SEVENTH AMENDMENT TO FIRST AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Exhibit 10.5
SEVENTH AMENDMENT TO FIRST AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT
THIS SEVENTH AMENDMENT TO FIRST AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (herein
called this “Amendment”) made as of the 31st day of March, 2009 by and between Priority Fulfillment
Services, Inc. (“Borrower”) and Comerica Bank (“Bank”),
WITNESSETH:
WHEREAS, Borrower and Bank have entered into that certain First Amended and Restated Loan and
Security Agreement dated as of December 29, 2004 (as from time to time amended or modified, the
“Original Agreement”) for the purposes and consideration therein expressed, pursuant to which Bank
became obligated to make loans to Borrower as therein provided; and
WHEREAS, Borrower and Bank desire to amend the Original Agreement to provide for term loans
and for the other purposes set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements
contained herein and in the Original Agreement, in consideration of the loans which may hereafter
be made by Bank to Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
§ 1.1 Terms Defined in the Original Agreement. Unless the context otherwise requires or
unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have
the same meanings whenever used in this Amendment.
§ 1.2 Other Defined Terms. Unless the context otherwise requires, the following terms when
used in this Amendment shall have the meanings assigned to them in this § 1.2.
“Amendment” means this Seventh Amendment to First Amended and Restated Loan and
Security Agreement.
“Loan Agreement” means the Original Agreement as amended hereby.
ARTICLE II.
Amendments to Original Agreement
§ 2.1 Defined Terms.
(a) The definition of “Revolving Maturity Date” in Exhibit A to the Original Agreement
is hereby amended in its entirety to read as follows:
“Revolving Maturity Date” means March 31, 2010.
(b) The definition of “Inflow Transfer” in Exhibit A to the Original Agreement is
hereby amended in its entirety to read as follows:
“Inflow Transfer” means the receipt by Borrower of cash payments after March 31,
2009, which are dividend payments or subordinated debt payments from BSD Holdings,
Inc., dividend payments or interest payments from SPRL PFSweb B.V, or other cash
payments made to Borrower by a Subsidiary or Affiliate, excluding payments made in
the ordinary course of business.
(c) Clause (c) of the definition of “Permitted Indebtedness” in Exhibit A to the
Original Agreement is hereby amended in its entirety to read as follows:
(c) Indebtedness secured by a lien described in clause (c) of the defined term
“Permitted Liens”, provided (i) such Indebtedness does not exceed the lesser of the
cost or fair market value at acquisition date of the equipment financed with such
Indebtedness and (ii) the aggregate amount of such Indebtedness incurred in each
fiscal year of Borrower shall not exceed $4,000,000.
(d) The definition of “Permitted Distribution” in Exhibit A to the Original Agreement
is hereby amended in its entirety to read as set forth below:
“Permitted Distribution” means any cash dividend or cash distribution by
Borrower to any entity that is an Affiliate of Borrower, provided that such cash
dividend or cash distribution is made from Inflow Transfer received by Borrower
after March 31, 2009, in excess of $5,175,000.
(e) Clauses (e), (f) and (g) of the definition of “Permitted Investment” in Exhibit A
to the Original Agreement are hereby amended in their entirety to read as follows:
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| (e) | Advances by Borrower to Supplies Distributor, Inc. pursuant to the Subordinated Demand Note, so long as (1) the aggregate outstanding principal amount of such Indebtedness does not exceed $6,500,000 (excluding accrued and unpaid interest) at any time, and (2) before and after giving effect to such advances no Event of Default has occurred and is continuing; | ||
| (f) | Incremental cash Investments by Borrower in or cash advances to SPRL PFSweb B.V., Priority Fulfillment Services of Canada, Inc., eCOST Philippine Services LLC, PFSM, LLC and xXXXX.xxx, not to exceed $150,000, provided that (1) the aggregate amount of all Inflow Transfers after March 30, 2009 and prior to April 30, 2009 equals or exceeds $500,000, and (2) at the time of each such incremental cash Investment and after giving effect thereto, no Event of Default has occurred and is continuing. | ||
| (g) | Investments which constitute Permitted Distributions, provided that before and after giving effect to each such Investment, no Event of Default has occurred and is continuing. |
§ 2.2 Interest Rates and Payments. Section 2.3 of the Original Agreement is hereby amended
in its entirety to read as follows:
§ 2.3 Interest Rates, Payments and Calculations. Interest shall accrue on the
Advances and shall be payable as set forth in the Prime References Rate Addendum to Loan and
Security Agreement attached hereto and made a part hereof.
§ 2.3 Fees. Section 2.5(a) of the Original Agreement is hereby amended in its entirety to
read as follows:
(a) Facility Fee. A facility fee in the aggregate amount of $50,000 to be paid
on April 1, 2009.
§ 2.4 Financial Statements.
(a) The due date for the financial statements due for the calendar month of January 2009 under
Section 6.2(a) of the Original Agreement is hereby extended to March 31, 2009.
(b) Section 6.2(j) of the Original Agreement is hereby amended to read as follows:
(j) within 30 days after the last day of each month, Borrower shall deliver to Bank a
Borrowing Base Certificate signed by a Responsible Officer, together with aged listings by
invoice date of accounts receivable and accounts payable; provided that if the average
outstanding amount of Advances during any fiscal quarter of Borrower exceeds forty percent
(40%) of the Committed Revolving Line then in effect, Borrower shall deliver its Borrowing
Base Certificate on a semi-monthly basis during the immediately following fiscal quarter,
such certificates being due within 15 days and 30 days after the
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last day of each month during such fiscal quarter;
(b) Section 6.2 of the Original Agreement is hereby amended to add the following clause (u)
thereto:
(u) as soon as available, but in any event within 30 days after the end of each
calendar month, a preliminary company prepared income statement of Borrower for such
calendar month.
§ 2.5 Financial Covenants.
(a) Section 6.7(a) of the Original Agreement is hereby amended in its entirety to read as
follows:
(a) Liquidity Ratio. A ratio of (i) Cash (including all pledged Cash with Bank
for repayment of the Bonds) plus Eligible Accounts to (ii) all Indebtedness to Bank of at
least 1.25 to 1.00.
(b) Section 6.7(d) of the Original Agreement is hereby amended in its entirety to read as
follows:
(d) EBITDA. As of the last day of each calendar month, the variance, if
negative, then expressed as a positive number, between Borrower’s EBITDA and the EBITDA set
forth in the Approved Projections for the twelve (12) calendar month period ending on such
date, shall not exceed $350,000. As used herein, “EBITDA” shall mean, for any period of
calculation, Borrower’s earnings for such period before interest and taxes plus
depreciation, amortization and non-cash stock compensation accruals to the extent deducted
in the calculation of such earnings. “Approved Projections” means for any period of time,
the projections for such period that have been reviewed by Borrower’s Board of Directors and
delivered to Bank. Borrower shall deliver to Bank (i) a preliminary draft of the
projections for the next fiscal year of Borrower by January 31 of each year and (ii) the
updated projections reviewed by Borrower’s Board of Directors for the next fiscal year not
later than March 10 of each year.
§ 2.6 Affirmative Covenants. The following Section 6.12 is hereby added to the
Original Agreement:
6.12 Inflow Transfers. Borrower shall receive not less than $5,175,000 in
aggregate Inflow Transfers during the period beginning March 31, 2009 and ending on July 2,
2009.
§ 2.7 Negative Covenants. Section 7.12 of the Original Agreement is hereby amended in its
entirety to read as follows:
7.12 Capital Expenditures. Make capital expenditures in an aggregate amount
greater than $4,000,000 in each fiscal year of Borrower, provided that the aggregate amount
of such expenditures purchased with cash (and not financed) shall not exceed
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$650,000; provided further, that any capital expenditures made by Borrower exclusively from
the proceeds of Permitted Distributions shall not be subject to the foregoing limitations.
As used herein, the term “capital expenditures” does not include (i) any software that is
internally developed by Borrower, whether or not Borrower capitalized the development costs,
and (ii) any equipment ordered, but not yet accepted or paid for, by Borrower.
§ 2.8 Exhibits. The Original Agreement is hereby amended to add the Prime Referenced Rate
Addendum to Loan and Security Agreement thereto in the form attached hereto.
ARTICLE III.
Conditions of Effectiveness
§ 3.1 Effective Date. This Amendment shall become effective as of the date first above
written when and only when Bank shall have received, at Bank’s office, a counterpart of this
Amendment executed and delivered by Borrower.
ARTICLE IV.
Representations and Warranties
§ 4.1 Representations and Warranties of Borrower. In order to induce Bank to enter into
this Amendment, Borrower represents and warrants to Bank that:
(a) The representations and warranties contained in Article 5 of the Original Agreement
are true and correct at and as of the time of the effectiveness hereof.
(b) Borrower is duly authorized to execute and deliver this Amendment and is and will
continue to be duly authorized to borrow and to perform its obligations under the Loan
Agreement. Borrower has duly taken all corporate action necessary to authorize the
execution and delivery of this Amendment and to authorize the performance of the obligations
of Borrower hereunder.
(c) The execution and delivery by Borrower of this Amendment, the performance by
Borrower of its obligations hereunder and the consummation of the transactions contemplated
hereby do not and will not conflict with any provision of law, statute, rule or regulation
or of the organizational documents of Borrower, or of any material agreement, judgment,
license, order or permit applicable to or binding upon Borrower, or result in the creation
of any lien, charge or encumbrance upon any assets or properties of Borrower. Except for
those which have been duly obtained, no consent, approval, authorization or order of any
court or governmental authority or third party is required in connection with the execution
and delivery by Borrower of this Amendment or to consummate the transactions contemplated
hereby.
(d) When duly executed and delivered, each of this Amendment and the Loan Agreement
will be a legal and binding instrument and agreement of Borrower,
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enforceable in accordance with its terms, except as limited by bankruptcy, insolvency
and similar laws applying to creditors’ rights generally and by principles of equity
applying to creditors’ rights generally.
ARTICLE V.
Miscellaneous
§ 5.1 Ratification of Agreements. The Original Agreement as hereby amended is hereby
ratified and confirmed in all respects. Any reference to the Loan Agreement in any Loan Document
shall be deemed to be a reference to the Original Agreement as hereby amended. The execution,
delivery and effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of Bank under the Loan Agreement or any other
Loan Document nor constitute a waiver of any provision of the Loan Agreement or any other Loan
Document.
§ 5.2 Survival of Agreements. All representations, warranties, covenants and agreements of
Borrower herein shall survive the execution and delivery of this Amendment and the performance
hereof, including without limitation the making or granting of the Advances, and shall further
survive until all of the Obligations are paid in full. All statements and agreements contained in
any certificate or instrument delivered by Borrower hereunder or under the Loan Agreement to Bank
shall be deemed to constitute representations and warranties by, or agreements and covenants of,
Borrower under this Amendment and under the Loan Agreement.
§ 5.3 Loan Documents. This Amendment is a Loan Document, and all provisions in the Loan
Agreement pertaining to Loan Documents apply hereto.
§ 5.4 Governing Law. This Amendment shall be governed by and construed in accordance with
the laws of the State of California and any applicable laws of the United States of America in all
respects, including construction, validity and performance.
§ 5.5 Counterparts. This Amendment may be separately executed in counterparts and by the
different parties hereto in separate counterparts, each of which when so executed shall be deemed
to constitute one and the same Amendment.
THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
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IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.
| PRIORITY FULFILLMENT SERVICES, INC. |
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| By: | ||||
| Name: | ||||
| Title: | ||||
| COMERICA BANK |
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| By: | ||||
| Name: | ||||
| Title: | ||||
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CONSENT AND AGREEMENT
PFSWEB, INC., a Delaware corporation, hereby consents to the provisions of this Amendment and
the transactions contemplated herein, and hereby ratifies and confirms the Guaranty dated as of
December 29, 2004, made by it for the benefit of Bank, and agrees that its obligations and
covenants thereunder are unimpaired hereby and shall remain in full force and effect.
| PFSWEB, INC. |
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| By: | ||||
| Name: | ||||
| Title: | ||||
Prime Referenced Rate Addendum To
Loan and Security Agreement
Loan and Security Agreement
This Prime Referenced Rate Addendum to Loan and Security Agreement (this “Addendum”) is
entered into as of March ___, 2009, by and between Comerica Bank (“Bank”) and Priority Fulfillment
Services, Inc. (“Borrower”). This Addendum supplements the terms of the First Amended and Restated
Loan and Security Agreement dated as of December 29, 2004 (as the same may be amended, modified,
supplemented, extended or restated from time to time, collectively, the “Agreement”).
1. Definitions. As used in this Addendum, the following terms shall have the
following meanings. Initially capitalized terms used and not defined in this Addendum shall have
the meanings ascribed thereto in the Agreement.
a. “Applicable Margin” means two percent (2.00%) per annum.
b. “Business Day” means any day, other than a Saturday, Sunday or any other day designated as
a holiday under Federal or applicable State statute or regulation, on which Bank is open for all or
substantially all of its domestic and international business (including dealings in foreign
exchange) in San Jose, California, and, in respect of notices and determinations relating the Daily
Adjusting LIBOR Rate, also a day on which dealings in dollar deposits are also carried on in the
London interbank market and on which banks are open for business in London, England.
c. “Daily Adjusting LIBOR Rate” means, for any day, a per annum interest rate which is equal
to the quotient of the following:
| (1) | for any day, the per annum rate of interest determined on the basis of the rate for deposits in United States Dollars for a period equal to one (1) month appearing on Page BBAM of the Bloomberg Financial Markets Information Service as of 8:00 a.m. (California time) (or as soon thereafter as practical) on such day, or if such day is not a Business Day, on the immediately preceding Business Day. In the event that such rate does not appear on Page BBAM of the Bloomberg Financial Markets Information Service (or otherwise on such Service) on any day, the “Daily Adjusting LIBOR Rate” for such day shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be reasonably selected by Bank, or in the absence of such other service, the “Daily Adjusting LIBOR Rate” for such day shall, instead, be determined based upon the average of the rates at which Bank is offered dollar deposits at or about 8:00 a.m. (California time) (or as soon thereafter as practical), on such day, or if such day is not a Business Day, on the immediately preceding Business Day, in the interbank eurodollar market in an amount comparable to the principal amount of the Obligations and for a period equal to one (1) month; | ||
| divided by | |||
| (2) | 1.00 minus the maximum rate (expressed as a decimal) on such day at which Bank is required to maintain reserves on “Euro-currency Liabilities” as defined in and pursuant to Regulation D of the Board of Governors of the Federal Reserve System or, if such regulation or definition is modified, and as long as Bank is required to maintain reserves against a category of liabilities which includes eurodollar deposits or includes a category of assets which includes eurodollar loans, the rate at which such reserves are required to be maintained on such category. |
d. “Prime Rate” means the per annum interest rate established by Bank as its prime rate for
its borrowers, as such rate may vary from time to time, which rate is not necessarily the lowest
rate on loans made by Bank at any such time.
e. “Prime Referenced Rate” means, for any day, a per annum interest rate which is equal to the
Prime Rate in effect on such day, but in no event and at no time shall the Prime Referenced Rate be
less than the sum of the Daily Adjusting LIBOR Rate for such day plus two and one-half percent
(2.50%) per annum. If, at any time, Bank determines that it is unable to determine or ascertain the
Daily Adjusting LIBOR Rate for any day, the Prime Referenced Rate for each such day shall be the
Prime Rate in effect at such time, but not less than two and one-half percent (2.50%) per annum.
2. Interest Rate. Subject to the terms and conditions of this Addendum, the
Obligations under the Agreement shall bear interest at the Prime Referenced Rate plus the
Applicable Margin.
3. Payment of Interest. Accrued and unpaid interest on the unpaid balance of the
Obligations outstanding under the Agreement shall be payable monthly, in arrears, on the 15th day
of each month, until maturity (whether as stated herein, by acceleration, or otherwise). In the
event that any payment under this Addendum becomes due and payable on any day which is not a
Business Day, the due date thereof shall be extended to the next succeeding Business Day, and, to
the extent applicable, interest shall continue to accrue and be payable thereon during such
extension at the rates set forth in this Addendum. Interest accruing hereunder shall be computed
on the basis of a year of 360 days, and shall be assessed for the actual number of days elapsed,
and in such computation, effect shall be given to any change in the applicable interest rate as a
result of any change in the Prime Referenced Rate on the date of each such change.
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4. Bank’s Records. The amount and date of each advance under the Agreement, its
applicable interest rate, and the amount and date of any repayment shall be noted on Bank’s
records, which records shall be conclusive evidence thereof, absent manifest error;
provided, however, any failure by Bank to make any such notation, or any error in
any such notation, shall not relieve Borrower of its obligations to repay Bank all amounts payable
by Borrower to Bank under or pursuant to this Addendum and the Agreement, when due in accordance
with the terms hereof.
5. Default Interest Rate. From and after the occurrence of any Event of Default, and
so long as any such Event of Default remains unremedied or uncured thereafter, the Obligations
outstanding under the Agreement shall bear interest at a per annum rate of five percent (5%) above
the otherwise applicable interest rate hereunder, which interest shall be payable upon demand. In
addition to the foregoing, a late payment charge equal to five percent (5%) of each late payment
hereunder may be charged on any payment not received by Bank within ten (10) calendar days after
the payment due date therefor, but acceptance of payment of any such charge shall not constitute a
waiver of any Event of Default under the Agreement. In no event shall the interest payable under
this Addendum and the Agreement at any time exceed the maximum rate permitted by law.
6. Prepayment. Borrower may prepay all or part of the outstanding balance of any
Obligations at any time without premium or penalty. Any prepayment hereunder shall also be
accompanied by the payment of all accrued and unpaid interest on the amount so prepaid. Borrower
hereby acknowledges and agrees that the foregoing shall not, in any way whatsoever, limit,
restrict, or otherwise affect Bank’s right to make demand for payment of all or any part of the
Obligations under the Agreement due on a demand basis in Bank’s sole and absolute discretion.
7. Regulatory Developments or Other Circumstances Relating to the Daily Adjusting LIBOR
Rate.
a. If the adoption after the date hereof, or any change after the date hereof in, any
applicable law, rule or regulation (whether domestic or foreign) of any governmental authority,
central bank or comparable agency charged with the interpretation or administration thereof, or
compliance by Bank with any request or directive (whether or not having the force of law) made by
any such authority, central bank or comparable agency after the date hereof: (a) shall subject Bank
to any tax, duty or other charge with respect to this Addendum or any Obligations under the
Agreement, or shall change the basis of taxation of payments to Bank of the principal of or
interest under this Addendum or any other amounts due under this Addendum in respect thereof
(except for changes in the rate of tax on the overall net income of Bank imposed by the
jurisdiction in which Bank’s principal executive office is located); or (b) shall impose, modify or
deem applicable any reserve (including, without limitation, any imposed by the Board of Governors
of the Federal Reserve System), special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by Bank, or shall impose on Bank or the foreign
exchange and interbank markets any other condition affecting this Addendum or the Obligations
hereunder; and the result of any of the foregoing is to increase the cost to Bank of maintaining
any part of the Obligations hereunder or to reduce the amount of any sum received or receivable by
Bank under this Addendum by an amount deemed by the Bank to be material, then Borrower shall pay to
Bank, within fifteen (15) days of Borrower=s receipt of written notice from Bank demanding such
compensation, such additional amount or amounts as will compensate Bank for such increased cost or
reduction. A certificate of Bank, prepared in good faith and in reasonable detail by Bank and
submitted by Bank to Borrower, setting forth the basis for determining such additional amount or
amounts necessary to compensate Bank shall be conclusive and binding for all purposes, absent
manifest error.
b. In the event that any applicable law, treaty, rule or regulation (whether domestic or
foreign) now or hereafter in effect and whether or not presently applicable to Bank, or any
interpretation or administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by Bank with any guideline, request or
directive of any such authority (whether or not having the force of law), including any risk-based
capital guidelines, affects or would affect the amount of capital required or expected to be
maintained by Bank (or any corporation controlling Bank), and Bank determines that the amount of
such capital is increased by or based upon the existence of any obligations of Bank hereunder or
the maintaining of any Obligations hereunder, and such increase has the effect of reducing the rate
of return on Bank’s (or such controlling corporation’s) capital as a consequence of such
obligations or the maintaining of such Obligations hereunder to a level below that which Bank (or
such controlling corporation) could have achieved but for such circumstances (taking into
consideration its policies with respect to capital adequacy), then Borrower shall pay to Bank,
within fifteen (15) days of Borrower’s receipt of written notice from Bank demanding such
compensation, additional amounts as are sufficient to compensate Bank (or such controlling
corporation) for any increase in the amount of capital and reduced rate of return which Bank
reasonably determines to be allocable to the existence of any obligations of the Bank hereunder or
to maintaining any Obligations hereunder. A certificate of Bank as to the amount of such
compensation, prepared in good faith and in reasonable detail by the Bank and submitted by Bank to
the undersigned, shall be conclusive and binding for all purposes absent manifest error.
8. Commitment Fee. In consideration of Bank’s commitment to make Advances, Borrower
will pay to Bank a commitment fee determined on a daily basis by applying the per annum rate of
0.50% to the Unused Borrowing Base determined at the end of each day. The commitment fee shall be
due and payable in arrears on the last day of each fiscal quarter and at the Revolving Maturity
Date. The term “Unused Borrowing Base” means, at any time of determination, the Borrowing Base
minus the aggregate amount of outstanding Advances and amounts outstanding under the Letter of
Credit Sublimit
9. Legal Effect. Except as specifically modified hereby, all of the terms and
conditions of the Agreement remain in full force and effect.
10. Conflicts. As to the matters specifically the subject of this Addendum, in the
event of any conflict between this Addendum and the Agreement, the terms of this Addendum shall
control.
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IN WITNESS WHEREOF, the parties have agreed to the foregoing as of the date first set forth above.
| COMERICA BANK | PRIORITY FULFILLMENT SERVICES, INC. | |||||||||
By:
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By: | |||||||||
| Name: | Name: | |||||||||
| Title: | Title: | |||||||||
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