1
EXHIBIT 10.28
================================================================================
LOAN AND SECURITY AGREEMENT
Dated as of December 18, 1996
Between
DATAFLEX CORPORATION
(the Borrower)
and
NATIONSBANK, N.A. (SOUTH)
(the Lender)
================================================================================
2
TABLE OF CONTENTS1
ARTICLE I - DEFINITIONS ............................................................................ 1
SECTION 1.1 DEFINITION ......................................................................... 1
SECTION 1.2 OTHER REFERENTIAL PROVISIONS ....................................................... 15
SECTION 1.3 EXHIBITS AND SCHEDULES ............................................................. 16
ARTICLE 2 - REVOLVING CREDIT FACILITY .............................................................. 16
SECTION 2A.1 REVOLVING CREDIT LOANS ............................................................ 16
SECTION 2A.2 MANNER OF BORROWING REVOLVING CREDIT LOANS ........................................ 17
SECTION 2A.3 REPAYMENT OF REVOLVING CREDIT LOANS ............................................... 18
SECTION 2A.4 REVOLVING CREDIT NOTE ............................................................. 18
SECTION 2A.5 EXTENSION OF FACILITY ............................................................. 18
B. TERM LOAN FACILITY .............................................................................. 18
SECTION 2B.1 TERM LOAN ......................................................................... 18
SECTION 2B.2 MANNER OF BORROWING AND DISTRIBUTING TERM LOAN .................................... 18
SECTION 2B.3 REPAYMENT OF TERM LOAN I ......................................................... 19
SECTION 2B.4 TERM NOTE ......................................................................... 19
SECTION 2B.5 PREPAYMENT OF TERM. LOAN .......................................................... 19
ARTICLE 3 - GENERAL LOAN PROVISIONS ................................................................ 19
SECTION 3.1 INTEREST ........................................................................... 19
SECTION 3.2 FEES ............................................................................... 21
SECTION 3.3 NONE OF CONVERSION OR CONTINUATION OF LOANS ........................................ 21
SECTION 3.4. CONVERSION OR CONTINUATION ........................................................ 22
SECTION 3.5 DURATION OF INTEREST PERIODS, MAXIMUM NUMBER OF LIBOR LOAN; MINIMUM INCREMENTS ..... 22
SECTION 3.6 CHANGED CIRCUMSTANCES .............................................................. 22
SECTION 3.7 PAYMENTS NOT AT END OF INTEREST PERIOD: FAILURE To BORROW .......................... 23
SECTION 3.9 INCREASED COSTS AND REDUCED RETURNS ................................................ 24
SECTION 3.9 MANNER OF PAYMENT .................................................................. 24
SECTION 3.10 STATEMENTS OF ACCOUNT ............................................................. 24
SECTION 3.11 TERMINATION OF AGREEMENT .......................................................... 25
ARTICLE 4 - CONDITIONS PRECEDENT ................................................................... 25
SECTION 4.1 CONDITIONS PRECEDENT TO INITIAL LOAN ............................................... 25
SECTION 4.2 ALL LOANS .......................................................................... 27
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE BORROWER ......................................... 28
SECTION 5.1 REPRESENTATIONS AND WARRANTIES ..................................................... 28
SECTION 5.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC .................................... 32
ARTICLE 6 - SECURITY INTEREST ...................................................................... 32
SECTION 6.1 SECURITY INTEREST .................................................................. 32
SECTION 6.2 CONTINUED PRIORITY OF SECURITY INTEREST ............................................ 32
ARTICLE 7 - COLLATERAL COVENANTS ................................................................... 33
SECTION 7.1 COLLECTION OF RECEIVABLES .......................................................... 33
SECTION 7.2 VERIFICATION AND NOTIFICATION ...................................................... 33
-----------------------------
1 This Table of contents is included for reference purposes only and does
not constitute part of the Loan and Security Agreement.
3
SECTION 7.3 DISPUTES, RETURNS AND ADJUSTMENTS ................................................ 34
SECTION 7.4 INVOICES ......................................................................... 34
SECTION 7.5 DELIVERY OF INSTRUMENTS .......................................................... 34
SECTION 7.6 SALES OF INVENTORY ............................................................... 34
SECTION 7.7 RETURNED GOODS ................................................................... 34
SECTION 7.8 OWNERSHIP AND DEFENSE OF TITLE ................................................... 34
SECTION 7.9 INSURANCE ........................................................................ 35
SECTION 7.10 LOCATION OF OFFICES AND COLLATERAL .............................................. 35
SECTION 7.11 RECORDS RELATING TO COLLATERAL
SECTION 7.12 INSPECTION ...................................................................... 36
SECTION 7.13 MAINTENANCE OF EQUIPMENT ........................................................ 36
SECTION 7.14 INFORMATION AND REPORTS ......................................................... 36
SECTION 7.15 POWER OF ATTORNEY ............................................................... 37
ARTICLE 8 - AFFIRMATIVE COVENANTS .................................................................. 37
SECTION 8.1 PRESERVATION OF CORPORATE EXISTENCE AND SIMILAR MATTERS .......................... 37
SECTION 8.2 COMPLIANCE WITH APPLICABLE LAW ................................................... 37
SECTION 8.3 CONDUCT OF BUSINESS .............................................................. 37
SECTION 8.4 PAYMENT OF TAXES AND CLAIMS ...................................................... 37
SECTION 8.5 ACCOUNTING METHODS AND FINANCIAL RECORDS ......................................... 38
SECTION 8.6 USE OF PROCEEDS .................................................................. 38
SECTION 8.7 HAZARDOUS WASTE AND SUBSTANCES; ENVIRONMENTAL REQUIREMENTS ....................... 38
SECTION 8.8 ACCURACY OF INFORMATION .......................................................... 38
SECTION 9.9 REVISIONS OR UPDATES TO SCHEDULES ................................................ 38
ARTICLE 9 - INFORMATION ............................................................................ 39
SECTION 9.1 FINANCIAL STATEMENTS ............................................................. 39
SECTION 9.2 ACCOUNTANTS, CERTIFICATE ......................................................... 39
SECTION 9.3 OFFICERS CERTIFICATE ............................................................. 40
SECTION 9.4 COPIES OF OTHER REPORTS .......................................................... 40
SECTION 9.5 NOTICE OF LITIGATION AND OTHER MATTERS ........................................... 40
SECTION 9.6 ERISA ............................................................................ 40
ARTICLE 10 - NEGATIVE COVENANTS .................................................................... 41
SECTION 10.1 FINANCIAL RATIOS ................................................................ 41
SECTION 10.2 INDEBTEDNESS .................................................................... 42
SECTION 10.3 GUARANTIES ...................................................................... 42
SECTION 10.4 INVESTMENTS ..................................................................... 42
SECTION 10.5 CAPITAL EXPENDITURES ............................................................ 42
SECTION 10.6 RESTRICTED DISTRIBUTIONS AND PAYMENTS, ETC ...................................... 42
SECTION 10.7 MERGER CONSOLIDATION AND SALE OF ASSETS ......................................... 43
SECTION 10.8 TRANSACTIONS WITH AFFILIATES .................................................... 43
SECTION 10.9 LIENS ........................................................................... 43
SECTION 1O.1O OPERATING LEASES ............................................................... 43
SECTION 1O.11 BENEFIT PLANS .................................................................. 43
SECTION 10.12 SALES AND LEASEBACKS ........................................................... 43
SECTION 10.13 AMENDMENTS OF OTHER AGREEMENTS ................................................. 43
SECTION 10.14 MINIMUM AVAILABILITY ........................................................... 43
ARTICLE II - DEFAULT ............................................................................... 43
SECTION 11.1 EVENTS OF DEFAULT ............................................................... 43
SECTION 11.2 REMEDIES ........................................................................ 45
SECTION 11.3 APPLICATION OF PROCEEDS ......................................................... 47
SECTION 11.4 POWER OF ATTORNEY ............................................................... 48
- ii -
4
SECTION 11.5 MISCELLANEOUS PROVISIONS CONCERNING REMEDIES .................................... 48
SECTION 11.6 TRADEMARK LICENSE ............................................................... 49
ARTICLE 12 - MISCELLANEOUS ......................................................................... 49
SECTION 12.1 NOTICES ......................................................................... 49
SECTION 12.2 EXPENSES ........................................................................ 50
SECTION 12.3 STAMP AND OTHER TAXES ........................................................... 50
SECTION 12.4 SETOFF .......................................................................... 51
SECTION 12.5 LITIGATION ...................................................................... 51
SECTION 12.6 WAIVER OF RIGHTS ................................................................ 51
SECTION 12.7 REVERSAL OF PAYMENTS ............................................................ 52
SECTION 12.8 INJUNCTIVE RELIEF ............................................................... 52
SECTION 12.9 ACCOUNTING MATTERS .............................................................. 52
SECTION 12.10 ASSIGNMENT; PARTICIPATION ...................................................... 52
SECTION 12.11 AMENDMENTS ..................................................................... 52
SECTION 12.12 PERFORMANCE OF BORROWER'S DUTIES ............................................... 52
SECTION 12.13 INDEMNIFICATION ................................................................ 53
SECTION 12.14 ALL POWERS COUPLED WITH INTEREST ............................................... 53
SECTION 12.15 SURVIVAL ....................................................................... 53
SECTION 12.16 SEVERABILITY OF PROVISIONS ..................................................... 53
SECTION 12.17 GOVERNING LAW .................................................................. 53
SECTION 12.19 COUNTERPARTS ................................................................... 53
SECTION 12.19 REPRODUCTION OF DOCUMENTS ...................................................... 53
SECTION 12.20 FUNDS TRANSFER SERVICES ........................................................ 54
- iii -
5
EXHIBITS AND SCHEDULES
EXHIBIT A-1 FORM OF REVOLVING CREDIT NOTE
EXHIBIT A-2 FORM OF TERM NOTE
EXHIBIT B FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C COPIES OF SUBORDINATED NOTES
EXHIBIT D FORM OF OFFICER'S CERTIFICATE
SCHEDULE 1.1A Xxxxxxx Bank Liens
SCHEDULE 5.1(a) Jurisdictions in Which Borrower is Qualified as a Foreign Corporation
SCHEDULE 5.1(b) Borrower's Capital Stock
SCHEDULE 5.1(e) Borrower's Business
SCHEDULE 5.1(f) Exceptions to Governmental Approvals
SCHEDULE 5.1(g) Non Lien Title Exceptions and Defects and Property Disposed of Out of
Ordinary Course of Business
SCHEDULE 5.1(h) Liens
SCHEDULE 5.1(i) Indebtedness for Money Borrowed and Guaranties
SCHEDULE 5.1(j) Litigation
SCHEDULE 5.1(k) Tax Returns and Payments
SCHEDULE 5.1(o) ERISA
SCHEDULE 5.1(t) Location of Chief Executive Office
SCHEDULE 5.1(u) Locations of Inventory
SCHEDULE 5.1(v) Locations of Equipment
SCHEDULE 5.1(w) Corporate and Fictitious Names
SCHEDULE 5.1(z) Employee Relations
SCHEDULE 5.1(aa) Proprietary Rights
SCHEDULE 8.6 Use of Proceeds
- iv -
6
LOAN AND SECURITY AGREEMENT
Dated as of December 18, 1996
DATAFLEX CORPORATION - N, a New Jersey corporation, and NATIONSBANK,
N.A. (SOUTH), a national banking association, agree as follows:
ARTICLE I - DEFINITIONS
Section 1. I Definitions. For the purposes of this Agreement:
"Account Debtor" means a Person who is obligated on a Receivable.
"Acquire", as applied to any Business Unit or Investment, means the
acquisition of such Business Unit or Investment by purchase, exchange, issuance
of stock or other securities, or by merger, reorganization or any other method.
"Adjusted EBITDA" means, for any accounting period of the Borrower, an
amount equal to the Borrower's Net Income before interest expense and taxes and
before depreciation and amortization, as adjusted, in the case of fiscal year
1997 only, for all charges, expenses and losses directly associated with the
sale of the Borrower's East and Midwest Divisions to Ameridata pursuant to the
Ameridata Sale Agreement.
"Affiliate" means, with respect to a Person, (a) any officer, director,
employee or managing agent of such Person, (b) any spouse, parents, brothers,
sisters, children and grandchildren of such Person, (C) any association,
partnership, trust, entity or enterprise in which such Person is a director,
officer or general partner, (d) any other Person that, (I) directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such given Person, (ii) directly or indirectly
beneficially owns or holds 10% or more of any class of voting stock or
partnership or other interest of such Person or any Subsidiary of such Person,
or (iii) 10% or more of the voting stock or partnership or other interest of
which is directly or indirectly beneficially owned or held by such Person or a
Subsidiary of such Person. The term .control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities or
partnership or other interests, by contract or otherwise.
"Agency Account' means an account of the Borrower maintained by it with
a Clearing Bank pursuant to an Agency Account Agreement.
"Agency Account Agreement" means an agreement among the Borrower, the
Lender and a Clearing Bank (if other than the Lender) concerning the collection
of payments which 'represent the proceeds of Receivables or of any other
Collateral.
"Agreement" means this Agreement, including the Exhibits and Schedules
hereto, and all amendments, modifications and supplements hereto and thereto and
restatements hereof and thereof
"Agreement Date" means the date as of which this Agreement is dated.
"Ameridata" means Ameridata of New Jersey, Inc., a Delaware corporation,
and its successors and assigns.
7
"Ameridata Sale Agreement" means the Asset Purchase Agreement dated
August 30, 1996 between Ameridata and the Borrower, as amended from time to
time.
"Assignment of Tax Claim" means the Assignment of Tax Claim, dated as of
the Effective Date, from the Borrower to the Lender, pursuant to which the
Borrower assigns to the Lender the right to receive the Tax Refund Claim.
"Availability" means, as of the date of determination, the amount of
Revolving Credit Loans available to be borrowed by the Borrower hereunder in
accordance with Section 2A.1 less the sum of the outstanding principal balance
of all Revolving Credit Loans hereunder as of such date.
"Benefit Plan" means an employee benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which a Person or
any Related Company is, or within the immediately preceding 6 years was, an
'employer" as defined in Section 3(5) of ERISA, including such plans as may be
established after the Agreement Date.
"Borrower" means Dataflex Corporation, a New Jersey corporation, and its
successors and assigns.
"Borrowing Base" means at any time an amount equal to the sum of
(a) 85% (or such lesser percentage as the Lender may in its
reasonable credit judgment determine from time to time) of the face value of
Eligible Receivables due and owing at such time, plus
(b) THE LESSER OF
(i) 50% (or such lesser percentage as the Leader may in its
reasonable credit judgment determine from time to time) of the lesser of
cost (computed on a first-in-first-out basis) and fair market value of
Eligible Inventory at such time, and
(ii) $1,000,000, minus
(c) the Letter of Credit Reserve and such other reserves as the
Lender may determine from time to time in the exercise of its reasonable credit
judgment.
"Borrowing Base Certificate" means a certificate in the form of Exhibit
B attached hereto.
"Business Day" means (a) any day other than a Saturday, Sunday or other
day on which banks in the city in which the principal office of the Lender is
located are authorized to close, and (b) in respect of any determination with
respect to a LIBOR Loan, any day referred to in clause (a) that is also a day on
which tradings are conducted in the London interbank eurodollar market.
"Business Unit" means the assets constituting the business, or a
division or operating unit thereof, of any Person.
"Capital Expenditures" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets (other
than assets which constitute a Business Unit) which are not, in accordance with
GAAP, treated as expense items for such Person in the year made or incurred or
as a prepaid expense applicable to a future year or years.
"Capitalized Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
2
8
"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
"Clearing Bank" means the Lender and any other banking institution with
which an Agency Account has been established pursuant to an Agency Account
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means and includes all of the Borrower's right, tide and
interest in and to each of the following, wherever located and whether now or
hereafter existing or now owned or hereafter acquired or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Equipment,
(d) all Contract Rights,
(e) all General Intangibles,
(f) all Deposit Accounts,
(g) all goods and other property, whether or not delivered, (i) die
sale or lease of which gives or purports to give rise to any Receivable,
including, but not limited to, all merchandise returned or rejected by or
repossessed from customers, or (ii) securing any Receivable, including, without
limitation, all rights as an unpaid vendor or lienor (including, without
limitation, stoppage in transit, replevin and reclamation) with respect to such
goods and other properties,
(h) all mortgages, deeds to secure debt and deeds of trust on real
or personal property, guaranties, leases, security agreements and other
agreements and property which secure or relate to any Receivable or other
Collateral or are acquired for the purpose of securing and enforcing any item
thereof,
(i) all documents of tide, policies and certificates of insurance,
securities, chattel paper and other documents and instruments evidencing or
pertaining to any and all items of Collateral,
(j) all files, correspondence, computer programs, tapes, disks and
related data processing software which contain information identifying or
pertaining to any of the Collateral or any Account Debtor or showing the amounts
thereof or payments thereon or otherwise necessary or helpful in the realization
thereon or the collection thereof,
(k) all cash deposited with the Lender or any Affiliate thereof or
which the Lender is entitled to retain or otherwise possess as collateral
pursuant to the provisions of this Agreement or any of the Security Documents,
and
(l) any and all products and cash and non-cash proceeds of the
foregoing (including, but riot limited to, any claims to any items referred to
in this definition and any claims against third parties for loss of, damage to
or destruction of any or all of the Collateral or for proceeds payable under or
unearned premiums
3
9
with respect to policies of insurance) in whatever form, including, but not
limited to. cash, negotiable instruments and other instruments for the payment
of money, chattel paper, security agreements and other documents.
"Contract Rights" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising rights under
contracts not yet earned by performance and not evidenced by an instrument or
chattel paper, to the extent that the same may lawfully be assigned.
"Default" means any of the events specified in SECTION 11.1 that, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
"Default Margin" means 2%.
"Deposit Accounts" means any demand, time, savings, passbook or like
account maintained with a bank, savings and loan association, credit union or
like organization, other than an account evidenced by a certificate of deposit
that is an instrument under the UCC.
"Disbursement Account" means the account maintained by and in the name
of the Borrower with the Lender for the purpose of disbursing Revolving Credit
Loan proceeds and amounts credited thereto pursuant to SECTIONS 2A.2(b)(I) and
7.1(b)(ii).
"Dollar" and "$" means freely transferable United States dollars.
"ERISA" means the Employee Retirement Income Security Act of 1974, as in
effect from time to time, and any successor statute.
"Effective Date" means the later of (a) the Agreement Date, and (b) the
first date on which all of the conditions set forth in Section 4.1 shall have
been fulfilled or waived by the Lender.
"Effective Interest Rate" means the rate of interest per annum on the
Loans in effect from time to time pursuant to the provisions of SECTION 3.1(a),
(b), (c) and (d).
"Eligible Inventory" means items of spare parts Inventory of the
Borrower held for sale in the ordinary course of the business of the Borrower
(but not including packaging or shipping materials or maintenance supplies)
which are deemed by the Lender in the exercise of its reasonable credit judgment
to be eligible for inclusion in the calculation of the Borrowing Base. Unless
otherwise approved in writing by the Lender, no Inventory shall be deemed to be
Eligible Inventory unless it meets all of the following requirements: (a) such
Inventory is owned by the Borrower, is subject to the Security Interest, which
is perfected as to such Inventory, and is subject to no other Lien whatsoever
other than a Permitted Lien; (b) such Inventory consists of spare parts and does
not consist of finished goods, work-in-process, supplies or consigned goods; (C)
such Inventory is in good condition and meets all standards applicable to such
goods, their use or sale imposed by any governmental agency, or department or
division thereof, having regulatory authority over such matters; (d) such
Inventory is currently either usable or saleable, at prices approximating at
least the cost thereof, in the normal course of the Borrower's business; (e)
such Inventory is not obsolete or returned or repossessed or used goods taken in
trade; (f) such Inventory is located at one of the locations listed in SCHEDULE
5.1(u); and (g) such Inventory is in the possession and control of the Borrower
and not any third party, or, if located in a warehouse or other facility leased
by the Borrower, the warehouseman or lessor has delivered to the Lender a waiver
and consent in form and substance satisfactory to the Lender.
"Eligible Receivable" means the unpaid portion of a Receivable payable
in Dollars to the Borrower net of any returns, discounts, claims, credits,
charges or other allowances, offsets, deductions, counterclaims,
4
10
disputes or other defenses and reduced by the aggregate amount of all reserves,
limits and deductions provided for in this definition and elsewhere in this
Agreement which is deemed by the Lender in the exercise of its reasonable credit
judgment to be eligible for inclusion in the calculation of the Borrowing Base.
Unless otherwise approved in writing by the Lender, no Receivable shall be
deemed an Eligible Receivable unless it meets all of the following requirements:
(a) such Receivable is owned by the Borrower and represents a complete bona fide
transaction which requires no further act under any circumstances on the part of
the Borrower to make such Receivable payable by the Account Debtor; (b) such
Receivable is not unpaid more than 90 days after the date of the original
invoice or past due more than 60 days after its due date, which shall not be
later than 30 days after the invoice date; (C) such Receivable does not arise
out of any transaction with any Subsidiary, Affiliate, creditor, lessor or
supplier of the Borrower; (d) such Receivable is not owing by an Account Debtor
more than 50% of whose then-existing accounts owing to die Borrower do not meet
the requirements set forth in CLAUSE b above; (e) if the Account Debtor with
respect thereto is located outside of the United States of America, Canada or
Puerto Rico, the goods which gave rise to such Receivable were shipped after
receipt by the Borrower from the Account Debtor of an irrevocable letter of
credit that has been confirmed by a financial institution acceptable to the
Lender and is in form and substance acceptable to the Lender, payable in the
full face amount of the face value of the Receivable in Dollars at a place of
payment located within the United States and has been duly delivered to the
Lender; (f) such Receivable is not subject to the Assignment of Claims Act of
1940, as amended from time to time, or any applicable law now or hereafter
existing similar in effect thereto, as determined in the sole discretion of the
Lender, or to any provision prohibiting its assignment or requiring notice of or
consent to such assignment; (g) the Borrower is not in breach of any express or
implied representation or warranty with respect to the goods the sale of which
gave rise to such Receivable; (h) the Account Debtor with respect to such
Receivable is not insolvent or the subject of any bankruptcy or insolvency
proceedings of any kind or of any other proceeding or action, threatened or
pending, which might, in the Lender's sole judgment, have a Materially Adverse
Effect on such Account Debtor; (i) the goods the sale of which gave rise to such
Receivable were shipped or delivered to the Account Debtor on an absolute sale
basis and not on a xxxx and hold sale basis, a consignment sale basis, a
guaranteed sale basis, a sale or return basis or on the basis of any other
similar understanding, and such goods have not been returned or rejected; (j)
such Receivable is not owing by an Account Debtor who or along with a group of
affiliated Account Debtors has then-existing accounts owing to the Borrower
which exceed in face amount 15 % of the Borrower's total Eligible Receivables;
(k) such Receivable is evidenced by an invoice or other documentation in form
acceptable to the Lender containing only terms normally offered by the Borrower.
and dated no later than the date of shipment; (l) such Receivable is a valid,
legally enforceable obligation of the Account Debtor with respect thereto and is
not subject to any present, or contingent (and no facts exist which are the
basis for any future), offset (other than any offset waived on terms
satisfactory to the Lender in its sole discretion), deduction or counterclaim,
dispute or other defense on the part of such Account Debtor; (m) such Receivable
is not evidenced by chattel paper or an instrument of any kind, unless such
chattel paper or instrument has been delivered and endorsed and/or assigned to
the Lender; W if such Receivable arises from the performance of services, such
services have been fully performed; and (o) such Receivable is subject to the
Security Interest, which is perfected as to such Receivable, and is subject to
no other Lien whatsoever other than a Permitted Lien and the goods giving rise
to such Receivable were not, at the time of the sale thereof, subject to any
Lien other than a Permitted Lien.
"Environmental Laws" means all federal, state, local and foreign laws
now or hereafter in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitations ambient air, surface water, ground water or land) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport or handling of pollutants, contaminants, chemicals
or industrial. toxic or hazardous substances or wastes, and any and all
regulations, notices or demand letters issued, entered, promulgated or approved
thereunder.
5
11
"Equipment" means and includes, as to any Person, all of such Person's
then owned or existing and future acquired or arising machinery, apparatus,
equipment, motor vehicles, tractors, trailers, rolling stock, fittings, and
other tangible personal property (other than Inventory) of every kind and
description used in such Person's business operations or owned by such Person or
in which such Person has an interest and all parts, accessories and special
tools and all increases and accessions thereto and substitutions and
replacements therefor.
"Escrow Account" means the escrow account established pursuant to the
Ameridata Sale Agreement for the payment of certain post-closing adjustments, as
set forth in the Ameridata Sale Agreement and the Escrow Account Agreement.
"Escrow Account Agreement" means the escrow account agreement between
the Borrower and Ameridata and escrow agent, entered into pursuant to the
Ameridata Sale Agreement with respect to the payment of certain post-closing
adjustments.
"Event of Default" means any of the events specified in SECTION 11.1.
"Financing Statements" means the Uniform Commercial Code financing
statements executed and delivered by the Borrower to the Lender, naming the
Lender as secured party and the Borrower as debtor, in connection with this
Agreement.
"GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and consistent with the
prior financial practice of the Person referred to.
"General Intangibles" means, as to any Person, all of such Person's then
owned or existing and future acquired or arising general intangibles, choses in
action and causes of action and all other intangible personal property of such
Person of every kind and nature (other than Receivables), including, without
limitation, Intellectual Property, corporate or other business records,
inventions, designs, blueprints, plans, specifications, trade secrets, goodwill,
computer software, customer lists, registrations, licenses, franchises, tax
refund claims, reversions or any rights thereto and any other amounts payable to
such Person from any Benefit Plan, Multiemployer Plan or other employee benefit
plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds thereof, proceeds of
insurance covering the lives of key employees on which such Person is
beneficiary and any letter of credit, guarantee, claims, security interest or
other security held by or granted to such Person to secure payment by an Account
Debtor of any of the Receivables.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
governmental bodies, whether federal, state, local, foreign national or
provincial, and all agencies thereof.
"Governmental Authority" means any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Guaranty", "Guaranteed" or to "Guarantee," as applied to any obligation
of another Person shall mean and include
(a) a guaranty (other than by endorsement of negotiable instruments
for collection in the ordinary course of business), directly or indirectly, in
any manner, of any part or all of such obligation of such other Person, and
6
12
(b) an agreement, direct or indirect, contingent or otherwise, and
whether or not constituting a guaranty, the practical effect of which is to
assure the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation of such other Person
whether by (i) the purchase of securities or obligations, (ii) the purchase,
sale or lease (as lessee or lessor) of property or the purchase or sale of
services primarily for the purpose of enabling the obligor with respect to such
obligation to make any payment or performance (or payment of damages in the
event of nonperformance) of or on account of any part or all of such obligation
or to assure the owner of such obligation against loss, (iii) the supplying of
funds to, or in any other manner investing in, the obligor with respect to such
obligation, (iv) repayment of amounts drawn down by beneficiaries of letters of
credit, or (v) the supplying of funds to or investing in a Person on account of
all or any part of such Person's obligation under a guaranty of any obligation
or indemnifying or holding harmless, in any way, such Person against any part or
all of such obligation.
"Indebtedness" of any Person means, without duplication, (a)
Liabilities, (b) all obligations for money borrowed or for the deferred purchase
price of property or services or in respect of reimbursement obligations under
letters of credit, (c) all obligations represented by bonds, debentures, notes
and accepted drafts that represent extensions of credit, (d) Capitalized Lease
Obligations, (e) all obligations (including, during the noncancellable term of
any lease in the nature of a tide retention agreement, all future payment
obligations under such lease discounted to their present value in accordance
with GAAP) secured by any Lien to which any property or asset owned or held by
such Person is subject, whether or not the obligation secured thereby shall have
been assumed by such Person, (f) all obligations of other Persons which such
Person has Guaranteed, including, but not limited to, all obligations of such
Person consisting of recourse liability with respect to accounts receivable sold
or otherwise disposed of by such Person, and (g) in the case of the Borrower
(without duplication) the Loans.
"Indemnification Agreement" means the Indemnification Agreement, dated
as of the Effective Date, between the Borrower and the Lender, pursuant to which
the Borrower agrees to indemnify the Lender for certain matters related to
Florida documentary stamp taxes.
"Initial Loans" means the Revolving Credit Loan and the Term Loan made
to the Borrower on the Effective Date.
"Intellectual Property" means, as to any Person, all of such Person's
then owned existing and future acquired or arising patents, patent rights,
copyrights, works which are the subject of copyrights, trademarks, service
marks, trade names, trade styles, patent, trademark and service xxxx
applications, and all licenses and rights related to any of the foregoing and
all other rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations and continuations-in-part of any of the foregoing and
all rights to xxx for past, present and future infringements of any of the
foregoing.
"Interbank Offered Rate" means, with respect to any LIBOR Loan for the
Interest Period applicable thereto, the average (rounded upward to the nearest
one-sixteenth (1/16) of one percent) per annum rate of interest determined by
the Lender (each such determination to be conclusive and binding absent manifest
error) as of two Business Days prior to the first day of such Interest Period
from Telerate Page 3750 as the effective rate at which deposits in immediately
available funds in Dollars are being offered or quoted to major banks in the
interbank market for eurodollar deposits for a term comparable to such Interest
Period and in the amount of the LIBOR Loan. If such rate is unavailable from
such service, then such rate may be determined by the Lender from any other
interest rate reporting service of recognized standing that the Lender shall
select.
"Intercreditor Agreement" means that certain Intercreditor Agreement,
dated on or about the Effective Date, between the Lender and NationsCredit,
pursuant to which the Lender and NationsCredit agree upon the relative
priorities of their Liens in the Collateral.
7
13
"Interest Expense" means interest on Indebtedness during the period for
which computation is being made, excluding (a) the amortization of fees and
costs incurred with respect to the closing of loans which have been capitalized
as transaction costs, and (b) interest paid in kind.
"Interest Payment Date" means the first day of each calendar month
commencing on January 1, 1997 and continuing thereafter until the Secured
Obligations have been irrevocably paid in full.
"Interest Period" means, with respect to each LIBOR Loan, the period
commencing on the date of the making or continuation of or conversion to such
LIBOR Loan and ending one, two, three or six months thereafter, as the Borrower
may elect in the applicable Notice of Borrowing or Notice of Conversion or
Continuation; PROVIDED, that:
(a) any Interest Period that would otherwise end on a day
that is not a Business Day shall, subject to the provisions of CLAUSE
(c) below, be extended to the next succeeding Business Day unless such
Business Day falls in the next calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day;
(b) any Interest 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 Interest
Period) shall, subject to CLAUSE (c)below, end on the last Business Day
of a calendar month;
(c) any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date;
(d) no Interest Period applicable to a LIBOR Tenn Loan may
end after the scheduled maturity thereof; and
(e) notwithstanding CLAUSE (c)above, no Interest Period
shall have a duration of less than one month, and, if any applicable
Interest Period would be for a shorter period, such Interest Period
shall not be available hereunder.
"Inventory" means and includes, as to any Person, all of such Person's
then owned or existing and future acquired or arising (a) goods intended for
sale or lease or for display or demonstration, (b) work in process, ((C)raw
materials and other materials and supplies of every nature and description used
or which might be used in connection with the manufacture, packing, shipping,
advertising, selling, leasing or furnishing of goods or otherwise used or
consumed in the conduct of business, and (d) documents evidencing and general
intangibles relating to any of the foregoing.
"Inventory Financing Agreement" means that certain Loan and Security
Agreement, dated as of the Agreement Date, between the Borrower and
NationsCredit.
"Investment" means, with respect to any Person: (a) the direct or
indirect purchase or acquisition of any beneficial interest in, any share of
capital stock of, evidence of Indebtedness of or other security issued by any
other Person, (b) any loan, advance or extension of credit to, or contribution
to the capital of, any other Person, excluding advances to employees in the
ordinary course of business for business expenses, (c)any Guaranty of the
obligations of any other Person, or (d) any commitment or option to take any of
the actions described in CLAUSES (a), (b) or (c)above.
"Lender" means NATIONSBANK, N.A. (South), a national banking
association, and its successors and as
8
14
"Lender's Office" means the office of the Lender specified in or
determined in accordance with the provisions of SECTION 12.1(c).
"Letter of Credit" means any letter of credit issued by the Lender for
the account of the Borrower.
"Letter of Credit Reserve" means, at any time, 100% of the sum of (i)
the aggregate undrawn amount of all Letters of Credit outstanding at such time,
PLUS (ii) the aggregate amount of all drawings under Letters of Credit for which
the Lender has not been reimbursed.
"Liabilities" means all liabilities of a Person determined in accordance
with GAAP and includable on a balance sheet of such Person prepared in
accordance with GAAP.
"LIBOR" means, with respect to the Interest Period applicable thereto, a
simple per annum interest rate determined pursuant to the following formula:
LIBOR = Interbank Offered Rate
------------------------------------------
1 - LIBOR Reserve Percentage
LIBOR shall be adjusted automatically as of the effective date of any change in
the LIBOR Reserve Percentage.
"LIBOR Loan" means a LIBOR Revolving Credit Loan or a LIBOR Term Loan.
"LIBOR Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect from time to time under Regulation D
of the Board of Governors of the Federal Reserve System, as such regulation may
be amended from time to time, or any successor regulation, as the maximum
reserve requirement (including, without limitation, any basic, supplemental,
emergency, special or marginal reserves) applicable to any member bank with
respect to Eurocurrency liabilities as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by reference to
which the interest rate of any LIBOR Loan is determined), whether or not Lender
has any Eurocurrency liabilities subject to such reserve requirement at that
time. All LIBOR Loans shall be deemed to constitute Eurocurrency liabilities and
as such shall be deemed subject to reserve requirements without the benefit of
credits for proration, exceptions or offsets that may be available from time to
time to Lender.
"LIBOR Revolving Credit Loan" means any Revolving Credit Loan bearing
interest at the time in question determined with reference to LIBOR.
"LIBOR Term Loan" means that portion of the unpaid principal amount of
the Term Loan bearing interest at the time in question determined with reference
to LIBOR.
"Lien" as applied to the property of any Person means: (a) any mortgage,
died to secure debt, deed of trust, lien, pledge, charge, lease constituting a
Capitalized Lease Obligation, conditional sale or other tide retention
agreement, or other security interest, security tide or encumbrance of any kind
in respect of any property of such Person or upon the income or profits
therefrom, (b) any arrangement, express or implied, under which any property of
such Person is transferred, sequestered or otherwise identified for the purpose
of subjecting the same to the payment of Indebtedness or performance of any
other obligation in priority to the payment of the general, unsecured creditors
of such Person, (C) any Indebtedness which is unpaid more than 30 days after the
same shall have become due and payable and which if unpaid might by law
(including, but not limited to, bankruptcy and insolvency laws) or otherwise be
given any priority whatsoever over general unsecured creditors of such Person,
and (d) the filing of, or any agreement to give, any financing statement under
the UCC or its equivalent in any jurisdiction.
9
15
"Loan" means any Revolving Credit Loan or the Term Loan, as well as all
such Loans collectively.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Security Documents and each other instrument, agreement and document executed
and delivered by the Borrower in connection with this Agreement and each other
instrument, agreement or document referred to herein or contemplated hereby.
"Lockbox" means the U.S. Post Office Box(es) specified in, or pursuant
to, an Agency Account Agreement.
"Materially Adverse Effect" means any act, omission, event or
undertaking which would, singly or in the aggregate, have a materially adverse
effect upon (a) the business, assets, properties, liabilities, condition
(financial or otherwise), results of operations or business prospects of the
Borrower or any of its Subsidiaries, (b) upon the respective ability of the
Borrower or any of its Subsidiaries to perform any obligations under this
Agreement or any other Loan Document to which it is a party, or (C) the
legality, validity, binding effect, enforceability or admissibility into
evidence of any Loan Document or the ability of Lender to enforce any rights or
remedies under or in connection with any Loan Document; in any case, whether
resulting from any single act, omission, situation, status, event, or
undertaking, together with other such acts, omissions, situations, statuses,
events, or undertakings .
"Money Borrowed" means, as applied to Indebtedness, (a) Indebtedness for
money borrowed, (b) Indebtedness, whether or not in any such case the same was
for money borrowed, (i) represented by notes payable and drafts accepted, that
represent extensions of credit, (ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid (other than trade Indebtedness) or that was issued
or assumed as full or partial payment for property, (c) Indebtedness that
constitutes a Capitalized Lease Obligation, and (d) Indebtedness that is such by
virtue of CLAUSE (f) of the definition thereof, but only to the extent that the
obligations Guaranteed are obligations that would constitute Indebtedness for
Money Borrowed.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or a Related Company is required to
contribute or has contributed within the immediately preceding 6 years.
"NationsCredit" means NationsCredit Commercial Corporation of America, a
North Carolina corporation, and its successors and assigns.
"Net Income" or "Net Loss" means, as applied to any Person, the net
income (or net loss) of such Person for the period in question after giving
effect to deduction of or provision for all operating expenses, all taxes and
reserves (including reserves for deferred taxes and all other proper
deductions), all determined in accordance with GAAP, provided that there shall
be excluded: (a) the net income (or net loss) of any Person accrued prior to the
date it becomes a Subsidiary of, or is merged into or consolidated with, the
Person whose Net Income is being determined or a Subsidiary of such Person, (b)
the net income (or net loss) of any Person in which the Person whose Net Income
is being determined or any Subsidiary of such Person has an ownership interest,
except, in the case of net income, to the extent that any such income has
actually been received by such Person or such Subsidiary in the form of cash
dividends or similar distributions, (c) any restoration of any contingency
reserve, except to the extent that provision for such reserve was made out of
income during such period, (d) any net gains or losses on the sale or other
disposition, not in the ordinary course of business, of Investments, Business
Units and other capital assets, provided that there shall also be excluded any
related charges for taxes thereon, (e) any net pin arising from the collection
of the proceeds of any insurance policy, (f) any write-up of any asset, and (g)
any other extraordinary item.
10
16
"Net Worth" of any Person means the total shareholders' equity
(including capital stock, additional paid-in capital and retained earnings,
after deducting treasury stock) which would appear as such on a balance sheet of
such Person prepared in accordance with GAAP.
"Note" means each of the Revolving Credit Note and the Term Note, and
"Notes" means more than one of such notes.
"Notice of Borrowing" has the meaning set forth in SECTION 2A.2(a)(iii).
"Notice of Conversion or Continuation" has the meaning set forth in
SECTION 3.3.
"Obligor" means the Borrower, each party to the Security Documents
(other than the Lender), and each other party at any time primarily or
secondarily, directly or indirectly, liable on any of the Secured Obligations.
"Operating Lease" means any lease (other than a lease constituting a
Capitalized Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Permitted Indebtedness for Money Borrowed" means (a) Permitted Purchase
Money Indebtedness, (b) Indebtedness to NationsCredit under the Inventory
Financing Agreement, (C) Subordinated Indebtedness, and (d) Indebtedness owing
to Xxxxxxx Bank of Pinellas County as set forth on the SCHEDULE 5.1(I) delivered
on the Effective Date.
"Permitted Investments" means Investments of the Borrower in: (a)
negotiable certificates of deposit, time deposits and banker's acceptances
issued by the Lender or any Affiliate of the Lender or by any United States bank
or trust company having capital, surplus and undivided profits in excess of
$250,000,000, (b) any direct obligation of the United States of America or any
agency or instrumentality thereof which has a remaining maturity at the time of
purchase of not more than one year and repurchase agreements relating to the
same, (C) sales on credit in the ordinary course of business on terms customary
in the industry, and (d) notes, accepted in the ordinary course of business,
evidencing overdue accounts receivable arising in the ordinary course of
business.
"Permitted Liens" means: (a) Liens securing taxes, assessments and other
governmental charges or levies (excluding any Lien unposed pursuant to any of
the provisions of ERISA) or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, but (i) in all cases, only if payment shall not
at the time be required to be made in accordance with SECTION 8.4, and (ii) in
the case of warehousemen or landlords controlling locations where Inventory is
located, only if such liens have been waived or subordinated to the Security
Interest in a manner satisfactory to the Lender; (b) Liens consisting of
deposits or pledges made in the ordinary course of business in connection with,
or to secure payment of, obligations under workers' compensation, unemployment
insurance or similar legislation or under surety or performance bonds, in each
case arising in the ordinary course of business; (c) Liens constituting
encumbrances in the nature of zoning restrictions, easements and rights or
restrictions of record on the use of the Borrower's real estate, which in the
sole judgment of the Lender do not materially detract from the value of such
real estate or impair the use thereof in the business of the Borrower; (d)
Purchase Money Liens securing Permitted Purchase Money Indebtedness; (e) Liens
in favor of NationsCredit as collateral for the Borrower's obligations under the
Inventory Financing Agreement, provided such Liens shall be subordinate to the
Security Interest except as provided in the Intercreditor Agreement; (f) Liens
of the Lender arising under this Agreement and the other Loan Documents; (g)
Liens arising out of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of
11
17
which shall not have expired, or in respect of which the Borrower is fully
protected by insurance or in respect of which the Borrower shall at any time in
good faith be prosecuting an appeal or proceeding for a review and in respect of
which a stay of execution pending such appeal or proceeding for review shall
have been secured, and as to which appropriate reserves have been established on
the books of the Borrower; and (h) Liens in favor of Xxxxxxx Bank of Pinellas
County, in the Borrower's property described on SCHEDULE 1.1A, as security for
the Indebtedness described in clause (d) of the definition of Permitted
Indebtedness for Money Borrowed.
"Permitted Purchase Money Indebtedness" means Purchase Money
Indebtedness secured only by Purchase Money Liens and Capitalized Lease
Obligations, incurred by the Borrower after the Agreement Date, up to an
aggregate amount outstanding at any time equal to $2,000,000.
"Person" means an individual, corporation, partnership, association,
trust or unincorporated organization or a government or any agency or political
subdivision thereof.
"Prime Rate" means during the period from the Effective Date through the
last day of the month in which the Effective Date falls, the per annum rate of
interest publicly announced by the Lender at its principal office as its "prime
rate" as in effect on the Effective Date, and thereafter during each succeeding
calendar month, means such "prime rate" as in effect on the last Business Day of
the immediately preceding calendar month. Any change in an interest rate
resulting from a change in the Prime Rate shall become effective as of 12:01
a.m. on the first day of the month following the month in which such change was
announced. The Prime Rate is a reference used by the Lender in determining
interest rates on certain loans and is not intended to be the lowest rate of
interest charged on any extension of credit to any debtor.
"Prime Rate Loan" means a Prime Rate Revolving Credit Loan or a Prime
Rate Term Loan.
"Prime Rate Revolving Credit Loan" means a Revolving Credit Loan bearing
interest at the time in question determined with reference to the Prime Rate.
"Prime Rate Term Loan" means that portion of the unpaid principal amount
of the Term Loan bearing interest at the time in question determined with
reference to the Prime Rate.
"Purchase Money Indebtedness" means Indebtedness created to finance the
payment of all or any pan of the purchase price (not in excess of the fair
market value thereof) of any tangible asset (other than Inventory) and incurred
at the time of or within 10 days prior to or after the acquisition of such
tangible asset.
"Purchase Money Lien" means any Lien securing Purchase Money
Indebtedness, but only if such Lien shall at all times be confined solely to the
tangible asset (other than Inventory) the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such Lien.
"Receivables" means and includes, as to any Person, all of such Person's
then owned or existing and future acquired or arising (a) rights to the payment
of money or other forms of consideration of any kind (whether classified under
the UCC as accounts, contract rights. chattel paper, general intangibles or
otherwise) including, but not limited to, accounts receivable, letters of credit
and the right to receive payment the Escrow Account and the right to receive
payments thereunder, chattel paper, tax refunds, insurance proceeds, Contract
Rights, notes, drafts, instruments, documents, acceptances and all other debts,
obligations and liabilities in whatever form from any Person and guaranties,
security and Liens securing payment thereof. (b) goods, whether now owned or
hereafter acquired, and whether sold, delivered, undelivered, in transit or
returned, which may be represented by, or the sale or lease of which may have
given rise to, any such right to payment or other debt, obligation or liability,
and (c) cash and non-cash proceeds of any of the foregoing.
12
18
"Related Company" means, as to any Person, any (a) corporation which is
a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as such Person, (b) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(C) of the Code) with such Person, or (C) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
such Person or any corporation described in CLAUSE (a) above or any partnership,
trade or business described in CLAUSE (b) above.
"Restricted Distribution" by any Person- means (a) its retirement,
redemption, purchase, or other acquisition for value of any capital stock or
other equity securities or partnership interests issued by such Person, (b) the
declaration or payment of any dividend or distribution on or with respect to any
such securities or partnership interests, (C) any loan or advance by such Person
to, or other investment by such Person in, the holder of any of such securities
or partnership interests, and (d) any other payment by such Person in respect of
such securities or partnership interests.
"Restricted Payment" means (a) any redemption, repurchase or prepayment
or other retirement, prior to the stated maturity thereof or prior to the due
date of any regularly scheduled installment or amortization payment with respect
thereto, of any Indebtedness of a Person (other than the Secured Obligations,
obligations under the Inventory Financing Agreement and trade debt), and (b) the
payment by any Person of the principal amount of or interest on any Subordinated
Indebtedness or on any Indebtedness (other than trade debt) owing to an
Affiliate of such Person.
"Revolving Credit Facility" means the facility for the Revolving Credit
Loans in the principal sum of up to $24,000,000.
"Revolving Credit Loans" means loans made to the Borrower pursuant to
SECTION 2A.1.
"Revolving Credit Note" means the Revolving Credit Note made by the
Borrower payable to the order of the Lender evidencing the obligation of the
Borrower to pay the aggregate unpaid principal amount of all Revolving Credit
Loans made to it by the Lender (and any promissory note or notes that may be
issued from time to time in substitution, renewal, extension, replacement or
exchange therefor, whether payable to the Lender or a different lender, whether
issued in connection with a Person becoming a tender after the Effective Date or
otherwise), substantially in the form of EXHIBIT A-1 hereto, with all blanks
properly completed.
"Sale Agreements" means the Vanstar Sale Agreement and the Ameridata
Sale Agreement.
"Schedule of Equipment" means a schedule delivered by the Borrower to
the Lender pursuant to the provisions of SECTION 7.14(c).
"Schedule of Inventory" means a schedule delivered by the Borrower to
the Lender pursuant to the provisions of SECTION 7.14(b).
"Schedule of Receivables" means a schedule delivered by the Borrower to
the Lender pursuant to the provisions of SECTION 7.14(a).
"Secured Obligations" means, in each case whether now in existence or
hereafter arising, (a) the principal of and interest and premium, if any, on the
Loans, (b) all reimbursement and other obligations relating to Letters of
Credit, and (c) all indebtedness, liabilities, obligations, overdrafts,
covenants and duties of the Borrower to the Lender or any Affiliate of the
Lender of every kind, nature and description. direct or indirect. absolute or
contingent, due or not due, contractual or tortious, liquidated, or
unliquidated, and whether or not evidenced by any note and whether or not for
the payment of money under or in respect of this Agreement, any Note or any of
the other Loan Documents.
13
19
"Security Documents" means each of (a) the Financing Statements, and (b)
each other writing executed and delivered by any Person securing the Secured
Obligations or evidencing such security.
"Security Interest" means the Liens of the Lender on and in the
Collateral effected hereby or by any of the Security Documents or pursuant to
the terms hereof or thereof.
"Senior Funded Indebtedness" means the Loans, all indebtedness under the
Inventory Financing Agreement and all Indebtedness for Money Borrowed having a
maturity of more than 12 months from the date of the most recent balance sheet
of the Borrower or having a maturity of less than 12 months from the date of
such balance sheet but by its terms being renewable or extendible beyond 12
months from the date of such balance sheet at the option of the Borrower,
excluding, however, Subordinated Indebtedness.
"Subordinated Indebtedness" means (a) the "earn-out" payments
due National Data Products, Inc. under Section 2.2 of the Asset Purchase
Agreement dated as of November 17, 1994 among the Borrower, National Data
Products, Inc. and the Shareholder Indemnitors named therein and the
Indebtedness evidenced by the Subordinated Notes which is subordinated to the
Secured Obligations as set forth in the Subordination Agreements, and (b) any
other Indebtedness for Money Borrowed of the Borrower which is subordinated to
the Secured Obligations on terms and conditions acceptable to the Lender in its
sole discretion.
"Subordinated Notes" means those certain promissory notes in the form of
EXHIBIT C attached hereto, with respect to which the outstanding principal
balances as of the Effective Date are set forth on SCHEDULE 5.1(i) attached
hereto.
"Subordination Agreements" means the subordination agreements, in form
and substance acceptable to the Lender, pursuant to which the Indebtedness
evidenced by the Subordinated Notes is subordinated to the Secured Obligations.
"Subsidiary" when used to determine the relationship of a Person to
another Person, means a Person of which an aggregate of 50% or more of the stock
of any class or classes or 50% or mom of other ownership interests is owned of
record or beneficially by such other Person or by one or more Subsidiaries of
such other Person or by such other Person and one or more Subsidiaries of such
Person, (i) if the holders of such stock or other ownership interests (A) are
ordinarily, in the absence of contingencies, entitled to vote for the election
of a majority of the directors (or other individuals performing similar
functions) of such Person, even though the right so to vote has been suspended
by the happening of such a contingency, or (B) are entitled, as such holders, to
vote for the election of a majority of the directors (or individuals performing
similar functions) of such Person, whether or not the right so to vote exists by
xxxxx of the happening of a contingency, or (ii) in the case of such other
ownership interests, if such ownership interests constitute a majority voting
interest.
"Tangible Net Worth" means, as applied to any Person, the Net Worth of
such Person at the time in question, after deducting therefrom the amount of all
intangible items reflected therein, including all unamortized debt discount and
expense, unamortized research and development expense, unamortized deferred
charges, goodwill, Intellectual Property, unamortized excess cost of investment
in Subsidiaries over equity at dates of acquisition, and all similar items which
should properly be treated as intangibles in accordance with GAAP.
"Tax Refund Claim" means the Borrower's claim for a refund with respect
to its fiscal year ended March 31, 1996.
"Term Loan" means the loan made to the Borrower pursuant to SECTION 2B.1
14
20
"Term Note" means the Term Note made by the Borrower payable to the
order of the Lender evidencing the obligation of the Borrower to pay the
aggregate unpaid principal amount of the Term Loan made to it by the Lender (and
any promissory note or notes that may be issued from time to time in
substitution, renewal, extension, replacement or exchange therefor, whether
payable to the Lender or a different lender, whether issued in connection with a
Person becoming a lender after the Effective Date or otherwise), substantially
in the form of EXHIBIT A-2 hereto, with all blanks properly completed.
"Termination Date" means the earlier of December 17, 1998 or such later
date to which the termination of the Revolving Credit Facility shall be extended
pursuant to SECTION 2A.5.
"Termination Event" means (a) a "Reportable Event" as defined in Section
4043(b) of ERISA, but excluding any such event as to which the provision for 30
days' notice to the PBGC is waived under applicable regulations, (b) the filing
of a notice of intent to terminate a Benefit Plan or the treatment of a Benefit
Plan amendment as a termination under Section 4041 of ERISA, or (C) the
institution of proceedings to terminate a Benefit Plan by the PBGC under Section
4042 of ERISA or the appointment of a trustee to administer any Benefit Plan.
"Type" means, with respect to a Loan, its classification as a LIBOR Loan
or Prime Rate Loan.
"Vanstar" means, collectively, Vanstar Corporation, a Delaware
Corporation, and VST West, Inc., a Delaware corporation, and their successors
and assigns.
"Vanstar Payments" means all amounts payable to the Borrower by Vanstar,
pursuant to Section 2.6 of the Vanstar Sale Agreement, with respect to certain
post-closing adjustments thereunder.
"Vanstar Sale Agreement" means the Asset Purchase Agreement dated May
24, 1996 between Vanstar, Borrower and Dataflex Southwest corporation, an
Arizona corporation, as amended from time to time.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of Georgia.
"Unfunded Vested Accrued Benefits' means, with respect to any Benefit
Plan at any time, the amount (if any) by which (a) the present value of all
vested nonforfeitable benefits under such Benefit Plan exceeds (b) the fair
market value of all Benefit Plan assets allocable to such benefits, as
determined using such reasonable actuarial assumptions and methods as are
specified in the Schedule B (Actuarial Information) to the most recent Annual
Report (Form 5500) filed with respect to such Benefit Plan.
Section 1.2 Other Referential Provisions.
(a) All terms in this Agreement, the Exhibits and Schedules hereto
shall have the same defined meanings when used in any other Loan Documents,
unless the context shall require otherwise.
(b) Except as otherwise expressly provided herein, all accounting
terms not specifically defined or specified herein shall have the meanings
generally attributed to such terms under GAAP including, without limitation,
applicable statements and interpretations issued by the Financial Accounting
Standards Board and bulletins, opinions, interpretations and statements issued
by the American Institute of Certified Public Accountants or its committees.
(c) All personal pronouns used in this Agreement, whether used in
the masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural, and the plural shall include the singular.
15
21
(d) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provisions of this Agreement.
(e) Titles of Articles and Sections in this Agreement are for
convenience only, do not constitute part of this Agreement and neither limit nor
amplify the provisions of this Agreement, and all references in this Agreement
to Articles, Sections, Subsections, paragraphs, clauses, subclauses, Schedules
or Exhibits shall refer to the corresponding Article, Section, Subsection,
paragraph, clause or subclause of, or Schedule or Exhibit attached to, this
Agreement, unless specific reference is made to the articles, sections or other
subdivisions or divisions of, or to schedules or exhibits to, another document
or instrument.
(f) Each definition of a document in this Agreement shall include
such document as amended, modified, supplemented or restated from time to time
in accordance with the terms of this Agreement.
(g) Except where specifically restricted, reference to a party to a
Loan Document includes that party and its successors and assigns permitted
hereunder or under such Loan Document.
(h) Unless otherwise specifically stated, whenever a time is
referred to in this Agreement or in any other Loan Document, such time shall be
the local time in the city in which the principal office of Lender is located.
(i) Whenever the phrase "to the knowledge of the Borrower" or words
of similar import relating to the knowledge of the Borrower are used herein,
such phrase shall mean and refer to (i) the actual knowledge of the President or
chief financial officer or (ii) the knowledge that such officers would have
obtained if they had engaged in good faith in the diligent performance of their
duties, including the making of such reasonable specific inquiries as may be
necessary of the appropriate persons in a good faith attempt to ascertain the
accuracy of the matter to which such phrase relates.
(j) The terms accounts, chattel paper, documents, equipment,
instruments, general intangibles and inventory, as and when used (without being
capitalized) in this Agreement or the Security Documents, shall have the
meanings given those terms in the UCC.
Section 1.3 Exhibits and Schedules. All Exhibits and Schedules
attached hereto are by reference made a part hereof.
ARTICLE 2 - REVOLVING CREDIT FACILITY
A. REVOLVING CREDIT FACILITY
Section 2A.1 Revolving Credit Loans. Upon the terms and subject to
the conditions of, and in reliance upon the representations and warranties made
under, this Agreement, the Lender shall make Revolving Credit Loans to the
Borrower from time to time from the Effective Date to the Termination Date, as
requested by the Borrower in accordance with the terms of SECTION 2A.2, in an
aggregate principal amount outstanding not to exceed at any time the LESSER OF
(a) the Revolving Credit Facility MINUS the Letter of Credit Reserve AND (b) the
Borrowing Base. It is expressly understood and agreed that the Lender may and at
present intends to use the lesser of the amounts referred to in the foregoing
SUBCLAUSE (A) and (B) as a maximum ceiling on Revolving Credit Loans; PROVIDED,
HOWEVER, that it is agreed that should Revolving Credit Loans exceed the ceiling
so determined or any other limitation set forth in this Agreement, such
Revolving Credit Loans shall nevertheless constitute Secured Obligations and, as
such, shall be entitled to all benefits thereof and security therefor. The
principal amount of any Revolving Credit Loan which is repaid may be reborrowed
by the Borrower in accordance with the terms of this SECTION 2A.1. The Lender is
hereby authorized to record each
16
22
repayment of principal of the Revolving Credit Loans in its books and records,
such books and records constituting PRIMA FACIE evidence of the accuracy of the
information contained therein.
Section 2A.2 Manner of Borrowing Revolving Credit Loans. Borrowings
of the Revolving Credit Loans shall be made as follows:
(a) Requests for Borrowing.
(i) Prime Rate Revolving Credit Loans. A request for the
borrowing of a Prime Rate Revolving Credit Loan shall be made, or shall
be deemed to be made, in the following manner:
(A) the Borrower may request a Prime Rate Revolving
Credit Loan by notifying the Lender, before 12:00 noon (Eastern
time) on the proposed borrowing date, of its intention to
borrow, specifying the effective date and amount of such
proposed Prime Rate Revolving Credit Loan;
(B) whenever a check is presented to the Lender for
payment against the Disbursement Account in an amount greater
than the then available balance in such account, such
presentation shall be deemed to be a request for a Prime Rate
Revolving Credit Loan on the date of such notice in an amount
equal to the excess of such check over such available balance,
and such request shall be irrevocable;
(C) unless payment is otherwise made by the
Borrower, the becoming due of any amount required to be paid
under this Agreement or any of the Notes as interest shall be
deemed to be a request for a Prime Rate Revolving Credit Loan on
the due date in the amount required to pay such interest, and
such request shall be irrevocable;
(D) unless payment is otherwise made by the
Borrower, the maturity of any Secured Obligation required to be
paid shall be deemed to be a request for a Prime Rate Revolving
Credit Loan on the due date in the amount required to pay such
Secured Obligation, and such request shall be irrevocable;
(E) whenever a drawing is made under a Letter of
Credit and the Borrower fails to reimburse the Lender therefor,
such failure to reimburse shall be deemed to be a request for a
Prime Rate Revolving Credit Loan on the date such notification
is received in the amount so unreimbursed; and
(F) any payment to NationsCredit pursuant to Section
9 of the Intercreditor Agreement shall be deemed to be a request
for a Prime Rate Revolving Credit Loan on the date of such
payment.
(ii) LIBOR Revolving Credit Loans. The Borrower may request a
LIBOR Revolving Credit Loan by notifying the Lender (which notice shall
be irrevocable) not later than 12:00 noon (Eastern time) on the date two
Business Days before the day on which the requested LIBOR Revolving
Credit Loan is to be made, specifying the effective date and amount of
such LIBOR Revolving Credit Loan and the duration of the applicable
Interest Period.
(iii) Notice of Borrowing. Any request for a Prime Rate
Revolving Credit Loan under SECTION 2A.2(A)(I)(A) or a LIBOR Revolving
Credit Loan under SECTION 2A.2(A)(II) (a "Notice of Borrowing") shall be
made by telephone or in writing (including telecopy) and, in the case of
any telephonic notice, shall be immediately followed by a written
confirmation thereof in a form acceptable
17
23
to the Lender, PROVIDED that the failure to provide written
confirmation shall not invalidate any telephonic notice and, if such
written confirmation differs in any respect from the action taken by
the Lender, the records of the Lender shall control absent manifest
error.
(b) Disbursement of Loans. The Borrower hereby irrevocably
authorizes the Lender to disburse the proceeds of each borrowing requested, or
deemed to be requested, pursuant to this on 2A.2 as follows: (I) the proceeds of
each borrowing requested under SECTION 2A.2(a)(1)(A) or (B) or SECTION 2A.2(ii)
shall be disbursed by the Lender in lawful money of the United States of America
in immediately available funds, (A) in the case of the initial borrowing, in
accordance with the terms of the written instructions from the Borrower to the
Lender, and (B) in the case of each subsequent borrowing, by credit to the
Disbursement Account or to such other account as may be agreed upon by the
Borrower and the Lender from time to time; and (ii) the proceeds of each
borrowing requested under SECTION 2A.2(a)(I)(C), (D), (E) or (F) shall be
disbursed by the Lender by way of direct payment of the relevant principal,
interest or other Secured Obligation, as the case may be.
Section 2A.3 The Revolving Credit Loans will be repaid as follows:
(a) whether or not any Default or Event of Default has occurred, the outstanding
principal amount of all the Revolving Credit Loans is due and payable, and shall
be repaid by the Borrower in full together with accrued and unpaid interest on
the amount repaid to the date of repayment, on the Termination Date; (b) if at
any time the aggregate unpaid principal amount of the Revolving Credit Loans
then outstanding exceeds the lesser of the amounts referred to in CLAUSES (a)
and (b) of SECTION 2A.1, the Borrower shall repay the Revolving Credit Loans in
an amount sufficient to reduce the aggregate unpaid principal amount of such
Loans by an amount equal to such excess, together with accrued and unpaid
interest on the amount repaid to the date of repayment; and (C) the Borrower
hereby instructs die Leader to repay the Revolving Credit Loans outstanding on
any day in an amount equal to the amount received by the Lender on such day
pursuant to Section 7.1(b).
Section 2A.4 Revolving Credit Note. The Revolving Credit Loans and
the obligation of the Borrower to repay such Loans shall also be evidenced by a
single Revolving Credit Note payable to the order of the Lender. Such Note shall
be dated the Effective Date and be duly and validly executed and delivered by
the Borrower.
Section 2A.5 Extension of Facility. The Termination Date shall be
automatically extended for successive one-year periods unless either the Lender
or the Borrower provides to the other written notice of termination not less
than 60 days prior to the then effective Termination Date.
B. TERM LOAN FACILITY
Section 2B.1 Term Loans. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, the Lender agrees to make the Term Loan to the Borrower
on the Effective Date in the amount of $4,000,000.
Section 2B.2 Manner of Borrowing and Disbursing Term Loan The
Borrower shall give the Lender at least two Business Days' pi written notice of
the occurrence of the Effective Date, specifying the portion of the Term Loan
which will bear interest initially as a Prime Rate Term Loan and the portion of
the Term Loan which will bear interest initially as one or more LIBOR Term
Loans, and the duration of the applicable Interest Period(s) with respect to any
such LIBOR Term Loan(s). On the Effective Date, upon satisfaction of the
applicable conditions set forth in SECTIONS 4.1 and 4.2, the Lender will
disburse the Term Loan in same day funds in accordance with the terms of the
written instructions from the Borrower to the Lender.
18
24
Section 2B.3 Repayment of Term Loan. The Term Loan is due and
payable and shall be repaid in full by the Borrower on August 31, 1997.
Section 2B.4 Term Note. The Term Loan and the obligation of the
Borrower to repay such Loan shall be evidenced by a single Term Note payable to
the order of the Lender. Such Note shall be dated the Effective Date and be duly
and validly executed and delivered by the Borrower.
Section 2B.5 Prepayment of Term Loan.
(a) Voluntary Prepayment. The Borrower shall have the right at any
time and from time to time, upon at least 60 days' prior written notice to the
Lender in the case of a prepayment in full and upon at least five days' prior
written notice to the Lender in the case of a partial prepayment, to prepay the
Term Loan in whole or in part on any Business Day. Each partial prepayment of
the Term Loan shall be in a principal amount equal to $25,000 or any integral
multiple thereof and shall be applied to the principal installments of the Tenn
Loan in the inverse order of their maturities, together with all amounts due
under SECTION 3.7 as a result of such prepayment. On the prepayment date, the
Borrower shall pay interest on the amount prepaid, accrued to the prepayment
date. Any notice of prepayment given by the Borrower hereunder shall be
irrevocable, and the amount to be prepaid (including accrued interest and any
prepayment fees) shall be due and payable on the date designated in the notice.
(b) Mandatory Prepayment. Any and all (i) amounts received by the
Borrower from the Escrow Account, (ii) Vanstar Payments received by the
Borrower, (iii) amounts received by the Borrower with respect to the Tax Refund
Claim covered by the Assignment of Tax Claim, and (iv) amounts received by the
Borrower from The Xxxxxx Group, GMT or any other liquidator with respect to the
liquidation (by consignment sale or otherwise) of spare parts and computers of
the Borrower's West and Southwest Divisions excluded from the assets sold to
Vanstar pursuant to the Vanstar Sale Agreement, shall be paid, immediately upon
receipt by the Borrower, to the Lender, and shall be applied to the principal
installments of the Term Loan in the inverse order of their maturities. Together
with any such payment, the Borrower shall pay to the Lender all amounts due
under SECTION 3.7 as a result of such prepayment. On the prepayment date, the
Borrower shall pay interest on the amount prepaid, accrued to the prepayment
date. The Borrower shall also be obligated to prepay the Term Loan in full
together with accrued and unpaid interest thereon (and all amounts due under
SECTION 3.7 as a result of such prepayment) upon any termination of this
Agreement pursuant to SECTION 3.5 or otherwise or upon any acceleration of the
Term Loan pursuant to ARTICLE 11.
ARTICLE 3 - GENERAL LOAN PROVISIONS
Section 3.1 Interest.
(a) (i) Prime Rate Revolving Credit Loans. The Borrower will pay
interest on the unpaid principal amount of each Prime Rate Revolving
Credit Loan for each day from the day such Loan was made until such Loan
is paid (whether at maturity, by reason of acceleration or otherwise),
or is converted to a Loan of a different Type, at a rate per annum equal
to the sum of one-quarter of one percent (0.25 %) plus the Prime Rate,
payable monthly in arrears on each Interest Payment Date and on the
Termination Date.
(ii) LIBOR Revolving Credit Loans. The Borrower will pay
interest on the unpaid principal amount of each LIBOR Revolving Credit
Loan for the Interest Period applicable thereto at a rate per annum
equal to the sum of two and one-quarter percent (2.25%) plus LIBOR,
payable in arrears on each Interest Payment Date, on the last day of
such Interest Period, and when such LIBOR Revolving Credit Loan is paid
(whether at maturity, by reason of acceleration or otherwise). In the
event (A) the Borrower's Net Income equals or exceeds $450,000 for each
of the fiscal quarters ending
19
25
on December 31, 1996 and March 31, 1997, and (B) the Borrower's Net Loss
is no greater than $4,200,000 for the fiscal year ending on March 31,
1997, then such interest rate shall be reduced to a per annum rate equal
to the sum of two percent (2.0%) plus LIBOR, effective as of the later
of July 1, 1997 and the date the Lender receives the audited financial
statements described in SECTION 9.1 for the fiscal year ending on March
31, 1997, together with the certificates described in SECTIONS 9.2 and
9.3, provided any such reduced rate shall only be effective for Interest
Periods commencing on or after the effective date of such rate
reduction.
(iii) Prime Rate Term Loans. The Borrower will pay interest on
each Prime Rate Term Loan at a rate per annum equal to the sum of
one-quarter of one percent (0.25%) plus the Prime Rate, payable in
arrears on each Interest Payment Date and when such Term Loan is due
(whether at maturity, by reason of acceleration or otherwise).
(iv) LIBOR Term Loans. The Borrower will pay interest on each
LIBOR Term Loan for the Interest Period applicable thereto at a rate per
annum equal to the sum of two and one-quarter percent (2.25 %) plus
LIBOR, payable in arrears on each Interest Payment Date, on the last day
of such Interest Period, and when such LIBOR Term Loan is due (whether
at maturity, by reason of acceleration or otherwise). In the event (A)
the Borrower's Net Income equals or exceeds $450,000 for each of the
fiscal quarters ending on December 31, 1996 and March 31, 1997, and (B)
the Borrower's Net Loss is no greater than $4,200,000 for the fiscal
year ending on March 31, 1997, then such interest rate shall be reduced
to a per annum rate equal to the sum of two percent (2.0%) plus LIBOR,
effective as of the later of July 1, 1997 and the date the Lender
receives the audited financial statements described in SECTION 9.1 for
the fiscal year ending on March 31, 1997, together with the certificates
described in SECTIONS 9.2 and 9.3, provided any such reduced rate shall
only be effective for Interest Periods commencing on or after the
effective date of such rate reduction.
(b) Notwithstanding anything to the contrary contained in this
Agreement or any other Loan Document, if the Borrower has not made a Term Loan
prepayment of at least $1,250,000 to the Lender on or before January 15, 1997
from the proceeds of Vanstar Payments, effective as of January 16, 1997 (i) the
Term Loan shall bear interest at a rate per annum equal to the sum of one
percent (1.0%) plus the Prime Rate (plus, it an Event of Default has occurred,
the Default Margin), (ii) the right of the Borrower to select LIBOR Term Loans
shall irrevocably be suspended, and (iii) all outstanding LIBOR Twin Loans shall
automatically be repaid and reborrowed as Prime Rate Loans.
(c) The Borrower shall pay interest on the unpaid principal amount
of each Secured Obligation other than a Loan for each day from the day such
Secured Obligation becomes due and payable until such Secured Obligation is paid
at the rate per annum applicable to Prime Rate Revolving Credit Loans, payable
on demand.
(d) From and after the occurrence of an Event of Default, the unpaid
principal amount of each Secured Obligation shall bear interest until paid in
full (or, if earlier, until such Event of Default is cured or waived in writing
by the Lender) at a rate per annum equal to the Default Margin plus the rate
otherwise in effect under SECTION 31(a), (b) or (c), payable on demand. The
interest rate provided for in this SECTION 3.1(d) shall to the extent permitted
by applicable law apply to and accrue on the amount of any judgment entered with
respect to any Secured Obligation and shall continue to accrue at such rate
during any proceeding described in SECTION 11.1(g) or (h).
(e) The interest rates provided for in SECTIONS 3.1(a), (b), (c)
and (d) shall be computed on the basis of a year of 360 days and the actual
number of days elapsed.
20
26
(f) It is not intended by the Lender, and nothing contained in this
Agreement or any Note shall be deemed, to establish or require the payment of a
rate of interest in excess of the maximum rate permitted by applicable law (the
"Maximum Rate"). If, in any month, the Effective Interest Rate, absent such
limitation, would have exceeded the Maximum Rate, then the Effective Interest
Rate for that month shall be the Maximum Rate, and if, in future months, the
Effective Interest Rate would otherwise be less than the Maximum Rate, then the
Effective Interest Rate shall remain at the Maximum Rate until such time as the
amount of interest paid hereunder equals the amount of interest which would have
been paid if the same had not been limited by the Maximum Rate. In this
connection, in the event that, upon payment in full of the Secured Obligations,
the total amount of interest paid or accrued under the terms of this Agreement
is less than the total amount of interest which would have been paid or accrued
if the Effective Interest Rate had at all times been in effect, then the
Borrower shall, to the extent permitted by applicable law, pay to the Lender an
amount equal to the difference between (i) the lesser of (A) the amount of
interest which would have been charged if the Maximum Rate had, at all times,
been in effect and (B) the amount of interest which would have accrued had the
Effective Interest Rate, at all times, been in effect, and (ii) the amount of
interest actually paid or accrued under this Agreement. In the event the Lender
receives, collects or applies as interest any sum in excess of the Maximum Rate,
such excess amount shall be applied to the reduction of the principal balance of
the applicable Secured Obligation, and, if no such principal is then
outstanding, such excess or part thereof remaining shall be paid to the
Borrower.
Section 3.2 Fees.
(a) Commitment Fee. In connection with and as consideration for the
Lender's commitment hereunder, subject to the terms hereof, to lend to the
Borrower under the Revolving Credit Facility, the Borrower shall pay a fee to
the Lender, from the Effective Date until the Termination Date, in an amount
equal to 1/8% per annum of the average daily unused portion of the Revolving
Credit Facility, payable monthly in arrears on the first day of each month and
on the date of any permanent reduction in the Revolving Credit Facility.
(b) Closing Fee. The Borrower shall pay to the Lender a closing fee
in the amount of $25,000 in connection with the establishment of the Revolving
Credit Facility and in consideration of the making of Loans under this Agreement
and in order to compensate the Lender for the costs associated with structuring,
processing, approving and closing the Revolving Credit Facility and the Loans,
but excluding expenses for which the Borrower has agreed elsewhere in this
Agreement to reimburse the Lender. Such fee shall be fully earned as of the
Effective Date, but shall be due and payable in four quarterly installments of
$6,250 on the Effective Date, March 1, 1997, June 1, 1997 and September 1, 1997.
(c) Administration Fee. For services performed by the Lender in
connection with its continuing administration hereof, the Borrower shall pay to
the Lender a fee of $8,000 per annum, payable annually in advance on the
Effective Date and on each anniversary thereof, and continuing so long as any
Loan shall remain outstanding or the Revolving Credit Facility shall not have
been terminated.
(d) General. Except as set forth in clause (b) above, all fees shall
be fully earned by the Lender when due and payable and, except as otherwise set
forth herein, shall not be subject to refund or rebate. All fees are for
compensation for services and are not, and shall not be deemed to be, interest
or a charge for the use of money.
Section 3.3 Notice of Conversion or Continuation of Loans. Whenever
the Borrower desires, subject to the provisions of SECTION 3.4, to convert an
outstanding Revolving Credit Loan or Term Loan into a Loan of a different Type
provided for in this Agreement or to continue all or a portion of an outstanding
LIBOR Revolving Credit Loan or LIBOR Term, Loan for a subsequent Interest
Period, the Borrower shall notify the Lender (which notice shall be irrevocable)
by telephone or in writing (including telecopy) not later
21
27
than 12:00 noon (Eastern time) on the date one Business Day before the day on
which a proposed conversion of a LIBOR Loan into a Prime Rate Loan is to be
effective (which effective date shall be the last day of the Interest Period
applicable to such LIBOR Loan) and two Business Days before the day on which a
proposed conversion of a Prime Rate Loan into, or continuation of a LIBOR Loan
as, a LIBOR Loan is to be effective (and such effective date of any continuation
shall be the last day of the Interest Period for such LIBOR Loan). Each such
notice (a "Notice of Conversion or Continuation") shall (a) identify the Loan to
be converted or continued, including the Type thereof, the aggregate outstanding
principal balance thereof and, in the case of a LIBOR Loan, the last day of the
Interest Period therefor, (b) specify the effective date of such conversion or
continuation, (c) specify the principal amount of such Loan to be converted or
continued and, if converted, the Type or Types of Loan into which conversion of
such principal amount or specified portions thereof is to be made, and (d) in
the case of any conversion into or continuation as a LIBOR Loan, the Interest
Period to be applicable thereto, and, in the case of any telephonic notice,
shall be immediately followed by a written confirmation thereof by the Borrower
in a form acceptable to the Lender, PROVIDED that the failure to provide a
written confirmation shall not invalidate any telephonic notice and, if such
written confirmation differs in any respect from the action taken by the Lender,
the records of the Lender shall control absent manifest error.
Section 3.4. Conversion or Continuation- Provided that no Event of
Default shall have occurred and be continuing (but subject to the provisions of
SECTIONS 3.5 and 3.6), the Borrower may request that all or any part of any
outstanding Loan of one Type (a) be converted into a Loan or Loans of any other
Type provided for in this Agreement, or (b) be continued as a Loan or Loans of
the same Type, in the same aggregate principal amount, on any Business Day
(which, in the case of a conversion or continuation of a LIBOR Loan, shall be
the last day of the Interest Period applicable to such LIBOR Loan), upon notice
(which notice shall be irrevocable) given in accordance with SECTION 3.3,
PROVIDED that nothing in this ARTICLE 3 shall be construed to permit the
conversion of a Revolving Credit Loan to a Term Loan or vice versa.
Section 3.5 Duration of Interest Periods: Maximum Number of LIBOR
Loans; Minimum Increments.
(a) Subject to the provisions of the definition "Interest Period",
the duration of each Interest Period applicable to a LIBOR Loan shall be as
specified in the applicable Notice of Borrowing or Notice of Conversion or
Continuation. The Borrower may elect a subsequent Interest Period to be
applicable to any LIBOR Loan by giving a Notice of Conversion or Continuation
with respect to such Loan in accordance with SECTION 3.3.
(b) If the Under does not receive a Notice of Conversion or
Continuation in accordance with SECTION 3.3 with respect to the continuation of
a LIBOR Loan within the applicable time limits specified in SECTION j3.3, or if,
when such notice must be given, an Event of Default exists or such Type of Loan
is not available, the Borrower shall be deemed to have elected to convert such
LIBOR Loan in whole into a Prime Rate Loan on the last day of the Interest
Period therefor.
(c) Notwithstanding the foregoing, the Borrower may not select an
Interest Period that would end, but for the provisions of the definition
"Interest Period," after the Termination Date.
(d) In no event shall there be more than four LIBOR Loans
outstanding hereunder at any time. For the purpose of this SUBSECTION (d), each
LIBOR Revolving Credit Loan and each LIBOR Term Loan having a distinct Interest
Period shall be deemed to be a separate Loan hereunder.
(e) Each LIBOR Loan shall be in a minimum amount of $1,000,000.
Section 3.6 Changed Circumstances.
22
28
(a) If the introduction of or any change in or in the interpretation
of (in each case, after the date hereof) any law or regulation makes it
unlawful, or any Governmental Authority asserts, after the date hereof, that it
is unlawful, for the Lender to perform its obligations hereunder to make or
maintain LIBOR Loans, the Lender shall notify the Borrower of such event, and
the right of the Borrower to select LIBOR Loans for any subsequent Interest
Period or in connection with any subsequent conversion of any Loan shall be
suspended until the Lender shall notify the Borrower that the circumstances
causing such suspension no longer exist, and the Borrower shall forthwith prepay
in full all LIBOR Revolving Credit Loans then outstanding and shall convert each
LIBOR Term Loan into a Prime Rate Term Loan, and shall pay all interest accrued
thereon through the date of such prepayment or conversion; PROVIDED, that if the
date of such repayment or proposed conversion is not the last day of the
Interest Period applicable to such LIBOR Loans, the Borrower shall also pay any
amount due pursuant to SECTION 3.7.
(b) If the Lender shall, prior to the disbursement of any requested
Revolving Credit Loan or the effective date of any conversion or continuation of
an existing Loan to be made or continued as or converted into a LIBOR Loan (each
such requested Revolving Credit Loan made and Loan to be converted or continued,
a "Pending Loan"), notify the Borrower that LIBOR will not adequately reflect
the cost to the Lender of making or funding such Pending Loan as a LIBOR Loan or
that the Interbank Offered Rate is not determinable from any interest rate
reporting service of recognized standing, then the right of the Borrower to
select LIBOR Loans for such Pending Loan, any subsequent Revolving Credit Loan,
or in connection with any subsequent conversion or continuation of any Loan,
shall be suspended until the Lender shall notify the Borrower that the
circumstances causing such suspension no longer exist, and each Loan comprising
each Pending Loan and each such subsequent Loan requested to be made, continued
or converted shall be made or continued as or converted into a Prime Rate Loan.
Section 3.7 Payments Not at End of Interest Period: Failure to
Borrow. If for any reason any payment of principal with respect to any LIBOR
Loan is made on any day prior to the last day of the Interest Period applicable
to such LIBOR Loan or, after having given a Notice of Borrowing with respect to
any Revolving Credit Loan to be comprised of LIBOR Revolving Credit Loans or a
Notice of Conversion or Continuation with respect to any Loan to be continued as
or converted into a LIBOR Loan, such Loan is not made or is not continued as or
converted into a LIBOR Loan due to the Borrower's failure to borrow or to
fulfill the applicable conditions set forth in ARTICLE 4, the Borrower shall pay
to the Lender, in addition to any other amounts that may be due under this
Agreement, an amount (if a positive number) computed pursuant to the following
formula:
L = (R - T) x P x D
---------------
360
L = amount payable
R = interest rate applicable to the LIBOR Loan
unborrowed or prepaid
T = effective interest rate per annum at which any
readily marketable bonds or other obligations of
the United States, selected at the Lender's sole
discretion, maturing on or near the last day of
the then applicable or requested Interest Period
for such Loan and in approximately the same
amount as such Loan, can be purchased by the
Lender on the day of such payment of principal
or failure to borrow
P = the amount of principal paid or the amount of
the requested Loan
23
29
D = the number of days remaining in the Interest Period as of the
date of such payment or the number of days in the requested
Interest Period
The Borrower shall pay such amount upon presentation by the Lender of a
statement setting forth the amount and the Lender's calculation thereof pursuant
hereto, which statement shall be deemed true and correct absent manifest error.
Section 3.8 Increased Costs and Reduced Returns. The Borrower agrees
that if any law now or hereafter in effect and whether or not presently
applicable to the Lender or any request, guideline or directive of any
Governmental Authority (whether or not having the force of law and whether or
not failure to comply therewith would be unlawful) or the interpretation or
administration thereof by any Governmental Authority, shall either (a)(i)
impose, affect, modify or deem applicable any reserve, special deposit, capital
maintenance or similar requirement against any Loan, (ii) impose on the Lender
any other condition regarding any Loan, this Agreement, the Notes or the
facilities provided hereunder, or (iii) result in any requirement regarding
capital adequacy (including any risk-based capital guidelines) affecting the
Lender being imposed or modified or deemed applicable to the Lender, or (b)
subject the Lender to any taxes on the recording, registration, notarization or
other formalization of the Loans or the Notes, and the result of any event
referred to in CLAUSE (a) or (b) above shall be to increase the cost to the
Lender of making, funding or maintaining any Loan or to reduce the amount of any
sum receivable by the Lender or the Lender's rate of return on capital with
respect to any Loan to a level below that which the Lender could have achieved
but for such imposition, modification or deemed applicability (taking into
consideration the Lender's policies with respect to capital adequacy) by an
amount deemed by Lender (in the exercise of its discretion) to be material,
then, upon demand by the Lender, the Borrower shall immediately pay to the
Lender additional amounts which shall be sufficient to compensate the Lender for
such increased cost, tax or reduced rate of return. A certificate of the Lender
to the Borrower claiming compensation under this SECTION 3.8 shall be final,
conclusive and binding on all parties for all purposes in the absence of
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such compensation, the additional amount or amounts to be paid to
it hereunder, and the method by which such amounts were determined In
determining such amount, the Lender may use any reasonable averaging and
attribution methods.
Section 3.9 Manner of Payment. (a) Each payment (including prepayments)
by the Borrower on account of the principal of or interest on the Loans or of
any fee or other amounts payable to the Lender under this Agreement or any Note
shall be made not later than 1:30 p.m. on the date specified for payment under
this Agreement (or if such day is not a Business Day, the next succeeding
Business Day) to the Lender at the Lender's Office, in Dollars, in immediately
available funds and shall, be made without any setoff, counterclaim or deduction
whatsoever.
(b) The Borrower hereby irrevocably authorizes the Lender and each
Affiliate of the Lender to charge any account of the Borrower maintained with
the Lender or such Affiliate with such amounts as may be necessary from time to
time to pay any Secured Obligations which are not paid when due.
Section 3.10 Statements of Account. The Lender will account to the
Borrower within 30 days after the end of each calendar month with a statement of
Loans, charges and payments made pursuant to this Agreement during such calendar
month, and such account rendered by the Lender shall be deemed an account stated
as between the Borrower and the Lender and shall be deemed final, binding and
conclusive unless the Lender is notified by the Borrower in writing to the
contrary within 60 days after the date such account is delivered to the
Borrower, save for manifest error. Any such notice shall be deemed an objection
only to those items specifically objected to therein. Failure of the Lender to
render such account shall in no way affect its rights hereunder.
24
30
Section 3.11 Termination of Agreement. On the Termination Date, the
Borrower shall pay to the Lender, in same day funds, an amount equal to the
aggregate amount of all Loans outstanding on such date, together with accrued
interest thereon, all fees payable pursuant to SECTION 3.2 accrued from the date
last paid through the effective date of termination, any amounts payable to the
Lender pursuant to the other provisions of this Agreement, including, without
limitation, SECTIONS 3.7, 3.8, 11.2, 12.12 and 12.13, any and all other Secured
Obligations then outstanding, and an amount equal to the Letter of Credit
Reserve to be held by the Lender as cash collateral security for the payment of
and to be applied to the payment of any amounts which may thereafter become due
with respect to any Letter of Credit, and provide the Lender with an
indemnification agreement in form and substance satisfactory to the Lender with
respect to returned and dishonored items and such other matters as the Lender
shall reasonably require.
ARTICLE 4 - CONDITIONS PRECEDENT
Section 4.1 Conditions Precedent to Initial Loan. Notwithstanding any
other provision of this Agreement, the Lender's obligation to make the Initial
Loans is subject to the fulfillment of each of the following conditions prior to
or contemporaneously with the making of such Loan:
(a) Closing Documents. The Lender shall have received each of the
following documents, all of which shall be satisfactory in form and substance to
the Lender and its counsel:
(1) this Agreement, duly executed and delivered by the
Borrower;
(2) the Notes, dated the Effective Date and duly executed and
delivered by the Borrower;
(3) certified copies of the articles of incorporation and
by-laws of the Borrower as in effect on the Effective Date;
(4) certified copies of all corporate action, including
stockholder approval, if necessary, taken by the Borrower to authorize
the execution, delivery and performance of this Agreement and the other
Loan Documents and the borrowings under this Agreement;
(5) certificates of incumbency and specimen signatures with
respect to each of the officers of the Borrower who is authorized to
execute and deliver this Agreement or any other Loan Document on behalf
of the Borrower or any document, certificate or instrument to be
delivered in connection with this Agreement or the other Loan Documents
and to request borrowings under this Agreement;
(6) a certificate evidencing the good standing of the Borrower
in the jurisdiction of its incorporation and in each other jurisdiction
in which it is qualified as a foreign corporation to transact business;
(7) the Financing Statements duly executed and delivered by
the Borrower, and evidence satisfactory to the Lender that the
Financing Statements have been filed in each jurisdiction where such
filing may be necessary or appropriate to perfect the Security
Interest;
(8) the Intercreditor Agreement, duly executed and delivered
by NationsCredit and the Borrower;
25
31
(9) the Subordination Agreements, duly executed and delivered
by the holders of the Subordinated Notes and the Borrower, together
with copies of the Subordinated Notes bearing a legend evidencing the
subordination thereof to the Secured Obligations;
(10) landlord's waiver and consent agreements duly executed on
behalf of each landlord of real property on which any Collateral is
located;
(11) a Schedule of Inventory, a Schedule of Receivables and a
Schedule of Equipment, each prepared as of a recent date;
(12) certificates or binders of insurance relating to each of
the policies of insurance covering any of the Collateral together with
loss payable clauses which comply with the terms of SECTION 7.9(b);
(13) such Agency Account Agreements as shall be required by
the Lender duly executed by the applicable Clearing Bank and the
Borrower;
(14) a Borrowing Base Certificate prepared as of the Effective
Date duly executed and delivered by the chief financial officer of the
Borrower;
(15) a letter from the Borrower to the Lender requesting the
Initial Loans and specifying the method of disbursement;
(16) copies of all the financial statements referred to in
SECTION 5.1(m) and meeting the requirements thereof;
(17) a balance sheet of the Borrower as at October 31, 1996,
prepared by the Borrower on a pro forma basis, giving effect to the
transactions contemplated by this Agreement and setting forth the
assumptions on which such balance sheet was prepared; forecasted
consolidated financial statements consisting of balance sheets, cash
flow statements and income statements of the Borrower, giving
effect to the transactions contemplated by this Agreement and
reflecting projected borrowings hereunder and setting forth the
assumptions on which such forecasted financial statements were
prepared, covering the two-year period commencing on October 1, 1996,
and prepared on a quarterly basis; and such other evidence as the
Lender shall require supporting the representation and warranty of the
Borrower set forth in SECTION 5.1(r);
(18) a certificate of the President of the Borrower stating
that, to the best of his knowledge and based on an examination
sufficient to enable him to make an informed statement, (a) all of the
representations and warranties made or deemed to be made under this
Agreement are true and correct as of the Effective Date, both with and
without giving effect to the Loans to be made at such time and the
application of the proceeds thereof, and (b) no Default or Event of
Default exists;
(19) a signed opinion of Holland & Knight, counsel for the
Borrower, and such local counsel as the Lender shall deem necessary or
desirable, opining as to such matters in connection with this Agreement
as the Lender or its counsel may reasonably request;
(20) the Indemnification Agreement, in form and substance
satisfactory to the Lender, duly executed and delivered by the
Borrower;
(21) certified copies of each Sale Agreement and the Escrow
Agreement, together with such agreements as may be necessary to perfect
the Lender's security interest in the Escrow Account
26
32
and the Borrower's rights to receive payments therefrom, including an
acknowledgment from Ameridata and the escrow agent under the Escrow
Account Agreement that all references in the Escrow Account Agreement
to IBM Credit Corporation shall hereafter be deemed to refer to the
Lender, and from Vanstar that all payments under the Vanstar Sale
Agreement escrow provisions shall hereafter be made to the Lender;
(22) the Assignment of Tax Claim, in form and substance
satisfactory to the Lender, duly executed and delivered by the
Borrower; and
(23) copies of each of the other Loan Documents duly executed
by the parties thereto with evidence satisfactory to the Lender and its
counsel of the due authorization, binding effect and enforceability of
each such Loan Document on each such party and such other documents and
instruments as the Lender may reasonably request.
(b) Availability. The Lender shall be provided with evidence
satisfactory to it that, as of the Effective Date, after giving effect to the
Initial Loan, Availability will be not less than $500,000.
(c) No Injunctions, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain or
prohibit or to obtain substantial damages in respect of or which is related to
or arises out of this Agreement or the consummation of the transactions
contemplated hereby or which, in the Lender's sole discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement.
(d) Material Adverse Change. As of the Effective Date, there shall not
have occurred any change which, in the Lender's sole discretion, has had or may
have a Materially Adverse Effect as compared to the condition of the Borrower
presented by the most recent unaudited financial statements of the Borrower
described in Section 5.1(m).
(e) Solvency. The Lender shall have received evidence satisfactory to
it that, after giving effect to the Initial Loans (i) the Borrower has assets
(excluding goodwill and other intangible assets not capable of valuation) having
value, both at fair value and at present fair salable value, greater than the
amount of its liabilities, and (ii) the Borrower's assets are sufficient in
value to provide the Borrower with sufficient working capital to enable it
profitably to operate its business and to meet its obligations as they become
due, and (iii) the Borrower has adequate capital to conduct the business in
which it is and proposes to be engaged.
(f) Release of Security Interests. The Lender shall have received
evidence satisfactory to it of the release and termination of all Liens other
than Permitted Liens.
(g) Net Worth Statement. The Lender shall have received a duly signed
copy of the "Net Worth Statement" between Vanstar and the Borrower, in form and
substance acceptable to the Lender.
(h) Tax Refund. The Borrower shall have delivered to the Lender drafts
of the initial documents to be filed with respect to its claim for a refund in
an amount not less than $900,000 with respect to the Tax Refund Claim, together
with a letter in form and substance acceptable to the Lender from the Borrower's
independent accountant with respect to the amount of and basis for the Tax
Refund Claim.
Section 4.2 All Loans. At the time of making of each Loan, including
the Initial Loan:
(a) all of the representations and warranties made or deemed to be made
under this Agreement shall be true and correct at such time both with and
without giving effect to the Loans to be made at such time
27
33
and the application of the proceeds thereof, except that representations and
warranties which, by their terms, are applicable only to the Effective Date
shall be required to be true and correct only as of the Effective Date,
(b) the corporate actions of the Borrower referred to in SECTION
4.1(a)(4) shall remain in full force and effect and the incumbency of officers
shall be as stated in the certificates of incumbency delivered pursuant to
SECTION 4.1(a)(5) or as subsequently modified and reflected in a certificate of
incumbency delivered to the Lender, and
(c) the Lender may, without waiving either condition, consider the
conditions specified in SECTIONS 4.2(a) and (b) fulfilled and a representation
by the Borrower to such effect made if no written notice to the contrary is
received by the Lender from the Borrower prior to the making of the Loans then
to be made.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Section 5.1 Representations and Warranties. The Borrower represents and
warrants to the Lender as follows:
(a) Organization; Power; Qualification. The Borrower is a corporation,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its properties and to carry on its business as now being and hereafter proposed
to be conducted and is duly qualified and authorized to do business in each
jurisdiction in which failure to be so qualified and authorized would have a
Materially Adverse Effect. The jurisdictions in which the Borrower is qualified
to do business as a foreign corporation are listed on SCHEDULE 5.1(a).
(b) Subsidiaries and Ownership of the Borrower. The Borrower has no
Subsidiaries. The outstanding stock of the Borrower has been duly and validly
issued and is fully paid and nonassessable by the Borrower and the number of
such shares of capital stock of the Borrower are set forth on SCHEDULE 5.1(b).
(c) Authorization of Agreement, Note, Loan Documents and Borrowing. The
Borrower has the right and power and has taken all necessary action to authorize
it to execute, deliver and perform this Agreement and each of the other Loan
Documents to which it is a party in accordance with their respective terms and
to borrow hereunder. This Agreement and each of the other Loan Documents to
which it is a party have been duly executed and delivered by the duly authorized
officers of the Borrower and each is, or when executed and delivered in
accordance with this Agreement will be, a legal, valid and binding obligation of
the Borrower, enforceable in accordance with its terms.
(d) Compliance of Agreement, Note, Loan Documents and Borrowing with
Laws, Etc. The execution, delivery and performance of this Agreement and each of
the other Loan Documents to which the Borrower is a party in accordance with
their respective terms and the borrowings hereunder do not and will not, by the
passage of time, the giving of notice or otherwise,
(i) require any Governmental Approval or violate any
applicable law relating to the Borrower or any of its Affiliates,
(ii) conflict with, result in a breach of or constitute a
default under (A) the articles or certificate of incorporation or
by-laws of the Borrower, (B) any indenture, agreement or other
instrument to which the Borrower is a party or by which any of its
property may be bound or (C) any Governmental Approval relating to the
Borrower, or,
(iii) result in or require the creation or imposition of any
Lien upon or with respect to any property now owned or hereafter
acquired by the Borrower other than the Security Interest.
28
34
(e) Business. The Borrower is engaged principally in the business
described on SCHEDULE 5.1(e).
(f) Compliance with Law; Governmental Approvals. Except as set forth in
SCHEDULE 5.1(f), the Borrower (i) has all Governmental Approvals, including
permits relating to federal, state and local Environmental Laws, ordinances and
regulations required by any applicable law for it to conduct its business, each
of which is in full force and effect, is final and not subject to review on
appeal and is not the subject of any pending or, to the knowledge of the
Borrower, threatened attack by direct or collateral proceeding, and (ii) is in
compliance with each Governmental Approval applicable to it and in compliance
with all other applicable laws relating to it, including, without being limited
to, all Environmental Laws and all occupational health and safety laws
applicable to the Borrower or its properties, except for instances of
noncompliance which would not, singly or in the aggregate, cause a Default or
Event of Default or have a Materially Adverse Effect and in respect of which
adequate reserves have been established on the books of the Borrower.
(g) Titles to Properties. Except as set forth in SCHEDULE 5.1(g), the
Borrower has good and marketable title to or a valid leasehold interest in all
its real estate and valid and legal title to or a valid leasehold interest in
all personal property and assets used in or necessary to the conduct of the
Borrower's business, including, but not limited to, those reflected on the
balance sheet of the Borrower delivered pursuant to Section 5.1(m)(ii).
(h) Liens. Except as set forth in SCHEDULE 5.1(h), none of the
properties and assets of the Borrower is subject to any Lien, except Permitted
Liens. Other than the Financing Statements, no financing statement under the
Uniform Commercial Code of any state which names the Borrower as debtor and
which has not been terminated has been filed in any state or other jurisdiction,
and the Borrower has not signed any such financing statement or any security
agreement authorizing any secured party thereunder to file any such financing
statement, except to perfect those Liens listed in SCHEDULE 5.1(h) and Permitted
Liens.
(i) Indebtedness and Guaranties. Set forth on SCHEDULE 5.1(i) is a
complete and correct listing of all of the Borrower's (i) Indebtedness for Money
Borrowed and (ii) Guaranties. The Borrower is not in default of any material
provision of any agreement evidencing or relating to such any such Indebtedness
or Guaranty.
(j) Litigation. Except as set forth on SCHEDULE 5.1(j), them are no
actions, suits or proceedings pending (nor, to the knowledge of the Borrower,
are there any actions, suits or proceedings threatened, nor is there any basis
therefor) against or in any other way relating adversely to or affecting the
Borrower or any of its property in any court or before any arbitrator of any
kind or before or by any governmental body.
(k) Tax Returns and Payments. Except as set forth on SCHEDULE 5.1(k),
all United States federal, state and local and foreign national, provincial and
local and all other tax returns of the Borrower required by applicable law to
be filed have been duly filed, and all United States federal, state and local
and foreign national, provincial and local and all other taxes, assessments
and other governmental charges or levies upon the Borrower and its property,
income, profits and assets which are due and payable have been paid, except any
such nonpayment which is at the time permitted under SECTION 8.4. The charges,
accruals and reserves on the books of the Borrower in respect of United States
federal, state and local taxes and foreign national, provincial and local taxes
for all fiscal years and portions thereof since the organization of the
Borrower are in the judgment of the Borrower adequate, and the Borrower knows
of no reason to anticipate any additional assessments for any of such years
which, singly or in the aggregate, might have a Materially Adverse Effect.
(l) Burdensome Provisions. The Borrower is not a party to any
indenture, agreement, lease or other instrument, or subject to any charter or
corporate restrictions, Governmental Approval or applicable law, compliance with
the terms of which might have a Materially Adverse Effect.
29
35
(m) Financial Statements. The Borrower has furnished to the Lender a
copy of (i) its audited balance sheet as at March 31, 1996, and the related
statements of income, cash flow and retained earnings for the twelve-month
period then ended and (ii) its unaudited balance sheet as at October 31, 1996,
and the related statement of income for the 7-month period then ended. Such
financial statements are complete and correct and present fairly and in all
material respects in accordance with GAAP, the financial position of the
Borrower as at the dates thereof and the results of operations of the Borrower
for the periods then ended. Except as disclosed or reflected in such financial
statements, the Borrower had no material liabilities, contingent or otherwise,
and there were no material unrealized or anticipated losses of the Borrower.
(n) Adverse Change. Since the date of the financial statements
described in CLAUSE (i) of SECTION 5.1(m), (i) no change in the business,
assets, liabilities, condition (financial or otherwise), results of operations
or business prospects of the Borrower has occurred that has had, or may have, a
Materially Adverse Effect, and (ii) no event has occurred or failed to occur
which has had, or may have, a Materially Adverse Effect.
(o) ERISA. Neither the Borrower nor any Related Company maintains or
contributes to any Benefit Plan other than those listed on SCHEDULE 5.1(o). Each
Benefit Plan is in substantial compliance with ERISA, and neither the Borrower
nor any Related Company has received any notice asserting that a Benefit Plan is
not in compliance with ERISA. No material liability to the PBGC or to a
Multiemployer Plan has been, or is expected by the Borrower to be, incurred by
the Borrower or any Related Company.
(p) Absence of Defaults. The Borrower is not in default under its
articles or certificate of incorporation or by-laws, and no event has occurred
which has not been remedied, cured or waived (i) that constitutes a Default or
an Event of Default or (ii) that constitutes or that, with the passage of time
or giving of notice, or both, would constitute a default or event of default by
the Borrower under any material agreement (other than this Agreement) or
judgment, decree or order to which the Borrower is a party or by which the
Borrower or any of its properties may be bound or which would require the
Borrower to make any payment thereunder prior to the scheduled maturity date
therefor.
(q) Accuracy and Completeness of Information. All written information,
reports and other papers and data produced by or on behalf of the Borrower and
furnished to the Lender were, at the time the same were so furnished, complete
and correct in all material respects to the extent necessary to give the
recipient a true and accurate knowledge of the subject matter, no fact is known
to the Borrower which has had, or may in the future have (so far as the Borrower
can foresee), a Materially Adverse Effect which has not been set forth in the
financial statements or disclosure delivered prior to the Effective Date, in
each case referred to in SECTION 5.1(m), or in such written information, reports
or other papers or data or otherwise disclosed in writing to the Lender prior to
the Effective Date. No document furnished or written statement made to the
Lender by the Borrower in connection with the negotiation, preparation or
execution of this Agreement or any of the Loan Documents contains or will
contain any untrue statement of a fact material to the creditworthiness of the
Borrower or omits or will omit to state a material fact necessary in order to
make the statements contained therein not misleading.
(r) Solvency. In each case after giving effect to the Indebtedness
represented by the Loans outstanding and to be incurred and the transactions
contemplated by this Agreement, the Borrower is solvent, having assets of a fair
value which exceeds the amount required to pay its debts (including contingent,
subordinated, unmatured and unliquidated liabilities) as they become absolute
and matured, and the Borrower is able to and anticipates that it will be able to
meet its debts as they mature and has adequate capital to conduct the business
in which it is or proposes to be engaged.
(s) Status of Receivables. Each Receivable reflected in the
computations included in any Borrowing Base Certificate meets the criteria
enumerated in the definition of Eligible Receivables, except as
30
36
disclosed in such Borrowing Base Certificate or as disclosed in a timely manner
in a subsequent Borrowing Base Certificate or otherwise in writing to the
Lender.
(t) Chief Executive Officer. The chief executive office of the Borrower
and the books and records relating to the Receivables are located at the address
or addresses set forth on SCHEDULE 5.1(t); except as set forth SCHEDULE 5.1(t),
the Borrower has not maintained its chief executive office or the books and
records relating to any Receivables at any other address at any time during the
five years immediately preceding the Agreement Date.
(u) Status of Inventory. All Inventory included in any Borrowing Base
Certificate delivered to the Lender pursuant to SECTION 7.14(d) meets the
criteria enumerated in the definition of Eligible Inventory, except as
disclosed in such Borrowing Base Certificate or in a subsequent Borrowing
Base Certificate or as otherwise specifically disclosed in writing to the
Lender. All Inventory is in good condition, meets all standards imposed by any
governmental agency or department or division thereof having regulatory
authority over such goods, their use or sale, and is currently either usable or
saleable in the normal course of the Borrower's business, except to the extent
reserved against in the financial statements delivered pursuant to ARTICLE 9 or
as disclosed on a Schedule of Inventory delivered to the Lender pursuant to
SECTION 7.14(b). Set forth on SCHEDULE 5.1(u) is the (i) address (including
street, city, county and state) of each facility at which Inventory is located,
(ii) the approximate quantity in Dollars of the Inventory customarily located
at each such facility, and (iii) if the facility is leased or is a third party
warehouse or processor location, the name of the landlord or such third party
warehouseman or processor. All Inventory is located on the premises set forth
on SCHEDULE 5.1(u) or is in transit to one of such locations, except as
otherwise disclosed in writing to the Lender; the Borrower has not located
Inventory at premises other than those set forth on SCHEDULE 5.1(u) at any time
during the four months immediately preceding the Agreement Date.
(v) Equipment. All Equipment is in good order and repair in all
material respects. Set forth on SCHEDULE 5.1(v) is the (i) address (including
street, city, county and state) of each facility at which Equipment (other than
motor vehicles) is located, (ii) the approximate value of Equipment located at
such facility, and (iii) if such facility is leased, the name of the landlord.
Except as set forth on SECTION 5.1(v), within the past four months no Equipment
has been located at any other location.
(w) Corporate and Fictitious Names; Trade Names. Except as otherwise
disclosed on SCHEDULE 5.1(w), during the one-year period preceding the Agreement
Date, the Borrower has not been known as or used any corporate or fictitious
name other than the corporate name of the Borrower on the Effective Date. All
trade names or styles under which the Borrower sells Inventory or Equipment or
creates Receivables, or to which instruments in payment of Receivables are made
payable, are listed on SCHEDULE 5.1(w).
(x) Federal Regulations. The Borrower is not engaged, principally or as
one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" (as each of the quoted
terms is defined or used in Regulations G and U of the Board of Governors of the
Federal Reserve System).
(y) Investment Company Act. The Borrower is not an "investment company"
or a company "controlled" by an "investment company" (as each of the quoted
terms is defined or used in the Investment Company Act of 1940, as amended).
(z) Employee Relations. The Borrower is not, except as set forth on
SCHEDULE 5.1(z), party to any collective bargaining agreement nor has any labor
union been recognized as the representative of the Borrower's employees; the
Borrower knows of no pending, threatened or contemplated strikes, work stoppage
or other labor disputes involving its employees or those of its Subsidiaries.
31
37
(aa) Intellectual Property. The Borrower owns or possesses all
Intellectual Property required to conduct its business as now and presently
planned to be conducted without, to its knowledge, conflict with the rights of
others, and SCHEDULE 5.1(aa) lists all Intellectual Property owned by the
Borrower.
(bb) Sale Agreements and Escrow Agreement. The copies of the Sale
Agreements and Escrow Agreement delivered to the Lender on or before the
Effective Date constitute complete and correct copies thereof as in effect on
the Effective Date, which agreements remain in full force and effect as of the
Effective Date. The balance of the Escrow Account equals or exceeds $5,000,000
as of the Effective Date.
(cc) Tax Refund Claim. The Borrower has delivered to the Lender drafts
of the initial documents to be filed with respect to the Tax Refund Claim. The
Borrower in good faith believes that it is entitled to the tax refund set forth
in the Tax Refund Claim.
Section 5.2 Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this ARTICLE 5 and all statements
contained in any certificate, financial statement or other instrument delivered
by or on behalf of the Borrower pursuant to or in connection with this Agreement
or any of the Loan Documents (including, but not limited to, any such
representation, warranty or statement made in or in connection with any
amendment thereto) shall constitute representations and warranties made under
this Agreement. All representations and warranties made under this Agreement
shall be made or deemed to be made at and as of the Agreement Date, at and as of
the Effective Date and at and as of the date of each Loan, except that
representations and warranties which, by their terms are applicable only to one
such date shall be deemed to be made only at and as of such date. All
representations and warranties made or deemed to be made under this Agreement
shall survive and not be waived by the execution and delivery of this Agreement,
any investigation made by or on behalf of the Lender or any borrowing hereunder.
ARTICLE 6 - SECURITY INTEREST
Section 6.1 Security Interest. (a) To secure the payment, observance
and performance of the Secured Obligations, the Borrower hereby mortgages,
pledges and assigns all of the Collateral to the Lender for itself and as agent
for any Affiliate of the Lender and grants to the Lender for itself and as agent
for any Affiliate of the Lender a continuing security interest in, and a
continuing Lien upon, all of the Collateral.
(b) As additional security for all of the Secured Obligations, the
Borrower grants to the Lender for itself and as agent for any Affiliate of the
Lender a security interest in, and assigns to the Lender for itself and as agent
for any Affiliate of the Lender all of the Borrower's right, tide and interest
in and to, any deposits or other sums at any time credited by or due from the
Lender and each Affiliate of the Lender to the Borrower, with the same rights
therein as if the deposits or other sums were credited by or due from the
Lender.
Section 6.2 Continued Priority of Security Interest. (a) The Security
Interest granted by the Borrower shall at all times be valid, perfected and
enforceable against the Borrower and all third parties in accordance with the
terms of this Agreement, as security for the Secured Obligations, and the
Collateral shall not at any time be subject to any Liens that are prior to, on a
parity with or junior to the Security Interest, other than Permitted Liens.
(b) The Borrower shall, at its sole cost and expense, take all action
that may be necessary or desirable, or that the Lender may request, so as at all
times to maintain the validity, perfection, enforceability and rank of the
Security Interest in the Collateral in conformity with the requirements of
SECTION 6.2(a) or to enable the Lender to exercise or enforce its rights
hereunder, including, but not limited to: (i) paying all taxes, assessments and
other claims lawfully levied or assessed on any of the Collateral, except to the
extent that such taxes, assessments and other claims constitute Permitted Liens,
(ii) diligently seeking to obtain, after the Agreement Date, landlords',
mortgagees' or mechanics' releases, subordinations, or waivers, (iii) delivering
to
32
38
the Lender, endorsed or accompanied by such instruments of assignment as the
Lender may specify, and stamping or marking in such manner as the Lender may
specify, any and all chattel paper, instruments, letters and advices of guaranty
and documents evidencing or forming a part of the Collateral, and (iv) executing
and delivering financing statements, pledges, designations, hypothecations,
notices and assignments, in each case in form and substance satisfactory to the
Lender, relating to the creation, validity, perfection, maintenance or
continuation of the Security Interest under the UCC or other applicable law.
(c) The Lender is hereby authorized to file one or more financing or
continuation statements or amendments thereto without the signature of or in the
name of the Borrower for any purpose described in SECTION 6.2(b). A carbon,
photographic or other reproduction of this Agreement or of any of the Security
Documents or of any financing statement filed in connection with this Agreement
is sufficient as a financing statement, to the extent permitted by applicable
law.
(d) The Borrower shall xxxx its books and records as may be necessary
or appropriate to evidence, protect and perfect the Security Interest and shall
cause its financial statements to reflect the Security Interest.
ARTICLE 7 - COLLATERAL COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Lender shall
otherwise consent in the manner provided in SECTION 12.11:
Section 7.1 Collection of Receivables. (a) The Borrower will cause all
moneys, checks, notes, drafts and other payments relating to or constituting
proceeds of Receivables, or of any other Collateral, to be forwarded to a
Lockbox for deposit in an Agency Account in accordance with the procedures set
out in the corresponding Agency Account Agreement, and in particular the
Borrower will (i) advise each Account Debtor to address all remittances with
respect to amounts payable on account of any Receivables to a specified Lockbox,
and (ii) stamp all invoices relating to any such amounts with a legend
satisfactory to the Lender indicating that payment is to be made to the Borrower
via a specified Lockbox.
(b) The Borrower and the Lender shall cause all collected balances in
each Agency Account to be transmitted daily by wire transfer or depository
transfer check or Automated Clearing House transfer in accordance with the
procedures set forth in the corresponding Agency Account Agreement to the Lender
at the Lender's Office (i) for application, on account of the Secured
Obligations, as provided in SECTION 2.3(c), 11.2 and 11.3, such credits to be
entered on the first Business Day following receipt and to be conditioned upon
final payment in cash or solvent credits of the items giving rise to them, and
(ii) with respect to any balance remaining after such application, so long as no
Default or Event of Default has occurred and is continuing, for transfer to the
Disbursement Account or such other account of the Borrower as the Borrower and
the Lender may agree.
(c) Any moneys, checks, notes, drafts or other payments referred to in
CLAUSE (a) of this SECTION 7.1 which are received by or on behalf of the
Borrower will be held in trust for the Lender and will be delivered to the
Lender at the Lender's Office as promptly as possible in the exact form
received, together with any necessary endorsements.
Section 7.2 Verification and Notification. The Lender shall have the
right (a) at any time and from time to time, in the name of the Lender or in the
name of the Borrower, to verify the validity, amount or any other matter
relating to any Receivables by mail, telephone, telegraph or otherwise, and (b)
after an Event of Default, to notify the Account Debtors or obligors under any
Receivables of the assignment of such Receivables to the Lender and to direct
such Account Debtor or obligors to make payment of all amounts due or to become
due thereunder directly to the Lender and, upon such notification and at the
expense of the
33
39
Borrower, to enforce collection of any such Receivables and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as the Borrower might have done.
Section 7.3 Disputes, Returns and Adjustments. (a) In the event (i)
amounts due and owing under any Receivable in excess of $100,000 are in dispute
between the Account Debtor and the Borrower, or (ii) of any dispute with respect
to more than $100,000 of Vanstar Payments or in the Escrow Account, the Borrower
shall provide the Lender with prompt written notice thereof.
(b) The Borrower shall notify the Lender promptly of all material
returns and credits in excess of $ 100,000 in respect of any Receivable, which
notice shall specify the Receivables affected.
(c) The Borrower may, in the ordinary course of business and prior to a
Default or an Event of Default, grant any extension of time for payment of any
Receivable or compromise, compound or settle the same for less than the full
amount thereof or release wholly or partly any Person liable for the payment
thereof or allow any credit or discount whatsoever thereon; PROVIDED that (i) no
such action results in the reduction of more than $100,000 in the amount payable
with respect to any Receivable or of more than $250,000 with respect to all
Receivables in any fiscal year of the Borrower, and (ii) the Lender is promptly
notified of the amount of such adjustments and the Receivable(s) affected
thereby.
Section 7.4 Invoices. (a) The Borrower will not use any invoices except
invoices in the forms delivered to the Lender prior to the Agreement Date,
unless the Borrower shall have given the Lender 45 days' prior notice of the
intended use of a different form of invoice together with a copy of such
different form.
(b) Upon the request of the Lender, the Borrower shall deliver to the
Lender, at the Borrower's expense, copies of customers' invoices or the
equivalent, original shipping and delivery receipts or other proof of delivery,
customers' statements, the original copy of all documents, including, without
limitation, repayment histories and present status reports, relating to
Receivables and such other documents and information relating to the Receivables
as the Lender shall specify.
Section 7.5 Delivery of Instruments. In the event any Receivable in an
amount in excess of $100,000 is, or Receivables in excess of $250,000 in the
aggregate are, at any time evidenced by a promissory note or notes, trade
acceptance or any other instrument for the payment of money, the Borrower will
immediately thereafter deliver such instruments to the Lender, appropriately
endorsed to the Lender.
Section 7.6 Sales of Inventory. All sales of Inventory will be made in
compliance with all requirements of applicable law.
Section 7.7 Returned Goods. The Security Interest in the Inventory
shall, without further act, attach to the cash and non-cash proceeds resulting
from the sale or other disposition thereof and to all Inventory which is
returned to the Borrower by customers or is otherwise recovered.
Section 7.8 Ownership and Defense of Title. (a) Except for Permitted
Liens, the Borrower shall at all times be the sole owner of each and every item
of Collateral and shall not create any Lien on, or sell, lease, exchange,
assign, transfer, pledge, hypothecate, grant a security interest or security
title in or otherwise dispose of, any of the Collateral or any interest
therein, except for sales of Inventory in the ordinary course of business, for
cash or on open account or on terms of payment ordinarily extended to its
customers and except as otherwise expressly contemplated herein. The inclusion
of "proceeds" of the Collateral under the Security Interest shall not be deemed
a consent by the Lender to any other sale or other disposition of any part or
all of the Collateral.
34
40
(b) The Borrower shall defend its title in and to the Collateral and
shall defend the Security Interest in the Collateral against the claims and
demands of all Persons.
(c) In addition to, and not in derogation of, the foregoing and the
requirements of any of the Security Documents, the Borrower shall (i) protect
and preserve all properties material to its business, including Intellectual
Property and maintain all tangible property in good and workable condition in
all material respects, with reasonable allowance for wear and tear, and (ii)
from time to time make or cause to be made all needed and appropriate repairs,
renewals, replacements and additions to such properties necessary for the
conduct of its business, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times.
Section 7.9 Insurance. (a) The Borrower shall at all times maintain
insurance on the Inventory and Equipment against loss or damage by fire, theft,
burglary, pilferage, loss in transit and such other hazards as the Lender shall
reasonably specify, in amounts and under policies issued by insurers acceptable
to the Lender. All premiums on such insurance shall be paid by the Borrower and
copies of the policies delivered to the Lender. The Borrower will not use or
permit the Inventory or Equipment to be used in violation of any applicable law
or in any manner which might render inapplicable any insurance coverage.
(b) All insurance policies required under SECTION 7.9(a) shall name the
Lender as an additional named insured and shall contain "New York standard" loss
payable clauses in the form submitted to the Borrower by the Lender, or
otherwise in form and substance satisfactory to the Lender, naming the Lender as
loss payee as its interests may appear, and providing that (i) all proceeds
thereunder shall be payable to the Lender, (ii) no such insurance shall be
affected by any act or neglect of the insured or owner of the property described
in such policy, and (iii) such policy and loss payable clauses may not be
cancelled, amended or terminated unless at least 30 days' prior written notice
is given to the Lender.
(c) Any proceeds of insurance referred to in this SECTION 7.9 which are
paid to the Lender shall be, at the option of the Lender in its sole discretion,
either (i) applied to rebuild, restore or replace the damaged or destroyed
property, or (ii) applied to the payment or prepayment of the Secured
Obligations.
(d) The Borrower shall at all times maintain, in addition to the
insurance required by SECTION 7.9(a) or any of the Security Documents, insurance
with responsible insurance companies against such risks and in such amounts as
is customarily maintained by similar businesses or as may be required by
applicable law, including such public liability, products liability, third party
property damage and business interruption insurance as is consistent with
reasonable business practices, and from time to time deliver to the Lender upon
its request a detailed list of the insurance then in effect, stating the names
of the insurance companies, the amounts and rates of the insurance, the dates of
the expiration thereof and the properties and risks covered thereby.
Section 7.10 Location of Offices and Collateral. (a) The Borrower will
not change the location of its chief executive office or the place where it
keeps its books and records relating to the Collateral or change its name,
identity or corporate structure without giving the Lender 30 days' prior written
notice thereof.
(b) All Inventory, other than Inventory in transit to any such
location, and all Equipment, other than motor vehicles, will at all times be
kept by the Borrower at one of the locations set forth in SCHEDULES 5.1(u) and
5.1(v), respectively, and shall not, without the prior written consent of the
Lender, be removed therefrom except, so long as no Event of Default shall have
occurred and be continuing, for sales of Inventory permitted under SECTION 7.8.
(c) If any Inventory is in the possession or control of any of the
Borrower's agents or processors, the Borrower shall notify such agents or
processors of the Security Interest and, upon the occurrence of an
35
41
Event of Default, shall instruct them (and cause them to acknowledge such
instruction) to hold all such Inventory for the account of the Lender, subject
to the instructions of the Lender.
Section 7.11 Records Relating to Collateral. (a) The Borrower will at
all times (i) keep complete and accurate records of Inventory on a basis
consistent with past practices of the Borrower, itemizing and describing the
kind, type and quantity of Inventory and the Borrower's cost therefor and a
current price list for such Inventory, and (ii) keep complete and accurate
records of all other Collateral.
(b) The Borrower will take a physical listing of all Inventory,
wherever located, at least annually.
Section 7.12 Inspection. The Lender (by any of its officers, employees
or agents) shall have the right, to the extent that the exercise of such right
shall be within the control of the Borrower, during normal business hours, after
providing one days' notice, to (a) visit the properties of the Borrower, inspect
the Collateral and the other assets of the Borrower and its Subsidiaries and
inspect and make extracts from the books and records of the Borrower and its
Subsidiaries, including, but not limited to, management letters prepared by
independent accountants, all during customary business hours at such premises,
(b) discuss the Borrower's business, assets, liabilities, financial condition,
results of operations and business prospects, insofar as the same are reasonably
related to the rights of the Lender hereunder or under any of the Loan
Documents, with the Borrower's and its Subsidiaries' (i) principal officers,
(ii) independent accountants and other professionals providing services to the
Borrower, and (iii) any other Person (except that any such discussion with any
third parties shall be conducted only in accordance with the Lender's standard
operating procedures relating to the maintenance of confidentiality of
confidential information of borrowers), and (c) verify the amount, quantity,
value and condition of, or any other matter relating to, any of the Collateral
and in this connection to review, audit and make extracts from all records and
files related to any of the Collateral. The Borrower will deliver to the Lender
any instrument necessary to authorize an independent accountant or other
professional to have discussions of the type outlined above with the Lender or
for the Lender to obtain records from any service bureau maintaining records on
behalf of the Borrower.
Section 7.13 Maintenance of Equipment. The Borrower shall maintain all
physical property that constitutes Equipment in good and workable condition in
all material respects, with reasonable allowance for wear and tear, and shall
exercise proper custody over all such property.
Section 7.14 Information and Reports.
(a) Schedule Of Receivables. The Borrower shall deliver to the Lender
(i) on or before the Effective Date, a Schedule of Receivables as of a date not
more than three Business Days prior to the Effective Date setting forth a
detailed aged trial balance of all of its then existing Receivables, specifying
the name of and the balance due from (and any rebate due to) each Account Debtor
obligated on a Receivable so listed, and (ii) no later than 15 days after the
end of each accounting month of the Borrower, a Schedule of Receivables as of
the last Business Day of the Borrower's immediately preceding accounting month
setting forth (A) a detailed aged trial balance of all the Borrower's then
existing Receivables, specifying the name of and the balance due from (and any
rebate due to) each Account Debtor obligated on a Receivable so listed and (B) a
reconciliation to the Schedule of Receivables delivered in respect of the next
preceding accounting month.
(b) Schedule of Inventory. The Borrower shall deliver to the Lender on
or before the Effective Date, and no later than 15 days after the end of each
accounting month of the Borrower thereafter, a Schedule of Inventory as of the
last Business Day of the immediately preceding accounting month of the Borrower,
itemizing and describing the kind, type, quantity and location of Inventory and
the cost thereof.
36
42
(c) Schedule of Equipment. The Borrower shall deliver to the Lender on
or before the Effective Date and thereafter on such subsequent dates as may be
requested by the Lender, a Schedule of Equipment, describing each item of such
Equipment and the location, cost and then current book value thereof.
(d) Borrowing Base Certificate. The Borrower shall deliver to the
Lender not later than two Business Days after the last day of each accounting
week of the Borrower a Borrowing Base Certificate prepared as of the close of
business on the last Business Day of such accounting week.
(e) Certification. Each of the schedules delivered to the Lender
pursuant to this SECTION 7.14 shall be certified by the Chief Financial Officer
or Vice President-Finance of the Borrower to be true, correct and complete as of
the date indicated thereon.
(f) Other Information. The Lender may, in its discretion, from time to
time require the Borrower to deliver the schedules described in Section 7.14(a),
(b), (c) and (d) more or less often and on different schedules than specified in
such Section, and the Borrower will comply with such requests. The Borrower
shall also furnish to the Lender such other information with respect to the
Collateral as the Lender may from time to time reasonably request.
Section 7.15 Power of Attorney. The Borrower hereby appoints the Lender
as its attorney, with power (a) at any time during the existence of a Default or
Event of Default, (i) to endorse the name of the Borrower on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into the Lender's possession, and (ii) to sign the name of the Borrower on
any invoice or xxxx of lading relating to any Receivables, Inventory or other
Collateral, on any drafts against customers related to letters of credit, on
schedules and assignments of Receivables furnished to the Lender by the
Borrower, on notices of assignment, financing statements and other public
records relating to the perfection or priority of the Security Interest, and (b)
at any time, to sign the name of the Borrower on any verifications of account
and on notices to or from customers.
ARTICLE 8 - AFFIRMATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Lender shall
otherwise consent in the manner provided for in SECTION 12.11, the Borrower
will:
Section 8.1 Preservation of Corporate Existence and Similar Matters.
Preserve and maintain its corporate existence, rights, franchises, licenses and
privileges in the jurisdiction of its incorporation and qualify and remain
qualified as a foreign corporation and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization.
Section 8.2 Compliance with Applicable Law. Comply with all applicable
laws relating to the Borrower.
Section 8.3 Conduct of Business. Engage only in businesses in
substantially the same fields as the businesses conducted on the Effective Date.
Section 8.4 Payment of Taxes and Claims. Pay or discharge when due (a)
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or upon any properties belonging to it, and (b) all
lawful claims of materialmen, mechanics, carriers, warehousemen and landlords
for labor, materials, supplies and rentals which, if unpaid, might become a Lien
on any properties of the Borrower or such Subsidiary, EXCEPT that this SECTION
8.4 shall not require the payment or discharge of any
37
43
such tax, assessment, charge, levy or claim which is being contested in good
faith by appropriate proceedings and for which adequate reserves have been
established on the appropriate books.
Section 8.5 Accounting Methods and Financial Records. Maintain a system
of accounting, and keep such books, records and accounts (which shall be true
and complete), as may be required or as may be necessary to permit the
preparation of financial statements in accordance with GAAP consistently
applied.
Section 8.6 Use of Proceeds. (a) Use the proceeds of (i) the Initial
Loans to pay in full the Borrower's secured Indebtedness (other than
Indebtedness secured by Permitted Liens) and to pay the amounts indicated in
SCHEDULE 8.6 to the Persons indicated therein, and (ii) all subsequent Revolving
Credit Loans only for working capital and general business purposes, and
(b) not use any part of such proceeds to purchase or carry, or to
reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of Regulation G or U of the Board of Governors
of the Federal Reserve System) or for any other purpose which would involve a
violation of such Regulation G or U or Regulation T or X of such Board of
Governors or for any other purpose prohibited by law or by the terms and
conditions of this Agreement.
Section 8.7 Hazardous Waste and Substances: Environmental Requirements.
(a) In addition to, and not in derogation of, the requirements of SECTION 8.2
and of the Security Documents, comply with all laws, governmental standards and
regulations applicable to the Borrower or to any of its assets in respect of
occupational health and safety laws, rules and regulations and Environmental
Laws, promptly notify the Lender of its receipt of any notice of a violation of
any such law, rule, standard or regulation and indemnify and hold the Lender
harmless from all loss, cost, damage, liability, claim and expense incurred by
or imposed upon the Lender on account of the Borrower's failure to perform its
obligations under this SECTION 8.7.
(b) Whenever the Borrower gives notice to the Lender pursuant to this
SECTION 8.7 with respect to a matter that reasonably could be expected to result
in liability to the Borrower in excess of $1,000,000 in the aggregate, the
Borrower shall, at the Lender's request and the Borrower's expense, (i) cause an
independent environmental engineer acceptable to the Lender to conduct such
tests of the site where the noncompliance or alleged noncompliance with
Environmental Laws has occurred and prepare and deliver to the Lender a report
setting forth the results of such tests, a proposed plan to bring the Borrower
into compliance with such Environmental Laws and an estimate of the costs
thereof, and (ii) provide to the Lender a supplemental report of such engineer
whenever the scope of the noncompliance or the response thereto or the estimated
costs thereof shall materially change.
Section 8.8 Accuracy of Information. All written information, reports,
statements and other papers and data furnished to the Lender, whether pursuant
to ARTICLE 9 or any other provision of this Agreement or any of the other Loan
Documents, shall be, at the time the same is so furnished, complete and correct
in all material respects to the extent necessary to give the Lender true and
accurate knowledge of the subject matter.
Section 8.9 Revisions or Updates to Schedules. Should any of the
information or disclosures provided on any of the Schedules originally attached
hereto become outdated or incorrect in any material respect, the Borrower shall
provide promptly to the Lender such revisions or updates to such Schedule(s) as
may be necessary or appropriate to update or correct such Schedule(s); PROVIDED
that no such revisions or updates to any Schedule(s) shall be deemed to have
cured any breach of warranty or representation resulting from the inaccuracy or
incompleteness of any such Schedule(s) unless and until the Lender, in its sole
discretion, shall have accepted in writing such revisions or updates to such
Schedule(s).
38
44
Section 8.10 Tax Refund Claim. The Borrower shall promptly, and in any
event on or before December 31, 1996, file with the Internal Revenue Service all
forms necessary for the Tax Refund Claim.
ARTICLE 9 - INFORMATION
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Lender shall
otherwise consent in the manner set forth in SECTION 12.11, the Borrower will
furnish to the Lender at the Lender's Office:
Section 9.1 Financial Statements.
(a) Audited Year-End Statements. As soon as available, but in any event
within 120 days after the end of each fiscal year of the Borrower, copies of the
balance sheet of the Borrower as at the end of such fiscal year and the related
statements of income, shareholders' equity and cash flow for such fiscal year,
in each case setting forth in comparative form the figures for the previous year
of the Borrower and reported on, without qualification, by Xxxxxx Xxxxxxxx LLP
or other independent certified public accountants selected by the Borrower and
acceptable to the Lender.
(b) Monthly Financial Statements. As soon as available, but in any
event within 30 days after the end of each accounting month of the Borrower,
copies of the unaudited balance sheet of the Borrower as at the end of such
month and the related unaudited income statement for the Borrower for such month
and for the portion of the fiscal year of the Borrower through such month,
certified by the chief financial officer of the Borrower to the best of his
knowledge as presenting fairly the financial condition and results of operations
of the Borrower as at the date thereof and for the periods ended on such date,
subject to normal year end adjustments.
(c) Projected Financial Statements. As soon as available, but in any
event within 30 days prior to the end of each fiscal year of the Borrower,
forecasted financial statements, prepared by the Borrower, consisting of balance
sheets, cash flow statements and income statements of the Borrower, reflecting
projected borrowings hereunder and setting forth the assumptions on which such
forecasted financial statements were prepared, covering the one-year period
until the next fiscal year end.
All such financial statements shall be complete and correct in all material
respects and all such financial statements referred to in clauses (a) and (b)
shall be prepared in accordance with GAAP (except, with respect to interim
financial statements, for the omission of footnotes) applied consistently
throughout the periods reflected therein.
Section 9.2 Accountants' Certificate. Together with each delivery of
financial statements required by SECTION 9.1(a), a certificate of the
accountants who performed the audit in connection with such statements (a)
stating that they have reviewed this Agreement and that, in making the audit
necessary to the issuance of a report on such financial statements, they have
obtained no knowledge of any Default or Event of Default or, if such accountants
have obtained knowledge of a Default or Event of Default, specifying the nature
and period of existence thereof, and (b) setting forth the calculations
necessary to establish whether or not the Borrower was in compliance with the
covenants contained in SECTIONS 10.1, 10.2, and 10.5 as of the date of such
statements.
The Borrower authorizes the Lender to discuss the financial condition of the
Borrower with the Borrower's independent certified public accountants. The
Borrower shall deliver a letter addressed to such accountants authorizing them
to comply with the provisions of this SECTION 9.2.
39
45
Section 9.3 Officer's Certificate. Together with each delivery of
financial statements required by SECTION 9.1(a) and (b), a certificate of the
Borrower's President or chief financial officer, in the form of EXHIBIT D
attached hereto, (a) stating that, based on an examination sufficient to enable
him to make an informed statement, no Default or Event of Default exists or, if
such is not the case, specifying such Default or Event of Default and its
nature, when it occurred, whether it is continuing and the steps being taken by
the Borrower with respect to such Default or Event of Default, and (b) setting
forth the calculations necessary to establish whether or not the Borrower was in
compliance with the covenants contained in SECTIONS 10.1, 10.2, and 10.5 as of
the date of such statements.
Section 9.4 Copies of Other Reports (a) Promptly upon receipt thereof,
copies of all reports, if any, submitted to the Borrower or its Board of
Directors by its independent public accountants, including, without limitation,
all management reports.
(b) From time to time and promptly upon each request, such forecasts,
data, certificates, reports, statements, opinions of counsel, documents or
further information regarding the business, assets, liabilities, financial
condition, results of operations or business prospects of the Borrower as the
Lender may reasonably request. The rights of the Lender under this SECTION
9.4(b) are in addition to and not in derogation of its rights under any other
provision of this Agreement or any Loan Document.
(c) If requested by the Lender, statements in conformity with the
requirements of Federal Reserve Form G-1 or U-1 referred to in Regulations G and
U, respectively, of the Board of Governors of the Federal Reserve System.
Section 9.5 Notice of Litigation and Other Matters. Prompt notice of:
(a) the commencement, to the extent the Borrower is aware of the same,
of all proceedings and investigations by or before any governmental or
nongovernmental body and all actions and proceedings in any court or before any
arbitrator against or in any other way relating adversely to, or adversely
affecting, the Borrower or any Affiliate of the Borrower or any of their
respective property, assets or businesses which might, singly or in the
aggregate, cause a Default or an Event of Default or have a Materially Adverse
Effect,
(b) any amendment of the articles of incorporation or by-laws of the
Borrower,
(c) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of the Borrower or any
Affiliate of the Borrower which has had or may have any Materially Adverse
Effect and any change in the executive officers of the Borrower, and
(d) any (i) Default or Event of Default, or (ii) event that constitutes
or that, with the passage of time or giving of notice or both, would constitute
a default or event of default by the Borrower under any material agreement
(other than this Agreement) to which the Borrower is a party or by which the
Borrower or any of its property may be bound if the exercise of remedies
thereunder by the other party to such agreement would have, either individually
or in the aggregate, a Materially Adverse Effect.
Section 9.6 ERISA. As soon as possible and in any event within 30 days
after the Borrower knows, or has reason to know, that:
(a) any Termination Event with respect to a Benefit Plan has occurred
or will occur,
(b) the aggregate present value of the Unfunded Vested Accrued Benefits
under all Plans has increased to an amount in excess of $0, or
40
46
(c) the Borrower is in "default" (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan required by reason of
its complete or partial withdrawal (as described in Section 4203 or 4205 of
ERISA) from such Multiemployer Plan,
a certificate of the President or the chief financial officer of the Borrower
setting forth the details of such of the events described in CLAUSES (a) through
(c) as applicable and the action which is proposed to be taken with respect
thereto and, simultaneously with the filing thereof, copies of any notice or
filing which may be required by the PBGC or other agency of the United States
government with respect to such of the events described in CLAUSES (a) through
(c) as applicable.
ARTICLE 10 - NEGATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Lender shall
otherwise consent in the manner set forth in SECTION 12.11, the Borrower will
not directly or indirectly:
Section 10.1 Financial Ratios.
(a) Minimum Tangible Net Worth. Permit the Tangible Net Worth of the
Borrower, as of the end of any fiscal quarter of the Borrower:
(i) from the Effective Date to and including December 30,
1996, to be less than $12,000,000;
(ii) from December 31, 1996 to and including March 30,
1997, to be less than $12,500,000;
(iii) from March 31, 1997 to and including June 29, 1997,
to be less than $13,100,000;
(iv) from June 30, 1997 to and including September 29,
1997, to be less than $13,600,000;
(v) from September 30, 1997 to and including December 30,
1997, to be less than $14,100,000;
(vi) from December 31, 1997 to and including March 30,
1998, to be less than $14,800,000;
(vii) from March 31, 1998 to and including June 30, 1998,
to be less than $15,600,000; and
(viii) thereafter, to be less than 75% of the Borrower's Net
Income for the immediately preceding fiscal quarter
plus the minimum Tangible Net Worth requirement as of
the last day of such immediately preceding fiscal
quarter.
(b) Minimum Interest Coverage Ratio. Permit the ratio of (i) the
Borrower's Adjusted EBITDA to (ii) the Borrower's Interest Expense, as of the
end of each fiscal quarter of the Borrower, measured for the immediately
preceding four fiscal quarters, to be less than:
(A) 1.25 to 1 as of December 31, 1996 and March 31, 1997;
41
47
(B) 2.25 to 1 as of June 30, 1997, September 30, 1997 and
December 31, 1997; and
(C) 3.0 to 1 as of the end of each fiscal quarter
thereafter.
(c) Minimum Funded Indebtedness Ratio. Permit the ratio of (i) the
Borrower's Senior Funded Indebtedness to (ii) the Borrower's Adjusted EBITDA, as
of the end of each fiscal quarter of the Borrower, measured for the immediately
preceding four fiscal quarters, to be greater than:
(A) 5.5 to 1 as of each fiscal quarter ending after
December 31, 1996 and on or prior to March 30, 1998;
(B) 3.5 to 1 as of each fiscal quarter ending on or after
March 31, 1998 but on or prior to March 30, 1999; and
(C) 3.0 to 1 as of each fiscal quarter ending thereafter.
(d) Minimum Fixed Charge Coverage Ratio. Permit the ratio of (i) the
Borrower's Adjusted EBITDA less Capital Expenditures less taxes paid, to (ii)
the Borrower's principal payments on Senior Funded Indebtedness plus Interest
Expense, as of the end of each fiscal quarter of the Borrower, measured for the
immediately preceding four fiscal quarters, to be less than:
(A) 1.0 to 1 as of December 31, 1996, March 31, 1997,
June 30, 1996 and September 30, 1997;
(B) 1.50 to 1 as of December 31, 1997; and
(C) 1.75 to 1 as of the end of each fiscal quarter
thereafter.
Section 10.2 Indebtedness. Create, assume, or otherwise become or
remain obligated in respect of, or permit or suffer to exist or to be created,
assumed or incurred or to be outstanding any Indebtedness for Money Borrowed,
except for Permitted Indebtedness for Money Borrowed.
Section 10. 3 Guaranties. Become or remain liable with respect to any
Guaranty of any obligation of any other Person.
Section 10.4 Investments. Acquire, after the Agreement Date, any
Business Unit or Investment or, after such date, permit any Investment to be
outstanding, other than Permitted Investments; provided, however, the Lender
shall in good faith consider any proposed acquisition of a Business Unit or
Investment in substantially the same line of business of the Borrower.
Section 10.5 Capital Expenditures. Make or incur any Capital
Expenditures, except that the Borrower may make or incur Capital Expenditures in
an amount not to exceed, in the aggregate, $1,500,000 in any fiscal year.
Section 10.6 Restricted Distributions and Payments, Etc. Declare or
make any Restricted Distribution or Restricted Payment, except that so long as
no Default or Event of Default shall have occurred and be continuing or would
result therefrom, the Borrower may (a) make payments on the Subordinated
Indebtedness (including "earn-out" payments due National Data Products, Inc.
under Section 2.2 of the Asset Purchase Agreement dated as of November 17, 1994
among the Borrower, National Data Products, Inc. and the Shareholder Indemnitors
named therein) to the extent permitted by the Subordination Agreements or the
other subordination provisions applicable thereto, (b) make cash dividends and
distributions, and redeem shares
42
48
of its capital stock for cash, in an aggregate amount not to exceed $1,000,000
in any fiscal year, if, immediately after making any such dividend, distribution
or redemption, Availability equals or exceeds $1,000,000, and (c) convert any
Subordinated Indebtedness into stock of the Borrower, provided no distribution
of cash or other consideration (other than stock) is made to any such converting
holder of Subordinated Indebtedness.
Section 10.7 Merger, Consolidation and Sale of Assets. Merge or
consolidate with any other Person or sell, lease or transfer or otherwise
dispose of all or a substantial portion of its assets to any Person.
Section 10.8 Transactions with Affiliates. Effect any transaction with
any Affiliate on a basis less favorable to the Borrower than would be the case
if such transaction had been effected with a Person not an Affiliate.
Section 10.9 Liens. Create, assume or permit or suffer to exist or
to be created or assumed any Lien on any of the property or assets of
the Borrower, real, personal or mixed, tangible or intangible, except for
Permitted Liens.
Section 10.10 Operating Leases. Enter into any lease other than a
Capitalized Lease which would cause the annual payment obligations of the
Borrower under all leases (other than leases of real property in effect on the
Effective Date (and renewals and substitutions therefor) and Capitalized Leases)
to exceed $1,000,000 in the aggregate.
Section 10.11 Benefit Plans. Permit, or take any action which would
result in, the aggregate present value of the Unfunded Vested Accrued Benefits
under all Benefit Plans of the Borrower to exceed $0.
Section 10.12 Sales and Leasebacks. Enter into any arrangement with any
Person providing for the leasing from such Person of real or personal property
which has been or is to be sold or transferred, directly or indirectly, by the
Borrower to such Person.
Section 10.13 Amendments of Other Agreements. Amend in any way (a) the
interest rate or principal amount or schedule of payments of principal and
interest with respect to any Indebtedness (other than the Secured Obligations)
other than to reduce the interest rate or extend the schedule of payments with
respect thereto, or (b) any material provision of the Escrow Account Agreement
or the provisions of any Sale Agreement applicable to the Escrow Account or the
Vanstar Payments.
Section 10.14 Minimum Availability. Permit Availability to be less than
$500,000 at any time.
ARTICLE 11 - DEFAULT
Section 11.1 Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
governmental or nongovernmental body:
(a) Default in Payment of Loans. The Borrower shall default in any
payment of principal of, or interest on, any Loan or Note when and as
due (whether at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the payment,
as and when due, of principal of or interest on, any other Secured Obligation,
and such default shall continue for ten days after written notice thereof has
been given to the Borrower by the Lender.
43
49
(c) Misrepresentation. Any representation or warranty made (or deemed
to be made under SECTION 4.2) by the Borrower under this Agreement or any other
Loan Document or any amendment hereto or thereto shall at any time prove to have
been incorrect or misleading in any material respect when made.
(d) Default in Performance. The Borrower shall default (i) in the
performance or observance of any term, covenant, condition or agreement
contained in ARTICLES 6, 7, 8, 9 or 10; or (ii) in the performance or observance
of any term, covenant, condition or agreement contained in any other provision
of this Agreement (other than as specifically provided for otherwise in this
SECTION 11.1) and such default shall continue for a period of 30 days after
written notice thereof has been given to the Borrower by the Lender.
(e) Indebtedness Cross-Default. (i) The Borrower shall fail to pay when
due and payable the principal of or interest on any Indebtedness under the
Inventory Financing Agreement or on any other Indebtedness (other than the Loans
or Note) where the principal amount of such Indebtedness is in excess of
$100,000, or (ii) the maturity of any such Indebtedness shall have (A) been
accelerated in accordance with the provisions of any indenture, contract or
instrument providing for the creation of or concerning such Indebtedness, or (B)
been required to be prepaid prior to the stated maturity thereof, or (iii) any
event shall have occurred and be continuing which, with or without the passage
of time or the giving of notice, or both, would permit any holder or holders of
such Indebtedness, any trustee or agent acting on behalf of such holder or
holders or any other Person so to accelerate such maturity.
(f) Other Cross-Defaults. The Borrower shall default in the payment
when due or in the performance or observance of any material obligation or
condition of any agreement, contract or lease (other than the Security Documents
or any such agreement, contract or lease relating to Indebtedness), if the
exercise of remedies thereunder by the other party to such agreement could have
a Materially Adverse Effect.
(g) Voluntary Bankruptcy Proceeding. Any Obligor shall (i) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (ii) commence a proceeding seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition for adjustment of debts, (iii) consent to or fail to contest
in a timely and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws, (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as they become due,
(vi) make a general assignment for the benefit of creditors, or (vii) take any
corporate action for the purpose of authorizing any of the foregoing.
(h) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be commenced against any Obligor in any court of competent jurisdiction seeking
(i) relief under the federal bankruptcy laws (as now or hereafter in effect) or
under any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts, or (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of any Obligor or of all or
any substantial part of the assets, domestic or foreign, of any Obligor, and
such case or proceeding shall continue undismissed or unstayed for a period of
60 consecutive calendar days, or an order granting the relief requested in such
case or proceeding against any Obligor (including, but not limited to, an order
for relief under such federal bankruptcy laws) shall be entered.
(i) Loan Documents. Any event of default or Event of Default under any
other Loan Document shall occur or any Obligor shall default in the performance
or observance of any material term, covenant, condition or agreement contained
in, or the payment of any other sum covenanted to be paid by any Obligor under,
any such Loan Document; or any provision of this Agreement, or of any other Loan
Document after delivery thereof hereunder, shall for any reason cease to be
valid and binding, other than a nonmaterial provision rendered unenforceable by
operation of law, or any Obligor or other party thereto (other than the
44
50
Lender) shall so state in writing; or this Agreement or any other Loan Document,
after delivery thereof hereunder, shall for any reason (other than any action
taken independently by the Lender and except to the extent permitted by the
terms thereof) cease to create a valid, perfected and, except as otherwise
expressly permitted herein, first priority Lien on, or security interest in, any
of the Collateral purported to be covered thereby.
(j) Judgment. A judgment or order for the payment of money which
exceeds $100,000 in amount shall be entered against any Obligor by any court and
such judgment or order shall continue discharged or unstayed for 30 days.
(k) Attachment. A warrant or writ of attachment or execution or similar
process which exceeds $100,000 in value shall be issued against any property of
any Obligor and such warrant or process shall continue undischarged or unstayed
for 30 days.
(l) ERISA. (i) Any Termination Event with respect to a Benefit Plan
shall occur that, after taking into account the excess, if any, of (A) the fair
market value of the assets of any other Benefit Plan with respect to which a
Termination Event occurs on the same day (but only to the extent that such
excess is the property of the Borrower) over (B) the present value on such day
of all vested nonforfeitable benefits under such other Benefit Plan, results in
an Unfunded Vested Accrued Benefit in excess of $0, (ii) any Benefit Plan shall
incur an "accumulated funding deficiency" (as defined in Section 412 of the Code
or Section 302 of ERISA) for which a waiver has not been obtained in accordance
with the applicable provisions of the Code and ERISA, or (iii) the Borrower is
in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan resulting from the Borrower's complete or
partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such
Multiemployer Plan.
(m) Qualified Audits. The independent certified public accountants
retained by the Borrower shall refuse to deliver an opinion in accordance with
SECTION 9.1(a) with respect to the annual financial statements of the Borrower.
(n) Change of Control. A Person or "group" of Persons (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended, and
the rules promulgated thereunder) shall acquire, beneficially or of record, 33%
or more of the outstanding capital stock of the Borrower.
(o) Material Adverse Change. There occurs any act, omission, event,
undertaking or circumstance or series of acts, omissions, events, undertakings
or circumstances which have, or in the sole judgment of the Lender would have,
either individually or in the aggregate, a Materially Adverse Effect.
(p) Change in Management. Xxxxxxx Xxxxx shall for any reason cease to
be the President of the Borrower and 120 days shall have elapsed during which
time no replacement satisfactory to the Lender shall have been appointed.
Section 11.2 Remedies.
(a) Automatic Acceleration and Termination of Facilities. Upon the
occurrence of an Event of Default specified in SECTION 11.1(g) or (h), (i) the
principal of and the interest on the Loans and the Notes at the time
outstanding, and all other amounts owed to the Lender under this Agreement or
any of the Loan Documents and all other Secured Obligations, shall thereupon
become due and payable without presentment, demand, protest or other notice of
any kind, all of which are expressly waived, anything in this Agreement or any
of the Loan Documents to the contrary notwithstanding, and (ii) the Revolving
Credit Facility and the commitment of the Lender to make advances thereunder or
under this Agreement shall immediately terminate.
45
51
(b) Other Remedies. If any Event of Default (other than as specified in
SECTION 11.1(g) or (h)) shall have occurred and be continuing, the Lender, in
its sole and absolute discretion, may do any of the following:
(i) declare the principal of and interest on the Loans and the
Notes at the time outstanding, and all other amounts owed to the Lender
under this Agreement or any of the Loan Documents and all other Secured
Obligations, to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest
or other notice of any kind, all of which are expressly waived,
anything in this Agreement or the Loan Documents to the contrary
notwithstanding;
(ii) terminate the Revolving Credit Facility and any
commitment of the Leader to make advances hereunder;
(c) Further Remedies. If any Event of Default shall have occurred and
be continuing, the Lender, in its sole and absolute discretion, may do any of
the following:
(i) notify, or request the Borrower to notify, in writing or
otherwise, any Account Debtor or obligor with respect to any one or
more of the Receivables to make payment to the Lender or any agent or
designee of the Lender, at such address as may be specified by the
Lender, and, if, notwithstanding the giving of any notice, any Account
Debtor or other such obligor shall make payments to the Borrower, the
Borrower shall hold all such payments it receives in trust for the
Lender, without commingling the same with other funds or property of,
or held by, the Borrower and shall deliver the same to the Lender or
any such agent or designee immediately upon receipt by the Borrower in
the identical form received, together with any necessary endorsements;
(i) settle or adjust disputes and claims directly with Account
Debtors and other obligors on Receivables for amounts and on terms
which the Lender considers advisable and in all such cases only the net
amounts received by the Lender in payment of such amounts, after
deductions of costs and attorneys' fees, shall constitute Collateral,
and the Borrower shall have no further right to make any such
settlements or adjustments or to accept any returns of merchandise;
(iii) enter upon any premises on which Inventory or Equipment
may be located and, without resistance or interference by the Borrower,
take physical possession of any or all thereof and maintain such
possession on such premises or move the same or any part thereof to
such other place or places as the Lender shall choose, without being
liable to the Borrower on account of any loss, damage or depreciation
that may occur as a result thereof, so long as the Lender shall act
reasonably and in good faith;
(iv) require the Borrower to and the Borrower shall, without
charge to the Lender, assemble the Inventory and Equipment and maintain
or deliver it into the possession of the Lender or any agent or
representative of the Lender at such place or places as the Lender may
designate;
(v) at the expense of the Borrower, cause any of the Inventory
and Equipment to be placed in a public or field warehouse, and the
Lender shall not be liable to the Borrower on account of any loss,
damage or depreciation that may occur as a result thereof, so long as
the Lender shall act reasonably and in good faith;
(vi) without notice, demand or other process, and without
payment of any rent or any other charge, enter any of the Borrower's
premises and, without breach of the peace, until the Lender completes
the enforcement of its rights in the Collateral, take possession of
such premises or place
46
52
custodians in exclusive control thereof, remain on such premises and
use the same and any of the Borrower's equipment, for the purpose of
(A) completing any work in process, preparing any Inventory for
disposition and disposing thereof, and (B) collecting any Receivable,
and the Lender is hereby granted a license or sublicense and all other
rights as may be necessary, appropriate or desirable to use the
Intellectual Property in connection with the foregoing, and the rights
of the Borrower under all licenses and franchise agreements shall inure
to the Lender's benefit (provided, however, that any use of any
federally registered trademarks as to any goods shall be subject to the
control as to the quality of such goods of the owner of such trademarks
and the goodwill of the business symbolized thereby);
(vii) exercise any and all of its rights under any and all of
the Security Documents;
(viii) apply any cash Collateral to the payment of the Secured
Obligations in any order in which the Lender may elect or use such cash
in connection with the exercise of any of its other rights hereunder or
under any of the Security Documents,
(ix) establish or cause to be established one or more
Lockboxes or other arrangement for the deposit of proceeds of
Receivables, and, in such case, the Borrower shall cause to be
forwarded to the Lender at the Lender's Office, on a daily basis,
copies of all checks and other items of payment and deposit slips
related thereto deposited in such Lockboxes, together with collection
reports in form and substance satisfactory to the Lender; and
(x) exercise all of the rights and remedies of a secured party
under the UCC (whether or not the UCC is applicable) and under any
other applicable law, including, without limitation, the right,
without notice except as specified below and with or without taking
the possession thereof, to sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any location chosen
by the Lender, for cash, on credit or for future delivery and at such
price or prices and upon such other terms as the Lender may deem
commercially reasonable. The Borrower agrees that, to the extent
notice of sale shall be required by law, at least 10 days' notice to
the Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notice, but notice given in any other reasonable manner or at any
other reasonable time shall also constitute reasonable notification.
The Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender may adjourn
any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
Section 11.3 Application of Proceeds. All proceeds from each sale of,
or other realization upon, all or any part of the Collateral following an Event
of Default shall be applied or paid over as follows:
(a) First: to the payment of all costs and expenses incurred in
connection with such sale or other realization, including attorneys' fees,
(b) Second: to the payment of the Secured Obligations (with the
Borrower remaining liable for any deficiency) in any order which the Lender may
elect,
(c) Third: to the creation of a fund in an amount equal to the Letter
of Credit Reserve, which fund shall be held by the Lender as security for and
applied to the payment of any amounts which may thereafter become due under the
Letter of Credit Facility, and
(d) Fourth: the balance (if any) of such proceeds shall be paid to the
Borrower or, subject to any duty imposed by law or otherwise, to whomsoever is
entitled thereto.
47
53
THE BORROWER SHALL REMAIN LIABLE AND WILL PAY, ON DEMAND, ANY DEFICIENCY
REMAINING IN RESPECT OF THE SECURED OBLIGATIONS, TOGETHER WITH INTEREST THEREON
AT A RATE PER ANNUM EQUAL TO THE HIGHEST RATE THEN PAYABLE HEREUNDER ON SUCH
SECURED OBLIGATIONS, WHICH INTEREST SHALL CONSTITUTE PART OF THE SECURED
OBLIGATIONS.
Section 11.4 Power of Attorney. In addition to the authorizations
granted to the Lender under SECTION 7.15 or under any other provision of this
Agreement or any of the Loan Documents, upon and after an Event of Default, the
Borrower hereby irrevocably designates, makes, constitutes and appoints the
Lender (and all Persons designated by the Lender from time to time) as the
Borrower's true and lawful attorney and agent in fact, and the Lender or any
agent of the Lender may, for the purpose of satisfying the Secured Obligations,
without notice to the Borrower, and at such time or times as the Lender or any
such agent in its sole discretion may determine, in the name of the Borrower or
the Lender,
(a) demand payment of the Receivables, enforce payment thereof by legal
proceedings or otherwise, settle, adjust, compromise, extend or renew any or all
of the Receivables or any legal proceedings brought to collect the Receivables,
discharge and release the Receivables or any of them and exercise all of the
Borrower's rights and remedies with respect to the collection of Receivables,
(b) prepare, file and sign the name of the Borrower on any proof of
claim in bankruptcy or any similar document against any Account Debtor or any
notice of Lien, assignment or satisfaction of Lien or similar document in
connection with any of the Collateral,
(c) endorse the name of the Borrower upon any chattel paper, document,
instrument, notice, freight xxxx, xxxx of lading or similar document or
agreement relating to the Receivables, the Inventory or any other Collateral,
(d) use the stationery of the Borrower, open the Borrower's mail,
notify the post office authorities to change the address for delivery of the
Borrower's mail to an address designated by the Lender and sign the name of the
Borrower to verifications of the Receivables and on any notice to the Account
Debtors,
(e) use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Receivables,
Inventory or other Collateral to which the Borrower or any Subsidiary of the
Borrower has access.
Section 11.5 Miscellaneous Provisions Concerning Remedies.
(a) Rights Cumulative. The rights and remedies of the Lender under this
Agreement, the Note and each of the Loan Documents shall be cumulative and not
exclusive of any rights or remedies which it or they would otherwise have. In
exercising such Rights and remedies, the Lender may be selective and no failure
or delay by the Lender in exercising any right shall operate as a waiver of such
right nor shall any single or partial exercise of any power or right preclude
its other or further exercise or the exercise of any other power or right.
(b) Waiver of Marshalling. The Borrower hereby waives any right to
require any marshalling of assets and any similar right.
(c) Limitation of Liability. Nothing contained in this ARTICLE 11 or
elsewhere in this Agreement or in any of the Loan Documents shall be construed
as requiring or obligating the Lender or any agent or designee of the Lender to
make any demand or to make any inquiry as to the nature or sufficiency of any
payment received by it or to present or file any claim or notice or take any
action with respect to any
48
54
AFFIDAVIT REGARDING DELIVERY
(attach to note or other written
obligation to pay money)
I, Xxxxxx Xxxx, hereby certify that I am a Vice President of
NationsBank, N.A. (South) and that the foregoing was executed and delivered to
me as a representative of NationsBank, N.A. (South) by Xxxxxxx Xxxx, as
President of DataFlex Corporation, in the State of Georgia, County of Xxxxxx on
December 15, 1996 in the presence of the undersigned notary public.
/s/ Xxxxxx Xxxx
----------------------------------------
Signature of Officer or Agent of Lender
On this the 18 day of December, 1996, before me, the undersigned a
Notary Public in and for the State of Georgia, County of Xxxxxx, personally
known to me or proved to me on the basis of satisfactory evidence to be a Vice
President of NationsBank, N.A. (South), who executed the foregoing affidavit on
behalf of such national banking association and acknowledged to me that such
national banking association executed the foregoing pursuant to its by-laws or a
resolution of its board of directors, said execution taking place in the State
of Georgia, County of Xxxxxx.
/s/ Xxxxxxxxx Xxxx
------------------------------
Notary Signature
My Commission Expires: 6/17/00
------------------------------
[Affix Notarial Seal]
55
Receivable or any other Collateral or the moneys due or to become due thereunder
or in connection therewith or to take any steps necessary to preserve any rights
against prior parties, and neither the Lender nor any of its agents or designees
shall have any liability to the Borrower for actions taken pursuant to this
ARTICLE 11, any other provision of this Agreement or any of the Loan Documents,
so long as the Lender or such agent or designee shall act reasonably and in good
faith.
(d) Appointment of Receiver. In any action under this ARTICLE 11, the
Lender shall be entitled to the appointment of a receiver, without notice of any
kind whatsoever, to take possession of all or any portion of the Collateral and
to exercise such power as the court shall confer upon such receiver.
Section 11.6 Trademark License. The Borrower hereby grants to the
Lender the nonexclusive right and license to use any trademark then used by the
Borrower, for the purposes set forth in SECTION 11.2(c)(vi) and for the purpose
of enabling the Lender to realize on the Collateral and to permit any purchaser
of any portion of the Collateral through a foreclosure sale or any other
exercise of the Lender's rights and remedies under the Loan Documents to use,
sell or otherwise dispose of the Collateral bearing any such trademark. Such
right and license is granted free of charge, without the requirement that any
monetary payment whatsoever be made to the Borrower or any other Person by the
Lender. The Borrower hereby represents, warrants, covenants and agrees that it
presently has, and shall continue to have, the right, without the approval or
consent of others, to grant the license set forth in this SECTION 11.6.
ARTICLE 12 - MISCELLANEOUS
Section 12.1 Notices.
(a) Method of Communication. Except as specifically provided in this
Agreement or in any of the Loan Documents, all notices and the communications
hereunder and thereunder shall be in writing or by telephone subsequently
confirmed in writing. Notices in writing shall be delivered personally or sent
by overnight courier service, by certified or registered mail, postage pre-paid,
or by facsimile transmission and shall be deemed received, in the case of
personal delivery, when delivered, in the case of overnight courier service, on
the next Business Day after delivery to such service, in the case of mailing, on
the third day after mailing (or, if such day is a day on which deliveries of
mail are not made, on the next succeeding day on which deliveries of mail are
made) and, in the case of facsimile transmission, upon transmittal; provided
that in the case of notices to the Lender, the Lender shall be charged with
knowledge of the contents thereof only when such notice is actually received by
the Lender. A telephonic notice to the Lender as understood by the Lender will
be deemed to be the controlling and proper notice on the event of a discrepancy
with or failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at
the following addresses, or any other address of which all the other parties are
notified in writing.
If to the Borrower: Dataflex Corporation
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxx
Facsimile No.: (000) 000-0000
49
56
If to the Lender: NationsBank, N.A. (South)
c/o NationsBank Business Credit
000 Xxxxxxxxx Xxxxxx, x0xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxx, VP
Facsimile No.: (000) 000-0000
(c) Lender's Office. The Lender hereby designates its office located at
000 Xxxxxxxxx Xxxxxx, x0xx Xxxxx, Xxxxxxx, Xxxxxxx 00000, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower, as the office to which payments due are to be made and at which Loans
will be disbursed.
Section 12.2 Expenses. The Borrower agrees to pay or reimburse on
demand all reasonable costs and expenses incurred by the Lender, including,
without limitation, the reasonable fees and disbursements of counsel, in
connection with (a) the negotiation, preparation, execution, delivery,
enforcement and termination of this Agreement and each of the other Loan
Documents, whenever the same shall be executed and delivered, including, without
limitation, (i) the costs and expenses of appraisals of the Collateral, (ii) the
costs and expenses of lien searches, and (iii) taxes, fees and other charges of
filing the Financing Statements and continuations and the costs and expenses of
taking other actions to perfect, protect, and continue the Security Interest;
(b) the preparation, execution and delivery of any waiver, amendment, supplement
or consent by the Lender relating to this Agreement or any of the Loan
Documents; (c) sums paid or obligations incurred in connection with the payment
of any amount or taking any action required of the Borrower under the Loan
Documents that the Borrower fails to pay or take; (d) if an Event of Default
exists, costs of inspections and verifications of the Collateral, including,
without limitation, standard per diem fees charged by the Lender for travel,
lodging, and meals for inspections of the Collateral and the Borrower's
operations and books and records by the Lender's agents; (e) costs and expenses
of forwarding loan proceeds, collecting checks and other items of payment, and
establishing and maintaining each Disbursement Account, Agency Account and
Lockbox; (f) costs and expenses of preserving and protecting the Collateral;
(g) after the occurrence of a Default, consulting with and obtaining opinions
and appraisals front one or more Persons, including personal property
appraisers, accountants and lawyers, concerning the value of any Collateral for
the Secured Obligations or related to the nature, scope or value of any right
or remedy of the Lender hereunder or under any of the Loan Documents, including
any review of factual matters in connection therewith, which expenses shall
include the fees and disbursements of such Persons; and (h) costs and expenses
paid or incurred to obtain payment of the Secured Obligations, enforce the
Security Interest, sell or otherwise realize upon the Collateral, and otherwise
enforce the provisions of the Loan Documents, or to prosecute or defend any
claim in any way arising out of, related to or connected with, this Agreement
or any of the Loan Documents, which expenses shall include the reasonable fees
and disbursements of counsel and of experts and other consultants retained by
the Lender.
The foregoing shall not be construed to limit any other provisions of the Loan
Documents regarding costs and expenses to be paid by the Borrower. The Borrower
hereby authorizes the Lender to debit the Borrower's loan accounts (by
increasing the principal amount of the Revolving Credit Loan) in the amount of
any such costs and expenses owed by the Borrower when due.
Section 12.3 Stamp and Other Taxes. The Borrower will pay any and all
stamp, registration, recordation and similar taxes, fees or charges and shall
indemnify the Lender against any and all liabilities with respect to or
resulting from any delay in the payment or omission to pay any such taxes, fees
or charges, which may be payable or determined to be payable in connection with
the execution, delivery, performance or enforcement of this Agreement and any of
the Loan Documents or the perfection of any rights or security interest
thereunder.
50
57
Section 12.4 Setoff. In addition to any rights now or hereafter granted
under a applicable law, and not by way of limitation of any such rights, upon
and after the occurrence of any Default or Event of Default, the Lender and any
participant with the Lender in the Loan are hereby authorized by the Borrower at
any time or from time to time, without notice to the Borrower or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, time or
demand, including, but not limited to, indebtedness evidenced by certificates of
deposit, whether matured or unmatured) and any other indebtedness at any time
held or owing by the Lender or any participant to or for the credit or the
account of the Borrower against and on account of the Secured Obligations
irrespective or whether or not (a) the Lender shall have made any demand under
this Agreement or any of the Loan Documents, or (b) the Lender shall have
declared any or all of the Secured Obligations to be due and payable as
permitted by SECTION 11.2 and although such Secured Obligations shall be
continent or unmatured.
Section 12.5 Litigation. EACH OF THE LENDER AND THE BORROWER HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE
COMMENCED BY OR AGAINST THE BORROWER OR THE LENDER ARISING OUT OF THIS
AGREEMENT, THE COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER
CAUSE OR DISPUTE WHATSOEVER BETWEEN THE BORROWER AND THE LENDER OF ANY KIND OR
NATURE. THE BORROWER AND THE LENDER HEREBY AGREE THAT THE FEDERAL COURT OF THE
NORTHERN DISTRICT OF GEORGIA OR, AT THE OPTION OF THE LENDER, ANY COURT IN WHICH
THE LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY AND WHICH SITS IN A
JURISDICTION IN WHICH THE BORROWER TRANSACTS BUSINESS SHALL HAVE NON-EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWER
AND THE LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR THE LOAN
DOCUMENTS OR TO ANY MATTER ARISING THEREFROM. THE BORROWER EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED
IN SUCH COURTS, HEREBY WAIVING PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT OR
OTHER PROCESS OR PAPERS ISSUED THEREIN AND AGREEING THAT SERVICE OF SUCH SUMMONS
AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO THE BORROWER AT THE ADDRESS SET FORTH IN SECTION 12.1(b),
WHICH SERVICE SHALL BE DEEMED MADE UPON RECEIPT THEREOF. THE NON EXCLUSIVE
CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION
UNDER THIS AGREEMENT TO ENFORCE THE SAME IN ANY APPROPRIATE JURISDICTION.
Section 12.6 Waiver of Rights. THE BORROWER HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES ALL RIGHTS WHICH THE BORROWER HAS UNDER
CHAPTER 14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR
PROVISION OF APPLICABLE LAW TO NOTICE AND TO A JUDICIAL HEARING PRIOR TO THE
ISSUANCE OF A WRIT OF POSSESSION ENTITLING THE LENDER, ITS SUCCESSORS AND
ASSIGNS TO POSSESSION OF THE COLLATERAL UPON DEFAULT OR EVENT OF DEFAULT.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING AND WITHOUT LIMITING ANY OTHER
RIGHT WHICH THE LENDER MAY HAVE, THE BORROWER CONSENTS THAT, IF THE LENDER FILES
A PETITION FOR AN IMMEDIATE WRIT OF POSSESSION IN COMPLIANCE WITH SECTIONS
00-00-000 AND 00-00-000 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR
PROVISION OF APPLICABLE LAW AND THIS WAIVER OR A COPY HEREOF IS ALLEGED IN SUCH
PETITION AND ATTACHED THERETO, THE COURT BEFORE WHICH SUCH PETITION IS FILED MAY
DISPENSE WITH ALL RIGHTS AND PROCEDURES HEREIN WAIVED AND MAY ISSUE
51
58
FORTHWITH AN IMMEDIATE WRIT OF POSSESSION IN ACCORDANCE WITH CHAPTER 14 OF TITLE
44 OF THE OFFICIAL CODE OF GEORGIA OR IN ACCORDANCE WITH ANY SIMILAR PROVISION
OF APPLICABLE LAW, WITHOUT THE NECESSITY OF AN ACCOMPANYING BOND AS OTHERWISE
REQUIRED BY SECTION 00-00-000 OF THE OFFICIAL CODE OF GEORGIA OR IN ACCORDANCE
WITH ANY SIMILAR PROVISION OF APPLICABLE LAW. THE BORROWER HEREBY ACKNOWLEDGES
THAT IT HAS READ AND FULLY UNDERSTANDS THE TERMS OF THIS WAIVER AND THE EFFECT
HEREOF.
Section 12.7 Reversal of Payments. To the extent the Borrower makes a
payment or payments to the Lender or the Lender receives any payment or proceeds
of the Collateral for the Borrower's benefit, which payment(s) or proceeds or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then, the Lender shall have the continuing and exclusive right
to apply, reverse and re-apply any and all payments to any portion of the
Secured Obligations, and, to the extent of such payment or proceeds received,
the Secured Obligations or part thereof intended to be satisfied shall be
revived and continued in full force and effect, as if such payment or proceeds
had not been received by the Lender.
Section 12.8 Injunctive Relief. The Borrower recognizes that, in the
event the Borrower fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy of law may prove to be
inadequate relief to the Lender; therefore, the Borrower agrees that the Lender,
at the Lender's option, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
Section 12.9 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower to determine whether it is in compliance with any covenant contained
herein, shall, unless there is an express written direction or consent by the
Lender to the contrary, be performed in accordance with GAAP.
Section 12.10 Assignment: Participation. All the provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or transfer any of its rights under this Agreement. The Lender may assign
to one or more Persons, or sell participations to one or more Persons in, all or
a portion of its rights and obligations hereunder and under the Note and, in
connection with any such assignment or sale of a participation, may assign its
rights and obligations under the Security Documents. The Lender may, in
connection with any assignment or proposed assignment or sale or proposed sale
of a participation, disclose to the assignee or proposed assignee or participant
or proposed participant any information relating to the Borrower furnished to
the Lender by or on behalf of the Borrower, provided any such proposed
participant or assignee agrees to preserve the confidentiality of any
confidential information relating to the Borrower received from the Lender.
Section 12.11 Amendments. Any term, covenant, agreement or condition
of this Agreement or any of the other Loan Documents may be amended or waived
and any departure therefrom may be consented to if, but only if, such
amendment, waiver or consent is in writing signed by the Lender and, in the
case of an amendment, by the Borrower. Unless otherwise specified in such
waiver or consent, a waiver or consent given hereunder shall be effective only
in the specific instance and for the specific purpose for which given.
Section 12.12 Performance of Borrower's Duties. The Borrower's
obligations under this Agreement and each of the Loan Documents shall be
performed by the Borrower at its sole cost and expense. If the Borrower shall
fail to do any act or thing which it has covenanted to do under this Agreement
or any of the Loan Documents, the Lender may (but shall not be obligated to) do
the same or cause it to be done either in
52
59
the name of the Lender or in the name and on behalf of the Borrower, and the
Borrower hereby irrevocably authorizes the Lender so to act.
Section 12.13 Indemnification. The Borrower agrees to reimburse the
Lender for all reasonable costs and expenses, including counsel fees and
disbursements, incurred and to indemnify and hold the Lender harmless from and
against all losses suffered by the Lender, other than losses resulting from the
Lender's gross negligence or willful misconduct, in connection with (a) the
exercise by the Lender of any right or remedy granted to it under this Agreement
or any of the Loan Documents, (b) any claim, and the prosecution or defense
thereof, arising out of or in any way connected with this Agreement or any of
the Loan Documents, except in the case of a dispute between the Borrower and the
Lender in which the Borrower prevails in a final unappealed or unappealable
judgment, and (c) the collection or enforcement of the Secured Obligations or
any of them.
Section 12.14 All Powers Coupled with Interest. All powers of attorney
and other authorizations granted to the Lender and any Persons designated by the
Lender pursuant to any provisions of this Agreement or any of the Loan Documents
shall be deemed coupled with an interest and shall be irrevocable so long as any
of the Secured Obligations remain unpaid or unsatisfied or the Revolving Credit
Facility has not been terminated.
Section 12.15 Survival. Notwithstanding any termination of this
Agreement, (a) until all Secured Obligations have been paid in full and the
Revolving Credit Facility terminated, the Lender shall retain its Security
Interest and shall retain all rights under this Agreement and each of the
Security Documents with respect to the Collateral as fully as though this
Agreement had not been terminated, and (b) the indemnities to which the Lender
is entitled under the provisions of this ARTICLE 12 and any other provision of
this Agreement and the Loan Documents shall continue in full force and effect
and shall protect the Lender against events arising after such termination as
well as before.
Section 12.16 Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 12.17 Governing Law. This Agreement and the Note shall be
construed in accordance with and governed by the law of the State of Georgia.
Section 12.18 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
Section 12.19 Reproduction of Documents. This Agreement, each of the
Loan Documents and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by the Lender, and (c) financial statements,
certificates and other information previously or hereafter furnished to the
Leader, may be reproduced by the Lender by any photographic, photostatic,
microcard, microfilm, miniature photographic or other similar process, and the
Lender may destroy any original document so reproduced. Each party hereto
stipulates that, to the extent permitted by applicable laws any such
reproduction shall be as admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original shall be in
existence and whether or not such reproduction was made by such Lender in the
regular course of business), and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
53
60
Section 12.20 Funds Transfer Services.
(a) The Borrower acknowledges that the Lender has made available to it
a description of security procedures regarding funds transfers executed by the
Lender or an affiliate bank at the request of such Borrower (the "Security
Procedures"). The Borrower and the Lender agree that the Security Procedures are
commercially reasonable. The Borrower further acknowledges that the full scope
of the Security Procedures which the Lender or such affiliate bank offers and
strongly recommends for funds transfers is available only if the Borrower
communicates directly with the Lender or such affiliate bank as applicable in
accordance with said procedures. If the Borrower attempts to communicate by any
other method or otherwise not in accordance with the Security Procedures, the
Lender or such affiliate bank, as applicable, shall not be required to execute
such instructions, but if the Lender or such affiliate bank, as applicable, does
so, the Borrower will be deemed to have refused the Security Procedures that the
Lender or such affiliate bank, as applicable, offers and strongly recommends,
and the Borrower will be bound by any funds transfer, whether or not authorized,
which is issued in the Borrower's name and accepted by the Lender or such
affiliate bank, as applicable, in good faith. The Lender or such affiliate bank,
as applicable, may modify the Security Procedures at such time or times and in
such manner as the Lender or such affiliate bank, as applicable, in its sole
discretion, deems appropriate to meet prevailing standards of good banking
practice. By continuing to use the Lender's or such affiliate bank's, as
applicable. wire transfer services after receipt of any modification of the
Security Procedures, the Borrower agrees that the Security Procedures, as
modified, are likewise commercially reasonable. The Borrower further agrees to
establish and maintain procedures to safeguard the Security Procedures and any
information related thereto.
(b) The Lender or such affiliate bank, as applicable, will generally
use the Fedwire funds transfer system for domestic funds transfers, and the
funds transfer system operated by the Society for Worldwide International
Financial Telecommunication (SWIFT) for international funds transfers.
International funds transfers may also be initiated through the Clearing House
InterBank Payment System (CHIPs) or international cable. However, the Lender or
such affiliate bank, as applicable, may use any means and routes that the Lender
or such affiliate bank, as applicable, in its sole discretion, may consider
suitable for the transmission of funds. Each payment order, or cancellation
thereof, carried out through a funds transfer system or a clearing house will be
governed by all applicable funds transfer system rules and clearing house rules
and clearing arrangements, whether or not the Lender or such affiliate bank, as
applicable, is a member of the system, clearing house or arrangement and the
Borrower acknowledges that the Lender's or such affiliate bank's, as applicable,
right to reverse, adjust, stop payment or delay posting of an executed payment
order is subject to the laws, regulations, rules, circulars and arrangements
described herein.
54
61
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Atlanta, Georgia by their duly authorized officers in several
counterparts all as of the day and year first written above.
BORROWER:
DATAFLEX CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: XXXXXXX X. XXXXX
--------------------------------
Title: PRESIDENT
-------------------------------
[CORPORATE SEAL]
LENDER:
NATIONSBANK, N.A. (SOUTH)
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
--------------------------------
Title: Vice President
-------------------------------
