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EXHIBIT 10.27
AMENDMENT NO. 14 TO THE
FOURTH AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amendment No. 14 to the Fourth Amended and Restated Agreement for Wholesale
Financing (this "Amendment") is made as of December 27, 1998 by and between
ENTEX Information Services, Inc., a Delaware corporation ("Borrower") and IBM
Credit Corporation, a Delaware corporation ("IBM Credit").
RECITALS
A. Borrower and IBM Credit have entered into that certain Fourth Amended
and Restated Agreement for Wholesale Financing dated as of September 15, 1995
(as amended on September 19, 1995 and as further amended, supplemented or
otherwise modified from time to time, the "Agreement").
B. The parties have agreed to modify the Agreement as more specifically set
forth below, upon and subject to the terms and conditions of this Amendment as
set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and IBM Credit hereby agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Agreement.
SECTION 2. MODIFICATION OF AGREEMENT
A. The following provisions are incorporated into and supplement the
Agreement as if fully set forth as additional terms therein. In the event of a
conflict between the terms of this Amendment and the terms of the Agreement, the
terms of this Amendment will control in determining the agreement between IBM
Credit and Borrower.
(a) Borrower agrees to pay IBM Credit a fee in the amount of One Hundred
Thousand Dollars ($100,000) which shall be due and payable on January 15, 1999
in consideration for restructuring the financial covenants pursuant to Section 2
B of this Amendment.
(b) Borrower shall cause the audited financial statements and accompanying
documents set forth in Section 2 (c) (i) (y) (A), (B) and (C) to be delivered
directly by the Auditors to IBM Credit via first class mail to IBM Credit
Corporation, 0000 XxxxxXxxx Xxxxxxx, Xxxxxxx, Xxxxxxx 00000, Attention: Credit
Manager.
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B. Section 12 of the Agreement is hereby amended by deleting paragraphs
(a) through (e) thereof in their entirety and substituting, in lieu thereof, the
following paragraphs (a) through (c):
"(a) From October 1, 1998 and thereafter, Borrower shall at all times
maintain a ratio of current assets to current liabilities equal to or greater
than 0.90:1.00.
(b) From July 1, 1998 to and including December 31, 1998, Borrower shall
not permit the ratio of (i) EBITDA for the fiscal year-to-date to (ii) Interest
Expense for the fiscal year-to-date to be less than 0.25:1.00; from July 1, 1998
to and including March 31, 1999, Borrower shall not permit the ratio of (i)
EBITDA for the fiscal year-to-date to (ii) Interest Expense for the fiscal
year-to-date to be less than 0.70:1.00; from July 1, 1998 to and including June
30, 1999, Borrower shall not permit the ratio of (i) EBITDA for the fiscal
year-to-date to (ii) Interest Expense for the fiscal year-to-date to be less
than 1.00:1.00; and from July 1, 1999 and thereafter, Borrower shall not permit
the ratio of (i) EBITDA for the fiscal year-to-date to (ii) Interest Expense for
the fiscal year-to-date be less than 1.75:1.00.
(c) From October 1, 1998, Borrower shall as of the end of each Fiscal
Quarter maintain Tangible Net Worth equal to or greater than the Tangible Net
Worth Requirement for such Fiscal Quarter. For purposes of this section
"Tangible Net Worth Requirement" for the Fiscal Quarter ending December 27, 1998
shall mean Twelve Million Dollars ($12,000,000) and for each Fiscal Quarter
thereafter shall mean the sum of the Tangible Net Worth Requirement for the
previous Fiscal Quarter plus eighty percent (80%) of the Consolidated Net Income
of Borrower for such Fiscal Quarter. If Consolidated Net Income for a Fiscal
Quarter is less than Zero Dollars ($0) then for purposes of Tangible Net Worth
Requirement, Consolidated Net Income shall be deemed to be Zero Dollars (0$)."
C. Section 19 of the Agreement is hereby amended by:
(a) deleting the definition of "Applicable Margin" in its entirety and
substituting, in lieu thereof, the following:
"Applicable Margin": shall mean (i) for the period from January 1, 1999 to
the first determination date occurring after July 1, 1999, the rate per annum
set forth in Tier I below and, (ii) thereafter, the rate per annum set forth
below under the caption "Applicable Margin" for the applicable Tier based on the
Indebtedness/EBITDA Ratio as of the most recent determination date:
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TIER INDEBTEDNESS/EBITDA RATIO APPLICABLE MARGIN
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I Greater than 4.50X 2.60%
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Less than or equal to 4.50X but
II greater than 4.00X 2.40%
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Less than or equal to 4.00X but
III greater than 3.50X 2.20%
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Less than or equal to 3.50X
IV but greater than 3.00X 2.10%
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Less than or equal to 3.00X
V but greater than 2.50X 2.00%
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VI Less than or equal to 2.50X 1.90%
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For purposes of the foregoing, (i) the Indebtedness/EBITDA Ratio shall be
determined based on the audited financial statements delivered pursuant to
Section 2(c)(i) of the Agreement except that, in the event that (x) Consolidated
EBITDA for the third and fourth fiscal quarters of the fiscal year ending June
30, 1999 is $35,000,000 or greater, and (y) Consolidated EBITDA for each of the
third and fourth fiscal quarters of the fiscal year ending June 30, 1999 is
greater than $0, then (1) effective from the first determination date through
December 31, 1999 the Applicable Margin shall be 2.50% (unless a lower
Applicable Margin is in effect in accordance with the above table) and (2) IBM
Credit shall provide Borrower with a rebate for any interest paid by Borrower to
IBM Credit for the period from July 1, 1999 to such determination date in excess
of LIBOR plus 2.50% (other than default interest), and (ii) each change in the
Applicable Margin resulting from a change in the Indebtedness/EBITDA Ratio shall
be effective beginning after December 31, 1999 on the first day of the month
following the receipt by IBM Credit of such audited financial statements
indicating such change (a "determination date"), provided, that for any period
during which (a) an Event of Default has occurred and is continuing or (b) the
Borrower fails to deliver the Compliance Certificate required to be delivered by
it pursuant to Section 12 of the Agreement, the Applicable Margin shall be
determined by IBM Credit in its sole discretion, up to a maximum rate of 4.0%
per annum; provided, that nothing in this definition shall affect the finance
charge of LIBOR plus 6.5% applicable to late payments."
(b) deleting the definition of "EBITDA" in its entirety and substituting,
in lieu thereof, the following:
"EBITDA" shall mean, for any period (determined on a consolidated basis in
accordance with GAAP), (a) the Consolidated Net Income of Borrower and its
Subsidiaries for such period, plus (b) each of the following to the extent
reflected as an expense in the determination of such Consolidated Net Income:
(i) the Borrower's provision for taxes based on income for such period; (ii)
Interest Expense for such period; and (iii) depreciation and amortization of
tangible
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and intangible assets of Borrower and its Subsidiaries for such period, plus (c)
any extraordinary losses and non-recurring charges for such period, minus (d)
any extraordinary gains for such period."
(c) deleting the definition of "Tangible Net Worth" in its entirety and
substituting, in lieu thereof, the following:
"Tangible Net Worth" shall mean as to Borrower, (i) the excess of the total
assets over total liabilities of such Person (such assets and liabilities being
determined by reference to the book value); plus (ii) the unpaid principal
balance of Subordinated Debt, provided, however, that such Subordinated Debt
shall not be so added if, at any time the interests of the holders of the
Subordinated Debt are not satisfactorily, as determined by IBM Credit,
subordinated to the interests of IBM Credit; (iii) but excluding goodwill from
the determination of such assets; all of the foregoing being determined in
accordance with GAAP."
SECTION 3. REPRESENTATIONS AND WARRANTIES. Borrower makes to IBM Credit the
following representations and warranties all of which are material and are made
to induce IBM Credit to enter into this Amendment.
SECTION 3.1 ACCURACY AND COMPLETENESS OF WARRANTIES AND REPRESENTATIONS. All
representations made by Borrower in the Agreement were true and accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Borrower in the Agreement are true,
accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make representations not
misleading.
SECTION 3.2 VIOLATION OF OTHER AGREEMENTS. The execution and delivery of this
Amendment and the performance and observance of the covenants to be performed
and observed hereunder do not violate or cause Borrower not to be in compliance
with the terms of any agreement to which Borrower is a party.
SECTION 3.3 LITIGATION. Except as has been disclosed by Borrower to IBM Credit
in writing, there is no litigation, proceeding, investigation or labor dispute
pending or threatened against Borrower, which if adversely determined, would
materially adversely affect Borrower's ability to perform Borrower's obligations
under the Agreement and the other documents, instruments and agreements executed
in connection therewith or pursuant hereto.
SECTION 3.4 ENFORCEABILITY OF AMENDMENT. This Amendment has been duly
authorized, executed and delivered by Borrower and is enforceable against
Borrower in accordance with its terms.
SECTION 4. RATIFICATION OF AGREEMENT. Except as specifically amended hereby, all
of the provisions of the Agreement shall remain unamended and in full force and
effect. Borrower hereby, ratifies, confirms and agrees that the Agreement, as
amended hereby, represents a valid and enforceable obligation of Borrower, and
is not subject to any claims, offsets or defense.
SECTION 5. GOVERNING LAW. This Amendment shall be governed by and interpreted in
accordance with the laws of the State of New York.
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SECTION 6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed by the authorized
officers of the undersigned as of the day and year first above written.
ENTEX INFORMATION SERVICES, INC.
/s/ Xxxx X. XxXxxxx, Xx. /s/ Xxxxxxx X. Xxxxxx
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By: Xxxx X. XxXxxxx, Xx. By: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer Title: President
Accepted and Agreed
IBM CREDIT CORPORATION
/s/ Xxxxxx Xxxxx
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By: Xxxxxx Xxxxx
Title: Director-North American
Field Operations
