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EXHIBIT 10.39
PNC BANK, NATIONAL ASSOCIATION
Xxx Xxxxx Xxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000
July 27, 2000
Eltrax Systems, Inc.
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
Re: Proposed Convertible Debenture Purchase Agreement among Eltrax
Systems, Inc., Strong River Investments, Inc. and Bay Harbor
Investments, Inc.
Ladies and Gentlemen:
Reference is hereby made to that certain Revolving Credit and Security
Agreement (as at any time amended, the "Credit Agreement") dated March 14, 2000,
among ELTRAX SYSTEMS, INC., a Minnesota corporation ("Eltrax"); ELTRAX
TECHNOLOGY SERVICES GROUP, INC., a Georgia corporation ("Technology"); ELTRAX
ASP GROUP, LLC, a Georgia limited liability company ("ASP"); SQUIRREL SYSTEMS,
INC., a Georgia corporation ("Squirrel"); SENERCOMM, INC., a Florida corporation
("Senercomm"); ELTRAX CUSTOMER CARE GROUP, INC., a Georgia corporation
("Customer Care"); ELTRAX INTERNATIONAL, INC., a Pennsylvania corporation
("International"); and ELTRAX HOSPITALITY GROUP, INC., a Georgia corporation
("Hospitality"; Eltrax, Technology, ASP, Squirrel, Senercomm, Customer Care,
International and Hospitality are collectively called the "Borrowers" and
individually called a "Borrower"); the financial institutions which are now or
which hereafter become a party to the Credit Agreement (collectively, the
"Lenders" and individually a "Lender"); and PNC BANK, NATIONAL ASSOCIATION, a
national banking association ("PNC"), as collateral and administrative agent for
Lenders (hereinafter, together with its successors and assigns in such capacity,
called the "Agent"). Further reference is hereby made to that certain
Convertible Debenture Purchase Agreement dated as of the date hereof, among
Eltrax, Strong River Investments, Inc. and Bay Harbor Investments, Inc. (the
"Purchasers"), a copy of which is attached hereto as Exhibit A (the "Purchase
Agreement"). Capitalized terms used herein and not otherwise defined herein
shall have the meaning ascribed to such terms in the Credit Agreement.
Borrowers have informed Agent that, in connection with entering into
the Purchase Agreement, Eltrax intends (1) to borrow up to $7,000,000 from the
Purchasers on an unsecured, subordinated basis and (2) to issue certain
Debentures (as defined in the Purchase Agreement and in the form attached
thereto) to evidence such borrowing and Warrants (as defined in the Purchase
Agreement and in the form attached thereto) to the Purchasers (the foregoing
transactions are hereinafter collectively referred to as the "Debenture
Financing").
Borrowers have also informed Agent that the following Events of
Default have occurred under the Credit Agreement (the "Designated Defaults"):
(1) Borrowers did not maintain the minimum Net Cash Flow required under Section
6.5 of the Credit Agreement for the two Fiscal Quarters ending June 30, 2000,
(2) Borrowers have contracted for, purchased or made Capital Expenditures (other
than
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July 27, 2000
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Capitalized Software Expenditures) during Borrowers' 2000 Fiscal Year in excess
of the amount permitted by Section 7.6 of the Credit Agreement, and (3)
Borrowers, as lessees, have entered in into lease arrangements for real and
personal property with aggregate annual rental payments exceeding the amount
permitted under Section 7.11 of the Credit Agreement for Borrowers' 2000 Fiscal
Year.
1. CONSENT TO DEBENTURE FINANCING. Borrowers have requested that
Agent and Lenders consent to Eltrax's entry into the Debenture Financing. Agent
and PNC, as the sole Lender, hereby consent to Eltrax entering into the
Debenture Financing, subject to the satisfaction of each of the following terms
and conditions, in form and substance satisfactory to Agent:
a. The Debenture Financing shall have been consummated in
accordance with the terms of the Purchase Agreement, Debentures and
Warrants.
b. Agent shall have received satisfactory assurances that, after
giving effect to the Debenture Financing, no Event of Default shall
exist.
c. Agent shall have received such other documents,
instruments and agreements as it may reasonably request in
connection with the Debenture Financing.
2. WAIVER OF DESIGNATED DEFAULTS. Borrowers have requested that Agent
and Lenders waive the Designated Defaults. Agent and PNC, as the sole Lender,
hereby waive the Designated Defaults.
3. ADDITIONAL COVENANTS. Borrowers hereby covenant and agree with
Agent as Lenders that each of the following shall constitute an additional
covenant of Borrowers under the Credit Agreement, the failure to comply with
which shall be an Event of Default under the Credit Agreement.
a. Eltrax shall (1) (A) deliver on or before August 26, 2000,
to PNC, for PNC's account, warrants (in form and substance acceptable
to PNC) for the purchase of 12,532 shares of common stock of Eltrax
("Common Stock"), with such warrants to have an exercise price of
$0.01 per share of Common Stock (the "PNC Warrants"); (B) not to file
the Underlying Shares Registration Statement (as defined in the
Purchase Agreement) unless such Underlying Shares Registration
Statement includes the Common Stock that PNC is to receive upon the
exercise of the PNC Warrants as securities registered for resale
thereunder; (C) to cause the Underlying Shares Registration Statement
to be filed with the Securities and Exchange Commission no later than
August 26, 2000, or (2) pay to PNC a waiver and consent fee of $50,000
immediately UPON DEMAND by PNC if (A) Eltrax shall fail to comply with
any provision of the foregoing clause (1) or (B) any of the following
events occur (i) the Securities and Exchange Commission fails to
declare the Underlying Shares Registration Statement effective on or
before October 24, 2001 or (ii) the Underlying Shares Registration
Statement ceases to remain effective or lapses at any time that PNC
holds any of the PNC Warrants or the Common Stock received upon the
exercise of the PNC Warrants. In the event Eltrax shall pay such
$50,000 fee to PNC after demand therefore by PNC, PNC will cancel and
return to Eltrax any PNC Warrants that have not been previously
transferred or exercised, and PNC will assign to Eltrax any shares of
Common Stock issued to PNC by Eltrax upon the exercise of the PNC
Warrants that are still held by PNC.
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b. Borrowers hereby covenant with Agent and Lenders and agree
to furnish to Agent, on or before August 18, 2000, financial
projections from July 1, 2000 through at least December 31, 2000, in
form, scope and substance acceptable to Agent. Such projections shall
include, without limitation, (i) month-by-month projected operating
budgets and cash flow statements of Borrowers on a consolidated and
consolidating basis for each weekly period and (ii) income statements
and balance sheets for Borrowers on a consolidated and consolidating
basis for each month, and such projections shall show, among other
things, (i) Borrowers' projected Availability for each such period,
(ii) the impact on the Borrowers' cash flow and profits of the sale of
any or all of the Hospitality Division and any other assets the
Borrowers intend to sell during such periods, and (iii) the impact on
the Borrowers' cash flow and profits of the sale of any additional
indebtedness the Borrowers expect to incur or equity contributions the
Borrowers expect to receive during such periods. Such projections shall
be accompanied by a certificate signed by the President or Chief
Financial Officer of each Borrower to the effect that such projections
have been prepared on the basis of sound financial planning practice
consistent with past budgets and financial statements and that such
officer has no reason to question the reasonableness of any material
assumptions on which such projections were prepared. Borrowers hereby
acknowledge and agree that the failure to furnish such projections, in
form, scope and substance acceptable to Agent, on or before August 18,
2000 shall be an Event of Default under the Credit Agreement.
c. Borrowers hereby covenant with Agent and Lenders not to
contract for, purchase or make any Capital Expenditures (other than
Capitalized Software Expenditures) or commitment for Capital
Expenditures (other than Capitalized Software Expenditures) during
Borrowers' 2000 Fiscal Year in an amount in excess of $6,250,000.
d. Borrowers hereby covenant with Agent and Lenders not to
enter, as lessee, into any lease arrangement for real or personal
property (unless capitalized and permitted under Section 7.6 of the
Credit Agreement) if after giving effect thereto, aggregate annual
rental payments for all leased property would exceed $3,250,000 in
Borrowers' 2000 Fiscal Year in the aggregate for all Borrowers.
4. MISCELLANEOUS.
a. Nothing herein shall be deemed to be a consent by Agent or
any Lender to, or a waiver of, any Default or Event of Default other
than the Designated Defaults.
b. This agreement shall be part of the Credit Agreement and a
breach of any representation, warranty or covenant herein shall
constitute an Event of Default. Except as expressly set forth herein,
nothing contained herein shall be deemed to modify or amend the terms
of the Credit Agreement, all of which shall remain in full force and
effect. This agreement shall be effective upon acceptance by
Borrowers, as evidenced by the signatures of all Borrowers hereto,
whereupon the same shall be governed by and construed in accordance
with the internal laws of the State of Georgia and shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
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c. This agreement may be executed in any number of counterparts
and by different parties to this agreement on separate counterparts,
each of which, when so executed, shall be deemed an original, but all
such counterparts shall constitute one and the same agreement. Any
signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.
Sincerely,
PNC BANK, NATIONAL ASSOCIATION, in
its capacities as Agent and as sole Lender
By: /s/ Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
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Title: Senior Vice President
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Accepted and Agreed to as of July 27, 2000:
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ATTEST: ELTRAX SYSTEMS, INC.
By: /s/ Xxxxxxx X. X'Xxxxxx
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/s/ Xxxxxxx X. Xxxxxxx, III, Secretary Name: Xxxxxxx X. X'Xxxxxx
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Title: Chairman
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ATTEST: ELTRAX TECHNOLOGY SERVICES
GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, III
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/s/ Clunet X. Xxxxx, Secretary Name: Xxxxxxx X. Xxxxxxx, III
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Title: Chief Financial Officer
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ATTEST: ELTRAX ASP GROUP, LLC
By: /s/ Xxxxxxx X. Xxxxxxx, III
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/s/ Clunet X. Xxxxx, Secretary Name: Xxxxxxx X. Xxxxxxx, III
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Title: Chief Financial Officer
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ATTEST: SQUIRREL SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, III
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/s/ Clunet X. Xxxxx, Secretary Name: Xxxxxxx X. Xxxxxxx, III
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Title: Chief Financial Officer
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ATTEST: SENERCOMM, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, III
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/s/ Clunet X. Xxxxx, Secretary Name: Xxxxxxx X. Xxxxxxx, III
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Title: Chief Financial Officer
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ATTEST: ELTRAX CUSTOMER CARE GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, III
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/s/ Clunet X. Xxxxx, Secretary Name: Xxxxxxx X. Xxxxxxx, III
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Title: Chief Financial Officer
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ATTEST: ELTRAX INTERNATIONAL, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, III
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/s/ Clunet X. Xxxxx, Secretary Name: Xxxxxxx X. Xxxxxxx, III
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Title: Chief Financial Officer
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ATTEST: ELTRAX HOSPITALITY GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, III
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/s/ Clunet X. Xxxxx, Secretary Name: Xxxxxxx X. Xxxxxxx, III
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Title: Chief Financial Officer
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ATTEST: SOLEMN ACQUISITION CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
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/s/ Xxxxxx X. Xxxxxxx, Secretary Name: Xxxxx X. Xxxxxxx
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Title: President
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