Exhibit 10.1
June 27, 1996
Pomeroy Computer Resources, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Vice President
Dear Ed:
This letter agreement (this "Amendment") confirms and evidences
certain agreements between Star Bank, National Association, a national banking
association (the "Bank"), and Xxxxxxx Computer Resources, Inc., a Delaware
corporation ("Pomeroy") and your subsidiary companies, C&N Corp., a Tennessee
corporation, Xenas Communications Corp., an Ohio corporation and Xxxxxxx
Computer Leasing Company, Inc., a Kentucky corporation (collectively with
Pomeroy, the "Borrowers"), with respect to amendment of the Loan Agreement
between the Bank and the Borrowers originally dated as of March 14, 1996 (the
"Agreement"), as follows:
1. REVOLVING CREDIT LOANS. The Agreement is hereby amended so that
the Revolving Credit Loans under Section 4(a) shall be made directly, without
use of a Credit Reserve, but subject to an Incentive Pricing Spread, all as
specified in the amended and restated Section 4(a), which shall hereafter read
as follows:
4. LOANS.
(a) REVOLVING CREDIT LOANS AND COMMITMENT. Subject to the terms
and conditions of this Agreement, and subject to there being no Event of Default
(or an event which would, with notice or the passage of time or both, mature
into an Event of Default) by Borrowers hereunder, the Bank agrees to lend and
relend to the Borrowers, jointly and severally, for the purposes specified in
EXHIBIT "1(i)" to the Agreement, during the period from the date hereof to THE
EARLIER OF (i) April 30, 1997 (or the date of any extension of this Agreement in
a writing signed by the Bank), OR (ii) the date of the occurrence of an Event of
Default specified in Section 5 below, unless waived by the Bank (such earlier
date herein called the "Commitment Termination Date"), such amounts as Borrowers
may from time to time request not exceeding in the aggregate at any time
outstanding to Borrowers the LESSER OF: [A] Eighty-Five Percent (85%) of
Eligible Receivables, OR [B] Twenty-Five Million Dollars (U.S.$25,000,000). If
the aggregate amount of Revolving Credit Loans made to Borrowers hereunder and
outstanding at any one time exceeds the limits as described in Section 4(a)[A]
and 4(a)[B] above, then Borrowers shall, within five (5)
days thereof, repay sufficient of the Loans to bring the outstanding Loan amount
within such limits. "Eligible Receivables" hereunder shall mean those accounts
receivables of Borrowers acceptable in good faith to Bank and as further
specified in EXHIBIT "4(a)(i)" to this Agreement. The Commitment Amount shall
also be reduced dollar-for-dollar for letters of credit issued by the Bank at
the request of Borrowers (such additional credit facilities being subject to
approval and pricing by the Bank on a case-by-case basis). Such loans shall be
referred to herein as the "Revolving Credit Loan" or the "Revolving Credit
Loans."
If the aggregate amount of Revolving Credit Loans made to
Borrowers hereunder and outstanding at any one time exceeds the applicable
Commitment Amount limits as described above, then Borrowers shall immediately
repay sufficient of the Revolving Credit Loans to bring the outstanding
Revolving Credit Loan amount within such limits. Each loan draw shall represent
Borrowers' representation to Bank that its Loan request is within such limits
and that there is no event of default hereunder.
The sum of all Revolving Credit Loan draws shall never exceed the
Commitment Amount and shall be drawn in minimum amounts of One Hundred Thousand
Dollars ($100,000) and multiples thereof up to the Commitment Amount; provided,
however, that no Revolving Credit Loan draw to be subject to fixed rate pricing
shall be less than Two Million dollars ($2,000,000) and additional multiples of
$100,000 thereafter up to the Commitment Amount. Borrowers shall give notice to
the Bank by 12:00 noon (such time, and any time hereinafter noted, being local
Cincinnati time) of the day on which it desires to obtain a Revolving Credit
Loan priced on a variable rate basis and by 11:00 a.m. of the date in which it
requires such Loan on a fixed rate pricing basis. The Bank requires three (3)
business days prior notice for fixed rate pricing Loans. Any notice received by
the Bank after such times shall be deemed to have been given on such time on the
next succeeding business day. Such notice for fixed rate pricing Loans may be
given by telephone but shall be promptly followed by written confirmation from
the Borrowers to the Bank in the form of EXHIBIT "4(a)(i)" hereof. Should
Borrowers decide not to take a draw at the time specified in a request by it,
such draw lapses and Borrowers must give the Bank a new request as provided in
this Section to take a draw at another time. If such lapsed draw involved a
Loan with fixed rate financing, Borrower shall be subject to prepayment fees as
specified in Section 4(d) hereof. Each advance of a Revolving Credit Loan shall
be effectuated by crediting of Xxxxxxx'x checking account at the Bank, account
number 000-0000-00. The Revolving Credit Loans shall be evidenced by the
Revolving Credit Note given by Borrowers to the Bank, in the form of EXHIBIT
"4(a)(ii)" attached hereto and made a part hereof (hereinafter called the
"Revolving Credit Note"). The Bank is hereby authorized by Borrowers to enter
from time to time on the reverse of the Revolving Credit Note the principal
balance of its Revolving Credit Loan and all payments and prepayments thereon,
and the aggregate
unpaid amount of the Revolving Credit Loan set forth on the Revolving Credit
Note shall be contained in a monthly statement sent to Borrowers and if not
objected to by Borrowers within a reasonable time thereafter, shall be
presumptive evidence of the principal amount owing to the Bank and unpaid
thereon. Upon written request of the Bank, Borrowers shall immediately exchange
the Revolving Credit Note then outstanding for a revised and updated Revolving
Credit Note.
The Revolving Credit Note shall bear interest at a rate (i) which
shall vary from time to time with the rate announced at the Bank from time to
time as its prime rate (the "Prime Rate") MINUS the Incentive Pricing Spread (as
defined below), OR, (ii) if elected by Borrowers, the LIBOR Rate (as defined
below) PLUS the Incentive Pricing Spread, such rates to be adjusted on the
effective date of any change in the Prime Rate and/or in the Incentive Pricing
Spread. If, for any reason in the good faith opinion of Bank, a LIBOR rate
cannot be determined or used for a short interim period, interest on the
Revolving Credit Loans for such period shall be at the Prime Rate minus the
applicable Incentive Pricing Spread. The Prime Rate is determined solely by the
Bank pursuant to market factors and its own operating needs and such rate is not
necessarily the Bank's best or most favorable rate for commercial or other
loans. The "LIBOR Rate" shall be the rate defined in and calculated pursuant to
EXHIBIT "4(a)(iii)", or, if unavailable, any other consensus LIBOR Rate
reasonably determined by Bank. Such interest shall be computed on the basis of
a year consisting of 360 days and applied to the actual number of days elapsed.
At the option of Borrowers, they may convert any portion of the then-available
Commitment Amount, whether then outstanding or not, in a minimum amount of
$2,000,000 and in additional multiples of $100,000 thereafter, to a fixed LIBOR
rate pricing over an elected period approximately equal, at Borrowers' option,
to one (1), two (2), three (3) or six (6) months during the term of this
Agreement, by a writing received by the Bank (as noted above). No such election
shall be effective if the fixed maturity date (three months) chosen is beyond
April 30, 1997 and not more than three (3) LIBOR rate Loans shall be outstanding
at any one time. Unless otherwise elected by Borrowers, any fixed LIBOR rate
Loan shall revert to a variable rate Loan (at the Prime Rate minus the
applicable Incentive Pricing Spread) at the expiration of any such fixed rate
term. Interest shall be payable to the Bank for fixed rate Loans as of the end
of each elected LIBOR period but no less frequently than monthly, and otherwise
for variable rate Loans monthly in arrears, commencing on June 30, 1996, and
monthly thereafter on the last day of each calendar month and when the Revolving
Credit Note is due. After any event of default as defined in Section 5 herein,
and whether or not the Bank accelerates the maturity of the Loans hereunder, the
Revolving Credit Note shall bear interest (computed and adjusted in the same
manner, and with the same effect, as interest on the Revolving Credit Note prior
to maturity) payable on demand at a rate per annum equal to the Prime Rate plus
three percent (3%), in all cases until paid or cured and whether before or after
any entry of any judgment thereon. The Borrowers shall also pay any late
payment fee specified in the Revolving Credit Note.
The interest rate pricing of the Revolving Credit Loans noted
herein shall be subject to incentive pricing adjustments (the "Incentive Pricing
Spread") as follows, such adjustments to be effective as of the fifteenth day of
the second fiscal month following Borrowers' quarterly consolidated fiscal
periods, commencing with such statements due for the period ended April 5, 1996
(and with any Borrower-favorable price adjustments in the Incentive Pricing
Spread conditioned on no events of default then existing under this Agreement)
and remain effective until readjusted by the next fiscal quarter's report
showing a different rate should be in effect:
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DEBT RATIO EBITDA RATIO INCENTIVE PRICING SPREAD PER
ANNUM BELOW PRIME RATE
(OR ABOVE LIBOR RATE)
--------------------------------------------------------------------------------
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Prime LIBOR
--------------------------------------------------------------------------------
More than 5.0 to 1.0 -- 0.00% 275 basis points
--------------------------------------------------------------------------------
Less than 5.0 to 1.0 -- 0.25% 250 basis points
--------------------------------------------------------------------------------
Less than 4.0 to 1.0
and Less than 3.5 to 1.0 0.50% 225 basis points
--------------------------------------------------------------------------------
Less than 3.0 to 1.0
and Less than 3.25 to 1.0 0.75% 200 basis points
--------------------------------------------------------------------------------
Less than 2.0 to 1.0
and Less than 3.0 to 1.0 0.75% 175 basis points
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The "Debt Ratio" and "EBITDA Ratio" shall be as defined in EXHIBIT
"2(o)". All financial terms shall be defined pursuant to generally
accepted accounting principles as consistently applied to Borrower's
business. Where both Ratios must be met and one is not so met, the
less advantageous Incentive Pricing Spread shall apply. For example,
if the Debt Ratio is less than 3.0 to 1.0, but the EBITDA Ratio is
less than 3.5 to 1.0, the Incentive Pricing Spread for Prime Rate
Loans will be Prime minus 0.50%. It is acknowledged that, as of the
date of this Agreement, based on the applicable Incentive Pricing
Spread, the current interest rate on variable priced Loans is the
Prime Rate minus 0% per annum and on fixed price loans, LIBOR plus 275
basis points.*
The Revolving Credit Note shall be due on April 30, 1997 without
need for demand or notice to Borrower, or earlier in case of any earlier
Commitment Termination Date.
*NOTWITHSTANDING THE ABOVE TABLE, THE BANK AGREES THAT THE INCENTIVE PRICING
SPREAD FOR PRIME RATE LOANS FROM THE DATE HEREOF UNTIL AUGUST 20, 1996 SHALL BE
PRIME MINUS 0.25%.
2. REVOLVING CREDIT NOTE. The Revolving Credit Note shall remain
outstanding as originally issued and is hereby ratified and confirmed by
Borrowers.
3. COMMITMENT FEE. Section 4(c) of the Loan Agreement is amended to
decrease the Commitment Fee from one-fourth of one percent (0.25%) to
three-sixteenth of one percent (0.1875%), effective July 1, 1996, but otherwise
calculated and payable as noted in said Section 4(c).
4. PREPAYMENT FEE. Section 4(d) of the Loan Agreement is hereby
amended and restated to read as follows:
(d) PREPAYMENTS AND REFINANCING. The Borrower may from time to
time, after the date of this Agreement and from time to time thereafter, repay
or prepay part or all of the Revolving Credit Loan or Term Loan principal
balance outstanding. Repayments shall be in the minimum amount of $100,000 and
multiples thereof. Except as noted below, there shall be no prepayment premium
for any such prepayments by Borrower. Prepayments on any Revolving Credit Loans
then subject to unexpired LIBOR pricing periods may be repaid only with
termination fees determined in good faith by Bank to compensate it from loss,
such fees usually determined in accord with EXHIBIT "4(d)" attached hereto. All
prepayments of the Term Loans shall be applied to unpaid principal installments
of the Term Loans in the inverse order of the maturity dates of such
installments, and each such repayment or prepayment shall include accrued
interest to the date of prepayment on the principal amount being prepaid. Any
amounts repaid or prepaid on any Term Loans shall not be reloaned to Borrowers
by the Bank.
5. NON-FINANCIAL COVENANTS. Sections 2(f), 2(j) and 2(w) of the
Loan Agreement [and related EXHIBIT "2(f)"] are hereby amended to reflect and
allow the $1,650,000 remaining as an unpaid Xxxxxxx obligation to Vanstar
Corporation pursuant to settlement of their outstanding litigation (for a total
of $3,300,000 and the related cancellation of $500,000 of accounts receivable
owing from Vanstar), as collateralized by the pledge of shares owned by Xxxxx X.
Xxxxxxx. The Bank waives, retroactive to the Vanstar settlement date, any Event
of Default which may have been caused thereby. Sections 2(j) and 2(w) shall
also be deemed interpreted to allow for Xxxxxxx'x pending secondary offering of
1,200,000 shares of its common stock (1,402,500 shares if the underwriter's
over-allotment is exercised), and for Xx. Xxxxxxx to sell, *150,000 of his
common shares. Provided, however, that such waivers shall not apply to
any other Borrower Indebtedness, or sale or pledge of shares by Xx. Xxxxxxx
which is not provided for or allowed under the Loan Agreement, as amended
hereby.
*IN CONNECTION WITH SUCH OFFERING
6. FINANCIAL COVENANTS. EXHIBIT "2(o)" is hereby modified and
restated to read as noted in revised EXHIBIT "2(o)" attached to this Amendment.
7. AMENDMENT FEE. In connection with this amendment, the Borrowers
agree to pay the Bank, upon execution hereof, the sum of * as an
amendment fee, and remain responsible for all other out-of-pocket expenses
(including attorneys' fees) payable under the terms of the Agreement.
*$35,000.00
8. DELIVERIES. In connection with this Amendment, there shall be
delivered to the Bank a copy of resolutions of each of Borrowers' Boards of
Directors authorizing the execution and delivery of this Amendment, each
certified in the form previously provided to the Bank.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as expressly
amended hereby, all representations, warranties and covenants of the Borrowers
set forth in the Agreement shall be deemed restated as of the date hereof, and
the Borrowers further represent and warrant that:
(a) This Amendment has been duly executed and delivered by the
Borrower and authorized by all requisite corporate action; and
(b) The execution and delivery by the Borrower of this Amendment does
not constitute a violation of any applicable law or a breach of any provision
contained in any Borrower's Certificate or Articles of Incorporation or By-Laws
or Regulations, or contained in any order of any court or other governmental
agency or in any agreement, instrument or document to which any Borrower is a
party or by which the Borrowers or any of their assets or properties is bound.
(c) There is outstanding no Event of Default, other than waived
hereunder (or previously by the Bank in writing).
10. MISCELLANEOUS.
(a) The Borrowers shall reimburse the Bank for all out-of-pocket
costs and expenses, including without limitation reasonable attorneys' fees,
incurred by the Bank or for which the Bank becomes obligated in connection with
or arising out of this Amendment.
(b) As amended hereby, the Agreement shall remain in full force and
effect, and all references in the Loan Documents to "the Agreement" shall mean
the Agreement as amended hereby.
(c) Capitalized terms used but not defined herein shall have the same
meanings herein as in the Agreement.
(d) This Amendment may be executed in counterparts.
Ed, please acknowledge the agreement of the Borrowers to the terms set
forth in this Amendment by having two copies of this Amendment duly executed by
the Borrowers in the appropriate places below and returning one of such copies
to the Bank with copies of the certified resolutions noted above.
STAR BANK, NATIONAL ASSOCIATION
By: \s\ Xxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxx X. Xxxxx
Vice President
ACKNOWLEDGED, ACCEPTED AND AGREED
TO AS OF THE DATE FIRST NOTED ABOVE:
XXXXXXX COMPUTER RESOURCES, INC. XENAS COMMUNICATIONS CORP.
By: \s\ Xxxxx X. Xxxxxxxxx By: \s\ Xxxxx X. Xxxxxxxxx
---------------------- -----------------------
Xxxxx X. Xxxxxxxxx Xxxxx X. Xxxxxxxxx
Chief Financial Officer and Treasurer Secretary-Treasurer
C & N CORP. XXXXXXX COMPUTER LEASING
COMPANY, INC.
By: \s\ Xxxxx X. Xxxxxxxxx By: \s\ Xxxxx X. Xxxxxxxxx
---------------------- -----------------------
Xxxxx X. Xxxxxxxxx Xxxxx X. Xxxxxxxxx
Vice President Secretary-Treasurer
EXHIBIT 4(a)(i)
REVOLVING CREDIT LOAN REQUEST FOR FIXED RATE PRICING
PURSUANT TO LOAN AGREEMENT BETWEEN XXXXXXX COMPUTER RESOURCES, INC.
SUBSIDIARIES AND STAR BANK, NATIONAL ASSOCIATION
Star Bank, National Association
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxx
Vice President
Dear Xxxx:
The undersigned hereby requests on behalf of Xxxxxxx Computer Resources, Inc.
and its subsidiaries (together the "Companies") a Revolving Credit Loan pursuant
to Section 4(a) of the above referenced Loan Agreement in the amount of
$____________ to be priced on a [1], [2], [3], [6] [circle one applicable
box]-month LIBOR Rate basis and to be made available on ________________, 19__
[specify a date not earlier than the date permitted in the Loan Agreement]. It
is understood that the Bank may provide a notation of same on, or on a schedule
attached to the Revolving Credit Note.
In support of this request, the Companies confirm and hereby represent and
warrant to the Bank that the representations and warranties contained in the
Loan Agreement remain true and correct in all material respects as of the date
hereof and will be correct in all material respects as of the date hereof and
will be true and correct in all material respects on the date such Revolving
Credit Loan is made (i.e. both before and after such Loan is made) and that no
Event of Default (as defined under the Loan Agreement) has occurred and is
continuing or will exist on the date such Revolving Credit Loan is made (whether
before or after such Loan is made).
Sincerely,
XXXXXXX COMPUTER RESOURCES, INC.
on behalf of itself and Subsidiaries
By:______________________________________
[authorized officer]
Date:__________________________, 19____
EXHIBIT 4(a)(iii)
LIBOR RATE DEFINITION
(i) "LIBOR Rate" shall mean that rate of interest per annum determined
solely by the Bank, as the rate offered to the Bank by prime banks (rounded off
upwards, if necessary, to the nearest 1/10000 of one percent) for deposits with
the Bank of immediately available Dollars in the London Interbank Market at or
about 11:00 a.m., London time, (or such earlier time as may be arranged and
agreed upon by the Borrower and the Bank) and the Bank on the date two (2)
Eurodollar Business Days preceding an Interest Determination Date and adjusted
for Reserve Percentages and any other regulatory and/or governmental costs
incurred by the Bank from eurocurrency liabilities. The amount of the
adjustment for Reserve Percentages and regulatory and/or governmental costs
shall be based upon the assumption that the Bank funded 100% of the loan in the
London Interbank Market.
(ii) "Interest Determination Date" shall mean (A) in the case of any
outstanding advance, the date which is the third to last Eurodollar Business Day
of the then current Interest Period, or (B) in the case of any new advance, that
date which is two (2) Eurodollar Business Days prior to the date such Advance is
actually made. If such rate is not a Eurodollar Business Day then the
immediately preceding Eurodollar Business Day shall be utilized.
(iii) "Interest Period" shall mean, with respect to any LIBOR Rate
Loan, the period commencing on the date such Loan is made, continued or
converted or on the last day of the immediately preceding Interest Period
applicable to such LIBOR Rate Loan, as the case may be, and ending on the same
day in the third calendar month thereafter, as the Borrower may elect in advance
in accordance with the requirements of the Loan Agreement; provided, however,
that whenever the last day of any Interest Period would otherwise occur on a day
other than a Eurodollar Business Day, the last day of such Interest Period shall
occur on the next succeeding Eurodollar Business Day, and further provided that
if such extension of time would cause the last day of such Interest Period for a
LIBOR Rate Loan to occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding Eurodollar Business Day.
If any Interest Period ends on a day during a month in which there is
numerically corresponding day to the first day of the Interest Period, then the
Interest Period shall end on the last Eurodollar Business Day of such calendar
month.
(iv) "Eurodollar Business Day" shall mean any day on which major commercial
banks in London, England are open for the regular conduct of business. Interest
shall accrue from and including the first day of an Interest Period to, but
excluding, the last day of such Interest Period.
(v) "Reserve Percentages" shall mean the total maximum reserve percentages
for determining the reserves to be maintained by member banks of the Federal
Reserve System for Eurocurrency Liabilities, as defined in Federal Reserve Board
Regulation D, rounded upward to the
nearest 1/100 of one percent. The percentage will include, but not be limited
to, marginal, emergency, supplemental, special, and other reserve percentages.
EXHIBIT 2(o)
FINANCIAL COVENANTS
In addition to the provisions of the Loan Agreement, Borrowers shall
have the following requirements:
1. Maintain consolidated Tangible Net Worth at no less than the
following amounts by and after the following dates:
TANGIBLE NET WORTH DATE
$11,500,000 April 5, 1996
$14,000,000 October 5, 1996
$16,000,000 January 5, 1997
"Tangible Net Worth" shall mean all equity accounts PLUS any debt full
subordinated to the Bank (excluding, however, debt owed to Supply) MINUS all
intangible assets MINUS any amounts due from officers, shareholders, or
affiliates of the Borrowers (excluding employee travel or expense advances
extended in the normal course of business).
2. Maintain a ratio of consolidated Debt to consolidated Tangible
Net Worth [the "Debt Ratio"] of not more than the following amounts by and after
the following dates:
DEBT RATIO DATE
5.75 to 1.0 April 5, 1996
4.75 to 1.0 October 5, 1996
4.25 to 1.0 January 5, 1997
"Debt" hereunder shall mean all the obligations and liabilities of the Borrowers
including (but not limited to) accounts payable, accrued expenses, Bank
borrowings, other notes payable, capitalized lease obligations, and amounts due
to floor plan finance companies.
3. Generate at all times consolidated trailing twelve (12) month
after-tax net income of not less than the following amounts by and after the
following dates:
AMOUNT DATE
$2,000,000 April 5, 1996
$3,500,000 October 5, 1996
$3,500,000 January 5, 1997
For purposes of the Incentive Pricing Spread under Section 4(a) of the
Agreement, the EBITDA Ratio shall mean the ratio of Borrower's consolidated Debt
to consolidated net earnings before interest, taxes, and depreciation and
amortization expenses for the trailing twelve (12) fiscal months.
