Amendments to Loan Agreement. The Loan Agreement is hereby
amended as follows:

 

(a)                By deleting the definitions of “Applicable Margin” “Inventory
Loan Limit”, “Foreign Accounts Loan Limit,” “Foreign Accounts (Uninsured) Loan
Limit,” “Letter of Credit Limit”, “Maximum Credit” and “Revolving Loan Limit”
contained in Section 1 of the Loan Agreement and by substituting the following
new definitions in lieu thereof, respectively:

 

1.9 “Applicable Margin” shall mean (a) 1.75%, with respect to Prime Rate Loans,
and (b) 3.75%, with respect to Three Month Fixed Eurodollar Rate Loans. Upon the
occurrence and during the continuance of an Event of Default, at the option of
the Agent, the Applicable Margin shall increase by two percent (2%) for (1) the
period from and after the date of termination or non-renewal hereof until
Lenders have received full and final payment of all Obligations and (2) the
period from and after the date of the occurrence of an Event of Default for so
long as such Event of Default is continuing as determined by Agent.

 

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1.72 “Inventory Loan Limit” shall mean at any time, the amount equal to
$2,000,000 minus Letters of Credit to the extent provided in the Borrowing Base.

 

"Foreign Accounts Loan Limit" shall mean an amount equal to $1,500,000.

 

"Foreign Accounts (Uninsured) Loan Limit" shall mean the amount of $500,000.

 

1.77 “Letter of Credit Limit” means $250,000.

 

1.87 “Maximum Credit” shall mean $7,500,000

 

1.111 “Revolving Loan Limit” shall mean an amount equal to $7,500,000.

 

(b)               By adding the following new definition of “Special
Availability Reserve” to Section 1 of the Loan Agreement:

 

“Special Availability Reserve” shall mean $3,750,000.

 

(c)                By adding the following new definition of “EBITDA” to Section
1 of the Loan Agreement:

 

"EBITDA" means for any specified period the sum of (A) the aggregate net income
of Borrowers for such period (computed without regard to any extraordinary items
of gain or loss) plus (B) to the extent deducted from (or included in) revenue
in computing net income of Borrowers for such period, the sum of (1) interest
expense plus (2) income tax expense plus (3) depreciation and amortization plus
(4) extraordinary items (but excluding any items arising from any foreign
currency fluctuations or events) plus (5) non-cash losses plus (or minus) (6)
non-recurring items minus (7) non-cash gains minus (8) earnings from any Foreign
Subsidiary of any Borrower unless cash or Cash Equivalents are received by
Borrowers as distributions from such Foreign Subsidiary.”

 

(d)               By adding the following new definition of “Eleventh Amendment
Date” to Section 1 of the Loan Agreement:

 

“Eleventh Amendment Date” shall mean March 13, 2014.

 

(e)                By adding the following new definition of “Notice of Default”
to Section 1 of the Loan Agreement:

 

“Notice of Default” shall mean the letter Re: Notice of Event of Default, dated
October 29, 2013, from the Agent to the Borrowers.

 

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(f)                By amending and restating, in its entirety, clause (i) of the
definition of “Reserves” (Section 1.110) to read as follows:

 

“(i) the Special Availability Reserve,”

 

(g)               By amending and restating Section 9.22(f) of the Loan
Agreement in its entirety to read as follows:

 

“(f) all out-of-pocket expenses and costs heretofore and from time to time
hereafter incurred by Agent during the course of periodic field examinations or
appraisals of the Collateral and such Borrower's operations, plus a per diem
charge at Agent's then standard rate for Agent's examiners in the field and
office (which rate as of the date hereof is $850 per person per day), which
out-of- pocket expenses, costs and per-diem charges shall not exceed $12,500 per
field examination; provided, that, so long as no Default or Event of Default
exists, Borrowers shall not be required to pay to Agent or reimburse Agent for
the expenses, costs and charges for more than (1) inventory appraisal and no
more than three (3) field examinations during such twelve month period; the
foregoing limitations on payment and reimbursement of expenses, costs and
charges shall not be construed to limit Agent's or any Lender's right to conduct
field examinations and appraisals of the Collateral as otherwise permitted under
this Agreement;”

 

(h)               By deleting Section 9.17 of the Loan Agreement.

 

(i)                 By deleting Schedule 1.97 “Permitted Holders” to the Loan
Agreement in its entirety and by substituting Schedule 1.97 attached hereto in
lieu thereof.

 

3.             Unused Line Fee. For purposes of calculating the Unused Line Fee
under the Loan Agreement, upon the satisfaction of the conditions set forth in
Section 11 of the Amendment, the Revolving Loan Limit shall be deemed to be
$7,500,000 as of the Eleventh Amendment Date.

 

4.             Adjusted Eurodollar Rate Loans. As of the Eleventh Amendment
Date, all references in the Financing Agreements to (a) “Eurodollar Rate Loans”
shall be deemed references to “Three Month Fixed Eurodollar Rate Loans”, (b) the
“Applicable Margin For Adjusted Eurodollar Rate Loans: shall be deemed
references to the “Applicable Margin for Three Month Fixed Eurodollar Rate
Loans,” and (c) the “Adjusted Eurodollar Rate” shall be deemed references to the
“Three Month Fixed Eurodollar Rate.” As of the effective date of this Amendment
no requests for Alternative Eurodollar Rate Loans shall be made by Borrowers or
honored by Agent under the Loan Agreement.

 

5.             Ratification and Reaffirmation. Each Borrower hereby ratifies and
reaffirms the Obligations, each of the Financing Agreements and all of such
Borrower’s covenants, duties, indebtedness and liabilities under the Financing
Agreements. Each Borrower hereby acknowledges, confirms and agrees that the
obligations, liabilities and indebtedness owing by it to Agent and Lenders for
the payment and performance of the Obligations pursuant to the Financing
Agreements are unconditionally due and owing to Agent and Lenders without
offset, defense or counterclaim of any kind, nature or description whatsoever.

 

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6.             Acknowledgments and Stipulations. Each Borrower acknowledges and
stipulates that the Loan Agreement and the other Financing Agreements executed
by such Borrower are legal, valid and binding obligations of such Borrower that
are enforceable against such Borrower in accordance with the terms thereof; all
of the Obligations are owing and payable without defense, offset or counterclaim
(and to the extent there exists any such defense, offset or counterclaim on the
date hereof, the same is hereby waived by such Borrower); and the security
interests and liens granted by Borrowers in favor of Agent are duly perfected,
first priority security interests and liens, subject only to liens and other
encumbrances permitted under the Loan Agreement.

 

7.             Waiver of Existing Event of Default.

 

(a)                Each Borrower hereby acknowledges and agrees that the
“Existing Event of Default” (as such term is defined in the Notice of Default)
has occurred and is continuing, and constitutes an Event of Default and,
entitles Lenders to cease making and providing Revolving Loans, Letters of
Credit and other financial and credit accommodations otherwise available under
the Loan Agreement and the other Financing Agreements and to exercise their
other rights and remedies under the Financing Agreements, applicable law or
otherwise. Agent and Lenders have agreed that upon the satisfaction of the
conditions precedent set forth in Section 11 below, the Existing Event of
Default shall be deemed waived.

 

(b)               Agent and Lenders have not waived, and are not by this
Amendment waiving and have no intention of waiving, any Defaults or Events of
Default (other than the Existing Event of Default) that have occurred or which
may be continuing on the date hereof or any Defaults or Events of Default which
may occur after the date hereof (whether the same or similar to the Existing
Event of Defaults or otherwise), and, Agent and Lenders have not agreed to
forbear with respect to any of its rights or remedies concerning any Defaults or
Events of Default, which may have occurred or are continuing as of the date
hereof or which may occur after the date hereof.

 

8.             Representations and Warranties. Each Borrower represents and
warrants to Agent and Lenders, to induce Agent and Lenders to enter into this
Amendment, that no Default or Event of Default exists on the date hereof;
delivery and performance of this Amendment have been duly authorized by all
requisite corporate action on the part of such Borrower and this Amendment has
been duly executed and delivered by such Borrower; and all of the
representations and warranties made by such Borrower in the Loan Agreement are
true and correct in all material respects on and as of the date hereof, except
to the extent such representations and warranties specifically relate to an
earlier date, in which case such representations and warranties shall have been
true, correct and complete in all material respects on and as of such earlier
date.

 

9.             Reference to Loan Agreement. Upon the effectiveness of this
Amendment, each reference in the Loan Agreement to “this Agreement,”
“hereunder,” or words of like import shall mean and be a reference to the Loan
Agreement, as amended by this Amendment.

 

10.           Breach of Amendment. This Amendment shall be part of the Loan
Agreement and a breach of any representation, warranty or covenant herein shall
constitute an Event of Default.

 

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11.           Conditions Precedent. The effectiveness of the amendments
contained in Sections 2, 3, and 4 hereof is subject to the delivery to Agent of
the following documents, each in form and substance satisfactory to Agent:

 

(a)                an original counterpart of this Amendment executed by each
Borrower; and

 

(b)               such other documents, instruments and agreements as the Agent
may require, in each case in form and substance satisfactory to Agent.

 

12.           Expenses of Agent. In consideration of Agent’s and Lenders’
willingness to enter into this Amendment as set forth herein, Borrowers jointly
and severally agree to pay, on demand, all costs and expenses incurred by Agent
in connection with the preparation, negotiation and execution of this Amendment
and any other Financing Agreements executed pursuant hereto and any and all
amendments, modifications, and supplements thereto, including, without
limitation, the costs and fees of Agent’s legal counsel and any taxes or
expenses associated with or incurred in connection with any instrument or
agreement referred to herein or contemplated hereby.

 

13.           Effectiveness; Governing Law. This Amendment shall be effective
upon acceptance by Agent and Lenders (notice of which acceptance is hereby
waived), whereupon the same shall be governed by and construed in accordance
with the internal laws of the State of Georgia.

 

14.           Successors and Assigns. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.

 

15.           No Novation, etc. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Financing Agreements, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Loan
Agreement as herein modified shall continue in full force and effect.

 

16.           Counterparts; Signatures. This Amendment may be executed in any
number of counterparts and by different parties to this Amendment on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile or other electronic transmission shall be
deemed to be an original signature hereto.

 

17.           Further Assurances. Each Borrower agrees to take such further
actions as Agent shall reasonably request from time to time in connection
herewith to evidence or give effect to the amendments set forth herein or any of
the transactions contemplated hereby.

 

18.           Section Titles. Section titles and references used in this
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto.

 

19.           Release of Claims. To induce Agent and Lenders to enter into this
Amendment, each Borrower hereby releases, acquits and forever discharges Agent
and each Lender, and all officers, directors, agents, employees, successors and
assigns of Agent and each Lender, from any and all liabilities, claims, demands,
actions or causes of action of any kind or nature (if there be any), whether
absolute or contingent, disputed or undisputed, at law or in equity, which are
known to such Borrower, that such Borrower now has or ever had against Agent and
any Lender arising under or in connection with any of the Financing Agreements
or otherwise. Each Borrower represents and warrants to Agent and Lenders that
such Borrower has not transferred or assigned to any Person any claim that such
Borrower ever had or claimed to have against Agent or any Lender.

 

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20.           Waiver of Jury Trial. To the fullest extent permitted by
applicable law, the parties hereto each hereby waives the right to trial by jury
in any action, suit, counterclaim or proceeding arising out of or related to
this Amendment.

 

[Remainder of page intentionally left blank; signatures appear on following
page.]

 

 

 

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IN WITNESS WHEREOF, the Borrowers have caused this Amendment to be duly executed
under seal and delivered in Atlanta, Georgia by their respective duly authorized
officers on the date first written above.

 

  SED INTERNATIONAL HOLDINGS, INC.       By:  /s/ Sham Gad   Name:  Sham Gad  
Title:  Chairman and CEO           SED INTERNATIONAL, INC.       By:  /s/ Sham
Gad   Name:  Sham Gad   Title:  Chairman and CEO           Accepted and agreed:
      WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent and sole Lender      
By:  Sherrill Grant   Name:  Sherrill Grant   Title:  Authorized Signatory

 

 

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