Exhibit 10(ad)
THIRD AMENDMENT
TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
This ("Amendment") to the INVENTORY AND WORKING CAPITAL FINANCING
AGREEMENT is made as of October 31, 2000 by and between CompuCom Systems Inc., a
Delaware corporation ("Customer") and IBM Credit Corporation, a Delaware
corporation ("IBM Credit").
RECITALS:
WHEREAS, Customer and IBM Credit have entered into that certain Inventory
and Working Capital Financing Agreement dated as of May 11, 1999 (as amended,
supplemented or otherwise modified from time to time, the "Agreement"); and
WHEREAS, Customer has requested and IBM Credit has agreed to amend the
Agreement as set forth herein and subject to the conditions set forth below.
AGREEMENT
NOW THEREFORE, in consideration of the premises set forth herein, and for
other good and valuable consideration, the value and sufficiency of which is
hereby acknowledged, the parties hereto agree that the Agreement is amended as
follows:
Section 1. Definitions. All capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Agreement.
Section 2. Amendment. The Agreement is hereby amended as follows:
(A) Attachment A is deleted in its entirety and substituting, in lieu thereof,
the Attachment A attached hereto. Such new Attachment A shall be effective as of
the date specified in the new Attachment A. The changes contained in such new
Attachment A include, without limitation, a change in the aggregate amount of
Credit facilities from $340,000,000 to $225,000,000 and a change in the
financial covenants as more fully set forth in such new Attachment A.
(B) Attachment C to the Agreement is hereby amended by deleting such Attachment
C in its entirety and substituting, in lieu thereof, the Attachment C attached
hereto; and from the date hereof, Customer shall use the Compliance Certificate
set forth on such new Attachment C to comply with the provisions of Section
6.1(B) of the Agreement.
Section 3. Condition Precedent. The effectiveness of this Amendment is subject
to the receipt by IBM Credit or a documentation fee in the amount of Ten
Thousand Dollars ($10,000.00).
Section 4. Ratification of Agreement. Except as specifically amended hereby, all
the provisions of the Agreement shall remain in full force and effect. Customer
hereby ratifies, confirms and agrees that the Agreement represents a valid and
enforceable obligation of Customer, and is not subject to any claims, offsets or
defenses.
Section 5. Governing Law. This Amendment shall be governed by and interpreted In
accordance with the laws of the State of New York.
Section 6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
Page 1 of 2 November 9, 2000
IN WITNESS WHEREOF, this Amendment has been executed by duly authorized
representatives of the undersigned as of the day and year first above written.
IBM CREDIT CORPORATION
By: /s/ Xxxxxxxxx Xxxxxx COMPUCOM SYSTEMS, INC.
-------------------------------
Print Name: Xxx Xxxxxx By: /s/ Xxxxxx Xxxxxx
----------------------- -------------------------------
Title: MGR Credit Print Name: XXXXXX XXXXXX
---------------------------- -----------------------
Title: V.P. - FINANCE
----------------------------
Page 2 of 2 November 9, 2000
ATTACHMENT A, EFFECTIVE DATE OCTOBER 31, 2000 ("IWCF ATTACHMENT A")
TO INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
DATED MAY 11, 1999
Customer: CompuCom Systems, Inc.
I. Fees, Rates and Repayment Terms:
(A) Credit Facilities: The aggregate of the following:
Inventory Financing Availability of One Hundred Twenty-Five Million
Dollars ($125,000,000)
plus
Working Capital Financing ("Revolver") Availability of One Hundred
Million ($100,000,000)
(B) Borrowing Base:
(i) 60% of the amount equal to the amount of Customer's Eligible
Accounts other than Concentration Accounts as of the date of
determination as reflected in the Customer's most recent Collateral
Management Report minus the outstanding amount of the Series 1999-1
and the Series 2000-1 Certificateholders' Interest and any other
outstanding interest in the Trust as of the same date;
(ii) a percentage, determined from time to time by IBM Credit in its
sole discretion, of the amount of Customer's Concentration Accounts
for a specific Concentration Account Debtor as of the date of
determination as reflected in the Customer's most recent Collateral
Management Report; unless otherwise notified by IBM Credit, in
writing, the percentage for Concentration Accounts for a specific
Concentration Account Debtor shall be the same as the percentage set
forth in paragraph (IA) or (IBi) as applicable of the Borrowing
Base;
Notwithstanding the terms of Section 3.1(W) of the Agreement, Accounts
arising from incentive payments, rebates, discounts and refunds which are
(i) verifiable by Authorized Suppliers, and (ii) payable by Authorized
Suppliers by check to the Lockbox will be deemed to be Eligible Accounts.
(iii) 100% of verifiable receivables due from IBM and IBM Credit
which are less than 90 days from the date of invoice;
(iv) 100% of the Customer's inventory in the Customer's possession
as of the date of determination as reflected in the Customer's most
recent Collateral Management Report constituting Products (other
than service parts) financed through a Product Advance by IBM
Credit, provided, however, IBM Credit has a first priority security
interest in such Products and such Products are in new and in
un-opened boxes. The value to be assigned to such inventory shall be
based upon the Authorized Supplier's invoice price to Customer for
Products net of all applicable price reduction credits;
(v) 50% of eligible inventory not financed by IBM Credit and
unencumbered by liens;
(vi) 85% of verifiable vendor credits from Hewlett-Packard Company
and Compaq Computer Corporation which credits shall be payable in
cash through Customer's Lockbox, not subject to offset, and shall be
less than 90 days from date of invoice; and
Page 1 of 4 November 9, 2000
(vii) Designated Account Debtors and Designated Account terms:
DESIGNATED ACCOUNT DEBTOR DESIGNATED ACCOUNT TERM
--------------------------------------------------------------------
Xxxxxxx-Xxxxx Squibb Company and the 105 Days
following subsidiaries and/or divisions;
Clairol Incorporated 105 Days
Convatec Limited 105 Days
Matrix Essentials, Inc. 105 Days
Xxxx Xxxxxxx & Company 105 Days
Xxxxxx Limited 000 Xxxx
Xxxxx xx Xxxxxxxxxx & various agencies, 120 Days
cities, departments and school districts.
Xxxxxx Broadcasting System Inc. 000 Xxxx
Xxxx xx Xxxxxx, Xxxxx 120 Days
(C) Collateral Insurance Amount Two Hundred and Fifty
Million Dollars
($250,000,000.00)
(D) A/R Finance Charge:
(i) PRO Advance Charge: LIBOR Rate plus 1.75%
(ii) WCO Advance Charge: LIBOR Rate plus 1.75%
(iii) Takeout Advance Charge: LIBOR Rate plus 1.75%
(E) Delinquency Fee Rate: Prime Rate plus 6.500%
(F) Shortfall Transaction Fee: Shortfall Amount
multiplied by 0.30%
(G) Free Financing Period Exclusion Fee: For each Product Advance
made by IBM Credit pursuant to Customer's financing plan where there
is no Free Financing Period associated with such Product Advance
there will be a fee equal to the Free Financing Period Exclusion
Fee. For a 30 day payment plan when Prime Rate is 7.75% the Free
Financing Period Exclusion Fee is 1.0875% of the invoice amount.
This fee will vary by .0125% with each .25% change in Prime Rate
(e.g. Prime Rate of 7.25%, the charge is 1.0425% of the invoice
amount). The fee accrues as of the Date of the Note and is payable
as stated in the billing Statement.
(H) Other Charges:
(i) Unused Facility Fee: 0.25% per annum on the
daily average unused
portion of the Revolver
payable quarterly in
arrears.
(ii) Annual Facility Fee: $50,000.00
(iii) Closing Fee; $1,075,000.00
(iv) Commitment Fee: $50,000.00
(v) Prepayment Fee: In the event that the
Customer in its sole discretion terminates the Revolver prior to the
third anniversary of the closing date, a fee in an amount equal to
the amount of the Revolver in effect as of the date of notice of
termination, multiplied by (x) from the first anniversary thereof to
the second anniversary thereof, one half percent (0.50%), and (y)
thereafter, one quarter of one percent (0.25%).
Page 2 of 4 November 9, 2000
II. Bank Account [This section intentionally left blank]
III. Financial Covenants:
Definitions: The following terms shall have the following respective meanings in
this Attachment A. All amounts shall be determined in accordance with generally
accepted accounting principles (GAAP).
"Current" shall mean within the on-going twelve month period.
"Current Assets" shall mean assets that are cash or expected to become
cash within the on-going twelve months.
"EBITDA" for any period shall mean Net Profit after Tax adjusted by adding
thereto the amount of Interest Charges and all amortization of
intangibles, taxes, depreciation, extraordinary losses, and other non-cash
charges that were deducted in arriving at Net Income for such period and
deducting any extraordinary gains that were included in arriving at Net
Income after Tax.
"Current Liabilities" shall mean payment obligations resulting from past
or current transactions that require settlement within the on-going
twelve-month period. All indebtedness to IBM Credit other than amounts
outstanding pursuant to the Revolver shall be considered a Current
Liability for purposes of determining compliance with the Financial
Covenants.
"Long Term" shall mean beyond the on-going twelve-month period.
"Long Term Assets" shall mean assets that take longer than a year to be
converted to cash. They are divided into four categories: tangible assets,
investments, intangibles and other.
"Long Term Debt" shall mean payment obligations of indebtedness which
mature more than twelve months from the date of determination, or mature
within twelve months from such date but are renewable or extendible at the
option of the debtor to a date more than twelve months from the date of
determination and specifically including all amounts outstanding to IBM
Credit pursuant to the Revolver.
"Net Profit after Tax" shall mean Revenue plus all other income, minus all
costs, including applicable taxes.
"Revenue" shall mean the monetary expression of the aggregate of products
or services transferred by an enterprise to its customers for which said
customers have paid or are obligated to pay, plus other income as allowed.
"Subordinated Debt" shall mean Customers Indebtedness to third parties
which in accordance with its terms shall rank junior in priority to the
indebtedness of Customer to IBM Credit.
"Tangible Net Worth" shall mean:
Total Net Worth specifically including all cumulative, convertible
preferred stock minus:
(a) goodwill, organizational expenses, pre-paid expenses, deferred
charges, research and development expenses, software development
costs, leasehold improvements, trademarks, trade names, copyrights,
patents, patent applications, privileges, franchises, licenses and
rights in any thereof, and other similar intangibles (but not
including contract rights) and other current and non-current assets,
deferred commitment or financing fees, current and non-current
Federal Income Taxes Due.
Page 3 of 4 November 9, 2000
deferred service costs and security deposits as identified in
Customers financial statements; and
(b) all accounts receivable from employees, officers, directors,
stockholders and affiliates.
"Total Assets" shall mean the total of Current Assets and Long Term
Assets.
"Total Liabilities" shall mean the Current Liabilities and Long Term Debt
less Subordinated Debt resulting from past or current transactions that
require settlement in the future.
"Total Net Worth" (the amount of owner's or stockholders ownership in an
enterprise) is equal to Total Assets minus Total Liabilities plus
Subordinated Debt.
"Working Capital" shall mean Current Assets minus Current Liabilities.
Customer will be required to maintain the following financial ratios,
percentages and amounts as of the last day of the fiscal quarter under review by
IBM Credit:
(a) Current Assets to Current Liabilities ratio equal to or greater than
1.25:1.0;
(b) The percentage derived by dividing the aggregate Net Profit/(Loss)
after Tax for each of the four successive fiscal quarters end with
the quarter for which the determination is made by the aggregate of
Revenue for the same four successive fiscal quarters which
percentage shall be at all times equal to or greater than 0.1%,
provided, however, that the results of no fiscal quarter ending
prior to July 1, 2000 shall be used to calculate the foregoing
percentage, and further provided that there shall occur no Net Loss
after Tax in any of two successive fiscal quarters ending after July
1, 2000.
(c) Tangible Net Worth equal to or greater than $110 Million Dollars
plus 75% of Net Profit after Tax plus 100% of the proceeds received
from the placement of additional equity;
(d) Loans to officers shall at no time exceed the aggregate amount of
$7,000,000;
(e) Capital expenditures shall not exceed the aggregate amount of
$15,000,000 in any one fiscal year, and
(f) Permitted Investments shall not exceed from the date hereof the
aggregate amount of $5,000,000 plus equity investments held by
Customer as of the date hereof in, E-Certify, Inc., Global Service
Computer Services, Ltd., and Gateway 2000 Corporation.
IV. Additional Conditions Precedent Pursuant to Section 5.1(K) of the
Agreement
[This section intentionally left blank]
V. Additional Condition Precedent Pursuant to Section 3. of the third
Amendment to the Agreement:
Payment to IBM Credit of a $10,000.00 Documentation Fee.
Page 4 of 4 November 9, 2000
IWCF ATTACHMENT C
TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
DATED MAY 11, 1999
COMPLIANCE CERTIFICATE
TO: IBM CREDIT CORPORATION
0000 XxxxxXxxx Xxxxxxx
Xxxxxxx, XX 00000
The undersigned authorized officers of CompuCom Systems, Inc.
("Customer"), hereby certify on behalf of the Customer, with respect to the
Inventory and Working Capital Financing Agreement executed by and between
Customer and IBM Credit Corporation ("IBM Credit") on May 11, 1999, as amended
from time to time (the "Agreement"), that (A) Customer has been in compliance
for the period from _________, 20__, to _____________, 20__, with the financial
covenants set forth in Attachment A to the Agreement, as demonstrated below, and
(B) no Default has occurred and is continuing as of the date hereof, except, in
either case, as set forth below. All capitalized terms used herein and not
otherwise defined shell have the meanings assigned to them in the Agreement.
Financial Covenants:
Covenant Covenant Requirement Covenant Actual
------------------------------- ----------------------------------------------------- ---------------
(i) Net Profit/(Loss) after Net Profit/(Loss) after Tax:
Tax to Revenue
Current fiscal quarter ending _________________, 200_ $______________
Prior fiscal quarter ending __________________, 200_ $______________
Prior fiscal quarter ending __________________, 200_ $______________
Prior fiscal quarter ending __________________, 200_ $______________
Aggregate Net Profit/(Loss) after Tax $______________
Revenue:
Current fiscal quarter ending ________________, 200_ $______________
Prior fiscal quarter ending __________________, 200_ $______________
Prior fiscal quarter ending __________________, 200_ $______________
Prior fiscal quarter ending___________________, 200_ $______________
Aggregate Revenue
Aggregate Net Profit/(Loss) after Tax ended by
Aggregate Revenue (must be greater than 0.01%) $______________
Successive fiscal quarters ending after July 1, 2000
in which the Net Profit After Tax shall be equal to
less than zero. ______________%
(ii) Current Assets to Greater than 1.25 : 1.0
Current Liabilities ______________
(iii) Loans to Officers Not to exceed $7,000,000 in aggregate $______________
Page 1 of 3 November 14, 2000
IWCF ATTACHMENT C
TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
DATED MAY 11, 1999
(Continued)
Covenant Covenant Requirement Covenant Actual
------------------------------- ----------------------------------------------------- ---------------
(iv) Permitted Investments Shall not exceed from the date hereof the
aggregate amount of $5,000,000 plus equity
investments held by Customer as of the date
hereof in; E-Certify Inc., Global Salvo Computer
Services, Ltd., and Gateway 2000 Corporation. $______________
(v) Capital Expenditures Shall not exceed the aggregate amount of $______________
$15,000.000 in any one fiscal year
(vi) Tangible Net Worth Tangible Net Worth equal to or greater than $110
Million Dollars plus 75% of Net
Profit after Tax plus 100% of the
proceeds received from the
placement of additional equity $______________
Calculation of Total Net Worth specifically including all
Tangible Net Worth cumulative, convertible preferred stock $_______________
LESS:
Goodwill $______________
Organizational expenses $______________
Deferred research and development expenses,
software development costs $______________
Deferred charges, etc $______________
Leasehold improvements $______________
Trademarks, trade names,
copyrights, patents, patent
applications, privileges,
franchises licenses and rights and
other similar intangibles (but not
including contract rights) $______________
Other current and non-current assets $______________
Officer, employee, director, stockholder
and affiliate receivables $______________
Prepaid expenses $______________
Deferred commitment or financing
fees, current and non-current
Federal Income Taxes Due, deferred
service costs and security deposits $______________
Total adjusted Tangible Net Worth $______________
Page 2 of 3 November 14, 2000
IWCF ATTACHMENT C
TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
DATED MAY 11, 1999
(Continued)
Attached hereto are Financial Statements as of and for the end of the fiscal
[quarter/fiscal] ended on the applicable date, as required by Section 7.1 of the
inventory and Working Capital Financing Agreement
Submitted by:
CompuCom Systems, Inc.
By: ________________________________________
Print Name: ________________________________
Title: _____________________________________
Page 3 of 3 November 14, 2000
