BUSINESS SUPPLIES DISTRIBUTORS HOLDINGS, LLC
BSD ACQUISITION CORP.
PRIORITY FULFILLMENT SERVICES, INC.
PFSWEB, INC.
INVENTORY FINANCING PARTNERS, LLC
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
TABLE OF CONTENTS
Section 1. DEFINITIONS; ATTACHMENTS ...................................................................... 1
1.1. Special Definitions ................................................................................. 1
1.2. Other Defined Terms ................................................................................. 11
1.3. Attachments ......................................................................................... 11
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES ..................................................... 11
2.1. Credit Line ......................................................................................... 11
2.2. Product Advances .................................................................................... 11
2.3. A/R Advances ........................................................................................ 12
2.4. Finance and Other Charges ........................................................................... 13
2.5. Borrower Account Statements ......................................................................... 14
2.6. Shortfall ........................................................................................... 14
2.7. Application of Payments ............................................................................. 14
2.8. Prepayment and Reborrowing By Borrower .............................................................. 14
Section 3. CREDIT LINE ADDITIONAL PROVISIONS ............................................................. 14
3.1. Ineligible Accounts ................................................................................. 14
3.2. Reimbursement for Charges ........................................................................... 18
3.3. Lockbox and Special Account ......................................................................... 18
3.4. Collections ......................................................................................... 18
3.5. Application of Remittances and Credits .............................................................. 19
3.6. Power of Attorney ................................................................................... 19
3.7. Concentration Accounts .............................................................................. 20
Section 4. SECURITY -- COLLATERAL ........................................................................ 20
4.1. Grant ............................................................................................... 20
4.2. Further Assurances .................................................................................. 21
Section 5. CONDITIONS PRECEDENT .......................................................................... 22
5.1. Conditions Precedent to the Effectiveness of this Agreement ......................................... 22
5.2. Conditions Precedent to Each Advance ................................................................ 24
Section 6. REPRESENTATIONS AND WARRANTIES ................................................................ 25
6.1. Organization and Qualifications ..................................................................... 25
6.2. Rights in Collateral; Priority of Liens ............................................................. 25
6.3. No Conflicts ........................................................................................ 25
6.4. Enforceability ...................................................................................... 25
6.5. Locations of Offices, Records and Inventory ......................................................... 25
6.6. Fictitious Business Names ........................................................................... 26
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6.7. Organization ......................................................................................... 26
6.8. No Judgments or Litigation ........................................................................... 26
6.9. No Defaults .......................................................................................... 26
6.10. Labor Matters ....................................................................................... 26
6.11. Compliance with Law ................................................................................. 26
6.12. ERISA ............................................................................................... 26
6.13. Compliance with Environmental Laws .................................................................. 27
6.14. Intellectual Property ............................................................................... 27
6.15. Licenses and Permits ................................................................................ 27
6.16. Investment Company .................................................................................. 27
6.17. Taxes and Tax Returns ............................................................................... 28
6.18. Status of Accounts .................................................................................. 28
6.19. Affiliate/Subsidiary Transactions ................................................................... 28
6.20. Accuracy and Completeness of Information ............................................................ 28
6.21. Recording Taxes ..................................................................................... 29
6.22. Indebtedness ........................................................................................ 29
6.23. Not Consumer Transaction ............................................................................ 29
6.24. Limitations on Lockboxes and Special Accounts ....................................................... 29
Section 7. AFFIRMATIVE COVENANTS ......................................................................... 29
7.1. Financial and Other Information ...................................................................... 29
7.2. Location of Borrower and Collateral .................................................................. 31
7.3. Changes in Loan Parties .............................................................................. 32
7.4. Legal Entity Existence ............................................................................... 32
7.5. ERISA ................................................................................................ 32
7.6. Environmental Matters ................................................................................ 32
7.7. Collateral Books and Records/Collateral Audit ........................................................ 32
7.8. Insurance; Casualty Loss ............................................................................. 33
7.9. Taxes ................................................................................................ 34
7.10. Compliance With Laws ................................................................................ 34
7.11. Fiscal Year ......................................................................................... 34
7.12. Intellectual Property ............................................................................... 34
7.13. Maintenance of Property ............................................................................. 34
7.14. Collateral .......................................................................................... 34
7.15 Additional Collateral, Etc. ......................................................................... 35
7.16. Subsidiaries ........................................................................................ 35
7.17. Financial Covenants; Additional Covenants ........................................................... 36
7.18. Transaction Documents ............................................................................... 36
Section 8. NEGATIVE COVENANTS ............................................................................. 36
8.1. Liens ................................................................................................ 36
8.2. Disposition of Assets ................................................................................ 36
8.3. Transaction Documents ................................................................................ 36
8.4. Changes in Borrower and Guarantor .................................................................... 36
8.5. Guaranties ........................................................................................... 36
8.6. Restricted Payments .................................................................................. 37
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8.7. Investments .......................................................................................... 37
8.8. Affiliate/Subsidiary Transactions .................................................................... 37
8.9. ERISA ................................................................................................ 37
8.10. Additional Negative Pledges ......................................................................... 38
8.11. Storage of Collateral ............................................................................... 38
8.12. Use of Proceeds ..................................................................................... 38
8.13. Accounts ............................................................................................ 38
8.14. Indebtedness ........................................................................................ 38
8.15. Loans ............................................................................................... 38
8.16. Lockboxes and Special Accounts ...................................................................... 38
8.17. Title to Collateral ................................................................................. 38
Section 9. DEFAULT ........................................................................................ 38
9.1. Event of Default ..................................................................................... 38
9.2. Acceleration ......................................................................................... 40
9.3. Remedies ............................................................................................. 40
9.4. Waiver ............................................................................................... 41
Section 10. MISCELLANEOUS ................................................................................. 42
10.1. Term; Termination ................................................................................... 42
10.2. Indemnification ..................................................................................... 42
10.3. Additional Obligations .............................................................................. 42
10.4. Limitation of Liability ............................................................................. 42
10.5. Alteration/Waiver ................................................................................... 43
10.6. Severability ........................................................................................ 43
10.7. One Loan ............................................................................................ 43
10.8. Additional Collateral ............................................................................... 43
10.9. No Merger or Novations .............................................................................. 43
10.10. Paragraph Titles ................................................................................... 44
10.11. Binding Effect; Assignment ......................................................................... 44
10.12. Obligations ........................................................................................ 44
10.13. Notices; E-Business Acknowledgment ................................................................. 44
10.14. Counterparts ....................................................................................... 45
10.15. Attachment A Modifications ......................................................................... 46
10.16. Submission and Consent to Jurisdiction and Choice of Law ........................................... 46
10.17. Jury Trial Waiver .................................................................................. 46
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INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT
This INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT (as amended,
supplemented or otherwise modified from time to time, this "Agreement") is
hereby made this ____ day of September, 2001, by and among IBM CREDIT
CORPORATION, a Delaware corporation with a place of business at 0000 Xxxxxxxxx
Xxxxxxx, Xxxxx Xxxxx, Xxx Xxxxx, XX 00000 ("IBM Credit"), BUSINESS SUPPLIES
DISTRIBUTORS HOLDINGS, LLC, a limited liability company duly organized under the
laws of the state of Delaware, with its principal place of business at 000 Xxxxx
Xxxxxxx Xxxxxxxxxx, Xxxxx, XX 00000 ("Holdings"), INVENTORY FINANCING PARTNERS,
LLC, a limited liability company duly organized under the laws of the state of
Delaware, with its principal place of business at 000 Xxxxx Xxxxxxx Xxxxxxxxxx,
Xxxxx, XX 00000 ("IFP"), BSD ACQUISITION CORP., a corporation duly organized
under the laws of the state of Delaware, with its principal place of business at
000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx, XX 00000 ("Borrower"), PRIORITY FULFILLMENT
SERVICES, INC., a corporation duly organized under the laws of the state of
Delaware, with its principal place of business at 000 Xxxxx Xxxxxxx Xxxxxxxxxx,
Xxxxx, XX 00000 ("PFS") and PFSWEB, INC., a corporation duly organized under the
laws of the state of Delaware, with its principal place of business at 000 Xxxxx
Xxxxxxx Xxxxxxxxxx, Xxxxx, XX 00000 ("PFSweb") (Borrower, Holdings, IFP, PFS,
PFSweb, and any other entity that executes any Other Document, including without
limitation all Guarantors, are each individually referred to as a "Loan Party"
and collectively referred to as "Loan Parties").
WITNESSETH
WHEREAS, in the course of Borrower's operations, Borrower intends to
purchase from Persons approved in writing by IBM Credit for the purposes of this
Agreement (the "Authorized Suppliers") computer hardware and software products,
including printer supplies, media supplies, print head bands and other
printing-related products, manufactured or distributed by or bearing any
trademark or trade name of such Authorized Suppliers (the "Products") (as of the
date hereof the Authorized Suppliers are as set forth on Attachment E hereto);
WHEREAS, pursuant to an IBM Transaction Management Services Agreement
dated as of August 14, 2001 between Borrower and PFS ("PFS Agreement") and the
Master Distributor Agreement dated August 14, 2001 by and among International
Business Machines Corporation ("IBM"), PFS, and Borrower, ("IBM Agreement"), PFS
provides various transaction management services to Borrower including, but not
limited to, distribution of Products to Borrower's customers, preparation and
delivery of invoices for the sale of Products to Borrower's customers, and
performance of certain accounting functions related thereto including the
collection of accounts receivable;
WHEREAS, Borrower has requested that IBM Credit finance its purchase of
Products from such Authorized Suppliers its working capital requirements, and
IBM Credit is willing to provide such financing to Borrower subject to the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
SECTION 1. DEFINITIONS; ATTACHMENTS
1.1. SPECIAL DEFINITIONS. The following terms shall have the following
respective meanings in this Agreement (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
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"A/R Advance": any loan or advance of funds made by IBM Credit to or on behalf
of Borrower pursuant to Section 2.3 of this Agreement, including, as the context
may require, a WCO Advance and a PRO Advance.
"A/R Advance Date": the Business Day on which IBM Credit makes an A/R Advance
under this Agreement.
"A/R Advance Term": for each A/R Advance, a period of one hundred eighty (180)
days commencing on the A/R Advance Date for such A/R Advance.
"A/R Finance Charges": as defined on Attachment A.
"Account Debtor": shall mean any Person required to make payment to Borrower or
to PFS, on account of Borrower, for the purchase of Product or any other Person
who has a debt obligation owing to Borrower.
"Accounts": as defined in the U.C.C and all now existing and/or hereafter
created or arising accounts receivable of Borrower arising from the sale of
Product, including any interest, finance charges and other amounts payable with
respect thereto. The foregoing shall not include the Acquired Accounts.
"Acquired Accounts": the BSD Accounts that the Borrower acquired from BSD as the
result of the merger described in the Merger Documents immediately following the
closing under the Daisytek Stock Purchase Agreement.
"Advance": any loan or other extension of credit by (or committed to be made by)
IBM Credit to or on behalf of Borrower pursuant to this Agreement including,
without limitation, (i) Product Advances and (ii) A/R Advances.
"Affiliate": with respect to any Person, any other Person (the "Affiliate")
meeting one of the following: (i) at least 10% of the Affiliate's equity is
owned, directly or indirectly, by such Person; (ii) at least 10% of such
Person's equity is owned, directly or indirectly, by the Affiliate; or (iii) at
least 10% of such Person's equity and at least 10% of the Affiliate's equity is
owned, directly or indirectly, by the same Person or Persons. All of Loan
Parties' officers, directors, joint venturers, and partners shall also be deemed
to be Affiliates of such Loan Party for purposes of this Agreement.
"Agreement": as defined in the caption.
"Auditors": a nationally recognized firm of independent certified public
accountants selected by Borrower, Holdings or PFSweb (as applicable) and
satisfactory to IBM Credit.
"Authorized Officer": shall mean the chief executive officer, president, or vice
president or such other officer or authorized member of any Loan Party who is
authorized to execute on such Loan Party's behalf any certification and
documents or give notices and other communications in connection with this
Agreement and the transactions contemplated hereunder.
"Authorized Suppliers": as defined in the recitals of this Agreement.
"Available Credit": at any time, (1) the Maximum Advance Amount less (2) the
Outstanding Advances at such time.
"Average Daily Balance": for each Advance for a given period of time, the sum of
the unpaid principal of such Advance as of each day during such period of time,
divided by the number of days in such period of time.
"Bank": as defined in Section 3.3.
"Borrower": as defined in the caption.
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"Borrower Stock Pledge Agreement": the Stock Pledge Agreement dated the date
hereof (or such other date as IBM Credit may agree) between Borrower and IBM
Credit.
"Borrowing Base": as defined in Attachment A.
"Business Day": any day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are generally closed or on which IBM
Credit is closed.
"BSD": means Business Supplies Distributors, Inc.
"BSD Account Debtors": any Person required to make payment in respect to the
Acquired Accounts.
"BSD Accounts": the Accounts (as defined in the UCC) of Business Supplies
Distributors, Inc.
"BSD Companies": means BSD, Business Supplies Distributors Europe B.V. and BSD
(Canada) Inc.
"BSD Europe": means Supplies Distributors, S.A.
"Closing Date": the date on which the conditions precedent to the effectiveness
of this Agreement set forth in Section 5.1 hereof are satisfied or waived in
writing by IBM Credit.
"Code": the Internal Revenue Code of 1986, as amended or any successor statute.
"Collateral": as defined in Section 4.1.
"Collateral Management Report": a report to be delivered by Borrower to IBM
Credit from time to time, as provided herein, signed by the chief executive
officer or chief financial officer of Borrower or other Authorized
Officer,substantially in the form and detail of Attachment F hereto, detailing
and certifying, among other items: a summary of Borrower's inventory on hand
financed by IBM Credit and Borrower's Eligible Accounts and Eligible Acquired
Accounts, the amounts and aging of all of Borrower's Accounts, Borrower's
Acquired Accounts, Borrower's inventory on hand financed by IBM Credit by
quantity, type, model, Authorized Supplier's invoice price to Borrower and the
total of the line item values for all inventory listed on the report, the
amounts and aging of Borrower's accounts payable as of a specified date, all of
Borrower's IBM Credit borrowing activity during a specified period and the total
amount of Borrower's Borrowing Base as well as Borrower's Outstanding A/R
Advances, Outstanding Product Advances, Available Credit and any Shortfall
Amount as of a specified date.
"Commercial Tort Claim": a claim arising in tort with respect to which (a) the
claimant is an organization or (b) the claimant is an individual and the claim
(i) arose in the course of the claimant's business or profession and (ii) does
not include damages arising out of personal injury to or the death of the
individual.
"Common Due Date": (1) the fifth day of a calendar month if the Product
Financing Period or A/R Advance Term, whichever is applicable, expires on the
first through tenth of such calendar month; (2) the fifteenth day of a calendar
month if the Product Financing Period or A/R Advance Term, whichever is
applicable, expires on the eleventh through twentieth of such calendar month;
and (3) the twenty-fifth day of a calendar month if the Product Financing Period
or A/R Advance Term, whichever is applicable, expires on the twenty-first
through the last day of such calendar month.
"Compliance Certificate": a certificate substantially in the form of Attachment
C.
"Concentration Accounts": an Eligible Account or Eligible Acquired Account that,
individually, or when aggregated with all other outstanding Accounts and
Acquired Accounts of the same account debtor and such account debtor's
Affiliates, constitute more than five percent (5%) of the net outstanding
balance of all
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Eligible Accounts and Eligible Acquired Accounts of the Borrower then
outstanding for all Account Debtors and BSD Account Debtors.
"Concentration Account Debtor": at any time, any Account Debtor or BSD Account
Debtor obligated to Borrower with respect to, or on account of, a Concentration
Account.
"Copyrights": (i) all copyrights arising under the laws of the United States,
any other country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished (including, without
limitation, those listed in Attachment B), all registrations and recordings
thereof, and all applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the United States
Copyright Office, and (ii) the right to obtain all renewals thereof.
"Credit Line": as defined in Section 2.1.
"Daisytek": shall mean Daisytek, Inc.
"Daisytek Stock Purchase Agreement": shall mean the Stock Purchase Agreement
dated September 25, 2001 among Daisytek, the Borrower, and PFS.
"Default": either (1) an Event of Default or (2) any event or condition which,
but for the requirement that notice be given or time lapse or both, would be an
Event of Default.
"Delinquency Fee Rate": as defined on Attachment A.
"Deposit Account": a demand, time, savings, passbook, or similar account
maintained with a bank.
"Domestic Subsidiary": a Subsidiary of any Loan Party that is incorporated in
the United States or in the District of Columbia.
"Eligible Accounts": as defined in Section 3.1(A).
"Eligible Acquired Accounts": as defined in Section 3.1(B).
"Environmental Laws": all statutes, laws, judicial decisions, regulations,
ordinances, and other governmental restrictions relating to pollution, the
protection of the environment, occupational health and safety, or to emissions,
discharges or release of pollutants, contaminants, hazardous substances or
wastes into the environment.
"Environmental Liability": any claim, demand, obligation, cause of action,
allegation, order, violation, injury, judgment, penalty or fine, cost or
expense, resulting from the violation or alleged violation of any Environmental
Laws or the imposition of any Lien pursuant to any Environmental Laws.
"Equity Interests": with respect to any Person, means (a) all shares, interests,
participations, rights or other equivalents (however designated, whether voting
or non-voting) of or interests in corporate or capital stock, including, without
limitation, shares of preferred or preference stock of such Person, (b) all
partnership interests (whether general or limited) of such Person, (c) all
membership interests or limited liability company interests in such Person, (d)
all other equity or ownership interests in such Person of any other type and (e)
all warrants, rights or options to purchase any of the foregoing.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended, or any
successor statutes.
"Event of Default": as defined in Section 9.1.
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"Financial Statements": the consolidated and consolidating balance sheets
(including, without limitation, securities such as stocks and investment bonds),
statements of operations, statements of cash flows and statements of changes in
shareholder's equity for the period specified, prepared in accordance with GAAP
and consistent with prior practices.
"Floor Plan Lender": any Person who now or hereinafter provides inventory
financing to Borrower, provided that such Person executes an Intercreditor
Agreement (as defined in Section 5.1 of this Agreement) or a subordination
agreement with IBM Credit each in form and substance satisfactory to IBM Credit.
"Free Financing Period": for each Product Advance, the period, if any, in which
IBM Credit does not charge Borrower a financing charge. IBM Credit shall
calculate the Borrower's Free Financing Period utilizing a methodology that is
consistent with the methodologies used for similarly situated customers of IBM
Credit. The Borrower understands that IBM Credit may not offer, may change or
may cease to offer a Free Financing Period for the Borrower's purchases of
Products.
"Free Financing Period Exclusion Fee": as defined in Attachment A.
"GAAP": generally accepted accounting principles in the United States as in
effect from time to time.
"General Intangibles": all "general intangibles" as such term is defined in the
U.C.C and, in any event, including, without limitation, with respect to the
Borrower, (a) all tax refunds, claims for tax refunds, and tax credits, (b) all
permits, licenses, approvals, authorizations, consents, variances and
certifications of any Governmental Authority, (c) all claims, tort claims and
causes of action, (d) all property, casualty, liability, and other insurance of
any kind or character, and all insurance claims and insurance refund claims, (e)
all payment intangibles, (f) all lists, books, records, recorded knowledge,
ledgers, files (whether in printed form or stored electronically), designs,
blueprints, data, specifications, engineering reports, manuals, computer
records, computer programs and computer software (including source codes), (g)
all Internet domain names and web sites and related licenses and agreements, and
(h) all contracts, agreements, instruments and indentures in any form, and
portions thereof, to which Borrower is a party or under which Borrower has any
right, title or interest or to which Borrower or any property of Borrower is
subject, as the same may from time to time be amended, supplemented or otherwise
modified, including, without limitation, (i) all rights of Borrower to receive
moneys due and to become due to it thereunder or in connection therewith, (ii)
all rights of Borrower to damages arising thereunder and (iii) all rights of
Borrower to perform and to exercise all remedies thereunder.
"Governmental Authority": any nation or government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled (through stock or capital
ownership or otherwise) by any of the foregoing.
"Guarantor": means Holdings, PFSweb, PFS and any other party that delivers a
guaranty in favor of IBM Credit.
"Hazardous Substances": all substances, wastes or materials, to the extent
subject to regulation as "hazardous substances" or "hazardous waste" under any
Environmental Laws.
"Holdings": as defined in the caption and a direct subsidiary of PFS and IFP.
"Holdings Stock Pledge Agreement": as defined in Section 5.1(R).
"IBM Credit": as defined in the caption.
"Indebtedness": with respect to any Person, (1) all obligations of such Person
for borrowed money or for the deferred purchase price of property or services
(other than trade liabilities incurred in the ordinary course of
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business and payable in accordance with customary practices) or which is
evidenced by a note, bond, debenture or similar instrument, (2) all obligations
of such Person under capital leases (including obligations under any leases such
Person may enter into, now or in the future, with IBM Credit), (3) all
obligations of such Person in respect of letters of credit, banker's acceptances
or similar obligations issued or created for the account of such Person, (4)
liabilities arising under any interest rate protection, future, option swap, cap
or hedge agreement or arrangement under which such Person is a party or
beneficiary, (5) all obligations under guaranties by such Person and (6) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof.
"Intellectual Property": as defined in Section 6.14.
"IFP": as defined in the caption and the owner of Fifty-one Percent (51%) of
Holdings.
"Investment": with respect to any Person (the "Investor"), (1) any investment by
the Investor in any other Person, whether by means of share purchase, capital
contribution, purchase or other acquisition of a partnership or joint venture
interest, loan, time deposit, demand deposit or otherwise, and (2) any guaranty
by the Investor of any Indebtedness or other obligation of any other Person.
"Investment Property": the collective reference to (i) all "investment property"
as such term is defined in the U.C.C. and (ii) whether or not constituting
"investment property" as so defined, all Pledged Interests.
"Letter of Credit Right": any right to payment or performance under a letter of
credit, whether or not the beneficiary has demanded or is at the time entitled
to demand payment or performance.
"LIBOR": as of the date of determination, the thirty-day average of the
one-month London Interbank Offered Rate as published by Bloomberg, L.P.
("Bloomberg") or any successor financial services for the previous calendar
month or, in the event such average is no longer published by Bloomberg or any
successor financial services, such other thirty (30) day average as IBM Credit
may use for determining "LIBOR" in its reasonable discretion. LIBOR is based on
a 360-day calendar year.
"Lien(s)": any lien, claim, charge, pledge, security interest, deed of trust,
mortgage, other encumbrance or other arrangement having the practical effect of
the foregoing, including the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement.
"Loan Parties": as defined in the caption.
"Lockbox": as defined in Section 3.3.
"Material Adverse Effect": a material adverse effect (1) on the business,
operations, results of operations, assets, or financial condition of any Loan
Party, (2) on the aggregate value of the Collateral or the collateral granted to
IBM Credit by any other Loan Party under the Other Documents ("Other
Collateral") or the aggregate amount which IBM Credit would be likely to receive
(after giving consideration to reasonably likely delays in payment and
reasonable costs of enforcement) in the liquidation of such Collateral or Other
Collateral to recover the Obligations in full, or (3) on the rights and remedies
of IBM Credit under this Agreement or any Other Documents.
"Maximum Advance Amount": at any time, the lesser of (1) the Credit Line and (2)
the Borrowing Base at such time.
"Merger Documents": shall mean the (i) Agreement and Plan of Merger and
Reorganization among Borrower and BSD dated September 25, 2001 and (ii) the
Certificate of Merger of BSD with and into Borrower dated September 25, 2001;
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"Obligations": all covenants, agreements, warranties, duties, representations,
loans, advances, interest (including interest accruing on or after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding),
fees, reasonable expenses, indemnities, liabilities and Indebtedness of any kind
and nature whatsoever now or hereafter arising, owing, due or payable from any
Loan Party to IBM Credit.
"Open Approvals": Product Advances committed to be made by IBM Credit under this
Agreement for which (1) Products have not been delivered by Authorized Supplier
to Borrower or (2) Products have been delivered to Borrower but for which IBM
Credit has not received the invoice associated with such Products from
Authorized Supplier.
"Other Charges": as set forth in Attachment A.
"Other Documents": all security agreements, mortgages, leases, instruments,
documents, guarantees, schedules of assignment, contracts and similar agreements
executed by any Loan Party and delivered to IBM Credit, pursuant to this
Agreement, including, without limitation, the collateralized guaranty executed
by Holdings in favor of IBM Credit, the collateralized guaranty executed by PFS
in favor of IBM Credit, the corporate guaranty executed by PFSweb in favor of
IBM Credit, the notes payable subordination agreement between IBM Credit and
PFS, the Holdings Stock Pledge Agreement, the Borrower Stock Pledge Agreement
and all amendments, supplements and other modifications to the foregoing from
time to time.
"Outstanding Advances": at any time of determination, the sum of (1) the unpaid
principal amount of all Outstanding A/R Advances and Outstanding Product
Advances made by IBM Credit under this Agreement, and (2) any finance charge,
fee, expense or other amount related to Advances charged to Borrower's account
with IBM Credit.
"Outstanding A/R Advances": at any time of determination, the sum of (1) the
unpaid principal amount of all A/R Advances made by IBM Credit under this
Agreement; and (2) any finance charge, fee, expense or other amount related to
A/R Advances charged to Borrower's account with IBM Credit.
"Outstanding Product Advances": at any time of determination, the sum of (1) the
unpaid principal amount of all Product Advances made (including Open Approvals
issued) by IBM Credit under this Agreement; and (2) any finance charge, fee,
expense or other amount related to Product Advances charged to Borrower's
account with IBM Credit.
"Patents": (i) all letters patent including, without limitation, all utility
patents, design patents, industrial designs and utility model registrations of
the United States or any other country, or any political subdivision thereof and
all reissues and extensions thereof, including, without limitation, those listed
on Attachment B, (ii) all applications for letters patent of the United States
or any other country and all divisions, continuations and continuations-in-part
thereof, including, without limitation, those listed on Attachment B, and (iii)
all rights to obtain any reissues, reexaminations, or extensions of the
foregoing.
"PBGC": as defined in Section 6.12.
"Permitted Indebtedness": shall mean any of the following:
(1) Indebtedness to IBM Credit;
(2) Indebtedness of BSD Europe to IBM Nederland Financieringen B.V. ("INF") and
the guaranty thereof by Holdings in a principal amount not to exceed the lesser
of (a) 17,000,000 Euros and (b) the amount of the credit line between BSD Europe
and INF;
(3) Indebtedness described in Section VIII of Attachment B;
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(4) Indebtedness to any Floor Plan Lender;
(5) Purchase Money Indebtedness;
(6) guaranties in favor of IBM Credit;
(7) other Indebtedness consented to by IBM Credit in writing prior to incurring
such Indebtedness; and
(8) unsecured Indebtedness in respect of any interest rate protection, future,
option, swap, cap or hedge agreement or arrangement under which any Loan Party
is a party or beneficiary.
"Permitted Liens": shall mean any of the following:
(1) Liens which are the subject of an Intercreditor Agreement, in effect from
time to time between IBM Credit and any other secured creditor;
(2) Purchase Money Security Interests;
(3) Liens described in Section II of Attachment B;
(4) Liens of warehousemen, mechanics, materialmen, workers, repairmen, common
carriers, landlords and other similar Liens arising by operation of law or
otherwise, not waived in connection herewith, for amounts that are not yet due
and payable or being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted if an adequate reserve or other appropriate
provisions shall have been made therefor as required to be in conformity with
GAAP and an adverse determination in such proceedings could not reasonably be
expected to have a Material Adverse Effect;
(5) attachment or judgment Liens individually or in the aggregate not in excess
of $250,000 (exclusive of (A) any amounts that are duly bonded to the
satisfaction of IBM Credit or (B) any amount fully covered by insurance as to
which the insurance company has acknowledged its obligation to pay such judgment
in full);
(6) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount and which do not materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of Borrower;
(7) extensions and renewals of the foregoing Permitted Liens; provided that (A)
the aggregate amount of such extended or renewed Liens do not exceed the
original principal amount of the Indebtedness which it secures, (B) such Liens
do not extend to any property other than property already previously subject to
the Lien and (C) such extended or renewed Liens are on terms and conditions no
more restrictive than the terms and conditions of the Liens being extended or
renewed;
(8) Liens arising from deposits or pledges to secure bids, tenders, contracts,
leases, surety and appeal bonds and other obligations of like nature arising in
the ordinary course of the Borrower's business;
(9) Liens for taxes, assessments or governmental charges not delinquent or being
contested, in good faith, by appropriate proceedings promptly instituted and
diligently conducted if an adequate reserve or other appropriate provisions
shall have been made therefor as required in order to be in conformity with GAAP
and an adverse determination in such proceedings could not reasonably be
expected to have a Material Adverse Effect;
(10) Liens arising out of deposits in connection with workers' compensation,
unemployment insurance or other social security or similar legislation;
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(11) Liens arising pursuant to this Agreement; and
(12) other Liens in favor of any Affiliate of IBM Credit or otherwise consented
to by IBM Credit in writing prior to incurring such Lien.
"Person": any individual, association, firm, corporation, partnership, trust,
unincorporated organization or other entity whatsoever.
"PFS": as defined in the caption and a wholly-owned subsidiary of PFSweb.
"PFS Agreement": as defined in the Recitals of this Agreement.
"PFSweb": as defined in the caption.
"Plans": as defined in Section 6.12.
"Pledged Interests": all Equity Interests of or in any Person that may be issued
or granted to, or held or owned by , Borrower, including, without limitation,
the Equity Interests described on Attachment B hereto, and all certificates
representing such Equity Interests.
"Policies": all policies of insurance required to be maintained by Borrower
under this Agreement or any of the Other Documents.
"Prime Rate": as of the date of determination, the average of the rates of
interest announced by Citibank, N.A., Chase Manhattan Bank and Bank of America
National Trust & Savings Association (or any other bank which IBM Credit uses in
its normal course of business of determining Prime Rate) as their prime or base
rate, as of the last Business Day of the calendar month immediately preceding
the date of determination, whether or not such announced rates are the actual
rates charged by such banking institutions to their most creditworthy borrowers.
"PRO Advance": an A/R Advance, with a PRO Advance Term, made by IBM Credit to
itself on behalf of Borrower to repay all or a portion of a Product Advance that
is due and payable.
"PRO Advance Term": for each PRO Advance, a period, in increments of ten days as
specified by Borrower in the Request for A/R Advance with respect to such PRO
Advance, but in no event in excess of thirty days, commencing on the A/R Advance
Date for such PRO Advance.
"Proceeds": all "proceeds" as such term is defined in the UCC and, in any event,
shall include, without limitation, all dividends, distributions and payments on,
from or with respect to Investment Property.
"Products": as defined in the recitals of this Agreement.
"Product Advance": any advance of funds made or committed to be made by IBM
Credit for the account of Borrower to an Authorized Supplier in respect of an
invoice delivered or to be delivered by such Authorized Supplier to IBM Credit
describing Products purchased by Borrower, including without limitation Open
Approvals.
"Product Financing Charge": as defined on Attachment A.
"Product Financing Period": for each Product Advance, a period of days equal to
that set forth in Attachment A from time to time, commencing on the invoice date
of such Product Advance.
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"Purchase Money Indebtedness": any Indebtedness (including capital leases)
incurred to finance the acquisition of assets (other than assets manufactured or
distributed by or bearing any trademark or trade name of any Authorized
Supplier) to be used in the Borrower's business not to exceed the lesser of (1)
the purchase price or acquisition cost of such asset and (2) the fair market
value of such asset.
"Purchase Money Security Interest": any security interest securing Purchase
Money Indebtedness, which security interest applies solely to the particular
asset acquired with the Purchase Money Indebtedness.
"Request for A/R Advance": as defined in Section 2.3.
"Requirement of Law": as to any Person, the articles of incorporation and
by-laws of such Person, and any law, treaty, rule or regulation or determination
of an arbitrator or a court or other governmental authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"Sales Agreements": shall mean collectively (i) the Agreement dated as of August
20, 2001 between IBM and the Borrower for Sales Force Services and (ii) the
Sales Force Agreement dated as of August 20, 2001 between the Borrower and
Global Marketing Services.
"Shortfall Amount": as defined in Section 2.6.
"Shortfall Transaction Fee": as defined in Attachment A.
"Special Account": as defined in Section 3.3.
"Subsidiary": with respect to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Supplier Credits": as defined in Section 2.2.
"Supporting Obligation": any Letter of Credit Right or secondary obligation that
supports the payment or performance of an Account, chattel paper, a document, a
General Intangible, an instrument, Investment Property, or any other Collateral.
"Termination Date": shall mean One Hundred Twenty (120) days from the date of
this Agreement or such other date as IBM Credit and Loan Parties may agree to in
writing from time to time.
"Trademarks": (i) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, service marks, logos, words, terms,
names, symbols and devices and all combinations thereof, and all other source or
business identifiers, and all goodwill of the business connected with the use
thereof as symbolized thereby, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, including, without
limitation those listed on Attachment B, and (ii) the right to obtain all
renewals and extensions thereof.
"Transaction Documents": shall mean collectively the IBM Agreement, the PFS
Agreement and the Sales Agreements.
"Voting Stock": securities, the holders of which are ordinarily, in the absence
of contingencies, entitled to elect the corporate directors (or persons
performing similar functions).
"WCO Advance": an A/R Advance, with a WCO Advance Term.
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"WCO Advance Term": for each WCO Advance, a period of one hundred eighty (180)
days commencing on the A/R Advance Date for such WCO Advance.
1.2. OTHER DEFINED TERMS. Terms not otherwise defined in this Agreement which
are defined in the Uniform Commercial Code as in effect in the State of New York
on the date of this Agreement (the "U.C.C.") shall have the meanings assigned to
them therein.
1.3. ATTACHMENTS. All attachments, exhibits, schedules and other addenda hereto,
including, without limitation, Attachment A and Attachment B, are specifically
incorporated herein and made a part of this Agreement.
SECTION 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES
2.1. CREDIT LINE. Subject to the terms and conditions set forth in this
Agreement, on and after the Closing Date to but not including the date that is
the earlier of (x) the date on which this Agreement is terminated pursuant to
Section 10 and (y) the date on which IBM Credit terminates the Credit Line
pursuant to Section 9, IBM Credit agrees to extend to the Borrower a credit line
("Credit Line") in the amount set forth in Attachment A pursuant to which IBM
Credit will make to the Borrower, from time to time, Advances in an aggregate
amount at any one time outstanding not to exceed the Maximum Advance Amount.
Notwithstanding any other term or provision of this Agreement, IBM Credit may,
at any time and from time to time, in its sole discretion (x) temporarily
increase the amount of the Credit Line above the amount set forth in Attachment
A and decrease the amount of the Credit Line back to the amount of the Credit
Line set forth in Attachment A, in each case upon written notice to the Borrower
and (y) make Advances pursuant to this Agreement upon the request of Borrower in
an aggregate amount at any one time outstanding in excess of the Credit Line.
2.2. PRODUCT ADVANCES. (A) Subject to the terms and conditions of this
Agreement, IBM Credit shall make Product Advances in connection with Borrower's
purchase of Products from Authorized Suppliers upon at least a two-day prior
written notice from Authorized Suppliers. Borrower hereby authorizes and directs
IBM Credit to pay the proceeds of Product Advances directly to the applicable
Authorized Supplier in respect of invoices delivered to IBM Credit for such
Products by such Authorized Supplier and acknowledges that (i) any delivery to
IBM Credit of an invoice by an Authorized Supplier shall be deemed as a request
for a Product Advance by Borrower, and (ii) each such Product Advance
constitutes a loan by IBM Credit to Borrower pursuant to this Agreement as if
the Borrower received the proceeds of the Product Advance directly from IBM
Credit. IBM Credit may, upon written notice to Borrower, cease to include a
supplier as an Authorized Supplier.
(B) No finance charge shall accrue on any Product Advance during the
Free Financing Period, if any, applicable to such Product Advance. Each Product
Advance shall be due and payable on the Common Due Date for such Product
Advance. Borrower may at its option, repay each Product Advance by requesting
IBM Credit to apply all or any part of the principal amount of an A/R Advance to
the Outstanding Product Advances. Borrower's request for such application shall
be made in accordance with Section 2. When so requested and subject to the terms
and conditions of this Agreement, IBM Credit shall apply the amount so requested
to the amounts due in respect of the Outstanding Product Advances. Nothing
contained herein shall relieve Borrower of its obligation to repay Product
Advances when due. Each Product Advance shall accrue a finance charge on the
Average Daily Balance thereof from and including the first (1st) day following
the end of the Free Financing Period, if any, for such Product Advance, or if no
such Free Financing Period shall be in effect, from and including the date of
invoice for such Product Advance, in each case, to and including the date such
Product Advance shall become due and payable in accordance with the terms of
this Agreement, at a per annum rate equal to the lesser of (a) the finance
charge set forth in Attachment A to this Agreement as the "Product Financing
Charge" and (b) the highest rate from time to time permitted by applicable law.
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In addition, for any Product Advance with respect to which a Free Financing
Period shall not be in effect, Borrower shall pay a Free Financing Period
Exclusion Fee. Such fee shall be due and payable on the Common Due Date for such
Product Advance. If it is determined that amounts received from Borrower were in
excess of the highest rate permitted by law, then the amount representing such
excess shall be considered reductions to principal of Advances.
(C) Borrower acknowledges that IBM Credit does not warrant the
Products. Borrower shall be obligated to pay IBM Credit in full even if the
Products are defective or fail to conform to the warranties extended by the
Authorized Supplier. The Obligations of Borrower shall not be affected by any
dispute Borrower may have with any manufacturer, distributor or Authorized
Supplier. Borrower will not assert any claim or defense which it may have
against any manufacturer, distributor or Authorized Supplier against IBM Credit.
(D) Borrower hereby authorizes IBM Credit to collect directly from any
Authorized Supplier any credits, rebates, bonuses or discounts owed by such
Authorized Supplier to Borrower ("Supplier Credits"). Any Supplier Credits
received by IBM Credit may be applied by IBM Credit to the Outstanding Advances.
Any Supplier Credits collected by IBM Credit shall in no way reduce Borrower's
debt to IBM Credit in respect of the Outstanding Advances until such Supplier
Credits are applied by IBM Credit; provided, however, that in the event any such
Supplier Credits must be returned or disgorged or are otherwise unavailable for
application, then Borrower's Obligations will be reinstated as of the date that
IBM Credit actually returns or repays such Supplier Credits. Upon the Borrower's
request, and provided there is no Event of Default or dispute with respect to
such Supplier Credits, IBM Credit shall remit the Supplier Credits directly to
Borrower within five (5) Business Days of IBM Credit's receipt of such Supplier
Credits.
(E) IBM Credit may apply any payments and Supplier Credits received by
IBM Credit to reduce finance charges first and then to principal amounts of
Advances owed by Borrower. IBM Credit may apply principal payments to the oldest
(earliest) invoices (and related Product Advances) first, but, in any case, all
principal payments will be applied in respect of the Outstanding Product
Advances made for Products which have been sold, lost, stolen, destroyed,
damaged or otherwise disposed of prior to any other application thereof.
(F) Borrower will indemnify and hold IBM Credit harmless from and
against any claims or demands asserted by any Person relating to or arising from
the Products for any reason whatsoever, including, without limitation, the
condition of the Products, any misrepresentation made about the Products by any
representative of Borrower, or any act or failure to act by Borrower except to
the extent such claims or demands are directly attributable to IBM Credit's
gross negligence or willful misconduct. Nothing contained in the foregoing shall
impair any rights or claims which the Borrower may have against any
manufacturer, distributor or Authorized Supplier.
2.3. A/R ADVANCES. (A) Whenever Borrower shall desire IBM Credit to provide an
A/R Advance, Borrower shall deliver to IBM Credit written notice of Borrower's
request for such an Advance ("Request for A/R Advance"). For any requested A/R
Advance pursuant to which monies will be disbursed to Borrower or any Person
other than IBM Credit, a Request for A/R Advance shall be delivered to IBM
Credit on or prior to 1:00 p.m. (eastern time) one Business Day prior to the
requested A/R Advance Date. The Request for A/R Advance shall specify (i) the
requested A/R Advance Date; (ii) the amount of the requested A/R Advance; (iii)
whether such A/R Advance is a WCO Advance or a PRO Advance; (iv) if applicable,
the PRO Advance Term for such A/R Advance; (v) for each PRO Advance, the month,
day and year of the Common Due Date, as set forth in Borrower's applicable
billing statement from IBM Credit, for the Product Advance to which the PRO
Advance is to be applied; and (vi) if applicable, the amount of the requested
A/R Advance that should be applied to the Outstanding Product Advances (provided
that all PRO Advances shall be applied to Outstanding Product Advances).
Borrower may deliver a Request for A/R Advance via facsimile. Any Request for
A/R Advance delivered to IBM Credit shall be irrevocable. Notwithstanding any
other provision of this Agreement, Borrower shall not (i) request more than one
PRO
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Advance in respect of any Product Advance; and (ii) request a PRO Advance for
any Common Due Date on which Borrower will take a discount offered by IBM Credit
for invoice amounts paid in full within fifteen days of the invoice date under
IBM Credit's High Turnover Option ("HTO") Program.
(B) Subject to the terms and conditions of this Agreement, on the A/R
Advance Date specified in a Request for A/R Advance, IBM Credit shall make the
principal amount of each A/R Advance available to the Borrower in immediately
available funds to an account maintained by Borrower. If IBM Credit is making an
A/R Advance hereunder on a day on which Borrower is to repay all or any part of
an Outstanding Advance (or any other amount owing hereunder), IBM Credit shall
apply the proceeds of the A/R Advance to such repayment and only an amount equal
to the difference, if any, between the amount of the A/R Advance and the amount
being repaid shall be made available to Borrower as provided in the immediately
preceding sentence. With respect to the WCO Advances made by IBM Credit on the
Closing Date, the Borrower hereby authorizes and directs IBM Credit to pay the
proceeds of such WCO Advance directly to IBM ("IBM Payment"). Such WCO Advance
constitutes a loan by IBM Credit to Borrower pursuant to this Agreement as if
the Borrower receives the proceeds of such WCO Advance directly from IBM Credit.
(C) Each A/R Advance shall accrue a finance charge on the Average Daily
Balance thereof, from and including the date of each A/R Advance to and
including the date such A/R Advance is due and payable in accordance with the
terms of this Agreement, at a per annum rate equal to the lesser of (a) the
finance charge set forth in Attachment A to this Agreement under the caption
"A/R Finance Charge" for such type of A/R Advance, and (b) the highest rate from
time to time permitted by applicable law. If it is determined that amounts
received from the Borrower were in excess of such highest rate, then the amount
representing such excess shall be considered reductions to principal of
Advances.
(D) Unless otherwise due and payable at an earlier date, the unpaid
principal amount of each A/R Advance shall be due and payable on the applicable
Common Due Date. Unless otherwise notified by Borrower in writing prior to the
day the principal amount of any WCO Advance becomes due and payable, the
Borrower shall be deemed to have provided IBM Credit with a Request for WCO
Advance requesting a WCO Advance on the day such principal amount is due and
payable in an amount equal to the unpaid principal amount of the WCO Advance so
due. Subject to the terms and conditions of this Agreement, the principal amount
of such WCO Advance shall automatically renew for an additional WCO Advance
Term.
2.4. FINANCE AND OTHER CHARGES. (A) Finance charges for an Advance for a
calendar month shall be equal to (i) one twelfth (1/12) of the applicable
Product Financing Charge or A/R Finance Charge multiplied by (ii) the Average
Daily Balance of such Advance for the period when such finance charge accrues
during such calendar month multiplied by (iii) the actual number of days during
such calendar month when such finance charge accrues divided by (iv) thirty
(30).
Late charges pursuant to subsection (D) of this Section 2.4 for an Advance for a
calendar month shall be equal to (i) one twelfth (1/12) of the Delinquency Fee
Rate multiplied by (ii) the Average Daily Balance of such Advance for the period
when such Advance is past due during such calendar month multiplied by (iii) the
actual number of days during such calendar month when such Advance is past due
divided by (iv) thirty (30).
(B) The Borrower hereby agrees to pay to IBM Credit the charges set
forth as "Other Charges" in Attachment A. The Borrower also agrees to pay IBM
Credit additional charges for any returned items of payment received by IBM
Credit. The Borrower hereby acknowledges that any such charges are not interest
but that such charges, if unpaid, will constitute part of the Outstanding
Advances.
(C) The finance charges and Other Charges owed under this Agreement,
and any charges hereafter agreed to in writing by the parties, are payable
monthly on receipt of IBM Credit's xxxx or statement therefor or IBM Credit may,
in its sole discretion, add unpaid finance charges and Other Charges to the
Borrower's Outstanding Advances.
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(D) If any amount owed under this Agreement, including, without
limitation, any Advance, is not paid when due (whether at maturity, by
acceleration or otherwise), the unpaid amount thereof will bear a late charge
from and including the day after such Advance was due and payable to and
including the date IBM Credit receives payment thereof, at a per annum rate
equal to the lesser of (a) the amount set forth in Attachment A to this
Agreement as the "Delinquency Fee Rate" and (b) the highest rate from time to
time permitted by applicable law. In addition, if any Shortfall Amount shall not
be paid when due pursuant to Section 2.6 hereof, Borrower shall pay IBM Credit a
Shortfall Transaction Fee. If it is determined that amounts received from
Borrower were in excess of such highest rate, then the amount representing such
excess shall be considered reductions to principal of Advances.
2.5. BORROWER ACCOUNT STATEMENTS. IBM Credit will send statements of each
transaction hereunder as well as monthly billing statements to Borrower with
respect to Advances and other charges due on Borrower's account with IBM Credit.
Each statement of transaction and monthly billing statement shall be deemed,
absent manifest error, to be correct and shall constitute an account stated with
respect to each transaction or amount described therein unless within seven (7)
Business Days after such statement of transaction or billing statement is
received by Borrower, Borrower provides IBM Credit written notice objecting that
such amount or transaction is incorrectly described therein and specifying the
error(s), if any, contained therein. IBM Credit may at any time adjust such
statements of transaction or billing statements to comply with applicable law
and this Agreement.
2.6. SHORTFALL. If, on any date, the Outstanding Advances shall exceed the
Maximum Advance Amount (such excess, the "Shortfall Amount"), then the Borrower
shall on such date prepay the Outstanding Advances in an amount equal to such
Shortfall Amount. If Borrower does not pay the Shortfall Amount on such date,
PFSweb agrees unconditionally and irrevocably to pay the Shortfall Amount upon
written demand by IBM Credit.
2.7. APPLICATION OF PAYMENTS. Borrower hereby agrees that all checks and other
instruments delivered to IBM Credit on account of Borrower's Obligations shall
constitute conditional payment until such items are actually collected by IBM
Credit. Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by IBM Credit on account of the
Borrower's Obligations. Borrower agrees that IBM Credit shall have the
continuing exclusive right to apply and reapply any and all such payments to
Borrower's Obligations in such manner as IBM Credit may deem advisable
notwithstanding any entry by IBM Credit upon any of its books and records.
2.8. PREPAYMENT AND REBORROWING BY BORROWER. (A) Borrower may at any time
prepay, without notice or penalty, in whole or in part amounts owed under this
Agreement. IBM Credit may apply payments made to it (whether by the Borrower or
otherwise) to pay finance charges and other amounts owing under this Agreement
first and then to the principal amount owed by the Borrower.
(B) Subject to the terms and conditions of this Agreement, any amount
prepaid or repaid to IBM Credit in respect to the Outstanding Advances may be
reborrowed by Borrower in accordance with the provisions of this Agreement.
SECTION 3. CREDIT LINE ADDITIONAL PROVISIONS
3.1. (A) INELIGIBLE ACCOUNTS. IBM Credit and Borrower agree that IBM Credit
shall have the sole right to determine eligibility of Accounts from an Account
Debtor for purposes of determining the Borrowing Base; provided that IBM Credit
shall exercise such discretion in good faith and, provided further, however,
without limiting such right, the following Accounts will be deemed to be
ineligible for purposes of determining the Borrowing Base:
Page 14 of 47
(1) Accounts created from the sale of goods and/or performance of
services on non-standard terms or that allow for payment to be made more than
thirty (30) days from the date of such sale or performance of services;
(2) Accounts unpaid more than ninety (90) days from date of invoice;
(3) Accounts payable by an Account Debtor if fifty percent (50%) or
more of the aggregate outstanding balance of all such Accounts and Acquired
Accounts payable by the same account debtor remain unpaid for more than ninety
(90) days from the date of invoice;
(4) Accounts payable by an Account Debtor that is an Affiliate of any
Loan Party, or an officer, employee, agent, guarantor, stockholder of Loan Party
or an Affiliate of any Loan Party, or is related to or has common shareholders,
officers or directors with any Loan Party;
(5) Accounts arising from consignment sales;
(6) Except for state, local and United States government institutions
and public educational institutions, Accounts with respect to which the payment
by the Account debtor is or may be conditional;
(7) Except for state, local and United States government institutions
and public educational institutions, Accounts with respect to which:
(i) the Account debtor is not a commercial entity, or
(ii) the Account debtor is not a resident of the United
States;
(8) Accounts payable by any Account Debtor to which any Loan Party is
or shall become liable for goods sold or services rendered by such Account
Debtor to any Loan Party , except for Accounts payable by IBM provided that IBM
Credit has received evidence satisfactory to it that IBM has waived in writing
its right to setoff such amounts owed to Borrower with any amount Borrower may
owe to IBM;
(9) Accounts arising from the sale or lease of goods purchased for a
personal, family or household purpose;
(10) Accounts arising from the sale or other disposition of goods that
have been used for demonstration purposes or loaned or leased by the Borrower to
another party;
(11) Accounts which are progress payment accounts or contra accounts;
(12) Accounts upon which IBM Credit does not have a valid, perfected,
first priority security interest;
(13) Accounts payable by an Account Debtor that any Loan Party knows is
subject to proceedings under United States Bankruptcy Law or other law for the
relief of debtors;
(14) Accounts that are not payable in US dollars;
(15) Accounts payable by any Account Debtor that is a remarketer of
computer hardware and software products and whose purchases of such products
from Borrower have been financed by another person, other than IBM Credit, who
pays the proceeds of such financing directly to Borrower on behalf of such
debtor ("Third Party Financer") unless (i) such Third Party Financer does not
have a separate financing relationship with Borrower or (ii) such Third Party
Financer has a separate financing relationship with Borrower and has waived its
right to set off its obligations to Borrower;
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(16) Accounts arising from the sale or lease of goods which are billed
to any Account Debtor but have not yet been shipped by Borrower or PFS;
(17) Accounts with respect to which Borrower or PFS has permitted or
agreed to any extension, compromise or settlement, or made any change or
modification of any kind or nature, including, but not limited to, any change or
modification to the terms relating thereto, unless agreed to in writing by IBM
Credit;
(18) Accounts that do not arise from undisputed bona fide transactions
completed in accordance with the terms and conditions contained in the invoices,
purchase orders and contracts relating thereto;
(19) Accounts that are discounted for the full payment term specified
in Borrower's terms and conditions with its Account Debtors, or for any longer
period of time;
(20) Accounts on cash on delivery (C.O.D.) terms;
(21) Accounts arising from maintenance or service contracts that are
billed in advance of full performance of service;
(22) Accounts arising from bartered transactions;
(23) Accounts arising from price protection payments, incentive
payments, rebates, discounts, credits, and refunds from a supplier, except for
Accounts arising from incentive payments, rebates invoiced on a monthly basis,
discounts, credits, and refunds in each case owed by IBM to Borrower provided
that (i) Borrower obtains (and provides to IBM Credit along with the monthly
Collateral Management Report required under Section 7.1(O)) from IBM written
confirmation (a) acknowledging the obligation of IBM to pay such amount, (b)
stating the date the amount is due to be paid and (c) IBM waiving its right to
setoff such amounts owed to Borrower with any amount Borrower may owe to IBM;
(ii) such Accounts do not remain unpaid for more than sixty (60) days from the
date the obligation of IBM occurred; and (iii) such Accounts are deposited
directly into the Lockbox; and,
(24) Any and all other Accounts that IBM Credit deems, in its sole and
absolute discretion, to be ineligible.
In the event IBM Credit determines in its sole discretion to deem certain
Accounts to be ineligible pursuant to the introductory paragraph or paragraph
(24) above, IBM Credit will provide written notification to Borrower of its
determination of ineligibility of such Accounts and such ineligibility shall be
applied to such Accounts arising from invoices dated one Business Day after the
date of such notification.
The aggregate of all Accounts that are not ineligible Accounts shall hereinafter
be referred to as "Eligible Accounts".
(B) INELIGIBLE ACQUIRED ACCOUNTS. IBM Credit and Borrower agree that
IBM Credit shall have the sole right to determine eligibility of Acquired
Accounts from a BSD Account Debtor for purposes of determining the Borrowing
Base; provided that IBM Credit shall exercise such discretion in good faith and,
provided further, however, without limiting such right, the following Acquired
Accounts will be deemed to be ineligible for purposes of determining the
Borrowing Base:
(1) Acquired Accounts created from the sale of goods and/or performance
of services on non-standard terms or that allow for payment to be made more than
thirty (30) days from the date of such sale or performance of services;
(2) Acquired Accounts unpaid more than ninety (90) days from date of
invoice;
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(3) Acquired Accounts payable by a BSD Account Debtor if fifty percent
(50%) or more of the aggregate outstanding balance of all such Acquired Accounts
and Accounts payable by such same account debtor remain unpaid for more than
ninety (90) days from the date of invoice;
(4) Acquired Accounts payable by a BSD Account Debtor that is an
Affiliate of any Loan Party or BSD, or an officer, employee, agent, guarantor,
stockholder of Loan Party or an Affiliate of any Loan Party or BSD, or is
related to or has common shareholders, officers or directors with any Loan
Party;
(5) Acquired Accounts arising from consignment sales;
(6) Except for state, local and United States government institutions
and public educational institutions, Acquired Accounts with respect to which the
payment by the BSD Account Debtor is or may be conditional;
(7) Except for state, local and United States government institutions
and public educational institutions, Accounts with respect to which:
(i) the BSD Account Debtor is not a commercial entity, or
(ii) the BSD Account Debtor is not a resident of the United
States;
(8) Acquired Accounts payable by any BSD Account Debtor to which any
Loan Party or BSD is or shall become liable for goods sold or services rendered
by such BSD Account Debtor to any Loan Party or BSD, except for BSD Acquired
Accounts payable by IBM provided that IBM Credit has received evidence
satisfactory to it that IBM has waived in writing its right to setoff such
amounts owed to Borrower or BSD with any amount Borrower or BSD may owe to IBM;
(9) Acquired Accounts arising from the sale or lease of goods purchased
for a personal, family or household purpose;
(10) Acquired Accounts arising from the sale or other disposition of
goods that have been used for demonstration purposes or loaned or leased by the
Borrower or BSD to another party;
(11) Acquired Accounts which are progress payment accounts or contra
accounts;
(12) Acquired Accounts upon which IBM Credit does not have a valid,
perfected, first priority security interest;
(13) Acquired Accounts payable by an BSD Account Debtor that any Loan
Party knows is subject to proceedings under United States Bankruptcy Law or
other law for the relief of debtors;
(14) Acquired Accounts that are not payable in US dollars;
(15) Acquired Accounts payable by any BSD Account Debtor that is a
remarketer of computer hardware and software products and whose purchases of
such products from Borrower or BSD have been financed by another person, other
than IBM Credit, who pays the proceeds of such financing directly to Borrower or
BSD on behalf of such debtor ("Third Party Financer") unless (i) such Third
Party Financer does not have a separate financing relationship with Borrower or
BSD or (ii) such Third Party Financer has a separate financing relationship with
Borrower and has waived its right to set off its obligations to Borrower or BSD;
(16) Acquired Accounts arising from the sale or lease of goods which
are billed to any BSD Account Debtor but have not yet been shipped by Borrower
or PFS or BSD;
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(17) Acquired Accounts with respect to which Borrower or PFS or BSD has
permitted or agreed to any extension, compromise or settlement, or made any
change or modification of any kind or nature, including, but not limited to, any
change or modification to the terms relating thereto, unless agreed to in
writing by IBM Credit;
(18) Acquired Accounts that do not arise from undisputed bona fide
transactions completed in accordance with the terms and conditions contained in
the invoices, purchase orders and contracts relating thereto;
(19) Acquired Accounts that are discounted for the full payment term
specified in Borrower's or BSD's terms and conditions with its BSD Account
Debtors, or for any longer period of time;
(20) Acquired Accounts on cash on delivery (C.O.D.) terms;
(21) Acquired Accounts arising from maintenance or service contracts
that are billed in advance of full performance of service;
(22) Acquired Accounts arising from bartered transactions;
(23) Acquired Accounts arising from incentive payments, rebates,
discounts, credits, and refunds from a supplier, and
(24) Any and all other Acquired Accounts that IBM Credit deems, in its
sole and absolute discretion, to be ineligible.
The aggregate of all Acquired Accounts that are not ineligible Acquired Accounts
shall hereinafter be referred to as "Eligible Acquired Accounts".
Notwithstanding anything herein to the contrary, Eligible Acquired Accounts
shall not include any accounts receivable acquired by the Borrower after the
Second Conversion Date.
3.2. REIMBURSEMENT FOR CHARGES. Borrower agrees to pay for all costs and
expenses of Borrower's bank in respect to collection of checks and other items
of payment, all fees relating to the use and maintenance of the Lockbox and the
Special Account and with respect to remittances of proceeds of the Advances
hereunder.
3.3. LOCKBOX AND SPECIAL ACCOUNT. Borrower shall establish and maintain
lockbox(es) (each, a "Lockbox") at the address(es) set forth in Attachment A
with the financial institution(s) listed in Attachment A (each, a "Bank")
pursuant to an agreement between the Borrower and each Bank in form and
substance satisfactory to IBM Credit. Borrower shall also establish and maintain
a deposit account which shall contain only proceeds of Borrower's Accounts and
the Acquired Accounts ("Special Account") with each Bank. Borrower shall enter
into and maintain a blocked account agreement with each Bank for the benefit of
IBM Credit in form and substance satisfactory to IBM Credit pursuant to which,
among other things, such Bank shall agree that disbursements from the Special
Account shall be made only as IBM Credit shall direct.
3.4. COLLECTIONS. Each of PFS and the Borrower shall instruct all Account
Debtors and the BSD Account Debtors to remit payments directly to a Lockbox. In
addition, each of PFS and the Borrower shall have such instruction printed in
conspicuous type on all invoices relating to such Accounts and Acquired
Accounts. Borrower shall instruct such Bank to deposit all remittances to such
Bank's Lockbox into its Special Account. Each of Borrower and PFS further agrees
that it shall not deposit or permit any deposits of funds other than remittances
paid in respect of the Accounts and the Acquired Accounts into the Special
Account(s) or permit any commingling of funds with such remittances in any
Lockbox or Special Account.
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Without limiting the Borrower's foregoing obligations, if, at any time, PFS or
the Borrower receives a remittance directly from an Account Debtor or BSD
Account Debtor in payment of an Account or Acquired Account, then PFS or the
Borrower (as applicable) shall make entries on its books and records in a manner
that shall reasonably identify such remittances and shall keep a separate
account on its record books of all remittances so received and deposit the same
into a Special Account. Until so deposited into the Special Account, PFS or the
Borrower (as applicable) shall keep all remittances received in respect of such
Accounts and Acquired Accounts separate and apart from PFS's or the Borrower's
(as applicable) other property so that they are capable of identification as the
proceeds of Accounts and Acquired Accounts in which IBM Credit has a security
interest.
3.5. APPLICATION OF REMITTANCES AND CREDITS. PFS and Borrower shall apply all
remittances against the aggregate of Borrower's outstanding Accounts and
Acquired Accounts no later than the end of the next Business Day on which such
remittances are deposited into the Special Account. Each of PFS and Borrower
agrees to apply each remittance against its respective Account or Acquired
Account no later than three (3) Business Days from the date such remittance is
deposited into the Special Account. If, however, Borrower or PFS is unable to
identify the manner in which a remittance should be applied within three (3)
Business Days, Borrower shall clearly identify such unapplied amount on the
Collateral Management Report. In addition, PFS and Borrower shall promptly apply
any credits owing in respect to any Account or Acquired Account when due.
3.6. AUTHORIZATION TO FILE; POWER OF ATTORNEY. The Borrower authorizes IBM
Credit to file with any filing office such financing statements, amendments,
addenda and other records showing IBM Credit as secured party, and Borrower as
debtor and identifying IBM Credit's security interest in the Collateral that IBM
Credit deems necessary to perfect and maintain perfected the security interest
of IBM Credit in the Collateral. Each of the Borrower and PFS (as applicable)
hereby irrevocably appoints IBM Credit, with full power of substitution, as its
true and lawful attorney-in-fact with full power, in good faith and in
compliance with commercially reasonable standards, in the discretion of IBM
Credit, to:
(A) sign the name of Borrower on any document or instrument that IBM
Credit shall deem necessary or appropriate to perfect and maintain perfected the
security interest in the Collateral contemplated under this Agreement and the
Other Documents;
(B) subject to any agreement between IBM Credit and such Bank, direct
the Bank maintaining any Lockbox or Special Account to pay the funds on deposit
to IBM Credit for application to the Obligations; upon the occurrence and during
the continuance of an Event of Default as defined in Section 9.1 hereof:
(C) endorse the name of Borrower or PFS upon any of the items of
payment of proceeds of collateral and deposit the same in the Special Account
for application to the Obligations;
(D) demand payment, enforce payment and otherwise exercise all of
Borrower's or PFS's rights and remedies with respect to the collection of any
Accounts or Acquired Account;
(E) settle, adjust, compromise, extend or renew any Accounts or
Acquired Account;
(F) settle, adjust or compromise any legal proceedings brought to
collect any Accounts or Acquired Account;
(G) sell or assign any Accounts or Acquired Account upon such terms,
for such amounts and at such time or times as IBM Credit may deem advisable;
(H) discharge and release any Accounts or Acquired Account;
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(I) prepare, file and sign any such Loan Party's name on any Proof of
Claim in Bankruptcy or similar document against any Account Debtor or BSD
Account Debtor;
(J) prepare, file and sign any such Loan Party's name on any notice of
lien, claim of mechanic's lien, assignment or satisfaction of lien or mechanic's
lien, or similar document in connection with any Accounts or Acquired Account;
(K) endorse the name of Borrower or PFS upon any chattel paper,
document, instrument, invoice, freight xxxx, xxxx of lading or similar document
or agreement relating to any Account or Acquired Account or goods pertaining
thereto;
(L) endorse the name of Borrower or PFS upon any of the items of
payment of proceeds and deposit the same in the account of IBM Credit for
application to the Obligation;
(M) sign the name of Borrower or PFS to requests for verification of
Accounts or Acquired Account and notices thereof to Account Debtors or BSD
Account Debtors;
(N) sign the name of Borrower or PFS on any document or instrument that
IBM Credit shall deem necessary or appropriate to enforce any and all remedies
it may have under this Agreement, at law or otherwise;
(O) make, settle and adjust claims under the Policies with respect to
the Collateral and endorse any Loan Party's name on any check, draft, instrument
or other item of payment of the proceeds of the Policies with respect to the
Collateral; and
(P) take control in any manner of any term of payment or proceeds and
for such purpose to notify the postal authorities to change the address for
delivery of mail addressed to any such Loan Party to such address as IBM Credit
may designate.
The power of attorney granted by this Section is for value and coupled with an
interest and is irrevocable so long as this Agreement is in effect or any
Obligations remain outstanding. Nothing done by IBM Credit pursuant to such
power of attorney will reduce any Loan Party's Obligations other than Borrower's
payment Obligations to the extent IBM Credit has received monies.
3.7. CONCENTRATION ACCOUNTS. Without limiting IBM Credit's other rights, IBM
Credit reserves the right to, from time to time in its sole discretion,
exercised in good faith, modify the percentage of the amount of Borrower's
Concentration Accounts permitted to be used in calculating Borrower's Borrowing
Base ("Advance Rate") or eliminate Concentration Accounts in calculating
Borrower's Borrowing Base. In the event IBM Credit determines in its sole
discretion to modify the Advance Rate pertaining to a particular Concentration
Account, or eliminate Concentration Accounts in calculating Borrower's Borrowing
Base, IBM Credit will provide written notification to Borrower of the modified
Advance Rate (or such elimination) to be applied to Accounts and Acquired
Accounts arising from invoices dated one Business Day after the date of such
notification.
SECTION 4. SECURITY -- COLLATERAL
4.1. GRANT. To secure Borrower's full and punctual payment and performance of
the Obligations (including obligations under any leases Borrower may enter into,
now or in the future, with IBM Credit) when due (whether at the stated maturity,
by acceleration or otherwise), Borrower hereby grants IBM Credit a security
interest in all of Borrower's right, title and interest in and to the following
property, whether now owned or hereafter acquired or existing and wherever
located:
(A) all goods, including, all inventory and equipment, and all parts
thereof, attachments, accessories and accessions thereto, products thereof and
documents therefor;
Page 20 of 47
(B) all accounts, contract rights (including without limitation, the
PFS Agreement, the IBM Agreement and the other Transaction Documents), chattel
paper, instruments, negotiable documents, promissory notes, obligations of any
kind owing to Borrower, whether or not arising out of or in connection with the
sale or lease of goods or the rendering of services and all books, invoices,
documents and other records in any form evidencing or relating to any of the
foregoing;
(C) all General Intangibles;
(D) all Deposit Accounts;
(E) all Commercial Tort Claims;
(F) all Intellectual Property;
(G) all Investment Property;
(H) all Letter of Credit Rights;
(I) all Supporting Obligations;
(J) all other obligations of any kind owing to Borrower, whether or not
arising out of or in connection with the sale or lease of goods or the rendering
of services;
(K) all rights now or hereafter existing in and to all mortgages,
security agreements, leases, the PFS Agreement, the IBM Agreement, the other
Transaction Documents or other contracts securing or otherwise relating to any
of the foregoing; and
(L) all substitutions and replacements for all of the foregoing, and
all products or proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets shall be collectively defined herein as the
"Collateral". Borrower covenants and agrees with IBM Credit that: (a) the
security constituted to by this Agreement is in addition to any other security
from time to time held by IBM Credit and (b) the security hereby created is a
continuing security interest and will cover and secure the payment of all
Obligations both present and future of Borrower to IBM Credit and (c) any
transfer of assets between any Loan Party is subject to IBM Credit's continuing
security interest in the Collateral of the transferor as well as IBM Credit's
continuing security interest in the Collateral of the transferee.
PFS consents to the Borrower assigning all of its right, title, and interest in
and to the PFS Agreement, the IBM Agreement, and the other Transaction Documents
as Collateral to secure the payment of all Obligations of Borrower to IBM
Credit.
4.2. FURTHER ASSURANCES. Borrower and PFS shall, from time to time upon the
request of IBM Credit, execute and deliver to IBM Credit, or cause to be
executed and delivered, at such time or times as IBM Credit may request such
other and further documents, certificates and instruments that IBM Credit may
deem necessary to perfect and maintain perfected IBM Credit's security interests
in the Collateral and the Other Collateral and in order to fully consummate all
of the transactions contemplated under this Agreement and the Other Documents.
PFS and Borrower shall make appropriate entries on its books and records
disclosing IBM Credit's security interests in the Collateral.
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SECTION 5. CONDITIONS PRECEDENT
5.1. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT. The
effectiveness of this Agreement is subject to the receipt by IBM Credit of, or
waiver in writing by IBM Credit of compliance with, the following conditions
precedent:
(A) this Agreement executed and delivered by each Loan Party and IBM
Credit;
(B) a favorable opinion of counsel for Loan Parties in substantially
the form of Attachment H;
(C) a certificate of the secretary or an assistant secretary of each
Loan Party, substantially in the form and substance of Attachment I hereto,
certifying that, among other items, (i) each Loan Party is duly organized under
the laws of the State of its organization or incorporation and has its principal
place of business as stated therein, (ii) each Loan Party is registered to
conduct business in specified states and localities, (iii) true and complete
copies of the articles of incorporation, or corresponding organizational
documents, as applicable, and by-laws of each Loan Party are delivered
therewith, together with all amendments and addenda thereto as in effect on the
date thereof, (iv) the resolution as stated in the certificate is a true,
accurate and compared copy of the resolution adopted by each Loan Party's Board
of Directors or, if a Loan Party is a limited liability company, by such Loan
Party's authorized members, authorizing the execution, delivery and performance
of this Agreement and each Other Document executed and delivered in connection
herewith, and (v) the names and true signatures of the officers of each Loan
Party authorized to sign this Agreement and the Other Documents;
(D) certificates dated as of a recent date from the Secretary of State
or other appropriate authority evidencing the good standing of each Loan Party
in the jurisdiction of its organization and in each other jurisdiction where the
ownership or lease of its property or the conduct of its business requires it to
qualify to do business;
(E) a certified copy of the fully executed Daisytek Stock Purchase
Agreement by and among Daisytek, PFS, and Borrower in form and substance
satisfactory to IBM Credit in its sole discretion;
(F) the Borrower shall have acquired all of the stock of the BSD
Companies and BSD shall have merged into the Borrower with the Borrower being
the surviving entity;
(G) a certified copy of the Merger Documents in form and substance
satisfactory to IBM Credit in its sole discretion;
(H) an opinion of counsel in form and substance satisfactory to IBM
Credit and from counsel satisfactory to it which opinion shall include, without
limitation, an opinion hat (i) the Daisytek Stock Purchase Agreement and related
documents are legal, valid, binding and enforceable obligations of the parties
thereto, (ii) the Acquired Accounts are free of all liens, security interests
and encumbrances and (iii) IBM Credit has a first perfected priority security
interest in such Acquired Accounts;
(I) the consolidated Financial Statements of Borrower and BSD as of
Closing Date in form and substance satisfactory to IBM Credit in its sole
discretion;
(J) evidence satisfactory to IBM Credit that Loan Parties have paid any
amounts necessary to IBM so that once the IBM Payment is made, pursuant to
Section 2.3(B) upon the Closing Date, all accounts receivable owed to IBM by
Daisytek and BSD ("IBM Liability") shall be indefeasibly paid in full;
(K) fully executed Supplement to Master Distributor Agreements in form
and substance satisfactory to IBM Credit in its sole discretion and evidence
that all payments required thereunder have been indefeasibly paid in full;
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(L) copies of all approvals and consents from any Person, in each case
in form and substance satisfactory to IBM Credit, which are required to enable
each Loan Party to authorize, or required in connection with, (a) the execution,
delivery or performance of this Agreement and each of the Other Documents, and
(b) the legality, validity, binding effect or enforceability of this Agreement
and each of the Other Documents;
(M) IBM Credit shall have received evidence satisfactory to it that (i)
PFS shall have made or caused to be made an equity contribution to the Borrower
in immediately available funds in an amount equal to Seven Hundred Fifty
Thousand Dollars ($750,000), (ii) IFP shall have made or caused to be made an
equity contribution to the Borrower in immediately available funds in an amount
equal to Two Hundred Fifty Thousand Dollars ($250,000) and (iii) PFS shall have
made or caused to be made a loan to the Borrower in immediately available funds
in an amount equal to Six Million Dollars ($6,000,000) and such loan shall be
subordinated to the Obligations pursuant to the notes payable subordination
agreement referred to in (G) below;
(N) notes payable subordination executed by PFS in favor of IBM Credit
in form and substance satisfactory to IBM Credit in its sole discretion;
(O) Subordinated Demand Note executed by Borrower and endorsed payable
to IBM Credit;
(P) collateralized guaranty executed by each of Holdings and PFS in
favor of IBM Credit in form and substance satisfactory to IBM Credit in its sole
discretion;
(Q) corporate guaranty executed by PFSweb in favor of IBM Credit in
form and substance satisfactory to IBM Credit in its sole discretion;
(R) the pledge by Holdings of one hundred percent (100%) of the stock
of its Domestic Subsidiaries and sixty-five percent (65%) of the stock of each
of its Subsidiaries incorporated outside the USA (the "Holdings Stock Pledge
Agreement") along with undated stock powers and stock certificates with respect
to the shares of stock pledged in form and substance satisfactory to IBM Credit
in its sole discretion;
(S) Borrower Stock Pledge Agreement executed by Borrower in form and
substance satisfactory to IBM Credit in its sole discretion pursuant to which
Borrower shall pledge the stock in BSD (Canada), Inc. and Supplies Distributors
of Canada, Inc.;
(T) documentation satisfactory to IBM Credit in its sole discretion
evidencing Borrower's right, title and interest to accounts receivable
represented by invoices under the name of PFS;
(U) fully-executed Transaction Documents, satisfactory to IBM Credit in
its sole discretion;
(V) evidence that Borrower is a wholly-owned Subsidiary of Holdings;
(W) delivery of a copy of the PFS Agreement which agreement shall be in
form and substance satisfactory to IBM Credit in its sole discretion;
(X) acknowledgment executed by PFS pursuant to Section 9-313(C) of the
U.C.C. which acknowledgment shall be in form and substance satisfactory to IBM
Credit in its sole discretion;
(Y) a lockbox agreement executed by Borrower and each Bank, in form and
substance satisfactory to IBM Credit;
(Z) a blocked account agreement executed by Borrower and each Bank in
form and substance satisfactory to IBM Credit;
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(AA) IBM's consent to the Borrower assigning all of its right, title,
and interest in and to the IBM Agreement as Collateral to secure the payment of
all Obligations of Borrower to IBM Credit;
(BB) the Notice of Assignment as defined in Section 9.3(A)(ii) executed
by PFS in form and substance satisfactory to IBM Credit in its sole discretion;
(CC) absence of any material adverse change in any Loan Party's or any
Guarantor's condition (financial or otherwise), its operations, assets, income
and/or prospects;
(DD) UCC-1 financing statements for each jurisdiction reasonably
requested by IBM Credit executed by each of Holdings, PFS and the Borrower as
necessary to perfect the security interests contemplated by Section 4.1 of this
Agreement and contemplated under the collateralized guaranties;
(EE) control or other agreements for all other deposit accounts,
letter-of-credit rights, electronic chattel paper, inventory in the possession
of third parties;
(FF) all securities and commodities accounts containing investment
property described in Attachment B;
(GG) the statements, certificates, documents, instruments, financing
statements, agreements and information set forth in Attachment A and Attachment
B;
(HH) a certified copy of the organization chart of Loan Parties;
(II) IBM Credit shall have received evidence satisfactory to it that
Supplies Distributors is a registered D.B.A. name of the Borrower; and
(JJ) all such other statements, certificates, documents, instruments,
financing statements, agreements and other information with respect to the
matters contemplated by this Agreement as IBM Credit shall have reasonably
requested.
5.2. CONDITIONS PRECEDENT TO EACH ADVANCE. No Advance will be required to be
made or renewed by IBM Credit under this Agreement unless, on and as of the date
of such Advance, the following statements shall be true to the satisfaction of
IBM Credit:
(A) The representations and warranties contained in this Agreement or
in any Other Document are true and correct in all material respects on and as of
the date of such Advance as though made on and as of such date (except for any
representations or warranties which are made as of any specified date which
shall be true and correct in all material respects as of such specified date);
(B) No event has occurred and is continuing or after giving effect to
such Advance or the application of the proceeds thereof would result in or would
constitute a Default;
(C) No event has occurred and is continuing which could reasonably be
expected to have a Material Adverse Effect; and
(D) Both before and after giving effect to the making of such Advance,
no Shortfall Amount exists.
Except as Borrower has otherwise disclosed to IBM Credit in writing prior to
each request, each request (or deemed request pursuant to Section 2.2(A) or
2.3(D)) for an Advance hereunder and the receipt (or deemed receipt) by the
Borrower of the proceeds of any Advance hereunder shall be deemed to be a
representation and warranty by Borrower and each Loan Party that, as of and on
the date of such Advance, the statements
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set forth in (A) through (D) above are true statements. No such disclosures by
Borrower to IBM Credit shall in any manner be deemed to satisfy the conditions
precedent to each Advance that are set forth in this Section 5.2.
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce IBM Credit to enter into this Agreement, each Loan Party as to itself
and its Subsidiaries represents and warrants to IBM Credit as follows:
6.1. ORGANIZATION AND QUALIFICATIONS. The first paragraph of this Agreement
states the exact name of the Borrower, PFS, Holdings and each other Guarantor
who executes a collateralized guaranty as set forth in its charter or other
organizational record. In addition, Borrower's, PFS's and Holding's (and each
other Guarantor who executes a collateralized guaranty) organizational
identification number assigned by its State of organization is as set forth in
Attachment B. Each Loan Party and each of their Subsidiaries (i) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has the power and authority to own its
properties and assets and to transact the businesses in which it presently is
engaged and (iii) is duly qualified and is authorized to do business and is in
good standing in each jurisdiction where it presently is engaged in business and
is required to be so qualified. PFSweb directly owns one hundred percent (100%)
of the capital stock of PFS. Each of PFS and IFP directly owns Forty-nine
Percent (49%) and Fifty-one Percent (51%), respectively, of the membership
interest of Holdings and Holdings directly owns One Hundred Percent (100%) of
the capital stock of Borrower.
6.2. RIGHTS IN COLLATERAL; PRIORITY OF LIENS. Each of the Borrower and
Guarantors (other than PFSweb) owns the property granted by it respectively as
Collateral and Other Collateral to IBM Credit, free and clear of any and all
Liens in favor of third parties except for the Liens otherwise permitted
pursuant to Section 8.1. The Liens granted by each such Loan Party pursuant to
this Agreement, the Guaranties and the Other Documents in the Collateral and
Other Collateral constitute the valid and enforceable first, prior and perfected
Liens on the Collateral and Other Collateral, except to the extent any Liens
that are prior to IBM Credit's Liens are (i) the subject of an Intercreditor
Agreement or (ii) Purchase Money Security Interests in product of a brand that
is not financed by IBM Credit.
6.3. NO CONFLICTS. The execution, delivery and performance by each Loan Party of
this Agreement and each of the Other Documents (i) are within its power under
its organizational documents; (ii) are duly authorized by all necessary
corporate or limited liability company actions; (iii) are not in contravention
in any respect of any Requirement of Law or any indenture, contract, lease,
agreement, instrument or other commitment to which it is a party or by which it
or any of its properties are bound; (iv) do not require the consent,
registration or approval of any Governmental Authority or any other Person
(except such as have been duly obtained, made or given, and are in full force
and effect); and (v) will not, except as contemplated herein, result in the
imposition of any Liens upon any of its properties.
6.4. ENFORCEABILITY. This Agreement and all of the other documents executed and
delivered by the each Loan Party in connection herewith are the legal, valid and
binding obligations of each Loan Party, and are enforceable in accordance with
their terms, except as such enforceability may be limited by the effect of any
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting creditors' rights generally or the general
equitable principles relating thereto. In addition, the accounts payable arising
from the sale of product from IBM to Borrower are legal, valid, binding
obligations of Borrower.
6.5. LOCATIONS OF OFFICES, RECORDS AND INVENTORY. The addresses of the principal
place of business and chief executive office of each Loan Party (other than IFP)
is as set forth on Attachment B or on any written notice provided by any Loan
Party to IBM Credit pursuant to Section 7.7(C) of this Agreement. The books and
records of each Loan Party (other than IFP), and all of its chattel paper (other
than the chattel paper delivered to IBM Credit pursuant to Section 7.14(E)) and
records of Accounts and Acquired Accounts,
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are maintained exclusively at the locations set forth on Attachment B or on any
written notice provided by any Loan Party to IBM Credit pursuant to Section
7.7(C) of this Agreement .
There is no jurisdiction in which the Borrower or any Guarantor (other than
PFSweb) has any assets, equipment or inventory (except for vehicles and
inventory in transit for processing) other than those jurisdictions identified
on Attachment B or on any notice provided by any Loan Party to IBM Credit
pursuant to Section 7.7(C) of this Agreement. Attachment B, as amended from time
to time by any notice provided by any Loan Party to IBM Credit in accordance
with Section 7.7(C) of this Agreement, also contains a complete list of the
legal names and addresses of each warehouse at which Borrower's inventory is
stored. None of the receipts received by any Loan Party in respect of the
Collateral from any warehouseman states that the goods covered thereby are to be
delivered to bearer or to the order of a named person or to a named person and
such named person's assigns. PFS maintains the inventory and equipment included
within the Collateral segregated from other property of PFS and from property of
other clients of PFS and clearly identified as property of Borrower. PFS has not
issued any warehouse receipts or other documents covering the Collateral.
6.6. FICTITIOUS BUSINESS NAMES. Neither the Borrower nor any Guarantor (other
than PFSweb) has used any company or fictitious name during the five (5) years
preceding the date of this Agreement, other than those listed on Attachment B.
Supplies Distributors is a registered D.B.A. of the Borrower.
6.7. ORGANIZATION. If any Borrower or Guarantor or any of their Subsidiaries is
a corporation, all of the outstanding capital stock of such Loan Party or any of
its Subsidiaries has been validly issued, is fully paid and nonassessable.
6.8. NO JUDGMENTS OR LITIGATION. Except as set forth on Attachment B, no
judgments, orders, writs or decrees are outstanding against the Borrower or any
Guarantor nor is there now pending or, to the best of such Loan Party's
knowledge after due inquiry, threatened, any litigation, contested claim,
investigation, arbitration, or governmental proceeding by or against any such
Loan Party.
6.9. NO DEFAULTS. None of the Borrower or any Guarantor is in default under any
term of any indenture, contract, lease, agreement, instrument or other
commitment to which it is a party or by which it, or any of its properties are
bound, which default could reasonably be expected to have a Material Adverse
Effect. None of the Borrower or any Guarantor has any knowledge of any dispute
regarding any such indenture, contract, lease, agreement, instrument or other
commitment. No Default or Event of Default has occurred and is continuing.
6.10. LABOR MATTERS. Except as set forth on any notice provided by the Borrower
or any Guarantor to IBM Credit pursuant to Section 7.1(L) of this Agreement, no
such Loan Party is a party to any labor dispute. There are no strikes or
walkouts or labor controversies pending or threatened against the Borrower or
any Guarantor which could reasonably be expected to have a Material Adverse
Effect.
6.11. COMPLIANCE WITH LAW. No Loan Party has violated or failed to comply with
any Requirement of Law or any requirement of any self regulatory organization,
which violation or failure could reasonably be expected to have a Material
Adverse Effect.
6.12. ERISA. Each "employee benefit plan", "employee pension benefit plan",
"defined benefit plan", or "multi-employer benefit plan", which the Borrower or
any Guarantor has established, maintained, or to which it is required to
contribute (collectively, the "Plans") is in compliance with all applicable
provisions of ERISA and the Code and the rules and regulations thereunder as
well as the Plan's terms and conditions. There have been no "prohibited
transactions" and no "reportable event" has occurred within the last 60 months
with respect to any Plan. None of the Borrower or any Guarantor is a party to
any "multi-employer benefit plan".
As used in this Agreement the terms "employee benefit plan", "employee pension
benefit plan", "defined benefit plan", and "multi-employer benefit plan" have
the respective meanings assigned to them in Section 3
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of ERISA and any applicable rules and regulations thereunder. None of the
Borrower or any Guarantor has incurred any "accumulated funding deficiency"
within the meaning of ERISA or incurred any liability to the Pension Benefit
Guaranty Corporation (the "PBGC") in connection with a Plan (other than for
premiums due in the ordinary course).
6.13. COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as otherwise disclosed in
Attachment B:
(A) Each of the Borrower and Guarantors has obtained all government
approvals required with respect to the operation of their businesses under any
Environmental Law.
(B) (i) None of the Borrower or Guarantors has generated, transported
or disposed of any Hazardous Substances; (ii) None of the Borrower or Guarantors
is currently generating, transporting or disposing of any Hazardous Substances;
(iii) None of the Borrower or Guarantors has any knowledge that (a) any of its
real property (whether owned, leased, or otherwise directly or indirectly
controlled) has been used for the disposal of or has been contaminated by any
Hazardous Substances, or (b) any of its business operations have contaminated
lands or waters of others with any Hazardous Substances; (iv) None of the
Borrower or any Guarantor and its respective assets are subject to any
Environmental Liability and, to the best of their knowledge, any threatened
Environmental Liability; (v) None of the Borrower or any Guarantor has received
any notice of or otherwise learned of any governmental investigation evaluating
whether any remedial action is necessary to respond to a release or threatened
release of any Hazardous Substances for which they may be liable; (vi) None of
the Borrower or any Guarantor is in violation of any Environmental Law; (vii)
there are no proceedings or investigations pending against any such Loan Party
with respect to any violation or alleged violation of any Environmental Law;
provided however, that the parties acknowledge that any generation,
transportation, use, storage and disposal of certain such Hazardous Substances
in any such Loan Party's or its Subsidiaries' business shall be excluded from
representations (i) and (ii) above, provided, further, that each such Loan Party
is at all times generating, transporting, utilizing, storing and disposing such
Hazardous Substances in accordance with all applicable Environmental Laws and in
a manner designed to minimize the risk of any spill, contamination, release or
discharge of Hazardous Substances other than as authorized by Environmental
Laws.
6.14. INTELLECTUAL PROPERTY. Each of the Borrower and each Guarantor (other than
PFSweb) possesses such assets, licenses, Patents, patent applications,
Copyrights, service marks, Trademarks, trade names and trade secrets and all
rights, priorities and privileges and other property relating thereto or arising
therefrom ("Intellectual Property") as are necessary or advisable to continue to
conduct its present and proposed business activities. No material claim has been
asserted and is pending by any Person challenging or questioning the use of any
Intellectual Property or the validity or effectiveness of any Intellectual
Property, nor does Borrower or any such Guarantor know of any valid basis for
any such claim. All Intellectual Property is valid, subsisting, unexpired and
enforceable, and the use of Intellectual Property by Borrower and each Guarantor
(other than PFSweb) and each of their Subsidiaries does not infringe on the
rights of any Person in any material respect.
6.15. LICENSES AND PERMITS. Each Loan Party has obtained and holds in full force
and effect all franchises, licenses, leases, permits, certificates,
authorizations, qualifications, easements, rights of way and other rights and
approvals which are necessary for the operation of its businesses as presently
conducted, except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect. None of the Borrower or any Guarantor is in
violation of the terms of any such franchise, license, lease, permit,
certificate, authorization, qualification, easement, right of way, right or
approval.
6.16. INVESTMENT COMPANY. No Loan Party is (i) an investment company or a
company controlled by an investment company within the meaning of the Investment
Company Act of 1940, as amended, (ii) a holding company or a subsidiary of a
holding company, or an Affiliate of a holding company or of a subsidiary of a
holding company, within the meaning of the Public Utility Holdings Company Act
of 1935, as amended, or (iii) subject to any other law which purports to
regulate or restrict its ability to borrow money or
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to consummate the transactions contemplated by this Agreement or the Other
Documents or to perform its obligations hereunder or thereunder.
6.17. TAXES AND TAX RETURNS. Each Loan Party has timely filed all federal,
state, and local tax returns and other reports which it is required by law to
file, and has either duly paid all taxes, fees and other governmental charges
indicated to be due on the basis of such reports and returns or pursuant to any
assessment received by each Loan Party, or made provision for the payment
thereof in accordance with GAAP. The charges and reserves on the books of each
Loan Party in respect of taxes or other governmental charges are in accordance
with GAAP. No tax liens have been filed against any Loan Party or any of its
property.
6.18. STATUS OF ACCOUNTS AND ACQUIRED ACCOUNTS. (A) Each Account is based on an
actual and bona fide sale and delivery of goods or rendition of services to
customers, made by Borrower, in the ordinary course of its business; the goods
and inventory being sold by Borrower and the Accounts created thereby are its
exclusive property and are not and shall not be subject to any Lien, consignment
arrangement, encumbrance, security interest or financing statement whatsoever
(other than Permitted Liens). In respect of each Eligible Account, the
Borrower's customers have accepted goods or services and owe and are obligated
to pay the full amounts stated in the invoices according to their terms. There
are no proceedings or actions known to Borrower or any Guarantor which are
pending or threatened against any Material Account Debtor (as defined in Section
7.14(B) of this Agreement) of any of the Accounts or Acquired Accounts which
could reasonably be expected to result in a Material Adverse Effect.
(B) Each Acquired Account is based on an actual and bona fide sale and
delivery of goods or rendition of services to customers, made by BSD, in the
ordinary course of its business; the goods and the Acquired Accounts created
thereby are Borrower's exclusive property. Borrower is the sole, legal and
beneficial owner and has good title to the Acquired Accounts. The Acquired
Accounts are not and shall not be subject to any Lien, consignment arrangement,
encumbrance, security interest or financing statement whatsoever (other than
Permitted Liens). In respect of each Eligible Acquired Account, the BSD Account
Debtors (i) have accepted goods or services and owe and are obligated to pay the
full amounts stated in the invoices according to their terms and (ii) have no
right of set-off.
(C) PFS acknowledges that it does not have title to any of the
Collateral, including inventory and Products owned by Borrower or the Accounts
arising therefrom or to the Acquired Accounts, or any lien on the Collateral
(including the Products and the Accounts arising from the sale of Products or to
the Acquired Accounts) and has not pledged, encumbered or granted any security
interest in the Collateral (including the Products and the Accounts arising from
the sale of Products). PFS acknowledges and agrees that in performing its
services under the PFS Agreement and IBM Agreement, PFS has not acquired title
to any of the Products acquired by Borrower or to the Accounts or Acquired
Accounts or revenue arising from the resale thereof or to the Acquired Accounts.
6.19. AFFILIATE/SUBSIDIARY TRANSACTIONS. No Loan Party is a party to or bound by
any agreement or arrangement (whether oral or written) to which any Affiliate or
Subsidiary of such Loan Party is a party except (i) in the ordinary course of
and pursuant to the reasonable requirements of such Loan Party's business and
(ii) upon fair and reasonable terms no less favorable to such Loan Party than it
could obtain in a comparable arm's-length transaction with an unaffiliated
Person. Except as disclosed to IBM Credit by Borrower in writing from time to
time after the Closing Date, Attachment B sets forth with respect to each
Subsidiary of Borrower and Holdings (i) its name; (ii) if a registered
organization, the State of its formation; (iii) if a non-registered
organization, the State of its principal place of business and chief executive
offices; (iv) if a proprietorship, proprietor's principal place of residence;
and as to each Subsidiary the percentage of ownership by Borrower or Holdings,
as appropriate.
6.20. ACCURACY AND COMPLETENESS OF INFORMATION. All factual information
furnished by or on behalf of any Loan Party to IBM Credit or the Auditors for
purposes of or in connection with this Agreement or any
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Other Document, or any transaction contemplated hereby or thereby is or will be
true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information not misleading at such time.
6.21. RECORDING TAXES. All recording taxes, recording fees, filing fees and
other charges payable in connection with the filing and recording of this
Agreement have either been paid in full by Loan Parties or arrangements for the
payment of such amounts by Loan Parties have been made to the satisfaction of
IBM Credit.
6.22. INDEBTEDNESS. Neither Borrower nor Holdings (i) has any Indebtedness,
other than Permitted Indebtedness; and (ii) has guaranteed the obligations of
any other Person (except for Permitted Indebtedness or as permitted by Section
8.5).
6.23. NOT CONSUMER TRANSACTION. None of the Advances are consumer-goods
transactions or consumer transactions and none of the Collateral constitutes
consumer goods (as defined in the UCC).
6.24. LIMITATIONS ON LOCKBOXES AND SPECIAL ACCOUNTS. Borrower has no Lockbox,
Special Account or other deposit accounts with any banks except as provided in
Attachment B of this Agreement.
SECTION 7. AFFIRMATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations:
7.1. FINANCIAL AND OTHER INFORMATION.
(A) Borrower and Holdings shall deliver as soon as available and in any
event within ninety (90) days after the end of each fiscal year of Holdings (i)
audited Financial Statements of Holdings (provided that, to the extent not
otherwise audited by the Auditors, the consolidating Financial Statements may be
unaudited) as of the close of the fiscal year and for the fiscal year, together
with a comparison to the Financial Statements for the prior year, in each case
accompanied by (a) either an opinion of the Auditors without a "going concern"
or like qualification or exception, or qualification arising out of the scope of
the audit or, if so qualified, an opinion which shall be in scope and substance
reasonably satisfactory to IBM Credit, (b) such Auditors' "Management Letter" to
Holdings, if any, (c) a written statement signed by the Auditors stating that in
the course of the regular audit of the business of Holdings and its consolidated
Subsidiaries, which audit was conducted by the Auditors in accordance with
generally accepted auditing standards, nothing has come to the attention of the
Auditors that has caused them to believe that Holdings has failed to comply with
the financial covenants set forth in Attachment A insofar as they relate to
accounting matters , it being understood that such audit was not directed
primarily toward obtaining knowledge of such non-compliance and such Auditors
shall have no liability, directly or indirectly, to anyone for failure to obtain
such knowledge; and (ii) a Compliance Certificate along with a schedule, in
substantially the form of Attachment C-1 hereto, of the calculations used in
determining, as of the end of such fiscal year, whether Holdings and Borrower
are in compliance with the financial covenants set forth in Attachment A;
(B) PFSweb shall deliver as soon as available and in any event within
ninety (90) days after the end of each fiscal year of PFSweb (i) the Form 10-K
Annual Report filed with the Securities and Exchange Commission for that fiscal
year just ended and (ii) a Compliance Certificate along with a schedule, in
substantially the form of Attachment C-2 hereto, of the calculations used in
determining, as of the end of such fiscal year, whether PFSweb is in compliance
with the financial covenants set forth in Attachment A (in the event PFSweb is
no longer a public company, PFSweb shall be required to deliver Financial
Statements and such other documentation as required by Holdings and Borrower in
(A) above);
(C) Borrower and Holdings shall deliver as soon as available and in any
event within forty-five (45) days after the end of each fiscal quarter of
Holdings (i) consolidating Financial Statements of Holdings and Borrower as of
the end of such period and for the fiscal year to date, together with a
comparison to the
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Financial Statements for the same periods in the prior year, all in reasonable
detail and duly certified (subject to normal year-end audit adjustments and
except for the absence of footnotes) by the chief executive officer, chief
financial officer, or Controller of Holdings and Borrower as having been
prepared in accordance with GAAP (except for the absence of all required
footnotes); and (ii) a Compliance Certificate along with a schedule, in
substantially the form of Attachment C-1 hereto, of the calculations used in
determining, as of the end of such fiscal quarter, whether each of Holdings and
Borrower are in compliance with the financial covenants set forth in Attachment
A;
(D) PFSweb shall deliver as soon as available and in any event within
forty-five (45) days after the end of each fiscal quarter of PFSweb (i) the Form
10-Q Quarterly Report filed with the Securities and Exchange Commission for that
quarter just ended and (ii) a Compliance Certificate along with a schedule, in
substantially the form of Attachment C-2 hereto, of the calculations used in
determining, as of the end of such fiscal quarter, whether PFSweb is in
compliance with the financial covenants set forth in Attachment A (in the event
PFSweb is no longer a public company, PFSweb shall be required to deliver
Financial Statements and such other documentation as required by Holdings and
Borrower in (C) above);
(E) Holdings, Borrower and PFSweb (as applicable) shall deliver as soon
as available and in any event within twenty five (25) days after the end of each
fiscal month of Holdings, Borrower and PFSweb (i) consolidating Financial
Statements of Holdings and consolidated Financial Statements of PFSweb as of the
end of such period and for the fiscal year to date, together with a comparison
to the Financial Statements for the same periods in the prior year, all in
reasonable detail and duly certified (subject to normal year-end audit
adjustments and except for the absence of footnotes) by the chief executive
officer or chief financial officer of such Loan Party as having been prepared in
accordance with GAAP; and (ii) a Compliance Certificate along with a schedule,
in substantially the form of Attachment C-1 and C-2 hereto, of the calculations
used in determining, as of the end of such fiscal month, whether Holdings, the
Borrower and PFSweb are in compliance with the financial covenants set forth in
Attachment A;
(F) Holdings shall deliver as soon as available and in any event within
sixty (60) days after the end of each fiscal year of Holdings (i) projected
Financial Statements, broken down by quarter, for the current and following
fiscal year; and (ii) if composed, a narrative discussion relating to such
projected Financial Statements;
(G) Holdings shall deliver if requested by IBM Credit, as soon as
available and in any event within thirty (30) days after the end of each fiscal
quarter of Holdings, revised projected Financial Statements, broken down by
quarter, for (i) the current fiscal year from the beginning of such fiscal
quarter to the fiscal year end and (ii) the following fiscal year;
(H) Each Loan Party shall deliver as soon as available and in any event
within forty-five (45) days after the end of each fiscal quarter of each Loan
Party quarterly compliance certificates of such Loan Party and all of its
affiliates evidencing compliance under any credit agreements to which they are a
party;
(I) Each Loan Party shall deliver promptly after any Loan Party obtains
knowledge of (i) the occurrence of a Default or Event of Default, or (ii) the
existence of any condition or event which would result in any such Loan Party's
failure to satisfy the conditions precedent to Advances set forth in Section 5,
a certificate of the chief executive officer or chief financial officer or other
Authorized Officer of such Loan Party specifying the nature thereof and such
Loan Party's proposed response thereto, each in reasonable detail;
(J) Each Loan Party shall deliver promptly after any such Loan Party
obtains knowledge of (i) any proceeding(s) being instituted or threatened to be
instituted by or against the Borrower or any Guarantor in any federal, state,
local or foreign court or before any commission or other regulatory body
(federal, state, local or foreign), or (ii) any actual or prospective change,
development or event which, in any such case, has had or could reasonably be
expected to have a Material Adverse Effect, a certificate of the chief executive
officer or chief financial officer or other Authorized Officer of such Loan
Party specifying the nature thereof and such Loan Party's proposed response
thereto, each in reasonable detail;
Page 30 of 47
(K) Each Loan Party shall deliver promptly after any such Loan Party
obtains knowledge that (i) any order, judgment or decree in excess of $1,000,000
shall have been entered against the Borrower or any Guarantor or any of its
properties or assets, or (ii) it has received any notification of a material
violation of any Requirement of Law from any Governmental Authority, a
certificate of the chief executive officer or chief financial officer or other
Authorized Officer of such Loan Party specifying the nature thereof and such
Loan Party's proposed response thereto, each in reasonable detail;
(L) Each Loan Party shall deliver promptly after any such Loan Party
learns of any material labor dispute to which the Borrower or any Guarantor may
become a party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which any such Loan
Party is a party or by which it is bound, a certificate of the chief executive
officer or chief financial officer or other Authorized Officer of such Loan
Party specifying the nature thereof and such Loan Party's proposed response
thereto, each in reasonable detail;
(M) Each Loan Party shall deliver within five (5) Business Days after
request by IBM Credit, any written certificates, schedules and reports together
with all supporting documents as IBM Credit may reasonably request relating to
the Collateral or the Borrower or any Guarantor or any Guarantor's business
affairs and financial condition;
(N) Borrower shall deliver prior to 5:00 p.m. (Pacific Standard Time)
on Tuesday of each week (or if such Tuesday is not a Business Day, the first
Business Day following such Tuesday), or as otherwise agreed in writing, a
Collateral Management Report as of the immediately preceding Friday (or if such
Friday is not a Business Day, as of the last Business Day of such preceding
week);
(O) Borrower shall deliver by the tenth (10th) Business Day of each
month, or as otherwise agreed in writing, a Collateral Management Report as of a
date no earlier than the last day of the immediately preceding month;
(P) Borrower shall deliver along with the Financial Statements set
forth in Section 7.1(A), (B), (C), (D) and (E), the name, address and phone
number of each of its Account Debtors' and BSD's Account Debtors' primary
contacts for each Account and Acquired Account on the Accounts (and Acquired
Accounts, if any) aging report contained in its most recent Collateral
Management Report; and
(Q) PFSweb shall deliver within five (5) days after the same are sent,
copies of all Financial Statements and reports which PFSweb sends to its
stockholders, and within five (5) days after the same are filed, copies of all
Financial Statements and reports which PFSweb may make to, or file with, the
Securities and Exchange Commission or any successor or analogous governmental
authority.
Each certificate, schedule and report provided by any Loan Party to IBM Credit
shall be signed by an Authorized Officer of such Loan Party, and which signature
shall be deemed a representation and warranty that the information contained in
such certificate, schedule or report is true and accurate in all material
respects on the date as of which such certificate, schedule or report is made
and does not omit to state a material fact necessary in order to make the
statements contained therein not misleading at such time. Each Financial
Statement delivered pursuant to this Section 7.1 shall be prepared in accordance
with GAAP (except as otherwise permitted hereunder) applied consistently
throughout the periods reflected therein and with prior periods. Holdings shall
cause the audited Financial Statements and accompanying documents set forth in
Section 7.1(A)(i) to be delivered directly by the Auditors to IBM Credit only
via first class mail or overnight delivery.
7.2. LOCATION OF BORROWER AND COLLATERAL. If it is a registered organization,
the organizational document creating Borrower, Holdings and each other Guarantor
has been filed in the appropriate office of the State referred to in the first
paragraph of this Agreement. The inventory, equipment and other tangible
Collateral or other Collateral shall be kept or sold at the addresses as set
forth on Attachment B or on any
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notice provided by any Loan Party to IBM Credit in accordance with Section
7.7(C). Such locations shall be certified quarterly to IBM Credit substantially
in the form of Attachment G.
7.3. CHANGES IN LOAN PARTIES. Each Loan Party shall provide thirty (30) days
prior written notice to IBM Credit of any change in such Loan Party's name,
chief executive office and principal place of business, organization, form of
ownership or structure; provided, however, that such Loan Party's compliance
with this covenant shall not relieve it of any of its other obligations or any
other provisions under this Agreement or any Other Document limiting actions of
the type described in this Section.
7.4. LEGAL ENTITY EXISTENCE. Each Loan Party shall (A) maintain its legal entity
existence, maintain in full force and effect all licenses, bonds, franchises,
leases and qualifications to do business, and all contracts and other rights
necessary to the profitable conduct of its business, (B) continue in, and limit
its operations to, the same general lines of business as presently conducted by
it unless otherwise permitted in writing by IBM Credit and (C) comply with all
Requirements of Law, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
7.5. ERISA. Each of the Borrower and Guarantors shall promptly notify IBM Credit
in writing after it learns of the occurrence of any event which would constitute
a "reportable event" under ERISA or any regulations thereunder with respect to
any Plan, or that the PBGC has instituted or will institute proceedings to
terminate any Plan. Notwithstanding the foregoing, none of the Borrower or any
Guarantor shall have any obligation to notify IBM Credit as to any "reportable
event" as to which the 30-day notice requirement of Section 4043(b) has been
waived by the PBGC, until such time as such Loan Party is required to notify the
PBGC of such reportable event.
Such notification shall include a certificate of the chief financial officer of
such Loan Party setting forth details as to such "reportable event" and the
action which such Loan Party proposes to take with respect thereto, together
with a copy of any notice of such "reportable event" which may be required to be
filed with the PBGC, or any notice delivered by the PBGC evidencing its intent
to institute such proceedings. Upon request of IBM Credit, each of the Borrower
and Guarantors shall furnish, or cause the plan administrator to furnish, to IBM
Credit the most recently filed annual report for each Plan.
7.6. ENVIRONMENTAL MATTERS. (A) Each of the Borrower and Guarantors and any
other Person under such Loan Party's control (including, without limitation,
agents and Affiliates under such control) shall (i) comply with all
Environmental Laws in all material respects, and (ii) undertake to use
commercially reasonable efforts to prevent any unlawful release of any Hazardous
Substance by such Loan Party or such Person into, upon, over or under any
property now or hereinafter owned, leased or otherwise controlled (directly or
indirectly) by such Loan Party.
(B) Each of the Borrower and Guarantors shall notify IBM Credit,
promptly upon its obtaining knowledge of (i) any non-routine proceeding or
investigation by any Governmental Authority with respect to the presence of any
Hazardous Substances on or in any property now or hereinafter owned, leased or
otherwise controlled (directly or indirectly) by such Loan Party, (ii) all
claims made or threatened by any Person or Governmental Authority against such
Loan Party or any of such Loan Party's assets relating to any loss or injury
resulting from any Hazardous Substance, (iii) such Loan Party's discovery of
evidence of unlawful disposal of or environmental contamination by any Hazardous
Substance on any property now or hereinafter owned, leased or otherwise
controlled (directly or indirectly) by such Loan Party, and (iv) any occurrence
or condition which could constitute a violation of any Environmental Law.
7.7. COLLATERAL BOOKS AND RECORDS/COLLATERAL AUDIT. (A) Each of the Borrower and
Guarantors (other than PFSweb) agrees to maintain its books and records,
pertaining to the Collateral and Other Collateral in such detail, form and scope
as is consistent with good business practice, and agrees that such books and
records will reflect IBM Credit's interest in the Accounts and Acquired Accounts
and accounts of the Guarantors (other than PFSweb). PFS further agrees that the
books and records pertaining to the
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Collateral shall be kept separately from PFS's other books and records and PFS
agrees to note on the books and records pertaining to the Collateral that such
books and records are the property of Borrower.
(B) Each of the Borrower and Guarantors (other than PFSweb) agrees that
IBM Credit or its agents may enter upon the premises of any such Loan Party at
any time and from time to time, during normal business hours and upon reasonable
notice under the circumstances, and at any time at all on and after the
occurrence and during the continuance of an Event of Default for the purposes of
(i) inspecting the Collateral and Other Collateral, (ii) inspecting and/or
copying (at Borrower's or Guarantor's expense) any and all records pertaining
thereto, (iii) discussing the affairs, finances and business of each such Loan
Party with any officers, employees and directors of such Loan Party or with the
Auditors and (iv) verifying Eligible Accounts, Eligible Acquired Accounts and
other Collateral. Upon reasonable prior notice, each such Loan Party also agrees
to provide IBM Credit with such reasonable information and documentation that
IBM Credit deems necessary to conduct the foregoing activities, including,
without limitation, reasonably requested samplings of purchase orders, invoices
and evidences of delivery or other performance.
Upon the occurrence and during the continuance of an Event of Default which has
not been waived by IBM Credit in writing, IBM Credit may conduct any of the
foregoing activities in any manner that IBM Credit deems reasonably necessary.
(C) Borrower and each Guarantor shall give IBM Credit thirty (30) days
prior written notice of any change in the location of any Collateral or Other
Collateral, the location of its books and records or in the location of its
chief executive office or place of business from the locations specified in
Attachment B, and will execute in advance of such change and cause to be filed
and/or delivered to IBM Credit any financing statements, landlord or other lien
waivers, or other documents reasonably required by IBM Credit, all in form and
substance reasonably satisfactory to IBM Credit.
(D) Borrower and PFS, on behalf of the Borrower and each Guarantor
(other than PFSweb), agrees to advise IBM Credit promptly, in reasonably
sufficient detail, of any event or substantial change in the Collateral or Other
Collateral which could reasonably be expected to have a Material Adverse Effect
on the Collateral or on the security interests granted to IBM Credit therein.
7.8. INSURANCE; CASUALTY LOSS. (A) Each Loan Party agrees to maintain with
financially sound and reputable insurance companies: (i) insurance on its
properties, (ii) public liability insurance against claims for personal injury
or death as a result of the use of any products sold by it and (iii) insurance
coverage against other business risks, in each case, in at least such amounts
and against at least such risks as are usually and prudently insured against in
the same general geographical area by companies of established repute engaged in
the same or a similar business. Each Loan Party will furnish to IBM Credit, upon
its written request, the insurance certificates with respect to such insurance.
In addition, all Policies so maintained are to name IBM Credit as an additional
insured as its interest may appear.
(B) Without limiting the generality of the foregoing, Borrower shall
keep and maintain, at its sole expense, the Collateral insured for an amount not
less than the amount set forth on Attachment A from time to time opposite the
caption "Collateral Insurance Amount" against all loss or damage under an "all
risk" Policy with companies mutually acceptable to IBM Credit and Borrower, with
a lender's loss payable endorsement or mortgagee clause in form and substance
reasonably satisfactory to IBM Credit designating that any loss payable
thereunder with respect to such Collateral shall be payable to IBM Credit. Upon
receipt of proceeds by IBM Credit the same shall be deposited in the Lockbox or,
if an Event of Default then exists and is continuing, applied on account of the
Borrower's Outstanding Product Advances first, then to the Outstanding A/R
Advances. Borrower agrees to instruct each insurer to give IBM Credit, by
endorsement upon the Policy issued by it or by independent instruments furnished
to IBM Credit, at least ten (10) days written notice before any Policy shall be
altered or cancelled and that no act or default of any Loan Party or any other
person shall affect the right of IBM Credit to recover under the Policies.
Borrower hereby agrees to direct all insurers under the Policies to pay all
proceeds with respect to the Collateral directly to IBM Credit to be applied as
set forth herein.
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If any Borrower fails to pay any cost, charges or premiums, or if Borrower fails
to insure the Collateral, IBM Credit may pay such costs, charges or premiums.
Any amounts paid by IBM Credit hereunder shall be considered an additional debt
owed by Borrower to IBM Credit and are due and payable immediately upon receipt
of an invoice by IBM Credit.
7.9. TAXES. Each of the Borrower and Guarantors agrees to pay, when due, all
taxes lawfully levied or assessed against such Loan Party or any of the
Collateral before any penalty or interest accrues thereon unless such taxes are
being contested, in good faith, by appropriate proceedings promptly instituted
and diligently conducted and an adequate reserve or other appropriate provisions
have been made therefor as required in order to be in conformity with GAAP and
an adverse determination in such proceedings could not reasonably be expected to
have a Material Adverse Effect.
7.10. COMPLIANCE WITH LAWS. Each Loan Party agrees to comply with all
Requirements of Law applicable to the Collateral or any part thereof, or to the
operation of its business.
7.11. FISCAL YEAR. Each of Holdings, Borrower and PFSweb agrees to maintain its
fiscal year as a year ending December 31 unless either Holdings, Borrower or
PFSweb provides IBM Credit at least thirty (30) days prior written notice of any
change thereof.
7.12. INTELLECTUAL PROPERTY. Each of the Borrower and Guarantors shall do and
cause to be done all things necessary to preserve and keep in full force and
effect all registrations of Intellectual Property which the failure to do or
cause to be done could reasonably be expected to have a Material Adverse Effect.
7.13. MAINTENANCE OF PROPERTY. Each Loan Party shall maintain all of its
material properties (business and otherwise) in good condition and repair
(ordinary wear and tear excepted) and pay and discharge all costs of repair and
maintenance thereof and all rental and mortgage payments and related charges
pertaining thereto and not commit or permit any waste with respect to any of its
material properties. PFS, on behalf of Borrower, shall maintain all of
Borrower's material properties in PFS's possession (business and otherwise) in
good condition in accordance with good business practice.
7.14. COLLATERAL. To the extent applicable to it, each Loan Party will:
(A) from time to time upon request of IBM Credit, provide IBM Credit
with access to copies of all invoices, delivery evidences and other such
documents relating to each Account and Acquired Account;
(B) promptly upon any Loan Party obtaining knowledge thereof, furnish
to and inform IBM Credit of all material adverse information relating to the
financial condition of any Account Debtor or BSD Account Debtors whose
outstanding obligations to Borrower constitute five percent (5%) or more of the
Accounts and Acquired Accounts (in the aggregate) at such time (a "Material
Account Debtor");
(C) promptly upon any Loan Party learning thereof, notify IBM Credit in
writing of any event which would cause any obligation of a Material Account
Debtor to become an Ineligible Account or Ineligible Acquired Accounts;
(D) keep all goods rejected or returned by any Account Debtor or BSD
Account Debtor and all goods repossessed or stopped in transit by PFS (or
Borrower, if applicable) from any Account Debtor or BSD Account Debtor
segregated from other property of Borrower or PFS, holding the same in trust for
IBM Credit until Borrower applies a credit against such Account Debtor's or BSD
Account Debtor's outstanding obligations to Borrower or Borrower sells such
goods in the ordinary course of business, whichever occurs earlier;
(E) stamp or otherwise xxxx chattel paper and instruments now owned or
hereafter acquired by the Borrower or any Guarantor in conspicuous type to show
that the same are subject to IBM Credit's
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security interest and immediately thereafter deliver or cause such chattel paper
and instruments to be delivered to IBM Credit or any agent designated by IBM
Credit with appropriate endorsements and assignments to vest title and
possession in IBM Credit;
(F) use commercially reasonable efforts to collect all Accounts and
Acquired Accounts owed;
(G) promptly notify IBM Credit of any loss, theft or destruction of or
damage to any of the Collateral or Other Collateral in an amount in excess of
Two Million Five Hundred Thousand Dollars ($2,500,000). Each Borrower and each
Guarantor shall diligently file and prosecute its claim for any award or payment
in connection with any such loss, theft, destruction of or damage to Collateral.
Each such Loan Party shall, upon demand of IBM Credit, make, execute and deliver
any assignments and other instruments sufficient for the purpose of assigning
any such award or payment to IBM Credit, free of any encumbrances of any kind
whatsoever;
(H) consistent with reasonable commercial practice, observe and perform
all matters and things necessary or expedient to be observed or performed under
or by virtue of any lease, license, concession or franchise forming part of the
Collateral and Other Collateral in order to preserve, protect and maintain all
the rights of IBM Credit thereunder;
(I) promptly notify IBM Credit if Borrower is a beneficiary under a
letter of credit now or hereafter issued in favor of Borrower;
(J) consistent with reasonable commercial practice, maintain, use and
operate the Collateral and Other Collateral and carry on and conduct its
business in a proper and efficient manner so as to preserve and protect the
Collateral and Other Collateral and the earnings, incomes, rents, issues and
profits thereof; and
(J) at any time and from time to time, upon the request of IBM Credit,
and at the sole expense of Loan Parties, each Loan Party will promptly and duly
execute and deliver such further instruments and documents and take such further
action as IBM Credit may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the security interests granted herein and the
payment of any and all recording taxes and filing fees in connection therewith.
7.15. ADDITIONAL COLLATERAL, ETC. If Borrower shall at any time hold or acquire
a Commercial Tort Claim, then Borrower shall immediately notify IBM Credit in
writing signed by Borrower of the details thereof and grant to IBM Credit in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
satisfactory to IBM Credit.
7.16. SUBSIDIARIES. IBM Credit may require that any Domestic Subsidiaries of any
Loan Party, except for direct Subsidiaries of PFS other than Holdings ("Excluded
Subsidiaries"), become parties to this Agreement or any other agreement executed
in connection with this Agreement as guarantors or sureties. Each Loan Party
will comply, and cause all Subsidiaries, other than Excluded Subsidiaries, of
such Loan Party to comply with Sections 7 and 8 of this Agreement, as if such
sections applied directly to such Subsidiaries. Each of Borrower and Holdings
hereby agrees that, promptly after it acquires any Subsidiary after the Closing
Date, it shall execute a supplement to the Holdings Stock Pledge Agreement or
Borrower Stock Pledge Agreement (as applicable) for the purpose of pledging to
IBM Credit (i) all shares of stock of the Subsidiary owned by Holdings or
Borrower (as applicable), if the new Subsidiary is a Domestic Subsidiary or (ii)
all shares of stock of the new Subsidiary owned by Holdings or Borrower (as
applicable), up to sixty-five percent (65%) of the total outstanding shares of
stock of the Subsidiary, if the new Subsidiary is not a Domestic Subsidiary. For
the purpose of this Section 7.16, each of Borrower and Holdings agrees to notify
the IBM Credit 10 days before it acquires a new Subsidiary.
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7.17. FINANCIAL COVENANTS; ADDITIONAL COVENANTS. Each of Borrower, Holdings and
PFSweb acknowledges and agrees that such party shall maintain the financial
covenants and other covenants set forth in the attachments, exhibits and other
addenda incorporated in this Agreement.
7.18. TRANSACTION DOCUMENTS. PFS and Borrower agree to comply with the terms of
the PFS Agreement, the IBM Agreement, and the other Transaction Documents in
accordance with the terms set forth therein.
SECTION 8. NEGATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations hereunder:
8.1. LIENS. Neither Borrower nor any Guarantor (other than PFSweb) will,
directly or indirectly mortgage, assign, pledge, transfer, create, incur,
assume, permit to exist or otherwise permit any Lien or judgment to exist on any
of its property, assets, revenues or goods, whether real, personal or mixed,
whether now owned or hereafter acquired, except for Permitted Liens and Liens
created under collateralized guaranties. PFS shall not pledge, encumber or grant
a security interest in the Collateral (including the Products and the Accounts
arising from the sale thereof and the Acquired Accounts) or acquire title or any
security interest to any of the Collateral (including the Products and the
Accounts arising from the sale thereof and the Acquired Accounts). In performing
its services under the PFS Agreement and IBM Agreement, PFS agrees that it shall
not acquire title to any of the Products acquired by the Borrower or the
Accounts or revenue arising from the resale thereof or the Acquired Accounts.
8.2. DISPOSITION OF ASSETS. Neither Borrower nor any Guarantor will, directly or
indirectly, sell, lease, assign, transfer or otherwise dispose of any assets
other than (i) sales of inventory in the ordinary course of business and short
term rental of inventory as demonstrations in amounts not material to it, and
(ii) voluntary dispositions of individual assets and obsolete or worn out
property in the ordinary course of business, provided, that the aggregate book
value of all such assets and property so sold or disposed of under this section
8.2 (ii) in any fiscal year shall not exceed 5% of the consolidated assets of
such Loan Party as of the beginning of such fiscal year.
8.3 TRANSACTION DOCUMENTS. No Loan Party will (i) modify, amend or agree to any
amendment, waiver, supplement or modification of any of the Transaction
Documents, the results of which could reasonably be expected to have a Material
Adverse Effect or (ii) cancel or terminate or agree to cancel or terminate any
of the Transaction Documents without the prior written consent of IBM Credit
which will not be unreasonably withheld provided that such cancellation or
termination could not reasonably be expected to have a Material Adverse Effect.
8.4. CHANGES IN BORROWER AND GUARANTOR. (A) Neither the Borrower nor any
Guarantor will change its name, location (as defined in Article 9 of the UCC),
State of organization, chief executive office, or principal place of business
without thirty (30) days prior written notice to IBM Credit; (B) Neither the
Borrower nor any Guarantor will, without the prior written consent of IBM
Credit, change its organization, form of ownership or structure; (C) no Loan
Party will, without the prior written consent of IBM Credit, directly or
indirectly, merge, consolidate, liquidate, dissolve or enter into or engage in
any operation or activity materially different from that presently being
conducted by such Loan Party.
8.5. GUARANTIES. Neither the Borrower nor Holdings will, directly or indirectly,
assume, guaranty, endorse, or otherwise become liable upon the obligations of
any other Person, except (i) by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business, (ii) by the giving of indemnities in connection with the sale of
inventory or other asset dispositions permitted hereunder, (iii) for guaranties
in favor of IBM Credit, and (iv) the guaranty referred to in
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paragraph 2 of the definition of Permitted Indebtedness and (v) for obligations
which, if incurred directly by any such Loan Party, would be permitted hereunder
as Permitted Indebtedness.
8.6. RESTRICTED PAYMENTS. Borrower will not, directly or indirectly make any of
the following payments ("Restricted Payments") if after giving effect to such
payment, the aggregate amount of all such Restricted Payments exceeds Six
Hundred Thousand Dollars ($600,000) during any fiscal year: (i) declare or pay
any dividend (other than dividends payable solely in common stock of Borrower)
on, or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of any class of capital stock of Borrower or
any warrants, options or rights to purchase any such capital stock or Equity
Interests, whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of Borrower; or (ii) make any optional payment or prepayment
on or redemption (including, without limitation, by making payments to a sinking
or analogous fund) or repurchase of any Indebtedness (other than the
Obligations)).
8.7. INVESTMENTS. Neither the Borrower nor Holdings will, directly or
indirectly, make, maintain or acquire any Investment in any Person (other than a
Loan Party or any wholly-owned Subsidiary thereof) other than:
(A) interest bearing deposit accounts (including certificates of
deposit) which are insured by the Federal Deposit Insurance Corporation ("FDIC")
or a similar federal insurance program;
(B) direct obligations of the government of the United States of
America or any agency or instrumentality thereof or obligations guaranteed as to
principal and interest by the United States of America or any agency thereof;
(C) stock or obligations issued to any Loan Party in settlement of
claims against others by reason of an event of bankruptcy or a composition or
the readjustment of debt or a reorganization of any debtor of any Loan Party;
and
(D) commercial paper of any company organized under the laws of any
State of the United States or any bank organized or licensed to conduct a
banking business under the laws of the United States or any State thereof having
the short-term highest rating then given by Xxxxx'x Investor's Services, Inc. or
Standard & Poor's Corporation.
8.8. AFFILIATE/SUBSIDIARY TRANSACTIONS. No Loan Party will, directly or
indirectly, enter into any transaction with any Affiliate or Subsidiary,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service to any Affiliate or Subsidiary of any Loan Party except
in the ordinary course of business and pursuant to the reasonable requirements
of such Loan Party's business upon fair and reasonable terms no less favorable
to such Loan Party than could be obtained in a comparable arm's-length
transaction with an unaffiliated Person.
8.9. ERISA. None of the Borrower or any Guarantor will (A) terminate any Plan so
as to incur a material liability to the PBGC, (B) permit any "prohibited
transaction" involving any Plan (other than a "multi-employer benefit plan")
which would subject such Loan Party to a material tax or penalty on "prohibited
transactions" under the Code or ERISA, (C) fail to pay to any Plan any
contribution which they are obligated to pay under the terms of such Plan, if
such failure would result in a material "accumulated funding deficiency",
whether or not waived, (D) allow or suffer to exist any occurrence of a
"reportable event" or any other event or condition, which presents a material
risk of termination by the PBGC of any Plan (other than a "multi-employer
benefit plan"), or (E) fail to notify IBM Credit as required in Section 7.5. As
used in this Agreement, the terms "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
the Code and ERISA. For purposes of this Section 8.9, the terms "material
liability", "tax", "penalty", "accumulated funding deficiency" and "risk of
termination" shall mean a liability, tax, penalty,
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accumulated funding deficiency or risk of termination which could reasonably be
expected to have a Material Adverse Effect.
8.10. ADDITIONAL NEGATIVE PLEDGES. No Loan Party will, directly or indirectly,
create or otherwise cause or permit to exist or become effective any contractual
obligation which may restrict or inhibit IBM Credit's rights or ability to sell
or otherwise dispose of the Collateral or Other Collateral or any part thereof
after the occurrence and during the continuance of an Event of Default.
8.11. STORAGE OF COLLATERAL. (A) Collateral shall not be stored with a bailee,
warehouseman or similar party without the prior written consent of IBM Credit
unless any Loan Party will, concurrently with the delivery of such Collateral to
such party, cause such party to (i) enter into an agreement acknowledging that
such party holds possession of Collateral (other than certificated securities
and goods covered by a document) for the benefit of IBM Credit, or (ii) issue
and deliver to IBM Credit warehouse receipts in the name of IBM Credit
evidencing the storage of such Collateral.
(B) PFS shall not permit any of its (or its customers') inventory
(other than Borrower) to be commingled with the Collateral.
8.12. USE OF PROCEEDS. Borrower shall not use any portion of the proceeds of any
Advances other than to acquire Products from Authorized Suppliers and for its
general working capital requirements. Borrower shall not use any portion of the
proceeds of any Advances made on the Closing Date other than to satisfy the IBM
Liabilities in accordance with an agreement in form and substance satisfactory
to IBM Credit in its sole discretion.
8.13. ACCOUNTS AND ACQUIRED ACCOUNTS. No Loan Party shall permit or agree to any
extension, compromise or settlement or make any change or modification of any
kind or nature with respect to any Account or Acquired Account, including any of
the terms relating thereto, which would affect IBM Credit's ability to collect
payment on any Account or Acquired Account in whole or in part, except for such
extensions, compromises or settlements made by any Loan Party in the ordinary
course of its business, provided, however, that the aggregate amount of such
extensions, compromises or settlements does not exceed five percent (5%) (in the
aggregate) of Borrower's Accounts and Acquired Accounts at such time.
8.14. INDEBTEDNESS. Neither the Borrower nor Holdings will create, incur, assume
or permit to exist any Indebtedness, except for Permitted Indebtedness.
8.15. LOANS. No Loan Party will make any loans, advances, contributions or
payments of money or goods to any Subsidiary, Affiliate or parent company or to
any officer, director or stockholder of such Loan Party or of any such company
(except for compensation for personal services actually rendered), except for
transactions which comply with the terms of this Agreement.
8.16. LOCKBOXES AND SPECIAL ACCOUNTS. Borrower shall not have or maintain any
Lockbox, Special Account or other deposit account with any bank except as
provided in Attachment B of this Agreement.
8.17. TITLE TO COLLATERAL. PFS disclaims and waives any right to assert any
lien, pledge or claim of title to the Collateral.
SECTION 9. DEFAULT
9.1. EVENT OF DEFAULT. Any one or more of the following events shall constitute
an Event of Default under this Agreement and the Other Documents:
(A) The failure to make timely payment of the Obligations or any part
thereof when due and payable;
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(B) Any Loan Party fails to comply with the financial covenants set
forth on Attachment A, Section 7.4(A), Section 7.4(B) or Section 8 hereof;
(C) Any Loan Party or any of their Affiliates fail to comply with or
observe any term, covenant or agreement contained in this Agreement, any Other
Documents (not covered by (A) or (B) above) to which it is a party, if such
failure shall remain unremedied for five (5) days after the earlier of (i) such
Loan Party obtains actual knowledge thereof and (ii) written notice thereof
shall have been given to such Loan Party by IBM Credit;
(D) Any representation, warranty, statement, report or certificate made
or delivered by or on behalf of any Loan Party or any of its officers, employees
or agents or by or on behalf of any Guarantor to IBM Credit was false in any
material respect at the time when made or deemed made;
(E) The occurrence of any event or circumstance which could reasonably
be expected to have a Material Adverse Effect;
(F) The Borrower or any Guarantor shall generally not pay its debts as
such debts become due, become or otherwise declare itself insolvent, file a
voluntary petition for bankruptcy protection, have filed against it any
involuntary bankruptcy petition, cease to do business as a going concern, make
any assignment for the benefit of creditors, or a custodian, receiver, trustee,
liquidator, administrator or person with similar powers shall be appointed for
any such Loan Party or any Guarantor or any of its respective properties or have
any of its respective properties seized or attached, or take any action to
authorize, or for the purpose of effectuating, the foregoing, provided, however,
that any such Loan Party or any Guarantor shall have a period of forty-five (45)
days within which to discharge any involuntary petition for bankruptcy or
similar proceeding;
(G) The use of any funds borrowed from IBM Credit under this Agreement
for any purpose other than as provided in this Agreement;
(H) The entry of any judgment against the Borrower or any Guarantor in
an amount in excess of $5,000,000 and such judgment is not satisfied, dismissed,
stayed or superseded by bond within thirty (30) days after the day of entry
thereof (and in the event of a stay or supersedeas bond, such judgment is not
discharged within thirty (30) days after termination of any such stay or bond)
or such judgment is not fully covered by insurance as to which the insurance
company has acknowledged its obligation to pay such judgment in full;
(I) The dissolution or liquidation of any Loan Party, or any Guarantor,
or any Loan Party or any Guarantor or its directors or stockholders shall take
any action to dissolve or liquidate any Loan Party or any Guarantor;
(J) Any "going concern" or like qualification or exception, or
qualification arising out of the scope of an audit by an Auditor of its opinion
relative to any Financial Statement delivered to IBM Credit under this
Agreement;
(K) The issuance of a warrant of distress for any rent or taxes with
respect to any premises occupied by any Loan Party in or upon which the
Collateral, or any part thereof, may at any time be situated and such warrant
shall continue for a period of ten (10) Business Days from the date such warrant
is issued and shall not be rescinded, revoked or otherwise terminated within
such ten (10) day period;
(L) Any Loan Party or any Guarantor suspends business;
(M) The occurrence of any event or condition that permits the holder of
any Indebtedness of any Loan Party, Guarantor, or any Loan Party's Subsidiary in
a principal amount in excess of $100,000 arising
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in one or more related or unrelated transactions to accelerate the maturity
thereof or the failure of any Loan Party to pay when due any such Indebtedness;
(N) Any guaranty of any or all of Borrower's Obligations executed by
any Guarantor in favor of IBM Credit, shall at any time for any reason cease to
be in full force and effect or shall be declared to be null and void by a court
of competent jurisdiction or the validity or enforceability thereof shall be
contested or denied by any such Guarantor, or any such Guarantor shall deny that
it has any further liability or obligation thereunder or any such Guarantor
shall fail to comply with or observe any of the terms, provisions or conditions
contained in any such guaranty;
(O) Any Loan Party is in default under the material terms of any of the
Other Documents after the expiration of any applicable cure periods;
(P) There shall occur a "reportable event" with respect to any Plan, or
any Plan shall be subject to termination proceedings (whether voluntary or
involuntary) and there shall result from such "reportable event" or termination
proceedings a liability of any Loan Party to the PBGC which in the reasonable
opinion of IBM Credit will have a Material Adverse Effect;
(Q) Any "person" (as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) acquires a beneficial interest in 50% or more
of the Voting Stock of any Loan Party;
(R) (a) PFSweb ceases to directly own One Hundred Percent (100%) of the
capital stock of PFS, and (b) PFS and IFP cease to directly own One Hundred
Percent (100%) of the interest in members of Holdings or (b) Holdings ceases to
directly own One Hundred Percent (100%) of the capital stock of Borrower;
(S) IBM ceases to be an Authorized Supplier.
(T) The PFS Agreement or any other Transaction Document expires or is
terminated.
9.2. ACCELERATION. Upon the occurrence and during the continuance of an Event of
Default which has not been waived in writing by IBM Credit, IBM Credit may, in
its sole discretion, take any or all of the following actions, without prejudice
to any other rights it may have at law or under this Agreement to enforce its
claims against any Loan Party: (a) declare all Obligations to be immediately due
and payable (except with respect to any Event of Default set forth in Section
9.1(F) hereof, in which case all Obligations shall automatically become
immediately due and payable without the necessity of any notice or other demand)
without presentment, demand, protest or any other action or obligation of IBM
Credit; and (b) immediately terminate the Credit Line hereunder.
9.3. REMEDIES. (A) Upon the occurrence and during the continuance of any Event
of Default which has not been waived in writing by IBM Credit, IBM Credit may
exercise all rights and remedies of a secured party under the U.C.C. Without
limiting the generality of the foregoing, IBM Credit may: (i) remove from any
premises where same may be located any and all documents, instruments, files and
records (including the copying of any computer records), and any receptacles or
cabinets containing same, relating to the Accounts or the Acquired Account, or
IBM Credit may use (at the expense of Loan Parties) such of the supplies or
space of such Loan Party at such Loan Party's place of business or otherwise, as
may be necessary to properly administer and control the Accounts and Acquired
Accounts or the handling of collections and realizations thereon; (ii) send a
notice of assignment that has been executed by PFS ("Notice of Assignment") to
notify all Account Debtors and BSD Account Debtors that PFS has no right, title
or interest in or to the Accounts and the Acquired Accounts and that the
Borrower has assigned its right, title and interest in and to the Accounts and
the Acquired Accounts to IBM Credit; (iii) bring suit, in the name of any Loan
Party or IBM Credit and generally shall have all other rights respecting said
Accounts and the Acquired Accounts, including without limitation the right to
accelerate or extend the time of payment, settle, compromise, release in whole
or in part any amounts owing on any Accounts or the Acquired
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Accounts and issue credits in the name of any Loan Party or IBM Credit; (iv)
sell, assign and deliver the Accounts and the Acquired Accounts and any
returned, reclaimed or repossessed merchandise, with or without advertisement,
at public or private sale, for cash, on credit or otherwise, at IBM Credit's
sole option and discretion, and IBM Credit may bid or become a purchaser at any
such sale; and (v) foreclose the security interests created pursuant to this
Agreement by any available judicial procedure, or to take possession of any or
all of the Collateral without judicial process and to enter any premises where
any Collateral may be located for the purpose of taking possession of or
removing the same.
(B) Upon the occurrence and during the continuance of any Event of
Default which has not been waived in writing by IBM Credit, IBM Credit shall
have the right to sell, lease, or otherwise dispose of all or any part of the
Collateral, whether in its then condition or after further preparation or
processing, in the name of any Loan Party or IBM Credit, or in the name of such
other party as IBM Credit may designate, either at public or private sale or at
any broker's board, in lots or in bulk, for cash or for credit, with or without
warranties or representations, and upon such other terms and conditions as IBM
Credit in its sole discretion may deem advisable, and IBM Credit shall have the
right to purchase at any such sale.
If IBM Credit, in its sole discretion determines that any of the Collateral
requires rebuilding, repairing, maintenance or preparation, IBM Credit shall
have the right, at its option, to do such of the aforesaid as it deems necessary
for the purpose of putting such Collateral in such saleable form as IBM Credit
shall deem appropriate. The Borrower hereby agrees that any disposition by IBM
Credit of any Collateral pursuant to and in accordance with the terms of a
repurchase agreement between IBM Credit and the manufacturer or any supplier
(including any Authorized Supplier) of such Collateral constitutes a
commercially reasonable sale. Each Loan Party agrees, at the request of IBM
Credit, to assemble the Collateral or Other Collateral and to make it available
to IBM Credit at places which IBM Credit shall select, whether at the premises
of any Loan Party or elsewhere, and to make available to IBM Credit the premises
and facilities of any Loan Party for the purpose of IBM Credit's taking
possession of, removing or putting such Collateral or Other Collateral in
saleable form. If notice of intended disposition of any Collateral is required
by law, it is agreed that ten (10) Business Days notice shall constitute
reasonable notification.
(C) Unless expressly prohibited by the licensor thereof, if any, IBM
Credit is hereby granted, upon the occurrence and during the continuance of any
Event of Default which has not been waived in writing by IBM Credit, an
irrevocable, non-exclusive license to use, assign, license or sublicense all
computer software programs, data bases, processes and materials used by any Loan
Party in its businesses or in connection with any of the Collateral.
(D) The net cash proceeds resulting from IBM Credit's exercise of any
of the foregoing rights (after deducting all charges, costs and expenses,
including reasonable attorneys' fees) shall be applied by IBM Credit to the
payment of any Loan Party's Obligations, whether due or to become due, in such
order as IBM Credit may in it sole discretion elect. Each Loan Party shall
remain liable to IBM Credit for any deficiencies, and IBM Credit in turn agrees
to remit to each Loan Party or its successors or assigns, any surplus resulting
therefrom.
(E) The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of any
other rights, all of which shall be cumulative.
9.4. WAIVER. If IBM Credit seeks to take possession of any of the Collateral by
any court process, each Loan Party hereby irrevocably waives to the extent
permitted by applicable law any bonds, surety and security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession and any demand for possession of the Collateral prior to the
commencement of any suit or action to recover possession thereof. In addition,
each Loan Party waives to the extent permitted by applicable law all rights of
set-off it may have against IBM Credit. Each Loan Party further waives to the
extent permitted by applicable law presentment, demand and protest, and notices
of non-payment, non-performance, any right of contribution, dishonor, and any
other demands, and notices required by law.
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SECTION 10. MISCELLANEOUS
10.1. TERM; TERMINATION. (A) This Agreement shall remain in force until the
earlier of (i) the Termination Date, (ii) the date specified in a written notice
by Borrower that it intends to terminate this Agreement which date shall be no
less than ninety (90) days following the receipt by IBM Credit of such written
notice, and (iii) termination by IBM Credit after the occurrence and during the
continuance of an Event of Default. Upon the date that this Agreement is
terminated, all of Obligations shall be immediately due and payable in their
entirety, even if they are not yet due under their terms.
(B) Until the indefeasible payment in full of all of each Loan Party's
Obligations, no termination of this Agreement or any of the Other Documents
shall in any way affect or impair (i) each Loan Party's Obligations to IBM
Credit including, without limitation, any transaction or event occurring prior
to and after such termination, or (ii) IBM Credit's rights hereunder, including,
without limitation IBM Credit's security interest in the Collateral. On and
after a Termination Date IBM Credit may, but shall not be obligated to, upon the
request of Borrower, continue to provide Advances hereunder.
10.2. INDEMNIFICATION. Each of the Borrower and the Guarantors hereby jointly
and severally agrees to indemnify and hold harmless IBM Credit and each of its
officers, directors, agents and assigns (collectively, the "Indemnified
Persons") against all losses, claims, damages, liabilities or other expenses
(including reasonable attorneys' fees and court costs now or hereinafter arising
from the enforcement of this Agreement, the "Losses") to which any of them may
become subject insofar as such Losses arise out of or are based upon any event,
circumstance or condition (a) occurring or existing on or before the date of
this Agreement relating to any financing arrangements IBM Credit may from time
to time have with (i) each Loan Party, (ii) any Person that shall be acquired by
any Loan Party or (iii) any Person that any Loan Party may acquire all or
substantially all of the assets of, or (b) directly or indirectly, relating to
the execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby or thereby or to any of the Collateral or
to any act or omission of any Loan Party in connection therewith.
Notwithstanding the foregoing, none of the Borrower or any of the Guarantors
shall be obligated to indemnify IBM Credit for any Losses incurred by IBM Credit
which are a result of IBM Credit's gross negligence or willful misconduct. The
indemnity provided herein shall survive the termination of this Agreement.
10.3. ADDITIONAL OBLIGATIONS. IBM Credit, without waiving or releasing any
Obligation or Default of any Loan Party, may perform any Obligations of the any
Loan Party that any Loan Party shall fail or refuse to perform and IBM Credit
may, at any time or times hereafter, but shall be under no obligation to do so,
pay, acquire or accept any assignment of any security interest, lien,
encumbrance or claim against the Collateral asserted by any person. All sums
paid by IBM Credit in performing in satisfaction or on account of the foregoing
and any expenses, including reasonable attorney's fees, court costs, and other
charges relating thereto, shall be a part of the Obligations, payable on demand
and secured by the Collateral.
10.4. LIMITATION OF LIABILITY. NEITHER IBM CREDIT NOR ANY OTHER INDEMNIFIED
PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES SUFFERED BY ANY LOAN PARTY IN CONNECTION WITH THIS
AGREEMENT, ANY OTHER AGREEMENT, ANY DELAY, OMISSION OR ERROR IN THE ELECTRONIC
TRANSMISSION OR RECEIPT OF ANY E-DOCUMENT, OR ANY CLAIMS IN ANY MANNER RELATED
THERETO. NOR SHALL IBM CREDIT OR ANY OTHER INDEMNIFIED PERSON HAVE ANY LIABILITY
TO ANY LOAN PARTY OR ANY OTHER PERSON FOR ANY ACTION TAKEN OR OMITTED TO BE
TAKEN BY IT OR THEM HEREUNDER, EXCEPT FOR ITS OR THEIR OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. IN THE EVENT BORROWER REQUESTS IBM CREDIT TO EFFECT A
WITHDRAWAL OR DEBIT OF FUNDS FROM AN ACCOUNT OF BORROWER, THEN IN NO EVENT SHALL
IBM CREDIT BE LIABLE FOR ANY AMOUNT IN EXCESS OF ANY AMOUNT INCORRECTLY DEBITED,
EXCEPT IN THE EVENT OF IBM CREDIT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. NO
PARTY SHALL BE LIABLE FOR ANY FAILURE TO PERFORM ITS OBLIGATIONS IN CONNECTION
WITH ANY E-DOCUMENT, WHERE SUCH FAILURE RESULTS FROM ANY ACT OF GOD OR OTHER
CAUSE BEYOND SUCH PARTY'S REASONABLE CONTROL (INCLUDING, WITHOUT LIMITATION, ANY
MECHANICAL, ELECTRONIC OR COMMUNICATIONS FAILURE) WHICH PREVENTS SUCH PARTY FROM
TRANSMITTING OR RECEIVING E-DOCUMENTS.
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10.5. ALTERATION/WAIVER. This Agreement and the Other Documents may not be
altered or amended except by an agreement in writing signed by each Loan Party
signatory to such agreement and by IBM Credit. No delay or omission of IBM
Credit to exercise any right or remedy hereunder, whether before or after the
occurrence of any Event of Default, shall impair any such right or remedy or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
In the event that IBM Credit at any time or from time to time dispenses with any
one or more of the requirements specified in this Agreement or any of the Other
Documents, such dispensation may be revoked by IBM Credit at any time and shall
not be deemed to constitute a waiver of any such requirement subsequent thereto.
IBM Credit's failure at any time or times to require strict compliance and
performance by each Loan Party of any undertakings, agreements, covenants,
warranties and representations of this Agreement or any Other Document shall not
waive, affect or diminish any right of IBM Credit thereafter to demand strict
compliance and performance thereof. Any waiver by IBM Credit of any Default by
any Loan Party under this Agreement or any of the Other Documents shall not
waive or affect any other Default by any Loan Party under this Agreement or any
of the Other Documents, whether such Default is prior or subsequent to such
other Default and whether of the same or a different type. None of the
undertakings, agreements, warranties, covenants, and representations of any Loan
Party contained in this Agreement or the Other Documents and no Default by any
Loan Party shall be deemed waived by IBM Credit unless such waiver is in writing
signed by an authorized representative of IBM Credit.
10.6. SEVERABILITY. If any provision of this Agreement or the Other Documents or
the application thereof to any Person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the Other Documents and the
application of such provision to other Persons or circumstances will not be
affected thereby, the provisions of this Agreement and the Other Documents being
severable in any such instance.
10.7. ONE LOAN. All Advances heretofore, now or at any time or times hereafter
made by IBM Credit to the Borrower under this Agreement or the Other Documents
shall constitute one loan secured by IBM Credit's security interests in the
Collateral and by all other security interests, liens and encumbrances
heretofore, now or from time to time hereafter granted by any Loan Party to IBM
Credit or any assignor of IBM Credit.
10.8. ADDITIONAL COLLATERAL. All monies, reserves and proceeds received or
collected by IBM Credit with respect to Accounts and Acquired Account and other
property of any Loan Party in possession of IBM Credit at any time or times
hereafter are hereby pledged by such Loan Party to IBM Credit as security for
the payment of each Borrower's Obligations and shall be applied promptly by IBM
Credit on account of Borrower's Obligations; provided, however, IBM Credit may
release to the Borrower such portions of such monies, reserves and proceeds as
IBM Credit may from time to time determine, in its sole discretion.
10.9. NO MERGER OR NOVATIONS. (A) Notwithstanding anything contained in any
document to the contrary, it is understood and agreed by each any Loan Party and
IBM Credit that the claims of IBM Credit arising hereunder and existing as of
the date hereof constitute continuing claims arising out of the Obligations of
each Loan Party under any Other Document. Each Loan Party acknowledges and
agrees that such Obligations outstanding as of the date hereof have not been
satisfied or discharged and that this Agreement is not intended to effect a
novation of any Loan Party's Obligations under any Other Document.
(B) Neither the obtaining of any judgment nor the exercise of any power
of seizure or sale shall operate to extinguish the Obligations of any Loan Party
to IBM Credit secured by this Agreement and shall not operate as a merger of any
covenant in this Agreement, and the acceptance of any payment or alternate
security shall not constitute or create a novation and the obtaining of a
judgment or judgments under a covenant herein contained shall not operate as a
merger of that covenant or affect IBM Credit's rights under this Agreement.
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10.10. PARAGRAPH TITLES. The Section titles used in this Agreement and the Other
Documents are for convenience only and do not define or limit the contents of
any Section.
10.11. BINDING EFFECT; ASSIGNMENT. This Agreement and the Other Documents shall
be binding upon and inure to the benefit of IBM Credit and the each Loan Party
and their respective successors and assigns; provided, that no Loan Party shall
have the right to assign this Agreement or any of the Other Documents without
the prior written consent of IBM Credit.
10.12. OBLIGATIONS. Subject to Section 10.5 above, the Obligations and any terms
and provisions herein may be modified or amended only by a document signed by
IBM Credit and the other parties hereto.
10.13. NOTICES; E-BUSINESS ACKNOWLEDGMENT. (A) Except as otherwise expressly
provided in this Agreement, any notice required or desired to be served, given
or delivered hereunder shall be in writing, and shall be deemed to have been
validly served, given or delivered (i) upon receipt if deposited in the United
States mails, first class mail, with proper postage prepaid, (ii) upon receipt
of confirmation or answerback if sent by telecopy, or other similar facsimile
transmission, (iii) one Business Day after deposit with a reputable overnight
courier with all charges prepaid, or (iv) when delivered, if hand-delivered by
messenger, all of which shall be properly addressed to the party to be notified
and sent to the address or number indicated as follows:
(i) If to IBM Credit at: (ii) If to Borrower at:
IBM Credit Corporation BSD Acquisition Corp.
0000 Xxxxxxxxx Xxxxxxx, Xxxxx Xxxxx 000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxx Xxxxx, XX 00000 Xxxxx, XX 00000
Attention: Region Manager, West Attention: Mr. Xxx Xxxxxxx
Facsimile: (000) 000-0000 President
Facsimile: (000) 000-0000
(iii) If to Holdings at: (iv) If to PFS:
Business Supplies Distributors Holdings, LLC Priority Fulfillment Services, Inc.
000 Xxxxx Xxxxxxx Xxxxxxxxxx 000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx, XX 00000 Xxxxx, XX 00000
Attention: Mr. Xxx Xxxxxxx, Manager Attention: Xx. Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000 Executive Vice President,
Chief Financial Officer
Facsimile: (000) 000-0000
(v) If to IFP at: (vi) If to PFSweb at:
Inventory Financing Partners, LLC PFSweb, Inc.
000 Xxxxx Xxxxxxx Xxxxxxxxxx 000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx, XX 00000 Xxxxx, XX 00000
Attention: Mr. Xxx Xxxxxxx, Manager Attention: Xx. Xxxxxx X. Xxxxxx
Facsimile: (000)000-0000 Executive Vice President,
Chief Financial Officer
Facsimile: (000) 000-0000
or to such other address or number as each party designates to the other in the
manner prescribed herein.
(B) (i) Each party may electronically transmit to or receive from the
other party certain documents set forth in Attachment J ("E-Documents") via the
Internet or electronic data interchange ("EDI"). Any transmission of data which
is not an E-Document shall have no force or effect between the parties. EDI
Page 44 of 47
transmissions may be sent directly or through any third party service provider
("Provider") with which either party may contract. Each party shall be liable
for the acts or omissions of its Provider while handling E-Documents for such
party, provided, that if both parties use the same Provider, the originating
party shall be liable for the acts or omissions of such Provider as to such
E-Document. Some information to be made available to each Loan Party will be
specific to such Loan Party and will require such Borrower's or Loan Parties'
registration with IBM Credit before access is provided. After IBM Credit has
approved the registration submitted by such Loan Party, IBM Credit shall provide
an ID and password(s) to an individual designated by such Loan Party
("Recipient"). Each Loan Party accepts responsibility for the designated
individual's distribution of the ID and password(s) within its organization and
each Loan Party will take reasonable measures to ensure that passwords are not
shared or disclosed to unauthorized individuals. Each Loan Party will conduct an
annual review of all IDs and passwords to ensure they are accurate and properly
authorized. IBM CREDIT MAY CHANGE OR DISCONTINUE USE OF AN ID OR PASSWORD AT ITS
DISCRETION AT ANY TIME. E-Documents shall not be deemed to have been properly
received, and no E-Document shall give rise to any obligation, until accessible
to the receiving party at such party's receipt computer at the address specified
herein. Upon proper receipt of an E-Document, the receiving party shall promptly
transmit a functional acknowledgment in return. A functional acknowledgment
shall constitute conclusive evidence that an E-Document has been properly
received. If any transmitted E-Document is received in an unintelligible or
garbled form, the receiving party shall promptly notify the originating party in
a reasonable manner. In the absence of such a notice, the originating party's
records of the contents of such E-Document shall control.
(ii) Each party shall use those security procedures which are reasonably
sufficient to ensure that all transmissions of E-Documents are authorized and to
protect its business records and data from improper access. Any E-Document
received pursuant to this Section 10.13 shall have the same effect as if the
contents of the E-Document had been sent in paper rather than electronic form.
The conduct of the parties pursuant to this Section 10.13 shall, for all legal
purposes, evidence a course of dealing and a course of performance accepted by
the parties. The parties agree not to contest the validity or enforceability of
E-Documents under the provisions of any applicable law relating to whether
certain agreements are to be in writing or signed by the party to be bound
thereby. The parties agree, as to any E-Document accompanied by any Loan Party's
ID, that IBM Credit can reasonably rely on the fact that such E-Document is
properly authorized by such Loan Party. E-Documents, if introduced as evidence
on paper in any judicial, arbitration, mediation or administrative proceedings,
will be admissible as between the parties to the same extent and under the same
conditions as other business records originated and maintained in documentary
form. Neither party shall contest the admissibility of copies of E-Documents
under either the business records exception to the hearsay rule or the best
evidence rule on the basis that the E-Documents were not originated or
maintained in documentary form.
RECIPIENT INFORMATION for Internet transmissions:
Name of Borrower's, Holdings' and IFP's Designated Central Contact Authorized to
Receive IDs and Passwords:
Xxx Xxxxxxx
E-MAIL ADDRESS: xxxxxxxx@xxxxxx.xxx
PHONE NUMBER:
-------------------------------------------------------------------
Name of PFS's and PFSweb's Designated Central Contact Authorized to Receive IDs
and Passwords:
Xxxxxx X. Xxxxxx
E-MAIL ADDRESS: xxxxxxx@xxxxxx.xxx
PHONE NUMBER:
-------------------------------------------------------------------
10.14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto were upon the same instrument.
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10.15. ATTACHMENT A MODIFICATIONS. IBM Credit may modify the Product Financing
Period set forth in Attachment A from time to time if on at least two occasions
during any three-month period a Shortfall Amount has become due and payable and
may modify the Collateral Insurance Amount set forth in Attachment A from time
to time, in each case, by providing each Loan Party with a new Attachment A. Any
such new Attachment A shall be effective as of the date specified in the new
Attachment A.
10.16. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW. TO INDUCE IBM
CREDIT TO ACCEPT THIS AGREEMENT AND THE OTHER DOCUMENTS, EACH OF LOAN PARTY
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT AND ANY OTHER DOCUMENT, OR FOR THE RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND ANY FEDERAL DISTRICT
COURT IN NEW YORK.
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREINAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME.
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY
BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS
SET FORTH IN SECTION 10.12 OR AT SUCH OTHER ADDRESS OF WHICH IBM CREDIT SHALL
HAVE BEEN NOTIFIED PURSUANT THERETO;
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO XXX
IN ANY OTHER JURISDICTION.
(E) AGREES THAT THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS (WITHOUT GIVING EFFECT TO CONFLICT OF
LAW PROVISIONS) OF THE STATE OF NEW YORK.
10.17. JURY TRIAL WAIVER. EACH OF IBM CREDIT AND EACH LOAN PARTY HEREBY
IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
(INCLUDING ANY COUNTERCLAIM) OF ANY TYPE IN WHICH IBM CREDIT AND ANY LOAN PARTY
ARE PARTIES AS TO ALL MATTERS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
AGREEMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED IN CONNECTION
HEREWITH.
IN WITNESS WHEREOF, each Loan Party has read this entire Agreement, and
has caused its authorized representatives to execute this Agreement and has
caused its corporate seal, if any, to be affixed hereto as of the date first
written above.
IBM CREDIT CORPORATION BSD ACQUISITION CORP.
By: By:
--------------------------------- ---------------------------------
Print Name: Print Name:
------------------------- -------------------------
Title: Title:
------------------------------ ------------------------------
BUSINESS SUPPLIES DISTRIBUTORS PRIORITY FULFILLMENT SERVICES, INC.
HOLDINGS, LLC
Page 46 of 47
By: as Managing Member
---------------
By: By:
--------------------------------- ---------------------------------
Print Name: Print Name:
------------------------- -------------------------
Title: Title:
------------------------------ ------------------------------
INVENTORY FINANCING PARTNERS, LLC PFSWEB, INC.
By: as Managing Member
---------------
By: By:
--------------------------------- ---------------------------------
Print Name: Print Name:
------------------------- -------------------------
Title: Title:
------------------------------ ------------------------------
Page 47 of 47
