Loan And Security Agreement/ Wachovia Bank National Association

EXHIBIT 10.60


LOAN AND SECURITY AGREEMENT


by and among


SED INTERNATIONAL HOLDINGS, INC.,


SED INTERNATIONAL, INC.


and


SED MAGNA (MIAMI), INC.


as Borrowers


THE LENDERS AND ISSUING BANK FROM TIME TO TIME PARTY HERETO


WACHOVIA BANK, NATIONAL ASSOCIATION
as Agent


Dated: September 21, 2005


TABLE OF CONTENTS Section 1. DEFINITIONS ................................................... 1


Section 2. CREDIT FACILITIES ............................................. 26
2.1. Loans .......................................................... 26
2.2. Letters of Credit .............................................. 28


Section 3.INTEREST AND FEES .............................................. 31
3.1. Interest ....................................................... 31
3.2. Fees ........................................................... 32
3.3. Changes in Laws and Increased Costs of Loans ................... 33


Section 4. CONDITIONS PRECEDENT .......................................... 35
4.1. Conditions Precedent to Initial Loans and Letters of Credit .... 35
4.2. Conditions Precedent to All Loans and Letters of Credit ........ 37


Section 5. GRANT AND PERFECTION OF SECURITY INTEREST ..................... 38
5.1. Grant of Security Interest ..................................... 38
5.2. Exclusions from Collateral ..................................... 39
5.3. Perfection of Security Interests ............................... 40


Section 6. COLLECTION AND ADMINISTRATION ................................. 43
6.1. Borrowers' Loan Accounts ....................................... 43
6.2. Statements ..................................................... 44
6.3. Collection of Accounts ......................................... 44
6.4. Payments ....................................................... 45
6.5. Taxes .......................................................... 46


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6.6. Authorization to Make Loans .................................... 48
6.7. Use of Proceeds ................................................ 49
6.8. Appointment of Administrative Borrower as Agent for Requesting
Loans and Receipts of Loans and Statements ..................... 49
6.9. Pro Rata Treatment ............................................. 50
6.10. Sharing of Payments, Etc ....................................... 50
6.11. Settlement Procedures .......................................... 51
6.12. Obligations Several; Independent Nature of Lenders' Rights ..... 53
6.13. Nature and Extent of Each Borrower's Liability ................. 53


Section 7. COLLATERAL REPORTING AND COVENANTS ............................ 55
7.1. Collateral Reporting ........................................... 55
7.2. Accounts Covenants ............................................. 56
7.3. Inventory Covenants ............................................ 57
7.4. Reserved ....................................................... 58
7.5. Power of Attorney .............................................. 58
7.6. Right to Cure .................................................. 59
7.7. Access to Premises ............................................. 59


Section 8. REPRESENTATIONS AND WARRANTIES ................................ 60
8.1. Corporate Existence, Power and Authority ....................... 60
8.2. Name; State of Organization; Chief Executive Office;
Collateral Locations ........................................... 60
8.3. Financial Statements; No Material Adverse Change ............... 61
8.4. Priority of Liens; Title to Properties ......................... 61
8.5. Tax Returns .................................................... 61
8.6. Litigation ..................................................... 62


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8.7. Compliance with Other Agreements and Applicable Laws ........... 62
8.8. Environmental Compliance ....................................... 62
8.9. Employee Benefits .............................................. 63
8.10. Bank Accounts .................................................. 64
8.11. Intellectual Property .......................................... 64
8.12. Subsidiaries; Affiliates; Capitalization; Solvency ............. 64
8.13. Labor Disputes ................................................. 65
8.14. Restrictions on Subsidiaries ................................... 65
8.15. Material Contracts ............................................. 65
8.16. Payable Practices .............................................. 66
8.17. Accuracy and Completeness of Information ....................... 66
8.18. Survival of Warranties; Cumulative ............................. 66


Section 9. AFFIRMATIVE AND NEGATIVE COVENANTS ............................ 67
9.1. Maintenance of Existence ....................................... 67
9.2. New Collateral Locations ....................................... 67
9.3. Compliance with Laws, Regulations, Etc ......................... 68
9.4. Payment of Taxes and Claims .................................... 69
9.5. Insurance ...................................................... 69
9.6. Financial Statements and Other Information ..................... 69
9.7. Sale of Assets, Consolidation, Merger, Dissolution, Etc ........ 71
9.8. Encumbrances ................................................... 73
9.9. Indebtedness ................................................... 74
9.10. Loans, Investments, Etc ........................................ 76
9.11. Dividends and Redemptions ...................................... 79


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9.12. Transactions with Affiliates ................................... 79
9.13. Compliance with ERISA .......................................... 80
9.14. End of Fiscal Years; Fiscal Quarters ........................... 80
9.15. Change in Business ............................................. 80
9.16. Limitation of Restrictions Affecting Subsidiaries .............. 81
9.17. Fixed Charge Coverage Ratio .................................... 81
9.18. Excess Availability ............................................ 83
9.19. License Agreements ............................................. 83
9.20. Foreign Assets Control Regulations, Etc ........................ 84
9.21. After Acquired Real Property ................................... 84
9.22. Costs and Expenses ............................................. 85
9.23. Depository Relationships ....................................... 85
9.24. Further Assurances ............................................. 86


Section 10. EVENTS OF DEFAULT AND REMEDIES ............................... 86
10.1. Events of Default .............................................. 86
10.2. Remedies ....................................................... 88


Section 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING
LAW ............................................................ 92
11.1. Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver ......................................................... 92
11.2. Waiver of Notices .............................................. 93
11.3. Amendments and Waivers ......................................... 93
11.4. Waiver of Counterclaims ........................................ 95
11.5. Indemnification ................................................ 96


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Section 12. THE AGENT .................................................... 96
12.1. Appointment, Powers and Immunities ............................. 96
12.2. Reliance by Agent .............................................. 97
12.3. Events of Default .............................................. 97
12.4. Wachovia in its Individual Capacity ............................ 98
12.5. Indemnification ................................................ 98
12.6. Non-Reliance on Agent and Other Lenders ........................ 98
12.7. Failure to Act ................................................. 99
12.8. Additional Loans ............................................... 99
12.9. Concerning the Collateral and the Related Financing
Agreements ..................................................... 100
12.10. Field Audit, Examination Reports and other Information;
Disclaimer by Lenders .......................................... 100
12.11. Collateral Matters ............................................. 100
12.12. Agency for Perfection .......................................... 102
12.13. Successor Agent ................................................ 103
12.14. Other Agent Designations ....................................... 103


Section 13. TERM OF AGREEMENT; MISCELLANEOUS ............................. 103
13.1. Term ........................................................... 103
13.2. Interpretative Provisions ...................................... 105
13.3. Notices ........................................................ 107
13.4. Partial Invalidity ............................................. 108
13.5. Confidentiality ................................................ 108
13.6. Successors ..................................................... 109
13.7. Assignments; Participations .................................... 109
13.8. Entire Agreement ............................................... 112


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13.9. USA Patriot Act ................................................ 112
13.10. Counterparts, Etc .............................................. 112


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INDEX
TO
EXHIBITS AND SCHEDULES


Exhibit A Form of Assignment and Acceptance Exhibit B Information Certificate Exhibit C Form of Compliance Certificate Schedule 1.51 Existing Lenders Schedule 1.52 Existing Letters of Credit Schedule 1.97 Permitted Holders Schedule 8.15 Material Contracts Schedule 9.12 Transactions with Affiliates


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LOAN AND SECURITY AGREEMENT


This Loan and Security Agreement dated September 21, 2005, is entered into by and among SED INTERNATIONAL HOLDINGS, INC., a Georgia corporation ("Parent"), SED INTERNATIONAL, INC., a Georgia corporation ("SED"), SED MAGNA (MIAMI), INC., a Delaware corporation ("Magna") and together with Parent and SED, each individually a "Borrower" and collectively, "Borrowers" as hereinafter further defined), the parties hereto from time to time as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a "Lender" and collectively, "Lenders" as hereinafter further defined) and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as agent for Lenders (in such capacity, "Agent" as hereinafter further defined).


RECITALS:


Each Borrower has requested that Lenders make available a revolving credit and letter of credit facility to Borrowers, which shall be used by Borrowers to finance their mutual and collective enterprise of selling and distributing microcomputer products, computers, convergent technology, wireless products and consumer electronics and accessories throughout the United States and Latin America. In order to utilize the financial powers of each Borrower in the most efficient and economical manner, and in order to facilitate the financing of each Borrower's needs, Lenders agree (severally and not jointly), at the request of any Borrower, to make loans to all Borrowers under the revolving credit facility on a combined basis and in accordance with the provisions hereinafter set forth. Borrowers' business is a mutual and collective enterprise and Borrowers believe that the consolidation of all revolving credit loans under this Agreement will enhance the aggregate borrowing powers of each Borrower and ease the administration of their revolving credit loan relationship with Lenders, all to the mutual advantage of Borrowers. Lenders' willingness to extend credit to Borrowers and to administer each Borrower's collateral security therefor, on a combined basis as more fully set forth in this Agreement, is done solely as an accommodation to Borrowers and at Borrowers' request in furtherance of Borrowers' mutual and collective enterprise.


Each Borrower has agreed to be jointly and severally liable for loans and all outstanding other obligations under this Agreement and to guarantee the obligations of each of the other Borrowers under this Agreement and each of the other Financing Agreements.


NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:


SECTION 1. DEFINITIONS


For purposes of this Agreement, the following terms shall have the respective meanings given to them below:


1.1. "Accommodation Payment" shall have the meaning set forth in
Section 6.13(d) hereof.


1.2. "Accounts" shall mean, as to each Borrower, all present and
future rights of such Borrower to payment of a monetary obligation, whether
or not earned by performance, which is not evidenced by chattel paper or an
instrument, (a) for property that has been or is to be sold, leased,
licensed, assigned, or otherwise disposed of, (b) for services rendered or
to be rendered, (c) for a secondary obligation incurred or to be incurred,
or (d) arising out of the use of a credit or charge card or information
contained on or for use with the card.


1.3. "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan comprising part of the same
borrowing (including conversions, extensions and renewals), the rate per
annum (rounded upwards to the nearest 1/100th of 1%) determined by dividing
(a) the London Interbank Offered Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For
purposes hereof, "Reserve Percentage" shall mean for any day, that
percentage (expressed as a decimal) which is in effect from time to time
under Regulation D of the Board of Governors of the Federal Reserve System
(or any successor), as such regulation may be amended from time to time or
any successor regulation, as the maximum reserve requirement (including,
without limitation, any basic, supplemental, emergency, special, or
marginal reserves) applicable with respect to Eurocurrency liabilities as
that term is defined in Regulation D (or against any other category of
liabilities that includes deposits by reference to which the interest rate
of Eurodollar Rate Loans is determined), whether or not any Lender has any
Eurocurrency liabilities subject to such reserve requirement at that time.
Eurodollar Rate Loans shall be deemed to constitute Eurocurrency
liabilities and as such shall be deemed subject to reserve requirements
without benefits of credits for proration, exceptions or offsets that may
be available from time to time to a Lender. The Adjusted Eurodollar Rate
shall be adjusted automatically on and as of the effective date of any
change in the Reserve Percentage.


1.4. "Administrative Borrower" shall mean SED, in its capacity as
Administrative Borrower on behalf of itself and the other Borrowers
pursuant to Section 6.8 hereof and its successors and assigns in such
capacity.


1.5. "Affiliate" shall mean, with respect to a specified Person, any
other Person which directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control
with such Person, and without limiting the generality of the foregoing,
includes (a) any Person which beneficially owns or holds ten percent (10%)
or more of any class of Voting Stock of such Person or other equity
interests in such Person, (b) any Person of which such Person beneficially
owns or holds ten percent (10%) or more of any class of Voting Stock or in
which such Person beneficially owns or holds ten percent (10%) or more of
the equity interests and (c) any director or executive officer of such
Person. For the purposes of this definition, the term "control" (including
with correlative meanings, the terms "controlled by" and "under common
control with"),


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as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of Voting Stock,
by agreement or otherwise.


1.6. "Agent" shall mean Wachovia Bank, National Association, in its
capacity as agent on behalf of Lenders pursuant to the terms hereof and any
replacement or successor agent hereunder.


1.7. "Agent Payment Account" shall mean account no. 2070482789126 of
Agent at Wachovia (ABA No. 053000219), or such other account of Agent as
Agent may from time to time designate to Administrative Borrower as the
Agent Payment Account for purposes of this Agreement and the other
Financing Agreements.


1.8. "Allocable Percentage" shall have the meaning set forth in
Section 6.13(d) hereof.


1.9. "Applicable Margin" shall mean a percentage equal to zero with
respect to Revolving Loans that are Prime Rate Loans and 2.00% with respect
to Revolving Loans that are Eurodollar Rate Loans, provided that the
Applicable Margin shall be increased or (if no Default or Event of Default
exists) decreased, on a monthly basis as of the first day of each fiscal
month (commencing with the first full fiscal quarter after the date
hereof), according to the performance of Borrowers as measured by Average
Excess Availability for the immediately preceding fiscal month of
Borrowers, as follows:


LEVEL AVERAGE EXCESS AVAILABILITY REVOLVING LOANS - ----- --------------------------- --------------------------------------------------- I > $10,000,000 Adjusted Eurodollar Rate + 1.75% Prime Rate + zero


II > $3,500,000 Adjusted Eurodollar Rate + 2.00% Prime Rate + zero
< or = $10,000,000


III < or = $3,500,000 Adjusted Eurodollar Rate + 2.25% Prime Rate + 0.25%


On the date of any adjustment, if the Fixed Charge Coverage Ratio (as defined in Section 9.17 hereof) is greater than 2.0 to 1.0 based upon the immediately preceding twelve month period, then the applicable percentage referenced in the grid above shall be reduced by 0.25 until the next adjustment date.


1.10. "Applicable Unused Line Fee Margin" shall mean a percentage
equal to 0.375%, provided that the Applicable Unused Line Fee Margin shall
be increased or (if no Default or Event of Default exists) decreased, on a
monthly basis as of the first day of


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each fiscal month (commencing with the first full fiscal quarter after the
date hereof), according to the Average Commitment Utilization for the
immediately preceding fiscal month of Borrowers, as follows:


LEVEL AVERAGE COMMITMENT UTILIZATION UNUSED LINE FEE - ----- ------------------------------ --------------- I or = 33% but or = 66% .25%


1.11. "Assignment and Acceptance" shall mean an Assignment and
Acceptance substantially in the form of EXHIBIT A attached hereto (with
blanks appropriately completed) delivered to Agent in connection with an
assignment of a Lender's interest hereunder in accordance with the
provisions of Section 13.7 hereof.


1.12. "Average Commitment Utilization" shall mean, for any period, a
percentage obtained by dividing the Average Revolving Loan Balance for such
period by the sum of the Commitments during such period.


1.13. "Average Excess Availability" shall mean, for any period, an
amount equal to the sum of the actual amount of Excess Availability at the
end of each day during such period, as determined by Agent, divided by the
number of days in such period.


1.14. "Average Revolving Loan Balance" shall mean, for any period, the
amount obtained by adding the unpaid balance of Revolving Loans and Letter
of Credit Obligations at the end of each day during the period in question
and by dividing such sum by the number of days in such period.


1.15. "Bank Products" shall mean any one or more of the following
types of products, services or facilities extended to any Borrower by
Wachovia or any Affiliate of Wachovia: (i) commercial credit cards; (ii)
merchant card services; (iii) products or services under Cash Management
Agreements; (iv) Hedging Agreements; (v) interstate depository network
services; and (vi) such other banking products or services provided by
Wachovia or any Affiliate of Wachovia as may be requested by any Borrower,
other than Letters of Credit.


1.16. "Banking Relationship Debt shall mean Indebtedness or other
obligations of a Borrower to Wachovia (or any Affiliate of Wachovia)
arising out of or relating to Bank Products.


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1.17. "Blocked Accounts" shall have the meaning set forth in Section
6.3 hereof.


1.18. "Borrowers" shall mean, collectively, the following (together
with their respective successors and assigns): (a) Parent; (b) SED; (c)
Magna; and (d) any other Person that at any time after the date hereof
becomes a Borrower; each sometimes being referred to herein individually as
a "Borrower".


1.19. "Borrowing Base" shall mean, at any time, the amount equal to:


(a) the amount equal to: (i) eighty-five percent (85%) of the Eligible Accounts, plus (ii) the lesser of (A) the Inventory Loan Limit or (B) the sum of: (1) the lesser of (a) sixty percent (60%) multiplied by the Value of the Eligible Inventory on hand 90 days or less or (b) eighty-five percent (85%) of the Net Recovery Percentage of such Eligible Inventory, plus (2) the lesser of (a) twenty-five percent (25%) multiplied by the Value of the Eligible Inventory on hand more than 90 days but not more than 180 days or (b) eighty-five percent (85%) of the Net Recovery Percentage of such Eligible Inventory, minus


(iii) Reserves.


For purposes only of applying the Inventory Loan Limit, Agent may treat the then undrawn amounts of outstanding Letters of Credit for the purpose of purchasing Eligible Inventory as Revolving Loans to the extent Agent is in effect basing the issuance of the Letter of Credit on the Value of the Eligible Inventory being purchased with such Letter of Credit. In determining the actual amounts of such Letter of Credit to be so treated for purposes of the sublimit, the outstanding Revolving Loans and Reserves shall be attributed first to any components of the lending formulas set forth above that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to such sublimit. The amounts of Eligible Inventory of any Borrower shall, at Agent's option, be determined based on the lesser of the amount of Inventory set forth in the general ledger of such Borrower or the perpetual inventory record maintained by such Borrower.


1.20. "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close
under the laws of the State of Georgia or the State of North Carolina, and
a day on which Agent is open for the transaction of business, except that
if a determination of a Business Day shall relate to any Eurodollar Rate
Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or
other applicable Eurodollar Rate market.


1.21. "Capital Leases" shall mean, as applied to any Person, any lease
of (or any agreement conveying the right to use) any property (whether
real, personal or mixed) by such Person as lessee which in accordance with
GAAP, is required to be reflected as a liability on the balance sheet of
such Person.


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1.22. "Capital Stock" shall mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however
designated) of such Person's capital stock or partnership, limited
liability company or other equity interests at any time outstanding, and
any and all rights, warrants or options exchangeable for or convertible
into such capital stock or other interests (but excluding any debt security
that is exchangeable for or convertible into such capital stock).


1.23. "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness (including marketable securities) with a maturity date of less
than twelve (12) months issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof;
provided, that, the full faith and credit of the United States of America
is pledged in support thereof; (b) certificates of deposit or bankers'
acceptances with a maturity of twelve (12) months or less and overnight
bank deposits of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of
not less than $500,000,000; (c) c ...