Exhibit 10.21
February 4, 1998
Xx. Xxxxxxx X. Xxxxx, Xx.
President/CEO
Pulsar Data Systems, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Dear Xx. Xxxxx:
The purpose of this letter is to memorialize the agreement reached at the
January 29 meeting, and the January 30 telephone conference between
representatives of Pulsar Data Systems, Inc. ("Pulsar") and IBM Credit
Corporation ("IBM Credit").
Pulsar has immediate cash requirements of $2,426,000.00 in excess of its
collateralized credit facility. Pulsar has been unable, as previously agreed in
the October 9, 1997 meeting, to obtain a cash Equity Infusion to cover such
immediate cash requirements and has requested that IBM Credit wire funds to
cover such requirements.
Pulsar will obtain a cash equity infusion in an amount of not less than
$2,000,000.00 by May 31, 1998 or a preliminary commitment for the sale of all or
substantially all of its assets by April 30, 1998. IBM Credit in good faith
agrees to continue to provide funding to Pulsar based on part on the
representations set forth herein.
IBM Credit and Pulsar agree that:
(a) The Shortfall amount (as such term is defined in the Forbearance Agreement)
shall fluctuate and shall note exceed the limits set forth in Schedule A
hereto; and
(b) Pulsar shall pay to IBM Credit a waiver fee in the amount of $30,000.00 in
consideration of the waiver of the December 31, 1997 breach of financial
covenants. Such fee shall be paid in full by Pulsar within 15 days of
billing by IBM Credit. The financial covenants are hereby reset as follows:
Covenant 3/98 6/98 9/98 12/98
NAT <.50%> 0.0% .50% 1.0%
WCTO 15 15 15 15
Xx. Xxxxxxx X. Xxxxx, Xx. 2 February 4, 1998
D/TNW 17 15 15 15
; and
(c) The consignment A/R due from Pax River shall be considered Eligible
Accounts so long as no more than 10% of such cosignment A/R remains
unbilled greater than sixty days by Pulsar. In the event that greater than
10% remains unbilled greater than sixty days, the consignment A/R deemed
Eligible Accounts shall be decreased by the amounts greater than sixty days
unbilled; and
(d) Pulsar shall provide IBM Credit with month-end financials (balance sheets
and income statements) due no later than 35 days after each calendar month;
and
(e) Pulsar shall remove the disclaimer language from all collateral reports;
and
(f) Effective February 1, 1998, Pulsar's interest rate is Prime (as such term
is defined in the IWCF) + 2.375%. The Shortfall Amount shall accrue
interest at a rate of Prime + 6.5%; and
(g) Pulsar shall provide to IBM Credit copies of finalized and executed Pledged
Collateral Agreements whereby Xxxxxxx Xxxxx pledges Xxxxxxx Xxxxx accounts
to IBM Credit on or before February 6, 1998. Until these Agreements are
received by IBM Credit, the Shortfall Schedule set forth in Schedule A
shall be decreased by $544,000.00; and
(h) To extend the term of the Forbearance Agreement until May 31, 998 provided
that Pulsar meets all its obligations as set forth herein and provided that
no further defaults.
(i) Per the terms set forth in the October 10, 1998 letter, IBM Credit is
entitled to stock representing a 4% ownership interest on a fully diluted
basis in Pulsar. At the option of Xxxxxxx Xxxxx on or before May 31, 1998,
in lieu of the 4% ownership interest, Pulsar shall pay to IBM Credit the
lesser of: (i) 4% of the sales price upon the sale of all or substantially
all its assets, or (ii) $650,000.00.
(j) Additionally, in lieu of the 1/2% ownership interest due to IBM Credit per
the October 10, 1997 letter, Pulsar shall pay IBM Credit $50,000.00 per
month (the "Forbearance Fee"), beginning February 1, 1998 and on the first
of each month until May 31, 1998.
(k) Xx. Xxxxxxx Xxxxx agrees that on or before February 28, 1998, he shall
obtain a loan of the cash value on the Life Insurance Policies in an amount
of no less than $1,545,000.00 and to submit such loan proceeds to IBM
Credit immediately upon receipt.
(l) Pulsar shall comply with the terms and conditions of the Audit Letter dated
September 10, 1997 and any subsequent Audit Letter.
Xx. Xxxxxxx X. Xxxxx, Xx. 3 February 4, 1998
Nothing in this letter, the Forbearance Agreement or any of the other
negotiations or actions undertaken pursuant to this letter, shall constitute a
waiver or modification of any of IBM Credit's rights and remedies against Pulsar
or Mr. and Xxx. X. Xxxxx.
Sincerely,
/S/ X.X. XXXXX
---------------
X.X. Xxxxx
Account Executive
ACKNOWLEDGED and AGREED to:
By: /S/ XXXXXXX X. XXXXX, XX.
----------------------------------
Name: Xxxxxxx X. Xxxxx, Xx. as Guarantor and as President and CEO of Pulsar Data
Systems, Inc.
Date: 2/5/98
SCHEDULE A
----------
Day 1-31 2,426,000
Week of 2-2 2,426,000
2-9 2,263,000
2-16 2,100,000
2-23 1,937,000
Day 2-28 1,774,000
Week of 3-2 1,774,000
3-9 1,638,000
3-16 1,502,000
3-23 1,366,000
Day 3-31 1,228,000
Week of 4-6 1,228,000
4-13 1,053,000
4-20 878,000
4-27 703,000
Day 4-30 528,000
Week of 5-4 528,000
5-11 434,000
5-18 340,000
5-25 246,000
Day 5-31 151,000
Week of 6-1 0
