Document:

EXECUTION COPY

 

LIMITED GUARANTY AGREEMENT

 

THIS LIMITED GUARANTY AGREEMENT (this “Guaranty”), dated as of September 28, 2007, by and between SCOTT DORFMAN, an individual resident of Georgia (“Guarantor”) and CHATHAM CREDIT MANAGEMENT III, LLC, a Georgia limited liability company, individually and as agent (in such capacity, “Agent”) for itself and the lenders from time to time signatory to the Loan Agreement hereinafter defined (“Lenders”).

W I T N E S S E T H:

WHEREAS, pursuant to that certain Loan and Security Agreement dated as of the date hereof by and between Innotrac Corporation, a Georgia corporation (“Borrower”) Agent and the Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the “Loan Agreement”), the Lenders have agreed, subject to certain terms and conditions, to make the Term Loan to Borrower;

WHEREAS, Guarantor is a shareholder and officer of Borrower and, as such, Guarantor will derive direct and indirect economic benefits from the making of the Term Loan to the Borrower pursuant to the Loan Agreement; and

WHEREAS, in order to induce the Lending Parties to enter into the Loan Agreement and other Loan Documents and to induce Lenders to make the Term Loan as provided for in the Loan Agreement, the Guarantor has agreed to guarantee payment of the Obligations;

NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, and to induce Lenders to provide the Loans and other financial accommodations under the Loan Agreement, it is agreed as follows:

	
            1.
 	
            DEFINITIONS.  
 

Capitalized terms used herein shall have the meanings assigned to them in the Loan Agreement, unless otherwise defined herein.

	
            2.
 	
            THE GUARANTY.
 

2.1.      Guaranty of Guaranteed Obligations of Borrower.  Subject to Section 9 hereof, Guarantor hereby unconditionally guarantees to Agent and Lenders, and their respective successors, endorsees, transferees and assigns, the prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of the Obligations of Borrower under the Loan Agreement and the other Loan Documents (hereinafter the “Guaranteed Obligations”).  Guarantor agrees that this Guaranty is a guaranty of payment and performance and not of collection, and that Guarantor’s obligations under this Guaranty shall be primary, absolute and unconditional, irrespective of, and unaffected by:

(a)        the genuineness, validity, regularity, enforceability or any future amendment of, or change in this Guaranty, any other Loan Document or any other agreement, document or instrument to which Borrower and/or Guarantor are or may become a party;

(b)       the absence of any action to enforce this Guaranty or any other Loan Document or the waiver or consent by Agent and/or Lenders with respect to any of the provisions thereof;

 

 

(c)        the existence, value or condition of, or failure to perfect its Lien against, any Collateral for the Guaranteed Obligations or any action, or the absence of any action, by Agent in respect thereof (including, without limitation, the release of any such security); 

	
             
  	
            (d)
 	
            the insolvency of Borrower; or
 

 (e)        any other action or circumstances which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor,

it being agreed by Guarantor that its obligations under this Guaranty shall not be discharged until the Termination Date.  Guarantor shall be regarded, and shall be in the same position, as principal debtor with respect to the Guaranteed Obligations.  Guarantor agrees that any notice or directive given at any time to Agent which is inconsistent with the waiver in the immediately preceding sentence shall be null and void and may be ignored by the Lending Parties, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Guaranty for the reason that such pleading or introduction would be at variance with the written terms of this Guaranty, unless the Lending Parties have specifically agreed otherwise in writing.  It is agreed among Guarantor and the Lending Parties that the foregoing waivers are of the essence of the transaction contemplated by the Loan Documents and
that, but for this Guaranty and such waivers, the Lending Parties would decline to enter into the Loan Agreement.

2.2.      Demand by Agent or Lenders.  In addition to the terms of the Guaranty set forth in Section 2.1 hereof, and in no manner imposing any limitation on such terms, it is expressly understood and agreed that, if, at any time, the outstanding principal amount of the Guaranteed Obligations (including all accrued interest thereon) is declared to be immediately due and payable, then Guarantor shall, without demand, pay to the holders of the Guaranteed Obligations the entire outstanding Guaranteed Obligations due and owing to such holders.  Payment by Guarantor shall be made to Agent in immediately available Federal funds to an account designated by Agent or at the address set forth herein for the giving of notice to Agent or at any other address that may be
specified in writing from time to time by Agent, and shall be credited and applied to the Guaranteed Obligations.

2.3.      Enforcement of Guaranty.  In no event shall Agent have any obligation (although it is entitled, at its option) to proceed against Borrower or any other Borrower or any Collateral pledged to secure Guaranteed Obligations before seeking satisfaction from either of the Guarantors, and Agent may proceed, prior or subsequent to, or simultaneously with, the enforcement of Agent’s rights hereunder, to exercise any right or remedy which it may have against any Collateral, as a result of any Lien it may have as security for all or any portion of the Guaranteed Obligations.

2.4.      Waiver.  In addition to the waivers contained in Section 2.1 hereof, Guarantor waives, and agrees that it shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshaling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by Guarantor of its Guaranteed Obligations under, or the enforcement by Agent or Lenders of, this Guaranty. Guarantor hereby waives diligence, presentment and demand (whether for non-payment or protest or of acceptance, maturity, extension of time, change in nature or form of the Guaranteed Obligations, acceptance of further security, release
of further security, composition or agreement arrived at as to the amount of, or the terms of, the Guaranteed Obligations, notice of adverse change in Borrower’s financial condition or any other fact
which might increase the risk to Guarantor) with respect to any of the Guaranteed Obligations or all other demands whatsoever and waive the benefit of all provisions of law which are or might be in conflict
with the terms of this Guaranty.  Guarantor represents, warrants and agrees that, as of the date of this Guaranty, its obligations under this Guaranty are not subject to any offsets or defenses against Agent or Lenders or Borrower of any kind.  Guarantor
further agrees that its obligations under this Guaranty shall not be subject to any counterclaims, offsets or defenses against any Lending Party or against Borrower of any kind which may arise in the future.

 

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2.5.      Benefit of Guaranty.  The provisions of this Guaranty are for the benefit of the Lending Parties and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between Borrower and the Lending Parties, the obligations of Borrower under the Loan Documents.  In the event all or any part of the Guaranteed Obligations are transferred, indorsed or assigned by Agent or any Lender to any Person or Persons, any reference to “Agent” or “Lender” herein shall be deemed to refer equally to such Person or Persons.

2.6.      Modification of Guaranteed Obligations, Etc.  Guarantor hereby acknowledges and agrees that any of the Lending Parties may at any time or from time to time, with or without the consent of, or notice to, Guarantor:

(a)        change or extend the manner, place or terms of payment of, or renew or alter all or any portion of, the Guaranteed Obligations;

(b)       take any action under or in respect of the Loan Documents in the exercise of any remedy, power or privilege contained therein or available to it at law, equity or otherwise, or waive or refrain from exercising any such remedies, powers or privileges;

	
             
  	
            (c)
 	
            amend or modify, in any manner whatsoever, the Loan Documents;
 

 (d)       extend or waive the time for Borrower’s performance of, or compliance with, any term, covenant or agreement on its part to be performed or observed under the Loan Documents, or waive such performance or compliance or consent to a failure of, or departure from, such performance or compliance;

(e)        take and hold Collateral for the payment of the Guaranteed Obligations guaranteed hereby or sell, exchange, release, dispose of, or otherwise deal with, any property pledged, mortgaged or conveyed, or in which Agent or Lenders have been granted a Lien, to secure any Obligations;

(f)        release anyone who may be liable in any manner for the payment of any amounts owed by Guarantor or Borrower to any Lending Party;

(g)       modify or terminate the terms of any intercreditor or subordination agreement pursuant to which claims of other creditors of Guarantor or Borrower are subordinated to the claims of the Lending Parties; and/or

(h)       apply any sums by whomever paid or however realized to any amounts owing by Guarantor or Borrower to any Lending Party in such manner as such Lending Party shall determine in its discretion;

and Agent and Lenders shall not incur any liability to Guarantor as a result thereof, and no such action shall impair or release the Guaranteed Obligations of the Guarantors under this Guaranty.

 

2.7.      Reinstatement.  This
Guaranty shall remain in full force and effect and continue to be effective should any petition be filed by or against Borrower or Guarantor for liquidation or
reorganization, should Borrower or Guarantor become insolvent or make an assignment for the benefit of creditors or should a receiver
or trustee be appointed for all or any significant part of Borrower’s or
Guarantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Guaranteed Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by Agent or any Lender, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Guaranteed Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

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2.8.      Deferral of Subrogation, Etc.  Notwithstanding anything to the contrary in this Guaranty, or in any other Loan Document, Guarantor hereby:

(a)        expressly and irrevocably waives, on behalf of itself and its heirs, successors, assigns and personal representatives (including any surety) until the Termination Date, any and all rights at law or in equity to subrogation, to reimbursement, to exoneration, to contribution, to indemnification, to set off or to any other rights that could accrue to a surety against a principal, to Guarantor against a principal, to Guarantor against a maker or obligor, to an accommodation party against the party accommodated, to a holder or transferee against a maker, or to the holder of any claim against any Person, and which Guarantor may have or hereafter acquire against Borrower in connection with or as a result of Guarantor’s execution, delivery and/or performance of this Guaranty, or any other documents to which Guarantor is a
party or otherwise; and

(b)       acknowledges and agrees (i) that this waiver is intended to benefit the Lending Parties and shall not limit or otherwise effect Guarantor’s liability hereunder or the enforceability of this Guaranty, and (ii) that the Lending Parties and their respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 2.8 and their rights under this Section 2.8 shall survive payment in full of the Guaranteed Obligations.

2.9.      Election of Remedies.   If Agent may, under applicable law, proceed to realize benefits under any of the Loan Documents giving Agent and Lenders a Lien upon any Collateral owned by Borrower, either by judicial foreclosure or by non-judicial sale or enforcement, Agent may, at its sole option, determine which of such remedies or rights it may pursue without affecting any of such rights and remedies under this Guaranty.  If, in the exercise of any of its rights and remedies, Agent shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against Borrower, whether because of any applicable laws pertaining to “election of remedies” or the like, Guarantor hereby consents to such action by Agent and waives any claim based upon such action, even if such action by
Agent shall result in a full or partial loss of any rights of subrogation which Guarantor might otherwise have had but for such action by Agent.  Any election of remedies which results in the denial or impairment of the right of Agent to seek a deficiency judgment against Borrower shall not impair Guarantor’s obligation to pay the full amount of the Guaranteed Obligations.  In the event Agent shall bid at any foreclosure or trustee’s sale or at any private sale permitted by law or the Loan Documents, Agent may bid all or less than the amount of the Guaranteed Obligations and the amount of such bid need not be paid by Agent but shall be credited against the Guaranteed Obligations.  The amount of the successful bid at any such sale shall be conclusively deemed to be the fair market value of the collateral and the difference between such bid amount and the remaining balance of the Guaranteed Obligations shall be conclusively deemed to be the amount of the Guaranteed Obligations
guaranteed under this Guaranty, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which Agent and Lenders might otherwise be entitled but for such bidding at any such sale.

 

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            3.
 	
            DELIVERIES.  
 

In a form satisfactory to Agent, Guarantor shall deliver to Agent (with sufficient copies for each Lender), concurrently with the execution of this Guaranty and the Loan Agreement, the Loan Documents and other instruments, certificates and documents as are required to be delivered by Guarantor to Agent under the Loan Agreement.

 

	
            4.
 	
            REPRESENTATIONS AND WARRANTIES.  
 

To induce Lenders to make the Term Loan under the Loan Agreement, Guarantor makes the representations and warranties contained in the Loan Agreement as Guarantor, each of which is incorporated herein by reference, and the following representations and warranties to the Lending Parties, each and all of which shall survive the execution and delivery of this Guaranty:

4.1.      Residence.  Guarantor’s residence address is as set forth in the introduction to this Agreement. 

4.2.      Power; Authorization; Enforceable Guaranteed Obligations.  The execution, delivery and performance of this Guaranty and all other Loan Documents and all instruments and documents to be delivered by Guarantor hereunder and under the Loan Agreement are within Guarantor’s power, do not violate any law or regulation, or any order or decree of any court or governmental or regulatory authority, body or agency (each, a “Governmental Authority”), do not conflict with or result in the breach of, or constitute a default under, or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which Guarantor is a party or by which Guarantor or any of its property is
bound, do not result in the creation or imposition of any Lien upon any of the property of Guarantor, other than those in favor of Agent, for the benefit of the Lending Parties, and the same do not require the consent or approval of any Governmental Authority or any other Person except those referred to in Section 4.2 of the Loan Agreement, all of which have been duly obtained, made or complied with prior to the Closing Date.  On or prior to the Closing Date, this Guaranty and each of the Loan Documents to which Guarantor is a party shall have been duly executed and delivered for the benefit of or on behalf of Guarantor, and each shall then constitute a legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms.

	
            5.
 	
            FURTHER ASSURANCES.  
 

Guarantor agrees, upon the written request of Agent or any Lender, to execute and deliver to Agent or such Lender, from time to time, any additional instruments or documents reasonably considered necessary by Agent or such Lender to cause this Guaranty to be, become or remain valid and effective in accordance with its terms.

	
            6.
 	
            PAYMENTS FREE AND CLEAR OF TAXES.  
 

All payments required to be made by the Guarantor hereunder shall be made to the Lending Parties free and
 clear of, and without deduction for, any and all present and future Charges or other similar taxes.  If Guarantor shall be required by law to deduct any Charges from or in respect of any sum payable
hereunder, (a) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this
Section 6) Agent or Lenders, as applicable, receive an amount equal to the sum they would have received had no such deductions been made, (b)
Guarantor shall make such deductions, and (c) Guarantor shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within thirty (30) days after the date of any payment of Charges, the Guarantor shall furnish to Agent the
original or a certified copy of a receipt evidencing payment thereof.  Guarantor shall indemnify and, within ten (10) days of demand therefor, pay Agent and each Lender for the full amount of Charges (including any Charges imposed by any jurisdiction on amounts payable under this Section 6) paid by Agent or such Lender, as appropriate, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Charges were correctly or legally asserted.

 

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            7.
 	
            OTHER TERMS.
 

7.1.      Entire Agreement.  This Guaranty, together with the other Loan Documents, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements relating to a guaranty of the loans and advances under the Loan Documents and/or the Guaranteed Obligations.

7.2.      Headings.  The headings in this Guaranty are for convenience of reference only and are not part of the substance of this Guaranty.

7.3.      Severability.  Whenever possible, each provision of this Guaranty shall be interpreted in such a manner to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty.  

7.4.      Notices.  Whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other party, or whenever any of the parties desires to give or serve upon another any such communication with respect to this Guaranty, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be addressed to the party to be notified as follows: 

	
             
  	
            (a)
 	
            If to Agent, at:
 

Chatham Credit Management III, LLC

400 Galleria Parkway, Suite 1950

Atlanta, Georgia 30339

Attention: Mr. Jack Guy 

Facsimile No: (770) 618-2101

Telephone No.: (770) 618-2100

 

	
             
  	
            (b)
 	
            If to any Lender, at the address of such Lender specified in the Loan Agreement.
 

	
             
  	
            (c)
 	
            If to Guarantor, at:
 

Scott D. Dorfman

	
             
 	
            8241 Nesbitt Ferry Road
 

	
             
 	
            Atlanta, Georgia 30350
 

 

or at such other address as may be substituted by notice given as herein provided.  The giving of any
notice required hereunder may be waived in writing by the party entitled to receive such notice.  Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be
deemed to have been validly served, given or delivered (i) upon the earlier of actual receipt and three (3)
Business Days after the same shall have been deposited with the United States mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (ii) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States mail as otherwise provided in this Section 7.4), (iii) one (1) Business Day after deposit with a reputable overnight carrier with all charges prepaid, or (iv) when delivered, if hand-delivered by messenger.

 

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7.5.      Successors and Assigns.  This Guaranty and all obligations of the Guarantor hereunder shall be binding upon the heirs, successors, assigns and personal representatives of the Guarantor and shall, together with the rights and remedies of Agent, for itself and for the benefit of the Lending Parties, hereunder, inure to the benefit of the Lending Parties, all future holders of any instrument evidencing any of the Obligations and their respective successors and assigns.  No sales of participations, other sales, assignments, transfers or other dispositions of any agreement governing or instrument evidencing the Obligations or any portion thereof or interest therein shall in any manner affect the rights of the Lending Parties hereunder.  Guarantor may not assign, sell, hypothecate or otherwise transfer any
interest in or obligation under this Guaranty.

7.6.      No Waiver; Cumulative Remedies; Amendments.  Neither Agent nor any Lender shall by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by Agent and then only to the extent therein set forth.  A waiver by Agent, for itself and the ratable benefit of Lenders, of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Agent would otherwise have had on any future occasion.  No failure to exercise nor any delay in exercising on the part of Agent or any Lender, any right, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or future
exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies hereunder provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights and remedies provided by law.  None of the terms or provisions of this Guaranty may be waived, altered, modified, supplemented or amended except by an instrument in writing, duly executed by Agent and Guarantor.

7.7.      Termination.  This Guaranty is a continuing guaranty and shall remain in full force and effect until the Termination Date.  Upon payment and performance in full of the Guaranteed Obligations, Agent shall deliver to Guarantor such documents as Guarantor may reasonably request to evidence such termination.

7.8.      Counterparts.  This Guaranty may be executed in any number of counterparts, each of which shall collectively and separately constitute one and the same agreement.

7.9.      GOVERNING LAW; CONSENT
 TO JURISDICTION AND VENUE. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, THIS GUARANTY AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED
 IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF GEORGIA.  AGENT AND GUARANTOR HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT AND ANY GEORGIA STATE COURT SITTING IN
 FULTON COUNTY, GEORGIA FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.  GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
 ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
 THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 7.4.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

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7.10.    WAIVER OF JURY TRIAL.  AGENT AND GUARANTOR HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.

	
            8.
 	
            SUBORDINATION.  
 

8.1.      Subordination of All Guarantor Claims.  As used herein, the term “Guarantor Claims” shall mean all debts and liabilities of Borrower to Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligations of Borrower thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Guarantor.  The Guarantor Claims shall include without
limitation all rights and claims of Guarantor against Borrower (arising as a result of subrogation or otherwise) as a result of Guarantor's payment of all or a portion of the Guaranteed Obligations.  Until such time as the Guaranteed Obligations are irrevocably paid and satisfied in full, Guarantor agrees that it shall not receive or collect, directly or indirectly, from Borrower or any other party any amount upon the Guarantor Claims.  

8.2.      Claims in Bankruptcy.  In the event of receivership, bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency proceedings involving Guarantor as debtor, Agent shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable upon Guarantor Claims.  Guarantor hereby assigns such dividends and payments to Agent for the benefit of the Lending Parties.  Should Agent receive, for application against the Guaranteed Obligations, any dividend or payment which is otherwise payable to Guarantor and which, as between Borrower and Guarantor, shall constitute a credit against the Guarantor Claims, then, upon payment to Agent in
full of the Guaranteed Obligations, Guarantor shall become subrogated to the rights of Lenders to the extent that such payments to Agent on the Guarantor Claims have contributed toward the liquidation of the Guaranteed Obligations, and such subrogation shall be with respect to that proportion of the Guaranteed Obligations which would have been unpaid if Agent had not received dividends or payments upon the Guarantor Claims.  

8.3.      Payments Held in Trust.
 In the event that, notwithstanding anything to the contrary in this Guaranty, Guarantor should receive any funds, payment, claim or distribution that is prohibited by this Guaranty, Guarantor agrees to hold in
trust for Agent an amount equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions so received except to pay them promptly to Agent,
and Guarantor covenants promptly to pay the same to Agent. 

 

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8.4.      Liens Subordinate.  Guarantor agrees that any liens, security interests, judgment liens, charges or other encumbrances upon Borrower's assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrower's assets securing payment of the Guaranteed Obligations, regardless of whether such encumbrances in favor of Guarantor or Agent or Lenders currently exist or are hereafter created or attach.  Without the prior written consent of Agent, Guarantor shall not (i) exercise or enforce any creditor's right it may have against Borrower, or (ii) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor's relief or insolvency proceeding) to enforce any liens, mortgage, deeds of trust, security interests, collateral rights, judgments or other encumbrances on assets of Borrower held by Guarantor, until the entire indebtedness and all other sums due and payable under the Loan Documents have been irrevocably paid in full.

	
            9.
 	
            SECURITY; LIMITED RECOURSE.  
 

9.1.      Security and Pledge.  To secure payment of the Guarantor’s obligations under this Guaranty, concurrently with the execution of this Guaranty, Guarantor has entered into a Pledge Agreement pursuant to which the Guarantor has pledged to Agent, for the benefit of the Lending Parties, certain financial assets owned by Guarantor, all as more specifically set forth in such Pledge Agreement. 

9.2.      Limited Recourse.  Notwithstanding anything to the contrary contained in this Guaranty, the recourse of the Agents and the Lenders with respect to the liability of the Guarantor under this Guaranty shall be limited solely to the Pledged Collateral (as such term is defined in the Guarantor Pledge Agreement), provided that nothing contained herein shall limit or otherwise restrict recourse to or the liability of Guarantor for any willful fraud or material misrepresentation by Guarantor in any Loan Document to which Guarantor is a party.

 

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Guaranty Agreement as of the date first above written.

 

 /s/ Scott D. Dorfman                                                               

SCOTT D. DORFMAN

 

CHATHAM CREDIT MANAGEMENT III, LLC, a Georgia limited liability company, as Agent

 

By: /s/ Chatham Credit Management III, LLC                                                           

	
             
 	
            Name:___________________________________________
 

	
             
 	
            Title:____________________________________________
 

 

 

 

10EXECUTION COPY

GUARANTOR PLEDGE AGREEMENT

 

THIS GUARANTOR PLEDGE AGREEMENT (the “Pledge Agreement”), dated as of September 28, 2007, made by SCOTT DORFMAN, an individual resident of Georgia (“Guarantor”) and CHATHAM CREDIT MANAGEMENT III, LLC, a Georgia limited liability company, individually and as collateral agent (in such capacity, “Collateral Agent”) for itself and the lenders from time to time signatory to the Loan Agreement hereinafter defined (“Lenders”).

W I T N E S S E T H:

WHEREAS, pursuant to that certain Loan and Security Agreement dated as of the date hereof by and between Innotrac Corporation, a Georgia corporation (“Borrower”), Agent and the Persons signatory thereto from time to time as lenders (collectively, the “Lenders”) (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the “Loan Agreement”; capitalized terms used but not defined herein shall have the meaning set forth in the Loan Agreement), the Lenders have agreed, subject to certain terms and conditions, to make the Term Loan to Borrower (the “Loans”);

WHEREAS, the Pledgor has invested in and holds membership interests in Chatham Investment Fund II, LLC (“Chatham Fund II”) and Chatham Investment Fund III, LLC (“Chatham Fund III”; and together with Chatham Fund II, the “Chatham Funds”) as more specifically identified and set forth in Schedule I hereto (the “Chatham Membership Interests”);

WHEREAS, as a condition precedent to the making of the Loans pursuant to the Loan Agreement (a) Pledgor is simultaneously herewith executing and delivering to the Collateral Agent a Guaranty Agreement, dated the date hereof, in favor of the Collateral Agent, for the benefit of the Lending Parties (the “Guaranty Agreement”), guaranteeing all of the obligations of the Borrower in respect of the Term Loan and the other Obligations, and (b) the Pledgor is required to execute and deliver to the Collateral Agent this Pledge Agreement providing for the pledge and grant to the Collateral Agent, for the benefit of the Agents and Lenders, of a security interest in, among other things, the Chatham Membership Interests;

WHEREAS, Pledgor has determined that the execution, delivery and performance of this Pledge Agreement directly benefit, and are in the best interest of, Pledgor;

NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Lenders to make and maintain the Loans pursuant to the Loan Agreement, Pledgor hereby agrees with the Collateral Agent as follows:

SECTION 1.   Definitions.
 Reference is hereby made to the Loan Agreement for a statement of the terms thereof.  All terms used in this Pledge Agreement which are defined in the Loan Agreement or
in Article 8 or Article 9 of the Uniform Commercial Code (the “UCC”) as in effect from time to time in the State of Georgia and which are not otherwise defined herein shall have the same meanings herein as set forth therein.

 

 

SECTION 2.   Pledge and Grant of Security Interest.  As collateral security for all of the Obligations (as defined in Section 3 hereof), Pledgor hereby pledges and assigns to the Collateral Agent, for the benefit of the Agents and Lenders, and grants to the Collateral Agent, for the benefit of the Agents and Lenders, a continuing security interest in and Lien on Pledgor’s right, title and interest in and to the following (collectively, the “Pledged Collateral”):

(a)       all Chatham Membership Interests now owned or hereafter acquired by Pledgor in the Chatham Funds (collectively, the “Pledged Interests”), in each case whether or not evidenced or represented by any certificated security or other instrument, the certificates representing the Pledged Interests, and all options and other rights, contractual or otherwise, in respect thereof including, without limitation, (i) Pledgor’s capital account, (ii) all participation in the profits and cash flow of the Chatham Funds arising out of such Pledged Interests, (iii) all rights to participate as a member in the business, affairs, decision making and management of each of the Chatham Funds, to the extent arising out of such Pledged Interests, (iv) all allocations
and distributions of profit and loss in the Chatham Funds arising out of such Pledged Interests, including without limitation, all dividends, distributions, cash, instruments, investment property and other property arising out of such interests, and (v) all other equity interests, founders fees, fees, distributions, receivables, contract rights, general intangibles, and other amounts now or hereafter payable in respect of, or arising out of, the Pledged Interests; and 

(b)       all proceeds (including proceeds of proceeds) of any and all of the foregoing; 

in each case, whether now owned or hereafter acquired by Pledgor and howsoever its interest therein may arise or appear (whether by ownership, security interest, claim or otherwise).

SECTION 3.   Security for Obligations.  The security interest created hereby in the Pledged Collateral constitutes continuing collateral security for all of the following obligations, whether now existing or hereafter incurred (collectively, the “Obligations”):

(a)       the Guaranteed Obligations (as defined in the Guaranty Agreement); and

(b)       the due performance and observance by Pledgor of all of Pledgor’s obligations from time to time existing under and in respect of this Pledge Agreement and any other Loan Documents to which Pledgor is a party.

	
             
  	
            SECTION 4.
 	
            Delivery of the Pledged Collateral.
 

 (a)       All certificates currently representing the Pledged Interests shall be delivered to the Collateral Agent on or prior to the execution and delivery of this Pledge Agreement.  All other certificates and instruments constituting Pledged Collateral, if any, from time to time or required to be pledged to the Collateral Agent by Pledgor pursuant to the terms of this Pledge Agreement (the “Additional Collateral”) shall be delivered to the Collateral Agent promptly upon (and in any event not more than five days after) receipt thereof by or on behalf of Pledgor.  All such certificates and instruments shall be held by or on behalf of the Collateral Agent pursuant hereto and shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment or undated stock powers executed in blank, all in form and substance satisfactory to the Collateral Agent.  If any Pledged Collateral of Pledgor consists
 of uncertificated securities, Pledgor shall cause the Collateral Agent (or its designated custodian or nominee) to become the registered holder thereof, or cause each issuer of such securities
to agree that it will comply with instructions originated by the Collateral Agent with respect to such securities without further consent by Pledgor.  If any Pledged Collateral consists of
security entitlements, Pledgor shall transfer such security entitlements to the
Collateral Agent (or its custodian, nominee or other designee), or cause the applicable securities intermediary
to agree that it will comply with entitlement orders by the Collateral Agent without further consent by Pledgor.  

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(b)       Within five (5) days of the receipt by Pledgor of any Additional Collateral, a pledge amendment, duly executed by Pledgor, in substantially the form of Schedule II hereto (a “Pledge Amendment”) shall be delivered to the Collateral Agent, in respect of the Additional Collateral that must be pledged pursuant to this Pledge Agreement, which Pledge Amendment shall from and after delivery thereof constitute part of Schedule I.  Pledgor hereby authorizes the Collateral Agent to attach each Pledge Amendment to this Pledge Agreement and agrees that all certificates or instruments listed on any Pledge Amendment delivered to the Collateral Agent shall for all purposes hereunder
constitute Pledged Collateral and Pledgor shall be deemed upon delivery thereof to have made the representations and warranties set forth in Section 5 with respect to such Additional Collateral.

(c)       If Pledgor shall receive, by virtue of Pledgor’s being or having been an owner of any Pledged Collateral, any (i) stock, partnership or membership interest certificate (including, without limitation, any certificate representing a stock dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock split, spin-off or split-off), promissory note or other instrument, (ii) option or right, whether as an addition to, substitution for, or in exchange for, any Pledged Collateral, or otherwise, (iii) dividends payable in cash (except such dividends permitted to be retained by Pledgor pursuant to Section 7 hereof) or in securities or other property or (iv) dividends,
distributions, cash, instruments, investment property and other property in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, Pledgor shall receive such stock certificate, promissory note, instrument, option, right, payment or distribution in trust for the benefit of the Agents and Lenders, shall segregate it from Pledgor’s other property and shall deliver it forthwith to the Collateral Agent in the exact form received, with any necessary endorsement and/or appropriate stock powers duly executed in blank, to be held by the Collateral Agent as Pledged Collateral and as further collateral security for the Obligations.

SECTION 5.   Representations and Warranties.  Pledgor represents and warrants as follows:

(a)       Pledgor has the legal capacity to execute, deliver and perform this Agreement and the other Loan Document to which it is a party.  Schedule III hereto sets forth (A) the exact legal name of Pledgor and all other names used by Pledgor at any time during the five years preceding the Effective Date, and (B) Pledgor’s principal residence and each place of business and residence of Pledgor during the five years preceding the Effective Date

(b)       The execution, delivery and performance by Pledgor of this Agreement and the other Loan Documents to which it is a party (A) have been duly authorized by all necessary action on the part of Pledgor, (B) do not and will not contravene any applicable law or any contractual restriction binding on or affecting Pledgor or any of Pledgor’s properties, and (C) do not and will not result in or require the creation of any Lien upon or with respect to any of Pledgor’s properties other than pursuant to this Agreement.

(c)       There is no action,
suit or proceeding pending or threatened against or otherwise affecting Pledgor before any foreign, federal, state, municipal or other court, governmental agency, authority or regulatory body
 or any arbitrator (collectively, “Governmental Authority”) (A) which challenges the validity or enforceability of this Agreement
or any of the other Loan Documents to which
Pledgor is a party, or (B) which, if adversely determined could reasonably be expected to materially and adversely affect the condition
(financial or otherwise), income, assets or liabilities of Pledgor.

 

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(d)       This Agreement constitutes the legal, valid and binding obligation of Pledgor, enforceable against Pledgor, in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws.

(e)       Pledgor is and will be at all times the legal and beneficial owner of the Pledged Collateral free and clear of any Lien, except for the security interest created by this Pledge Agreement and has the right and requisite authority to pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral pledged by Pledgor to Agent  as provided herein.

(f)        To the knowledge of Pledgor, all of the Pledged Interests have been duly authorized, validly issued and are fully paid and non-assessable;

(g)       To the knowledge of Pledgor, none of the Pledged Interests has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject;

(h)       The exercise by any Agent or any Lender of any of its rights and remedies hereunder will not contravene any applicable law or any contractual restriction binding on or affecting Pledgor or any of the properties of Pledgor and will not result in or require the creation of any Lien upon or with respect to any of the properties of Pledgor other than pursuant to this Agreement or the other Loan Documents.

(i)        No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority, and no consent of any other Person, is required to be obtained or made for (i) the due execution, delivery and performance by Pledgor of this Pledge Agreement, (ii) the grant by Pledgor, or the perfection, of the security interest purported to be created hereby in the Pledged Collateral, or (iii) the exercise by the Agents or the Lenders of any of their rights and remedies hereunder, except for the filing in the offices described in Schedule IV hereto of UCC financing statements naming Pledgor as debtor, the Collateral Agent as secured party and covering the Pledged Collateral of Pledgor, to perfect the Collateral Agent’s security interests in items of
the Pledged Collateral in which such security interests are not susceptible to perfection by possession of certificates or instruments, which financing statements have been duly filed and except as may be required in connection with any sale of any Pledged Collateral by laws affecting the offering and sale of securities generally.  

(j)        This Agreement creates a valid security interest in favor of the Collateral Agent in the Pledged Collateral, as security for the Obligations.  The Collateral Agent’s having possession of the certificates, if any, representing the Pledged Interests and all other certificates, instruments and cash constituting Pledged Collateral from time to time, or “control” (as such term is defined in Sections 8-106 and 9-106 of the UCC) over the Pledged Collateral and the filing of the UCC financing statements described in Section 5(c)(iv) above results in the perfection of such security interest.  Such security interest is, or in the case of Pledged Collateral in which Pledgor obtains rights after the date hereof, will be, a perfected security interest subject to no
Liens.  All action necessary or desirable to perfect and protect such security interest has been duly taken, except for the Collateral Agent’s having possession of certificates, instruments and
cash constituting Pledged Collateral after the date hereof.

 

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SECTION 6.   Covenants as to the Pledged Collateral.  So long as any Obligation shall remain outstanding, Pledgor will, unless the Collateral Agent shall otherwise consent in writing:

(a)       keep adequate records concerning the Pledged Collateral and permit the Collateral Agent or any agents, designees or representatives thereof at any time or from time to time to examine and make copies of and abstracts from such records;

(b)       at the Pledgor’s joint and several expense, promptly deliver to the Collateral Agent a copy of each notice or other communication received by Pledgor in respect of the Pledged Collateral;

(c)       at the Pledgor’s joint and several expense, defend the Collateral Agent’s right, title and security interest in and to the Pledged Collateral against the claims of any Person;

(d)       at the Pledgor’s joint and several expense, at any time and from time to time, promptly execute and deliver all further instruments and documents and take all further action that may be necessary or desirable or that the Collateral Agent may reasonably request in order to (i) perfect and protect the security interest purported to be created hereby in the Pledged Collateral, (ii) enable the Collateral Agent to exercise and enforce its rights and remedies hereunder in respect of the Pledged Collateral, or (iii) otherwise effect the purposes of this Pledge Agreement, including, without limitation, delivering to the Collateral Agent irrevocable proxies in respect of the Pledged Collateral;

(e)       give the Collateral Agent at least 30 days’ prior written notice of any change in Pledgor‘s name or principal residence;

(f)        not sell, assign (by operation of law or otherwise), exchange or otherwise dispose of any Pledged Collateral or any interest therein;

(g)       not create or suffer to exist any Lien, security interest or other charge or encumbrance upon or with respect to any Pledged Collateral, except for the security interest created hereby and by the other Loan Documents;

(h)       not make or consent to any amendment or other modification or waiver with respect to any Pledged Collateral or enter into any agreement or permit to exist any restriction with respect to any Pledged Collateral other than pursuant to the Loan Documents; and

(i)        not take or fail to take any action which would in any manner impair the validity or enforceability of the Collateral Agent’s security interest in and Lien on any Pledged Collateral.

	
             
  	
            SECTION 7.
 	
            Voting Rights, Dividends, Etc. in Respect of the Pledged Collateral.
 

	
             
  	
            (a)
 	
            So long as no Event of Default shall have occurred and be continuing:
 

 (i)        Pledgor may exercise any and all voting
and other consensual rights pertaining to any Pledged Collateral for any purpose not inconsistent with the terms of this Pledge Agreement, the Loan Agreement and the other Loan Documents;
 provided, however, that (A) no Pledgor will take action to obstruct, impede or infringe upon
any Agent’s or any Lender’s enforcement of their rights, benefits and remedies under the Loan Documents, (B) Pledgor will cooperate fully with the Agents and the Lenders in taking any
action that any of them may reasonably request in order to cause the Agents and the Lenders to obtain and enjoy the full rights and benefits granted to them under the Loan
Documents, and (C) (I) Pledgor will
exercise or refrain from exercising any such right, as the case may be, if the Collateral Agent gives Pledgor notice that such action or inaction is reasonably likely to have a material adverse
effect on the value of any Pledged Collateral and (II) Pledgor will give the Collateral Agent at least five (5) Business Days’ notice of the manner in which Pledgor intends to exercise,
or the reasons for refraining from exercising, any such right which could reasonably be expected to have a material adverse effect on the value of any of the Pledged Collateral of Pledgor;

 

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(ii)       Pledgor may receive and retain any and all dividends or other distributions paid in respect of the Pledged Collateral; provided, however, that any and all (A) dividends paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of or in exchange for, any Pledged Collateral, (B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, and (C) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Collateral shall be, and shall
forthwith be delivered to the Collateral Agent to hold as, Pledged Collateral and shall, if received by Pledgor, be received in trust for the benefit of the Agents and Lenders, shall be segregated from the other property or funds of Pledgor, and shall be forthwith delivered to the Collateral Agent in the exact form received with any necessary indorsement and/or appropriate stock powers duly executed in blank, to be held by the Collateral Agent as Pledged Collateral and as further collateral security for the Obligations; and

(iii)      the Collateral Agent will execute and deliver (or cause to be executed and delivered) all such proxies and other instruments as the Pledgor may reasonably request for the purpose of enabling the Pledgor to exercise the voting and other rights which they are entitled to exercise pursuant to paragraph (i) of this Section 7(a) and to receive the dividends which they are authorized to receive and retain pursuant to paragraph (ii) of this Section 7(a).

	
             
  	
            (b)
 	
            Upon the occurrence and during the continuance of an Event of Default:
 

 (i)        all rights of the Pledgor to exercise the voting and other consensual rights which they would otherwise be entitled to exercise pursuant to paragraph (i) of this Section 7(a) and to receive the dividends which the Pledgor would otherwise be authorized to receive and retain pursuant to paragraph (ii) of Section 7(a), shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Collateral such dividends (it being understood that this Section 7 shall not limit in any respect the conditions to distributions and dividends set
forth in the Loan Agreement);

(ii)       without limiting the generality of the foregoing, the Collateral Agent may at its option exercise any and all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any of the Pledged Collateral as if it were the absolute owner thereof, including, without limitation, the right to exchange, in its discretion, any and all of the Pledged Collateral upon the merger, consolidation, reorganization, recapitalization or other adjustment of any Pledged Issuer, or upon the exercise by any Pledged Issuer of any right, privilege or option pertaining to any Pledged Collateral, and, in connection therewith, to deposit and deliver any and all of the Pledged Collateral with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as it may determine; and 

(iii)      all dividends and other
distributions which are received by Pledgor contrary to the provisions of paragraph (i) of this Section 7(b) shall be received in trust
for the benefit of the Agents and Lenders, shall be segregated from other funds of Pledgor, and shall be forthwith
paid over to the Collateral Agent as Pledged Collateral in the exact
form received with any necessary indorsement and/or appropriate stock powers duly executed in blank, to be held by the Collateral Agent as Pledged Collateral and as further collateral
security for the Obligations.

 

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            SECTION 8.
 	
            Additional Provisions Concerning the Pledged Collateral.
 

 (a)       Pledgor (i) authorizes the Collateral Agent to execute any agreements, instruments or other documents in Pledgor’s name and to file such agreements, instruments or other documents in Pledgor’s name and to file such agreements, instruments, or other documents in any appropriate filing office, for the purpose of taking any action which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Pledge Agreement,  (ii) authorizes the Collateral Agent to file any financing statements required hereunder or under any other Loan Document, and any continuation statements or amendment with respect thereto, in any appropriate filing office without the signature of Pledgor, and (iii) ratifies the filing of any financing statement, and any continuation statement or amendment with
respect thereto, filed by the Collateral Agent without the signature of Pledgor prior to the date hereof.  

(b)       Pledgor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact and proxy, with full authority in the place and stead of Pledgor and in the name of Pledgor or otherwise, in the Collateral Agent’s sole discretion at any time and from time to time, to take any action and to execute any instrument which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Pledge Agreement with respect to the Pledged Collateral of Pledgor (subject to the revocable rights of Pledgor under Section 7(a) hereof), including, without limitation, to receive, indorse and collect all instruments made payable to Pledgor representing any dividend or other distribution in respect of any Pledged Collateral and to give full discharge for the same.  This
power is coupled with an interest and is irrevocable until all of the Obligations are paid in full and each Commitment is terminated.

(c)       If Pledgor fails to perform any agreement or obligation contained herein, the Collateral Agent itself may perform, or cause performance of, such agreement or obligation, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by the Pledgor pursuant to Section 10 hereof and shall be secured by the Pledged Collateral.

(d)       Other than the exercise of reasonable care to assure the safe custody of the Pledged Collateral while held hereunder, the Collateral Agent shall have no duty or liability to preserve rights pertaining thereto and shall be relieved of all responsibility for the Pledged Collateral of Pledgor upon surrendering it or tendering surrender of it to Pledgor.  The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property, it being understood that the Collateral Agent shall not have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters
relating to any Pledged Collateral, whether or not the Collateral Agent has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral.

(e)       The powers conferred on the Collateral Agent hereunder are solely to protect its interest in the Pledged Collateral and shall not impose any duty upon it to exercise any such powers.  Except for the safe custody of any Pledged Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Pledged Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Pledged Collateral.

 

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(f)        Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent may at any time in its discretion (i) without notice to Pledgor, transfer or register in the name of the Collateral Agent or any of its nominees any or all of the Pledged Collateral, subject only to the revocable rights of Pledgor under Section 7(a) hereof, and (ii) exchange certificates or instruments constituting Pledged Collateral for certificates or instruments of smaller or larger denominations.

SECTION 9.   Remedies Upon Default.  If any Event of Default shall have occurred and be continuing:

(a)       The Collateral Agent may exercise in respect of the Pledged Collateral, in addition to any other rights and remedies provided for herein or otherwise available to it, all of the rights and remedies of a secured party on default under the UCC then in effect in the State of Georgia; and without limiting the generality of the foregoing and without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or broker’s board or elsewhere, at such price or prices and on such other terms as the Collateral Agent may deem commercially reasonable.  Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ notice to Pledgor of the time and place of any public sale of Pledged Collateral owned by
Pledgor or the time after which any private sale is to be made shall constitute reasonable notification.  The Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given.  The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

(b)       Pledgor recognizes that the Collateral Agent may deem it impracticable to effect a public sale of all or any part of the Pledged Interests  or any other securities constituting Pledged Collateral and that the Collateral Agent may, therefore, determine to make one or more private sales of any such securities to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof.  Pledgor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sales shall be deemed to have been made in a commercially
reasonable manner and that the Collateral Agent shall have no obligation to delay the sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act of 1933, as amended (the “Securities Act”).  Pledgor further acknowledges and agrees that any offer to sell such securities which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community (to the extent that such an offer may be so advertised without prior registration under the Securities Act) or (ii) made privately in the manner described above to not less than fifteen bona fide offerees shall be deemed to involve a “public disposition” for the purposes of Section 9-610(c) of the UCC (or any
successor or similar, applicable statutory provision) as then in effect in the State of Georgia, notwithstanding that such sale may not constitute a “public offering” under the Securities Act, and that the Agents and Lenders may, in such event, bid for the purchase of such securities.

(c)       Any cash held by the
Collateral Agent as Pledged Collateral and all cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon, all or any part of the
Pledged Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and/or then or at any time thereafter applied (after payment of any
amounts payable to the Agents and Lenders pursuant to Section 11 hereof) in whole or in part by the Collateral Agent against, all or any part
of the Obligations in such order as the Collateral Agent shall elect consistent with the provisions of the Loan Agreement.  Any surplus of such cash or cash proceeds held by the Collateral
Agent and remaining after payment in full of all of the Obligations and the termination of
the Guaranties shall be paid over to the Pledgor or to such Person as may be lawfully entitled to receive such surplus.

 

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(d)       In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which any Agent or any Lender is legally entitled, the Pledgor be liable for the deficiency, together with interest thereon at the highest rate specified in the Loan Agreement for interest on overdue principal thereof or such other rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees, costs and expenses of any attorneys employed by any Agent and any Lender to collect such deficiency.

	
             
  	
            SECTION 10.
 	
            Indemnity and Expenses.  
 

 (a)       The Pledgor agrees to defend, protect, indemnify and hold harmless the Agents and the Lenders (and all of their respective officers, directors, employees, attorneys, consultants and agents) from and against any and all claims, damages, losses, liabilities, obligations, penalties, fees, costs and expenses (including, without limitation, reasonable legal fees and other client charges and disbursements of each Agent’s and each Lender’s counsel) incurred by any Agent or any Lender as a result of or arising from or relating to or in connection with this Pledge Agreement or any other Pledge Agreement, dated the date hereof (as amended or otherwise modified from time to time, the “Other Pledge Agreements”), made by the other holders of Equity Securities of the
Borrower in favor of the Collateral Agent for the benefit of the Agents and the Lenders (including, without limitation, enforcement of this Pledge Agreement and the Other Pledge Agreements), except, as to any such indemnified Person, claims, damages, losses, liabilities, obligations, penalties, fees, costs and expenses resulting solely and directly from such Person’s gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction.

(b)       The Pledgor agrees to pay to each Agent and each Lender upon demand the amount of any and all costs and expenses, including the legal fees and other client charges and disbursements of each Agent’s and each Lender’s counsel and of any experts and agents, which such Agent or such Lender may incur in connection with (i) the preparation, negotiation, execution, delivery, recordation, administration, amendment, waiver or other modification or termination of this Agreement and the Other Pledge Agreements, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any Pledged Collateral (as defined herein and in the Other Pledge Agreements), (iii) the exercise or enforcement of any of the rights of any Agent or any Lender hereunder or under the Other Pledge
Agreements, or (iv) the failure by Pledgor to perform or observe any of the provisions hereof and the failure by any other Person under the Other Pledge Agreements to perform or observe any provision thereof.

SECTION 11. Notices, Etc.  All notices and other communications provided for hereunder shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt requested), telecopied or delivered (by messenger or by courier), if to Pledgor, to Pledgor at its address specified on Schedule III hereto, if to the Collateral Agent, to it at its address specified in the Loan Agreement, or as to any such Person at such other address as shall be designated by such Person in a written notice to such other Person complying as to delivery with the terms of this Section 11.  All such notices and other communications shall be effective (i) if mailed (by certified mail, return receipt requested), when received or three (3) Business Days after being deposited in the mails, whichever
occurs first, (ii) if telecopied, when transmitted and confirmation of such transmission is received, or (iii) if delivered (by messenger or by courier), upon delivery.

SECTION 12. Submission to Jurisdiction; Waivers.  Pledgor hereby irrevocably and unconditionally:

 

- 9 -

 

(a)       Submits for Pledgor and the property of Pledgor in any action, suit or proceeding relating to this Pledge Agreement or any other Loan Document to which Pledgor is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of Georgia, the courts of the United States of America for the Southern District of Georgia, and appellate courts thereof;

(b)       Agrees that any such action, suit or proceeding may be brought in such courts and waives any objection that Pledgor may now or hereafter have to the venue of any such action, suit or proceeding in any such court or that such action, suit or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(c)       Consents to the service of any and all process in any such action, suit or proceeding by the mailing of copies of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to Pledgor, at Pledgor’s address set forth in Section 11 hereof or at such other address of which the Collateral Agent shall have been notified pursuant thereto;

(d)       To the extent that Pledgor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to Pledgor or the property of Pledgor, Pledgor hereby irrevocably waives such immunity in respect of the obligations of Pledgor under this Pledge Agreement; 

(e)       Agrees that nothing herein shall affect the right of the Collateral Agent to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

(f)        Waives any right Pledgor may have to claim or recover in any legal action or proceeding referred to in this Section 12 any special, exemplary, punitive or consequential damages.

	
             
  	
            SECTION 13.
 	
            Obligation Unconditional; Continuing Security Interest.
 

 (a)       All rights and interests of the Agents and the Lenders hereunder, and all agreements and obligations of the Pledgor hereunder, shall remain in full force and effect and shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of any Guaranty, the Loan Agreement or any other Loan Document, (ii) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from any Loan Document, (iii) any exchange or release of, or non-perfection of any lien on or security interest in, any collateral for any of the Obligations, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations, or (iv) any
other circumstance which might otherwise constitute a defense available to, or a discharge of, a borrower, Pledgor or other obligor in respect of the Obligations.

(b)       Pledgor hereby waives
(i) promptness and diligence, (ii) notice of acceptance and notice of the incurrence of any Obligation by Borrower, (iii) notice of any actions taken by any Agent, any
Lender, Borrower or any other Person under any Loan Document or any other agreement, document or instrument relating thereto, (iv) all other notices, demands and protests, and
all other formalities of every kind in connection with the enforcement of the Obligations, the omission of or delay in which, but for the provisions of this subsection (b), might
constitute grounds for relieving
Pledgor of any of the Pledgor’s obligations hereunder and (v) any requirement that any Agent or any Lender protect, secure, perfect or
insure any security interest or other lien on any property subject thereto or exhaust any
right or take any action against Borrower  or any other Person or any collateral.

 

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SECTION 14. JURY TRIAL WAIVER.  THE PLEDGOR AND THE COLLATERAL AGENT (BY ITS ACCEPTANCE OF THIS PLEDGE AGREEMENT) HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING THIS PLEDGE AGREEMENT, ANY LOAN DOCUMENT OR ANY AMENDMENT, MODIFICATION OR OTHER DOCUMENT NOW OR HEREAFTER DELIVERED IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREE THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

	
             
  	
            SECTION 15.
 	
            Miscellaneous.
 

 (a)       No amendment of any provision of this Pledge Agreement shall be effective unless it is in writing and signed by the Pledgor and by the Collateral Agent (except as otherwise expressly provided in Section 4(b) hereof), and no waiver of any provision of this Pledge Agreement, and no consent to any departure by the Pledgor therefrom, shall be effective unless it is in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

(b)       No failure on the part of any Agent or any Lender to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.  The rights and remedies of the Agents and Lenders provided herein and in the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law.  The rights of the Agents and Lenders under any Loan Document against any party thereto are not conditional or contingent on any attempt by the Agents and Lenders to exercise any of its rights under any other Loan Document against such party or against any other Person, including, but not limited to, the Pledgor.

(c)       Any provision of this Pledge Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 

(d)       This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) remain in full force and effect until the payment in full or release of the Obligations and the termination of the Guaranties in accordance with their terms, and (ii) be binding on the Pledgor’s and, by its acceptance hereof, the Collateral Agent, and their respective successors and assigns and shall inure, together with all rights and remedies of the Agents and the Lenders hereunder, to the benefit of the Agents and the Lenders and their respective successors, transferees and assigns.  Without limiting the generality of clause (ii) of the immediately preceding sentence, the Collateral Agent may assign or otherwise transfer its rights and obligations under this Pledge Agreement and any other Loan Document
to any other Person appointed as successor Collateral Agent, and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to the Collateral Agent herein or otherwise.  Upon any such assignment or transfer, all references in this Pledge Agreement to the Collateral Agent shall mean the assignee of the Collateral Agent.  None of the rights or obligations of the Pledgor hereunder may be assigned or otherwise transferred without the prior written consent of the Collateral Agent, and any such assignment or transfer shall be null and void.

 

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(e)       Upon the satisfaction in full of the Obligations and the termination of the Guaranty, (i) this Pledge Agreement and the security interest created hereby shall terminate and all rights to the Pledged Collateral shall revert to the Pledgor, and (ii) the Collateral Agent will, upon the Pledgor’s request and at the Pledgor’s expense, (A) return to the Pledgor such of the Pledged Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof, and (B) execute and deliver to the Pledgor, without recourse, representation or warranty, such documents as the Pledgor shall reasonably request to evidence such termination, all without any representation, warranty or recourse whatsoever. 

(f)        This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia, except to the extent that the validity and perfection or the perfection and the effect of perfection or non-perfection of the security interest created hereby, or remedies hereunder, in respect of any particular Pledged Collateral are governed by the law of a jurisdiction other than the State of Georgia.

(g)       This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

[Signature Page Follows]

 

 

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IN WITNESS WHEREOF, the Pledgor has caused this Guarantor Pledge Agreement to be executed and delivered on the date first above written.

PLEDGOR:

 

	
             
 	
            /s/ Scott D. Dorfman          
SCOTT D. DORFMAN
 

 

 

ACCEPTED AND AGREED:

 

CHATHAM CREDIT MANAGEMENT III, LLC

as Collateral Agent

 

	
            By: /s/ Chatham Credit Management III, LLC          
 

Name:

Title:

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