EXHIBIT 10.1
FORBEARANCE AGREEMENT
Forbearance Agreement dated as of May 17, 2001 (this "AGREEMENT") by and
among AZTEC TECHNOLOGY PARTNERS, INC., a Delaware corporation ("AZTEC"),
BLUEFLAME INC. (DE) (f/k/a PROFESSIONAL COMPUTER SOLUTIONS, INC.) ("BLUEFLAME"),
as Co-Borrower with respect to $15,000,000 in outstanding principal amount of
Acquisition Loans (Aztec and Blueflame, collectively called the "BORROWER"),
FLEET NATIONAL BANK (f/k/a BANKBOSTON, N.A.) and the other lending institutions
listed on SCHEDULE 1 to the Credit Agreement (as hereinafter defined) (the
"BANKS"), with respect to the Revolving Credit Agreement dated as of July 27,
1998 (as amended and in effect from time to time, the "CREDIT AGREEMENT") by and
among the Borrower, the Banks and Fleet National Bank (f/k/a BankBoston, N.A.)
as agent for the Banks (the "AGENT"). Terms not otherwise defined herein which
are defined in the Credit Agreement shall have the same respective meanings
herein as therein.
WHEREAS, the Borrower has failed to pay the Loans in full at maturity on
April 30, 2001 (the "EXISTING EVENT OF DEFAULT"), which failure is an Event of
Default under Section 14.1 of the Credit Agreement; and
WHEREAS, the Banks have agreed with the Borrower, subject to the terms
and conditions contained herein, to forbear from exercising certain remedies
provided for in the Credit Agreement which may be available to the Banks after
the occurrence and during the continuance of the Existing Event of Default;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. FORBEARANCE.
(a) Subject to the satisfaction of the conditions precedent set forth in
Section 4 below, the Banks and the Agent agree, for the period commencing on the
Effective Date (as defined in Section 1(c) below) and terminating on the
earliest of (i) June 30, 2001, (ii) the failure of the Borrower to perform fully
and timely any of its obligations provided in this Agreement, (iii) the filing
of any litigation or other proceeding or exercise of any remedies against the
Borrower by any employee of BlueFlame Inc. (DE) in respect of or related to the
Borrower's obligations under the PCSI Key Employee Agreements each dated May 15,
1998 between Aztec and each of the eight employees identified in the respective
Schedule 1 attached thereto, or (iv) the occurrence of a Event of Default (other
than the Existing Event of Default) under the Credit Agreement or the occurrence
of a Default under the Credit Agreement and its continuance beyond any
applicable grace or cure periods provided therefor in the Credit Agreement (the
"FORBEARANCE PERIOD"), to forebear from exercising any remedies permitted under
the Credit Agreement in respect of the Existing Event of Default, but the Banks
and the Agent shall not be restricted from exercising other rights arising as a
consequence of the Existing Event of Default. Borrower hereby acknowledges the
Existing Event of Default and further acknowledges that this Agreement does not
extend to any existing or future Default or Event of Default other than the
Existing Event of
Default, and does not in any way limit the rights of the Agent and the Banks to
exercise their rights (i) with respect to any other such existing or future
Default or Event of Default at any time or (ii) with respect to the Existing
Event of Default following the termination or expiration of the Forbearance
Period.
(b) During the Forbearance Period, the Borrower shall be permitted to
borrow Revolving Credit Loans to the extent of availability notwithstanding the
Existing Event of Default; PROVIDED, HOWEVER, that the Borrower is in compliance
with all of the terms and conditions of this Agreement (other than the
representations and warranties in Section 8.4.4 of the Credit Agreement) and
that no Event of Default other than the Existing Event of Default shall have
occurred and be continuing. Nothing in this Agreement shall, however, be
construed as a waiver of or acquiescence in the Existing Event of Default, which
shall continue in existence subject only to the agreement of the Banks and the
Agent set forth herein not to enforce certain remedies for a limited period of
time. Except as expressly provided herein, the execution and delivery of this
Agreement shall not: (i) constitute an extension, modification, or waiver of any
aspect of the Credit Agreement; (ii) extend the terms of the Credit Agreement or
the due date of any of the Obligations; (iii) give rise to any obligation on the
part of the Agent or the Banks to extend, modify or waive any term or condition
of the Credit Agreement; or (iv) give rise to any defenses or counterclaims to
the Agent's or the Banks' right to demand payment of the Obligations or to
otherwise enforce their rights and remedies under the Credit Agreement.
Following termination of the Forbearance Period, the Agent and the Banks shall
be entitled to enforce the Credit Agreement according to the original terms of
the Credit Agreement, as the Credit Agreement has been heretofore amended from
time to time.
(c) For purposes of this Agreement, "EFFECTIVE DATE" shall mean
May 17, 2001.
(d) From April 30, 2001 through the end of the Forbearance Period,
notwithstanding Section 6.11 of the Credit Agreement, the Agent and the Banks
shall not impose the default rate of interest provided in Section 6.11 of the
Credit Agreement so long as the Borrower is in compliance with all of the terms
and conditions of this Agreement and no Event of Default other than the Existing
Event of Default shall have occurred and be continuing; PROVIDED, HOWEVER, that
the Agent and the Banks shall retain the right to charge the default rate of
interest provided in Section 6.11 of the Credit Agreement retroactively to April
30, 2001 upon expiration of the Forbearance Agreement unless the Obligations
shall have been paid in full or the Agent and the Banks shall otherwise agree.
SECTION 2. AFFIRMATIVE COVENANTS OF BORROWER DURING FORBEARANCE PERIOD.
(a) The Borrower and/or the Guarantors shall pay all interest on the
Obligations as and when the same shall become due and payable under the terms of
the Credit Agreement and shall be jointly and severally liable therefor.
(b) (i) The Borrower and Guarantors will cooperate fully with The
Recovery Group, Inc., the financial consultant (the "FINANCIAL CONSULTANT")
selected by the Agent's counsel, the Agent and the Banks to assist the Agents'
counsel in valuing the Collateral and to review the financial performance of the
Borrower and the Guarantors, their operations, financial
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information and projections, the budget previously provided by the Borrower and
the Guarantors and the business plan described in Section 4(a) below.
(ii) The Borrower and each Guarantor shall cooperate with the
Financial Consultant in affording the Financial Consultant access to all of the
Borrower's and the Guarantors' and their Subsidiaries' books and records and
projections and information regarding revenues and other matters reasonably
requested by the Financial Consultant and making available on a reasonable basis
officers and managers to answer the Financial Consultant's questions about the
foregoing and other matters concerning the businesses and finances of the
Borrower, the Guarantors and their Subsidiaries, without regard to the specific
provisions of Section 9.9 of the Credit Agreement.
(c) The Borrower and the Guarantors shall reimburse the Agent and the
Banks for all reasonable costs and expenses (including reasonable legal fees and
expenses) incurred by the Agent or any Bank in connection with this Agreement
and the Credit Agreement within 30 days after the submission of any invoice
therefor by the Agent or any Bank, and shall be jointly and severally liable
therefor.
(d) Within 10 days after the later of (i) the Effective Date or (ii)
the date upon which the Lenders shall have provided the Borrower with all
information requested and corrections and comments on the Form S-1, the Borrower
shall file a Registration Statement on Form S-1 with the Securities and Exchange
Commission (the "SEC") with respect to the warrant shares that would be issuable
upon exercise of the Warrants issued to the Banks on September 30, 2000 and
January 31, 2001. The Borrower shall use commercially reasonable efforts to
cause the SEC to declare such Registration Statement effective as promptly as
practicable.
(e) The Borrower shall use reasonable efforts to deliver to the Agent
on or before May 30, 2001, a fully executed blocked account agreement and/or
control agreement in form and substance acceptable to the Agent with respect to
any bank account, money market fund, certificate of deposit or other similar
cash equivalent investment of the Borrower or any Guarantor or Subsidiary for
which such an agreement is not then in force.
(f) The Borrower covenants that none of the Borrower or any Guarantor
or Subsidiary will establish any new bank account, money market fund,
certificate of deposit or other similar cash equivalent investment without prior
written notice to the Agent and prior delivery of a fully executed blocked
account agreement and/or control agreement in form and substance acceptable to
the Agent with respect to such account or investment.
(g) On each Business Day during the Forbearance Period, the Borrower
shall cause all cash balances held by the Borrower or any Guarantor or any of
their respective Subsidiaries in bank accounts, money market funds, certificates
of deposit and similar cash equivalent investments, in excess of $2 million in
the aggregate, to be swept to Aztec's operating account no. 378559 at Fleet
National Bank and applied to reduce the outstanding principal balance of the
Revolving Credit Loans (which may be reborrowed to the extent provided in
Section 1(b) above).
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(h) The Overadvance Fee provisions of Section 2.2.2 of the Credit
Agreement shall apply during the Forbearance Period and any Overadvance Fee
accrued through June 30, 2001 pursuant to Section 2.2.2 of the Credit Agreement
shall be due and payable on June 30, 2001.
(i) The Borrower shall cause 100% of the Tax Refund to be paid to the
Agent for application as a prepayment and permanent reduction of the Acquisition
Loans, in lieu of the 75% provided in Section 4.8.3 of the Credit Agreement, and
the Borrower shall no longer be entitled to retain and use 25% of the Tax Refund
as provided in Section 4.8.3 of the Credit Agreement. The Borrower shall cause
the Internal Revenue Service (the "IRS") to direct deposit the Tax Refund into
Aztec's operating account no. 378559 at Fleet National Bank and authorizes the
Agent to apply the Tax Refund to prepayment of the Acquisition Loans upon
deposit thereof or at any time thereafter. The Borrower shall notify the Agent
by telephone and email immediately upon receipt of any notice or actual
knowledge that the IRS has or will deposit such Tax Refund in such account.
(j) During the Forbearance Period, the Borrower shall use commercially
reasonable efforts to cause CIT Lending Services Corporation ("CIT") to increase
the amount CIT would be willing to lend as an initial advance against the
existing accounts receivable of the Borrower and the Guarantors above the $13-18
million currently estimated by CIT, and the Borrower will continue to use
commercially reasonable efforts to find additional sources of equity or
financing to repay the Obligations.
(k) Notwithstanding the foregoing, the Banks and the Agent shall have
no obligation to release Collateral in respect of or otherwise accept less than
a full payoff of all Obligations to the Banks. During the Forbearance Period,
the Borrower shall also work with the Agent, the Banks and the Financial
Consultant to make a current evaluation of the operations, projections and
business plans of the Borrower and the Guarantors to develop a proposal for a
restructuring of the Obligations under the Credit Agreement.
(l) During the Forbearance Period, Aztec shall continue to maintain
its engagement with Xxxxxxxxx & Associates, or another consultant selected by
the Borrower and reasonably acceptable to the Agent and the Banks.
(m) During the Forbearance Period, the Borrower and the Guarantors
shall continue to hold bi-weekly conference calls among the Borrower and the
Guarantors and the Agent and the Banks in accordance with Section 9.4(i) of the
Credit Agreement. During the Forbearance Period, notwithstanding the provisions
of Section 9.4(i) of the Credit Agreement, the Borrower and the Guarantors shall
provide bi-weekly cash flow reports to the Agent and the Banks one business day
in advance of each such conference call. Such cash flow reports shall show
actual performance compared to projections for the relevant period and shall
include accounts receivable reports showing aging of accounts receivable by
Subsidiary.
(n) The Borrower and the Guarantors shall evaluate any claims any of
them may have against U.S. Office Products Company ("USOP") and shall make
appropriate filings to preserve such claims in connection with the bankruptcy
proceedings of USOP.
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SECTION 3. NEGATIVE COVENANTS OF BORROWER DURING FORBEARANCE PERIOD.
(a) During the Forbearance Period, (i) no payment shall be made to
employees of BlueFlame of amounts owed to them of approximately $3.3 million in
the aggregate pursuant to Aztec Technology Partners, Inc. PCSI Key Employee
Agreements each dated May 15, 1998 between Aztec and each of the eight employees
identified in the respective Schedule 1 attached thereto nor (ii) shall any
other payments be made to employees, officers or directors of any of the
Borrower, the Guarantors or their Subsidiaries in excess of (A) regularly
scheduled salary and/or commissions and (B) certain quarterly performance
bonuses and retention payments not to exceed $250,000 in the aggregate during
the period from April 15, 2001 through the end of the Forbearance Period, in
each case earned in accordance with policies pre-dating the Existing Event of
Default.
(b) During the Forbearance Period, no LIBOR Rate Loans shall be
permitted, and all outstanding LIBOR Rate Loans, if any, shall upon the
Effective Date be converted to Base Rate Loans.
SECTION 4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT
This Agreement shall become effective only upon satisfaction of
the following conditions:
(a) The Borrower shall have delivered a business plan for the Borrower
and the Guarantors in form and substance reasonably satisfactory to the Agent
and the Banks;
(b) The Borrower and the Guarantors shall have cooperated with the
Financial Consultant, in (i) affording the Financial Consultant access to all of
the Borrower's and the Guarantors' and their Subsidiaries' books and records and
projections and information regarding revenues and other matters reasonably
requested by the Financial Consultant and (ii) making available on a reasonable
basis officers and managers to answer the Consultant's questions about the
foregoing and other matters concerning the finances of the Borrower, the
Guarantors and their Subsidiaries, without regard to the specific provisions of
Section 9.9 of the Credit Agreement;
(c) From April 15, 2001 through the Effective Date, the Borrower shall
not have paid or permitted any of its Subsidiaries to have paid (i) any amounts
owed to certain employees of BlueFlame of approximately $3.3 million in the
aggregate pursuant to Aztec Technology Partners, Inc. PCSI Key Employee
Agreements each dated May 15, 1998 between Aztec and each of the eight employees
identified in the respective Schedule 1 attached thereto or (ii) any other
payments to employees, officers or directors of any of the Borrowers or their
Subsidiaries between April 15, 2001 and the Effective Date in excess of (A)
regularly scheduled salary and/or commissions and (B) certain quarterly
performance bonuses and retention payments not to exceed $250,000 in the
aggregate, in each case earned in accordance with policies pre-dating the
Existing Event of Default;
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(d) Borrower shall have delivered an officer's certificate listing all
bank accounts, money market funds, certificates of deposit and other similar
cash equivalent investments held by the Borrower, any Guarantor and/or their
Subsidiaries as of the Effective Date;
(e) All Overadvance Fees required to have been paid on or before April
30, 2001 pursuant to Section 2.2.2 of the Credit Agreement shall have been paid
in full;
(f) Aztec shall have replaced the Warrant issued to The Fuji Bank,
Limited ("FUJI") on January 31, 2001 exercisable for 44,986 shares of common
stock of Aztec, which has been lost, upon delivery of a lost warrant affidavit
in the form of EXHIBIT A hereto, executed by Fuji and properly notarized, and
Aztec shall have waived any requirement for indemnification in respect of such
lost Warrant;
(g) The Borrower shall have paid all reasonable legal fees and
expenses of the Agent and the Banks for which invoices have been submitted;
(h) Aztec shall have provided written evidence that it has instructed
the IRS to direct deposit the Tax Refund into Aztec's operating account at
Fleet National Bank;
(i) All Guarantors shall have signed the Reaffirmation of Guaranty
attached hereto;
(j) The Borrower and each Guarantor shall have delivered customary
incumbency certificates, good standing certificates and legal opinions regarding
this Agreement, equivalent to those required under Section 12 of the Credit
Agreement; and
(k) All representations and warranties in Section 8 of the Credit
Agreement shall be true and correct as of the Effective Date, with the
exceptions of (i) the Existing Event of Default and (ii) the solvency
representation in Section 8.4.4.
SECTION 5. RATIFICATION, ETC. Except as expressly modified hereby, the
Credit Agreement and all documents, instruments and agreements related thereto,
including but not limited to the Registration Rights Agreement and the Security
Documents, are hereby ratified and confirmed in all respects and shall continue
in full force and effect, and the Borrower and the Guarantors agree that the
Credit Agreement, the Registration Rights Agreement (as modified by the
provisions of Section 2(d) hereof) and the Security Documents are legal, valid
and binding obligations of each Borrower or Guarantor signatory thereto and the
Obligations are absolutely owing to the Banks without offset, counterclaim or
any defense thereto by the Borrower or any Guarantor. The Borrower represents
and warrants that all representations and warranties in Section 8 of the Credit
Agreement are true and correct as of the Effective Date, with the sole exception
of the Existing Event of Default.
SECTION 6. NO WAIVER. Nothing contained herein shall constitute a waiver
of, impair or otherwise affect the Obligations or any other obligation of the
Borrower or the Guarantors or any rights of the Agent or the Banks consequent
thereto, except such waivers as are specifically and explicitly set forth
herein, if any, and all of the rights of the Banks and the Agent under the
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Credit Agreement, the Registration Rights Agreement, the Security Documents, at
law, or in equity, are expressly reserved.
SECTION 7. RELEASE OF CLAIMS. The Borrower and, by executing the
attached Ratification of Guaranty, each of the Borrower's Subsidiaries, releases
the Agent and the Banks and all agents, officers, directors, shareholders, or
anyone acting at the direction or control of the Agent or each or all of the
Banks from any and all liabilities and claims under the Credit Agreement, this
Agreement, the Registration Rights Agreement or any Security Documents or
otherwise in connection with the transactions contemplated herein and therein,
except those arising after the time of execution and delivery of this Agreement.
SECTION 8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
SECTION 9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
SECTION 10. ENTIRE AGREEMENT. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained.
SECTION 11. AMENDMENTS. Neither this Agreement nor any provision hereof
may be modified, supplemented, waived or amended, except pursuant to a written
agreement, consent or waiver executed and delivered by the Agent and the Banks.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as a
document under seal as of the date first above written.
AZTEC TECHNOLOGY PARTNERS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
BLUEFLAME INC. (DE)
(f/k/a PROFESSIONAL COMPUTER
SOLUTIONS, INC.)
(HAVING JOINT AND SEVERAL
LIABILITY FOR A PORTION OF THE
ACQUISITION LOANS HAVING AN
OUTSTANDING PRINCIPAL AMOUNT OF
$15,000,000)
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
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CITIZENS BANK OF MASSACHUSETTS
By: /s/ Xxxxx X. Xxx
-------------------------------
Name: Xxxxx X. Xxx
Title: Vice President
FLEET NATIONAL BANK (AS AGENT AND
AS A BANK)
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
THE FUJI BANK, LIMITED
By: /s/ Xxxxxxxx Xxxxxx
-------------------------------
Name: Xxxxxxxx Xxxxxx
Title: Senior Vice President
& Group Head
NATIONAL CITY BANK OF KENTUCKY
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
LASALLE BANK NATIONAL ASSOCIATION
By: /s/ Xxxxxxx Xxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxx
Title: Commercial Banking
Officer
PEOPLE'S BANK
By: /s/ Xxxx X. XxXxxxx
-------------------------------
Name: Xxxx X. XxXxxxx
Title: Vice President
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RATIFICATION OF GUARANTY
Each of the undersigned guarantors hereby acknowledges and consents to
the foregoing Forbearance Agreement dated as of May 17, 2001 (the "AGREEMENT"),
and by signing below agrees to be bound by the Agreement, including without
limitation the Release of Claims provided for in Section 7 of the Agreement, and
each of the undersigned guarantors also hereby agrees that the Guaranty dated as
of (a) July 27, 1998; (b) September 17, 1998; (c) October 2, 1998, (d) June 26,
2000 or (e) November 1, 2000 from such undersigned guarantor remains in full
force and effect, and each of the undersigned guarantors confirms and ratifies
all of its obligations thereunder.
AZTEC INTERNATIONAL LLC
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
AZTEC TECHNOLOGY PARTNERS OF NEW
ENGLAND LLC (f/k/a BAY STATE
COMPUTER GROUP LLC)
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
ENTRA COMPUTER CORP.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
TWO TWO TWO CORPORATION (f/k/a PCM,
INC.)
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
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XXXXXXXX, XXXXXX & CO., INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
BLUEFLAME INC. (DE) (f/k/a
PROFESSIONAL COMPUTER SOLUTIONS,
INC.)
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
SOFTECH COMMUNICATIONS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
SOLUTIONS E.T.C. INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
DIGITAL NETWORK ASSOCIATES LLC
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
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PROFESSIONAL NETWORK SERVICES, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
OFFICE EQUIPMENT SERVICE, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
BLUEFLAME, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Treasurer
