Exhibit 10.11
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CREDIT AGREEMENT
among
HSBC BANK USA, as Arranger,
L/C Issuer and an American Lender
GENERAL ELECTRIC CAPITAL CORPORATION,
as American Collateral Agent and an American Lender
LASALLE BUSINESS CREDIT, LLC,
as Documentation Agent and an American Lender
and the other American Lenders who Become Parties
Hereto on or after the Date Hereof
and
General Electric Capital Canada Inc.,
as Canadian Collateral Agent and a Canadian Lender
and HSBC Bank USA (Toronto Branch), as a Canadian Lender,
ABN AMRO BANK N.V., Canada Branch, as a
Canadian Lender
the other Canadian Lenders who Become Parties
Hereto on and after the Date Hereof
and
WESTCON GROUP, INC., as Westcon and an Obligor,
WESTCON GROUP NORTH AMERICA, INC.,
as Westcon America and a Borrower
and
WESTCON CANADA SYSTEMS (WCSI) INC.
as Westcon Canada and a Borrower
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Dated: June 12, 2003
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS....................................................2
1.1 Definitions....................................................2
1.2 UCC Terms.....................................................29
1.3 Accounting Terms..............................................29
1.4 Dollars.......................................................29
ARTICLE 2. THE CREDITS...................................................29
2.1 The Revolving Credit..........................................29
2.2 The Revolving Notes...........................................32
2.3 Letters of Credit.............................................32
2.4 Letters of Credit.............................................33
2.5 Interest Option...............................................38
2.6 Computation And Payment Of Interest...........................40
2.7 Voluntary Prepayment..........................................41
2.8 LIBOR Breakage And Other Costs................................41
2.9 Sharing of Payments...........................................42
2.10 Non-Receipt of Funds by American Collateral Agent.............43
2.11 Non-Receipt of Funds by Canadian Collateral Agent.............43
2.12 Special Provisions Governing LIBOR Loans - Increased Costs....44
2.13 Required Termination and Repayment of LIBOR Loans.............45
2.14 Taxes.........................................................46
2.15 Revolving Loan Commitment Reduction...........................48
2.16 Payments......................................................48
2.17 Charge to Account.............................................49
2.18 Use of Proceeds...............................................49
2.19 American Cash Management......................................49
2.20 Canadian Cash Management......................................49
ARTICLE 3. CONDITIONS TO THE CREDIT......................................49
3.1 Corporate Action..............................................50
3.2 Charter Documents.............................................50
3.3 Revolving Notes...............................................50
3.4 Security Agreements...........................................50
3.5 Pledge Security Agreements....................................51
3.6 Blocked Account Agreements....................................52
3.7 Guaranties....................................................52
3.8 Intentionally Omitted.........................................52
3.9 Subordination Agreement.......................................52
3.10 Minimum Excess Availability...................................52
3.11 Solvency......................................................52
3.12 Lien Searches.................................................53
3.13 Material Adverse Effect.......................................53
3.14 Intellectual Property Security Agreements.....................53
3.15 Guarantor Security Agreement..................................53
3.16 Payment of Existing Facilities................................54
3.17 Assignment of Claims..........................................54
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3.18 Waivers, Warehousemen And Processor's Notifications
And Acknowledgments And Freight Forwarder's Agreements........54
3.19 Collateral Audits.............................................54
3.20 Inventory Appraisals..........................................55
3.21 Projections...................................................55
3.22 Insurance.....................................................55
3.23 Other Collateral..............................................55
3.24 Fees..........................................................56
3.25 Equity Requirement............................................56
3.26 Opinions......................................................56
3.27 Subsequent Extensions of Credit-Revolving Credit..............56
3.28 Other Matters.................................................56
ARTICLE 4. REPRESENTATIONS AND WARRANTIES.................................56
4.1 Good Standing and Authority....................................57
4.2 Executive Offices, Collateral Locations, FEIN..................57
4.3 Ownership of Property; Liens...................................57
4.4 Ventures, Subsidiaries and Affiliates; Outstanding Stock
and Indebtedness...............................................58
4.5 Insurance......................................................58
4.6 Deposit and Disbursement Accounts..............................58
4.7 Supplemental Disclosure........................................58
4.8 Valid and Binding Obligation...................................59
4.9 Notes Receivable...............................................59
4.10 No Pending Litigation..........................................59
4.11 No Consent or Filing...........................................59
4.12 No Violations..................................................59
4.13 Financial Statements...........................................60
4.14 Tax Returns....................................................60
4.15 Subsidiaries and Authorized Shares.............................60
4.16 Validity Of Loan Documents.....................................61
4.17 Intellectual Property..........................................61
4.18 Contingent Liabilities.........................................61
4.19 Licenses, Permits, Etc.........................................61
4.20 Labor Contracts................................................61
4.21 Solvency.......................................................61
4.22 ERISA Matters..................................................61
4.23 Environmental Matters..........................................62
4.24 Validity of Receivables........................................63
4.25 Inventory......................................................63
ARTICLE 5. CERTAIN DOCUMENTS TO BE DELIVERED TO SECURED PARTY............ 63
5.1 Invoices.......................................................63
5.2 Chattel Paper..................................................64
ARTICLE 6. COLLECTIONS....................................................64
6.1 Collections....................................................64
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ARTICLE 7. PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND EXPENSES...64
7.1 Promise To Pay Principal.......................................64
7.2 Promise To Pay Interest........................................65
7.3 Mandatory Prepayment...........................................65
7.4 Promise To Pay Fees............................................65
7.5 Promise To Pay Costs And Expenses..............................66
7.6 Limitation on Westcon Canada's Obligations.....................67
7.7 Method of Payment Of Principal, Interest, Fees,
And Costs And Expenses.........................................67
7.8 Account Stated.................................................68
7.9 Capital Adequacy...............................................68
ARTICLE 8. AFFIRMATIVE COVENANTS..........................................69
8.1 Payments.......................................................69
8.2 Future Financial Statements....................................69
8.3 U.S. Collateral Reporting......................................71
8.4 Canadian Collateral Reporting..................................73
8.5 Additional Reporting...........................................76
8.6 Taxes..........................................................76
8.7 Insurance......................................................76
8.8 Corporate Standing.............................................77
8.9 Books and Records..............................................77
8.10 Compliance with Law............................................77
8.11 Continue Business..............................................77
8.12 Fiscal Year....................................................77
8.13 Intellectual Property..........................................77
8.14 Pension Reports................................................77
8.15 Canadian Pension and Benefit Plans.............................78
8.16 Environmental Compliance.......................................78
8.17 Maintenance of Property........................................79
8.18 U.S. Collateral................................................79
8.19 Canadian Collateral............................................81
8.20 Landlords' Agreements, Mortgagee Agreements, Bailee
Letters and Real Estate Purchases..............................83
ARTICLE 9. NEGATIVE COVENANTS.............................................84
9.1 Borrowed Money.................................................84
9.2 Liens..........................................................84
9.3 Storing and Use of Collateral..................................84
9.4 Guaranties.....................................................84
9.5 Sale of Assets.................................................84
9.6 Capital Stock..................................................85
9.7 Leases.........................................................85
9.8 Investments and Loans..........................................85
9.9 Consolidations, Merger and Fundamental Changes.................85
9.10 Dividends......................................................85
9.11 Investments....................................................86
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9.12 Affiliate/Subsidiary Transactions..............................86
9.13 Westcon........................................................88
9.14 Additional Negative Pledges....................................88
9.15 Change Name....................................................88
9.16 Business Operations............................................88
9.17 Records Review/Collateral Verification.........................88
9.18 New Locations..................................................88
9.19 Financing Statements...........................................88
9.20 Intentionally Omitted..........................................88
9.21 Fixed Charge Ratio.............................................88
9.22 Minimum Tangible Net Worth.....................................89
ARTICLE 10. EVENTS OF DEFAULT..............................................90
10.1 Events of Default..............................................90
10.2 Effects of an Event of Default.................................93
10.3 Remedies.......................................................93
ARTICLE 11. EXPENSES.......................................................95
11.1 Expenses.......................................................95
ARTICLE 12. THE AGENT......................................................96
12.1 Appointment, Powers and Immunities.............................96
12.2 No Other Duties................................................97
12.3 Waiver of Liability of Agents and L/C Issuer...................97
12.4 Reliance by Agents.............................................98
12.5 Events of Default..............................................98
12.6 Agents in their Individual Capacity...........................101
12.7 Indemnification...............................................101
12.8 Non-Reliance on Agents and Other Lenders......................102
12.9 Failure to Act................................................102
12.10 Concerning the Collateral and the Related
Financing Agreements..........................................102
12.11 Field Audit, Examination Reports and other Information;
Disclaimer by Lenders.........................................103
12.12 American Collateral Agent's Rights in Collateral..............104
12.13 Canadian Collateral Agent's Rights in Collateral..............105
12.14 Agency for Perfection.........................................106
12.15 Collection; Payments by Collateral Agent......................107
12.16 Successor Agent...............................................107
12.17 Loan Syndication..............................................108
12.18 Benefit Of Article XII........................................110
ARTICLE 13. MISCELLANEOUS.................................................110
13.1 Amendments and Waivers........................................110
13.2 Performance Of Borrowers' Duties..............................111
13.3 Termination...................................................111
13.4 Setoff........................................................111
13.5 Delays and Omissions..........................................112
13.6 Successors and Assigns........................................112
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13.7 Headings......................................................112
13.8 Further Assurances............................................112
13.9 Confidentiality...............................................113
13.10 Press Releases and Related Matters............................113
13.11 Severability..................................................114
13.12 Entire Agreement..............................................114
13.13 Notices.......................................................114
13.14 Governing Law.................................................116
13.15 Counterparts..................................................116
13.16 Titles .....................................................116
13.17 Inconsistent Provisions.......................................116
13.18 Negotiation...................................................116
13.19 Course of Dealing.............................................116
13.20 CONSENT TO JURISDICTION.......................................116
13.21 JURY TRIAL WAIVER.............................................117
13.22 U.S. LITIGATION...............................................117
13.23 Judgment Currency.............................................117
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WITNESSETH
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AGREEMENT dated as of June 12, 2003 (this "Agreement") among WESTCON
GROUP, INC. ("Westcon"), a Delaware corporation with its principal place of
business at 000 Xxxxx Xxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000-0000, WESTCON GROUP
NORTH AMERICA, INC. ("Westcon America") a New York corporation with its
principal place of business at 000 Xxxxx Xxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx
00000-0000 and WESTCON CANADA SYSTEMS (WCSI) INC. ("Westcon Canada" and together
with Westcon America, "Borrowers"), a Canadian corporation, with its principal
place of business at 0000 00xx Xxxxxx, Xxxxxxx, Xxxxxx X0X 0X0, the financial
institutions listed on the signature pages hereto and each other financial
institution which from time to time, becomes a party hereto, pursuant to one or
more Lender Agreements (as defined below) (individually a "Lender" and
collectively, the "Lenders"), with certain of the Lenders being "American
Lenders" and certain of the Lenders being "Canadian Lenders" (as such terms are
defined below and all as set forth herein, including, without limitation, on the
signature pages hereto), HSBC BANK USA, a New York State banking corporation
with a place of business at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as
syndication agent and arranger for the Lenders ("Arranger"), General Electric
Capital Corporation, a Delaware corporation with a place of business at 000
Xxxxxxxxxxx Xxxxxx, 0 Xxxxx, Xxxxxxx Xxxxxxxxxxx 00000, as collateral agent for
the American Lenders (as defined below) ("American Collateral Agent"), General
Electric Capital Canada Inc., a Canadian corporation with a place of business at
00 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx X0X 0X0, as collateral agent for
the Canadian Lenders (as defined below) ("Canadian Collateral Agent" and
together with the American Collateral Agent, the "Collateral Agents") and
LaSalle Business Credit, LLC, a Delaware limited liability company with a place
of business at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as documentation
agent for the Lenders ("Documentation Agent"), and the L/C Issuers (as defined
below).
WHEREAS, Westcon, Canada, certain predecessors to Westcon America,
certain other subsidiaries of Westcon (collectively, the "Westcon Entities") and
IBM Credit, LLC (f/k/a IBM Credit Corporation "IBMCC") are parties to a
Revolving Credit Agreement dated as of November 20, 1998, as amended by
amendments dated March 25, 1999, August 12, 1999, August 25, 1999, September 28,
1999, June 20, 2000, August 18, 2000 and February 15, 2001 (as the foregoing may
have been further amended from time to time, collectively the "IBM Credit
Agreement"), pursuant to which IBMCC has provided certain loans and financial
accommodations (the "Existing Facility") to the Westcon Entities to be used for,
among other things, the working capital needs of Westcon and the Westcon
Entities, and other purposes appropriate to the needs of the business of the
Westcon Entities and their subsidiaries;
WHEREAS, Westcon America has requested that the American Lenders
extend a revolving credit facility to Westcon America of up to One Hundred
Seventy-Five Million Dollars ($175,000,000) in the aggregate less the aggregate
amount of the Canadian revolving credit facility, for the purpose of refinancing
the Existing Facility and to provide (a) working capital financing for Westcon
America, (b) funds for other general corporate purposes for Westcon America and
(c) funds for other purposes permitted hereunder; and for these purposes, the
American Lenders are willing to make certain loans and other extensions of
credit to Westcon America of up to such amount less the amount of the Canadian
revolving credit facility upon the terms and conditions set forth herein;
1
WHEREAS, Westcon Canada has requested that the Canadian Lenders extend
a revolving credit facility to Westcon Canada of up to Ten Million Dollars
($10,000,000.00) in the aggregate to provide (a) working capital financing for
Westcon Canada, (b) funds for general corporate purposes for Westcon Canada and
(c) funds for other purposes permitted hereunder; and for these purposes, the
Canadian Lenders are willing to make certain loans and other extensions of
credit to Westcon Canada of up to such amount upon the terms and conditions set
forth herein; and
WHEREAS, Westcon America and any American Subsidiaries (as defined
below) have agreed to secure all of their obligations and the obligations of
Westcon Canada hereunder and under the other Loan Documents (as defined below)
by granting to American Collateral Agent, for the benefit of American Collateral
Agent, Canadian Collateral Agent and Lenders, a security interest in and lien
upon all of their existing and after-acquired personal property; and
WHEREAS, Westcon Canada and its Canadian Subsidiaries (as defined
below) have agreed to secure all of their obligations hereunder and under the
other Loan Documents (as defined below) by granting to Canadian Collateral
Agent, for the benefit of the Canadian Collateral Agent and the Canadian
Lenders, a security interest in and lien upon all of their existing and
after-acquired personal property; and
WHEREAS, the American Lenders are willing to provide financing to
Westcon America on such terms and on the terms and conditions set forth herein;
and
WHEREAS, the Canadian Lenders are willing to provide financing to
Westcon Canada on such terms and on the terms and conditions set forth herein;
NOW, THEREFORE, the Borrowers, the Agents (as defined below), L/C
Issuer and the Lenders agree as follows:
ARTICLE 1. DEFINITIONS
1.1 Definitions. As used in this Agreement, unless otherwise specified, the
following terms shall have the following respective meanings:
"Account Debtor" means the Person, firm, or entity obligated to pay a
Receivable.
"Advance", or collectively, "Advances" means either an American
Advance (as defined below) or a Canadian Advance (as defined below) as the case
may be, or all such advances collectively.
"Affiliate" or "Affiliates" means singly or collectively, any Person
that directly or indirectly, through one or more intermediaries, Controls, or is
Controlled by, or is under Common Control with the Person specified.
"Agents" means, collectively, the Arranger, the Collateral Agents and
the Documentation Agent.
2
"American Advance" or "American Advances" means, collectively, any
advance of the Loans under Section 2 hereof to Westcon America or all such
advances hereunder.
"American Collateral" as defined in Section 3.4(a) hereof.
"American Collateral Agent" means General Electric Capital
Corporation, and its successors and assigns.
"American Collateral Agent's Collection Account" means GECC/CAF
Depository, Bankers Trust, 00 Xxxxxx Xxxxxx, 0xx xxxxx, Xxxxxx Xxxx, Xxx Xxxxxx
00000, ABA #: 000-000-000, Acct #: 00-000-000, Ref.: Westcon America.
"American L/C Issuer" means HSBC Bank USA and its successors and
assigns.
"American Letters-of-Credit" means any Letters-of-Credit issued for
the account of Westcon America.
"American Lenders" means each Lender party hereto that shall make
loans and provide other financial accommodations, from time to time to Westcon
America, including without limitation, HSBC, GE Capital and LaSalle.
"American Loan Account" means a deposit account established with HSBC
into which the proceeds of any funds borrowed hereunder by Westcon America shall
be initially deposited.
"American Notes" means any and all notes evidencing the Indebtedness
of Westcon America created under this Agreement.
"American Percentage" means with respect to each American Lender the
percentage of such Lender's American Loans, which is set forth on Exhibit A
annexed hereto and made a part hereof.
"American Revolving Credit" as defined in Section 2.1(a)(i) hereof.
"American Revolving Loan" or "American Revolving Loans" are defined in
Section 2.1(a)(i) hereof.
"American Subsidiaries" means any Subsidiary of Westcon America formed
under the laws of the United States or any of its States.
"Applicable Interest Rate" means with respect to the Revolving Loans,
the Index Rate, plus the Applicable Index Margin (as set forth below) per annum
or, at the election of the applicable Borrower, the applicable LIBOR Rate, plus
the Applicable LIBOR Margin (as set forth below) per annum.
"Applicable Margins" means the applicable margins set forth below as
of the Closing Date and thereafter adjusted, as the case may be:
3
Applicable Index Margin .50%
Applicable LIBOR Margin 2.50%
Applicable L/C Margin 2.50%
Applicable Unused Line Fee .375%
The Applicable Margins may be adjusted by reference to the following
grids:
Level of Applicable Unused
Applicable Index LIBOR L/C Line
If Excess Availability is: Margins: Margin Margin Margin Fee
------------------------- ------- ------ ------ ------ ---
Less than or equal to $17,500,000.00 Level I .75% 2.75% 2.75% .50%
Less than or equal to $27,500,000.00 Level II .50% 2.50% 2.50% .375%
but greater than $17,500,000.00
Greater than $27,500,000.00 Level III .25% 2.25% 2.25% .25%
Adjustments in the Applicable Margins per the foregoing grid
commencing with the Fiscal Quarter ending August 31, 2003 shall be implemented
quarterly on a prospective basis based on the Excess Availability, for each
calendar month commencing at least five (5) days after the date of delivery to
the Collateral Agents of the quarter end monthly Borrowing Capacity Certificates
for Westcon America and Westcon Canada evidencing the need for an adjustment.
Concurrently with the delivery of those Borrowing Capacity Certificates, Westcon
shall deliver to the Collateral Agents a certificate, signed by its chief
executive officer or chief financial officer, setting forth in reasonable detail
and calculated based on the average daily availability for the prior Fiscal
Quarter the basis for the continuance of, or any change in, the Applicable
Margins. Failure to timely deliver such quarter end monthly Borrowing Capacity
Certificates for Westcon America and Westcon Canada shall, in addition to any
other remedy provided for in this Agreement, result in an increase in the
Applicable Margins to Level I set forth in the foregoing grid, until the first
day of the first calendar month following the delivery of those quarter end
monthly Borrowing Capacity Certificates demonstrating that such an increase is
not required. If an Event of Default has occurred and is continuing at the time
any reduction in the Applicable Margins is to be implemented, that reduction
shall be deferred until the first day of the first calendar month following the
date on which such Event of Default is waived or cured.
"American Reports" as defined in Section 12.11(a) hereof.
"Arranger" means HSBC Bank USA, and its successors and assigns.
"Assigned Interest" as defined in Section 12.17 hereof.
"Auditors" means Deloitte Touche Tohmatsu.
"Bankruptcy Code" means the provisions of Title 11 of the United
States Code, 11 U.S.C. ss.ss.101 et seq., the Bankruptcy and Insolvency Act
(Canada) and the Companies'
4
Creditors Arrangement Act (Canada) each as now and hereafter in effect any
successors to such statutes and any other applicable insolvency or securities
law of a jurisdiction, including, without limitation, a law of any jurisdiction
permitting a debtor to obtain a stay or compromise of the claims of creditors
against it.
"Borrower" or "Borrowers" means, individually, either of Westcon
America and Westcon Canada and, collectively, both of Westcon America and
Westcon Canada.
"Borrowing Capacity (Westcon America)" means the net amount which can
be borrowed hereunder by Westcon America, determined by taking the lesser of the
following amounts: (a) the Maximum Limit, in the aggregate collectively for
Westcon America and Westcon Canada; or (b) subject to the Borrowing Capacity
Reserve, the amount equal to the sum of: (i) the applicable Receivables
Borrowing Capacity; plus (ii) the applicable Inventory Borrowing Capacity; and
subtracting from the lesser of (a) or (b) above, the sum of: (i) letters of
guaranty; (ii) 100% of the face amount of Letters of Credit and (iii) all
outstanding Canadian Advances, less the amount of any reserves in effect.
"Borrowing Capacity (Westcon Canada)" means the net amount which can
be borrowed hereunder by Westcon Canada, determined by taking the lesser of the
following amounts: (a) the Westcon Canada Sublimit; or (b) the amount equal to
the sum of: (i) the applicable Receivables Borrowing Capacity; plus (ii) the
applicable Inventory Borrowing Capacity; and subtracting from the lesser of (a)
or (b) above, the sum of: (i) letters of guaranty; and (ii) 100% of the face
amount of Letters of Credit, less the amount of any reserves in effect
including, without limitation, in respect of Prior Claims.
"Borrowing Capacity Certificates" means a certificate from the
President or Chief Financial Officer of either Westcon America or Westcon
Canada, as applicable, substantially in the form of Exhibit E-1 or E-2, as
applicable, attached hereto with all blanks appropriately completed.
"Borrowing Capacity Reserve" means USD $5,000,000.00.
"Breakage Fee" means a premium in an amount determined by the
applicable Collateral Agent at the time of a prepayment of a LIBOR Loan to be
equal to the sum of the costs, losses, expenses and penalties incurred by any of
the Collateral Agents, the Arranger and any of the Lenders, in the aggregate as
a result of such prepayment. The applicable Collateral Agent's calculation of
any such Breakage Fee shall be conclusive absent manifest error.
"Business Day" means for all purposes other than as set forth in
clause (b) below: (a) any day excluding Saturday, Sunday, and (x) with respect
to Westcon America, the American Lenders and American Collateral Agent, any day
in which banks in New York, New York are authorized by law or governmental
action to close and (y) with respect to Westcon Canada, the Canadian Lenders and
Canadian Collateral Agent's any day in which banks in Xxxxxxx, Xxxxxxx, Xxxxxx
or Xxxxxxxx, Xxxxxx, Xxxxxx are authorized by law or governmental action to
close; and (b) with respect to LIBOR Loans, any day which is a Business Day
described in clause (a) and which is also a day for trading by and between banks
in U.S. dollar deposits in the London Interbank Eurodollar Market.
5
"Canadian Advance" means collectively any advance to Westcon Canada or
all such advances hereunder.
"Canadian Benefit Plans" means all employee benefit plans of any
nature or kind whatsoever that are not Canadian Pension Plans and are maintained
or contributed to by either Borrower or any other Obligor having employees in
Canada.
"Canadian Collateral" as defined in Section 3.4(b) hereof.
"Canadian Collateral Agent" means General Electric Capital Canada Inc.
and its successors and assigns.
"Canadian Collection Account" means that certain Canadian Dollar
account of Canadian Collateral Agent, account number 0000000 or US Dollar
account of Canadian Collateral Agent, account number 0000000, with the account
name GECCI_COMM_FIN at Royal Bank of Canada in Xxxxxxx, Xxxxxxx, transit number
00000, or such other account as may be specified in writing by Canadian
Collateral Agent as the "Canadian Collection Account".
"Canadian Dollar" means the legal currency of Canada.
"Canadian L/C Issuer" means HSBC Bank USA (Toronto Branch) and its
successors and assigns.
"Canadian Lender" means each Lender a party hereto that shall make
loans and provide other financial accommodations, from time-to-time to Westcon
Canada, including, without limitation, GE Capital Canada, HSBC Canada and ABN
AMRO Bank N.V., Canada Branch.
"Canadian Letters of Credit" means any Letters of Credit issued for
the account of Westcon Canada.
"Canadian Loan Account" means a deposit account established with HSBC
Canada into which the proceeds of any funds borrowed hereunder by Westcon Canada
shall be initially deposited.
"Canadian Notes" means any and all notes evidencing the Indebtedness
of Westcon Canada created under this Agreement.
"Canadian Pension Plans" means each plan which is considered to be a
pension plan for the purposes of any applicable pension benefits standards
statute and/or regulation in Canada established, maintained or contributed to by
either Borrower or any other Obligor for its employees or former employees.
"Canadian Percentage" means with respect to each Canadian Lender the
percentage of such Lender's Canadian Loans, which is set forth on Exhibit A
annexed hereto and made a part hereof.
"Canadian Reports" as defined in Section 12.11(b) hereof.
6
"Canadian Revolving Credit" as defined in Section 2.1 (a)(ii) hereof.
"Canadian Revolving Loan" or "Canadian Revolving Loans" as defined in
Section 2.1(a)(ii) hereof .
"Canadian Subsidiaries" means any Subsidiaries of Westcon Canada
formed under the laws of Canada or a province or territory thereof.
"Canadian Undrawn Commitment Fee" as defined in Section 7.4(b) hereof.
"Capital Expenditures" means the gross dollar amount of expenditures
(including the present value of obligations under capital leases calculated
using a discount rate provided for in such lease, or in the absence of a stated
rate, a discount rate set by the applicable Collateral Agent in its reasonable
discretion) made for fixed assets, real property, plant and equipment, and all
renewals, improvements and replacements thereto (but not repairs thereto)
incurred for any period, but excluding any expenditures made in connection with
the removal, improvement or replacement of assets to the extent financed (i)
from insurance proceeds or other similar recoveries paid on account of the loss
or damage to assets being replaced or restored, or (ii) with awards of
compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of the United States, as in
effect from time to time.
"Collateral" as defined in Section 3.4 hereof.
"Collateral Agents" means the American Collateral Agent and the
Canadian Collateral Agent.
"Collateral Documents" means, collectively, the Security Agreements,
Guaranties, Financing Statements, Pledge Security Agreements and any other
collateral security documents delivered by any of Westcon, Borrowers, or any
other Obligor hereunder.
"Commitment (Westcon America)" means the commitment of each American
Lender to make its Percentage of American Advances, or purchase participations
in Letter(s) of Credit issued by American L/C Issuer, in the maximum amounts set
forth next to each American Lender's name on Exhibit A - 1 hereto.
"Commitment (Westcon Canada)" means the commitment of each Canadian
Lender to make its Percentage of Canadian Advances, or purchase participations
in Canadian Letter(s) of Credit issued by Canadian L/C Issuer, in the maximum
amounts set forth next to each Canadian Lender's name on Exhibit A-2 hereto.
"Commitment" means the Commitment (Westcon America) and the Commitment
(Westcon Canada).
7
"Compliance Certificate" means, a certificate from the Chief Executive
Officer or Chief Financial Officer of the applicable entity substantially in the
form of Exhibit B attached hereto with all blanks appropriately completed.
"Control", "Controlling", "Controlled by", and "under Common Control
with" the possession, direct or indirect, of the power to (a) vote 10% or more
of the securities having ordinary voting power for the election of directors, or
(b) cause the direction of the management and policies, whether by contract or
through the ownership of stock or other interests, or otherwise.
"Copyrights" means all of the following now owned or hereafter adopted
or acquired by either Borrower or any Obligor: (a) all copyrights and General
Intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or the Canadian Copyright Office or in any
similar office or agency of the United States or Canada or any state, province
or territory thereof, or any other country or any political subdivision thereof,
and (b) all reissues, extensions or renewals thereof.
"Correspondent" means a securities firm, bank or other financial
organization which performs services for another such Person.
"Datatec" means Datatec Limited, a South African corporation and its
successors and assigns.
"Debenture Pledge Agreements" means each pledge of debenture created
pursuant to the Civil Code of Quebec and under which a Borrower or other Obligor
issuer of a Debenture pledges such Debenture to Canadian Agent for the benefit
of Canadian Agent and Canadian Lenders.
"Debentures" means the debentures executed and issued to Canadian
Agent by a Borrower or any other Obligor under the Deeds of Hypothec.
"Debt Amortization" means with respect to any Fiscal Year, the sum of
all of a Person's regularly scheduled principal payments made with respect to
all Obligations, including, without limitation, the Indebtedness.
"Deeds of Hypothec" shall mean each deed of hypothec entered into
between Canadian Agent and a Borrower or any other Obligor signatory thereto.
"Defaulting Lender" means any Lender that at such time owes any amount
required to be paid by such Lender to any of the Agents, L/C Issuer or any other
Lender pursuant to this Agreement or any Loan Document which has not been so
paid, or any Lender who has failed to timely make available to a Borrower or to
a Collateral Agent, the Arranger or L/C Issuer, as applicable, for the account
of such Lender all or any portion of an Advance or any other payment required to
be made by a Lender hereunder.
"Default Rate" as defined in Section 2.6(b) hereof.
8
"Designs" means the following now owned or hereafter acquired by
either Borrower or any other Obligor: (a) all industrial designs, design patents
and other designs now owned or existing or hereafter adopted or acquired, all
registrations and recordings thereof and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the Canadian Industrial Designs Office or any similar office in
any country and all records thereof and (b) all reissues, extensions or renewals
thereof.
"Disposal" means the intentional or unintentional abandonment,
discharge, deposit, injection, dumping, spilling, leaking, storing, burning,
terminal destruction or placing of any substance so that it or any of its
constituents may enter the Environment.
"Drawing Fee" as defined in Section 2.3(d) hereof.
"EBITDA" means, with respect to any Person for any fiscal period,
without duplication, an amount equal to (a) consolidated net income of such
Person for such period determined in accordance with GAAP, minus (b) the sum of
(i) any benefit from income taxes, (ii) interest income, (iii) gain from
extraordinary items for such period, (iv) any aggregate net gain (but not any
aggregate net loss) during such period arising from the sale, exchange or other
disposition of capital assets by such Person (including any fixed assets,
whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), and (v) non-cash foreign
exchange gains and any other non-cash gains that have been added in determining
consolidated net income, in each case to the extent included in the calculation
of consolidated net income of such Person for such period in accordance with
GAAP, but without duplication, plus (c) the sum of (i) any provision for income
taxes, (ii) Interest Expense, (iii) non-cash loss from extraordinary items for
such period, (iv) depreciation and amortization for such period, (v) amortized
debt discount for such period, (vi) the amount of any deduction to consolidated
net income as the result of any grant to any members of the management of such
Person of any stock, in each case to the extent included in the calculation of
consolidated net income of such Person for such period in accordance with GAAP,
but without duplication, and (vii) non-cash foreign exchange losses. For
purposes of this definition, the following items shall be excluded in
determining consolidated net income of a Person: (1) the income (or deficit) of
any other Person accrued prior to the date it became a Subsidiary of, or was
merged or consolidated into, such Person or any of such Person's Subsidiaries;
(2) the income (or deficit) of any other Person (other than a Subsidiary) in
which such Person has an ownership interest, except to the extent any such
income has actually been received by such Person in the form of cash dividends
or distributions; (3) the undistributed earnings of any Subsidiary of such
Person to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of
any contractual obligation or requirement of law applicable to such Subsidiary;
(4) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of income accrued during such
period, and except to the extent that provision for such reserve when made shall
have been made in accordance with and consistent with past accounting practices
and the restoration to income of such contingency reserve shall be made in
accordance with and consistent with past practices; (5) any write-up of any
asset; (6) any net gain from the collection of the proceeds of life insurance
policies; (7) any net gain arising from the acquisition of any securities, or
the extinguishment, under GAAP, of any Indebtedness, of such Person; (8) in the
case of a successor to such Person by consolidation or merger or as a transferee
of its assets, any
9
earnings of such successor prior to such consolidation, merger or transfer of
assets; (9) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary; (10) any charge
relating to impairment of goodwill determined in accordance with GAAP; (11)
costs not to exceed $1,500,000 incurred during fiscal year 2004 which are
associated with the planned restructuring of the Borrowers; and (12) costs not
to exceed $2,500,000 incurred during fiscal year 2004 which are associated with
the planned restructuring of the European subsidiaries of Westcon.
"Eligible Inventory (Westcon America)" means Inventory of Westcon
America in which American Collateral Agent has, for the benefit of the American
Lenders, American Collateral Agent, Canadian Lenders and Canadian Collateral
Agent, a first and only priority perfected security interest reduced by (i) any
Inventory as to which a representation or warranty contained in Section 4.3 or
4.25 is not, or does not continue to be, true and accurate; (ii) any Inventory
not denominated in U.S. Dollars; (iii) any Inventory comprised of promotional or
marketing materials, work-in-process, raw materials, inventory-in-transit; and
(iv) any Inventory which is otherwise unacceptable to such Collateral Agent, in
its reasonable credit judgment.
"Eligible Inventory (Westcon Canada)" means Inventory of Westcon
Canada in which Canadian Collateral Agent has, for the benefit of the Canadian
Lenders and Canadian Collateral Agent, a first and only priority perfected
security interest reduced by (i) any Inventory as to which a representation or
warranty contained in Section 4.3 or 4.25 is not, or does not continue to be,
true and accurate; (ii) any Inventory not denominated in U.S. Dollars; (iii) any
Inventory comprised of promotional or marketing materials, work-in-process, raw
materials, inventory-in-transit; and (iv) any Inventory which is otherwise
unacceptable to Canadian Collateral Agent, in its reasonable credit judgment.
"Environment" means any water, including, but not limited to, surface
water and ground water or water vapor; any land including land surface or
subsurface; stream sediments; air; fish; wildlife; plants; and all other natural
resources or environmental media.
"Environmental Laws" means all federal, state, provincial and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances, regulations, codes and rules, orders-in-council and
guidelines relating to the protection of the Environment and/or governing the
use, storage, treatment, generation, transportation, processing, handling,
production or disposal of Hazardous Substances and the policies, guidelines,
procedures, interpretations, decisions, orders and directives of federal, state
and local governmental agencies and authorities with respect thereto.
"Environmental Permits" means all licenses, permits, approvals,
authorizations, consents or registrations required by any applicable
Environmental Laws and all applicable judicial and administrative orders in
connection with ownership, lease, purchase, transfer, closure, use and/or
operation of a Person's property and/or as may be required for the storage,
treatment, generation, transportation, processing, handling, production or
disposal of Hazardous Substances.
10
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended by the Multiemployer Pension Plan Amendments Act of 1980.
"Event of Default" or "Events of Default" as defined in Section 10.1
of this Agreement.
"Excess Availability" means an amount equal to: (a) the amount
available to Borrowers collectively hereunder for Advances and Letters of
Credit, subject to the limits of Borrowing Capacity (Westcon America) and
Borrowing Capacity (Westcon Canada), as the case may be, plus immediately
available cash of Westcon America in which American Collateral Agent has, for
the benefit of the American Lenders, American Collateral Agent, Canadian Lenders
and Canadian Collateral Agent, a first and only priority perfected security
interest and immediately available cash of Westcon Canada in which Canadian
Collateral Agent has, for the benefit of Canadian Lenders and Canadian
Collateral Agent, a first and only priority perfected security interest; minus
(b) the sum of (i) the aggregate unpaid balance of all outstanding Advances and
100% of the face amount of all outstanding Letter(s) of Credit, (ii) all sums
due and owing to trade creditors of either Borrower which remain outstanding
beyond normal trade terms inconsistent with past practices, (iii) any taxes
owing by Westcon or either Borrower to any Canadian taxing authority whether
federal, provincial or local, and (iv) any taxes of Westcon or either Borrower
that are unpaid and past due; provided that Excess Availability shall be
calculated based on the average daily availability for the prior Fiscal Quarter.
"Existing Facility" as defined in the recitals hereto.
"Existing Lender" means any Lender that is a party hereto on or before
the assignment of an interest in the Loans under Section 12.17 hereof.
"Federal Funds Rate" means for any period, a fluctuating per annum
interest rate equal, for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day for such
transactions obtained by the American Collateral Agent from three Federal funds
brokers of recognized standing selected by the American Collateral Agent.
"FDIC" means the Federal Deposit Insurance Corporation.
"Fees" as defined in Section 7.4 hereof.
"Financial Statements" means the consolidated and consolidating income
statements, statements of cash flows and balance sheets, and statement of
changes in shareholders' equity, all prepared in accordance with GAAP.
"Financing Statements" as defined in Section 3.4 of this Agreement.
"Fiscal Quarter" means each three-month period of a Fiscal Year
commencing on March 1, June 1, September 1 and December 1 thereof.
11
"Fiscal Year" means March 1 to the last day of February of each year.
"Fixed Charge Ratio" means the ratio of (a) EBITDA minus Capital
Expenditures to (b) Debt Amortization, plus Interest Expense, plus income or
capital taxes paid or payable in cash; provided, that in calculating the Fixed
Charge Ratio for Westcon, management fees payable by Westcon to Datatec shall be
included in the denominator.
"Fronting Fee" as defined in Section 2.3(d) hereof.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States of America.
"GE Capital" means General Electric Capital Corporation and its
successors and assigns.
"GE Capital Canada" means General Electric Capital Canada Inc. and its
successors and assigns.
"Government Authority" means any court, board, commission, agency or
instrumentality of the Federal or Canadian or provincial or state or foreign
government or of any municipal or local government or any agency or subdivision
of any of the foregoing.
"Guaranties" as defined in Section 3.7 of this Agreement.
"Guarantors" means Westcon and Westcon America and any other American
subsidiaries of Westcon or Westcon American.
"Guarantor Security Agreement" as defined in Section 3.15 hereof.
"Hazardous Substances" means without limitation, any explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances and any other
material defined as a hazardous substance in Section 101(14) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Section 9601(14) or as a "dangerous good" under any other Environmental
Laws.
"HSBC" means HSBC Bank USA and its successors and assigns.
"HSBC Canada" means HSBC Bank USA (Toronto Branch) and its successors
and assigns.
"IBMCC" as defined in the recitals hereto.
"IBM Credit Agreement" as defined in the recitals hereto.
"Incipient Default" means an event or condition which, but for the
requirement of notice, or lapse of time, or both, would constitute an Event of
Default.
12
"Indebtedness" means any and all obligations, liabilities and
indebtedness, and performance of all obligations and agreements, of any Borrower
or any other Obligor to any of the Agents, Lenders or L/C Issuer arising
hereunder or under the other Loan Documents, whether now existing or hereafter
incurred or arising, of every kind and character, primary or secondary, direct
or indirect, absolute or contingent, sole, joint or several, and whether such
indebtedness is from time to time reduced and thereafter increased, or entirely
extinguished and thereafter reincurred, including, without limitation: (a) all
Advances; (b) all obligations arising out of any Lenders' reimbursement of an
L/C Issuer for draws made under Letters of Credit issued by an L/C Issuer; (c)
all interest which accrues on any such indebtedness, until payment of such
indebtedness in full, including, without limitation, all interest provided for
under this Agreement; (d) all other moneys payable by any Borrower or any other
Obligor, and all obligations and agreements of any Borrower or any other Obligor
to any of the Lenders, Agents or L/C Issuer pursuant to any of the Loan
Documents; (e) all moneys due, and to become due, pursuant to Sections 7.1, 7.2,
7.3, 7.4. and 7.5 hereof.
"Indemnified Liabilities" as defined in Section 11.1(d) hereof.
"Index Rate Loan" means any portion of an American Advance or Canadian
Advance bearing interest at the Index Rate plus the Applicable Index Margin.
"Index Rate" means, for any day, a floating rate equal to the higher
of (i) the rate publicly quoted from time to time by The Wall Street Journal as
the "prime rate" (or, if The Wall Street Journal ceases quoting a prime rate,
the highest per annum rate of interest published by the Federal Reserve Board in
Federal Reserve statistical release H.15 (519) entitled "Selected Interest
Rates" as the Bank prime loan rate or its equivalent), and (ii) the Federal
Funds Rate plus 50 basis points per annum; and each change in any interest rate
provided for in the Agreement based upon the Index Rate shall take effect at the
time of such change in the Index Rate.
"Index Rate Margin" as defined in the definition of Applicable Margins
above.
"Ineligible Receivables" means the following described Receivables of
the applicable Borrower and any other Receivables which are not satisfactory to
a Collateral Agent, in such Collateral Agent's reasonable credit judgment, for
any reason:
(i) Any Receivable on which payment has remained unpaid for more
than ninety (90) days after invoice date or sixty (60) days past its due date;
(ii) Any Receivable with respect to which a representation or
warranty contained in Sections 4.3, 4.10 and 4.24 of this Agreement or any other
representation or warranty contained herein or in the other Loan Documents is
not, or does not continue to be, true and accurate in all respects, including,
without limitation, any Receivable subject to a setoff;
(iii) Any Receivable with respect to which a Borrower or any
other Obligor has extended the time for payment without the consent of the
applicable Collateral Agent;
13
(iv) Any Receivable as to which any one or more of the following
events occurs: an Account Debtor or guarantor of a Receivable shall die or be
judicially declared incompetent; a request, or petition for liquidation,
reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, or
other relief under the bankruptcy, insolvency, or similar laws of the United
States, any state or territory thereof, Canada, any province or territory
thereof, or any other foreign jurisdiction, now or hereafter in effect, shall be
filed by or against a Responsible Party; a Responsible Party shall make any
general assignment for the benefit of creditors; an interim receiver, receiver,
receiver or manager or trustee including, without limitation, a "custodian," as
defined in the Bankruptcy Code, shall be appointed for a Responsible Party or
for any of the assets of a Responsible Party; any other type of insolvency
proceeding with respect to a Responsible Party (under the bankruptcy laws of the
United States, Canada or otherwise) or any formal or informal proceeding for the
dissolution or liquidation of, settlement of claims against, or winding up of
affairs of, a Responsible Party shall be instituted; all or any part of the
assets of a Responsible Party shall be sold, assigned, or transferred; a
Responsible Party shall fail to pay its debts as they become due; or a
Responsible Party shall cease doing business as a going concern;
(v) All contra accounts, including, without limitation,
Receivables owed by an Account Debtor owing Receivables classified as ineligible
under any criterion set forth in any of (i) through (iii) above, if the
outstanding dollar amount of such classified Receivables constitutes more than
50% of the aggregate outstanding dollar amount of all Receivables owed by such
Account Debtor;
(vi) All Receivables owed by an Account Debtor which does not
maintain its chief executive office in the United States or Canada or which is
not organized under the laws of the United States or Canada or any state or
province thereof, except for Receivables backed by letters of credit issued by
United States or Canadian banks acceptable to the applicable Collateral Agent,
in its sole discretion;
(vii) All Receivables owed by an Account Debtor that is an
Affiliate of Westcon, either Borrower or any other Obligor;
(viii) Any Receivable arising from a consignment or other
arrangement pursuant to which the subject Inventory is returnable if not sold or
otherwise disposed of by the Account Debtor; any Receivable constituting a
partial billing under terms providing for payment only after full shipment or
performance; any Receivable arising from a xxxx and hold sale or in connection
with any prebilling where the Inventory or services have not been delivered,
performed, or accepted by the Account Debtor; and any Receivable as to which the
Account Debtor contends the balance reported by either Borrower is incorrect or
is not owing, but only to the extent of such claim or contention by such Account
Debtor;
(ix) Any Receivable or Receivables owed by an Account Debtor,
which is deemed unenforceable against such Account Debtor by a Collateral Agent,
in such Collateral Agent's reasonable credit judgment;
(x) Any Receivable which is an Instrument, Document, or Chattel
Paper or which is evidenced by a note, draft, trade acceptance, or other
instrument for the
14
payment of money where such Instrument, Document, Chattel Paper, note, draft,
trade acceptance, or other instrument has not been endorsed and delivered by
such Borrower that is the holder thereof to the applicable Collateral Agent, in
the case of the American Collateral Agent, for the benefit of American Lenders,
American Collateral Agent, Canadian Lenders and Canadian Collateral Agent, and
in the case of the Canadian Collateral Agent, for the benefit of Canadian
Lenders and Canadian Collateral Agent;
(xi) All concentration accounts including any Receivable or
Receivables owed by an Account Debtor which exceeds any credit limit established
by Collateral Agent in its reasonable credit judgment for such Account Debtor;
provided, that such Receivable or Receivables shall be ineligible only to the
extent of such excess;
(xii) Any Receivable that does not arise from the sale of goods
or the performance of services by the applicable Borrower in the ordinary course
of its business;
(xiii) Any Receivable (x) upon which the applicable Borrower's
right to receive payment is not absolute or is contingent upon the fulfillment
of any condition whatsoever or (y) as to which the applicable Borrower is not
able to bring suit or otherwise enforce its remedies against the Account Debtor
through judicial process or (z) if the Receivable represents a progress billing
consisting of an invoice for goods sold or used or services rendered pursuant to
a contract under which the Account Debtor's obligation to pay that invoice is
subject to a Borrower's completion of further performance under such contract or
is subject to the equitable lien of a surety bond issuer;
(xiv) Any Receivable as to which any defense, counterclaim,
setoff or dispute is asserted but only to the extent of such defense,
counterclaim, setoff or dispute;
(xv) Any Receivable that is not a bona fide indebtedness incurred
in the amount of the Receivable for merchandise sold to or services rendered and
accepted by the applicable Account Debtor;
(xvi) Any Receivable with respect to which a true and correct
invoice, acceptable to the applicable Collateral Agent in form and substance,
has not been sent to the applicable Account Debtor or in the case of Account
Debtors which make payments based on the applicable notice of shipping, a notice
of shipping in form and substance acceptable to the applicable Collateral Agent,
has not been received by the applicable Borrower;
(xvii) Any Receivable that (x) is not owned by the applicable
Borrower or (y) is subject to any right, claim, security interest or other
interest of any other Person, other than Liens in favor of Collateral Agents, on
behalf of themselves and Lenders;
(xviii) Any Receivable that arises from a sale to any director,
officer, other employee or Affiliate of a Borrower or any other Obligor, or to
any entity that has any common officer or director with any Borrower or other
Obligor;
(xix) Any Receivable that is the obligation of an Account Debtor
that is the United States or Canadian government or a political subdivision
thereof, or any state, province, county or municipality or department, agency or
instrumentality thereof unless the
15
applicable Collateral Agent, in its sole discretion, has agreed to the contrary
in writing and the applicable Borrower, if necessary or desirable, has complied
with respect to such obligation with the Federal Assignment of Claims Act of
1940, Financial Administration Act (Canada) or any applicable Canadian state,
provincial, county or municipal law restricting assignment thereof;
(xx) Any Receivable to which Westcon, any Borrower or any
Subsidiary thereof is liable for goods sold or services rendered by the
applicable Account Debtor, including, without limitation, any Vendors of
Westcon, any Borrower or any Subsidiary thereof, but only to the extent of the
potential offset;
(xxi) Any Receivable that arises with respect to goods that are
delivered on a xxxx-and-hold, cash-on-delivery basis or placed on consignment,
guaranteed sale or other terms by reason of which the payment by the Account
Debtor is or may be conditional;
(xxii) Any Receivable that is in default; provided, that, without
limiting the generality of the foregoing, a Receivable shall be deemed in
default upon the occurrence of any of the following:
(A) the Account Debtor obligated upon such Receivable
suspends business, makes a general assignment for the benefit of creditors or
fails to pay its debts generally as they come due; or
(B) a petition is filed by or against any Account Debtor
obligated upon such Receivable under any bankruptcy law or any other Federal,
Canadian, state, provincial or other foreign receivership, insolvency relief or
other law or laws for the relief of debtors;
(xxiii) Any Receivable that is the obligation of an Account
Debtor if 50% or more of the Dollar amount of all Receivables owing by that
Account Debtor are ineligible under the other criteria set forth in this
definition;
(xxiv) Any Receivable to the extent such Receivable is evidenced
by a judgment, Instrument or Chattel Paper;
(xxv) Any Receivable that is payable in any currency other than
Dollars (or Canadian dollars as to Receivables owed by Account Debtors arising
out of Canadian sales); or
(xxvi) Any Receivable that is otherwise unacceptable to a
Collateral Agent in its reasonable credit judgment.
"Intangible Assets" as defined in accordance with GAAP.
"Intellectual Property" means all of a Person's owned or licensed
trademarks, logos, tradenames, patents, industrial designs, copyrights,
applications for the foregoing whether under state, federal, provincial or any
other law.
16
"Interest Payment Date" means with respect to an Index Rate Loan, the
last Business Day of each month and with respect to a LIBOR Loan, the last day
of the applicable LIBOR Period, except that in the case of any LIBOR Loan,
having an interest period in excess of three (3) months, the last Business Day
of the first three months thereof.
"Interest Expense" as defined in accordance with GAAP.
"Inventory" means all "inventory," as such term is defined in the UCC
or the PPSA, as applicable, whether now owned or hereafter acquired by any
Borrower or other Obligor, wherever located, including, without limitation,
inventory, merchandise, goods and other personal property that are held by or on
behalf of any Borrower or other Obligor for sale or lease or are furnished or
are to be furnished under a contract of service, or that constitute raw
materials, work in process, finished goods, returned goods, or materials or
supplies of any kind, nature or description used or consumed or to be used or
consumed in such Borrower's or other Obligor's business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
all supplies and embedded software.
"Inventory Borrowing Capacity" means at the time of computation for
the applicable Borrower, an amount up to the lesser of: (a) sixty-five percent
(65%) of the sum of Eligible Inventory of such Borrower calculated at the lower
of such Borrower's cost therefor determined on a first in first out basis, but
in no event more than eighty-five percent (85%) of the appraised value of
Eligible Inventory included in any such appraisal on a "net orderly liquidation
value" basis as determined by an appraiser acceptable to the applicable
Collateral Agent, and reflected in such reports of Inventory as are furnished by
Westcon America to the American Collateral Agent or Westcon Canada to the
Canadian Collateral Agent, as the case may be, upon such Collateral Agent's
request, or pursuant to Section 8.3 or 8.4 hereof, as the case may be, in which,
in the case of the American Collateral Agent, the American Collateral Agent
holds a first and only priority perfected security interest for the benefit of
American Lenders, American Collateral Agent, Canadian Lenders and Canadian
Collateral Agent, and, in the case of the Canadian Collateral Agent, the
Canadian Collateral Agent holds a first and only priority perfected security
interest for the benefit of Canadian Lenders and Canadian Collateral Agent; or
(b) $60,000,000.00 in the aggregate collectively for Westcon America and Westcon
Canada ("Inventory Sublimit"); provided, that, at no time will Advances to a
Borrower with respect to Inventory be greater than an amount equal to 35% of
total Advances to such Borrower, in each instance, less the amount of ineligible
Inventory and any reserves established from time to time as a Collateral Agent
determines in its reasonable credit judgment.
"Invoices" means any document or documents used or to be used to
evidence a Receivable.
"Inventory Sublimit" as defined above.
"ITA" means the Income Tax Act (Canada) as the same may, from time to
time, be in effect.
17
"L/C Sublimit" means Ten Million U.S. Dollars ($10,000,000.00) in the
aggregate collectively available for Letters of Credit to be issued by HSBC on
behalf of Westcon America or by HSBC Canada on behalf of Westcon Canada, as the
case may be.
"L/C Issuer" means HSBC Bank USA as issuer of the Letters of Credit to
Westcon America and HSBC Bank USA (Toronto Branch) as issuer of the Letters of
Credit to Westcon Canada pursuant to the terms and conditions of this Agreement
and their successors and assigns.
"Lender Agreement" as defined in Section 12.17 hereof.
"Lender" or "Lenders" means as defined in the opening paragraph of
this Agreement, and their successors and assigns.
"Lenders' Obligations" as defined in Section 10.2(a) hereof.
"Letter(s) of Credit" means any irrevocable commercial or standby
letter of credit issued by an L/C Issuer pursuant to this Agreement upon
application by Westcon America or Westcon Canada, as the case may be.
"Letter of Credit Fees" shall mean the fees defined in Section 2.3(d)
hereof.
"Letter of Indemnity" means any indemnity issued by L/C Issuer or
either Collateral Agent relating to goods covered by a Letter of Credit pursuant
to which L/C Issuer or either Collateral Agent will hold a carrier named by a
Borrower named as applicant under such Letter of Credit harmless by reason of
such carrier's releasing such goods without surrender to the carrier of the
endorsed transport document covering the shipment of such goods.
"LIBOR Loan" means any portion of an Advance bearing interest at the
LIBOR Rate plus the Applicable LIBOR Margin.
"LIBOR Period" means, with respect to any LIBOR Loan, each period
commencing on a Business Day selected by the applicable Borrower pursuant to
this Agreement and ending one, two or three months thereafter, as selected by
such Borrower's irrevocable notice to the applicable Collateral Agent as set
forth in Section 2.5(a); provided, that, the foregoing provision relating to
LIBOR Periods is subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is not a
Business Day, such Period shall be extended to the next succeeding Business Day
unless the result of such extension would be to carry such LIBOR Period into
another calendar month in which event such LIBOR Period shall end on the
immediately preceding Business Day;
(b) any LIBOR Period that would otherwise extend beyond the Maturity
Date shall end two (2) Business Days prior to such date;
(c) any LIBOR Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such LIBOR Period) shall end on the last
Business Day of a calendar month;
18
(d) Borrowers shall select LIBOR Periods so as not to require a
payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and
(e) Borrowers shall select LIBOR Periods so that collectively for both
Borrowers there shall be no more than 3 separate LIBOR Loans in existence at any
one time.
"LIBOR Rate" means for each LIBOR Period, a rate of interest
determined by the applicable Collateral Agent equal to:
(a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m.
(London time), on the second full Business Day next preceding the first day of
such LIBOR Period (unless such date is not a Business Day, in which event the
next succeeding Business Day will be used); divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two (2) Business Days prior to the
beginning of such LIBOR Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Federal Reserve Board or other
Government Authority having jurisdiction with respect thereto, as now and from
time to time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board that are
required to be maintained by a member bank of the Federal Reserve System.
If such interest rates shall cease to be available from Telerate News Service
(or its successor satisfactory to the applicable Collateral Agent), the LIBOR
Rate shall be determined from such financial reporting service or other
information as shall be determined by the applicable Collateral Agent.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien, charge or encumbrance, or preference,
priority or other security agreement or preferential arrangement in respect of
any asset of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the
authorization of, or the filing of, any financing statement or similar notice
filing under the UCC, any personal property security act or otherwise).
"Loans" means the Advances and any obligations arising in connection
with any Letters of Credit and any other financial accommodations made hereunder
or under any of the other Loan Documents.
"Loan Document" means this Agreement, the Subordination Agreement and
any other document, agreement, instrument or other writing executed and
delivered by any of Westcon, either Borrower, any Guarantor or any other Obligor
to any of the Agents, L/C Issuer or the Lenders in connection with this
Agreement, including, without limitation, the Notes, the Subordination Agreement
and the Collateral Documents.
19
"Material Adverse Effect" means a material adverse effect on (a) the
financial condition, business, assets, operations, properties or prospects of
any Person, as determined by either Collateral Agent in its reasonable judgment,
or (b) the ability of any Person to pay or perform any obligation under this
Agreement or any other Loan Document, or (c) the rights or remedies of any of
the Agents, any of the Lenders or either L/C Issuer hereunder or under any of
the other Loan Documents.
"Maturity Date" means the third anniversary of the date hereof, unless
accelerated sooner pursuant to Section 10.2, or otherwise, under this Agreement.
"Maximum Lawful Rate" as defined in Section 2.5(b) hereof.
"Maximum Limit" means One Hundred and Seventy Five Million U.S.
Dollars ($175,000,000.00).
"Net Income" as defined in accordance with GAAP.
"North American Subsidiaries" means any Subsidiaries of Westcon,
Westcon America and Westcon Canada that are formed under the laws of the United
States or Canada or any state, province or territory thereof.
"Note" or "Notes" means the American Notes and the Canadian Notes;
provided that all of the Indebtedness evidenced by the Notes shall be in and
repayable in United States Dollars.
"Obligations" means at a particular date, without duplication, (a) all
indebtedness of a Person for borrowed money or for the deferred purchase price
of property (excluding trade accounts payable in the ordinary course of
business), whether short term or long term, (b) the face amount of all letters
of credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder and not repaid by such Person, and (c) lease obligations
of such Person which, in accordance with GAAP, are or should be capitalized.
"Obligor" means any guarantor, endorser, acceptor, surety or other
Person liable on or with respect to the Indebtedness hereunder or under any
other Loan Document, or who is the owner of any property, which is security for
any of the Indebtedness hereunder or under any other Loan Document, including,
without limitation, any Guarantors and Borrowers.
"Patents" means all of the following in which either Borrower or any
Obligor now holds or hereafter acquires any interest: (a) all letters patent of
the United States or Canada or any state, province or territory thereof or of
any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or Canada or any state,
province or territory thereof or of any other country, including registrations,
recordings and applications in the United States Patent and Trademark Office or
the Canadian Patent and Trademark Office or in any similar office or agency of
the United States or Canada or any state, province or territory thereof or any
other country, and (b) all reissues, continuations-in-part of extensions
thereof.
"Payment Fee" as defined in 2.3(d) hereof.
20
"Pension Plan" means any pension plan as defined in Section 3(2) of
ERISA which is a multiemployer plan or single employer plan as defined in
Section 4001 of ERISA and subject to Title IV of ERISA and which is (i) a plan
maintained by Westcon, either of Borrowers or any of their Subsidiaries for
employees or former employees of Westcon, any Borrower or of any of their
Subsidiaries, (ii) a plan to which Westcon, either of Borrowers or any of their
Subsidiaries contributes or is required to contribute, (iii) a plan to which
Westcon, either of Borrowers or any of their Subsidiaries was required to make
contributions at any time, or (iv) any other plan with respect to which Westcon,
either of Borrowers or any of their Subsidiaries has incurred or may incur
liability, including contingent liability, under Title IV of ERISA, to such plan
or to the Pension Benefit Guaranty Corporation. For purposes of this definition
and for purposes of Sections 4.22, 8.14 and 8.15 hereof, "Borrower" shall
include any trade or business (whether or not incorporated) which, together with
Westcon, a Borrower or a Subsidiary, is deemed to be a "single employer" within
the meaning of Section 4001(b)(1) of ERISA. Each such Pension Plan in existence
as of the date of this Agreement is listed and identified on Schedule 1 annexed
hereto.
"Percentage" means with respect to each Lender the percentage of such
Lender's Loans, which is set forth on Exhibit A annexed hereto and made a part
hereof.
"Permitted Acquisitions" means, so long as there is no Event of
Default or Incipient Default, the purchase by a Borrower of all or substantially
all of the assets of any other Person (or of any operating division or unit
thereof) in the same business conducted by such Borrower (a "Target"), provided,
that (i) the aggregate principal amount invested by all Borrowers in all such
businesses may not exceed $20,000,000 for any single investment and $20,000,000
in the aggregate for all such investments in any twelve month period (inclusive
in all instances of the principal amount of any indebtedness or other
obligations assumed or refinanced in such acquisition), (ii) pro-forma for the
acquisition, Westcon and the Borrowers remain in compliance with all of the
covenants, (iii) both before and after giving effect to such acquisition,
Borrowers shall have Excess Availability of no less than $20,000,000.00, and
(iv) each of the following is met in connection with the acquisition:
(a) the applicable Collateral Agent shall receive at least thirty (30)
Business Days' prior written notice of such proposed acquisition, which notice
shall include a reasonably detailed description of such proposed acquisition;
(b) such acquisition shall only involve assets located in the United
States or Canada and comprising a business, or those assets of a business, of
the type engaged in by Borrowers as of the Closing Date, and which business
would not subject any Collateral Agent or any Lender to regulatory or third
party approvals in connection with the exercise of its rights and remedies under
this Agreement or any other Loan Documents other than approvals applicable to
the exercise of such rights and remedies with respect to Borrowers prior to such
acquisition;
(c) such acquisition shall be consensual and shall have been approved
by the Target's board of directors;
(d) the Target shall not have incurred an operating loss for the
trailing twelve-month period preceding the date of the acquisition, as
determined based upon the Target's
21
financial statements for its most recently completed fiscal year and its most
recent interim financial period completed within sixty (60) days prior to the
date of consummation of such acquisition;
(e) at or prior to the closing of any acquisition, applicable
Collateral Agent will be granted a first priority perfected Lien subject to
Permitted Encumbrances in all assets acquired pursuant thereto or in the assets
and Stock of the Target, and Westcon and Borrowers and the Target shall have
executed such documents and taken such actions as may be required by applicable
Collateral Agent in connection therewith;
(f) on or prior to the date of such acquisition, applicable Collateral
Agent shall have received, in form and substance reasonably satisfactory to
applicable Collateral Agent, copies of the acquisition agreement and related
agreements and instruments, and all opinions, certificates, lien search results
and other documents reasonably requested by applicable Collateral Agent;
(g) at the time of such acquisition and after giving effect thereto,
no Incipient Default or Event of Default has occurred and is continuing; and
(h) Notwithstanding the foregoing, the Accounts and Inventory of the
Target shall not be included in eligible Receivables and Eligible Inventory
without the prior written consent of the applicable Collateral Agent.
"Permitted Indebtedness" means any of the following with regard to
Westcon, Borrowers and the other North American Subsidiaries:
(a) Indebtedness to the Agents, L/C Issuer and the Lenders under this
Agreement;
(b) Obligations set forth on Schedule 1.1(a) hereof;
(c) Intercompany Obligations consisting of loans from Westcon America
to Westcon Canada in an aggregate outstanding amount not to exceed $1,000,000;
provided, that (i) all such loans are evidenced by a subordinated promissory
note in form and substance satisfactory to the American Collateral Agent (ii)
such promissory note is pledged pursuant to documentation in form and substance
satisfactory to the American Collateral Agent to the American Collateral Agent,
on behalf of American Lenders, American Collateral Agent, Canadian Lenders and
Canadian Collateral Agent, and (iii) such loans do not impair the Solvency of
Westcon America;
(d) Intercompany Obligations consisting of loans from Westcon America
to Westcon in an aggregate outstanding amount not to exceed $2,000,000;
provided, that (i) all such loans are evidenced by a subordinated promissory
note in form and substance satisfactory to the American Collateral Agent (ii)
such promissory note is pledged pursuant to documentation in form and substance
satisfactory to the American Collateral Agent to the American Collateral Agent,
on behalf of American Lenders, American Collateral Agent, Canadian Lenders and
Canadian Collateral Agent and (iii) such loans do not impair the Solvency of
Westcon America;
22
(e) Intercompany Obligations consisting of loans from Westcon Canada
to Westcon America in an aggregate outstanding amount not to exceed $2,000,000;
provided, that (i) all such loans are evidenced by a subordinated promissory
note in form and substance satisfactory to the Canadian Collateral Agent (ii)
such promissory note is pledged pursuant to documentation in form and substance
satisfactory to the Canadian Collateral Agent to the Canadian Collateral Agent,
on behalf of Canadian Lenders and Canadian Collateral Agent and (iii) such loans
do not impair the Solvency of Westcon Canada;
(f) Intercompany Obligations consisting of loans from Westcon Canada
to Westcon in an aggregate outstanding amount not to exceed $500,000; provided,
that (i) all such loans are evidenced by a subordinated promissory note in form
and substance satisfactory to the Canadian Collateral Agent (ii) such promissory
note is pledged pursuant to documentation in form and substance satisfactory to
the Canadian Collateral Agent to the Canadian Collateral Agent, on behalf of
Canadian Lenders and Canadian Collateral Agent and (iii) such loans do not
impair the Solvency of Westcon Canada;
(g) Obligations consisting of (i) intercompany loans by
Westcon to Unrestricted Subsidiaries, or (ii) guaranties by Westcon of the
Obligations of Unrestricted Subsidiaries, so long as such guaranties are
unsecured;
(h) Purchase Money Indebtedness in an aggregate outstanding amount not
to exceed $5,000,000;
(i) Guaranties in favor of the Agents, L/C Issuer and the Lenders;
(j) Other Obligations consented to by the Agents and the Lenders in
writing prior to the incurrence of such Obligations.
"Permitted Liens" means any of the following with respect to Westcon,
Borrowers and the other North American Subsidiaries:
(a) Purchase Money Security Interests securing Purchase Money
Indebtedness expressly permitted under clause (i) of the definition of
"Permitted Indebtedness";
(b) Liens described on Schedule 1.1(b) hereof;
(c) Liens on the Capital Stock, property or assets of any Unrestricted
Subsidiary;
(d) Liens of warehousemen, mechanics, materialmen, workers, repairmen,
common carriers, landlords and other similar Liens arising by operation of law
or otherwise, not waived in connection herewith, for amounts that are not yet
due and payable or being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted if an adequate reserve or other
appropriate provisions shall have been made therefor as required to be in
conformity with GAAP and an adverse determination in such proceedings could not
be expected to have an adverse effect in excess of $500,000;
23
(e) Attachment or judgment Liens individually or in the aggregate not
in excess of One Million U.S. Dollars ($1,000,000.00) (exclusive of (A) any
amounts that are duly bonded to the satisfaction of the Agents or (B) any amount
fully covered by insurance as to which the insurance company (such insurance
company to be satisfactory to the applicable Collateral Agent) has acknowledged
its obligation to pay such judgment in full);
(f) Easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not detract from the value
of the property subject thereto or interfere with the ordinary conduct of the
business of Westcon, Borrowers or any of the other North American Subsidiaries;
(g) Extensions and renewals of the foregoing Permitted Liens; provided
that (A) the aggregate amount of such extended or renewed Liens do not exceed
the original principal amount of the Obligations which it secures, (B) such
Liens do not extend to any property other than property already previously
subject to the Lien and (C) such extended or renewed Liens are on terms and
conditions no more restrictive than the terms and conditions of the Liens being
extended or renewed;
(h) Liens arising from deposits or pledges to secure bids, tenders,
contracts, leases, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of Westcon's, Borrowers' or any of their
respective North American Subsidiaries' businesses in an aggregate outstanding
amount not to exceed $500,000;
(i) Liens for taxes, assessments or governmental charges not
delinquent or being contested, in good faith, by appropriate proceedings
promptly instituted and diligently conducted if an adequate reserve or other
appropriate provisions shall have been made therefor as required in order to be
in conformity with GAAP and an adverse determination in such proceedings could
not be expected to have an adverse effect in excess of $500,000;
(j) Liens arising out of deposits in the ordinary course of business,
consistent with past practices in connection with workers' compensation,
unemployment insurance or other social security or similar legislation;
(k) Liens arising pursuant to this Agreement and the other Loan
Documents in favor of the Collateral Agents or Lenders;
(l) To the extent not provided for in clauses (e) and (i) above, Prior
Claims; and
(m) Other Liens consented to by the Agents and Lenders in writing
prior to incurring such Lien.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated association, government or
political subdivision or other entity, body, organization or group.
"Pledge Security Agreements" as defined in Section 3.5 of this
Agreement.
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"Prepayment Premium" means, in the event Borrowers permanently prepay
or reduce any portion of the Advances or the Commitments prior to the Maturity
Date, an amount equal to: (a) one percent (1%) of such prepayment or reduction
in the event such prepayment or reduction occurs on or prior to the first
anniversary of the date hereof; and (b) one quarter of one percent (.25%) of
such prepayment or reduction in the event such prepayment or reduction occurs
after the first anniversary of this Agreement, but on or prior to the second
anniversary of this Agreement; provided, however, that in the event the Loans
are refinanced in full with financing provided by the Lenders, the prepayment
premium will not apply.
"Pricing Date" means the day on which adjustments in the Applicable
Margins are made.
"Pricing Event" means the occurrence of any adjustments in the
Applicable Margin.
"Prior Claims" means all Liens created by applicable law (in contrast
with Liens voluntarily granted) which rank or are capable of ranking prior or
pari passu with the Canadian Collateral Agent's security interests (or similar
Liens under applicable laws), against all or part of the Collateral, including
for amounts owing for employee source deductions, goods and services taxes,
sales taxes, Quebec corporate income taxes, withholding taxes, municipal taxes,
workers' compensation, pension fund obligations and overdue rents.
"Projections" means Westcon's and Borrowers' forecasted consolidated
and consolidating: (a) balance sheets; (b) profit and loss statements; and (c)
cash flow statements, all prepared on a basis consistent with the historical
Financial Statements of Westcon and the Borrowers, together with appropriate
supporting details and a statement of underlying assumptions.
"Purchase Money Indebtedness" means any Indebtedness (including
capital leases) incurred to finance the acquisition of assets to be used in a
Borrower's business not to exceed the lesser of (1) the purchase price or
acquisition cost of such asset and (2) the fair market value of such asset,
subject to the limitations set forth in the definition of Permitted
Acquisitions.
"Purchase Money Security Interest" means any security interest
securing Purchase Money Indebtedness, which security interest applies solely to
the particular asset acquired with the Purchase Money Indebtedness.
"PPSA" means the Personal Property Security Act (Ontario) and the
regulations thereunder, as from time to time in effect, provided, however, if
attachment, perfection or priority of Canadian Collateral Agent's security
interests in any Canadian Collateral are governed by the personal property
security laws of any jurisdiction other than Ontario, PPSA shall mean those
personal property security laws in such other jurisdiction for the purposes of
the provisions hereof relating to such attachment, perfection or priority and
for the definitions related to such provisions.
"Quebec Security Agreements" means the Debentures, Debenture Pledge
Agreements and Deeds of Hypothec.
25
"Rate of Exchange" means the rate of exchange at which the Canadian
Collateral Agent would, on the relevant date at or about noon (New York Time),
be prepared to convert Canadian Dollars into U.S. Dollars by reference to the
Wall Street Journal or, in the event that reference to the Wall Street Journal
is not available, by reference to such other standard as the Canadian Collateral
Agent may deem appropriate.
"Rate Option" or "Rate Options" means individually, and collectively,
the choice of applicable interest rates and LIBOR Periods offered pursuant to
this Agreement to establish the interest to be charged on certain portions of
the unpaid principal borrowed hereunder from time to time.
"Receivable" means the right to payment for Goods sold, leased or
licensed or services rendered by the applicable entity, whether or not earned by
performance, and may, without limitation, in whole or in part be in the form of
an Account, Claim, Chattel Paper, Document, or Instrument, as such terms are
defined in the UCC as in effect in New York State from time to time.
"Receivables Borrowing Capacity" means at the time of its computation
for the applicable Borrower, eighty five percent (85%) of the sum of the
aggregate amount of the outstanding eligible Receivables in the case of Westcon
America in which American Collateral Agent, for the benefit of the American
Lenders, American Collateral Agent, Canadian Lenders and Canadian Collateral
Agent, has a first and only priority perfected security interest and Westcon
Canada in which Canadian Collateral Agent, for the benefit of the Canadian
Lenders and itself, has a first and only priority perfected security interest
subject to Prior Claims (adjusted with respect to credits and returned
merchandise), in the instance of Westcon Canada, with eligible Receivables
denominated in Canadian Dollars calculated in U.S. Dollars at the Rate of
Exchange for Canadian Dollars, as determined by the Canadian Collateral Agent,
and in each instance less the amount of Ineligible Receivables and any reserves
established from time to time as the applicable Collateral Agent determines in
its reasonable credit judgment.
"Record" as defined in the UCC.
"Release" has the same meaning as given to that term in Section
101(22) of the Comprehensive, Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Section 9601, et. seq. and the regulations promulgated
thereunder.
"Reportable Event" means any event with regard to a Pension Plan
described in Section 4043(c) of ERISA, or in regulations issued thereunder.
"Request Certificate" means a certificate in the form annexed hereto
as Exhibit C, with all blanks appropriately completed, and duly executed on
behalf of the applicable Person.
"Required American Lenders" means American Lenders owed or holding at
least fifty-one percent (51%) of the sum of the aggregate principal amount of
the American Advances outstanding and undrawn American Letter(s) of Credit at
such time or, if no American Advances or American Letters of Credit are
outstanding, American Lenders holding at least fifty-one percent (51%) of the
Commitments (Westcon America); provided, however, that if any American Lender
shall be a Defaulting Lender at such time, there shall be excluded from the
26
determination of such Required Lenders at such time (i) the aggregate
outstanding principal amount of the American Loans owing to such Defaulting
Lender, and (ii) the aggregate Commitments (Westcon America) of such Defaulting
Lender under this Agreement at such time.
"Required Canadian Lenders" means Canadian Lenders owed or holding at
least fifty-one percent (51%) of the sum of the aggregate principal amount of
the Canadian Advances outstanding and undrawn Canadian Letter(s) of Credit at
such time or, if no Canadian Advances or Canadian Letters of Credit are
outstanding, Canadian Lenders holding at least fifty-one percent (51%) of the
Commitments (Westcon Canada); provided, however, that if any Canadian Lender
shall be a Defaulting Lender at such time, there shall be excluded from the
determination of such Required Lenders at such time (i) the aggregate
outstanding principal amount of the Canadian Loans owing to such Defaulting
Lender, and (ii) the aggregate Commitments (Westcon Canada) of such Defaulting
Lender under this Agreement at such time.
"Required Lenders" means Lenders owed or holding at least fifty-one
percent (51%) of the sum of the aggregate principal amount of the sum of the
aggregate principal amount of the Advances outstanding and undrawn Letter(s) of
Credit at such time or, if no Advances or Letters of Credit are outstanding,
Lenders holding at least fifty-one percent (51%) of the Commitments; provided,
however, that if any Lender shall be a Defaulting Lender at such time, there
shall be excluded from the determination of Required Lenders at such time (i)
the aggregate outstanding principal amount of American Loans owing to such
Defaulting Lender, and (ii) the aggregate Commitments of such Defaulting Lender
under this Agreement at such time.
"Responsible Party" means an Account Debtor, a general partner of an
Account Debtor, or any party otherwise in any way directly or indirectly liable
for the payment of a Receivable.
"Revolving Credit" means together the American Revolving Credit and
the Canadian Revolving Credit.
"Revolving Loan" or "Revolving Loans" means any American Revolving
Loan or Canadian Revolving Loan, all American Revolving Loans, all Canadian
Revolving Loans, and collectively any combinations thereof.
"Revolving Note" or "Revolving Notes" means an American Revolving Note
or Canadian Revolving Note and, collectively, all American Revolving Notes and
Canadian Revolving Notes.
"Security Agreements" and "Security Interests" as defined in Section
3.4 of this Agreement.
"Solvency" means on any date (i) with respect to any Person organized
under the laws of the United States or a state thereof (a) the fair value of the
property of such Person exceeds its total liabilities including, without
limitation, contingent liabilities, (b) the present fair saleable value of the
assets of such Person is not less than the amount that will be required to pay
its probable liability on its debts as they become absolute and matured, (c)
such Person does not intend to, and does not believe that it will, incur debts
or liabilities beyond its ability to pay as
27
such debts and liabilities mature and (d) such Person is not engaged, and is not
about to engage, in business or a transaction for which its property would
constitute unreasonably small capital or (ii) with respect to any Person
organized under the federal laws of Canada, or any province or territory
thereof, that on such date (a) the aggregate property of such Person is
sufficient, if disposed of at a fairly conducted sale under legal process, to
enable payment of all its obligations, due and accruing due, (b) the property of
such Person is, at a fair valuation, greater than the total amount of
liabilities, including contingent liabilities, of such Person; (c) such Person
has not ceased paying its current obligations in the ordinary course of business
as they generally become due and (d) such Person is not, for any reason, unable
to meet its obligations as they generally become due.
"Solvency Certificate" as defined in Section 3.11 of this Agreement.
"Subordination Agreement" as defined in Section 3.9 of this Agreement.
"Subsidiary" means any corporation of which at least 50% of the voting
stock is owned by any entity directly, or indirectly through one or more
Subsidiaries. If the applicable entity has no Subsidiaries, the provisions of
this Agreement relating to Subsidiaries shall be inapplicable, without affecting
the applicability of such provisions to any entity alone.
"Swap Agreement" means a non-speculative interest rate swap, cap or
collar agreement, or any non-speculative agreement for foreign exchange
transactions, or any non-speculative arrangement similar to any of the foregoing
between any Borrower and any Lender, each as providing for the transfer or
mitigation of interest rate or currency risks either generally or under specific
contingencies.
"Tangible Net Worth" means the sum of an entity's stockholders' equity
minus (i) accumulated unrealized gains or losses from foreign exchange
translation adjustments; and (ii) the book value of such entity's Intangible
Assets, all determined in accordance with GAAP, consistently applied each year
and from year to year.
"Trademarks" means all of the following now owned or hereafter
existing or adopted or acquired by either Borrower or any Obligor: (a) all
trademarks, trade names, corporate names, business names, trade styles, service
marks, logos, other source or business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and general intangibles of
like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or the Canadian Patent and Trademark Office or in any similar
office or agency of the United States or Canada or any state province or
territory thereof, or any other country or any political subdivision thereof;
(b) all reissues, extensions or renewals thereof; and (c) all goodwill
associated with or symbolized by any of the foregoing.
"Trailing 12-Month Basis" means the most recently completed twelve
consecutive months which precede the date on which a financial covenant is
calculated.
"UCC" means the Uniform Commercial Code as in effect from time to
time; provided, that if the personal property security laws of a jurisdiction of
Canada governs the
28
validity and effect of perfection and non-perfection then "UCC" means those
personal property security laws.
"Undrawn Commitment Fee" as defined in Section 7.4(a) hereof.
"Unrestricted Subsidiary" means any direct or indirect Subsidiary of
Westcon other than the Borrowers and other North American Subsidiaries.
"Vendors" means any Person from whom any Obligor purchases, leases or
licenses goods or services in the ordinary course of such Obligor's business.
"Vendor Receivables" means any Receivables due from Vendors.
"Westcon" means Westcon Group, Inc., a Delaware corporation.
"Westcon America" means Westcon Group North America, Inc., a New York
corporation.
"Westcon Canada" means Westcon Canada Systems (WCSI) Inc., a Canadian
corporation.
"Westcon Canada Sublimit" means Ten Million U.S. Dollars
("$10,000,000.00").
"Westcon Subsidiaries" means all of the Subsidiaries of Westcon from
time to time, including, without limitation, those Subsidiaries listed on
Schedule 4.15 of this Agreement.
1.2 UCC Terms. Capitalized terms used, but not otherwise defined herein
shall have the meanings given thereto in the UCC.
1.3 Accounting Terms. All accounting terms used, but not otherwise defined
herein have the meaning assigned to them in accordance with GAAP.
1.4 Dollars. All references to "dollar", "Dollar", or "$" or any other such
terms hereunder shall mean United States Dollars, it being understood and agreed
that all Advances and financial accommodations hereunder shall be made in U.S.
Dollars, evidenced by instruments bearing references to U.S. Dollars and repaid
or reimbursed in U.S. Dollars.
ARTICLE 2. THE CREDITS
2.1 The Revolving Credit.
(a) Revolving Loans (Westcon America).
(i) Each American Lender severally and for itself alone agrees,
subject to the terms and conditions of this Agreement and relying upon the
representations and warranties set forth in this Agreement and within the limits
hereof, that it shall from time to time during the period commencing on the date
the conditions specified in Article III are satisfied through the Business Day
preceding the Maturity Date or the earlier termination of this Agreement make
one or more American Advances (each an "American Revolving Loan", and
29
collectively the "American Revolving Loans") to Westcon America, equal to such
American Lender's American Percentage of the Commitment (Westcon America);
provided, that, no American Lender shall be required or permitted to make
American Revolving Loans or participate in any American Letter of Credit, if
after giving effect thereto, (i) the aggregate outstanding principal amount of
all such Revolving Loans and the aggregate face amount of all such Letters of
Credit would exceed the Borrowing Capacity (Westcon America); or (ii) cause such
American Lender to exceed its Commitment (Westcon America) (collectively, the
"American Revolving Credit"). American Collateral Agent may, at any time and
from time to time, in its reasonable credit judgment, establish reserves against
the Receivables or the Inventory of Westcon America, which shall be subtracted
from the applicable Receivables Borrowing Capacity or Inventory Borrowing
Capacity when calculating the amount of the Borrowing Capacity (Westcon
America). Notwithstanding any other provision of this Agreement, American
Collateral Agent may from time to time reduce the percentages applicable to the
Receivables Borrowing Capacity and the Inventory Borrowing Capacity as they
relate to amounts of the Borrowing Capacity (Westcon America) if American
Collateral Agent determines in its reasonable credit judgment, that there has
been a change in circumstances related to any of the Receivables or Inventory of
Westcon America from those circumstances in existence on or prior to the date of
this Agreement or in the financial or other condition of Westcon, either of
Borrowers or any Obligor.
(ii) Canadian Revolving Loans. Each Canadian Lender severally and
for itself alone agrees, subject to the terms and conditions of this Agreement
and relying upon the representations and warranties set forth in this Agreement
and within the limits hereof, that it shall from time to time during the period
commencing on the date the conditions specified in Article III are satisfied
through the Business Day preceding the Maturity Date or the earlier termination
of this Agreement make one or more Canadian Advances (each a "Canadian Revolving
Loan", and collectively the "Canadian Revolving Loans") to Westcon Canada, equal
to such Canadian Lender's Canadian Percentage of the Commitment (Westcon
Canada); provided, that, no Canadian Lender shall be required or permitted to
make Canadian Revolving Loans or participate in any Canadian Letter of Credit,
if after giving effect thereto, (i) the aggregate outstanding principal amount
of all such Revolving Loans and the aggregate face amount of all such Letters of
Credit would exceed the Borrowing Capacity (Westcon Canada); or (ii) cause such
Canadian Lender to exceed its Commitment (Westcon Canada) (collectively, the
"Canadian Revolving Credit"). Canadian Collateral Agent may, at any time and
from time to time, in its reasonable credit judgment, establish reserves against
the Receivables or the Inventory of Westcon Canada, which shall be subtracted
from the applicable Receivables Borrowing Capacity or Inventory Borrowing
Capacity when calculating the amount of the Borrowing Capacity (Westcon Canada).
Notwithstanding any other provision of this Agreement, Canadian Collateral Agent
may from time to time reduce the percentages applicable to the Receivables
Borrowing Capacity and the Inventory Borrowing Capacity as they relate to
amounts of the Borrowing Capacity (Westcon Canada) if Canadian Collateral Agent
determines in its reasonable credit judgment, that there has been a change in
circumstances related to any of the Receivables or Inventory of Westcon Canada
from those circumstances in existence on or prior to the date of this Agreement
or in the financial or other condition of Westcon, either of Borrowers or any
Obligor.
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(iii) Each request for an Advance shall be conclusively presumed
to be made by a person authorized by such Borrower to do so, and the making of
such Advance to either of the Borrowers as hereinafter provided shall
conclusively establish such Borrower's obligation to repay the Advance. The
Revolving Loans may be repaid and reborrowed in accordance with the provisions
hereof.
(b) Method for Loans.
(i) Method for American Revolving Loans. Westcon America shall
request American Collateral Agent in a Record to cause the American Lenders to
make American Revolving Loan(s) by submitting a Request Certificate not later
than 11:00 a.m. (Eastern Time) on the Business Day on which such Revolving Loan
is to be funded in the case of an Index Rate Loan, and in the case of a LIBOR
Loan not later than 11:00 a.m. (Eastern Time) three (3) Business Days prior to
the proposed commencement date of the applicable LIBOR Period. The Request
Certificate shall have all blanks appropriately completed, and Westcon America
shall specify (i) the aggregate amount of the American Revolving Loan to be made
on a designated date, which, for a LIBOR Loan, shall be in a minimum amount of
$2,000,000.00 and shall be in whole multiples of $500,000.00 for amounts in
excess of such minimum amount, and for an Index Rate Loan shall be in any
amount; (ii) whether the American Revolving Loan shall be an Index Rate Loan or
a LIBOR Loan, and if a LIBOR Loan the applicable LIBOR Period; and (iii) the
proposed date on which the American Revolving Loan is to be funded, which shall
be a Business Day. As early as practically possible on the date on which a Loan
is made and upon fulfillment of the conditions set forth in Article III of this
Agreement, the American Lenders will make the proceeds of the American Revolving
Loan available to Westcon America by a deposit to the applicable bank account as
indicated by the American Collateral Agent, provided, that, none of the American
Collateral Agent or the American Lenders shall have any obligation with respect
to the application of such proceeds.
(ii) Method for Canadian Revolving Loans. Westcon Canada shall
request Canadian Collateral Agent in a Record to cause the Canadian Lenders to
make Canadian Revolving Loan(s) by submitting a Request Certificate not later
than 11:00 a.m. (Eastern Time) on the Business Day on which such Revolving Loan
is to be funded in the case of an Index Rate Loan, and in the case of a LIBOR
Loan not later than 11:00 a.m. (Eastern Time) three (3) Business Days prior to
the proposed commencement date of the applicable LIBOR Period. The Request
Certificate shall have all blanks appropriately completed, and Westcon Canada
shall specify (i) the aggregate amount of the Canadian Revolving Loan to be made
on a designated date, which, for a LIBOR Loan, shall be in a minimum amount of
$2,000,000.00 and shall be in whole multiples of $500,000.00 for amounts in
excess of such minimum amount, and for an Index Rate Loan shall be in any
amount; (ii) whether the Canadian Revolving Loan shall be an Index Rate Loan or
a LIBOR Loan, and if a LIBOR Loan the applicable LIBOR Period; and (iii) the
proposed date on which the Canadian Revolving Loan is to be funded, which shall
be a Business Day. As early as practically possible on the date on which a Loan
is made and upon fulfillment of the conditions set forth in Article III of this
Agreement, the Canadian Lenders will make the proceeds of the Canadian Revolving
Loan available to Westcon Canada by a deposit to the applicable bank account as
indicated by the Canadian Collateral Agent, provided, that, none of the Canadian
Collateral Agent or the Canadian Lenders shall have any obligation with respect
to the application of such proceeds.
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2.2 The Revolving Notes. The Revolving Loans shall be evidenced by one or
more Revolving Notes, payable as provided therein to each American Lender, in
the case of Westcon America and American Revolving Loans, and each Canadian
Lender, in the case of Westcon Canada and Canadian Revolving Loans, for such
Lender's applicable Percentage of the applicable Commitments.
2.3 Letters of Credit.
(a) American Letters of Credit. American L/C Issuer, all subject to
the terms and conditions of this Agreement and relying on the representations
and warranties set forth in this Agreement, within the limits hereof, and upon
application of Westcon America, shall from time to time during the period
commencing on the date the conditions specified in Article III are satisfied
through the date which is 90 days preceding the Maturity Date, issue American
Letters of Credit on behalf of the American Lenders for the account of Westcon
America in an aggregate face amount of American Letters of Credit outstanding at
any one time not to exceed, when aggregated with 100% of the face amount of
Canadian Letters of Credit outstanding at any such one time, the L/C Sublimit;
provided, however, American L/C Issuer will not issue any American Letter of
Credit if, after giving effect thereto, (ii) the aggregate outstanding principal
amount of all American Revolving Loans and the aggregate face amount of American
Letters of Credit outstanding would exceed the Borrowing Capacity (Westcon
America) or the issuance of the American Letter of Credit by American L/C Issuer
or any American Lender's purchase of a participation interest by such American
Lender in the American Letter of Credit would cause American L/C Issuer or any
such American Lender to exceed its Commitment (Westcon America).
(b) Canadian Letters of Credit. Canadian L/C Issuer, all subject to
the terms and conditions of this Agreement and relying on the representations
and warranties set forth in this Agreement, within the limits hereof, and upon
application of Westcon Canada, shall from time to time during the period
commencing on the date the conditions specified in Article III are satisfied
through the date which is 90 days preceding the Maturity Date, issue Canadian
Letters of Credit on behalf of the Canadian Lenders for the account of Westcon
Canada in an aggregate face amount of Canadian Letters of Credit outstanding at
any one time not to exceed, when aggregated with 100% of the face amount of
American Letters of Credit outstanding at any such one time, the L/C Sublimit;
provided, however, Canadian L/C Issuer will not issue any Canadian Letter of
Credit if, after giving effect thereto, the aggregate outstanding principal
amount of all Canadian Revolving Loans and the aggregate face amount of Canadian
Letters of Credit outstanding would exceed the Borrowing Capacity (Westcon
Canada) or the issuance of the Canadian Letter of Credit by Canadian L/C Issuer
or any Canadian Lender's purchase of a participation interest by such Canadian
Lender in the Canadian Letter of Credit would cause Canadian L/C Issuer or any
such Canadian Lender to exceed its Commitment (Westcon Canada).
Each Letter of Credit shall (i) provide for the payment of drafts in
United States dollars, in each case, presented for honor thereunder by the
beneficiary in accordance with the terms thereof, at sight when accompanied by
the documents described therein, which in the case of any transport documents
shall be consigned to the order of (x) in the case of Westcon America, General
Electric Capital Corporation, as a Collateral Agent, and (y) in the case of
Westcon Canada, General Electric Capital Canada, Inc., as a Collateral Agent,
(ii) have an
32
expiration date which is no later than: (A) the Business Day which is twelve
(12) months from the date of issuance of such Letter of Credit or (B) the
Business Day immediately preceding the Maturity Date; and (iii) otherwise be in
form and substance satisfactory to L/C Issuer as the issuer of such Letter of
Credit. Upon the issuance of any Letter(s) of Credit, the applicable L/C Issuer
shall deliver the original of such Letter of Credit to the beneficiary thereof
at the direction of the applicable Borrower and advise each other applicable
Lender of the issuance thereof.
(c) Application by a Borrower for Issuance of Letters of Credit.
Westcon America or Westcon Canada, as the case may be, shall request, for its
own account, the applicable L/C Issuer in writing to issue the American Letters
of Credit or Canadian Letters of Credit, as applicable, by delivering to the
applicable L/C Issuer on or before the date hereof, in the case of Letters of
Credit to be issued on the date hereof, or one (1) Business Day prior to the
proposed date of issuance, in the case of all other Letters of Credit to be
issued hereunder, a Letter of Credit application in form and content
satisfactory to the applicable L/C Issuer that specifies that it is the account
party for the requested Letter of Credit and is otherwise completed to the
satisfaction of the applicable L/C Issuer and such other certificates, documents
and other papers and information as the applicable L/C Issuer may request.
(d) Letter of Credit Fees. Westcon America agrees to pay American L/C
Issuer for the ratable benefit of the American Lenders, and Westcon Canada
agrees to pay to Canadian L/C Issuer for the ratable benefit of the Canadian
Lenders, as the case may be, a fee equal to the Applicable L/C Margin ("Payment
Fee"), in effect at such time on the face amount of any outstanding American
Letter of Credit or Canadian Letter of Credit, as applicable, plus (i) a fee of
one-eighth of one percent (0.125%) as a fronting fee payable quarterly, in
arrears on the last Business Day of each March, June, September and December of
each year ("Fronting Fee"); and (ii) a payment fee in connection with each
Letter of Credit, which fee shall in no event be less than seventy-five dollars
($75.00) for each such drawing received quarterly on the last Business Day of
each March, June, September and December ("Drawing Fee"). The Fronting Fee and
the Drawing Fee shall be for the account of the applicable L/C Issuer. In
addition, Westcon America agrees to pay American L/C Issuer for its own account
and Westcon Canada agrees to pay to Canadian L/C Issuer for its own account,
upon the application therefor, such L/C Issuer's customary processing fee for
the issuance of any such Letter of Credit, any amendment to such Letter of
Credit, and any related Letter of Indemnity in accordance with the fee Schedule
attached hereto as Schedule 2.3(d), as the same may be updated from time to time
by either L/C Issuer. Such fees shall be payable in advance of the issuance of
any Letter of Credit, amendment thereto or Letter of Indemnity.
2.4 Letters of Credit.
(a) Participation in Letters of Credit.
(i) American L/C Issuer hereby sells to each American Lender in
the case of Westcon America, and such American Lender hereby purchases from
American L/C Issuer, without recourse to American L/C Issuer (except as to
payments to be made by American L/C Issuer to such American Lender under Section
2.3(d)) an undivided interest in each American Letter of Credit and in each
Payment Fee payable pursuant to Section 2.3(d), in each case equal to such
American Lender's American Percentage thereof.
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(ii) Canadian L/C Issuer hereby sells to each Canadian Lender in
the case of Westcon Canada, and such Canadian Lender hereby purchases from
Canadian L/C Issuer, without recourse to Canadian L/C Issuer (except as to
payments to be made by Canadian L/C Issuer to such Canadian Lender under Section
2.3(d)) an undivided interest in each Canadian Letter of Credit and in each
Payment Fee payable by Westcon Canada pursuant to Section 2.3(d), in each case
equal to such Canadian Lender's Canadian Percentage thereof.
(iii) Upon any drawing under a Letter of Credit, for the payment
of which either Westcon America or Westcon Canada has not otherwise made funds
available, American Collateral Agent shall notify each of the American Lenders
and Canadian Collateral Agent shall notify each of the Canadian Lenders, as
appropriate, of the date of payment of the drawing and the dollar amount of each
such Lender's Percentage interest therein. Such payment by either L/C Issuer
under the applicable Letter of Credit shall constitute, as applicable either an
American Revolving Loan or Canadian Revolving Loan by the American Lenders or
the Canadian Lenders, as the case may be subject to the terms and conditions of
this Agreement pertaining thereto other than Section 3.27 of this Agreement.
(iv) The obligation of the American Lenders in the case of
Westcon America and the Canadian Lenders in the case of Westcon Canada to remit
the amount of its applicable Revolving Loan to the applicable L/C Issuer
pursuant to a drawing under an applicable Letter of Credit in accordance with
Section 2.4(a)(iii) shall be unconditional and irrevocable under any and all
circumstances (unless the payment of such drawing was the result of such L/C
Issuer's gross negligence or willful misconduct as determined by a final
non-appealable order of a court of competent jurisdiction, or such Letter of
Credit was issued in violation of Section 2.3 of this Agreement) , and may not
be terminated, suspended or delayed for any reason notwithstanding any other
provision of this Agreement, including the occurrence and continuance of an
Event of Default or an Incipient Default hereunder. If for some reason the
American Lenders are not permitted to make American Advances to Westcon America
or the Canadian Lenders are not permitted to make Canadian Advances to Westcon
Canada as the case may be, each applicable Lender in lieu of making its
applicable Revolving Loan will forthwith pay the applicable L/C Issuer for such
Lender's applicable Percentage interest in the Letter of Credit by making a
payment to L/C Issuer equal to such Lender's Percentage share of such drawing;
provided, that, a Lender making a payment to an L/C Issuer pursuant hereto shall
have the right to participate, as a participant, in all rights, reimbursements
and collections of such L/C Issuer on account of the applicable Letter of
Credit.
(b) Obligation to Reimburse. American L/C Issuer will promptly notify,
by telephone, American Collateral Agent who shall promptly notify, by telephone,
Westcon America and Canadian L/C Issuer shall promptly notify, by telephone
Canadian Collateral Agent who shall promptly notify Westcon Canada of any draft
drawn pursuant to an American Letter of Credit or a Canadian Letter of Credit,
as the case may be, and presented for payment and of the date such L/C Issuer
intends to pay such draft. If that is the case, American L/C Issuer will provide
the American Lenders in the case of Westcon America and Canadian L/C Issuer will
provide the Canadian Lenders in the case of Westcon Canada with a monthly report
for the immediately preceding month describing each draft drawn pursuant to a
Letter of Credit and presented for payment during such period and the dates on
which such L/C Issuer has paid such drafts. With respect to any draft paid
pursuant to a Letter of Credit, as applicable, Westcon
34
America shall pay to American L/C Issuer and Westcon Canada shall pay to
Canadian L/C Issuer the amount of such payment on the date of payment by
depositing with such L/C Issuer prior to 11:00 a.m. (Eastern Time) immediately
available funds in the amount of such draft. The failure to so deposit shall be
deemed a request for American Revolving Loans in the case of an American Letter
of Credit and Westcon America and Canadian Revolving Loans in the case of a
Canadian Letter of Credit and Westcon Canada in an aggregate amount equal to the
amount paid and if such Revolving Loan is made it shall be deemed to be an
applicable Advance hereunder. If for any reason such a Revolving Loan is not
able to be advanced to a Borrower, such Borrower shall immediately pay the
amount of the draft to such L/C Issuer, together with interest at a per annum
rate equal to three (3) percent plus the Index Rate for the period from the date
of payment of such draft until payment is made by such Borrower to such L/C
Issuer.
(c) Unconditional Obligation. Delivery to an L/C Issuer or its
Correspondents of any documents purporting to comply with the requirements of
any Letter of Credit shall be sufficient evidence of the validity, genuineness,
and sufficiency thereof and of the good faith and proper performance of the
drawer and user of any Letter of Credit, their agents and assignees, and each
L/C Issuer and its Correspondents may rely and act thereon without liability or
responsibility with respect thereto or with respect to the correctness thereof.
Upon receipt by American L/C Issuer of written approval thereof from Westcon
America and Canadian L/C Issuer of written approval thereof from Westcon Canada,
such L/C Issuer may (but shall not be required to) accept or pay overdrafts or
irregular drafts or drafts with irregular documents attached or with respect to
which time limits have been extended, and no such acceptance or payment shall
impair any rights of such L/C Issuer under this Agreement or otherwise. In the
event of any variation between the documents called for by any Letter of Credit
and the documents received by an L/C Issuer which becomes apparent to an L/C
Issuer, American L/C Issuer will advise Westcon America and Canadian L/C Issuer
will advise Westcon Canada, as applicable, promptly and such Borrower will
direct such L/C Issuer whether or not to honor the purported draw within
twenty-four (24) hours of such notice from such L/C Issuer. In any event, in
case of any variation between the documents called for by any Letter of Credit
and the documents accepted by such L/C Issuer or its Correspondents, Borrowers
shall be conclusively deemed to have waived any right to object to such
variation with respect to any action of American L/C Issuer in the case of
Westcon America and Canadian L/C Issuer in the case of Westcon Canada or its
Correspondents relating to such documents and to have ratified and approved such
action as having been taken on the direction of the applicable Borrower, unless
such Borrower, within five (5) Business Days of the receipt of such documents or
acquisition of knowledge of such variation files an objection, in writing, with
American L/C Issuer in the case of Westcon America or Canadian L/C Issuer in the
case of Westcon Canada. Neither L/C Issuer shall be liable for any delay in
giving, or failing to give, any notice, or for any error, neglect or default of
any of its Correspondents; nor shall any L/C Issuer be responsible for the
non-fulfillment of any requirement of any Letter of Credit that drafts bear
appropriate reference to such Letter of Credit or that the amount of any draft
be noted on the reverse of any Letter of Credit or that the Letter of Credit be
surrendered or taken up or that documents be forwarded apart from any drafts,
and the applicable L/C Issuer or its Correspondents may, if they see fit, waive
any such requirements.
(d) Indemnity. Westcon America agrees with respect to any American
Letters of Credit and Westcon Canada agrees with respect to any Canadian Letters
of Credit to
35
indemnify the American L/C Issuer and the Canadian L/C Issuer, as the case may
be, and each of their respective Correspondents and hold them harmless from and
against any and all claims, damages, losses, liabilities, penalties, actions,
judgments, suits, costs, expenses and disbursements whatsoever which they may
incur or suffer by reason of or in connection with the execution and delivery or
assignment of or payment or presentation under any American Letter of Credit in
the case of Westcon America or Canadian Letter of Credit in the case of Westcon
Canada or any action taken or omitted to be taken with respect to any such
Letter of Credit, except only if and to the extent that any such claims,
damages, losses, liabilities, penalties, actions, judgments, suits, costs,
expenses or disbursements shall be caused by the willful misconduct or gross
negligence of the applicable L/C Issuer as determined by a final non-appealable
order of a court of competent jurisdiction or such Correspondent in making
payment against any draft presented under any such Letter of Credit which does
not comply with the term thereof, or in failing to make payment against any such
drafts which complies with the terms of such Letter of Credit (it being
understood that (x) in making such payment, such L/C Issuer's or such
Correspondent's exclusive reliance in good faith on the documents presented to
and believed to be genuine by it in accordance with the terms of such Letter of
Credit as to any and all matters set forth therein, including without
limitation, reliance in good faith on any affidavit presented pursuant to such
Letter of Credit and on the amount of any sight draft presented pursuant to any
Letter of Credit whether or not any statement or any other document presented
pursuant to such Letter of Credit proves to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein proves to be untrue or
inaccurate in any respect whatsoever, and (y) any such noncompliance in a
nonmaterial respect shall, in each case, not be deemed willful misconduct or
gross negligence of such L/C Issuer or such Correspondent). Upon demand by
American L/C Issuer or its Correspondent or Canadian L/C Issuer or its
Correspondent at any time, Westcon America or Westcon Canada, as applicable,
shall reimburse such L/C Issuer or such Correspondent for any legal or other
expenses incurred in connection with investigating or defending against any of
the foregoing. The indemnities contained herein shall survive the expiration or
termination of the Letters of Credit and this Agreement and shall be payable
upon demand. American L/C Issuer shall return any such funds paid by Westcon
America and Canadian L/C Issuer shall return any such funds paid by Westcon
Canada to such Borrower, as applicable under this Section 2.4(d) in the event
such claims, damages, losses, liabilities, penalties, actions, judgments, suits,
costs, expenses and disbursements arise as a consequence of the willful
misconduct or gross negligence of such L/C Issuer as determined by a final
non-appealable order of a court of competent jurisdiction.
(e) Reimbursement of Certain Costs.
(i) The respective obligations of Borrowers hereunder with regard
to Letters of Credit are absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the applicable Borrower may have against any Person, including,
without limitation, the beneficiary of such Letter of Credit and such L/C
Issuer, and all sums payable by a Borrower hereunder with respect to any such
Letter of Credit, whether of principal, interest, fees, expenses or otherwise,
shall be paid in full, without any deduction or withholding whatsoever. In the
event that either of Borrowers are compelled by any applicable law to make any
such deduction or withholding, then, unless prohibited by applicable law, the
applicable Borrower shall pay the applicable L/C Issuer such additional
36
amount as will result in the receipt by such L/C Issuer of a net sum equal to
the sum it would have received if no such deduction or withholding had been
required to be made.
(ii) In the event that any change in conditions or the adoption
of any law, regulation or directive or any change in applicable law, regulation
or directive, or interpretation thereof (including any request, guideline or
policy whether or not having the force of law and including, without
limitation, Regulation D promulgated by the Federal Reserve Board as now and
from time to time hereafter in effect) by any authority charged with the
administration or interpretation thereof, occurs which:
(A) subjects an L/C Issuer to any tax with respect to any
amount paid or to be paid by such L/C Issuer as the issuer of any American or
Canadian Letter of Credit, as the case may be, or its commitment under any such
Letter of Credit (other than any tax measured by or based upon the overall Net
Income of an L/C Issuer); or
(B) changes the basis of taxation of payments to an L/C
Issuer with respect to any such Letter of Credit or such commitment (other than
any tax measured by or based upon the overall Net Income of an L/C Issuer); or
(C) imposes, modifies or deems applicable any reserve,
deposit, insurance assessment or similar requirements against any assets held
by, deposits with or for the account of, or loans or commitments by, an office
of an L/C Issuer in connection with payments by such L/C Issuer under any
American Letter of Credit or Canadian Letter of Credit, as the case may be, or
commitments under any such Letter of Credit; or
(D) imposes upon an L/C Issuer any other condition with
respect to any amount paid or payable to or by such L/C Issuer with respect to
any American Letter of Credit or Canadian Letter of Credit, as the case may be;
and the result of any of the foregoing is to increase the cost
to such L/C Issuer of making any payment under, or maintaining its commitment
under, any such Letter of Credit, or to reduce the amount of any payment
(whether of principal, interest or otherwise) received or receivable by such
L/C Issuer with respect to any such Letter of Credit calculated by reference to
the gross amount of any sum received by it with respect to any such Letter of
Credit, in each case by an amount which an L/C Issuer in its judgment deems
material, then and in any such case:
(i) American L/C Issuer shall promptly notify Westcon America
and the American Lenders and Canadian L/C Issuer shall promptly notify Westcon
Canada and the Canadian Lenders in writing of the happening of such event;
(iii) American L/C Issuer shall promptly deliver to Westcon
America, American Collateral Agent and the American Lenders and Canadian L/C
Issuer shall promptly deliver to Westcon Canada, Canadian Collateral Agent and
the Canadian Lenders a certificate stating the change which has occurred or the
reserve requirements or other conditions which have been imposed on such L/C
Issuer or the request, directive or requirement with which it has complied,
together with the date thereof and the amount of such increased cost, reduction
or payment; and
37
(iv) Such Borrower shall pay such L/C Issuer, upon demand, after
delivery of the notice referred to above, such amount or amounts as will
compensate it for such additional cost, reduction or payment, to the extent
permitted by law.
A certificate delivered by either American L/C Issuer or Canadian L/C Issuer as
to the additional amounts payable pursuant to this paragraph shall, in the
absence of manifest error, be conclusive evidence of the amount thereof. The
protections of this paragraph shall be available to American L/C Issuer or
Canadian L/C Issuer regardless of any possible contention of invalidity or
inapplicability of any law, regulation, directive or condition, which has been
imposed. In the event the applicable Lenders have purchased participations in
any Letter of Credit pursuant to the terms hereof, the obligations of the
applicable Borrower hereunder shall also run to such Lenders.
2.5 Interest Option.
(a) Subject to the conditions precedent set forth in Article 3
hereof, the applicable Borrower shall have the option to (i) request that any
Advance be made as a LIBOR Loan, (ii) convert at any time all or any part of
outstanding Loans from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR
Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs in
accordance with Section 2.8 hereof if such conversion is made prior to the
expiration of the LIBOR Period applicable thereto, or (iv) continue all or any
portion of any Loan as a LIBOR Loan upon the expiration of the applicable LIBOR
Period and the succeeding LIBOR Period of that continued Loan shall commence on
the first day after the last day of the LIBOR Period of the Loan to be
continued. Any Loan or group of Loans having the same proposed LIBOR Period to
be made or continued as, or converted into, a LIBOR Loan must be in a minimum
amount of, in the case of Westcon America, $2,000,000.00 and integral multiples
of $500,000 in excess of such amount and, in the case of Westcon Canada,
$2,000,000 and integral multiples of $500,000 in excess of such amount. Any
such election must be made by 11:00 a.m. (Eastern Time) on the third Business
Day prior to (1) the date of any proposed Advance which is to bear interest at
the LIBOR Rate, (2) the end of each LIBOR Period with respect to any LIBOR
Loans to be continued as such, or (3) the date on which the applicable Borrower
wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period
designated by such Borrower in such election. If no election is received with
respect to a LIBOR Loan by 11:00 a.m. (Eastern Time) on the third Business Day
prior to the end of the LIBOR Period with respect thereto (or if a Default or
an Event of Default has occurred and is continuing or if the additional
conditions precedent set forth in Article III shall not have been satisfied),
that LIBOR Loan shall be converted to an Index Rate Loan at the end of its
LIBOR Period. The applicable Borrower must make such election by written notice
to the applicable Collateral Agent, by telecopy or overnight courier. In the
case of any conversion or continuation, such election must be made in writing
by the applicable Borrower submitting a Request Certificate to the applicable
Collateral Agent no later than three (3) Business Days prior to the proposed
conversion. No Loan may be made as or converted into a LIBOR Loan until
forty-five (45) days after the Closing Date.
(b) Notwithstanding anything to the contrary set forth in this
Section 2.5, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of
interest permissible under law (the "Maximum Lawful Rate"), then so long as the
Maximum Lawful
38
Rate would be so exceeded, the rate of interest payable hereunder shall be
equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, the applicable Borrower shall continue to pay interest hereunder
at the Maximum Lawful Rate until such time as the total interest received by
the applicable Collateral Agent, on behalf of the applicable Lenders, is equal
to the total interest that would have been received had the interest rate
payable hereunder been (but for the operation of this paragraph) the interest
rate payable since the Closing Date as otherwise provided in this Agreement. In
no event shall the total interest received by any Lender pursuant to the terms
hereof exceed the amount that such Lender could lawfully have received had the
interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate.
(c) If any provision of this Agreement or any of the other Loan
Documents would obligate Westcon Canada to make any payment of interest with
respect to its obligations hereunder or thereunder payable to any Canadian
Lender in an amount or calculated at a rate which would be prohibited by law or
would result in a receipt by that Canadian Lender of interest with respect to
such obligations at a criminal rate (as such terms are construed under the
Criminal Code (Canada)) then, notwithstanding such provision, such amount or
rates shall be deemed to have been adjusted with retroactive effect to the
maximum amount or rate of interest, as the case may be, as would not be so
prohibited by law or so result in a receipt by that Canadian Lender of interest
with respect to such obligations at a criminal rate, such adjustment to be
effected, to the extent necessary, as follows: (1) first, by reducing the
amount or rates of interest required to be paid to the affected Canadian Lender
under this Agreement; and (2) thereafter, by reducing any fees, commissions,
premiums and other amounts required to be paid to the affected Canadian Lender
which would constitute interest with respect to such obligations for purposes
of Section 347 of the Criminal Code (Canada). Notwithstanding the foregoing,
and after giving effect to all adjustments contemplated thereby, if any
Canadian Lender shall have received an amount in excess of the maximum
permitted by that section of the Criminal Code (Canada), then Westcon Canada
shall be entitled, by notice in writing to the affected Canadian Lender, to
obtain reimbursement from that Canadian Lender in an amount equal to such
excess, and pending such reimbursement, such amount shall be deemed to be an
amount payable by that Canadian Lender to Westcon Canada. Any amount or rate of
interest referred to in this Section 2.5(c) shall be determined in accordance
with generally accepted actuarial practices and principles as an effective
annual rate of interest over the term that any Loan made to Westcon Canada
remains outstanding on the assumption that any charges, fees or expenses that
fall within the meaning of "interest" (as defined in the Criminal Code
(Canada)) shall, if they relate to a specific period of time, be pro-rated over
that period of time and otherwise be pro-rated over the period from the Closing
Date to the date on which all of the obligations of Westcon Canada to Canadian
Collateral Agent, Canadian L/C Issuer and the Canadian Lenders have been
indefeasibly paid in full in cash and the Canadian Commitments have terminated
and, in the event of a dispute, a certificate of a Fellow of the Canadian
Institute of Actuaries appointed by Canadian Collateral Agent shall be
conclusive for the purposes of such determination.
(d) Any Loans as to which the applicable Borrower does not exercise
the election set forth in Section 2.5(a) in accordance with the provisions
thereof shall be an Index Rate Loan or shall remain an Index Rate Loan if it is
already an Index Rate Loan or shall become an Index Rate Loan at the end of the
applicable LIBOR Period if it is a LIBOR Rate Loan.
39
(e) No Collateral Agent shall incur any liability to any Borrower or
any other Obligor in acting upon a notice referred to herein which either
Collateral Agent believes to have been given by a duly authorized officer or
other person authorized to and on behalf of Westcon, either Borrower or any
other Obligor or for otherwise acting under this Agreement or otherwise herein.
2.6 Computation And Payment Of Interest.
(a) Interest shall be computed: (i) with respect to LIBOR Rate Loans
on the basis of a 360-day year for the actual number of days elapsed; and (ii)
with respect to an Index Rate Loan on the basis of a 360-day year for the
actual number of days elapsed. Interest on the outstanding principal portion of
the Loans shall be payable, monthly, in arrears on the last Business Day of
each month, except in the case of a LIBOR Loan, where interest shall be payable
on the last day of each applicable LIBOR Period, but in no event later than
ninety (90) days after the commencement of any LIBOR Period. The rate of
interest on the Loans shall change simultaneously with each change in the Index
Rate or LIBOR, as applicable. Each determination by the applicable Collateral
Agent of an interest rate shall be presumptive evidence of the correctness of
such rate.
(b) Default Rate.
(i) American Default Rate. So long as an Event of Default has
occurred and is continuing under Section 10.1 hereof or so long as any other
Event of Default has occurred and is continuing and at the election of American
Collateral Agent (or upon the written request of Required American Lenders),
the interest rates applicable to the American Advances and the American Letter
of Credit Fees shall be increased by two percentage points (2%) per annum above
the rates of interest or the rate of such Fees otherwise applicable hereunder
unless the American Collateral Agent or the Required American Lenders elect, in
their respective sole discretion, to impose a smaller increase (the "American
Default Rate" or "Default Rate"), and all outstanding American Indebtedness
shall bear interest at the Default Rate applicable to such Indebtedness.
Interest and Letter of Credit Fees at the Default Rate shall accrue from the
initial date of such Event of Default until that Event of Default is cured or
waived and shall be payable upon demand.
(ii) Canadian Default Rate. So long as an Event of Default has
occurred and is continuing under Section 10.1 hereof or so long as any other
Event of Default has occurred and is continuing and at the election of Canadian
Collateral Agent (or upon the written request of Required Canadian Lenders),
the interest rates applicable to the Canadian Advances and the Canadian Letter
of Credit Fees shall be increased by two percentage points (2%) per annum above
the rates of interest or the rate of such Fees otherwise applicable hereunder
unless Canadian Collateral Agent or the Required Canadian Lenders elect, in
their respective sole discretion, to impose a smaller increase (the "Canadian
Default Rate" or "Default Rate"), and all outstanding Canadian Indebtedness
shall bear interest at the Default Rate applicable to such Indebtedness.
Interest and Letter of Credit Fees at the Default Rate shall accrue from the
initial date of such Event of Default until that Event of Default is cured or
waived and shall be payable upon demand.
40
(c) Late Charge.
(i) American Late Charge. Upon failure to make any payment of
interest or principal under any of the American Loans upon the date such
payment becomes due, Westcon America promises to pay a late charge of two
percent (2%) of the amount of the overdue payment.
(ii) Canadian Late Charge. Upon failure to make any payment of
interest or principal under any of the Canadian Loans upon the date such
payment becomes due, Westcon Canada promises to pay a late charge of two
percent (2%) of the amount of the overdue payment.
(iii) The assessment and/or collection of late charges shall in
no way impair the right to pursue any other remedies hereunder.
(d) Interest Act (Canada). For purposes of disclosure pursuant to the
Interest Act (Canada), the annual rates of interest or fees to which the rates
of interest or fees provided in this Agreement and the other Loan Documents
(and stated herein or therein, as applicable, to be computed on the basis of a
360 day year or any other period of time less than a calendar year) are
equivalent are the rates so determined multiplied by the actual number of days
in the applicable calendar year and divided by 360 or such other period of
time, respectively.
2.7 Voluntary Prepayment.
(a) Index Rate Loans. Westcon America and Westcon Canada, as the case
may be, shall have the right to prepay at any time without premium all or any
portion of any Index Rate Loans made to it, together with interest on the
principal so prepaid to the date of such prepayment, except that in the event
of any permanent prepayment or reduction of the applicable Commitments, payment
of the Prepayment Premium shall be required.
(b) LIBOR Rate Loans. Westcon America and Westcon Canada, as the case
may be, shall have the right to prepay all or any portion of any LIBOR Rate
Loans made to it (i) on the expiration day of the applicable LIBOR Period, and
(ii) if any LIBOR Loan is prepaid at any other time, the applicable Borrower
shall provide the applicable Collateral Agent, for the benefit of the
Applicable Lenders, not less than ten (10) days prior written notice, and shall
pay: (x) the Prepayment Premium; and (y) the amount specified in Section 2.8
hereof. Any partial prepayment of principal hereunder shall be in the amount of
$500,000.00 or an integral multiple thereof.
2.8 LIBOR Breakage And Other Costs. Westcon America shall pay to American
Collateral Agent, for the benefit of American Lenders and Westcon Canada shall
pay to Canadian Collateral Agent, for the benefit of Canadian Lenders, as
applicable, an amount sufficient to reimburse the applicable Lenders for any
and all loss (including loss of margin or profit), cost or expense incurred or
suffered by such Lender, that the applicable Collateral Agent determines is
attributable to (i) any payment, repayment, mandatory or optional prepayment,
or conversion of a LIBOR Loan for any reason on a date other than the last day
of the LIBOR Period for such LIBOR Loan, (ii) any failure by Westcon America or
Westcon Canada for any reason to borrow, convert or prepay a LIBOR Loan on the
date for such borrowing, conversion
41
or prepayment specified in any relevant notice given pursuant to this
Agreement, and/or (iii) any default by such Borrower in payment when due of the
principal amount of or interest on any Loans to such Borrower, as applicable.
Any such determination by the Applicable Collateral Agent shall, in the absence
of manifest error, be conclusive and binding upon the applicable Borrower.
2.9 Sharing of Payments.
(a) If any American Lender shall obtain any payment or other recovery
or receive any Collateral (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any American Revolving Loan or Collateral
then or therewith obtained by all American Lenders, such American Lender shall
purchase from the other American Lenders such participation in American
Revolving Loans or American Letters of Credit, or shall provide such other
American Lenders with the benefits of any such payments, recovery or such
Collateral or the proceeds thereof as shall be necessary to cause such
purchasing American Lender to share the excess payment, recovery or such
Collateral ratably with each of them; provided, however, if all or any portion
of such excess payment, recovery or such Collateral or benefits is thereafter
recovered from such American Lender, such purchase shall be rescinded and the
purchase price and benefits returned to the extent of such recovery, without
interest.
(b) If any Canadian Lender shall obtain any payment or other recovery
or receive any Collateral (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Canadian Revolving Loan or Collateral
then or therewith obtained by all Canadian Lenders, such Canadian Lender shall
purchase from the other Canadian Lenders such participation in Canadian
Revolving Loans or Canadian Letters of Credit, or shall provide such other
Canadian Lenders with the benefits of any such payments, recovery or such
Collateral or the proceeds thereof as shall be necessary to cause such
purchasing Canadian Lender to share the excess payment, recovery or such
Collateral ratably with each of them; provided, however, if all or any portion
of such excess payment, recovery or such Collateral or benefits is thereafter
recovered from such Canadian Lender, such purchase shall be rescinded and the
purchase price and benefits returned to the extent of such recovery, without
interest.
Westcon America and Westcon Canada agree that any Lender so
purchasing a portion of such American Lender's American Revolving Loans or such
Canadian Lenders' Canadian Revolving Loans, or participation in American
Letters of Credit or Canadian Letters of Credit, as the case may be, may
exercise all rights, to the extent permitted hereunder (including, but not
limited to, rights of setoff) with respect to such portion purchased as if such
other American Lenders in the case of American Revolving Loans or Canadian
Lenders in the case of Canadian Revolving Loans were the direct holders
thereof. Westcon America and Westcon Canada agree that each American Lender or
Canadian Lender, as applicable shall have a security interest in, and the right
to set off as against any American Revolving Loan or Canadian Revolving Loan,
as applicable, and all other such liabilities under this Agreement, with
respect to any deposit account or other obligation of Borrowers. No American
Lender shall exercise any right of setoff unless it shall first have obtained
the consent of American Collateral Agent to the exercise of such right of
setoff and no Canadian Lender shall exercise any right of setoff unless it
shall first have obtained the consent of Canadian Collateral Agent to the
exercise of such right of setoff.
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2.10 Non-Receipt of Funds by American Collateral Agent.
(a) Unless American Collateral Agent shall have been notified in
writing by an American Lender prior to the date of any American Revolving Loan
to be made by such American Lender (which notice shall be effective upon
receipt) that such Lender does not intend to make the proceeds of such American
Revolving Loan available to American Collateral Agent, American Collateral
Agent may assume that such American Lender has made such proceeds available to
American Collateral Agent on such date, and American Collateral Agent may in
reliance upon such assumption (but shall not be required to) make available to
Westcon America a corresponding amount. If such amount is made available to
American Collateral Agent on a date after such borrowing date, such American
Lender shall pay to American Collateral Agent on demand an amount equal to the
product of (i) the Federal Funds Rate during such period as quoted by American
Collateral Agent, times (ii) the amount of such American Lender's American
Percentage of such borrowing, times (iii) a fraction, the numerator of which is
the number of days that elapse from and including such borrowing date to the
date on which such American Lender's American Percentage of such borrowing
shall have become immediately available to American Collateral Agent and the
denominator of which is 360. If such American Lender's American Percentage of
such borrowing is not in fact made available to American Collateral Agent by
such American Lender within three (3) Business Days of such borrowing date,
such American Lender shall be deemed a Defaulting Lender and American
Collateral Agent shall be entitled to recover such amount with interest thereon
at the rate per annum applicable to such borrowing hereunder, on demand, from
Westcon America.
(b) Unless American Collateral Agent shall have been notified by
Westcon America prior to the date on which any payment is due from it hereunder
(which notice shall be effective upon receipt) that Westcon America does not
intend to make such payment, American Collateral Agent may assume that Westcon
America has made such payment when due, and American Collateral Agent may in
reliance upon such assumption (but shall not be required to) make available to
each American Lender on such payment date an amount equal to the portion of
such assumed payment to which such American Lender is entitled hereunder, and
if Westcon America has not in fact made such payment to American Collateral
Agent, such American Lender shall, on demand, repay to American Collateral
Agent the amount made available to such American Lender, together with interest
thereon for each day during the period commencing on the date such amount was
made available to such American Lender and ending on (but excluding) the date
such American Lender repays such amount to American Collateral Agent, at a
daily rate equal to 1/360 of the Federal Funds Rate on such day.
(c) A certificate of American Collateral Agent submitted to Westcon
America or any American Lender with respect to any amount owing under this
Section 2.10 as to the computation of such amount shall be conclusive absent
manifest error.
2.11 Non-Receipt of Funds by Canadian Collateral Agent.
(a) Unless Canadian Collateral Agent shall have been notified in
writing by a Canadian Lender prior to the date of any Canadian Revolving Loan
to be made by such Lender (which notice shall be effective upon receipt) that
such Canadian Lender does not intend to make the proceeds of such Canadian
Revolving Loan available to Canadian Collateral Agent,
43
Canadian Collateral Agent may assume that such Lender has made such proceeds
available to Canadian Collateral Agent on such date, and Canadian Collateral
Agent may in reliance upon such assumption (but shall not be required to) make
available to Westcon Canada a corresponding amount. If such amount is made
available to Canadian Collateral Agent on a date after such borrowing date,
such Canadian Lender shall pay to Canadian Collateral Agent on demand an amount
equal to the product of (i) the Federal Funds Rate during such period as quoted
by Canadian Collateral Agent, times (ii) the amount of such Lender's Canadian
Percentage of such borrowing, times (iii) a fraction, the numerator of which is
the number of days that elapse from and including such borrowing date to the
date on which such Canadian Lender's Canadian Percentage of such borrowing
shall have become immediately available to Canadian Collateral Agent and the
denominator of which is 360. If such Canadian Lender's Canadian Percentage of
such borrowing is not in fact made available to Canadian Collateral Agent by
such Canadian Lender within three (3) Business Days of such borrowing date,
such Canadian Lender shall be deemed a Defaulting Lender and Canadian
Collateral Agent shall be entitled to recover such amount with interest thereon
at the rate per annum applicable to such borrowing hereunder, on demand, from
Westcon Canada.
(b) Unless Canadian Collateral Agent shall have been notified by
Westcon Canada prior to the date on which any payment is due from it hereunder
(which notice shall be effective upon receipt) that Westcon Canada does not
intend to make such payment, Canadian Collateral Agent may assume that Westcon
Canada has made such payment when due, and Canadian Collateral Agent may in
reliance upon such assumption (but shall not be required to) make available to
each Canadian Lender on such payment date an amount equal to the portion of
such assumed payment to which such Canadian Lender is entitled hereunder, and
if Westcon Canada has not in fact made such payment to Canadian Collateral
Agent, such Canadian Lender shall, on demand, repay to Canadian Collateral
Agent the amount made available to such Canadian Lender, together with interest
thereon for each day during the period commencing on the date such amount was
made available to such Canadian Lender and ending on (but excluding) the date
such Canadian Lender repays such amount to Canadian Collateral Agent, at a
daily rate equal to 1/360 of the Federal Funds Rate on such day.
(c) A certificate of Canadian Collateral Agent submitted to Westcon
Canada or any Canadian Lender with respect to any amount owing under this
Section 2.11 as to the computation of such amount shall be conclusive absent
manifest error.
2.12 Special Provisions Governing LIBOR Loans - Increased Costs.
(a) In the event that upon the date that the applicable Borrower
requests a LIBOR Loan, the applicable Collateral Agent shall have determined
(which determination shall be final, conclusive and binding) that:
(i) by reason of conditions in the London Interbank Eurodollar
Market or of conditions affecting the position of either Collateral Agent in
such market occurring after the date hereof, adequate fair means do not exist
for establishing the LIBOR Rate, or
(ii) by reason of (i) any applicable law or governmental rule,
regulation, guideline or order (or any written interpretation thereof and
including any new law or
44
governmental rule, regulation, guideline or order), or (ii) other circumstances
affecting either Collateral Agent or the applicable Lenders or the London
Interbank Eurodollar Market or the position of either Collateral Agent or the
applicable Lenders in such market (such as, but not limited to, official
reserve requirements), the LIBOR Rate does not represent the effective pricing
to the applicable Lenders for U.S. dollar deposits of comparable amounts for
the relevant period due to such increased costs; then, and in either such
event, the applicable Collateral Agent shall on such date (and in any event as
soon as possible after being notified of a new LIBOR Period) send notice by
telephone, confirmed in writing, to the applicable Borrower of such
determination.
(b) Thereafter, the applicable Borrower shall pay to the applicable
Collateral Agent upon written request therefor, such additional amounts as the
applicable Collateral Agent in its sole discretion, shall determine to be
required to compensate the applicable Collateral Agent and the applicable
Lenders for such increased costs. A certificate as to such additional amounts
submitted to the applicable Borrower by the applicable Collateral Agent shall,
absent manifest error, be final, conclusive and binding upon Westcon, Borrowers
and the Collateral Agents and Lenders.
2.13 Required Termination and Repayment of LIBOR Loans.
(a) In the event either Collateral Agent shall have determined, at
any time (which determination shall be final, conclusive and binding), that the
making or continuation of any or all of the LIBOR Loans hereunder:
(i) has become unlawful by compliance by either Collateral Agent
or any Lender in good faith with any applicable law, governmental rule,
regulation, guideline or order, or
(ii) would cause either Collateral Agent or any Lender severe
hardship as a result of a contingency occurring after the date hereof which
adversely affects the London Interbank Eurodollar Market (such as, but not
limited to disruptions resulting from political or economic events);
then, and in either such event, a Collateral Agent shall on such date
(and in any event as soon as possible after making such determination) give
telephonic notice to the applicable Borrower, confirmed in writing, of such
determination, identifying which of the LIBOR Loans was so affected.
(b) The applicable Borrower then shall, upon the termination of the
then current LIBOR Period applicable to each LIBOR Loan so affected or, if
earlier, when required by law, repay each such affected LIBOR Loan, together
with all interest accrued thereon.
(c) In lieu of the repayment to the applicable Collateral Agent, on
behalf of the applicable Lenders, required by this Section 2.13, the applicable
Borrower may exercise the following options:
(i) If such determination by the applicable Collateral Agent
relates only to a LIBOR Loan then being requested by the applicable Borrower
pursuant to the terms
45
hereof, the applicable Borrower may, on such date by giving notice in writing
to the applicable Collateral Agent, withdraw such request; or
(ii) the applicable Borrower may, by giving notice in writing to
the applicable Collateral Agent, request the applicable Lenders to make the
LIBOR Loan then being requested in the form of an Index Rate Loan, or to
convert its outstanding LIBOR Loan or Loans that are so affected into an Index
Rate Loan at the end of the then current LIBOR Period applicable to each such
LIBOR Loan (or at such earlier time as repayment is otherwise required to be
made pursuant to the terms hereof). Such notice shall pertain only to the LIBOR
Loan outstanding or to be outstanding during each such affected LIBOR Period.
2.14 Taxes. If any taxes or duties of any kind shall be payable, or ruled
to be payable, by or to any taxing authority of or in the United States or
Canada, or any other country, or any political subdivision of any thereof, in
respect of any of the transactions contemplated by this Agreement (including,
but not limited to, execution, delivery, performance, enforcement, or payment
of principal or interest of or under the Notes or the making of any LIBOR
Loan), by reason of any now existing or hereafter enacted statute, rule,
regulation or other determination (excluding any taxes imposed on or measured
by the Net Income of any Collateral Agent, the Arranger, the Documentation
Agent, L/C Issuer or any Lender), the applicable Borrower will:
(a) pay on written request therefor all such taxes or duties,
including interest and penalty, if any,
(b) promptly furnish the applicable Collateral Agent and the
applicable Lenders with evidence of any such payment, and
(c) indemnify and hold the Collateral Agents, the Arranger, the
Documentation Agent, L/C Issuer, the Lenders and any holder or holders of any
of the Notes harmless and indemnified against any liability or liabilities
with respect to or in connection with any such taxes or the payment thereof or
resulting from any delay or omission to pay such taxes.
Without prejudice to the survival of any other agreement of Westcon or either
Borrower or any other Obligor under this Agreement, the agreement and
obligations of Westcon and the Borrowers and the other Obligors contained in
this Section 2.14 shall survive the termination of this Agreement.
(d) The place of payment by Borrowers of amounts in United States
currency is of the essence, and United States currency shall be the currency of
account in all events. If for the purpose of obtaining judgment in any court of
competent jurisdiction in Canada ("Foreign Jurisdiction") or for any other
purpose hereunder it is necessary to convert an amount due hereunder from the
United States currency in which it is due ("U.S. Currency") into another
currency ("Second Currency"), the rate of exchange applied shall be the spot
rate at which, in accordance with normal banking procedures, Lenders could
purchase, in the New York foreign exchange market, the U.S. Currency with the
Second Currency on the date two Business Days preceding that on which judgment
is given. Westcon Canada agrees that its obligations in respect of any U.S.
Currency due from it to Lenders hereunder shall, notwithstanding any
46
judgment in the Second Currency, be discharged by a payment made to such
Lenders on account thereof in the Second Currency only to the extent that, on
the Business Day following receipt of such payment in the Second Currency, such
Lenders may, in accordance with normal banking procedures, purchase, in the New
York foreign exchange market, the U.S. Currency with the amount of the Second
Currency so paid; and if the amount of the U.S. Currency which may be so
purchased is less than the amount originally due in the U.S. Currency, Westcon
Canada agrees as a separate and independent obligation and notwithstanding any
such payment or judgment to indemnify such Lenders against such deficiency. The
term "rate of exchange" in this Section includes any premium and costs of
exchange payable in connection with the purchase of the U.S. Currency.
"Business Day" shall mean a day other than a Saturday, Sunday or other day on
which commercial banks in New York State are authorized or required by law to
close.
(e) (i) Any and all payments by Borrowers under this Agreement shall
be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, imposed by any Foreign Jurisdiction, any
state or province thereof or any successor sovereignty or any political
subdivision or taxing authority of or in any Foreign Jurisdiction or any such
state or province or successor sovereignty (all such taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Applicable Taxes"), excluding in each case any income or franchise taxes
imposed on a Lender by the jurisdiction or political subdivision in which such
Lender is organized or has its lending office or principal place of business,
as the case may be. If a Borrower shall be required by law to deduct any
Applicable Taxes from or in respect of any sum payable hereunder to a Lender
(i) the sum payable shall be increased as may be necessary so that after making
all such required deductions (including deductions applicable to additional
sums payable hereunder) such Lender receives an amount equal to the sum it
would have received had no such deductions been made, (ii) such Borrower shall
make such deductions and (iii) such Lender shall pay the full amount deducted
to the relevant taxing authority or other authority in accordance with
applicable law.
(ii) In addition, Borrowers agree to pay any present or future
stamp, court or documentary taxes or any other excise or property taxes,
charges or similar levies imposed by any Foreign Jurisdiction, any state or
province thereof or any successor sovereignty or any political subdivision or
taxing authority of any Foreign Jurisdiction or any such state or province or
successor sovereignty which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement (hereinafter referred to as "Other Applicable Taxes").
(iii) Borrowers will indemnify Lenders for the full amount of
Applicable Taxes or Other Applicable Taxes (including, without limitation, any
Applicable Taxes or Other Applicable Taxes imposed on amounts payable
hereunder) paid by any Lender or any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto, whether or not such
Applicable Taxes or Other Applicable Taxes were correctly or legally asserted.
Payment pursuant to this indemnification shall be made within ten (10) days
from the date any affected Lender makes written demand therefor.
(iv) Within ten (10) days after the date of any payment of
Applicable Taxes, the applicable Borrower will furnish to the applicable
Lender, with a copy to the
47
applicable Collateral Agent, the original or a certified copy of a receipt
evidencing the amount and payment thereof.
2.15 Revolving Loan Commitment Reduction. Notwithstanding anything to the
contrary contained herein, including, without limitation, Sections 2.6(a) and
(b) hereof, Westcon America and/or Westcon Canada may, at any time by three (3)
Business Days prior written notice to the American Collateral Agent by Westcon
America and the Canadian Collateral Agent by Westcon Canada and, in either
instance, each of the applicable Lenders, state their desire to reduce the
American Commitment or Canadian Commitment, as applicable, to any amount which
is not less than the aggregate of the then outstanding principal amount of
American Advances or Canadian Advances, as applicable, and the face amount of
outstanding and undrawn American Letters of Credit or Canadian Letters of
Credit; provided, however, that in no event shall the total Commitments be
partially reduced to an aggregate amount of less than $125,000,000. Any
reductions of any Lender's Commitment shall not be reinstated at any future
date and any partial reduction shall be in the amount of $500,000.00 and in
incremental multiples of $1,000,000.00. Two (2) Business Days after receipt of
such a reduction notice, the obligation of the American Lenders to make
American Advances and the Canadian Lenders to make Canadian Advances hereunder
shall be limited to the applicable Lenders' applicable Commitment as reduced
pursuant to said notice. Any such reduction of the Commitments shall be
accompanied by the Prepayment Premium, if applicable, plus any LIBOR breakage
fees, if applicable, as described in Section 2.8.
2.16 Payments.
(a) All payments of interest, principal, fees and other expenses by
the Borrowers under this Agreement unless otherwise specified shall be made as
set forth in Article VII hereof and otherwise, in the case of Westcon America,
in lawful currency of the United States of America and, in the case of Westcon
Canada, in lawful currency of the United States of America, and in each case in
immediately available funds without counterclaim or setoff and free and clear
and without reduction for any present or future income, stamp or other taxes,
deductions or withholdings, all of which shall be paid by the applicable
Borrower for its own account. All payments shall be made not later than 11:00
a.m. (Eastern Time) on the due date to the applicable Collateral Agent's
Collection Account.
(b) All payments (unless stated herein otherwise) shall, in the case
of Westcon America be applied first to the payment of all fees, expenses and
other amounts due to the American Lenders, American L/C Issuer and American
Collateral Agent (excluding principal and interest) and in the case of Westcon
Canada be applied first to the payment of all fees, expenses, and other amounts
due to the Canadian Lenders, Canadian L/C Issuer and Canadian Collateral Agent
(excluding principal and interest), then in each case to such Borrower's
accrued interest, and the balance on account of outstanding principal;
provided, that upon repayment in full of all amounts owing by Westcon America
hereunder and under the other Loan Documents, all payments made by Westcon
America shall then be applied to Indebtedness of Westcon Canada (but there
shall be no corresponding provision applicable to payments by Westcon Canada
upon repayment in full of all amounts owing by Westcon Canada hereunder and
under the other Loan Documents); provided, however, that after an Event of
Default, payments will be applied to the Indebtedness as the applicable
Collateral Agent determines in its sole discretion, or
48
as otherwise directed by the Required American Lenders or the Required Canadian
Lenders, as applicable.
2.17 Charge to Account.
(a) Charge to U.S. Account. On the date that any principal of, or
interest on, the American Loans or any fees or charges payable under this
Agreement or any other Loan Documents are due to American Collateral Agent,
American L/C Issuer or American Lenders, including, without limitation, as set
forth in Article VII hereof, Westcon America authorizes the American Collateral
Agent to debit any bank accounts of Westcon America maintained with the
American Collateral Agent on such due date in an amount equal to such unpaid
principal, interest, fees or charges, as applicable.
(b) Charge to Canadian Account. On the date that any principal of, or
interest on, the Canadian Loans or any fees or charges payable under this
Agreement or any other Loan Documents are due to Canadian Collateral Agent,
Canadian L/C Issuer or Canadian Lenders, including, without limitation, as set
forth in Article VII hereof, Westcon Canada authorizes the Canadian Collateral
Agent to debit any bank accounts of Westcon Canada maintained with the Canadian
Collateral Agent on such due date in an amount equal to such unpaid principal,
interest, fees or charges, as applicable.
2.18 Use of Proceeds.
(a) Westcon America covenants to American Collateral Agent, American
L/C Issuer and American Lenders that it will use the proceeds borrowed under
this Agreement for Westcon America's working capital needs, to refinance the
Existing Facility and for such other legal and proper general corporate
purposes as are consistent with all applicable laws and Westcon America's
certificate of incorporation and by-laws.
(b) Westcon Canada covenants to Canadian Collateral Agent, Canadian
L/C Issuer and Canadian Lenders that they will use the proceeds borrowed under
this Agreement for Westcon Canada's working capital needs and for such other
legal and proper general corporate purposes as are consistent with all
applicable laws and Westcon Canada's articles of incorporation and by-laws.
2.19 American Cash Management. On or prior to the date of execution of
this Agreement, Westcon America and its Subsidiaries shall establish and shall
at all times thereafter maintain the cash management systems described in Annex
2.19.
2.20 Canadian Cash Management. On or prior to the date of execution of
this Agreement, Westcon Canada and its Subsidiaries shall establish and shall
at all times thereafter maintain the cash management systems described in Annex
2.20.
ARTICLE 3. CONDITIONS TO THE CREDIT
The Lenders' agreements to lend and L/C Issuers' agreements to issue
Letters of Credit contained in this Agreement, shall be effective only upon
fulfillment of the following conditions at or prior to the date of the
execution of this Agreement.
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3.1 Corporate Action. Westcon and each of the Borrowers and each of the
other Obligors shall have taken all necessary and appropriate corporate and
shareholder action and shall have adopted resolutions authorizing, as
applicable, the transactions contemplated hereby, to which the execution and
delivery of this Agreement, the Notes, the other Loan Documents and the taking
of all action required of such party, as applicable, by this Agreement and the
other Loan Documents; and Westcon and Borrowers and the other Obligors shall
have furnished to the applicable Collateral Agent copies certified as of the
date of the execution of this Agreement of such resolutions and such other
company documents as the applicable Collateral Agent shall request.
3.2 Charter Documents. There shall have been furnished to the applicable
Collateral Agent a general certificate from Westcon and each Borrower and each
other Obligor including: (i) certificates evidencing such party's good standing
and a certificate of compliance for Westcon Canada duly issued of recent date
by each jurisdiction where such party is qualified to do business and, in the
case of Westcon Canada, by the Director under its incorporation statute; (ii)
copies of the certificates of incorporation and current by-laws of such party
and any unanimous stockholders agreement binding Westcon Canada or to which
Westcon Canada is subject, certified by its Secretary as of the date of the
execution of this Agreement; (iii) an incumbency certificate specifying the
officers of such party, together with their specimen signatures; (iv) evidence
in form and substance satisfactory to the Collateral Agent, including without
limitation, appropriate filed merger certificates from the appropriate State
Secretaries of State certifying that Voda One Corp., Comstor, Inc., Westcon,
Inc., Xxxxxxx.Xxx, Inc., Westcon Mexico, Inc., Westcon Australia, Inc. and all
other American Subsidiaries of Westcon other than Eastpro Services, Inc. have
been merged with and into Westcon America, with Westcon America as the
surviving corporation; and (v) such other certifications and exhibits as either
Collateral Agent may request.
3.3 Revolving Notes. Westcon America shall have executed and delivered to
the American Lenders the American Notes and Westcon Canada shall have executed
and delivered to the Canadian Lenders the Canadian Notes, in each case
appropriately completed, evidencing such Borrower's obligations to repay the
American Revolving Loans in the case of Westcon America and the Canadian
Revolving Loans in the case of Westcon Canada.
3.4 Security Agreements.
(a) U.S. Security Agreements. Westcon, Westcon America and their
American Subsidiaries shall have executed and delivered to the American
Collateral Agent (i) one or more security agreements governed by the laws of
New York ("American Security Agreements") in form and content satisfactory to
American Collateral Agent and granting to American Collateral Agent, for the
benefit of the American Lenders, American Collateral Agent, Canadian Lenders
and Canadian Collateral Agent, security interests ("Security Interests") in all
of each such Obligor's assets, except as provided in Section 3.4(b) below in
the case of Westcon, including, without limitation, Equipment; Inventory;
Accounts; Documents; Instruments; Chattel Paper; Investment Property and
General Intangibles, including deposit accounts, letter of credit rights,
industrial designs, patents, trademarks, tradenames, copyrights, swap
agreements, insurance proceeds, tax refunds, cash and license rights whether
now owned or hereafter acquired, wherever located, and any and all products and
proceeds thereof ("American
50
Collateral") as continuing collateral security for the payment of any and all
Indebtedness; and (ii) appropriate UCC financing statements or similar
applicable notice filings ("Financing Statements"), or equivalents, to perfect
the Security Interests, which Security Interests shall be first and only
priority Liens and security interests in such property, except as otherwise
specifically permitted by this Agreement.
(b) Canadian Security Agreements. Westcon Canada shall have executed
and delivered to the Canadian Collateral Agent (i) one or more security
agreements governed by the laws of Quebec and Ontario, or other applicable
jurisdiction determined by Canadian Collateral Agent as the case may be
("Canadian Security Agreements") in form and content satisfactory to Canadian
Collateral Agent and granting to Canadian Collateral Agent, for the benefit of
the Canadian Lenders and Canadian Collateral Agent, security interests and
hypothecs ("Security Interests") in all of Westcon Canada's assets, including,
without limitation, Equipment; Inventory; Accounts; Documents; Instruments;
Chattel Paper; Investment Property and General Intangibles, including deposit
accounts, letter of credit rights, industrial designs, patents, trademarks,
tradenames, copyrights, swap agreements, insurance proceeds, tax refunds, cash
and license rights whether now owned or hereafter acquired, wherever located,
and any and all products and proceeds thereof ("Canadian Collateral" and
together with the American Collateral "Collateral"; provided that the terms
"American Collateral", "Canadian Collateral" and "Collateral" as used herein
shall not include any cash or cash equivalents owned by Westcon or any
shareholder, partnership, membership or similar ownership interests of Westcon
in any Unrestricted Subsidiaries, rights of Westcon under distribution
contracts outside the United States and Canada solely for the benefit of
Unrestricted Subsidiaries and Westcon and any assets of the Unrestricted
Subsidiaries), as continuing collateral security for the payment of any and all
Indebtedness of Westcon Canada; and (ii) appropriate personal property act
financing statements or similar applicable notice filings ("Financing
Statements"), or equivalents, to perfect or publish the Security Interests,
which Security Interests shall be first and only priority Liens and security
interests in such property, except as otherwise specifically provided by this
Agreement.
3.5 Pledge Security Agreements. Westcon shall have executed and delivered
to the American Collateral Agent (i) one or more pledge security agreements in
form and content satisfactory to the American Collateral Agent (collectively,
the "Pledge Security Agreements") granting to the American Collateral Agent for
the benefit of the Lenders and the Collateral Agents a first and only priority
security interest in 100% of the stock of Westcon America and any other
American Subsidiaries of Westcon or Westcon America and in 66.66% of the stock
of Westcon Canada and any other Canadian Subsidiaries of Westcon, Westcon
Canada and Westcon America, as continuing collateral security for the payment
of the Indebtedness, (ii) the original stock certificates therefor; provided
that, in the case of the pledge of shares of stock of Westcon Canada or any
other Canadian Subsidiaries, if the constituent documents of such Person
provide that the shares of such Person may not be transferred without the
consent of the directors of such person, then the shares of such Person shall
at the election of Canadian Collateral Agent be registered in Canadian
Collateral Agent's name, (iii) stock transfer powers; (iv) Pledge Security
Agreements of Westcon, Westcon America, Westcon Canada and any of their
respective North American Subsidiaries pledging in the case of Westcon, Westcon
America and any of their American Subsidiaries, a first and only priority
security interest in any and all promissory notes and other Instruments owned
or otherwise held by such Person to the American Collateral Agent, on behalf of
American Lenders, American Collateral Agent, Canadian Lenders
51
and Canadian Collateral Agent, pursuant to documentation satisfactory in form
and substance to the American Collateral Agent and in the case of Westcon
Canada, a first and only priority security interest in any and all promissory
notes and other Instruments owned or otherwise held by Westcon Canada to the
Canadian Collateral Agent, on behalf of Canadian Lenders and Canadian
Collateral Agent, pursuant to documentation in form and substance satisfactory
to the Canadian Collateral Agent, (v) endorsements in blank of all promissory
notes and other Instruments pledged to either Collateral Agent, and (vi) all
other necessary documents to perfect the first and only priority Lien of the
American Collateral Agent, on behalf of the Collateral Agents and Lenders.
3.6 Blocked Account Agreements.
(a) Westcon America shall have executed and delivered one or more
blocked account agreement(s) and related documents in form and content
satisfactory to American Collateral Agent into which its Account Debtors shall
remit or cause the remittance of payment with respect to all Receivables and
all other Collateral owned or otherwise held by Westcon America; and
(b) Westcon Canada shall have executed and delivered one or more
blocked account agreement(s) and related documents in form and content
satisfactory to Canadian Collateral Agent into which its Account Debtors shall
remit or cause the remittance of payment with respect to all Receivables and
all other Collateral owned or otherwise held by Westcon Canada.
3.7 Guaranties. Westcon, Westcon America and each of the American
Subsidiaries of Westcon and Westcon America, if any, shall have executed and
delivered to the American Collateral Agent: (a) a guaranty agreement in form
and content satisfactory to the American Collateral Agent guarantying to the
American Collateral Agent, for the benefit of the Lenders and Collateral
Agents, payment of any and all Indebtedness of the Borrowers (collectively,
"Guaranties"), and (b) Security Agreements and Financing Statements, as more
fully described in Section 3.4 above.
3.8 Intentionally Omitted.
3.9 Subordination Agreement. A Subordination and Pledge Agreement from
Datatec, in form and content satisfactory to the Arranger and the Collateral
Agents ("Subordination Agreement"), which shall be in full force and effect and
the provisions of the Subordination Agreement shall be satisfactory in form and
substance to the Arranger and Collateral Agents. The maturity date of the
Subordinated Note shall not be earlier than November 30, 2007.
3.10 Minimum Excess Availability. Westcon America and Westcon Canada shall
collectively have Excess Availability in the amount of at least $17,500,000.00
on the Closing Date.
3.11 Solvency. There shall have been executed and delivered to the
applicable Collateral Agent separate officer's certificates (each a "Solvency
Certificate") in form and substance satisfactory to the applicable Collateral
Agent, from a responsible officer of each of
52
the Borrowers and Westcon attesting to the Solvency thereof in each case
individually and together with its Subsidiaries, if any, taken as a whole.
3.12 Lien Searches.
(a) U.S. Lien Searches. American Collateral Agent shall be in receipt
of searches of the appropriate filing records, including, without limitation,
the United States Patent and Trademark Office, the United States Copyright
Office or any other jurisdiction, as the American Collateral Agent or any of
the American Lenders may require in order to confirm the priority of the
Security Interests in the assets of Westcon, Westcon America and the other
North American Subsidiaries.
(b) Canadian Lien Searches. Canadian Collateral Agent shall be in
receipt of searches of the appropriate filing records, including, without
limitation, the Canadian Patent and Trademark Office, the Canadian Copyright
Office or any other jurisdiction, as the Canadian Collateral Agent or any of
the Canadian Lenders may require in order to confirm the priority of the
Security Interests in the assets of Westcon Canada.
3.13 Material Adverse Effect. There shall not have occurred any Material
Adverse Effect since February 28, 2002 with respect to (a) Westcon or either of
the Borrowers individually, or (b) Westcon and its Subsidiaries taken as a
whole.
3.14 Intellectual Property Security Agreements.
(a) U.S. Intellectual Property Security Agreements. Westcon, Westcon
America and each of their American Subsidiaries shall have executed and
delivered to the American Collateral Agent intellectual property collateral
assignment and security agreement(s) with respect to its intellectual property
in form and content satisfactory to the American Collateral Agent and granting
American Collateral Agent, for the benefit of the Lenders and for the benefit
of the Collateral Agents, a first and only priority security interest in the
intellectual property and licenses for the use thereof of Westcon, Westcon
America and each of their American Subsidiaries, as applicable, each together
with a special power of attorney and such other documentation as is necessary
to perfect such security interest.
(b) Canadian Intellectual Property Security Agreements. Westcon
Canada shall have executed and delivered to the Canadian Collateral Agent
intellectual property collateral assignment and security agreement(s) with
respect to its intellectual property in form and content satisfactory to the
Canadian Collateral Agent and granting Canadian Collateral Agent for the
benefit of the Canadian Lenders and for the benefit of Canadian Collateral
Agent a first and only priority security interest in the intellectual property
and licenses for the use thereof of Westcon Canada, together with a special
power of attorney and such other documentation as is necessary to perfect such
security interest.
3.15 Guarantor Security Agreement. Each Guarantor shall have furnished the
applicable Collateral Agent with executed counterparts of a general security
agreement of such Guarantor (each a "Guarantor Security Agreement"), each such
Guarantor Security Agreement to be in form and content satisfactory to the
applicable Collateral Agent, pursuant to which each such Guarantor shall grant
the applicable Collateral Agent, in the case of the American Collateral
53
Agent, for the benefit of the Lenders and Collateral Agents and, in the case of
the Canadian Collateral Agent, for the benefit of the Canadian Lenders and
Canadian Collateral Agent, a lien and security interest in all of the personal
property and assets of such Guarantor; provided that such property and assets
shall not include any cash or cash equivalents owned by Westcon or any
shareholder, partnership, membership or similar ownership interests of Westcon
in any Unrestricted Subsidiaries, rights of Westcon under distribution
contracts outside the United States and Canada solely for the benefit of
Unrestricted Subsidiaries and Westcon and any assets of the Unrestricted
Subsidiaries.
3.16 Payment of Existing Facilities. Westcon and Borrowers shall have
executed and delivered to the Collateral Agents evidence in form and content
satisfactory to the Collateral Agents that the Existing Facilities have been
paid in full and that none of Westcon, Borrowers nor any of their Subsidiaries
has any further obligations thereunder, including without limitation, documents
and instruments in form and content satisfactory to Agents terminating all
security interests thereunder.
3.17 Assignment of Claims. To the extent applicable, each Borrower shall
have executed and delivered to the applicable Collateral Agent assignments of
claims with respect to all government receivables in form and content
satisfactory to the applicable Collateral Agent granting to Collateral Agent,
in the case of the American Collateral Agent, for the benefit of the Lenders
and Collateral Agents and, in the case of the Canadian Collateral Agent, for
the benefit of the Canadian Lenders and Canadian Collateral Agent, a first and
only priority lien and security interest in such Receivables, together such
other documentation as is required by the applicable Collateral Agent.
3.18 Waivers, Warehousemen And Processor's Notifications And
Acknowledgments And Freight Forwarder's Agreements.
(a) U.S. Westcon America shall have caused to be executed and
delivered to the American Collateral Agent such landlord waivers, warehousemen
and processor's notifications and acknowledgments, and freight forwarder's
agreements in form and content satisfactory to the American Collateral Agent
and executed by such landlords, warehouseman, processors and freight forwarders
as American Collateral Agent shall request.
(b) Canada. Westcon Canada shall have caused to be executed and
delivered to Canadian Collateral Agent such landlord waivers, warehousemen and
processor's notifications and acknowledgments, and freight forwarder's
agreements in form and content satisfactory to the Canadian Collateral Agent
and executed by such landlords, warehouseman, processors and freight forwarders
as Canadian Collateral Agent shall request.
3.19 Collateral Audits.
(a) U.S. American Collateral Agent shall have performed an audit of
the Collateral owned by Westcon America, the results of which shall be
reasonably satisfactory to American Collateral Agent and Westcon America shall,
at its sole cost and expense, cooperate with and assist American Collateral
Agent in connection with the audit, including, without limitation, giving
American Collateral Agent access to Westcon America's books and records
54
and furnishing all other information and material requested by American
Collateral Agent or any of American Lenders.
(b) Canada. Canadian Collateral Agent shall have performed an audit
of the Collateral owned by Westcon Canada, the results of which shall be
reasonably satisfactory to Canadian Collateral Agent and Westcon Canada shall,
at Westcon Canada's sole cost and expense, cooperate with and assist Canadian
Collateral Agent in connection with the audit, including, without limitation,
giving Canadian Collateral Agent access to Westcon Canada's books and records
and furnishing all other information and material requested by Canadian
Collateral Agent or any of Canadian Lenders.
3.20 Inventory Appraisals.
(a) U.S. American Collateral Agent shall have received an appraisal
of the Inventory owned by Westcon America, from an appraiser only, in form and
content satisfactory to the American Collateral Agent.
(b) Canada. Canadian Collateral Agent shall have received an
appraisal of the Inventory owned by Westcon Canada, from an appraiser only, in
form and content satisfactory to Canadian Collateral Agent.
3.21 Projections. The Agents and Lenders shall have received Projections
in form and content satisfactory to each of them with respect to Westcon,
Borrowers and their Subsidiaries on a consolidated and consolidating basis
through the Maturity Date, on a monthly basis through February 28, 2004 and
quarterly thereafter.
3.22 Insurance.
(a) Westcon America shall have caused to be delivered to the American
Collateral Agent evidence of insurance coverage evidencing compliance with
Section 8.7 and otherwise in form and substance satisfactory to the American
Collateral Agent, and naming the American Collateral Agent as additional
insured or loss payee, as appropriate, on behalf of the Lenders and Collateral
Agents; and (b) Westcon Canada shall have caused to be delivered to the
Canadian Collateral Agent evidence of insurance coverage evidencing compliance
with Section 8.7 and otherwise in form and substance satisfactory to the
Canadian Collateral Agent, and naming the Canadian Collateral Agent as
additional insured or loss payee, as appropriate, on behalf of the Canadian
Lenders and Canadian Collateral Agent.
3.23 Other Collateral. Nothing contained in this Agreement shall limit the
rights of American Collateral Agent or any of the American Lenders in the case
of Westcon America or Canadian Collateral Agent or any of the Canadian Lenders
in the case of Westcon Canada in and to any other collateral securing the
Indebtedness which may have been, or may hereafter be, granted to such
Collateral Agent, in the case of the American Collateral Agent, for the benefit
of the Lenders and Collateral Agents and, in the case of the Canadian
Collateral Agent, for the benefit of the Canadian Lenders and Canadian Agent,
by such Borrower pursuant to any other agreement.
55
3.24 Fees. Borrowers shall have paid all of the fees specified in Section
7.4 of this Agreement and all other fees and expenses incurred by Arranger or
either Collateral Agent in connection with this Agreement, including, without
limitation, attorneys' fees and expenses of Arranger or either Collateral
Agent.
3.25 Equity Requirement. American Collateral Agent shall have received
evidence, in form and content satisfactory to the American Collateral Agent,
that on the Closing Date, Westcon America has a Tangible Net Worth of no less
than $148,000,000 and Westcon has Tangible Net Worth of no less than
$190,900,000.
3.26 Opinions.
(a) U.S. Opinions. Independent counsel for the Borrowers, Westcon and
any other Obligors shall have furnished to the Lenders, the Agents and L/C
Issuer their favorable opinions, in form and content satisfactory to the
Lenders, the Agents and L/C Issuer and their counsel, dated the date of the
execution of this Agreement.
(b) Canadian Opinions. Independent counsel for the Borrowers, Westcon
and any other Obligors in Canada shall have furnished to the Lenders, the
Agents and L/C Issuer their favorable opinions, in form and content
satisfactory to the Lenders, the Agents and L/C Issuer and their counsel, dated
the date of the execution of this Agreement.
3.27 Subsequent Extensions of Credit-Revolving Credit. Subsequent to the
satisfaction of the conditions set forth herein, each request by the applicable
Borrower to the applicable Collateral Agent for a Revolving Loan or to cause
the applicable L/C Issuer to issue a Letter of Credit after the date hereof
shall constitute confirmation, and a representation and warranty, by the
applicable Borrower of all the factual matters set forth in the form of
Compliance Certificate as of the date of such Revolving Loan in the same manner
as if a written Compliance Certificate had then been delivered, such factual
matters shall be true on the date such Revolving Loan is made and the Arranger
and applicable Collateral Agent shall be satisfied that there has not occurred
any Material Adverse Effect or become aware of any facts or conditions not
previously known that could have a Material Adverse Effect with respect to
Westcon or either of the Borrowers. No Revolving Loan shall be made if such
certification is not made without qualification or if the Arranger and
applicable Collateral Agent determine that there is or could be such Material
Adverse Effect. If an Incipient Default or Event of Default shall have occurred
and be continuing, and the applicable Collateral Agent, or Requisite American
Lenders or Requisite Canadian Lenders, as applicable, shall have determined to
cease funding, no Revolving Loan shall be made and no Letter of Credit shall be
issued.
3.28 Other Matters. All matters incidental to the execution and delivery
of this Agreement, the Notes, the Collateral Documents and the other documents
required hereby, and all action required by this Agreement, shall be
satisfactory to Agents and to their counsel.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
Each of the Borrowers, Westcon and each of the Obligors signatory
hereto, jointly and severally, make the following representations and
warranties:
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4.1 Good Standing and Authority. Each Borrower and Westcon and each other
Obligor is a corporation, duly organized, validly existing, and in good
standing under the laws of its jurisdiction of organization; has power and
authority to transact the business in which it is engaged; is duly licensed or
qualified and in good standing in each jurisdiction in which the conduct of
such business requires such licensing or such qualification; and has all
necessary power and authority to enter into this Agreement and to execute,
deliver and perform this Agreement, the Notes, the Collateral Documents and any
other Loan Document to which it is a party, all of which have been duly
authorized by all proper and necessary corporate and shareholder action.
4.2 Executive Offices, Collateral Locations, FEIN. As of the Closing Date,
Westcon and each Borrower's and each other Obligor's name as it appears in
official filings in its jurisdiction of incorporation or organization,
organization type, organization number, if any, issued by its jurisdiction of
incorporation or organization, and the current location of Westcon and each
Borrower's and each other Obligor's chief executive office or domicile (as that
term is used in the Civil Code of Quebec) and the warehouses and premises at
which any Collateral is located are set forth in Schedule 4.2, none of such
locations has changed within the four (4) months preceding the Closing Date and
Westcon and each Borrower and each other Obligor has only one state or other
jurisdiction of incorporation or organization. In addition, Schedule 4.2 lists
the federal employer identification number of Westcon and Westcon America and
each other American Obligor.
4.3 Ownership of Property; Liens.
(a) As of the Closing Date, the real estate ("Real Estate") listed in
Schedule 4.3 constitutes all of the real property owned, leased, subleased, or
used by any of Westcon and Borrowers and the other Obligors. Westcon and
Borrowers and the other Obligors own good and marketable fee simple title to
all of their respective owned Real Estate, and valid and marketable leasehold
interests in all of their respective leased Real Estate, all as described on
Schedule 4.3, and copies of all such leases or a summary of terms thereof
reasonably satisfactory to the applicable Collateral Agent have been delivered
to the applicable Collateral Agent. Schedule 4.3 further describes any Real
Estate with respect to which any of Westcon or Borrowers or the other Obligors
is a lessor, sublessor or assignor as of the Closing Date. Westcon and
Borrowers and the other Obligors also have good and marketable title to, or
valid leasehold interests in, all of their respective personal property and
assets. As of the Closing Date, none of the properties and assets of any of
Westcon or Borrowers or the other Obligors are subject to any Liens other than
Permitted Encumbrances, and there are no facts, circumstances or conditions
known to any of Westcon or Borrowers or the other Obligors that may result in
any Liens (including Liens arising under Environmental Laws) other than
Permitted Encumbrances. Each of Westcon and Borrowers and the other Obligors
has received all deeds, assignments, waivers, consents, nondisturbance and
attornment or similar agreements, bills of sale and other documents, and has
duly effected all recordings, filings and other actions necessary to establish,
protect and perfect their respective right, title and interest in and to all
such Real Estate and other properties and assets. Schedule 4.3 also describes
any purchase options, rights of first refusal or other similar contractual
rights pertaining to any Real Estate. As of the Closing Date, no portion of any
of Westcon's or either Borrower's or any other Obligor's Real Estate has
suffered any material damage by fire or other casualty loss that has not
heretofore been repaired and restored in all
57
material respects to its original condition or otherwise remedied. As of the
Closing Date, all material permits required to have been issued or appropriate
to enable the Real Estate to be lawfully occupied and used for all of the
purposes for which it is currently occupied and used have been lawfully issued
and are in full force and effect.
(b) (i) Westcon America has the unconditional authority to grant the
Security Interest to the American Collateral Agent for the benefit of the
Lenders and for the benefit of Collateral Agents and assuming that all
necessary UCC filings have been made, the American Collateral Agent has an
enforceable first and only lien on all Collateral owned by Westcon America for
the benefit of the Lenders and Collateral Agents; and (ii) Westcon Canada has
the unconditional authority to grant the Security Interest to the Canadian
Collateral Agent for the benefit of the Canadian Lenders and for the benefit of
Canadian Collateral Agent and assuming that all necessary PPSA or other
personal property security act filings have been made, the Canadian Collateral
Agent has an enforceable first and only lien, subject to Prior Claims, on all
Collateral owned by Westcon Canada for the benefit of the Canadian Lenders and
Canadian Collateral Agent.
4.4 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Schedule 4.4, as of the Closing Date, none
of Westcon or Borrowers or any other Obligors have any Subsidiaries, are
engaged in any joint venture or partnership with any other Person, or are an
Affiliate of any other Person. All of the issued and outstanding Stock of
Westcon, each of the Borrowers and each of the other direct and indirect
Subsidiaries of Westcon is owned by each of the stockholders and in the amounts
set forth in Schedule 4.4. Except as set forth in Schedule 4.4, there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any of Westcon, Borrowers or any Subsidiaries may
be required to issue, sell, repurchase or redeem any of its stock or other
equity securities or any stock or other equity securities of its Subsidiaries.
All outstanding Obligations of Westcon and Borrowers and their Subsidiaries as
of the Closing Date (unless another date is otherwise expressly set forth on
Schedule 4.4)(except for the Indebtedness) is described in Schedule 4.4.
4.5 Insurance. Schedule 4.5 lists all insurance policies of any nature
maintained, as of the Closing Date, for current occurrences by each of Westcon,
Borrowers and the other North American Subsidiaries, as well as a summary of
the terms of each such policy.
4.6 Deposit and Disbursement Accounts. Schedule 4.6 lists all banks and
other financial institutions at which any of Westcon or Borrowers or any other
Obligors maintains deposit or other accounts including, without limitation,
investment accounts, as of the Closing Date, including any disbursement
accounts (including, without limitation, payroll accounts), and such Schedule
correctly identifies the name, address and telephone number of each depository,
the name in which the account is held, a description of the purpose of the
account, and the complete account number therefor.
4.7 Supplemental Disclosure. From time to time as may be requested by
either Collateral Agent (which request will not be made more frequently than
once each year absent the occurrence and continuance of an Event of Default) or
at Westcon's or a Borrower's election, Westcon and Borrowers shall supplement
each Schedule hereto, or any representation herein or in any other Loan
Document, with respect to any matter hereafter arising that, if existing or
58
occurring at the date of this Agreement, would have been required to be set
forth or described in such Schedule or as an exception to such representation
or that is necessary to correct any information in such Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Schedule, such Schedule shall be appropriately marked to
show the changes made therein); provided that (a) no such supplement to any
such Schedule or representation shall amend, supplement or otherwise modify any
Schedule or representation, or be or be deemed a waiver of any Incipient
Default or Event of Default resulting from the matters disclosed therein,
except as expressly consented to by Collateral Agents and Required Lenders in
writing, and (b) no supplement shall be required or permitted as to
representations and warranties that relate solely to the Closing Date.
4.8 Valid and Binding Obligation. This Agreement, the Notes, the
Collateral Documents, and any other Loan Document to which such Borrower or
Westcon or such other Obligor is a party, will constitute the legal, valid and
binding obligations of such Borrower or Westcon or such other Obligor party
thereto, enforceable in accordance with their respective terms, except as
enforceability (i) may be limited by state, provincial or federal bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally and (ii) may be subject to equity principles in
the event equitable remedies are sought.
4.9 Notes Receivable. No Receivable is an Instrument, Document, or Chattel
Paper or is evidenced by any note, draft, trade acceptance, or other instrument
for the payment of money, except such Instrument, Document, Chattel Paper,
note, draft, trade acceptance, or other instrument as has been endorsed and
delivered by the applicable Borrower or Guarantor to the applicable Collateral
Agent and has not been presented for payment and returned uncollected for any
reason.
4.10 No Pending Litigation. Schedule 4.10 contains a list of pending
actions against any of Westcon or the Borrowers or their Subsidiaries. There
are not any actions, suits, proceedings or investigations pending or, to the
knowledge of Westcon or Borrowers, threatened against Westcon or Borrowers or
their Subsidiaries or any basis therefor, which, if adversely determined,
including those described on Schedule 4.10, would, in any case or in the
aggregate, be in an amount in excess of $750,000 or which question the validity
of this Agreement, the Notes, the Collateral Documents, the other Loan
Documents or any other documents required by this Agreement, or any action
taken or to be taken pursuant to any of the foregoing.
4.11 No Consent or Filing. No consent, license, approval or authorization
of, or registration, declaration or filing with, any court, governmental body
or authority or other Person or entity is required in connection with the valid
execution, delivery or performance of this Agreement, the Notes, the Collateral
Documents, the other Loan Documents or other documents required by this
Agreement or in connection with any of the transactions contemplated thereby,
other than filings and recordings in connection with the Collateral Documents.
4.12 No Violations. Neither Westcon nor any Borrower nor any of the other
North American Subsidiaries are in violation of any term of their respective
certificate or articles of incorporation or by-laws, or of any mortgage,
borrowing agreement, or other instrument or agreement pertaining to Obligations
for borrowed money. Neither Westcon nor any Borrower nor any of the other North
American Subsidiaries is in violation of any term of any other
59
indenture, instrument or agreement to which it is a party or by which it may be
bound. Neither Westcon nor any Borrower nor any of the other North American
Subsidiaries is in violation of any order, writ, judgment, injunction or decree
of any court of competent jurisdiction or, of any statute, rule or regulation
of any competent governmental authority. The execution and delivery of this
Agreement, the Notes, the Collateral Documents, the other Loan Documents and
other documents required by this Agreement, and the performance of any and all
of the same is and will be in compliance with the foregoing and will not result
in any violation or result in the creation of any mortgage, Lien, security
interest, charge or encumbrance upon any properties or assets except in favor
of the applicable Collateral Agent, in the case of the American Collateral
Agent, for the benefit of Lenders and Collateral Agents and, in the case of the
Canadian Collateral Agent, for the benefit of the Canadian Lenders and Canadian
Collateral Agent. There exists no fact or circumstance not disclosed in this
Agreement or in the documents furnished in connection herewith that could be
expected to have an adverse effect in excess of $1,000,000, either individually
or in the aggregate.
4.13 Financial Statements. Westcon has furnished to the Arranger and
Collateral Agents, the Audited Financial Statement as of February 28, 2002
prepared by the Auditors which statement presents fairly the consolidated
financial position of Westcon as of such date and the results of its operations
and changes in its financial position for such period then ended and has been
prepared in conformity with GAAP applied on a basis consistent with that of
similar periods for preceding years. From the date of such Financial Statement
to the date of the execution of this Agreement, there have not been any changes
in the financial condition of Westcon as disclosed in such financial statement
that constitute or could constitute a Material Adverse Effect with respect to
any of such parties. None of the property or assets shown in the Financial
Statements delivered to the Arranger or Collateral Agent have been adversely
affected as the result of any fire, explosion, accident, flood, drought, storm,
earthquake, condemnation, requisition, statutory or regulatory change, act of
God, or act of public enemy or other casualty, whether or not insured.
4.14 Tax Returns. Westcon and each Borrower and each of their Subsidiaries
have duly filed all federal and other tax returns required to be filed by any
of them under the federal or provincial laws of Canada or the United States and
have duly paid all taxes required by such returns through the date hereof after
giving effect to any extensions. Neither Westcon nor Borrowers nor any of their
Subsidiaries have received any assessments by the Internal Revenue Service, the
Canada Customs and Revenue Agency, the Quebec Department of Revenue, or any
other taxing authority for additional unpaid taxes.
4.15 Subsidiaries and Authorized Shares. The total authorized and issued
shares of each of Westcon, Westcon America and Westcon Canada and each of the
other Obligors are set forth on Schedule 4.15 hereto. All of the issued shares
have been validly issued in full compliance with all applicable federal, state,
provincial and applicable foreign laws, and are fully paid and nonassessable.
No other shares of such entities of any class or type are authorized or
outstanding. As of the date of this Agreement:
Westcon America has no Subsidiaries;
Westcon Canada has no Subsidiaries;
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The Subsidiaries of Westcon are as set forth on Schedule 4.15 hereto.
4.16 Validity Of Loan Documents. The Loan Documents constitute the legal,
valid, and binding obligations of Westcon, the Borrowers and all other
Obligors, enforceable in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy and insolvency laws and
laws affecting creditors' rights generally.
4.17 Intellectual Property. As of the Closing Date, Westcon, the Borrowers
and their Subsidiaries own or have rights to use all Intellectual Property
necessary to continue to conduct its business as now conducted by it or
presently proposed to be conducted by it, and each Patent, Trademark,
Copyright, Design and License is listed, together with application or
registration numbers, as applicable, in Schedule 4.17. Westcon, the Borrowers
and their Subsidiaries conduct their business and affairs without infringement
of or interference with any Intellectual Property of any other Person in any
material respect. Except as set forth in Schedule 4.17, none of Westcon,
Borrowers or their Subsidiaries is aware of any material infringement claim by
any other Person with respect to any Intellectual Property.
4.18 Contingent Liabilities. There are no suretyship agreements,
guaranties, or other contingent liabilities of Westcon or Borrowers
Subsidiaries, which are not disclosed by the financial statements described in
Section 4.13. Schedule 4.18 contains a list of all intercompany indebtedness
among Westcon, the Borrowers and any of their Subsidiaries.
4.19 Licenses, Permits, Etc. Each franchise, grant, approval,
authorization, license, permit, easement, consent, certificate, and order of
and registration, declaration, and filing with, any court, governmental body or
authority, or other person or entity that is required for or in connection with
the conduct of Westcon's, any Borrower's or any Subsidiary's business as now
conducted is in full force and effect and each such franchise, grant, approval,
authorization, license, permit, easement, consent, certificate, and order of
and registration, declaration, and filing of Westcon, the Borrowers and their
Subsidiaries is set forth on Schedule 4.19, annexed hereto and made a part
hereof.
4.20 Labor Contracts. Neither Westcon, nor any Borrower nor any other
North American Subsidiary are a party to any collective bargaining agreement or
to any existing or threatened labor dispute or controversy.
4.21 Solvency. Westcon and each Borrower is solvent and able to pay its
respective debts as they mature, and owns assets and property which in the
aggregate have a fair market value greater than the amount required to pay its
debts as they mature.
4.22 ERISA Matters.
(a) No Pension Plan has been terminated or partially terminated or is
insolvent or in reorganization, nor have any proceedings been instituted to
terminate or reorganize any Pension Plan; neither Westcon nor any Borrower nor
any Subsidiary has withdrawn from any Pension Plan in a complete or partial
withdrawal, nor has a condition occurred which if continued would result in a
complete or partial withdrawal; neither Westcon nor any Borrower nor any
Subsidiary has incurred any withdrawal liability, including contingent
withdrawal liability, to any Pension Plan pursuant to Title IV of ERISA;
neither Westcon nor any
61
Borrower nor any Subsidiary has incurred any liability to the Pension Benefit
Guaranty Corporation other than for required insurance premiums which have been
paid when due; no Reportable Event has occurred; and no Pension Plan or other
"employee pension benefit plan" as defined in Section 3(2) of ERISA to which
Westcon, any Borrower or any Subsidiary is a party has an "accumulated funding
deficiency" (whether or not waived) as defined in Section 302 of ERISA or in
Section 412 of the Internal Revenue Code. Each Pension Plan and each other
"employee benefit plan" as defined in Section 3(2) of ERISA to which Westcon or
any Borrower or any Subsidiary is a party is in substantial compliance with
ERISA, and no such plan, or any administrator, trustee or fiduciary thereof has
engaged in a prohibited transaction described in Section 406 of ERISA or in
Section 4975 of the Internal Revenue Code.
(b) Canadian Pension and Benefit Matters. As of the Closing Date,
Schedule 4.22 lists all Canadian Benefit Plans (other than, for greater
certainty, plans maintained by the Government of Canada or by the government of
any province of Canada to which either Borrower or any Obligor is obligated to
contribute by statute) and Canadian Pension Plans currently maintained by
either Borrower or any Obligor. The Canadian Pension Plans are duly registered
under the ITA and all other applicable laws which require registration and no
event has occurred which is reasonably likely to cause the loss of such
registered status. All material obligations of each Borrower and Obligor
(including fiduciary, funding, investment and administration obligations)
required to be performed in connection with the Canadian Pension Plans and the
funding agreements therefor have been performed in a timely fashion. There have
been no improper withdrawals or applications of the assets of the Canadian
Pension Plans or the Canadian Benefit Plans. Except as set forth on Schedule
4.22, there are no outstanding disputes concerning the assets of the Canadian
Pension Plans or the Canadian Benefit Plans. Except as set forth on Schedule
4.22, each of the Canadian Pension Plans is fully funded on a solvency basis
(using actuarial methods and assumptions which are consistent with the
valuations last filed with the applicable Government Authorities and which are
consistent with generally accepted actuarial principles). Westcon Canada does
not employ any employees outside of Canada.
4.23 Environmental Matters.
(a) Any Environmental Questionnaire previously provided to a
Collateral Agent was and is accurate and complete and does not omit any fact
the omission of which would make the information contained therein misleading.
(b) No above ground or underground storage tanks containing Hazardous
Substances are or have been located on any property owned, leased or operated
by Westcon, any Borrower or any other North American Subsidiary.
(c) No property owned, leased or operated by Westcon or any Borrower
or any other North American Subsidiary is or has been used for the Disposal of
any Hazardous Substance or for the unpermitted or unauthorized treatment,
storage or Disposal of Hazardous Substances in violation of any applicable
Environmental Law.
(d) No Release of a Hazardous Substance has occurred or is threatened
on, at, from or, to our knowledge, near any property owned, leased or operated
by Westcon or any Borrower or any other North American Subsidiary that will now
or in the future (based on
62
Environmental Laws currently in effect) require (i) remedial or corrective
action, removal, monitoring or closure pursuant to any Environmental Law
currently in effect or (ii) such party to incur costs pursuant to the terms or
conditions of any lease.
(e) Neither Westcon nor any Borrower nor any other North American
Subsidiary is subject to any existing, pending or threatened suit, claim,
notice of violation or request for information under any Environmental Law.
(f) Westcon, each Borrower and each other North American Subsidiary
is in compliance in all respects with, and have obtained all Environmental
Permits required by, all Environmental Laws.
4.24 Validity of Receivables. (a) Each Receivable is genuine and
enforceable in all respects in accordance with its terms and represents an
undisputed and bona fide indebtedness owing to the applicable Borrower by the
Account Debtor obligated thereon; (b) there are no defenses, setoffs, or
counterclaims against any Receivable; (c) no unapplied payment has been
received on any Receivable, and no Receivable is subject to any credit or
extension or agreements therefor beyond the time permitted pursuant to this
Agreement unless written notice specifying such payment, credit, extension, or
agreement has been delivered to the applicable Collateral Agent; (d) each copy
of each invoice is a true and genuine copy of the original invoice sent to the
Account Debtor named therein and accurately evidences, in all respects, the
transaction from which the underlying Receivable arose, and the date payment is
due as stated on each such invoice or computed based on the information set
forth on each such invoice is, in all respects, correct; (e) all Chattel Paper,
and all promissory notes, drafts, trade acceptances, and other instruments for
the payment of money relating to or evidencing each Receivable, and each
endorsement thereon, are true and genuine and in all respects what they purport
to be, and are the valid and binding obligation of all parties thereto, and
the date or dates stated on all such items as the date on which payment in
whole or in part is due is correct; (f) all Inventory described in each invoice
has, in all respects, been delivered to the Account Debtor named in such
invoice; (g) all evidence of the delivery or shipment of Inventory is true and
genuine; (h) all services to be performed by a Borrower in connection with each
Receivable of such Borrower have been performed by such Borrower; and (i) all
evidence of the performance of such services by such Borrower is true and
genuine in all respects.
4.25 Inventory. (a) All representations made by each Borrower to the
applicable Collateral Agent and the applicable Lenders, and all documents and
schedules given by or on behalf of such Borrower to the applicable Collateral
Agent and Lenders, relating to the description, quantity, quality, condition,
and valuation of the Inventory are true and correct in all respects other than
inadvertent, immaterial errors not exceeding the aggregate amount of $500,000;
(b) no Borrower has received any Inventory on consignment or approval.
ARTICLE 5. CERTAIN DOCUMENTS TO BE
DELIVERED TO SECURED PARTY.
5.1 Invoices. Borrowers shall cause all of their Invoices to be printed
and to bear consecutive numbers and shall prepare and issue its Invoices in
such consecutive numerical order. If requested by a Collateral Agent, all
copies of Invoices not previously delivered to the
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applicable Collateral Agent shall be delivered to the applicable Collateral
Agent with each schedule of Receivables and copies of customer statements and
credit memos, remittance advices and reports, and copies of deposit slips and
bank statements, copies of shipping and delivery documents, and copies of
purchase orders and delivery documents for Inventory. Copies of all Invoices
which are voided or cancelled or which, for any other reason, do not evidence a
Receivable shall be included in such delivery. If any Invoice or copy thereof
is lost, destroyed, or otherwise unavailable, the applicable Borrower shall
account in a Record, in form satisfactory to the applicable Collateral Agent,
for such missing Invoice.
5.2 Chattel Paper. The original of each item of Chattel Paper evidencing a
Receivable shall be delivered to the applicable Collateral Agent with the
schedule listing the Receivable which it evidences, together with an assignment
in form and content satisfactory to the applicable Collateral Agent of such
Chattel Paper by Borrower, as applicable to the applicable Collateral Agent.
ARTICLE 6. COLLECTIONS.
6.1 Collections. Any Proceeds of Collateral received by Westcon or any of
the Borrowers or any other Obligors, including, without limitation, payments on
Receivables and other payments from sales, leases or licenses of Inventory,
shall be held by it in trust for the applicable Collateral Agent for the
benefit of the Lenders and the Collateral Agents in the same medium in which
received, shall not be commingled with any assets of Westcon or the Borrowers
or any other Obligors, and shall be delivered immediately to the applicable
Collateral Agent. Upon receipt of Proceeds of Collateral, the applicable
Collateral Agent shall apply such Proceeds directly to the Indebtedness in the
manner provided in Section 2.16. All such amounts realized from the proceeds of
Collateral owned by Westcon America shall first be applied to the outstanding
American Revolving Loans and American Letters of Credit, then to the
outstanding Canadian Revolving Loans and Canadian Letters of Credit.
ARTICLE 7. PAYMENT OF PRINCIPAL, INTEREST,
FEES, AND COSTS AND EXPENSES.
7.1 Promise To Pay Principal.
(a) Revolving Loans. (i) Westcon America promises to pay the American
Collateral Agent for the account of each of the Lenders, in accordance with
such Lenders' Percentage, the outstanding principal of all Advances; and (ii)
Westcon Canada promises to pay the Canadian Collateral Agent for the account of
each of the Canadian Lenders, the outstanding principal of all Canadian
Advances, in each case, indefeasibly in full in cash: (x) on the Maturity Date;
(y) on termination of this Agreement, pursuant to Section 13.3; or (z) on
acceleration of the time for payment of the Indebtedness, pursuant to Section
10.2; provided, however, that all such payments made by Westcon America shall
first be applied to the American Revolving Loans and American Letters of
Credit, then to Canadian Revolving Loans and Canadian Letters of Credit.
(b) Whenever the outstanding principal balance of American Advances
exceeds the Borrowing Capacity (Westcon America), Westcon America shall
immediately pay to American Collateral Agent for the account of each of the
American Lenders an amount equal to
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the aggregate amount of each American Lender's American Percentage with respect
to the amount by which the outstanding principal portion of the American
Advances exceeds the Borrowing Capacity (Westcon America).
(c) Whenever the outstanding principal balance of Canadian Advances
exceeds the Borrowing Capacity (Westcon Canada) or Westcon Canada Sublimit,
Westcon Canada shall immediately pay to Canadian Collateral Agent for the
account of each of the Canadian Lenders an amount equal to the aggregate amount
of each Canadian Lender's Canadian Percentage with respect to the amount by
which the outstanding principal portion of the Canadian Advances exceeds the
Borrowing Capacity (Westcon Canada) or Westcon Canada Sublimit, as applicable.
(d) If any payment on any Loan becomes due and payable on a day other
than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable
at the then applicable rate during such extension.
7.2 Promise To Pay Interest.
(a) Westcon America promises to pay the American Collateral Agent for
the account of each of the American Lenders interest on the principal of all
American Loans made hereunder from time to time at a per annum rate equal to
the Applicable Interest Rate.
(b) Westcon Canada promises to pay Canadian Collateral Agent for the
account of each of the Canadian Lenders interest on the principal of all
Canadian Loans made hereunder from time to time at a per annum rate equal to
the Applicable Interest Rate.
(c) Interest on all of the Revolving Notes shall be paid (i) as set
forth in Section 2.5 of this Agreement, (ii) on the Maturity Date, (iii) on
termination of this Agreement, pursuant to Section 13.3, (iv) on acceleration
of the time for payment of the Loans, pursuant to Section 10.2, and (v) on the
date the Indebtedness is paid in full.
7.3 Mandatory Prepayment. All of the Proceeds received by Westcon or
either of the Borrowers or any of their Subsidiaries from the (i) sale or other
disposition of Collateral, except for sales or other dispositions of Inventory
in the ordinary course of business, and sales or other dispositions of
Collateral in the amount of up to $200,000, per annum, (ii) the issuance of
equity securities, (iii) insurance, condemnation and similar recoveries, and
(iv) the reversion of pension plan assets (except to the extent Westcon
America's 401(K) plan requires funds to be held in the plan for future
application in accordance with the terms of such 401(k) plan as in effect on
the Closing Date), shall be immediately remitted to the applicable Collateral
Agent for the account of the applicable Lenders to be applied in the same
manner as is set forth in Section 7.7. In the event such Proceeds are applied
to permanently prepay or reduce Advances or Commitments, prior to the Maturity
Date, the Prepayment Premium shall be payable.
7.4 Promise To Pay Fees. Westcon America promises to pay to the American
Collateral Agent for the account of the American Lenders and Westcon Canada
promises to pay to the Canadian Collateral Agent for the account of Canadian
Lenders (unless otherwise
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provided) any fees specified in this Agreement on the applicable due dates
therefor, including, without limitation, the following (collectively, "Fees"):
(a) Westcon America. If the average outstanding daily principal of
American Loans in any month shall, in any case, be less than the Maximum Limit,
Westcon America promises to pay to the American Collateral Agent for the
ratable benefit of the American Lenders on or before the last Business Day of
each month, or as soon thereafter as the American Collateral Agent deems
appropriate, an undrawn commitment fee ("Undrawn Commitment Fee") per annum,
based on a 360 day year, on the amount by which the Maximum Limit exceeds the
average outstanding daily balance of the sum of the American Loans in respect
of such month, which American Undrawn Commitment Fee shall be equal to the
applicable Unused Line Fee Margin;
(b) Westcon Canada. If the average outstanding daily principal of
Canadian Loans in any month shall, in any case, be less than the Westcon Canada
Sublimit, Westcon Canada promises to pay to the Canadian Collateral Agent for
the ratable benefit of the Canadian Lenders on or before the last Business Day
of each month, or as soon thereafter as Canadian Collateral Agent deems
appropriate, an undrawn commitment fee ("Canadian Undrawn Commitment Fee") per
annum, based on a 360-day year, on the amount by which the Westcon Canadian
Sublimit exceeds the average outstanding daily balance of the sum of the
Canadian Loans in respect of such month, which Canadian Undrawn Commitment Fee
shall be equal to the applicable Unused Line Fee Margin.
(c) Each determination by Agents of Fees hereunder shall be
presumptive evidence of the correctness of such Fees.
(d) The fees set forth in a certain fee letter or fee letters
executed on or about the date hereof by Borrowers and the various applicable
Agents.
(e) The fees described elsewhere in this Agreement, whether in
connection with Letters of Credit or otherwise.
7.5 Promise To Pay Costs And Expenses.
(a) Borrowers promise to pay to the Arranger and Collateral Agents,
on demand, all costs and expenses as provided in this Agreement, and all costs
and expenses, other than internal costs and expenses, incurred by the Arranger
or either of Collateral Agents from time to time in connection with this
Agreement, including, without limitation, those incurred in: (i) preparing,
negotiating, amending, waiving, or granting consent with respect to the terms
under any or all of the Loan Documents; (ii) enforcing the Loan Documents;
(iii) performing any of Westcon's or the Borrowers' or any other Obligor's
duties under the Loan Documents upon Westcon's or a Borrower's or another
Obligor's failure to perform them; provided that, none of the Agents, L/C
Issuer or Lenders shall have any obligation to perform any such duties; (iv)
filing financing statements, assignments, or other documents relating to the
Collateral (e.g., filing fees, recording taxes, and documentary stamp taxes);
(v) maintaining any operating account; (vi) administering the Loan Documents;
(vii) compromising, pursuing, or defending any controversy, action, or
proceeding resulting, directly or indirectly, from any Agent's, L/C Issuer's or
any
66
Lender's relationship with any of Westcon or the Borrowers or the other
Obligors under the Loan Documents regardless of whether any of Westcon or any
of the Borrowers or any of the other Obligors is a party to such controversy,
action, or proceeding and of whether the controversy, action, or proceeding
occurs before or after the Indebtedness has been paid in full; (viii) realizing
upon or protecting any Collateral; (ix) enforcing or collecting any
Indebtedness or guaranty thereof; (x) employing collection agencies or other
agents to collect any or all of the Receivables; (xi) examining any of
Westcon's or the Borrowers' or the other Obligors' books and records or
inspecting the Collateral, including, without limitation, the costs of audits,
examinations and inspections conducted by third parties, or other fees
otherwise payable under Section 7.4, provided that nothing herein shall limit
Collateral Agent's right to conduct or cause its designee to conduct, audits,
examinations, inspections; and (xii) without limiting the generality of clause
(xi), field examinations and audits of the Collateral; provided, however, that
Westcon and Borrowers' obligation to reimburse the Agents for such field
examinations and audits shall be limited as set forth in Sections 8.3 and 8.4
hereof, so long as there is no Event of Default or Incipient Default hereunder,
in which case no such limitations on Westcon's or the Borrowers' reimbursement
obligations shall apply.
(b) Without limiting Section 7.5(a), Borrowers also promise to pay to
the Arranger and Collateral Agents, on demand, the fees and disbursements
incurred by the Arranger and Collateral Agents, for attorneys retained by the
Arranger and Collateral Agents, for advice, suit, appeal, or insolvency or
other proceedings relating to Westcon or the Borrowers or the other Obligors
and arising out of the Loan Documents under the Bankruptcy Code or otherwise,
or in connection with any purpose specified in Section 7.5(a).
7.6 Limitation on Westcon Canada's Obligations. Notwithstanding anything
to the contrary contained herein, Westcon Canada's obligations to pay any
principal, interest, fees, expenses and other Indebtedness hereunder shall be
limited to Advances made by the Canadian Lenders to Westcon Canada,
reimbursement obligations with respect to Letters of Credit issued by Canadian
L/C Issuer for the account of Westcon Canada, and any other financial
accommodations made by the Canadian Lenders for Westcon Canada and the
interest, fees, costs and expenses of Canadian Collateral Agent or Canadian
Lenders or Canadian L/C Issuer incident thereto and Westcon Canada shall have
no obligation to repay, reimburse or indemnify any of the Agents, Lenders or
L/C Issuer with respect to any Indebtedness of Westcon America.
7.7 Method of Payment Of Principal, Interest, Fees, And Costs And
Expenses.
Without limiting Borrowers' obligations pursuant to Sections 7.1, 7.2, 7.3, 7.4
and 7.5 to pay the principal of the Notes, and all interest, fees, costs and
expenses relating thereto, the following provisions shall apply to the payment
thereof:
(a) Payment of Principal.
(i) Westcon America authorizes American Collateral Agent to
apply any Proceeds of Collateral owned by Westcon America, including, without
limitation, payments on Receivables, or other payments from sales or leases of
Inventory, to the unpaid principal of all of the Notes, first to the American
Notes and, after the American Notes have been indefeasibly repaid in full in
cash, to the Canadian Notes.
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(ii) Westcon Canada authorizes Canadian Collateral Agent to
apply any Proceeds of Collateral owned by Westcon Canada, including, without
limitation, payments on Receivables, or other payments from sales or leases of
Inventory, to the unpaid principal of the Canadian Notes.
(b) Payment of Interest, Fees, and Costs and Expenses.
(i) Without limiting Westcon America's obligation to pay accrued
interest, fees, and costs and expenses arising in connection with the Revolving
Loans and the Letters of Credit, Westcon America authorizes the American
Collateral Agent to (provided, however, none of the Lenders shall incur any
liability for failure to): (a) make an Advance to pay for such items; or (b)
apply Proceeds of Collateral owned by Westcon America, including, without
limitation, payments on Receivables, other payments from sales or leases of
Inventory, to the payment of such items.
(ii) Without limiting Westcon Canada's obligation to pay accrued
interest, fees, and costs and expenses arising in connection with the Canadian
Revolving Loans or the Canadian Letters of Credit, Westcon Canada authorizes
the Canadian Collateral Agent to (provided, however, none of the Canadian
Lenders shall incur any liability for failure to): (a) make an Advance to pay
for such items; or (b) apply Proceeds of Collateral owned by Westcon Canada,
including, without limitation, payments on Receivables, other payments from
sales or leases of Inventory, to the payment of such items.
Notwithstanding any other provision of this Agreement, the Agents and the
Lenders, in their sole discretion, shall determine the manner and amount of
application of payments and credits and Proceeds of Collateral, if any, to be
made on all or any part of any component or components of the Indebtedness,
whether principal, interest, fees, costs and expenses, or otherwise.
7.8 Account Stated. Each monthly or other statement of account mailed or
delivered by the applicable Collateral Agent to the applicable Borrower
pertaining to the outstanding balance of the applicable Loans, the amount of
interest due thereon, fees, and costs and expenses shall be final, conclusive,
and binding and shall constitute an "account stated" with respect to the
matters contained therein unless, within fifteen (15) calendar days from when
such statement is mailed or, if not mailed, delivered to the applicable
Borrower, such Borrower shall deliver to the applicable Collateral Agent
written notice of any objection which such Borrower may have as to such
statement of account, and in such event, only the items to which objection is
expressly made in such notice shall be considered to be disputed by such
Borrower.
7.9 Capital Adequacy. If any change in, or the introduction, adoption,
effectiveness, interpretation, reinterpretation, or phase-in of, any law or
regulation, directive, guideline, decision or request (whether or not having
the force of law) of any court, central bank, regulator or other governmental
authority affects or would affect the amount of capital required or expected to
be maintained by any of the Lenders or any Person controlling any of the
Lenders, and any such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its commitment to make Advances is reduced to a level below that
which such Lender or such Person controlling such Lender could have achieved
but for the occurrence of any such circumstance, then, in any such case upon
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notice from time to time by such Lender to the applicable Borrower, with a copy
of such notice to the applicable Collateral Agent, such Borrower shall promptly
pay directly to such Lender additional amounts sufficient to compensate such
Lender or such controlling Person for such reduction in rate of return. A
statement of a Lender as to such additional amount or amounts (including
calculations thereof in reasonable detail) shall, in the absence of manifest
error, be conclusive and binding. In determining such amount, a Lender may use
any method of averaging and attribution that such Lender (in its sole and
absolute discretion) shall deem applicable.
ARTICLE 8. AFFIRMATIVE COVENANTS
During the term of this Agreement, and so long thereafter as any
Indebtedness of either of the Borrowers to any Agent, any of the Lenders or
either L/C Issuer shall remain unpaid, including any Indebtedness for fees and
expenses, Westcon and each Borrower and each other Obligor shall and shall
cause each of its North American Subsidiaries to:
8.1 Payments. Duly and punctually pay the principal of, interest on, and
all fees and charges on, and all costs and expenses related to, all
Indebtedness incurred by Borrowers pursuant to this Agreement and the other
Loan Documents in the manner set forth in this Agreement and the other Loan
Documents.
8.2 Future Financial Statements. Furnish to Agents and the Lenders:
(a) Within 90 days of the close of the Fiscal Year and for such
Fiscal Year, Financial Statements, on a consolidated and consolidating basis,
for the prior year, together with a comparison of the Financial Statements and
the Projections for such year in each case accompanied by (a) an opinion of
the Auditors relating to Westcon and its Subsidiaries on a consolidated basis
without qualification or exception, which opinion shall be in scope and
substance satisfactory to the Arranger and Collateral Agents, (b) such
Auditors' "Management Letter" to Westcon and/or the Borrowers, if any, (c) a
written statement signed by the Auditors stating that in the course of the
regular audit of the business of Westcon and its Subsidiaries on a consolidated
basis, which audit was conducted by the Auditors in accordance with GAAP, the
Auditors have not obtained any knowledge of the existence of any Event of
Default or Incipient Default regarding the financial covenants set forth in
this Agreement, or, if such Auditors shall have obtained from such examination
any such knowledge, they shall disclose in such written statement the existence
of such Event of Default or Incipient Default and the nature thereof; and (ii)
a Compliance Certificate in the form of Exhibit B annexed hereto and made a
part hereof ("Compliance Certificate") as of the end of such Fiscal Year,
stating whether Westcon and the Borrowers, as the case may be, are in
compliance with the financial covenants set forth in this Agreement.
(b) As soon as available and in any event within forty-five (45) days
after the end of each Fiscal Quarter (i) Financial Statements, on a
consolidated and consolidating basis, as of the end of such period and for the
Fiscal Year to date, together with a comparison to the Financial Statements and
the Projections for the same periods in the prior year, all in reasonable
detail and duly certified (subject to normal year-end audit adjustments and
except for the absence of footnotes) by the chief executive officer or chief
financial officer of Westcon as having been
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prepared in accordance with GAAP; and (ii) a Compliance Certificate stating
whether Westcon and the Borrowers, as the case may be, are in compliance with
the financial covenants set forth in Sections 9.21 through and including 9.22
hereof.
(c) As soon as available and in any event within thirty (30) days
after the end of each month, Financial Statements, on a consolidated and
consolidating basis, as of the end of such month and the information required
by Section 9.12(a), if applicable, all in reasonable detail and duly certified
by the chief executive officer or chief financial officer of Westcon as having
been prepared in accordance with GAAP.
(d) As soon as available and in any event within thirty (30) days
after the end of each Fiscal Year (i) the Projections, broken down by quarter,
for the current and following Fiscal Year; and (ii) if composed, a narrative
discussion relating to such Projections.
(e) As soon as available and in any event within thirty (30) days
after the end of each fiscal quarter of Westcon revised Projections, broken
down by quarter, for (i) the current Fiscal Year from the beginning of such
fiscal quarter to the end of the Fiscal Year and (ii) the following Fiscal
Year.
(f) Within thirty (30) days following the commencement of each Fiscal
Year, Projections for the coming three years and monthly projections for each
of Westcon and the Borrowers for the coming year, in the same format as used
for the financial statements required pursuant to 8.2(a) above.
(g) Promptly after Westcon or any Borrower obtains knowledge of (i)
the occurrence of an Event of Default or an Incipient Default, or (ii) the
existence of any condition or event which would result in any failure to
satisfy the conditions precedent to Advances or the issuance of any Letters of
Credit set forth in Article III, a certificate of the chief executive officer
or chief financial officer of Westcon specifying the nature thereof and its
proposed response thereto, each in reasonable detail.
(h) Promptly after Westcon or any Borrower obtains knowledge of (i)
any proceedings being instituted or threatened to be instituted by or against
Westcon or either Borrower or any other Obligor in any federal, state,
provincial, local or foreign court or before any commission or other regulatory
body (federal, state, provincial, local or foreign), or (ii) any actual or
prospective change, development or event which, in any such case, has had or
could be expected to have a Material Adverse Effect, a certificate of the chief
executive officer or chief financial officer of Westcon specifying the nature
thereof and Westcon's proposed response thereto, each in reasonable detail.
(i) Promptly after Westcon or any Borrower obtains knowledge that (i)
any order, judgment or decree in excess of $750,000 shall have been entered
against Westcon or either Borrower or any other Obligor or any of their
respective properties or assets, or (ii) it has received any notification of a
violation of any applicable laws, rules or regulations of any Governmental
Authority, a certificate of the chief executive officer or chief financial
officer of Westcon specifying the nature thereof and Westcon's proposed
response thereto, each in reasonable detail.
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(j) Promptly after Westcon learns of any labor dispute to which it,
either Borrower or any Obligor may become a party, any strikes or walkouts
relating to any of its plants or other facilities, and the expiration of any
labor contract to which it, either Borrower or any Obligor are a party or by
which it is bound, a certificate of the chief executive officer or chief
financial officer of Westcon specifying the nature thereof and Westcon's
proposed response thereto, each in reasonable detail.
(k) Such additional information as Arranger or either Collateral Agent
may from time to time request regarding the financial and business affairs of
Westcon, either Borrower or any Subsidiary.
8.3 U.S. Collateral Reporting. Westcon America shall furnish to the
American Collateral Agent:
(a) A report of daily receivables rollover;
(b) Upon American Collateral Agent's request, and in any event no less
frequently than 11:00 a.m. (Eastern Time) on the Friday which is closest to the
fifteenth (15th) day of each month, unless the reporting required pursuant to
subsection 8.3(d) below is not yet due, in which event on the immediately
succeeding Friday (together with a copy of all or any part of the following
reports requested by any American Lender in writing after the Closing Date),
each of the following reports, each of which shall be prepared by Westcon
America as of the last day of the immediately preceding week:
(i) a summary of Inventory by location and type setting forth
detail with respect to vendor mix, gross Inventory count and detail with respect
to Inventory mix and product type, in each case accompanied by such additional
supporting detail and documentation as shall be requested by American Collateral
Agent in its sole discretion;
(ii) collateral reports with respect to Westcon America,
including all additions and reductions (cash and non-cash) with respect to
Receivables of such Borrower, in each case accompanied by such supporting
detail and documentation as shall be requested by the American Collateral Agent
in its discretion each of which shall be prepared by Westcon America as of the
last day of the immediately preceding week; and
(iii) With respect to Westcon America, a trial balance showing
Receivables outstanding aged from invoice date as follows: 1 to 30 days, 31 to
60 days, 61 to 90 days and 91 days or more, accompanied by such supporting
detail and documentation as shall be requested by American Collateral Agent in
its discretion.
(c) To American Collateral Agent, within fifteen (15) days of the end
of each month:
(i) A Borrowing Capacity Certificate with respect to Westcon
America, in each case accompanied by such supporting detail and documentation as
shall be requested by American Collateral Agent in its sole discretion,
including, without limitation, (A) perpetual inventory reports, (B) inventory
reports by location and category (and including the amounts of Eligible
Inventory and the value thereof at any leased locations and at premises of
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warehouses or other third parties (or if any Inventory that is not Eligible
Inventory having a value of more than $100,000 is at any such leased location or
third party location, then including such Inventory and the value thereof in
such report)) and specifically the Inventory purchased with any Letter of Credit
and including the amounts of Inventory.
(ii) a reconciliation of the Receivables trial balance of Westcon
America to its most recent Borrowing Capacity Certificate, general ledger and
monthly Financial Statements delivered hereunder, in each case accompanied by
such supporting detail and documentation as shall be requested by American
Collateral Agent in its discretion;
(iii) a reconciliation of the perpetual inventory by location of
Westcon America to its most recent Borrowing Capacity Certificate, general
ledger and monthly Financial Statements delivered hereunder, in each case
accompanied by such supporting detail and documentation as shall be requested by
American Collateral Agent in its discretion;
(iv) an aging of accounts payable and a reconciliation of that
accounts payable aging to Westcon America's general ledger and monthly Financial
Statements delivered hereunder, in each case accompanied by such supporting
detail and documentation as shall be requested by American Collateral Agent in
its discretion; and
(v) a reconciliation of the outstanding American Loans as set
forth in the monthly American loan account statement provided by American
Collateral Agent to Westcon America's general ledger and monthly Financial
Statements delivered hereunder in each case accompanied by such supporting
detail and documentation as shall be requested by Collateral Agent in its
discretion;
(d) To American Collateral Agent, at the time of delivery of each of
the quarterly Financial Statements delivered hereunder, (i) a listing of
government contracts of Westcon America subject to the Federal Assignment of
Claims Act of 1940; and (ii) a list of any applications for the registration of
any Patent, Trademark, Design or Copyright filed by Westcon America with the
United States Patent and Trademark Office, the United States Copyright Office,
or any similar office or agency in the prior Fiscal Quarter;
(e) Westcon America, at its own expense, shall deliver to American
Collateral Agent the results of each physical verification, if any, that
Westcon, Westcon America or any of their Subsidiaries may in their discretion
have made, or caused any other Person to have made on their behalf, of all or
any portion of their Inventory (and, if an Incipient Default or an Event of
Default has occurred and is continuing, Westcon America shall, upon the request
of the American Collateral Agent, conduct, and deliver the results of, such
physical verifications as the American Collateral Agent may require);
(f) Upon the American Collateral Agent's request, and in any event no
less than once each Fiscal Quarter, Westcon America, at its own expense, shall
deliver to the American Collateral Agent appraisals of its Inventory, such
appraisals to be conducted by an appraiser, and in form and substance,
satisfactory to the American Collateral Agent, with full appraisals to be
conducted for the Fiscal Quarters ending May and November of each year and
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desk top appraisals to be conducted for the Fiscal Quarters ending August and
February of each year; and
(g) Within five (5) Business Days after request by the American
Collateral Agent, any written certificates, schedules and reports together with
all supporting documents as the American Collateral Agent may request relating
to the Collateral owned by Westcon America or any Obligor's business affairs and
financial condition.
(h) American Collateral Agent shall have the right at any time or
times, in American Collateral Agent's name or in the name of a nominee of
American Collateral Agent, to verify the validity, amount or any other matter
relating to any Receivables or other Collateral owned by Westcon America, by
mail, telephone, facsimile transmission or otherwise, and so long as there is no
Incipient Default or Event of Default, the American Collateral Agent shall,
either concurrently or promptly following doing so, provide notice to Westcon of
any such verifications and shall carry out such verification in a nominee's
name. Westcon America shall at all times and from time to time permit American
Collateral Agent or its agents during Westcon America's regular business hours
to inspect its Collateral and to examine and make extracts from, or copies of,
any of Westcon America's books, ledgers, reports, correspondence, and other
records, and American Collateral Agent shall have the right to verify the
Collateral in any manner and through any means that American Collateral Agent
considers appropriate. Westcon America agrees to furnish all assistance and
information, and perform any acts, which American Collateral Agent may require
in connection therewith. Without limitation of the foregoing, Westcon America
shall permit American Collateral Agent, at Westcon America's expense, to conduct
field examinations of the Collateral no less than once each Fiscal Quarter.
(i) If any of Westcon America's records or reports of the Collateral
are prepared or maintained by any Receivables service, contractor, shipper or
other agent, Westcon America hereby irrevocably authorizes such service,
contractor, shipper or agent to deliver such records, reports, and related
documents to the American Collateral Agent and to follow the American Collateral
Agent's instructions with respect to further services at any time that an Event
of Default exists or has occurred and is continuing.
8.4 Canadian Collateral Reporting. Westcon Canada shall furnish to the
Canadian Collateral Agent:
(a) A report of daily receivables rollover;
(b) Upon Canadian Collateral Agent's request, and in any event no less
frequently than 11:00 a.m. (Eastern Time) on the Friday which is the closest to
the fifteenth (15th) day of each month, unless the reporting required pursuant
to 8.4(d) below is not yet due, in which event on the immediately succeeding
Friday (together with a copy of all or any part of the following reports
requested by any Canadian Lender in writing after the Closing Date), each of the
following reports, each of which shall be prepared by Westcon Canada as of the
last day of the immediately preceding week:
(i) a summary of Inventory by location and type setting forth
detail with respect to vendor mix, gross Inventory count and detail with respect
to Inventory mix
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and product type, in each case accompanied by such additional supporting detail
and documentation as shall be requested by Canadian Collateral Agent in its sole
discretion;
(ii) collateral reports with respect to Westcon Canada, including
all additions and reductions (cash and non-cash) with respect to Receivables of
Westcon Canada, in each case accompanied by such supporting detail and
documentation as shall be requested by Canadian Collateral Agent in its
discretion each of which shall be prepared by Westcon Canada as of the last day
of the immediately preceding week; and
(iii) With respect to Westcon Canada, a trial balance showing
Receivables outstanding aged from invoice date as follows: 1 to 30 days, 31 to
60 days, 61 to 90 days and 91 days or more, accompanied by such supporting
detail and documentation as shall be requested by Canadian Collateral Agent in
its discretion.
(c) To Canadian Collateral Agent, within fifteen (15) days of the end
of each month:
(i) A Borrowing Capacity Certificate with respect to Westcon
Canada, in each case accompanied by such supporting detail and documentation as
shall be requested by Canadian Collateral Agent in its sole discretion,
including, without limitation, (A) perpetual inventory reports, (B) inventory
reports by location and category (and including the amounts of Eligible
Inventory and the value thereof at any leased locations and at premises of
warehouses or other third parties (or if any Inventory that is not Eligible
Inventory having a value of more than $100,000 is at any such leased location or
third party location, then including such Inventory and the value thereof in
such report)) and specifically the Inventory purchased with any Letter of Credit
and including the amounts of Inventory.
(ii) a reconciliation of the Receivables trial balance of Westcon
Canada to its most recent Borrowing Capacity Certificate, general ledger and
monthly Financial Statements delivered hereunder, in each case accompanied by
such supporting detail and documentation as shall be requested by Canadian
Collateral Agent in its discretion;
(iii) a reconciliation of the perpetual inventory by location of
Westcon Canada to its most recent Borrowing Capacity Certificate, general ledger
and monthly Financial Statements delivered hereunder, in each case accompanied
by such supporting detail and documentation as shall be requested by Canadian
Collateral Agent in its discretion;
(iv) an aging of accounts payable and a reconciliation of that
accounts payable aging to Westcon Canada's general ledger and monthly Financial
Statements delivered hereunder, in each case accompanied by such supporting
detail and documentation as shall be requested by Canadian Collateral Agent in
its discretion; and
(v) a reconciliation of the outstanding Canadian Loans as set
forth in the monthly Canadian loan account statement provided by Canadian
Collateral Agent to Westcon Canada's general ledger and monthly Financial
Statements delivered hereunder in each case accompanied by such supporting
detail and documentation as shall be requested by Canadian Collateral Agent in
its discretion;
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(d) To Canadian Collateral Agent, at the time of delivery of each of
the quarterly Financial Statements delivered hereunder, (i) a listing of
government contracts of Westcon Canada, subject to the Financial Administration
Act (Canada); and (ii) a list of any applications for the registration of any
Patent, Trademark, Design or Copyright filed by Westcon Canada with the United
States Patent and Trademark Office, the Canadian Patent Office, the Canadian
Trademark Office, the United States Copyright Office or the Canadian Copyright
Office, or any similar office or agency in the prior Fiscal Quarter;
(e) Westcon Canada, at its own expense, shall deliver to the Canadian
Collateral Agent the results of each physical verification, if any, that Westcon
Canada or any of its Subsidiaries may in their discretion have made, or caused
any other Person to have made on their behalf, of all or any portion of their
Inventory (and, if an Incipient Default or an Event of Default has occurred and
is continuing, Westcon Canada shall, upon the request of the Canadian Collateral
Agent, conduct, and deliver the results of, such physical verifications as the
Canadian Collateral Agent may require);
(f) Upon the Canadian Collateral Agent's request, and in any event no
less than once each Fiscal Quarter, Westcon Canada, at its own expense, shall
deliver to the Canadian Collateral Agent appraisals of its Inventory, such
appraisals to be conducted by an appraiser, and in form and substance reasonably
satisfactory to Canadian Collateral Agent with full appraisals to be conducted
for the Fiscal Quarters ending May and November of each year and desk top
appraisals to be conducted for the Fiscal Quarters ending August and February of
each year; and
(g) Within five (5) Business Days after request by the Canadian
Collateral Agent, any written certificates, schedules and reports together with
all supporting documents as the Canadian Collateral Agent may request relating
to the Collateral owned by Westcon Canada or any Obligor's business affairs and
financial condition.
(h) Canadian Collateral Agent shall have the right at any time or
times, in Canadian Collateral Agent's name or in the name of a nominee of
Canadian Collateral Agent, to verify the validity, amount or any other matter
relating to any Receivables or other Collateral owned by Westcon Canada, by
mail, telephone, facsimile transmission or otherwise, and so long as there is no
Incipient Default of Event of Default, the Canadian Collateral Agent shall give,
either concurrently or promptly following doing so, provide notice to Westcon of
any such verification and shall carry out such verification in a nominee's name.
Westcon Canada shall at all times and from time to time permit Canadian
Collateral Agent or its agents during Westcon Canada's regular business hours to
inspect the Collateral owned by Westcon Canada and to examine and make extracts
from, or copies of, any of Westcon Canada's books, ledgers, reports,
correspondence, and other records, and Canadian Collateral Agent shall have the
right to verify the Collateral owned by Westcon Canada in any manner and through
any means that Canadian Collateral Agent considers appropriate. Westcon Canada
agrees to furnish all assistance and information, and perform any acts, which
Canadian Collateral Agent may require in connection therewith. Without
limitation of the foregoing, Westcon Canada shall permit Canadian Collateral
Agent, at Westcon Canada's expense to conduct field examinations of the
Collateral no less than once each Fiscal Quarter.
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(i) If any of Westcon Canada's records or reports of the Collateral
are prepared or maintained by any Receivables service, contractor, shipper or
other agent, Westcon Canada hereby irrevocably authorizes such service,
contractor, shipper or agent to deliver such records, reports, and related
documents to the Canadian Collateral Agent and to follow the Canadian Collateral
Agent's instructions with respect to further services at any time that an Event
of Default exists or has occurred and is continuing.
8.5 Additional Reporting.
(a) Along with the Financial Statements set forth above, the name,
address and phone number of each Account Debtors' primary contacts for each
Receivable on the Receivable aging report contained in its most recent Borrowing
Capacity Certificate.
(b) Within five (5) days after the same are sent, copies of all
Financial Statements and reports which any of Westcon or the Borrowers or the
other Obligors sends to any of their stockholders, and within five (5) days
after the same are filed, copies of all Financial Statements and reports which
Westcon or any of the Borrowers or any of the other Obligors may make to, or
file with, the Securities and Exchange Commission or any successor or analogous
governmental authority in any jurisdiction.
(c) Such other reports, statements and reconciliations with respect to
the Borrowing Base, Collateral or Indebtedness of any or all of Westcon or
Borrowers or any of the other Obligors as either Collateral Agent shall from
time to time request in its discretion.
Each certificate, schedule and report provided by Westcon, any Borrower or any
other Obligor to any of the Arranger or Collateral Agents or to any Lender under
Article VIII or otherwise hereunder shall be signed by the Chief Executive
Officer or Chief Financial Officer of Westcon or the applicable Borrower, as
applicable, and which signature shall be deemed a representation and warranty
that the information contained in such certificate, schedule or report is true
and accurate in all respects, except for inadvertent, immaterial errors not
exceeding the aggregate amount of $500,000.00 on the date as of which such
certificate, schedule or report is made and does not omit to state a fact
necessary in order to make the statements contained therein not misleading at
such time, except for inadvertent, immaterial errors not exceeding the aggregate
amount of $500,000.00. Each Financial Statement delivered pursuant to this
Article VIII shall be prepared in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods.
8.6 Taxes. Promptly pay and discharge all of its taxes, assessments and
other governmental charges (including any charged or assessed on the issuance
of any of the Notes) prior to the date on which penalties are attached thereto,
establish adequate reserves for the payment of taxes and assessments and make
all required withholding and other tax deposits; provided, however, that
nothing herein contained shall be interpreted to require the payment of any
tax, assessment or charge so long as its validity is being contested in good
faith and by appropriate proceedings diligently conducted.
8.7 Insurance. (a) Keep all its property insured at all times with
responsible insurance carriers against fire, theft and other risks in coverage,
form and amount satisfactory to the
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Collateral Agents; (b) keep adequately insured at all times in amounts with
responsible insurance carriers against liability on account of damage to persons
or property, including, without limitation, coverage against liability based on
products liability and under all applicable worker's compensation laws; (c)
promptly deliver to the applicable Collateral Agent certificates of insurance or
the insurance policies required to be carried by Westcon, the Borrowers and the
other Obligors pursuant hereto, with appropriate endorsements designating the
applicable Collateral Agent as a named insured or loss payee and containing the
standard mortgage clause approved by the Insurance Bureau of Canada, in the case
of Westcon Canada as requested by the applicable Collateral Agent; and (d) cause
each such insurance policy to contain a thirty (30) day mandatory notice of
cancellation provision satisfactory to the applicable Collateral Agent.
8.8 Corporate Standing. Maintain each Borrower's, Westcon's and each other
Obligor's corporate existence in good standing and remain or become duly
licensed or qualified and in good standing in each jurisdiction in which the
conduct of its business requires such qualification or licensing except where
failure to become so licensed or qualified shall not cause liability or
obligations on the part of either of Borrowers, Westcon or any other Obligor
either individually or in the aggregate in excess of $50,000.
8.9 Books and Records. Keep proper books and records in accordance with
GAAP consistently applied, and keep the books and records of Westcon, each
Borrower and each other Obligor in the location where they are kept on the date
of this Agreement unless both Collateral Agents are given thirty (30) days'
prior written notice of any relocation of such books and records; provided that
in the case of any of Westcon Canada's books and records that are maintained in
Quebec a duplicate copy of such books and records shall be kept in Ontario and
Canadian Collateral Agent shall be advised of such location.
8.10 Compliance with Law. Comply with all applicable United States and
Canadian federal, state, provincial and local laws and governmental rules,
regulations or decrees.
8.11 Continue Business. Engage only in the lines of business heretofore
conducted by the Borrowers, Westcon and the other Obligors.
8.12 Fiscal Year. Maintain its fiscal year end at the last day of February
of each year.
8.13 Intellectual Property. Westcon, the Borrowers and the other Obligors
shall do and cause to be done all things necessary to preserve and keep in full
force and effect, all registrations of and rights to use any material
Intellectual Property.
8.14 Pension Reports.
(a) With respect to each Pension Plan, Westcon, the Borrowers and the
other Obligors will furnish the following to the applicable Collateral Agent:
(i) as soon as possible and in any event within thirty (30) days
after Westcon or a Borrower knows or has reason to know that any Reportable
Event with respect to such Pension Plan has occurred, the statement of the Chief
Executive Officer or Chief Financial Officer of Westcon or such Borrower setting
forth the details of such Reportable Event and the action which Westcon or such
Borrower proposes to take with respect thereto; and
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(ii) promptly after the filing thereof with the Secretary of
Labor, the Pension Benefit Guaranty Corporation or the Internal Revenue Service,
copies of reports (including, without limitation, notices of Reportable Events
and annual reports in the Form 5500 Series) filed with respect to each Pension
Plan.
8.15 Canadian Pension and Benefit Plans.
(a) For each existing Canadian Pension Plan, Westcon Canada shall
ensure that such plan retains its registered status under and is administered in
a timely manner in all respects in accordance with the applicable pension plan
text, funding agreement, the ITA and all other applicable laws.
(b) For each Canadian Pension Plan hereafter adopted by Westcon Canada
which is required to be registered under the ITA or any other applicable laws,
Westcon Canada shall use its best efforts to seek and receive confirmation in
writing from the applicable Government Authorities to the effect that such plan
is unconditionally registered under the ITA and such other applicable laws.
(c) For each existing and hereafter adopted Canadian Pension Plan and
Canadian Benefit Plan, Westcon Canada shall in a timely fashion perform all
obligations (including fiduciary, funding, investment and administration
obligations) required to be performed in connection with such plan and the
funding media therefor.
(d) Westcon Canada shall deliver to Canadian Collateral Agent if
requested by Canadian Collateral Agent, promptly after the filing thereof by
Westcon Canada with any applicable Government Authority, (i) copies of each
annual and other return, report or valuation with respect to each Canadian
Pension Plan; (ii) promptly after receipt thereof, a copy of any direction,
order, notice, ruling or opinion that Westcon Canada may receive from any
applicable Government Authority with respect to any Canadian Pension Plan; and
(iii) notification within 30 days of any increases having a cost to Westcon
Canada in excess of $50,000 per annum, in the benefits of any existing Canadian
Pension Plan or Canadian Benefit Plan, or the establishment of any new Canadian
Pension Plan or Canadian Benefit Plan, or the commencement of contributions to
any such plan to which Westcon Canada was not previously contributing.
8.16 Environmental Compliance.
(a) Comply in all respects with all Environmental Laws.
(b) Not suffer, cause or permit any Disposal of Hazardous Substances
at any property owned, leased or operated by it or any North American Subsidiary
except in accordance with applicable Environmental Laws.
(c) Promptly notify all Agents in the event of the Disposal of any
Hazardous Substance in violation of any Environmental Law at any property owned,
leased or operated by Westcon, any Borrower or any other Obligor, or in the
event of any Release, or threatened Release, of a Hazardous Substance in
violation of any Environmental Law from any such property.
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(d) Each Borrower shall, at either Collateral Agent's request,
provide, at such Borrower's expense, updated Environmental Questionnaires and/or
Environmental Reports concerning any property owned, leased or operated by
Westcon, such Borrower or any of their North American Subsidiaries.
(e) Deliver promptly to the Collateral Agents (i) copies of any
documents received from the United States Environmental Protection Agency or any
Canadian or any state, provincial, county or municipal environmental or health
agency concerning a violation or alleged violation by Westcon, any Borrower or
any Subsidiary of any Environmental Law; and (ii) copies of any documents
submitted by Westcon, any Borrower to the United States Environmental Protection
Agency or any Canadian or any state, provincial, county or municipal
environmental or health agency concerning the operations of Westcon, any
Borrower or any other North American Subsidiary.
8.17 Maintenance of Property. Westcon, Borrowers and the North American
Subsidiaries each shall: (a) conduct continuously and operate actively each of
its respective businesses according to good business practices and maintain all
of its properties (business or otherwise) in good working order and condition
(ordinary wear and tear excepted and except as may be disposed of in accordance
with the express terms of this Agreement), including Intellectual Property, (b)
comply in all respects with the laws and regulations governing the conduct of
its business; (c) make all such reports and pay all such franchise and other
taxes and license fees and do all such other acts and things as may be lawfully
required to maintain its rights, licenses, leases, powers and franchises under
the laws of the United States or Canada, if applicable, or any political
subdivision thereof.
8.18 U.S. Collateral. Westcon America shall:
(a) From time to time, upon the request of the American Collateral
Agent, provide such Collateral Agent with access to copies of all invoices,
delivery evidences and other such documents relating to each Receivable;
(b) Promptly upon obtaining knowledge thereof, furnish to and inform
the American Collateral Agent of all adverse information relating to the
financial condition of any Account Debtor;
(c) Promptly upon obtaining knowledge thereof, notify the American
Collateral Agent in writing of any event which would cause any obligation of an
Account Debtor to become an Ineligible Receivable;
(d) Keep all goods rejected or returned by any Account Debtor and all
goods repossessed or stopped in transit from any Account Debtor segregated from
all other property, holding the same in trust for the American Collateral Agent
until Westcon America applies a credit against such Account Debtor's outstanding
obligations to Westcon America or sells such goods in the ordinary course of
business, whichever occurs earlier;
(e) Stamp or otherwise xxxx chattel paper and instruments now owned or
hereafter acquired by it in conspicuous type to show that the same are subject
to the American Collateral Agent's security interest and immediately thereafter
deliver or cause such chattel
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paper and instruments to be delivered to the American Collateral Agent or any
agent designated in writing by the American Collateral Agent with appropriate
endorsements and assignments to vest title and possession in such Collateral
Agent;
(f) Use commercially reasonable efforts to collect all Receivables;
(g) Promptly notify the American Collateral Agent of any loss, theft
or destruction of or damage to any of the Collateral aggregating in excess of
$150,000.00. Westcon America shall diligently file and prosecute its claim for
any award or payment in connection with any such loss, theft, destruction of or
damage to Collateral. Westcon America shall, upon demand of the American
Collateral Agent, make, execute and deliver any assignments and other
instruments sufficient for the purpose of assigning any such award or payment to
the American Collateral Agent, for the benefit of the Lenders and Collateral
Agents, free of any encumbrances of any kind whatsoever;
(h) Observe and perform all matters and things necessary or expedient
to be observed or performed under or by virtue of any lease, license, concession
or franchise forming part of the Collateral in order to preserve, protect and
maintain all the rights of the American Collateral Agent, for the benefit of the
Lenders and Collateral Agents, thereunder;
(i) Consistent with reasonable commercial practice, maintain, use and
operate the Collateral and carry on and conduct its business in a proper and
efficient manner so as to preserve and protect the Collateral and the earnings,
incomes, rents, issues and profits thereof; and
(j) At any time and from time to time, upon the request of the
American Collateral Agent, and at the sole expense of Westcon America, promptly
and duly execute and deliver such further instruments and documents and take
such further action as the American Collateral Agent may request for the purpose
of obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, the filing of any
Financing Statements, or any other financing or continuation statements under
the UCC in effect in any jurisdiction with respect to the security interests or
other liens granted herein and the payment of any and all recording taxes and
filing fees in connection therewith.
(k) Westcon America shall notify the American Collateral Agent
promptly if an event or circumstance has occurred which, to its knowledge, would
cause the American Collateral Agent to consider the Receivables of an Account
Debtor owing more than $150,000 of Receivables to no longer constitute eligible
Receivables. No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any Account Debtor without the American
Collateral Agent's consent, except in the ordinary course of such Borrower's
business in accordance with its current practices and policies as of the date of
this Agreement. So long as no Event of Default exists or has occurred and is
continuing, Westcon America may settle, adjust or compromise any claim, offset,
counterclaim or dispute with any Account Debtor. At any time that an Event of
Default exists or has occurred and is continuing, the American Collateral Agent
shall, at its option, have the exclusive right to settle, adjust or compromise
any claim, offset, counterclaim or dispute with Account Debtors or grant any
credits, discounts or allowances.
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(l) With respect to each Receivable: (i) the amounts shown on any
invoice delivered to the American Collateral Agent or schedule thereof delivered
to the American Collateral Agent shall be true and complete, (ii) no payments
shall be made thereon except payments immediately delivered to the American
Collateral Agent pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any Account Debtor except as reported to the American Collateral
Agent in accordance with this Agreement and except for credits, discounts,
allowances or extensions made or given in the ordinary course of Westcon
America's business in accordance with practices and policies previously
disclosed to the American Collateral Agent, (iv) there shall be no setoffs,
deductions, contras, defenses, counterclaims or disputes existing or asserted
with respect thereto except as reported to the American Collateral Agent in
accordance with the terms of this Agreement, (v) none of the transactions giving
rise thereto will violate any applicable foreign, Federal, Canadian, state,
provincial or local laws or regulations, (vi) all documentation relating thereto
will be legally sufficient under such laws and regulations and (vii) all such
documentation will be legally enforceable in accordance with its terms.
(m) Irrevocably constitute and appoint American Collateral Agent (and
all officers, employees or agents designated by the American Collateral Agent),
with full power of substitution, as Westcon America's true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of Westcon America and in the name of Westcon America or in its own name,
from time to time in the American Collateral Agent's discretion to file such
financing statements with respect to the Security Agreement, with or without
Westcon America's signature, or to file a photocopy of the Security Agreement in
substitution for a financing statement, as the American Collateral Agent may
deem appropriate and to execute in the name of Westcon America such financing
statements and amendments thereto and continuation statements which may require
the signature of Westcon America.
8.19 Canadian Collateral. Westcon Canada shall:
(a) From time to time, upon the request of the Canadian Collateral
Agent, provide the Canadian Collateral Agent with access to copies of all
invoices, delivery evidences and other such documents relating to each
Receivable;
(b) Promptly upon obtaining knowledge thereof, furnish to and inform
the Canadian Collateral Agent of all adverse information relating to the
financial condition of any Account Debtor;
(c) Promptly upon obtaining knowledge thereof, notify the Canadian
Collateral Agent in writing of any event which would cause any obligation of an
Account Debtor to become an Ineligible Receivable;
(d) Keep all goods rejected or returned by any Account Debtor and all
goods repossessed or stopped in transit from any Account Debtor segregated from
all other property, holding the same in trust for the Canadian Collateral Agent
until Westcon Canada applies a credit against such Account Debtor's outstanding
obligations to Westcon Canada or sells such goods in the ordinary course of
business, whichever occurs earlier;
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(e) Stamp or otherwise xxxx chattel paper and instruments now owned or
hereafter acquired by it in conspicuous type to show that the same are subject
to the Canadian Collateral Agent's security interest and immediately thereafter
deliver or cause such chattel paper and instruments to be delivered to the
Canadian Collateral Agent or any agent designated in writing by the Canadian
Collateral Agent with appropriate endorsements and assignments to vest title and
possession in Canadian Collateral Agent;
(f) Use commercially reasonable efforts to collect all Receivables;
(g) Promptly notify the Canadian Collateral Agent of any loss, theft
or destruction of or damage to any of the Collateral owned by Westcon Canada
aggregating in excess of $100,000.00. Westcon Canada shall diligently file and
prosecute its claim for any award or payment in connection with any such loss,
theft, destruction of or damage to Collateral owned by Westcon Canada. Westcon
Canada shall, upon demand of the Canadian Collateral Agent, make, execute and
deliver any assignments and other instruments sufficient for the purpose of
assigning any such award or payment to the Canadian Collateral Agent, for the
benefit of the Canadian Lenders and Canadian Collateral Agent, free of any
encumbrances of any kind whatsoever;
(h) Observe and perform all matters and things necessary or expedient
to be observed or performed under or by virtue of any lease, license, concession
or franchise forming part of the Collateral in order to preserve, protect and
maintain all the rights of the Canadian Collateral Agent, for the benefit of the
Canadian Lenders and Canadian Collateral Agents, thereunder;
(i) Consistent with reasonable commercial practice, maintain, use and
operate the Collateral owned by Westcon Canada and carry on and conduct its
business in a proper and efficient manner so as to preserve and protect the
Collateral owned by Westcon Canada and the earnings, incomes, rents, issues and
profits thereof; and
(j) At any time and from time to time, upon the request of the
Canadian Collateral Agent, and at the sole expense of Westcon Canada, promptly
and duly execute and deliver such further instruments and documents and take
such further action as the Canadian Collateral Agent may request for the purpose
of obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, the filing of any
Financing Statements, PPSA filings or filings under the Quebec Civil Code or any
other personal property security act filing or continuation thereof in effect in
any jurisdiction with respect to the security interests, hypothecs or other
liens granted herein and the payment of any and all recording taxes and filing
fees in connection therewith.
(k) Westcon Canada shall notify the Canadian Collateral Agent promptly
if an event or circumstance has occurred which, to its knowledge, would cause
the Canadian Collateral Agent to consider the existing Receivables of an Account
Debtor owing more than $150,000 of Receivables to no longer constitute eligible
Receivables. No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any Account Debtor without the Canadian
Collateral Agent's consent, except in the ordinary course of Westcon Canada's
business in accordance with its current practices and policies as of the date
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of this Agreement. So long as no Event of Default exists or has occurred and is
continuing, Westcon Canada may settle, adjust or compromise any claim, offset,
counterclaim or dispute with any Account Debtor. At any time that an Event of
Default exists or has occurred and is continuing, the Canadian Collateral Agent
shall, at its option, have the exclusive right to settle, adjust or compromise
any claim, offset, counterclaim or dispute with Account Debtors or grant any
credits, discounts or allowances.
(l) With respect to each Receivable: (i) the amounts shown on any
invoice delivered to the Canadian Collateral Agent or schedule thereof delivered
to the Canadian Collateral Agent shall be true and complete, (ii) no payments
shall be made thereon except payments immediately delivered to the Canadian
Collateral Agent pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any Account Debtor except as reported to the Canadian Collateral
Agent in accordance with this Agreement and except for credits, discounts,
allowances or extensions made or given in the ordinary course of Westcon
Canada's business in accordance with practices and policies previously disclosed
to the Canadian Collateral Agent, (iv) there shall be no setoffs, deductions,
contras, defenses, counterclaims or disputes existing or asserted with respect
thereto except as reported to the Canadian Collateral Agent in accordance with
the terms of this Agreement, (v) none of the transactions giving rise thereto
will violate any applicable foreign, Federal, Canadian, state, provincial or
local laws or regulations, (vi) all documentation relating thereto will be
legally sufficient under such laws and regulations and (vii) all such
documentation will be legally enforceable in accordance with its terms.
8.20 Landlords' Agreements, Mortgagee Agreements, Bailee Letters and Real
Estate Purchases. Each of Westcon and Borrowers and the other Obligors shall
use commercially reasonable efforts to obtain a landlord's agreement, mortgagee
agreement or bailee letter, as applicable, from the lessor of each leased
property, mortgagee of owned property or bailee with respect to any warehouse,
processor or converter facility or other location where Collateral is stored or
located, which agreement or letter shall contain a waiver or subordination of
all Liens or claims that the landlord, mortgagee or bailee may assert against
the Collateral at that location, and shall otherwise be reasonably satisfactory
in form and substance to the applicable Collateral Agent. With respect to such
locations or warehouse space leased or owned as of the Closing Date and
thereafter, if the applicable Collateral Agent has not received a landlord or
mortgagee agreement or bailee letter as of the Closing Date (or, if later, as
of the date such location is acquired or leased), any Inventory at that
location shall, in the applicable Collateral Agent's discretion, be excluded
from Borrowing Capacity or be subject to such reserves as may be established by
the applicable Collateral Agent in its judgment. After the Closing Date, no
real property or warehouse space shall be leased by any Westcon or Borrowers or
other Obligors and no Inventory shall be shipped to a processor or converter
under arrangements established after the Closing Date without the prior written
consent of the applicable Collateral Agent (which consent, in the applicable
Collateral Agent's discretion, may be conditioned upon the exclusion from
Borrowing Capacity of such Inventory at that location or the establishment of
reserves acceptable to the applicable Collateral Agent) or, unless and until a
satisfactory landlord agreement or bailee letter, as appropriate, shall first
have been obtained with respect to such location. Each of Westcon and Borrowers
and the other Obligors shall timely and fully pay and perform its obligations
under all leases and other agreements with respect to each leased location or
public warehouse where any Collateral is or may be located. To the extent
otherwise
83
permitted hereunder, if any of Westcon or Borrowers or any other Obligors
propose to acquire a fee ownership interest in Real Estate after the Closing
Date, it shall first provide to the applicable Collateral Agent a mortgage or
deed of trust granting applicable Collateral Agent a first and only priority
Lien on such Real Estate, together with environmental audits, mortgage title
insurance commitment, real property survey, local counsel opinion(s), and, if
required by the applicable Collateral Agent, supplemental casualty insurance and
flood insurance, and such other documents, instruments or agreements requested
by the applicable Collateral Agent, in each case, in form and substance
satisfactory to the applicable Collateral Agent.
ARTICLE 9. NEGATIVE COVENANTS
During the term of this Agreement and so long thereafter as any of the
Indebtedness of either of the Borrowers to any Agent, any of the Lenders or
either L/C Issuer, including any Indebtedness for fees and expenses, shall
remain unpaid, Westcon and each Borrower and each other Obligor shall not and
shall not permit any of its North American Subsidiaries to:
9.1 Borrowed Money. Create, incur, assume or suffer to exist any liability
for borrowed money, except Permitted Indebtedness, including, without
limitation, unsecured guaranties or other credit support given by Westcon with
respect to the Obligations of Unrestricted Subsidiaries.
9.2 Liens. Create, incur, assume or suffer to exist any mortgage, Lien,
security interest, pledge or other encumbrance on any of its property or assets,
whether now owned or hereafter owned or acquired, except Permitted Liens.
9.3 Storing and Use of Collateral. Place the Collateral in any warehouse
which may issue a negotiable Document with respect thereto or use the Collateral
in violation of any provision of the Loan Documents, or any applicable statute,
regulation or ordinance, or of any policy insuring the Collateral.
9.4 Guaranties. Become a guarantor, surety or otherwise liable for the
debts or other obligations of any other Person (except (i) pursuant to the
Guaranties contemplated hereunder, (ii) as set forth on Schedule 9.4 hereof, and
(iii) unsecured guaranties or other credit support given by Westcon with respect
to the Obligations of Unrestricted Subsidiaries), whether by guaranty or
suretyship agreement, agreement to purchase the indebtedness of such Person, or
agreement for the furnishing of funds to any other Person, through the purchase
of goods, supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or discharging the
Indebtedness of such Person, or otherwise, except as an endorser of instruments
for the payment of money deposited to its bank account for collection in the
ordinary course of business.
9.5 Sale of Assets. Convey, sell, transfer, lease, or sell and lease
back any of its property, assets or business to any other Person, except for (i)
the sale by Westcon of the Capital Stock, property or assets of any of the
Unrestricted Subsidiaries, (ii) the sale of Inventory in the ordinary course of
business, (iii) the sale of Equipment no longer used or usable having a value
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of $500,000.00 in the aggregate per annum, (iv) the sale of Lucent Inventory
acquired prior to the date hereof, or (v) the sale by Westcon of Cisco Systems,
Inc. common stock owned by it.
9.6 Capital Stock. Purchase, redeem or retire any of its capital stock
or issue any capital stock or otherwise change the capital structure of Westcon,
Borrowers or the other Obligors or change the relative rights, preferences or
limitations relating to any of its capital stock; provided, however, that the
foregoing restriction shall not prohibit an initial public offering of the stock
of Westcon so long as there is no Incipient Default or Event of Default
hereunder and such initial public offering does not result in a change of
control of Westcon; provided, further, that the foregoing restriction shall not
prohibit repurchases of the capital stock of Westcon from its chief executive
officer in accordance with the put agreement in place with such individual on
the Closing Date.
9.7 Leases. Enter, as lessee, or assume or suffer to exist operating or
true leases or rental agreements of real or personal property, except for leases
entered into in the ordinary course of Borrowers or such other Obligor's
business.
9.8 Investments and Loans. Make any investments in, or advances to, any
other Person, including, without limitation, loans or advances between
Borrowers, to Westcon or to their respective Subsidiaries, shareholders,
directors, officers, employees or any other Affiliate, except (i) as set forth
in Schedule 9.8 hereof, or (ii) in the case of Westcon, direct obligations of
the United States of America, (iii) intercompany loans which are expressly
permitted under, and made in compliance with, the terms and conditions set forth
in the definition of "Permitted Indebtedness", or (iv) in the case of Westcon,
investments in the Unrestricted Subsidiaries.
9.9 Consolidations, Merger and Fundamental Changes. Merge, amalgamate or
consolidate with or into any other firm or corporation, or enter into any joint
venture or partnership with any other individual, firm or corporation.
9.10 Dividends. Pay or declare any cash dividend on, or make any payment
on account of, or set apart assets for a sinking or other analogous fund for,
the purchase, redemption, defeasance, retirement or other acquisition of, any
shares of any class of capital stock of any of the Borrowers or any of their
Subsidiaries or any warrants, options or rights to purchase any such capital
stock, whether now or hereafter outstanding, or make any other distribution in
respect thereof, either directly or indirectly, whether in cash or property or
in obligations of the Borrowers or any of their Subsidiaries; or make any
optional payment or prepayment on or redemption (including, without limitation,
by making payments to a sinking or analogous fund) of the Obligations owing to
Datatec or any other Obligations, except for the Indebtedness and except that a
Subsidiary may pay dividends of any kind to a Borrower; provided, however, that,
the foregoing to the contrary notwithstanding, so long as there is no Incipient
Default or Event of Default hereunder, Westcon America may make a one-time
payment to Westcon in an amount of up to $9,000,000.00 no later than September
30, 2003 in connection with the repayment of the Revolving Credit Agreement
between IBM United Kingdom Financial Services Limited and Westcon (UK) Limited,
dated June 30, 2000; provided further, that both before and on a pro forma basis
after giving effect to such payment in connection with such Revolving Credit
Agreement repayment there is Excess Availability of no
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less than $15,000,000.00 as determined by Collateral Agent calculated on the
average daily availability for the prior fifteen (15) days.
9.11 Investments. Directly or indirectly, make, maintain or acquire any
investment in any Person other than:
(a) Stock or obligations issued to a Borrower in settlement of claims
against others by reason of an event of bankruptcy or a composition or the
readjustment of debt or a reorganization of any debtor of a Borrower;
(b) Permitted Acquisitions;
(c) Investments by Westcon in Unrestricted Subsidiaries;
(d) Acquisitions made by Westcon outside of North America either
through existing Unrestricted Subsidiaries or through newly formed Unrestricted
Subsidiaries; and
(e) the ownership by Westcon of shares of common stock of Cisco
Systems, Inc.
9.12 Affiliate/Subsidiary Transactions.
(a) Neither Westcon nor either Borrower nor any of their Subsidiaries
shall acquire or form any new Subsidiaries after the date hereof other than the
formation by Westcon or the Unrestricted Subsidiaries of additional Unrestricted
Subsidiaries so long as Westcon advises the Collateral Agent, in writing, of the
formation of any such additional Unrestricted Subsidiary or Unrestricted
Subsidiaries contemporaneously with the delivery of the next succeeding
financial statements required to be delivered pursuant to Section 8.2(c) hereof.
(b) Neither Westcon nor either Borrower nor any of their Subsidiaries
shall either before (reflected Westcon's consolidated financial statements as of
April 30, 2003), on or after the date hereof, directly or indirectly, have
entered into or enter into any transaction with any Affiliate or Subsidiary,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service to any Affiliate or Subsidiary, except in the ordinary
course of business and pursuant to the reasonable requirements of its business,
in accordance with past practices, and upon fair and reasonable terms no less
favorable to it than could be obtained in a comparable arm's-length transaction
with an unaffiliated Person.
In addition to the foregoing:
(i) the following transactions shall be permitted either before
(reflected on Westcon's consolidated financial statements as of April 30, 2003),
on or after the date hereof, provided that each is upon fair and reasonable
terms, determined on an arms-length basis, in the ordinary course of business
and consistent with past practices:
(A) payments by Westcon America, Westcon Canada or the
Unrestricted Subsidiaries to Westcon of fees with respect to its allocated share
of wages, payroll and related employment costs, travel, meals, payroll taxes,
health insurance, franchise
86
and licensing fees and postage, all as determined in a manner which complies
with applicable requirements of the Code, the ITA and related rules and
regulations;
(B) payments by Westcon America, Westcon Canada or the
Unrestricted Subsidiaries to Westcon or payments by Westcon to Westcon America
or Westcon Canada as reimbursement of their respective allocable share of rent,
utilities, income taxes, audit fees, legal fees, insurance premiums and other
similar ordinary course costs and expenses; and
(C) payments in any Fiscal Year by Westcon America to
Westcon Canada or the Unrestricted Subsidiaries as reimbursement for capital
expenditures made by Westcon Canada or such Unrestricted Subsidiaries, as the
case may be, on behalf of Westcon America for equipment and other assets owned
by Westcon America in an aggregate amount not to exceed the aggregate amount of
global information services fees previously received by Westcon America in such
Fiscal Year from Westcon Canada or the Unrestricted Subsidiaries, as the case
may be.
(ii) the following transactions shall be permitted either before
(reflected on Westcon's consolidated financial statements as of April 30, 2003),
on or after the date hereof, provided that each is upon fair and reasonable
terms, determined on an arms-length basis, in the ordinary course of business
and consistent with past practices and, provided, further, that at the time of
each such transaction there is no Event of Default or Incipient Default
hereunder, unless the applicable Collateral Agent otherwise consents thereto in
writing:
(A) payments by Westcon America, Westcon Canada or the
Unrestricted Subsidiaries to Westcon of fees with respect to its allocated share
of entertainment, bonuses, charitable contributions, marketing and consultant
fees, all as determined in a manner which complies with applicable requirements
of the Code, the ITA and related rules and regulations; and
(B) payments by Westcon America, Westcon Canada or the
Unrestricted Subsidiaries to Eastpro Services, Inc. for marketing services,
merchandise for marketing events, website maintenance, public relations and
travel, meals and entertainment expenses associated with President's Club and
other similar costs incurred as part of the delivery of these services by
Eastpro to, as applicable, Westcon, Westcon America or Westcon Canada, or the
Unrestricted Subsidiaries.
(c) Neither Westcon nor either Borrower nor any of their Subsidiaries
shall directly or indirectly make or permit to be made any payment with respect
to the obligations of any of Westcon UK Limited, RBR Networks Gmbh or Comstor
Limited owing to Datatec, including, without limitation, the obligations
evidenced by: (a) the promissory note dated November 30, 2001 in the original
principal amount of GBP 5,252,000 made by Westcon UK Limited; (b) the promissory
note dated December 16, 2001 in the original principal amount of Euro
1,553,049.00 by RBR Network Gmbh; (c) the promissory note dated November 30,
2001 in the principal amount of GBP 6,584,506.00 by Comstor Limited; and (d) the
promissory note dated November 30, 2001 in the principal amount of US
$3,800,000.00 by Comstor Limited.
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9.13 Westcon. Permit Westcon to function other than as a holding company
or to conduct business or to incur liabilities other than incident to the
ownership of the Borrowers and its other Subsidiaries.
9.14 Additional Negative Pledges. Directly or indirectly, create or
otherwise cause or permit to exist or become effective any contractual
obligation which may restrict or inhibit a Collateral Agent's rights or ability
to sell or otherwise dispose of the Collateral or any part thereof or to obtain
Liens on additional assets or properties; provided that, notwithstanding the
foregoing, Westcon may enter into a negative pledge with respect to the stock,
property or assets of any Unrestricted Subsidiary.
9.15 Change Name. Change the jurisdiction of formation, chief executive
office or registered office of Westcon, any Borrower or any other Obligor or the
name or registered corporate or tradename, if any, of Westcon, any Borrower or
any other Obligor, as such name appears on the date hereof in the official
filings of such Person's jurisdiction of formation.
9.16 Business Operations. Permit its business operations to be conducted
through any other Person or engage in any business other than as a reseller of
and sales channel for networking communications systems or other products and
services associated with the sale of such systems.
9.17 Records Review/Collateral Verification. Prevent the applicable
Collateral Agent from examining and inspecting the books and records of Westcon
or any Borrower or any other Obligor or verifying the Collateral as provided in
Article VIII or otherwise provided under the terms of this Agreement or any
other Loan Document.
9.18 New Locations. Establish any new Inventory locations or transfer
any Inventory, Equipment or other Collateral to a new location without first
providing the applicable Collateral Agent thirty (30) days prior written notice
of such impending action, and executing and delivering to the applicable
Collateral Agent a satisfactory landlord waiver or warehouseman's waiver
regarding each such location for which Collateral Agent does not previously have
a landlord waiver or warehouseman's waiver.
9.19 Financing Statements. Execute, or permit the filing or continuation
of, any financing statement, financing change statement or similar filing to
perfect a security interest or to publish hypothecs, except in favor of the
applicable Collateral Agent or in connection with a Permitted Encumbrance.
9.20 Intentionally Omitted.
9.21 Fixed Charge Ratio.
(a) Westcon. Allow the ratio of the Fixed Charge Ratio of Westcon, on
a consolidated basis, to be less than the ratio set forth below tested quarterly
computed on a Trailing 12-Month Basis commencing on February 29, 2004.
Ratio Period
----- ------
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1.10 to 1.00 Quarter ending May 31, 2003
1.16 to 1.00 Quarter ending August 31, 2003
1.23 to 1.00 Quarter ending November 30, 2003
1.24 to 1.00 Quarter ending February 29, 2004
1.23 to 1.00 Quarter ending May 31, 2004
1.26 to 1.00 Quarter ending August 31, 2004
1.28 to 1.00 Quarter ending November 30, 2004
1.28 to 1.00 Quarter ending February 28, 2005
1.34 to 1.00 Quarter ending May 31, 2005 through the Quarter ending
November 30, 2005 and each Fiscal Quarter thereafter
1.35 to 1.00 Quarter ending February 28, 2006
(b) Westcon America. Allow the ratio of the Fixed Charge Ratio of
Westcon America, on a consolidated basis, to be less than the ratio set forth
below tested quarterly with EBITDA to be computed on a Trailing 12-Month Basis
commencing on February 29, 2004.
Ratio Period
----- ------
1.45 to 1.00 Quarter ending May 31, 2003
1.40 to 1.00 Quarter ending August 31, 2003
1.40 to 1.00 Quarter ending November 30, 2003
1.40 to 1.00 Quarter ending February 29, 2004
1.40 to 1.00 Quarter ending May 31, 2004
1.40 to 1.00 Quarter ending August 31, 2004
1.40 to 1.00 Quarter ending November 30, 2004
1.45 to 1.00 Quarter ending February 28, 2005
1.45 to 1.00 Quarter ending May 31, 2005
1.50 to 1.00 Quarter ending August 31, 2005 and each Fiscal Quarter
thereafter
9.22 Minimum Tangible Net Worth.
(a) Westcon. Allow Westcon's consolidated Tangible Net Worth to be
less than the amounts set forth below:
Amount Period
------ ------
$190,900,000.00 Quarter ending May 31, 2003
$192,900,000.00 Quarter ending August 31, 2003
$195,600,000.00 Quarter ending November 30, 2003
$198,900,000.00 Quarter ending February 29, 2004
$202,200,000.00 Quarter ending May 31, 2004
$205,600,000.00 Quarter ending August 31, 2004
$209,300,000.00 Quarter ending November 30, 2004
$212,900,000.00 Quarter ending February 28, 2005
$216,600,000.00 Quarter ending May 31, 2005
$220,500,000.00 Quarter ending August 31, 2005
$224,300,000.00 Quarter ending November 30, 2005
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$228,300,000.00 Quarter Ending February 28, 2006
(b) Westcon America. Allow Westcon America's consolidated Tangible Net
Worth to be less than the amounts set forth below:
Amount Period
------ ------
$148,000,000.00 Quarter ending May 31, 2003
$149,500,000.00 Quarter ending August 31, 2003
$151,400,000.00 Quarter ending November 30, 2003
$153,100,000.00 Quarter ending February 29, 2004
$154,600,000.00 Quarter ending May 31, 2004
$156,400,000.00 Quarter ending August 31, 2004
$158,300,000.00 Quarter ending November 30, 2004
$160,200,000.00 Quarter ending February 28, 2005
$162,100,000.00 Quarter ending May 31, 2005
$164,100,000.00 Quarter ending August 31, 2005
$166,100,000.00 Quarter ending November 30, 2005
$168,200,000.00 Quarter Ending February 28, 2006
ARTICLE 10. EVENTS OF DEFAULT
10.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an event of default (individually, "Event of
Default", or, collectively, "Events of Default"):
(a) Nonpayment. Nonpayment when due whether by acceleration or
otherwise of principal of, or interest on, any of the Notes, any fee, cost,
expense or premium provided for hereunder or under any other Loan Document or
any other Indebtedness owing hereunder or under any other Loan Document.
(b) Certain Covenants. Default by Westcon or either of the Borrowers
or any of the other Obligors in the observance of any of the covenants or
agreements by Westcon or such Borrowers or such Obligors contained in Articles
VI, VII or IX or Section 8.5 of this Agreement.
(c) Other Covenants. Default by Westcon or either of the Borrowers or
any of the other Obligors in the observance of any of the covenants or
agreements by Westcon or such Borrowers or such Obligors contained in this
Agreement, other than in Articles VI, VII or IX or Section 8.5, which is not
remedied within fifteen (15) days after the occurrence thereof.
(d) Voluntary Insolvency Proceedings. If Westcon or either of the
Borrowers or any of their Subsidiaries: (i) shall file a petition, application
or request for or notice of intention in connection with liquidation,
reorganization, arrangement, adjudication as a bankrupt, relief as a debtor or
other relief under the bankruptcy, insolvency or similar laws of the United
States of America or Canada or any state or territory thereof or any other
foreign jurisdiction, now or hereafter in effect; (ii) shall make a general
assignment for the benefit of creditors; (iii) shall consent to the appointment
of an interim receiver, receiver, receiver or manager or trustee for Westcon,
such Borrower or such Subsidiary or any of such Person's assets including,
without
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limitation, the appointment of or taking possession by a "custodian" as defined
in the federal Bankruptcy Code; (iv) shall make any, or send notice of any bulk
sale; or (v) shall execute a consent to any other type of insolvency proceeding
(under the Bankruptcy Code or any other insolvency or bankruptcy laws) or any
formal or informal proceeding for the dissolution or liquidation of, or
settlement or compromise of claims against or winding up of affairs of, Westcon,
such Borrower or any of their Subsidiaries. Notwithstanding the foregoing,
Westcon may dissolve or liquidate, in an orderly fashion, those Unrestricted
Subsidiaries set forth on Schedule 10.1(d).
(e) Involuntary Insolvency Proceedings. The appointment of an interim
receiver, receiver, receiver and manager, trustee, custodian or officer
performing similar functions for Westcon, any Borrower or any of their
Subsidiaries or any of such Person's assets including, without limitation, the
appointment of or taking possession by a "custodian" as defined in the federal
Bankruptcy Code; or the filing against Westcon, such Borrower or such Subsidiary
of a request, application or petition for or notice of intention in connection
with liquidation, reorganization, arrangement, adjudication as a bankrupt or
other relief under the bankruptcy, insolvency or similar laws of the United
States of America or Canada or any other insolvency or bankruptcy laws, now or
hereafter in effect; or the institution against Westcon, such Borrower or such
Subsidiary of any other type of insolvency proceeding (under the federal
Bankruptcy Code or otherwise) or of any formal or informal proceeding for the
dissolution or liquidation of, settlement of claims against or winding up of
affairs of Westcon, such Borrower or such Subsidiary, and the failure to have
such appointment vacated or such petition or proceeding dismissed within thirty
(30) days after such appointment, filing or institution.
(f) Representations. If any certificate, written statement,
representation, warranty or financial statement furnished by or on behalf of
Westcon or either Borrower or any other Obligor under, pursuant to or in
connection with this Agreement or any other Loan Document (including, without
limitation, representations and warranties contained herein) or as an inducement
to Agents, Lenders and L/C Issuer to enter into this Agreement, any other Loan
Document or any other lending agreement with Westcon or such Borrower or such
other Obligor shall prove to have been false in any respect at the time as of
which the facts therein set forth were certified, or to have omitted any
substantial contingent or unliquidated liability or claim against Westcon or
such Borrower or such other Obligor.
(g) Other Indebtedness and Agreements. Nonpayment by Westcon or either
Borrower of any Obligations owing by Westcon or either Borrower when due,
whether such Obligations shall become due by scheduled maturity, by required
prepayment, by acceleration, by demand or otherwise, or failure to perform any
term, covenant or agreement on such Person's part to be performed under any
agreement or instrument (other than this Agreement) evidencing or securing or
relating to any Obligations owing by Westcon or either Borrower when required to
be performed if the effect of such failure is to permit the holder(s) (or agent
or trustee for such holder(s)) to accelerate the maturity of such Obligations,
except for Obligations which individually and in the aggregate do not exceed
$1,000,000.00.
(h) Judgments. If any judgment or judgments in excess of $1,000,000.00
for any one such judgment or all judgments in the aggregate (other than any
judgment for which it is fully insured and for which the insurer has
acknowledged full and unconditional coverage in
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writing) against Westcon, either Borrower or any other Obligor, remains unpaid,
unstayed on appeal, undischarged, unbonded or undismissed for a period of thirty
(30) days.
(i) Pension Default. Any Reportable Event which the American
Collateral Agent determines in good faith constitutes grounds for the
termination of any Pension Plan by the Pension Benefit Guaranty Corporation or
for the appointment by an appropriate United States district court of a trustee
to administer any Pension Plan shall have occurred and be continuing; or the
Pension Benefit Guaranty Corporation shall institute proceedings to terminate
any Pension Plan or to appoint a trustee to administer any Pension Plan; or a
trustee shall be appointed by an appropriate United States district court to
administer any Pension Plan; or any Pension Plan shall be terminated; or Westcon
or either Borrower or any Subsidiary withdraws from a Pension Plan in a complete
withdrawal or a partial withdrawal; or there shall arise vested unfunded
liabilities under any Pension Plan in excess of $750,000 or Westcon or either
Borrower or any Subsidiary shall fail to pay to any Pension Plan any
contribution which it is obligated to pay under the terms of such plan or any
agreement, or which is required to meet statutory minimum funding standards.
(j) Collateral Impairment. There shall occur with respect to the
Collateral any (i) misappropriation, conversion, diversion, or fraud, (ii) levy,
seizure, or attachment or (iii) loss, theft, or damage, which impact in the case
of (i), (ii) and/or (iii), individually or in the aggregate, exceeds $150,000.
(k) Insecurity; Change. Either Collateral Agent shall reasonably
believe that the prospect of payment of all, or any part, of the Indebtedness or
performance of Westcon's or either Borrower's or any other Obligor's obligations
under the Loan Documents or any other agreement among or between any of the
Agents, the Lenders, the L/C Issuers and Westcon and/or the Borrowers and/or
other Obligors is impaired; or there shall occur or could occur any Material
Adverse Effect with respect to Westcon or the Borrowers.
(l) Challenge to Validity. Westcon, either Borrower or any other
Obligor commences any action or proceeding to contest the validity or
enforceability of any Loan Document or any lien or security interest or other
lien granted or obligations arising under or evidenced by any Loan Document.
(m) Termination. Any Obligor terminates or attempts to terminate, in
accordance with its terms or otherwise, any Guaranty or other Loan Document
executed by such Obligor.
(n) Other Agreements. A default by Datatec in complying with the terms
of the Subordination Agreement or a default by any Obligor under any Loan
Document to which such Obligor is a party, including without limitation, any
Guaranty, or the termination of any Loan Document by any Obligor, or the
occurrence with respect to any Obligor of an insolvency proceeding of the type
specified in Section 10.1(d) and (e) hereof.
(o) Change of Control. In the event Westcon no longer owns all of the
capital stock of Borrowers and its other North American Subsidiaries or
Borrowers no longer all of the capital stock of their respective Subsidiaries,
or there is a change in the occupation of a majority
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of the seats on any of their respective Boards of Directors or management
committees by Persons who are neither nominated by the Boards of Directors or
management committees on the date hereof or appointed by a Board of Directors or
management committees so nominated or there is a change in the ownership of more
than twenty percent (20%) of the common stock or any other capital stock of
Westcon.
(p) Non-perfection or Loss of Priority. If at any time, any of the
Collateral Documents shall cease to be in effect, or if any security interest in
favor of either Collateral Agent, in the case of the American Collateral Agent,
for the benefit of the American Lenders, American Collateral Agent, Canadian
Lenders and Canadian Collateral Agent, and in the case of the Canadian
Collateral Agent, for the benefit of the Canadian Lenders and Canadian
Collateral Agent, in any portion of the Collateral shall cease to be enforceable
or cease to have a first-priority Lien position, or if title to any Collateral
is not satisfactory to the applicable Collateral Agent by reason of any
unpermitted Lien or title condition.
10.2 Effects of an Event of Default.
(a) Upon the happening of one or more Events of Default (except a
default under either Section 10.1(d) or 10.1(e) hereof), the Collateral Agents
may, or at the direction of the Required Lenders, shall declare any commitments
of the Lenders to lend money to any of the Borrowers or the commitment for the
L/C Issuers to issue Letters of Credit for the account of the Borrowers
(collectively, the "Lenders' Obligations") to be canceled and the principal of
all of the Notes then outstanding to be immediately due and payable, together
with all interest thereon and fees and expenses accruing under this Agreement
and under any other Loan Document. Upon such declaration, the Lenders'
obligations shall be immediately canceled and the Loans evidenced by the Notes
shall become immediately due and payable without presentation, demand or further
notice of any kind to the Borrowers.
(b) Upon the happening of one or more Events of Default under Section
10.1(d) or 10.1(e) hereof, the Lenders' Obligations shall be canceled
immediately, automatically and without notice, and all of the Notes shall become
immediately due and payable without presentation, demand or notice of any kind
to either of the Borrowers.
(c) Upon the happening of any Event of Default, the Collateral Agents
may, and shall upon the request of the Required Lenders, exercise such rights
and remedies specified under this Agreement, the Notes and the other Loan
Documents or under the Uniform Commercial Code or other applicable law which the
Collateral Agents deem appropriate under the circumstances in order to enforce
such agreements, instruments and documents.
(d) Upon the happening of any Event of Default, the Collateral Agents
may, and upon the request of the Required Lenders shall, require Borrowers to
provide to the Collateral Agents with cash collateral in an amount equal to 110%
of the face amount of all issued and unexpired Letters of Credit available for
drawings.
10.3 Remedies.
(a) Rights Under Uniform Commercial Code. Upon the occurrence and
during the continuance of any Event of Default or upon any termination of this
Agreement as a
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result of an Event of Default, then the Collateral Agents shall have, in
addition to all of their other rights under this Agreement, the other Loan
Documents or otherwise (which rights shall be cumulative), all of the rights and
remedies of a secured party under the New York Uniform Commercial Code and shall
have the right to enter upon any premises where the Collateral is kept and
peacefully retake possession thereof. Upon the occurrence and during the
continuance of an Event of Default, the applicable Collateral Agent may, without
demand, advertising or notice all of which Westcon and each Borrower and each
other Obligor hereby waives (except as the same may be required by law), sell,
lease, dispose of, deliver and grant options to a third party to purchase, lease
or otherwise dispose of any and all Receivables, General Intangibles, Inventory,
Equipment, Investment Property or other security or Collateral held by it or for
its account at any time or times in one or more public or private sales or other
dispositions, for cash, on credit or otherwise, as such prices and upon such
terms as such Collateral Agent, in its sole discretion, deems advisable. Notice
of any public sale shall be sufficient if it describes the security or
collateral to be sold in general terms, stating the amounts thereof, the nature
of the business in which such collateral was created and the location and nature
of the properties covered by the other security interests or mortgages and the
prior liens thereon, and is published at least once in The Wall Street Journal
or a suitable local area newspaper of general circulation not less than ten (10)
days prior to the date of sale. Without requiring notice to Westcon or either of
Borrowers or any other Obligor, all requirements of reasonable notice under this
Section shall be met if such notice is mailed, postage prepaid, to the
applicable Borrower at the address set forth herein for such entity, at least
ten (10) days before the time of such sale or disposition. The applicable
Collateral Agent may postpone or adjourn any sale of any Collateral from time to
time by an announcement at the time and place of the sale to be so postponed or
adjourned without being required to give a new notice of sale; provided,
however, that the applicable Collateral Agent shall provide the applicable
Borrower with written notice of the time and place of such postponed or
adjourned sale. Any of the Agents or the Lenders, as the case may be, may be the
purchaser at any such sale if it is public, and payment may be made, in whole or
in part, in respect of such purchase price by the application of Indebtedness
due from the applicable Borrower to the Lenders or the Collateral Agents. The
applicable Borrower shall be obligated for, and the proceeds of sale shall be
applied first to, the costs of retaking, refurbishing, storing, guarding,
insuring, preparing for sale, and selling the Collateral, including the fees and
expenses of attorneys, auctioneers, appraisers and accountants employed by a
Collateral Agent. Proceeds shall then be applied to the payment in whatever
order the applicable Collateral Agent may elect, of all Indebtedness of
Borrowers under the Loan Documents. The applicable Collateral Agent shall return
any excess to the applicable Borrower and Borrowers shall remain liable for any
deficiency.
(b) Waiver of Rights by Borrowers. Westcon and each Borrower and each
other Obligor waives, to the extent permitted by law, any bonds, security or
sureties required by any statute, rule or otherwise by law as an incident to any
taking of possession by a Collateral Agent of property subject to the Lien in
favor a Collateral Agent or any of the Lenders. Upon the occurrence and during
the continuance of an Event of Default, Westcon, each Borrower and each other
Obligor also consents that either Collateral Agent may enter upon any premises
owned by or leased to it without obligation to pay rent or for use and
occupancy, through self help, without judicial process and without having first
given notice to it or obtained an order of any court. These waivers and all
other waivers provided for in this Agreement and any other agreements or
instruments executed in connection herewith have been negotiated by the parties.
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Westcon and each Borrower and each other Obligor acknowledge that they have been
represented by counsel of their own choice and have consulted such counsel with
respect to their rights hereunder.
(c) Collateral Agents' Rights. Westcon and each Borrower and each
other Obligor agrees that no Collateral Agent shall have any obligation to
preserve rights to any Collateral against prior parties or to marshal any
Collateral of any kind for the benefit of any other creditor of Westcon or such
Borrower or any other Obligor or any other Person. After the occurrence and
during the continuance of an Event of Default, each Collateral Agent is hereby
granted a license or other right to use, without charge, Westcon's or either
Borrowers' or any other Obligor's labels, patents, copyrights, designs, rights
of use of any name, trade secrets, trade names, trademarks and advertising
matter, or any property of a similar nature, in completing production of,
advertising for sale, and selling any Collateral and Westcon's or either
Borrower's or any other Obligor's rights under all licenses and any franchise,
sales or distribution agreements shall inure to each Collateral Agent's benefit
for such purpose.
ARTICLE 11. EXPENSES
11.1 Expenses.
(a) The Borrowers shall promptly pay all the costs and expenses
hereunder as set forth herein, including, without limitation, in Article VII
hereof; provided that Westcon Canada shall not make any payment with respect to
any Indebtedness other than Indebtedness of Westcon Canada.
(b) If after receipt of any payment of all, or any part of, the
Indebtedness, any of the Agents, any L/C Issuer or any Lender is, for any
reason, compelled to surrender such payment to any person or entity because such
payment is determined to be void or voidable as a preference, an impermissible
setoff, or a diversion of trust funds, or for any other reason, the Loan
Documents shall continue in full force and Borrowers shall be liable, and shall
indemnify and hold the Agents, L/C Issuers and any Lenders, as the case may be,
harmless for, the amount of such payment surrendered. The provisions of this
Section shall be and remain effective notwithstanding any contrary action which
may have been taken by the Agents, L/C Issuers or any Lender in reliance upon
such payment, and any such contrary action so taken shall be without prejudice
to the Agents', L/C Issuers', or any Lender's rights under the Loan Documents
and shall be deemed to have been conditioned upon such payment having become
final and irrevocable. The provisions of this Section 11.1 (b) shall survive the
termination of this Agreement and the Loan Documents.
(c) Westcon America agrees, and with respect to any obligations of
Westcon Canada to the Canadian Collateral Agent and the Canadian Lenders,
Westcon Canada agrees to indemnify, defend, and hold harmless each of the
Agents, each of the L/C Issuers and each Lender from, and against, any and all
liabilities, claims, damages, penalties, expenditures, losses, or charges,
including, but not limited to, all costs of investigation, monitoring, legal
representations, remedial response, removal, restoration, or permit
acquisition, which may now, or in the future, be undertaken, suffered, paid,
awarded, assessed, or otherwise incurred by any of the Agents, any of the L/C
Issuers or any Lender or any other person or entity as a result
95
of the presence of, Release of, or threatened Release of Hazardous Substances
on, in, under, or near the property owned, leased, or operated by Westcon, any
Borrower or any Subsidiary. The liability of Borrowers under the covenants of
this Section 11.1 (c) is not limited by any exculpatory provisions in this
Agreement or any other documents securing the Indebtedness and shall survive
repayment of the Indebtedness or any transfer or termination of this Agreement
regardless of the means of such transfer or termination. Borrowers agree that
each of the Agents, each of the L/C Issuers and each Lender shall not be liable
in any way for the completeness or accuracy of any Environmental Report or the
information contained therein. Borrowers further agree that neither any of the
Agents, any of the L/C Issuers or any Lender has any duty to warn Westcon,
either Borrower, any Subsidiary or any other Person about any actual or
potential environmental contamination or other problem that may have become
apparent, or will become apparent, to such Agent, L/C Issuer or Lender.
(d) Westcon America agrees, and with respect to any obligations of
Westcon Canada to the Canadian Collateral Agent and the Canadian Lenders,
Westcon Canada agrees to pay, indemnify, and hold each of the Agents, each of
the L/C Issuers and each of the Lenders (each an "Indemnified Party") harmless
from, and against, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, or disbursements of any
kind or nature whatsoever (including, without limitation, counsel and special
counsel fees and disbursements in connection with any litigation, investigation,
hearing, or other proceeding) with respect, or in any way related, to the
existence, execution, delivery, enforcement, performance, and administration of
or otherwise related in any way to this Agreement or any other Loan Document,
except in the case of such Indemnified Party's gross negligence or willful
misconduct as determined by a final, non-appealable determination of a court of
competent jurisdiction (all of the foregoing, collectively, the "Indemnified
Liabilities"). The agreements in this Section 11.1 (d) shall survive repayment
of the Indebtedness.
ARTICLE 12. THE AGENT
12.1 Appointment, Powers and Immunities. Each Lender irrevocably
designates, appoints and authorizes: (a) HSBC to act as Arranger hereunder and
under the other Loan Documents; and (b) GE Capital to act as American Collateral
Agent hereunder and under the other Loan Documents; and (c) GE Capital Canada to
act as Canadian Collateral Agent hereunder and under the other Loan Documents,
in each case, with such powers as are specifically delegated to them by the
terms of this Agreement and of the other Loan Documents, together with such
other powers as are reasonably incidental thereto, including, without
limitation, the power to execute and/or file financing or similar statements or
notices and other related documents relating to the transactions contemplated by
the Loan Documents. None of the Agents (a) shall have any duties or
responsibilities except those expressly set forth in this Agreement and in the
other Loan Documents, or shall by reason of this Agreement or any other Loan
Documents be a trustee or fiduciary for any Lender; (b) shall be responsible in
any way to any Agent or any Lender for any recitals, statements, representations
or warranties contained in this Agreement or in any of the other Loan Documents,
or in any certificate or other document referred to or provided for in, or
received by any of them under, this Agreement or any other Loan Documents, or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Documents or any other document
referred to or provided for herein or therein or for any failure by Westcon or
either Borrower or any other
96
Obligor or any other Person to perform any of its obligations hereunder or
thereunder; and (c) shall be responsible in any way to any Lender for any action
taken or omitted to be taken by it hereunder or under any other Loan Documents
or under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except in the event of such
individual Agent's own gross negligence or willful misconduct, as determined by
a final non-appealable judgment of a court of competent jurisdiction. Each of
the Agents may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith. In administering the Letters of Credit, a L/C
Issuer shall not be under any liability to any Lender, except for such L/C
Issuer's own gross negligence or willful misconduct, as determined by a final
non-applicable decision of a court of competent jurisdiction or as set forth in
Article II hereof.
12.2 No Other Duties. None of the Agents shall have any duties or
obligations other than those expressly provided for in this Agreement and the
Loan Documents, and none of the Agents, nor any of their directors, officers,
employees, attorneys, representatives or agents, shall be liable for any action
taken or omitted to be taken in connection with this Agreement, the Loan
Documents, and other documents related thereto, the negotiation, preparation or
execution thereof, or in connection with the syndication, implementation or
administration of the Loans or the Loan Documents. The duties of each of the
Agents shall be mechanical and administrative in nature; and nothing in this
Agreement or the Loan Documents, expressed or implied, is intended or shall be
construed to impose upon the any of the Agents any obligations in respect of
this Agreement or any document in connection herewith or the Loan Documents
except as expressly set forth herein, in such documents and this Agreement.
12.3 Waiver of Liability of Agents and L/C Issuer. None of the Agents or
L/C Issuers shall have any liability or, as the case may be, any duty or
obligation:
(a) To Westcon or either Borrower or any other Obligor on account for
any failure of any Lender to perform, or the delay of any Lender in the
performance of, any of its respective obligations under this Agreement or any of
the Loan Documents or any of the other documents in connection herewith;
(b) To any Lender on account of any failure or delay in performance by
Westcon or either of the Borrowers, or any other Obligor or any of their
Subsidiaries, or any other Lender of any of their respective obligations under
this Agreement or any of the Loan Documents or any of the other documents in
connection herewith;
(c) To any Lender for (i) the accuracy of any written or oral
statements furnished or made by Westcon or a Borrower or another Obligor, or by
any other Person (including an Agent or L/C Issuer) on behalf of Westcon or the
Borrowers or any Obligor in connection with the Loans, (ii) the accuracy of any
representation, warranty or statement made by Westcon or either Borrower, or
any other Obligor or any Affiliate or Subsidiary pursuant to this Agreement or
any of the Loan Documents or any of the other documents in connection herewith,
or (iii) the legality, validity, effectiveness, enforceability or sufficiency of
this Agreement or any of the other Loan Documents or any other document in
connection herewith, or any other document referred to herein;
97
(d) To any Lender to provide either initially or on a continuing basis
any information with respect to Westcon or either Borrower or any other Obligor
or any of their Affiliates or Subsidiaries or their respective condition, or for
analyzing or assessing or omitting to analyze or assess the status,
creditworthiness or prospects of Westcon or either Borrower or any other
Obligor, or any of their Affiliates or Subsidiaries or any of the Collateral;
(e) To any Lender to investigate whether or not any default or Event
of Default or Incipient Default has occurred (and each Agent may assume that,
until such Agent shall have received notice from Westcon or a Borrower, to the
contrary, no such default or Event of Default or Incipient Default has
occurred);
(f) To any Lender to account for any sum or profit or any property of
any kind received by any of the Agents or L/C Issuers arising out of any present
or future financial or other relationship with Westcon or either Borrower or any
other Obligor or with any other Person, except the relationship established
pursuant to this Agreement and the Loan Documents;
(g) To any Lender to disclose to any Person any information relating
to Westcon or either Borrower or any other Obligor or any of their Affiliates or
Subsidiaries received by any of the Agents or L/C Issuers, if in such individual
Agent's or L/C Issuer's, as the case may be, determination (such determination
to be conclusive), such disclosure would or might constitute a breach of any law
or regulation or be otherwise actionable by suit against such Agent or L/C
Issuer by Westcon or a Borrower or another Obligor or any other Person;
(h) To take any action or refrain from taking any action other than as
expressly required by this Agreement and the Loan Documents; and
(i) To commence any legal action or proceeding arising out of or in
connection with this Agreement or the Loan Documents or the Collateral Documents
until each of the Agents and L/C Issuers, shall have been indemnified to such
Agent's or L/C Issuer's satisfaction against any and all costs, claims and
expenses (including, but not limited to, attorneys' fees and expenses) in
respect of such legal action or proceeding.
12.4 Reliance by Agents. Each of the Agents shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by any of them to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by them. As to any matters
not expressly provided for by this Agreement or any other Loan Document, each of
the Agents shall in all cases be fully protected in acting, or in refraining
from acting, hereunder or thereunder in accordance with instructions given by
the Required Lenders, Required American Lenders, Required Canadian Lenders or
all Lenders as is required in such circumstance, and such instructions of such
appropriate Lenders and any action taken or failure to act pursuant thereto
shall be binding on all Lenders.
12.5 Events of Default.
(a) None of the Agents shall be deemed to have knowledge or notice of
the occurrence of an Incipient Default or an Event of Default or other failure
of a condition
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precedent to the Loans or issuance of a Letter of Credit hereunder, unless and
until such Agent has received written notice from Westcon or a Borrower
specifying an Event of Default or any unfulfilled condition precedent, and
stating that such notice is a "notice of an Event of Default or failure of a
condition." The American Collateral Agent shall take such action with respect to
any such Event of Default or failure of condition precedent as shall be directed
by the Required American Lenders; provided, that, unless and until the American
Collateral Agent shall have received such directions, American Collateral Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to or by reason of such Event of Default or failure of
condition precedent, as it shall deem advisable, as applicable, in the best
interest of the American Lenders. The Canadian Collateral Agent shall take such
action with respect to any such Event of Default or failure of condition
precedent as shall be directed by the Required Canadian Lenders; provided, that,
unless and until the Canadian Collateral Agent shall have received such
directions, Canadian Collateral Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to or by reason of
such Event of Default or failure of condition precedent, as it shall deem
advisable, as applicable, in the best interest of the Canadian Lenders. Without
limiting the foregoing, and notwithstanding the existence or occurrence and
continuance of an Event of Default or any other failure to satisfy any of the
conditions precedent set forth in Articles III of this Agreement to the
contrary, the applicable Collateral Agent may, but shall have no obligation to,
continue to make Loans or cause to be issued Letters of Credit for the ratable
account of the applicable Lenders from time to time until such time as the
applicable Required Lenders direct the applicable Collateral Agent in writing to
no longer do so.
(b) Each Collateral Agent shall be entitled at its option, to refrain
from such action or taking such action with respect to any Event of Default or
failure of a condition unless and until such Collateral Agent shall have
received instructions from all of the Lenders or the Required Lenders, as the
case may be; and Collateral Agent shall not incur liability to any Person by
reason of so refraining. Each Collateral Agent shall be fully justified in
failing or refusing to take any action hereunder or under this Agreement, the
other Loan Documents, or any document related thereto (i) if such action would,
in the opinion of such Collateral Agent, be contrary to law or the terms of this
Agreement, the Loan Documents, or any document related thereto, (ii) if it shall
not receive such advice or concurrence, if any, of all of the Lenders or the
Required Lenders or the Required American Lenders or the Required Canadian
Lenders, as the case may be, as it deems appropriate, or (iii) if it shall not
first be indemnified to its satisfaction against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. Without limiting the foregoing, no Lender shall have any right
of action whatsoever against either Collateral Agent as a result of either
Collateral Agent acting or refraining from acting hereunder, under the Loan
Documents, or under any document related thereto.
(c) Each Collateral Agent and L/C Issuer may without liability to
Westcon or either Borrower or any other Obligor, or any Lender, (i) rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telephone notice, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the Person or Persons by whom it purports to have been
communicated or signed and (ii) employ in such Collateral Agent's or L/C
Issuer's sole discretion and rely on the advice and
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opinions received by it from any professional adviser, including, without
limitation, legal counsel, independent accountants, appraisers or other experts,
whether or not such professional adviser was selected by a Collateral Agent or
L/C Issuer, and Westcon, the Borrowers, the other Obligors and each Lender
hereby waives any claim or action it may have against any Collateral Agent or
L/C Issuer arising out of or resulting from such employment or reliance.
(d) (i) U.S. Except as provided in Article VII of this Agreement, all
moneys realized by the American Collateral Agent from any payment or other
recovery from Westcon, Westcon America or any Subsidiary from any Collateral or
under any of the Loan Documents or otherwise shall be distributed and applied by
the American Collateral Agent to the American Lenders against the following in
the following priority: first, to costs and expenses of the American Collateral
Agent, the American L/C Issuer or any American Lender which are reimbursable by
Westcon or Westcon America or any Subsidiary pursuant to this Agreement, the
Notes and any other Loan Document; second, to interest on the American Notes and
fees payable to the American Lenders and the American Collateral Agent and the
L/C Issuer pursuant to this Agreement; third, to the unpaid principal balances
of the American Notes; and fourth, to cash collateralize 110% of the aggregate
then outstanding American Letters of Credit. After all Indebtedness and other
amounts owing to American Lenders, American Collateral Agent and American L/C
Issuer have been so indefeasibly repaid in full or cash collateralized as
provided above, all remaining moneys shall be applied by the American Collateral
to repay the Canadian Indebtedness based on the same order of application of
priority. Thereafter, remaining moneys, if any, shall be paid to such other
Person as is entitled thereto. If any payments and/or recoveries applied from
time to time are not sufficient to pay in full all items described in one of the
above levels of priority, such payments and/or recoveries will be distributed
and shared ratably by the American Lenders and the American Collateral Agent,
and the American L/C Issuer based on the aggregate of such items in such level
of priority owed to American Lenders and the American Collateral Agent and the
American L/C Issuer. The American Collateral Agent and the American L/C Issuer
are authorized to deduct from the portion of any such payments or recoveries to
be distributed to an American Lender the amount of any payment due from such
Lender to the American Collateral Agent or the American L/C Issuer as Letter of
Credit issuer and to retain for itself, as appropriate, the amount so deducted.
(ii) Canada. Except as provided in Article VII of this Agreement,
all moneys realized by the Canadian Collateral Agent from any payment or other
recovery from Westcon Canada or any Canadian Subsidiary from any Collateral or
under any of the Loan Documents or otherwise shall be distributed and applied by
the Canadian Collateral Agent to the Canadian Lenders against the following in
the following priority: first, to costs and expenses of the Canadian Collateral
Agent, the Canadian L/C Issuer or any Canadian Lender which are reimbursable by
Westcon Canada or any Canadian Subsidiary pursuant to this Agreement, the Notes
and any other Loan Document; second, to interest on the Canadian Notes and fees
payable to the Canadian Lenders and the Canadian Collateral Agent and the
Canadian L/C Issuer pursuant to this Agreement; third, to the unpaid principal
balances of the Canadian Notes; and fourth, to cash collateralize 110% of the
aggregate then outstanding Canadian Letters of Credit. Thereafter, remaining
moneys, if any, shall be paid over to such other Person as is entitled thereto.
If any payments and/or recoveries applied from time to time are not sufficient
to pay in full all items described in one of the above levels of priority, such
payments and/or recoveries will be distributed and shared ratably by the
Canadian Lenders and the Canadian Collateral
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Agent and the Canadian L/C Issuer based on the aggregate of such items in such
level of priority owed to the Lenders and the Canadian Collateral Agent and the
Canadian L/C Issuer. The Canadian Collateral Agent and the Canadian L/C Issuer
are authorized to deduct from the portion of any such payments or recoveries to
be distributed to a Canadian Lender the amount of any payment due from such
Canadian Lender to the Canadian Collateral Agent or the Canadian L/C Issuer as
Letter of Credit issuer and to retain for itself, as appropriate, the amount so
deducted.
(e) Except with the prior written consent of the Collateral Agents, no
Lender may assert or exercise any enforcement right or remedy or right of set
off in respect of the Loans, Letters of Credit or other Indebtedness, as against
Westcon, any Borrower or any other Obligor or any of the Collateral or other
property of Westcon, any Borrower or any other Obligor.
12.6 Agents in their Individual Capacity.
(a) With respect to its Commitment and the Loans made and, in the case
of the L/C Issuers, Letters of Credit issued or caused to be issued by it (and
any successor acting as an Agent), so long as any Agent shall be a Lender
hereunder, they shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though they were not acting as Agents, and
the term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include HSBC, HSBC Canada, GE Capital, GE Capital Canada, LaSalle Business
Credit, LLC and ABN AMRO Bank, N.V. in their individual capacity as Lenders
hereunder. HSBC, GE Capital and LaSalle Business Credit LLC (and any successor
acting as Agents) and their respective Affiliates may (without having to account
therefor to any Lender) accept deposits from, lend money to, make investments in
and generally engage in any kind of business with Westcon America, including,
without limitation, entering into any Swap Agreement as if they were not acting
as Agents, and HSBC, GE Capital and LaSalle Business Credit, LLC and their
Affiliates may accept fees and other consideration from Westcon America for
services in connection with this Agreement or otherwise without having to
account for the same to Lenders. HSBC Canada, GE Capital Canada and ABN AMRO
Bank, N.V. (and any successor acting as Agents) and their respective Affiliates
may (without having to account therefor to any Lender) accept deposits from,
lend money to, make investments in and generally engage in any kind of business
with Westcon Canada, including, without limitation, entering into any Swap
Agreement as if they were not acting as Agents, and HSBC Canada, GE Capital
Canada and ABN AMRO Bank N.V. and their Affiliates may accept fees and other
consideration from Westcon Canada, for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
12.7 Indemnification.
(a) The American Lenders agree to indemnify each American Collateral
Agent and HSBC in its capacity as American L/C Issuer (to the extent not
reimbursed by Westcon America hereunder and without limiting any obligations of
Westcon America hereunder) as well as their respective affiliates, subsidiaries
or respective directors, officers, employees, counsel, representatives or agents
ratably, in accordance with such Lender's respective American Percentage, and
the Canadian Lenders agree to indemnify each of Canadian Collateral Agent and
HSBC Canada in its capacity as Canadian L/C Issuer (to the extent not reimbursed
by Westcon Canada hereunder and without limiting any obligations of Westcon
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Canada hereunder) as well as their respective affiliates, subsidiaries or
respective directors, officers, employees, counsel or agents ratably, in
accordance with such Lender's respective Canadian Percentage, for any and all
claims of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the applicable Collateral Agent (including by any Lender)
arising out of or by reason of any investigation in or in any way relating to or
arising out of this Agreement or any other Loan Document or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses (including,
without limitation, attorneys fees and expenses) that any of the applicable
Collateral Agent or the applicable L/C Issuer are obligated to pay hereunder) or
the enforcement of any of the terms hereof or thereof or of any such other
documents, provided, that, no Lender shall be liable for any of the foregoing to
the extent it arises from the gross negligence or willful misconduct of the
party to be indemnified as determined by a final non-appealable judgment of a
court of competent jurisdiction. The foregoing indemnity shall survive the
payment of the Indebtedness and the termination or non-renewal of this
Agreement.
12.8 Non-Reliance on Agents and Other Lenders. Each Lender agrees that
it has, independently and without reliance on any of the Agents, any of the L/C
Issuers or any other Lenders, and based on such documents and information as it
has deemed appropriate, made its own credit analysis of the Borrowers, Westcon
and any other Obligors and has made its own decision to enter into this
Agreement and that it will, independently and without reliance upon any of the
Agents, any of the L/C Issuers or any other Lenders, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement
or any of the other Loan Documents. Neither any Agent nor any L/C Issuer shall
be required to keep itself informed as to the performance or observance by any
Borrower, Westcon, or any other Obligor of any term or provision of this
Agreement or any of the other Loan Documents or any other document referred to
or provided for herein or therein or to inspect the properties or books of any
Borrower, Westcon or any other Obligor.
12.9 Failure to Act. Each Agent shall in all cases be fully justified in
failing or refusing to act hereunder and under the other Loan Documents unless
it shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.7 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
12.10 Concerning the Collateral and the Related Financing Agreements.
(a) Each American Lender authorizes and directs the American
Collateral Agent and the American L/C Issuer to enter into this Agreement and
the other Loan Documents. Each American Lender agrees that any action taken by
the American Collateral Agent and the American L/C Issuer or Required American
Lenders or Required Lenders, as may be provided in this Agreement, in
accordance with the terms of this Agreement or the other Loan Documents and the
exercise by the American Collateral Agent and the American L/C Issuer or
Required American Lenders or Required Lenders of their respective powers set
forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the American Lenders.
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(b) Each Canadian Lender authorizes and directs the Canadian
Collateral Agent and the Canadian L/C Issuer to enter into this Agreement and
the other Loan Documents. Each Canadian Lender agrees that any action taken by
the Canadian Collateral Agent and the Canadian L/C Issuer or Required Canadian
Lenders or Required Lenders, as may be provided in this Agreement, in accordance
with the terms of this Agreement or the other Loan Documents and the exercise by
the Canadian Collateral Agent and the Canadian L/C Issuer or Required Canadian
Lenders or Required Lenders of their respective powers set forth therein or
herein, together with such other powers that are reasonably incidental thereto,
shall be binding upon all of the Canadian Lenders.
12.11 Field Audit, Examination Reports and other Information; Disclaimer
by Lenders.
(a) By signing this Agreement, each American Lender:
(i) is deemed to have requested that American Collateral Agent
furnish to such American Lender, promptly after it becomes available, a copy of
each field audit or examination report and a monthly report with respect to the
Borrowing Capacity (Westcon America), including, without limitation, a copy of
the applicable Borrowing Capacity Certificate prepared by American Collateral
Agent and/or Westcon America (each field audit or examination report and monthly
report with respect to the Borrowing Capacity (Westcon America) being referred
to herein as an "American Report" and collectively, "American Reports");
(ii) expressly agrees and acknowledges that American Collateral
Agent (i) does not make any representation or warranty as to the accuracy of any
American Report, or (ii) shall not be liable for any information contained in
any American Report; and
(iii) expressly agrees and acknowledges that the American Reports
are not comprehensive audits or examinations, that American Collateral Agent or
any other party performing any audit or examination will inspect only specific
information regarding Westcon America and will rely significantly upon Westcon
America's books and records, as well as on representations of Westcon America's
personnel.
(b) By signing this Agreement, each Canadian Lender:
(i) is deemed to have requested that Canadian Collateral Agent
furnish to such Canadian Lender, promptly after it becomes available, a copy of
each field audit or examination report and a monthly report with respect to the
Borrowing Capacity (Westcon Canada), including, without limitation, a copy of
the applicable Borrowing Capacity Certificate prepared by Canadian Collateral
Agent and/or Westcon Canada (each field audit or examination report and monthly
report with respect to the Borrowing Capacity (Westcon Canada) being referred to
herein as a "Canadian Report" and collectively, "Canadian Reports");
(ii) expressly agrees and acknowledges that Canadian Collateral
Agent (i) does not make any representation or warranty as to the accuracy of any
Canadian Report, or (ii) shall not be liable for any information contained in
any Canadian Report; and
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(iii) expressly agrees and acknowledges that the Canadian Reports
are not comprehensive audits or examinations, that Canadian Collateral Agent or
any other party performing any audit or examination will inspect only specific
information regarding Westcon Canada and will rely significantly upon Westcon
Canada's books and records, as well as on representations of Westcon Canada's
personnel.
12.12 American Collateral Agent's Rights in Collateral.
(a) American Lenders hereby irrevocably authorize American Collateral
Agent, at its option and in its discretion to release any security interest in,
mortgage or lien upon, any of the Collateral owned by Westcon America (i) upon
termination of the American Commitments and payment and satisfaction of all of
the Indebtedness, or (ii) constituting property being sold or disposed of if
Westcon America certifies to American Collateral Agent that the sale or
disposition is made as contemplated in Section 7.3 hereof (and American
Collateral Agent may rely conclusively on any such certificate, without further
inquiry), or (iii) constituting property in which Westcon America did not own an
interest at the time the security interest, mortgage or lien was granted or at
any time thereafter, or (iv) if required or permitted under the terms hereof or
under the terms of any of the other Loan Documents, including any intercreditor
agreement, or (v) subject to the provisions set forth in Section 13.1 hereof,
approved, authorized or ratified in writing by the Required American Lenders.
Except as provided above, American Collateral Agent will not release any
security interest in, mortgage or lien upon, any of the Collateral owned by
Westcon America without the prior written authorization of the Required American
Lenders. Upon request by American Collateral Agent at any time, American Lenders
will promptly confirm in writing American Collateral Agent's authority to
release particular types or items of Collateral owned by Westcon America
pursuant to this Section.
(b) American Collateral Agent shall (and is hereby irrevocably
authorized by American Lenders to) execute such documents as may be necessary to
evidence the release of the security interest, mortgage or liens granted to
American Collateral Agent upon any American Collateral to the extent set forth
above; provided, that, (i) American Collateral Agent shall not be required to
execute any such document on terms which, in American Collateral Agent's
opinion, would expose American Collateral Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii) such release
shall not in any manner discharge, affect or impair the Indebtedness or any
security interest, mortgage or lien upon (or obligations of Westcon America or
any other Obligor in respect of) the Collateral owned by Westcon America
retained by Westcon America or any other Obligor.
(c) American Collateral Agent shall have no obligation whatsoever to
any American Lender or any other Person to investigate, confirm or assure that
the Collateral owned by Westcon America exists or is owned by Westcon America or
any other Obligor or is cared for, protected or insured or has been encumbered,
or that any particular items of such Collateral meet the eligibility criteria
applicable in respect of the American Advances or American Letters of Credit
issued hereunder, or whether any particular reserves are appropriate. American
Collateral Agent shall have no obligation to exercise at all or in any
particular manner or be under any duty of care, disclosure or fidelity, to
continue exercising, any of the rights, authorities
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and powers granted or available to American Collateral Agent in this Agreement
or in any of the other Loan Documents, it being understood and agreed that in
respect of the American Collateral, or any act, omission or event related
thereto, American Collateral Agent may act in any manner it may deem
appropriate, in its discretion, given American Collateral Agent's own interest
in such Collateral as an American Lender and American Collateral Agent shall
have no duty or liability whatsoever to any other Lender, except as otherwise
provided herein.
12.13 Canadian Collateral Agent's Rights in Collateral.
(a) Canadian Lenders hereby irrevocably authorize Canadian Collateral
Agent, at its option and in its discretion to release any security interest in,
mortgage or lien upon, any of the Collateral owned by Westcon Canada or any
Canadian Subsidiary (i) upon termination of the Canadian Commitments and payment
and satisfaction of all of the Indebtedness, or (ii) constituting property being
sold or disposed of if Westcon Canada certifies to Canadian Collateral Agent
that the sale or disposition is made as contemplated in Section 7.3 hereof (and
Canadian Collateral Agent may rely conclusively on any such certificate, without
further inquiry), or (iii) constituting property in which Westcon Canada did not
own an interest at the time the security interest, mortgage or lien was granted
or at any time thereafter, or (iv) if required or permitted under the terms
hereof or under the terms of any of the other Loan Documents, including any
intercreditor agreement, or (v) subject to the provisions set forth in Section
13.1 hereof, approved, authorized or ratified in writing by the Required
Canadian Lenders. Except as provided above, Canadian Collateral Agent will not
release any security interest in, mortgage or lien upon, any of the Collateral
owned by Westcon Canada or any Canadian Subsidiary without the prior written
authorization of the Required Canadian Lenders. Upon request by Canadian
Collateral Agent at any time, Canadian Lenders will promptly confirm in writing
Canadian Collateral Agent's authority to release particular types or items of
Collateral owned by Westcon Canada or any Canadian Subsidiary pursuant to this
Section.
(b) Canadian Collateral Agent shall (and is hereby irrevocably
authorized by Canadian Lenders to) execute such documents as may be necessary to
evidence the release of the security interest, mortgage or liens granted to
Canadian Collateral Agent upon any Canadian Collateral to the extent set forth
above; provided, that, (i) Canadian Collateral Agent shall not be required to
execute any such document on terms which, in Canadian Collateral Agent's
opinion, would expose Canadian Collateral Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii) such release
shall not in any manner discharge, affect or impair the Indebtedness or any
security interest, mortgage or lien upon (or obligations of Westcon Canada or
any other Obligor in respect of) the Collateral owned by Westcon Canada retained
by Westcon Canada or any other Obligor.
(c) Canadian Collateral Agent shall have no obligation whatsoever to
any Canadian Lender or any other Person to investigate, confirm or assure that
the Collateral owned by Westcon Canada or any Canadian Subsidiary exists or is
owned by Westcon Canada or any other Obligor or is cared for, protected or
insured or has been encumbered, or that any particular items of such Collateral
meet the eligibility criteria applicable in respect of the Canadian Advances or
Canadian Letters of Credit issued hereunder, or whether any particular reserves
are appropriate. Canadian Collateral Agent shall have no obligation to exercise
at all or in any
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particular manner or be under any duty of care, disclosure or fidelity, to
continue exercising, any of the rights, authorities and powers granted or
available to Canadian Collateral Agent in this Agreement or in any of the other
Loan Documents, it being understood and agreed that in respect of the Canadian
Collateral, or any act, omission or event related thereto, Canadian Collateral
Agent may act in any manner it may deem appropriate, in its discretion, given
Canadian Collateral Agent's own interest in such Collateral as an Canadian
Lender and Canadian Collateral Agent shall have no duty or liability whatsoever
to any other Lender, except as otherwise provided herein.
12.14 Agency for Perfection.
(a) Each American Lender hereby appoints American Collateral Agent and
each other American Lender as agent and bailee for the purpose of perfecting the
security interests in and liens upon the Collateral owned by Westcon America of
American Collateral Agent in assets which, in accordance with Article 9 of the
UCC or otherwise, can be perfected only by possession (or where the security
interest of a secured party with possession has priority over the security
interest of another secured party) and American Collateral Agent and each
American Lender hereby acknowledges that it holds possession of any such
Collateral for the benefit of the American Collateral Agent as secured party, on
behalf of the Lenders and Collateral Agents. Should any such Lender obtain
possession of any such Collateral, such Lender shall notify such Collateral
Agent thereof, and, promptly upon such Collateral Agent's request therefor shall
deliver such Collateral to such Collateral Agent or in accordance with such
Collateral Agent's instructions.
(b) Each Canadian Lender hereby appoints Canadian Collateral Agent and
each other Canadian Lender as agent and bailee for the purpose of perfecting the
security interests in and liens upon the Collateral owned by Westcon Canada of
Canadian Collateral Agent in assets which, in accordance with the PPSA or any
other personal property security act or otherwise, can be perfected only by
possession (or where the security interest of a secured party with possession
has priority over the security interest of another secured party) and Canadian
Collateral Agent and each Canadian Lender hereby acknowledges that it holds
possession of any such Collateral for the benefit of the Canadian Collateral
Agent as secured party, on behalf of the Canadian Lenders and Canadian
Collateral Agent. Should any such Lender obtain possession of any such
Collateral, such Lender shall notify such Collateral Agent thereof, and,
promptly upon such Collateral Agent's request therefor shall deliver such
Collateral to such Collateral Agent or in accordance with such Collateral
Agent's instructions.
(c) Without limiting any of the foregoing provisions in favor of
Collateral Agents, for the purposes of holding any security granted by any
Obligor pursuant to the laws of the Province of Quebec, including any deed of
hypothec, debenture, bond or other title of indebtedness and debenture or bond
pledge agreements, Canadian Collateral Agent is hereby appointed to act as the
Person holding an irrevocable power of attorney (fonde de pouvoir) pursuant to
article 2692 of the Civil Code of Quebec to act on behalf of each present and
future Canadian Lender. By executing a Lender Agreement, each future Canadian
Lender shall be deemed to ratify the power of attorney (fonde de pouvoir)
granted herein. Canadian Collateral Agent agrees to act in such capacity. Each
party hereto agrees that, notwithstanding Section 32 of an Act respecting the
Special Powers of Legal Persons (Quebec), Canadian Collateral Agent
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may, as the Person holding the power of attorney of the Canadian Lenders,
acquire and or be the pledgee of any debentures, bonds or other titles of
indebtedness secured by any hypothec granted by any Obligor to the Canadian
Collateral Agent pursuant to the laws of the Province of Quebec.
12.15 Collection; Payments by Collateral Agent. With respect to the
American Advances, American Collateral Agent and with respect to the Canadian
Advances, Canadian Collateral Agent shall have the sole right to receive payment
of, to collect, and to otherwise realize all payments of principal, interest and
fees with respect to such respective Loans.
(a) American Collateral Agent shall promptly remit to each American
Lender its American Percentage of all payments of all fees received from Westcon
America (other than fees solely for the account of the Arranger, American
Collateral Agent or applicable L/C Issuer as provided herein) and all payments
of principal of and interest on the American Loans or payments on unreimbursed
American Letter of Credit draws, which in each case are actually paid, collected
or otherwise realized, but American Collateral Agent may offset from any such
payments due a Defaulting Lender any amount owed to the Arranger, American
Collateral Agent, American L/C Issuer or the American Lenders under this
Agreement by such Defaulting Lender; provided, however, that funds received from
Westcon America to reimburse the American L/C Issuer for draws on Letters of
Credit (other than a Lender's American Percentage of such reimbursement to the
extent such Lender has complied fully with any funding obligations in Article II
hereof) or to fund any risk participant in the American Letters of Credit or to
pay any Letter of Credit fees payable solely for the account of American L/C
Issuer shall be paid to American L/C Issuer for its own account. Notwithstanding
the foregoing, at the election of the American Collateral Agent, in its sole
discretion, the American Collateral Agent may determine to settle weekly, rather
than more frequently, with the American Lenders and American L/C Issuer.
(b) Canadian Collateral Agent shall promptly remit to each Canadian
Lender its Canadian Percentage of all payment(s) of all fees received from
Westcon Canada (other than fees solely for the account of the Canadian
Collateral Agent or Canadian L/C Issuer as provided herein) and all payments of
principal of and interest on the Canadian Loans or payments on unreimbursed
Canadian Letter of Credit draws, which in each case are actually paid, collected
or otherwise realized, but Canadian Collateral Agent may offset from any such
payments due a Defaulting Lender any amount owed to the Canadian Collateral
Agent, the Canadian L/C Issuer or the Canadian Lenders under this Agreement by
such Defaulting Lender; provided, however, that funds received from Westcon
Canada to reimburse the Canadian L/C Issuer for draws on Canadian Letters of
Credit (other than a Lender's Canadian Percentage of such reimbursement to the
extent such Lender has complied fully with any funding obligations in Article II
hereof) or to fund any risk participant in the Canadian Letters of Credit or to
pay any Letter of Credit fees payable solely for the account of Canadian L/C
Issuer shall be paid to Canadian L/C Issuer for its own account. Notwithstanding
the foregoing, at the election of the Canadian Collateral Agent, in its sole
discretion, the Canadian Collateral Agent may determine to settle weekly, rather
than more frequently, with the Canadian Lenders and Canadian L/C Issuer.
12.16 Successor Agent. Any Agent may resign as an Agent upon ninety (90)
days' notice to Lenders. Such a resignation shall be effective upon appointment
of a successor agent and the acceptance of such appointment by such successor.
If the American Collateral Agent
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resigns under this Agreement, Required American Lenders shall appoint from the
American Lenders, a successor American Collateral Agent for such Lenders, and if
Canadian Collateral Agent resigns under this Agreement, Required Canadian
Lenders shall appoint from Canadian Lenders, a successor Canadian Collateral
Agent for such Lenders. In either case, if no successor agent is appointed prior
to the effective date of the resignation of such Agent, such Agent may appoint,
after consulting with the applicable Lenders, a successor agent from among the
applicable Lenders or a commercial banking institution, in the case of Westcon
America, organized under the laws of the United States (or any State thereof) or
a United States branch or agency of a commercial banking institution, and in the
case of Westcon Canada, organized under the laws of Canada (or any Province
thereof) or a Canadian branch or agency of a commercial banking institution, and
in each instance having a combined capital and surplus of at least
$500,000,000.00. Upon the acceptance by the new American Collateral Agent or
Canadian Collateral Agent, as applicable, so selected of its appointment as
successor agent hereunder, such successor agent shall succeed to all of the
rights, powers and duties of the retiring agent and the term American Collateral
Agent or Canadian Collateral Agent, as the case may be, as used herein and in
the other Loan Documents shall mean such successor agent and the retiring
applicable Collateral Agent's appointment, powers and duties as such Collateral
Agent shall be terminated. After any retiring Agent's resignation hereunder as
an Agent, the provisions of this Article XII shall inure to its benefit as to
any actions taken or omitted by it while it was such an Agent under this
Agreement.
12.17 Loan Syndication. Except for each Lender's right to assign its
Loans or sell participations therein, the Arranger shall have the sole right to
syndicate the Loans and the Commitments, subject to the provisions of this
Article XII. Upon the execution and delivery by a Lender to the Arranger and
applicable Collateral Agent of an Assignment and Assumption Agreement ("Lender
Agreement"), in the form of Exhibit F attached hereto, such Lender shall be
deemed to be a party hereto and shall have the rights and obligations of an
American Lender or a Canadian Lender, as the case may be, hereunder and under
each of the other Loan Documents to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned to such Lender
and assumed by such Lender under the Lender Agreement. Such Lender to which an
assignment is made hereunder shall be (i) any subsidiary or affiliate of any
Lender; or (ii) (x) in the case of an American Lender, a commercial bank or
finance company or other financial institution organized or licensed under the
laws of the United States of America or any state thereof having a combined
capital and surplus of at least $500,000,000.00, and (y) in the case of a
Canadian Lender, a commercial bank or finance company or other financial
institution organized or licensed under the laws of Canada or any province
thereof having a combined capital and surplus of at least $500,000,000.00, or
(iii) (x) in the case of an American Lender, a savings and loan association or
savings bank organized under the laws of the United States or any state thereof
having a combined capital and surplus of at least $500,000,000, and (y) in the
case of a Canadian Lender a savings and loan association or savings bank,
organized under the laws of Canada or any province thereof having a combined
capital and surplus of at least $500,000,000.00, or (iv) such other bank,
insurance company, finance company or other financial institution approved by
the Arranger, such approval not to be unreasonably withheld or delayed. In
addition, to the extent said rights and obligations have been assigned by a
Lender or Lenders to a new Lender or Lenders, the Existing Lenders shall
relinquish said rights and be released from said obligations hereunder and under
the other Loan Documents (the "Assigned Interest"); provided, however: (a) that
the Existing Lenders shall be relieved of the Assigned
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Interest if, and only if, the new Lender or Lenders shall be a Lender which
shall have been approved by the Arranger in writing prior to the execution of
the applicable Lender Agreement, and (b) any sale or assignment of a Lender's
interest hereunder shall be in minimum amounts of $5,000,000.00 or the entire
remaining balance of the Loans held by such Lender. The Arranger's consent to
any assignment hereunder shall not be unreasonably withheld or delayed.
The rights and benefits of a Lender hereunder shall inure to any Lender
acquiring any interest in the Indebtedness or any part thereof owing to it.
Borrowers acknowledge the foregoing and agree that upon the delivery by
a new American Lender or Canadian Lender of a Lender Agreement hereunder, as
contemplated hereby, Westcon America or Westcon Canada, as the case may be,
shall promptly execute new American Notes or Canadian Notes, as applicable: (a)
reflecting the Assigned Interest and evidencing such Borrower's Indebtedness
with respect to such new Lender's applicable Percentage of the applicable Loans
and applicable Commitments; and (b) evidencing such Borrower's Indebtedness with
respect to the applicable Percentage of the applicable Loans and applicable
Commitments being retained by the Existing Lender, if any. In each case, such
new Notes shall be payable to the Lenders in accordance with each such Lender's
applicable Percentage as in effect after the consummation of the assignment
contemplated hereby. Additionally, Borrowers agree to cooperate and assist the
Arranger in connection with any assignment or syndication efforts hereunder.
Upon the delivery of the Lender Agreement and issuance of the new Notes,
Exhibit A-1 and/or A-2, as applicable, to this Agreement shall be deemed amended
to reflect the applicable Percentage(s) of each American Lender's share of the
American Advances and American Commitments and each Canadian Lender's share of
the Canadian Advances and the Canadian Commitments. The American Collateral
Agent and the Canadian Collateral Agent may deem and treat the payee of any Note
as the holder thereof for all purposes hereof, unless and until the assignment
thereof pursuant to an agreement (if and to the extent permitted herein) in form
and substance satisfactory to such Collateral Agent shall have been delivered to
and acknowledged by such Collateral Agent.
Each Lender may sell participations to one or more banks, finance
companies, other financial institutions or other entities, in the case of
American Lenders, provided such entities are formed under the laws of the United
States and in the case of Canadian Lenders, provided such entities are formed
under the laws of Canada in or to all or a portion of its rights and obligations
under this Agreement and the other Loan Documents (including, without
limitation, all or a portion of its Commitments and the Loans owing to it and
its participation in the Letters of Credit); provided that, (i) such Lender's
obligations under this Agreement (including, without limitation, its Commitments
hereunder) and the other Loan Documents shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, and Westcon, Borrowers, the other Obligors, the other
Lenders, the Agents, and the L/C Issuers shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents, and (iii) the
participant shall not have any rights under this Agreement or any of the other
Loan Documents (the participant's rights against such Lender in favor of the
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participant relating thereto) and all amounts payable by any Borrower or Obligor
hereunder shall be determined as if such Lender had not sold such participation.
Nothing in this Agreement shall prevent any Lender from pledging its
Loans hereunder to a Federal Reserve Bank in support of borrowings made by such
Lender from such Federal Reserve Bank.
Westcon and the applicable Borrower shall assist Agents or any Lender
permitted to sell assignments or participations under this Section 12.17 in
whatever manner reasonably necessary in order to enable or effect any such
assignment or participation, including (but not limited to) the execution and
delivery of any and all agreements, notes and other documents and instruments as
shall be requested and the delivery of informational materials, appraisals or
other documents in connection therewith for, and the participation of relevant
management in meetings and conference calls. Westcon and Borrowers shall certify
the correctness, completeness and accuracy, in all material respects, of all
descriptions of Westcon and Borrowers and their affairs provided, prepared or
reviewed by any of Westcon and Borrowers that are contained in any selling
materials and all other information provided by it and included in such
materials.
In connection with any sale, assignment or participation sold hereunder,
in the case of any American Lender, if such Lender is not a bank, finance
company or other financial institution organized under the United States or any
state thereof such Lender will provide to Westcon America, the American
Collateral Agent and the Arranger on or before the date of this Agreement, and
thereafter on or before each date that such form is no longer effective, U.S.
Internal Revenue Service Forms 1001, Form 4224 or W8-ECI or W8-BEN, or any
subsequent version thereof, properly completed and duly executed.
12.18 Benefit Of Article XII. The provisions of this Article XII are
intended solely for the benefit of the Agents, L/C Issuers and Lenders and may
be modified by mutual agreement of the Agents, L/C Issuers and the Lenders.
Westcon, the Borrowers, the other Obligors and any Subsidiaries shall not be
entitled to rely on any such provisions or assert any such provisions in a
claim, or as a defense, against any of the Agents, L/C Issuers or Lenders.
ARTICLE 13. MISCELLANEOUS
13.1 Amendments and Waivers. All requests for any amendment or waiver of
any provision of this Agreement, the Notes or the other Loan Documents or any
consent to any departure by Westcon, Borrowers or any other Obligor therefrom,
shall be in writing delivered to the Arranger and the applicable Collateral
Agent and no such amendment or waiver of any provision of this Agreement, the
Notes or the other Loan Documents, nor consent to any departure by Westcon,
either Borrower or any other Obligor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Arranger, at the direction
of the Required Lenders, or signed by the Required Lenders, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided, that no amendment,
waiver or consent shall, unless in writing and signed by the Agents and L/C
Issuers, in addition to the Required Lenders, affect the rights or duties of
such Agent or L/C Issuer under this Agreement, any Notes, or any of the other
Loan Documents; provided, further, that, no amendment, waiver or consent shall
unless in writing and signed by
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the applicable Collateral Agent, in addition to any other approval required
under this Section 13.1, affect the rights or duties of such Collateral Agent
under this Agreement, any Notes or any of the other Loan Document; provided
further, that, no amendments, waiver or consent with respect to this Section
13.1, the Maturity Date, the Maximum Limit, the amount of the Commitments,
reductions in principal due, a reduction in the rate of interest or fees payable
thereon, or extensions in the payments thereof, a reduction in the Borrowing
Capacity Reserve, any increases in the percentage advance formulas set forth in
the definitions of Inventory Borrowing Capacity and the Receivables Borrowing
Capacity, an increase in the Inventory Sublimit or a release of the Guaranties
or more than $10,000,000 of the Collateral, a reduction in the number of audits
and appraisals of Inventory for which Borrowers are responsible to reimburse the
Collateral Agents as set forth in Sections 8.3(h) and 8.4(h) hereof, or
modification of the definition of Required Lenders will be effective unless
approved in writing by all of the Lenders. No amendment, waiver or other
modification of this Agreement or any other Loan Document that has the effect of
treating the American Lenders differently from the Canadian Lenders or of
directly and adversely affecting only the American Lenders shall be effective
unless approved in writing by the Required American Lenders. No amendment,
waiver or other modification of this Agreement or any other Loan Document that
has the effect of treating the Canadian Lenders differently from the American
Lenders or of directly and adversely affecting only the Canadian Lenders shall
be effective unless approved in writing by the Required Canadian Lenders.
13.2 Performance Of Borrowers' Duties. Upon a Borrower's failure to
perform any of its duties under the Loan Documents, including, without
limitation, the duty to obtain insurance as specified in Section 8.7, American
Collateral Agent, in the case of and on behalf of Westcon America and Canadian
Collateral Agent, in the case and on behalf of Westcon Canada may, but shall not
be obligated to, perform any or all such duties.
13.3 Termination. This Agreement is, and is intended to be, a continuing
Agreement and shall remain in full force and effect until the Maturity Date.
Either Collateral Agent, at the direction of the Required Lenders, may terminate
this Agreement immediately and without notice upon the occurrence of an Event of
Default. Notwithstanding the foregoing or anything in this Agreement or
elsewhere to the contrary, the Security Interest, each of the Agents' and
Lenders' rights and remedies under the Loan Documents and Westcon's, Borrowers'
and the other Obligors' obligations and liabilities under the Loan Documents,
shall survive any termination of this Agreement and shall remain in full force
and effect until all of the Indebtedness outstanding, or contracted or committed
for (whether or not outstanding), and any extensions or renewals thereof,
together with interest accruing thereon, shall be finally and irrevocably paid
in full in cash. No Collateral shall be released or financing statement
terminated until such final and irrevocable payment in full in cash of the
Indebtedness as described in the preceding sentence.
13.4 Setoff. Without limiting any other right that any of the Agents or
the Lenders may have at law or otherwise, whenever the American Collateral Agent
has the right to declare any Indebtedness of Westcon America or Canadian
Collateral Agent has the right to declare any Indebtedness of Westcon Canada to
be immediately due and payable (whether or not it has so declared), such
Collateral Agent may setoff against such Indebtedness any and all moneys then or
thereafter owed to Borrowers by such Collateral Agent, the American L/C Issuer
or Canadian
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L/C Issuer, as applicable, or any American Lender or Canadian Lender, as
applicable, in any capacity, whether or not the Indebtedness or the obligation
to pay such moneys owed to Westcon or Borrowers by such Collateral Agent, the
American L/C Issuer or Canadian L/C Issuer, as applicable, or any American
Lender or Canadian Lender, as applicable, is then due, and such Collateral
Agent, shall be deemed to have exercised such right of setoff, in the case of
American Collateral Agent with respect to Westcon America, and with respect to
Canadian Collateral Agent, Westcon Canada, immediately at the time of such
election even though any charge therefor is made or entered on the records of
such Collateral Agent subsequent thereto. No Lender or L/C Issuer shall at any
time exercise any right of setoff unless it shall first obtain the prior consent
of the applicable Collateral Agent to its doing so.
13.5 Delays and Omissions. No course of dealing and no delay or omission
by any Agent in exercising any right or remedy hereunder or with respect to any
Indebtedness of any of Westcon or the Borrowers or any other Obligors to Agents,
L/C Issuers or the Lenders shall operate as a waiver thereof or of any other
right or remedy, and no single or partial exercise thereof shall preclude any
other or further exercise thereof or the exercise of any other right or remedy.
Within the limits of the Borrowing Capacity (Westcon America), the American
Collateral Agent may, and at the direction of the direction of the Required
American Lenders, the American Collateral Agent shall, remedy any default by
Westcon America and within the limits of the Borrowing Capacity (Westcon
Canada), the Canadian Collateral Agent may, and at the direction of the Required
Canadian Lenders, the Canadian Collateral Agent shall, remedy any default by
Westcon Canada hereunder or in either case with respect to any other Person,
firm or corporation in any reasonable manner without waiving the default
remedied and without waiving any other prior or subsequent default by such
Borrower and shall be reimbursed for any of their expenses in so remedying such
default. All rights and remedies of the Agent and Lenders hereunder are
cumulative.
(a) Neither Westcon nor any Borrower nor any other Obligor shall
assign or otherwise transfer any of their respective rights or obligations
pursuant to this Agreement without the prior written consent of the Required
Lenders, and any such assignment or other transfer without such prior written
consent shall be void. No consent by the Required Lenders to any such assignment
or other transfer shall release Westcon or any Borrower or any other Obligor
from any Indebtedness, liability or obligation pursuant to this Agreement.
(b) Subject to the provisions of Section 12.17, each Lender may sell,
assign or participate all or a portion of its rights and obligations under this
Agreement.
13.6 Successors and Assigns. Westcon and Borrowers and the other
Obligors, the L/C Issuers, Collateral Agents, Arranger and Lenders as used
herein shall include the legal representatives, permitted successors and
permitted assigns of those parties.
13.7 Headings. Article and Section headings used in this Agreement are
for convenience only and shall not affect the construction of this Agreement.
13.8 Further Assurances. From time to time, Westcon, Borrowers and the
other Obligors shall take such action and execute and deliver to the Agents and
L/C Issuers such
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additional documents, instruments, certificates, and agreements as any of the
Agents or L/C Issuers may request to effectuate the purposes of the Loan
Documents.
13.9 Confidentiality.
(a) The Arranger, each of the Collateral Agents and each Lender agree
to use commercially reasonable efforts (equivalent to the efforts the Arranger,
Collateral Agents or such Lender applies to maintaining the confidentiality of
its own confidential information) to maintain as confidential all confidential
information provided to them by Westcon, either of the Borrowers or any other
Obligor for a period of two (2) years following receipt thereof, except that the
Arranger, either of the Collateral Agents and any Lender may disclose such
information (a) to Persons employed or engaged by the Arranger, either of the
Collateral Agents or such Lender; (b) to any bona fide assignee or participant
or potential assignee or participant that has agreed to comply with the covenant
contained in this Section 13.10 (and any such bona fide assignee or participant
or potential assignee or participant may disclose such information to Persons
employed or engaged by them as described in clause (a) above); (c) as required
or requested by any Governmental Authority or reasonably believed by the
Arranger, either of the Collateral Agents or such Lender to be compelled by any
court decree, subpoena or legal or administrative order or process; (d) as, on
the advice of Arranger's, either of the Collateral Agent's or such Lender's
counsel, is required by law; (e) in connection with the exercise of any right or
remedy under the Loan Documents or in connection with any Litigation to which
Arranger, either of the Collateral Agents or such Lender is a party; or (f) that
ceases to be confidential through no fault of Arranger, either of the Collateral
Agents or any Lender.
(b) The confidentiality obligations contained in Section 13.10(a)
above, or in any other agreement among the parties hereto, as they relate to
this Agreement and the transactions contemplated hereby ("Transaction"), shall
not apply to the federal tax structure or federal tax treatment of the
Transaction and each party hereto and their respective Affiliates may disclose
to any and all Persons, without limitation of any kind, the federal tax
structure and federal tax treatment of the Transaction; provided, that such
disclosure may not be made until the earliest of (x) the date of the public
announcement of discussions relating to the Transaction, (y) the date of the
public announcement of the Transaction, or (z) the date of the execution of a
definitive written agreement to enter into the Transaction. The preceding
sentence is intended to cause the Transaction to be treated as not having been
offered under conditions of confidentiality for purposes of Section
1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations
promulgated under Section 6011 of the Internal Revenue Code of 1986, as amended,
and shall be construed in a manner consistent with such purpose. Subject to the
proviso with respect to disclosure in the first sentence of this Section, each
party hereto acknowledges that it has no proprietary or exclusive rights to the
federal tax structure of the Transaction or any federal tax matter or federal
tax idea related to the Transaction.
13.10 Press Releases and Related Matters. Each of Westcon, either of the
Borrowers or any other Obligor agrees that neither it nor its Affiliates will in
the future issue any press releases or other public disclosure using the name of
GE Capital or its affiliates or referring to this Agreement or the other Loan
Documents without at least two (2) Business Days' prior notice to GE Capital and
without the prior written consent of GE Capital unless (and only to the extent
that) Westcon, either of the Borrowers or any other Obligor is required to do so
under law and
113
then, in any event, Westcon, either of the Borrowers or any other Obligor will
consult with GE Capital before issuing such press release or other public
disclosure. Each of Westcon, either of the Borrowers or any other Obligor
consents to the publication by Arranger, either Collateral Agent or any Lender
of advertising material relating to the financing transactions contemplated by
this Agreement using Borrower's name, product photographs, logo or trademark.
Each of the Arranger and each of the Collateral Agents reserve the right to
provide to industry trade organizations information necessary and customary for
inclusion in league table measurements.
13.11 Severability. The provisions of this Agreement are independent of,
and separable from, each other, and no such provision shall be affected or
rendered invalid or unenforceable by virtue of the fact that for any reason any
other such provision may be invalid or unenforceable in whole or in part. If any
provision of this Agreement is prohibited or unenforceable in any jurisdiction,
such provision shall be ineffective in such jurisdiction only to the extent of
such prohibition or unenforceability, and such prohibition or unenforceability
shall not invalidate the balance of such provision to the extent it is not
prohibited or unenforceable nor render prohibited or unenforceable such
provision in any other jurisdiction.
13.12 Entire Agreement. This Agreement and the other Loan Documents
constitute the entire agreement and understanding between the parties hereto
with respect to the transactions contemplated hereby and supersede all prior
negotiations, understandings, and agreements between such parties with respect
to such transactions, including, without limitation, those expressed in any term
sheet or commitment letter delivered by any of the Agents or any Lender to
Westcon or any Borrower.
13.13 Notices. Any notice or demand to be given hereunder shall be in
writing, unless otherwise expressly provided herein and shall be deemed to have
been given or made when delivered by hand or facsimile, and one (1) business day
after being delivered to a courier for express delivery, to the address below,
or three (3) business days after being deposited in an official depository
maintained by the United States Post Office for the collection of mail, postage
prepaid and addressed as follows (provided, however, that failure to deliver a
copy of any notice to outside legal counsel of a recipient shall not make
insufficient a delivery of notice to such recipient):
To the Borrowers and Westcon Group, Inc.
Westcon 000 Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxx 00000-0000
Attn: Chief Financial Officer and Chief Executive
Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
To Arranger or L/C HSBC Bank USA
Issuer and HSBC as a 00 Xxxxx Xxxxxxxx
Xxxxxx Xxxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx Xxxxxxxxxx
Tel: (000) 000-0000
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Fax: (000) 000-0000
With a copy to (which Phillips, Lytle, Xxxxxxxxx, Xxxxxx & Xxxxx LLP
shall not constitute 000 Xxxxxxx Xxxxxx
xxxxxx) Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To Collateral Agents General Electric Capital Corporation
and GE Capital as a 000 Xxxxxxxxxxx Xxxxxx
Lender: Xxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attn: Westcon Group Account Manager
Telephone: (000) 000-0000
Fax: (000) 000-0000
and
General Electric Capital Canada Inc.
00 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx X00 0X0 Xxxxxx
Attn: Westcon Group Account Manager
Telephone: (000) 000-0000
Fax: (000) 000-0000
and
General Electric Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: General Counsel
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: (which Winston & Xxxxxx
shall not constitute 000 Xxxx Xxxxxx
xxxxxx) Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
and
Xxxxx Xxxxxx & Harcourt LLP
115
1 First Canadian Place
Toronto, Ontario
Canada M5X 1B8
Attn: Xxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
The addresses for notice hereunder to the American Lenders and
the Canadian Lenders are set forth in Schedule 13.14 hereof.
13.14 Governing Law. This Agreement, the transactions described herein
and the obligations of Agents, Lenders, L/C Issuers, Westcon, the Borrowers and
the other Obligors shall be construed under, and governed by, the internal laws
of the State of New York without regard to principles of conflicts of laws.
13.15 Counterparts. This Agreement may be executed in any number of
counterparts and by Agents, Lenders, L/C Issuers, Westcon, the Borrowers and the
other Obligors on separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same Agreement.
13.16 Titles. Titles to the sections of this Agreement are solely for
the convenience of the parties hereto, and are not an aid in the interpretation
of this Agreement or any part thereof.
13.17 Inconsistent Provisions. The terms of this Agreement and any
related agreements, instruments or other documents shall be cumulative except to
the extent that they are specifically inconsistent with each other, in which
case the terms of this Agreement shall prevail.
13.18 Negotiation. This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Agents,
Lenders, L/C Issuers, Westcon, Borrowers and the other Obligors, and are the
products of all the parties hereto. Accordingly, this Agreement and the other
Loan Documents shall not be construed against any of such parties merely because
of such parties' involvement in their preparation.
13.19 Course of Dealing. Without limitation of the foregoing, each of
the Agents and L/C Issuers shall have the right, but not the obligation, at all
times to enforce the provisions of this Agreement and all other documents
executed in connection herewith in strict accordance with their terms,
notwithstanding any course of dealing or performance by any of the Agents or L/C
Issuers in refraining from so doing at any time and notwithstanding any custom
in the banking trade. Any delay or failure by any of the Agents or L/C Issuers
at any time or times in enforcing its rights under such provisions in strict
accordance with their terms shall not be construed as having created a course of
dealing or performance modifying or waiving the specific provisions of this
Agreement.
13.20 CONSENT TO JURISDICTION.
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(a) WESTCON AMERICA, EACH AMERICAN LENDER, AMERICAN COLLATERAL AGENT,
HSBC AMERICA IN ITS CAPACITY AS AMERICAN L/C ISSUER AND ARRANGER AND
DOCUMENTATION AGENT AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING
OUT OF THIS AGREEMENT MAY BE COMMENCED IN THE SUPREME COURT OF NEW YORK IN NEW
YORK COUNTY, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK SITTING IN NEW YORK COUNTY, NEW YORK. WESTCON CANADA, EACH CANADIAN
LENDER, CANADIAN COLLATERAL AGENT, HSBC CANADA IN ITS CAPACITY AS CANADIAN L/C
ISSUER, ARRANGER AND DOCUMENTATION AGENT AGREE THAT ANY ACTION OR PROCEEDING TO
ENFORCE OR ARISING OUT OF THIS AGREEMENT MAY BE COMMENCED IN THE COURTS LOCATED
IN THE PROVINCE OF ONTARIO, CANADA. WESTCON AND EACH BORROWER WAIVES PERSONAL
SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION
OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY SERVED AND SHALL CONFER
PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO WESTCON, AT
ITS ADDRESS SET FORTH AT THE BEGINNING OF THIS AGREEMENT, OR AS PROVIDED BY THE
LAWS OF THE STATE OF NEW YORK OR THE UNITED STATES OR THE PROVENCE OF ONTARIO OR
CANADA.
13.21 JURY TRIAL WAIVER. WESTCON, EACH BORROWER, EACH LENDER, L/C
ISSUERS, AND THE AGENTS HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE
ANY RIGHT TO TRIAL BY JURY THEY MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR
IN EQUITY, IN CONNECTION WITH THIS AGREEMENT OR ANY LOAN DOCUMENT OR THE
TRANSACTIONS RELATED HERETO. WESTCON AND EACH BORROWER REPRESENTS AND WARRANTS
THAT NEITHER ANY REPRESENTATIVE OF AGENTS NOR THE AGENTS HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT AGENTS WILL NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THIS JURY TRIAL WAIVER. WESTCON AND EACH BORROWER ACKNOWLEDGES THAT
AGENTS, L/C ISSUERS AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION.
13.22 U.S. LITIGATION. WESTCON CANADA, EACH CANADIAN LENDER, CANADIAN
COLLATERAL AGENT, HSBC CANADA IN ITS CAPACITY AS CANADIAN L/C ISSUER, ARRANGER
AND DOCUMENTATION AGENT AGREE THAT ANY JUDGMENT OBTAINED AGAINST IT IN ANY
ACTION OR PROCEEDING IN THE COURTS OF THE UNITED STATES OF AMERICA OR OF THE
STATE OF NEW YORK SHALL BE FINAL AND BINDING AND NOT BE SUBJECT TO COLLATERAL
ATTACK BY IT FOR ANY REASON WHATSOEVER. WESTCON CANADA AGREES THAT ANY SUCH
JUDGMENT MAY BE SUED UPON AND ENFORCED IN ANY COURT OF COMPETENT JURISDICTION
LOCATED IN THE PROVIDENCE OF ONTARIO OR QUEBEC, RESPECTIVELY, WITH FULL POWER OF
EXECUTION AND LEVY, AND WAIVES ANY DEFENSE IT MAY HAVE TO THE ENFORCEMENT OF
SUCH JUDGMENT.
13.23 Judgment Currency
117
(a) If, for the purpose of obtaining or enforcing judgment against
Westcon, either Borrower or any other Obligor in any court in any jurisdiction,
it becomes necessary to convert into any other currency (such other currency
being hereinafter in this Section 13.24 referred to as the "Judgment Currency")
an amount due under any Loan Document in any currency (the "Obligation
Currency") other than the Judgment Currency, the conversion shall be made at the
rate of exchange prevailing on the Business Day immediately preceding (i) the
date of actual payment of the amount due, in the case of any proceeding in the
courts of any jurisdiction that will give effect to such conversion being made
on such date, or (ii) the date on which the judgment is given, in the case of
any proceeding in the courts of any other jurisdiction (the applicable date as
of which such conversion is made pursuant to this Section 13.24 being
hereinafter in this Section 13.24 referred to as the "Judgment Conversion
Date").
(b) If, in the case of any proceeding in the court of any jurisdiction
referred to in this Section 13.24, there is a change in the rate of exchange
prevailing between the Judgment Conversion Date and the date of actual receipt
for value of the amount due, the applicable Borrower or other Obligor shall pay
such additional amount (if any, but in any event not a lesser amount) as may be
necessary to ensure that the amount actually received in the Judgment Currency,
when converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of the Judgment Currency stipulated in the judgment or judicial
order at the rate of exchange prevailing on the Judgment Conversion Date. Any
amount due from a Borrower or other Obligor under this Section 13.24 shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of any of the Loan Documents.
(c) The term "rate of exchange" in this Section 13.24 means the rate
of exchange at which the applicable Collateral Agent would, on the relevant date
at or about noon (New York time), be prepared to sell the Obligation Currency
against the Judgment Currency.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers all as of the 12th day of June, 2003.
WESTCON GROUP, INC.
By: /s/ Xxxx X. X'Xxxxxx III
-----------------------------------------
Name: Xxxx X. X'Xxxxxx III
Title: Vice President
WESTCON GROUP NORTH AMERICA, INC.
By: /s/ Xxxx X. X'Xxxxxx III
-----------------------------------------
Name: Xxxx X. X'Xxxxxx III
Title: Vice President
000
XXXXXXX XXXXXX SYSTEMS (WCSI) INC.
By: /s/ Xxxxxx Reffiani
-----------------------------------------
Name: Xxxxxx Reffiani
Title: Secretary
EASTPRO SERVICES, INC., as an Obligor
By: /s/ Xxxx X. X'Xxxxxx
-----------------------------------------
Name: Xxxx X. X'Xxxxxx III
Title: Vice President
119
HSBC BANK USA, as Arranger, as American L/C
Issuer and as an American Lender
By: /s/ Xxxxxxxx Xxxxxxxxxx
-----------------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
Title: V.P.
120
GENERAL ELECTRIC CAPITAL
CORPORATION, as American Collateral Agent
and an American Lender
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: ITS DULY AUTHORIZED SIGNATORY
121
LASALLE BUSINESS CREDIT, LLC, as an
American Lender
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
122
GENERAL ELECTRIC CAPITAL CANADA
INC., as Canadian Collateral Agent and a
Canadian Lender
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Senior Vice President
000
XXXX XXXX XXX (Xxxxxxx Branch), as Canadian
L/C Issuer and a Canadian Lender
By: /s/ Xxxxxxxx Xxxxxxxxxx
-----------------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
Title: Vice President
124
THE CIT GROUP/BUSINESS CREDIT, INC., as
an American Lender
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President
125
ABN AMRO BANK, N.V., Canada Branch
By: /s/ Xxxxx Xxxx
-----------------------------------------
Name: Xxxxx Xxxx
Title: V.P.
By: /s/ Xxxxx Xxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxx
Title: Senior Vice President
126
CITIZENS BUSINESS CREDIT COMPANY, a
division of Citizens Leasing Corp. as an
American Lender
By: /s/ Xxxxxxx X. X'Xxxxx
-----------------------------------------
Name: Xxxxxxx X. X'Xxxxx
Title: Senior Vice President
127
SIEMENS FINANCIAL SERVICES, INC., as an
American Lender
By: /s/ Xxxxx Xxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President - Credit
128
CONGRESS FINANCIAL CORPORATION
(CENTRAL), as an American Lender
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Senior Vice President
129
CONGRESS FINANCIAL CORPORATION,
(CANADA), as a Canadian Lender
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Senior Vice President
130
SIEMENS FINANCIAL SERVICES, LIMITED, as
a Canadian Lender
By: /s/ X. X. Xxxxxxxx
-----------------------------------------
Name: X. X. Xxxxxxxx
Title: Chairman & Chief Executive
Officer
131
THE CIT GROUP/BUSINESS CREDIT, INC., as a
Canadian Lender
By: /s/ Xxxxx Xxx-Xxxxxxxxx
-----------------------------------------
Name: Xxxxx Xxx-Xxxxxxxxx
Title: Authorized Signatory
132
CITIZENS BUSINESS CREDIT COMPANY, a
division of Citizens Leasing Corp. as a
Canadian Lender
By: /s/ Xxxxxxx X. X'Xxxxx
-----------------------------------------
Name: Xxxxxxx X. X'Xxxxx
Title: Senior Vice President
133
