EXECUTION COPY
AGREEMENT FOR INVENTORY FINANCING
Dated as of April 13, 2000
Among
MTS HOLDING COMPANY,
MICROAGE COMPUTER CENTERS, INC.,
MICROAGE TECHNOLOGY SERVICES, L.L.C.
and
PINACOR, INC.,
as Customers
MICROAGE, INC.,
as Parent,
and
IBM CREDIT CORPORATION
TABLE OF CONTENTS
PAGE
Section 1. DEFINITIONS; ATTACHMENTS 3
1.1. Definitions. 3
1.2. Other Defined Terms. 13
1.3. Attachments. 13
Section 2. CREDIT LINE; FINANCE CHARGES; OTHER CHARGES 13
2.1. Credit Line. 13
2.2. Product Advances. 14
2.3. Late Charges and Other Charges 15
2.4. Customer Account Statements. 16
2.5. Shortfall. 16
2.6. Application of Payments. 16
2.7. Prepayment and 17
Section 3. CREDIT LINE ADDITIONAL PROVISIONS 17
3.1. Power of Attorney. 17
Section 4. SECURITY -- COLLATERAL 18
4.1. Grant. 18
4.2. Further Assurances. 19
Section 5. CONDITIONS PRECEDENT 19
5.1. Conditions Precedent to the Effectiveness of this
Agreement. 19
5.2. Conditions Precedent to Each Product Advance. 21
5.3. Post Closing 21
Section 6. REPRESENTATIONS AND WARRANTIES 22
6.1. Organization and Qualifications. 22
6.2. Subsidiaries 22
6.3. Rights in Collateral; Priority of Liens. 22
6.4. No Conflicts. 22
6.5. Enforceability. 23
6.6. Locations of Offices, Records and Inventory. 23
6.7. Fictitious Business Names. 23
6.8. Organization. 23
6.9. No Judgments or Litigation. 23
6.10. No Defaults. 23
6.11. Labor Matters. 24
6.12. Compliance with Law. 24
6.13. ERISA. 24
6.14. Compliance with Environmental Laws. 24
6.15. Intellectual Property. 25
6.16. Licenses and Permits. 25
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6.17. Investment Company. 25
6.18. Taxes and Tax Returns. 25
6.19. Affiliate/Subsidiary Transactions. 25
6.20. Accuracy and Completeness of Information. 25
6.21. Recording Taxes. 26
6.22. Indebtedness. 26
Section 7. AFFIRMATIVE COVENANTS 26
7.1. Financial and Other Information. 26
7.2. Location of Collateral. 29
7.3. Changes in Customers. 29
7.4. Corporate Existence. 29
7.5. ERISA. 29
7.6. Environmental Matters. 30
7.7. Collateral Books and Records/Collateral Audit. 30
7.8. Insurance; Casualty Loss. 31
7.9. Taxes. 31
7.10. Compliance With Laws. 31
7.11. Fiscal Year. 32
7.12. Intellectual Property. 32
7.13. Maintenance of Property. 32
7.14. Collateral. 32
7.15. Borrowing Base Certificate 33
7.16. Subsidiaries 33
7.17. Compliance with Terms of Leaseholds 33
7.18. Additional Covenants 33
7.19. Joint and Several Guaranty 33
7.20. Parent Guaranty 34
Section 8. NEGATIVE COVENANTS 37
8.1. Liens. 37
8.2. Disposition of Assets. 37
8.3. Corporate Changes. 38
8.4. Mergers, Etc 38
8.5. Guaranties. 38
8.6. Restricted Payments. 38
8.7. Investments. 39
8.8. Affiliate/Subsidiary Transactions. 40
8.9. ERISA. 40
8.10. Additional Negative Pledges. 40
8.11. Storage of Collateral with Bailees and Warehousemen. 41
8.12. Indebtedness. 41
8.13. Loans. 41
8.14. Amendment, Etc. of Credit Agreement 41
8.15. Interim Order and Final Order 41
8.16. Application to the Bankruptcy Court 41
8.17. Chapter 11 Claims 41
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8.18. Reclamation Claims; Bankruptcy Code Section 546(g)*
Agreements 42
8.19. Non-Filing Subsidiaries 42
Section 9. DEFAULT 42
9.1. Event of Default. 42
9.2. Acceleration. 46
9.3. Remedies. 46
9.4. Waiver. 47
Section 10. FINANCIAL COVENANT DEFINITIONS; FINANCIAL COVENANTS 48
10.1. Financial Covenant Definitions 48
10.2. Financial Covenants 52
Section 11. MISCELLANEOUS 53
11.1. Term; Termination. 53
11.2. Indemnification. 53
11.3. Additional Obligations 54
11.4. Limitation of Liability 54
11.5. Alteration/Waiver 54
11.6. Severability 55
11.7. Entire Agreement 55
11.8. One Loan 55
11.9. Additional Collateral. 55
11.10. No Merger or Novations 55
11.11. Paragraph Titles. 56
11.12. Binding Effect; Assignment 56
11.13. Notices; E-Business Acknowledgment 56
11.14. Counterparts 58
11.15. Submission and Consent to Jurisdiction
And Choice of Law 58
11.16. Jury Trial Waiver 59
11.17. Intercreditor Agreements 59
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AGREEMENT FOR INVENTORY FINANCING
This AGREEMENT FOR INVENTORY FINANCING (as amended, supplemented or
otherwise modified from time to time, this "Agreement") and is hereby dated as
of the 13th day of April, 2000, by and between IBM CREDIT CORPORATION, a
Delaware corporation with a place of business at Xxxxx Xxxxxx Xxxxx, Xxxxxx, Xxx
Xxxx 00000 ("IBM Credit"), MTS HOLDING COMPANY, a Delaware corporation with a
place of business at 0000 Xxxxx XxxxxXxx Xxx, Xxxxx, Xxxxxxx 00000 ("MTSI"),
MICROAGE COMPUTER CENTERS, INC., a Delaware corporation with a place of business
at 0000 Xxxxx XxxxxXxx Xxx, Xxxxx, Xxxxxxx 00000 ("MCCI"), MICROAGE TECHNOLOGY
SERVICES, L.L.C., a Delaware corporation with a place of business at 0000 Xxxxx
XxxxxXxx Xxx, Xxxxx, Xxxxxxx 00000 ("MTS", and PINACOR, INC., a Delaware
corporation with a place of business at 0000 Xxxxx XxxxxXxx Xxx, Xxxxx, Xxxxxxx
00000 ("Pinacor", and together with , MCCI, MTS and MTSI, the "Customers" and
individually a "Customer") and MICROAGE, INC., a Delaware corporation with a
place of business at 0000 Xxxxx XxxxxXxx Xxx, Xxxxx, Xxxxxxx 00000 (the
"Parent"). Notwithstanding the foregoing, and unless otherwise indicated, any
obligation of a "Customer" or "Customers" herein shall be the joint and several
obligation of MTS, MTSI, MCCI, Pinacor and Parent.
WITNESSETH
WHEREAS, IBM Credit entered into an Amended and Restated Agreement for
Wholesale Financing, dated as of October 29, 1999 (as amended, supplemented or
otherwise modified through the date hereof, the "PRE-PETITION INVENTORY FINANCE
AGREEMENT") with the Customers and Parent;
WHEREAS, as of the date hereof an aggregate amount of $66,000,000 is
outstanding under the Pre-Petition Inventory Finance Agreement in respect of
principal, interest and fees ("PRE-PETITION OBLIGATIONS"), after all draws on
Irrevocable Standby Letter of Credit No. NY-20511-30026459 issued by Citibank,
N.A. ("CITIBANK") for the account of MTS and Pinacor under the Citibank Credit
Agreement (as defined below) and the Pre-Petition Inventory Finance Agreement,
made with the consent of MicroAge and Citibank on April 12, 2000;
WHEREAS, on April 13, 2000 (the "PETITION DATE"), voluntary petitions
for relief under Chapter 11 of Title 11 of the United States Code, 11 U.S.C.
ss.101 et seq. (the "BANKRUPTCY CODE") were filed by MicroAge and certain
subsidiaries listed on Attachment _ hereto (collectively, the "Debtors") in the
United States Bankruptcy Court for the District of Arizona (the "COURT")
(collectively, the "CHAPTER 11 CASES" or the "CASES");
WHEREAS, IBM Credit is a lender under the Credit Agreement, dated as of
October 28, 1999 (as amended, supplemented or otherwise modified through the
date hereof, the "CITIBANK CREDIT AGREEMENT"), among MTSI, Pinacor, the Parent,
the several banks and other financial institutions from time to time parties
thereto and Citibank, as Administrative Agent, pursuant to which the lenders
provided a $300 million (as reduced on the terms thereof) three-year senior
secured working capital facility, swing line facility and letter of credit
facility;
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WHEREAS, Citibank, as agent and certain banks and other financial
institutions as lenders (other than IBM Credit), certain Debtors as borrowers
desire to enter into a debtor-in-possession financing facility (the "CREDIT
AGREEMENT") to provide up to $225,000,000 of post-petition financing to the
Debtors;
WHEREAS, Customers have determined that it is in their best interest,
in the course of Customers' operations, to continue to purchase from
International Business Machines Corporation ("IBM") computer hardware and
software products manufactured or distributed by or bearing any trademark or
trade name of IBM (the "PRODUCTS");
WHEREAS, Customers have requested that IBM Credit continue to finance
its purchase of Products from IBM and IBM Credit is willing to provide such
financing to Customers subject to the terms and conditions set forth in this
Agreement and the Cash Collateral Stipulation referred to below;
WHEREAS, in order to induce IBM Credit to enter into this Agreement,
the Borrowers under the Credit Agreement intend to utilize availability under
the Credit Agreement (a) to repay IBM Credit for all amounts outstanding to IBM
Credit under the Citibank Credit Agreement and, (b) to repay $10 million of the
Pre-Petition Obligations outstanding under the Pre-Petition Inventory Finance
Agreement, leaving a remaining amount of Obligations due under the Pre-Petition
Inventory Finance Agreement of $55 million; and
WHEREAS, IBM Credit has agreed to make a new inventory loan under the
terms of this Agreement in the initial amount of $27 million, the proceeds of
which will be utilized to repay $27 million of the remaining Pre-Petition
Obligations, leaving a total of $30 million (the "PRE-PETITION SECURED
OBLIGATION") due under the Pre-Petition Inventory Finance Agreement, which the
parties have agreed will remain outstanding under a Cash Collateral Stipulation
to be entered into by and among the Debtors and IBM Credit simultaneously with
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. 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):
"Affiliate": with respect to each Loan Party, any Person meeting one of the
following: (i) at least 10% of such Person's equity is owned, directly or
indirectly, by such Loan Party; (ii) at least 10% of such Loan Party's equity is
owned, directly or indirectly, by such Person; or (iii) at least 10% of
Customer's equity and at least 10% of such Person's equity is owned, directly or
indirectly, by the same Person or Persons. Each of Loan Party's officers,
directors, joint venturers, and partners shall also be deemed to be Affiliates
of such Loan Party for purposes of this Agreement.
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"Approved Inventory": (1) during the period from the Closing Date to and
including July 14, 2000, the sum of (x) 100% of the value of the Products in
Customer's possession at Authorized Locations and (y) 100% of the value of the
Products in Customers' possession at Temporary Locations and (z) up to Two
Million Dollars ($2,000,000) of Products in the Customers' possession at all
locations other than Authorized Locations and Temporary Locations and (2) during
the period from July 15, 2000 and thereafter, the sum of (x) 100% of the value
of the Products in Customers' possession at Authorized Locations and (y) up to
Two Million Dollars ($2,000,000) of the Products in Customers' possession at all
locations other than Authorized Locations and Temporary Locations, as of the
date of determination as reflected in the Loan Parties' most recent Collateral
Management Report constituting Products (other than service parts) financed
through a Product Advance by IBM Credit, provided, however, IBM Credit has
first, prior and perfected liens in such Products and such Products are new and
in unused condition. The value to be assigned to such Approved Inventory shall
be determined by IBM Credit in its sole discretion which, by way of example
only, and without limiting the discretion of IBM Credit to determine such
valuation, shall be based upon, among other things, IBM's invoice price to
Customers for Approved Inventory net of all IBM Credit adjustments, provided,
however, if any Customer acquires inventory through an Affiliate of such
Customer, the value to be assigned to such Approved Inventory shall be based on
the Affiliate's invoice price less the Affiliate's gross profit net of all
applicable price reduction credits.
"Agreement": as defined in the caption.
"Auditors": a nationally recognized firm of independent certified public
accountants selected by the Loan Parties and satisfactory to IBM Credit.
"Authorized Locations": 0000 Xxxxxx Xxxxx/XXX Xxxx. 000, Xxxxxx, Xxxxx Xxxxxxxx
00000, (2) 000 Xxxx Xxxxxxx Xxxxx, Xxxxx XX, 00000, (3) 000 Xxxx Xxxxxxx Xxxxx,
Xxxxx, XX 00000, and (4) 000 Xxxx Xxxxxxx Xxxxx, Xxxxx XX, 00000; provided,
however, any such location shall cease to be an Authorized Location upon a
breach of the covenants specified in Section 7.17 hereof, or upon receipt by any
Loan Party or any Guarantor of a notice described in Section 7.17.
"Available Credit": at any time (1) from the Closing Date to and including June
12, 2000, shall be an amount equal to (a) the Maximum Advance Amount, less (b)
the sum of (i) the Outstanding Product Advances at such time, and (ii) the
Outstanding Product Advances at such time multiplied by 6.5%, and (iii) the GSP
Adjustment, plus (c) the amount of a Credit Request; and (2) from June 13, 2000
and thereafter, shall be an amount equal to (a) the Maximum Advance Amount, less
(b) the sum of (i) the Outstanding Product Advances at such time, and (ii) the
Outstanding Product Advances at such time multiplied by 6.5%, plus (c) the
amount of a Credit Request.
"Average Daily Balance": for each Product Advance for a given period of time,
the sum of the unpaid principal of such Product Advance as of each day during
such period of time, divided by the number of days in such period of time.
"Bankruptcy Code": as defined in the recitals to this Agreement.
"Bankruptcy Court": as defined in the recitals to this Agreement.
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"Borrowers' Professionals": means all Persons retained or engaged by any Loan
Party as professional persons within the meaning of Section 327 of the
Bankruptcy Code
"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.
"Carve Out": an amount (without duplication under the Credit Agreement) not
exceeding One Million Dollars ($1,000,000) which amount may be used by Loan
Parties after the occurrence and during the continuation of a Default or Event
of Default, notwithstanding IBM Credit's security interests in the Collateral
and IBM Credit's rights hereunder, to pay fees or expenses incurred by the Loan
Parties constituting (i) allowances of compensation for services rendered or
reimbursement or expenses awarded by the Bankruptcy Court under Sections 330 and
331 of the Bankruptcy Code or otherwise, to Borrowers' Professionals, (ii)
allowances of compensation for services rendered or reimbursement of expenses
awarded by the Bankruptcy Court under Section 105(a), 330 or 331 of the
Bankruptcy Code, to accountants, attorneys and other professionals retained in
the Cases by any unsecured creditors' committee appointed in accordance with
Section 1102 of the Bankruptcy Code or any examiner appointed in accordance with
Section 1104 of the Bankruptcy Code other than an examiner of the type referred
to in Section 6.01(t) hereof, (iii) fees required to be paid to the Office of
the United States Trustee under Section 1930(a), Title 28, United States Code,
and (iv) the actual, necessary expenses, other than compensation, and
reimbursement pursuant to Section 503(b)(4) of the Bankruptcy Code, incurred by
a member of a committee appointed under Section 1102 of the Bankruptcy Code, if
such expenses are incurred in the performance of the duties of such committee
and are allowed by the Bankruptcy Court; provided, however, that (a) the amount
of such fees and expenses shall not exceed One Million Dollars ($1,000,000) (in
addition to compensation awarded prior to the occurrence of a Default or Event
of Default (whether or not Paid) and (b) such dollar limitation on fees and
disbursements shall not include any retainer fees paid to the Borrowers'
Professionals prior to the Petition Date (the "Retainers") and shall not be
reduced by the amount of any compensation and reimbursement of expenses paid
prior to the occurrence of the Default or Event of Default in respect of which
the Carve-Out is invoked or any fees, expenses, indemnities or other amounts
paid to the Administrative Agent, the Lenders and their attorneys and agents
under this Agreement of otherwise.
"Cases": as defined in the recital to this Agreement.
"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.
"COA Amount": the total dollar amount that an IBM Credit customer who finance
products and services supplied with IBM Credit under a Term Lease Master
Agreement, Installment Payment Master Agreement, Quicklease Agreement or
Software and Services Financing Agreement authorizes IBM Credit to pay a Loan
Party for the products and/or services listed on the certificate of acceptance.
"Code": the Internal Revenue Code of 1986, as amended or any successor statute.
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"Collateral": as defined in Section 4.1.
"Collateral Management Report": a report to be delivered by the Loan Parties
daily to IBM Credit, signed by the chief executive officer, chief financial
officer, executive vice president, controller, treasurer or assistant treasurer
of the Parent and each Customer, substantially in the form and detail of
Attachment D hereto detailing and certifying as of the date of the report, among
other items: a summary of the Approved Inventory on hand financed by IBM Credit,
the Customers' Approved Inventory on hand (excluding Products delivered but not
invoiced by IBM) financed by IBM Credit by quantity, type, model, IBMs invoice
price (net of all applicable price reduction credits) to the Customers (if any
Customer acquires Approved Inventory through an Affiliate of such Customer the
value to be assigned to such Approved Inventory shall be based on the
Affiliate's invoice price less the Affiliate's gross profit (net of all
applicable price reduction credits)) and the total of the line item values for
all Authorized Brands listed on the report, the amounts and aging of the Loan
Parties accounts payable as of a specified date, all of the Loan Parties IBM
Credit borrowing activity during a specified period and the total amount of the
Loan Parties' Outstanding Product Advances, Available Credit and any Shortfall
Amount as of a specified date, and a listing of all of the Approved Inventory,
identified by the address of all locations and the value of the Approved
Inventory at each location.
"Compliance Certificate": a certificate substantially in the form of Attachment
C.
"Consolidated" refers to the consolidation of accounts in accordance with GAAP.
"Consolidating" refers to the presentation of the Consolidated financial
statements of the Parent and the Consolidated financial statements of each
Customer.
"Credit Agreement" or the "Citibank Debtor-in-Possession Credit Agreement": the
Credit Agreement dated as of April 13, 2000 among the Customers and Parent,
Citibank, N.A. as Agent and the lenders that are signatories to the Credit
Agreement.
"Credit Line": as defined in Section 2.1.
"Credit Request": as defined in Section 2.4.
"Customer": as defined in the caption.
"Debtors": as defined in the recitals to this Agreement.
"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.
"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.
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"Environmental Liability": any claim, demand, demand letter, obligation, cause
of action, allegation, order, notice of non-compliance, violation, injury,
judgment, penalty or fine, cost or expense, resulting from the violation of any
Environmental Laws or the imposition of any Lien pursuant to any Environmental
Laws by any Governmental Authority by any Governmental Authority or third party
for damages, contribution, indemnification, cost recovery, compensation or
relief.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended, or any
successor statutes.
"Event of Default": as defined in Section 9.1.
"Fee Letter": that certain Fee Letter between IBM Credit and the Parent dated as
of the date hereof.
"Final Order": as defined in Section 5.2 (D) of this Agreement.
"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 of the Parent and the Customers for the period specified,
prepared in accordance with GAAP and consistent with prior practices.
"First Day Orders": those orders presented to the Bankruptcy Court in the Cases
for consideration on the first day of Cases, regardless of whether such orders
are entered on the first day of the Cases or shortly thereafter.
"Fiscal Year" means a fiscal year of the Parent and its Consolidated
Subsidiaries ending on the Sunday nearest to October 31 in any calendar year.
"Floor Plan Lender": any Person who now or hereinafter provides inventory
financing to either Customer, provided that such Person executes an
Intercreditor Agreement (as defined in Section 5.1 of this Agreement) or a
subordination agreement with IBM Credit 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 Customers a financing charge. IBM Credit shall
calculate the Customers' Free Financing Period utilizing a methodology that is
consistent with the methodologies used for similarly situated customers of IBM
Credit. Each Customer understands that if IBM withdraws or reduces its funding
of a Free Financing Period, IBM Credit may not offer, may change or may cease to
offer a Free Financing Period for the Customers' 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.
"Governmental Authority": any nation or government, any state or other political
subdivision
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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.
"GSP Adjustments": as of any day, shall be the aggregate amount of all
Overpayments, Variances and GSP Finance Charges, as of such day.
"GSP Advance Payment": is an advance payment made under the Guaranteed
Settlement Program which was applied to the Outstanding Product Advances
hereunder.
"GSP Finance Charge": as of the date of determination, the prime rate multiplied
by the sum of (1) Overpayments and (2) Variances.
"GSP Invoice": an EDI invoice submitted by a Loan Party to IBM Credit containing
the following information: 1) equipment serial numbers; 2) lease acknowledgment
letter number; 3) sold-to name of IBM Credit customer; 4) description of
products and/or services; 5) freight and/or tax charges provided that the IBM
Credit customer requested these such charges be financed; 6) total amount to be
financed; and 7) any other information agreed to in writing by IBM Credit and
such Loan Party.
"Guarantor": the Parent and all Subsidiaries of Parent and each Customer.
"Guaranty: each guaranty entered into by a Guarantor for the benefit of IBM
Credit.
"Hazardous Substances": all substances, wastes or materials, to the extent
subject to regulation as "hazardous substances" or "hazardous waste" which exist
in measurable quantity in excess of any applicable standard established under
any Environmental Laws.
"IBM": as defined in the recitals to this Agreement.
"IBM Credit": as defined in the preamble to this Agreement.
"Immaterial Subsidiary": means any Subsidiary of the Parent for which the total
assets of such Subsidiary do not exceed $25,000.
"Indemnified Persons": as defined in Section 11.2.
"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 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 entered 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 of such Person and (6) all liabilities secured by any Lien on any
property owned by
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such Person even though such Person has not assumed or otherwise become liable
for the payment thereof.
"Intercompany Debt": the Indebtedness owed to any Loan Party or to a wholly
owned Subsidiary of such Loan Party from any other Loan Party or its
Subsidiaries.
"Interim Order": as defined in Section 5.1 (D) of this Agreement.
"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.
"Intercreditor Agreement": as defined in Section 5.1 (M) of this Agreement.
"LIBOR" shall mean, as of the date of determination, the thirty (30) day average
of the one-month London Interbank Offered Rate as published by Bloomberg L.P.
("Bloomberg") for the previous calendar month or, in the event such average is
no longer published by Bloomberg, such other thirty day average as IBM Credit
may, in its reasonable discretion, use for determining LIBOR.
"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": means the Customers and the Parent.
"Losses": as defined in Section 7.14 (C).
"Material Adverse Effect" means a material adverse effect on (a) the business,
condition (financial or otherwise), operations, performance, properties or
prospects of any of the Parent, the Parent and its Subsidiaries taken as a
whole, MTSI, MTSI and its Subsidiaries taken as a whole, Pinacor or Pinacor and
its Subsidiaries taken as a whole, (b) the rights and remedies of IBM Credit
under this Agreement or any Other Document or (c) the ability of any Loan Party
to perform its Obligations under this Agreement or any Other Document to which
it is or is to be a party.
"Maximum Advance Amount": (1) at any time during the period from the Closing
Date to and including May 15, 2000, up to Twenty Seven Million ($27,000,000) of
Approved Inventory, and (2) at any time thereafter, the lesser of (i) the Credit
Line and (ii) the Approved Inventory.
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"Non-Filing Subsidiaries" means 153000 Canada Ltd., ConnectWorks, Inc., Contract
PC, Inc., Eleris, Inc., InterPC de Columbia, InterPC de Venezuela, IntraCom
Marketing, Inc., MaxSource L.L.C., MCSS, Inc. MicroAge Administration, Inc.,
MicroAge Deutschland Gmbh, MicroAge Europe Limited, MicroAge Government, Inc.,
MicroAge Infosystems Services, Inc., MicroAge Infosystems Services Europe
Limited, MicroAge Paymaster, Inc., MicroAge Technologies, Inc. MicroAge
Teleservices, L.L.C., MicroAge (U.K.) Limited, MicroAge Ventures, Inc., PC
Clearance, Inc., Phoenix Connections, Inc. and Pri-Tech Solutions, Inc.
"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 such
Loan Party to IBM Credit.
"Other Documents": all security agreements, mortgages, leases, instruments,
documents, guarantees, schedules of assignment, operating and repurchase
agreement, contracts, Intercreditor Agreements, and similar agreements executed
by any Loan Party and delivered to IBM Credit, pursuant to this Agreement or
otherwise, and all amendments, supplements and other modifications to the
foregoing from time to time.
"Other Charges": as set forth in Attachment A.
"Outstanding Product Advances": at any time of determination, the sum of (1) the
unpaid principal amount of all Product Advances made by IBM Credit under this
Agreement; and (2) any finance charge, fee, expense or other amount related to
Product Advances charged to the Customers account with IBM Credit.
"Overpayment": the amount of any GSP Invoice included in any GSP Advance Payment
that is subsequently deemed to be invalid for any of the following reasons: 1) a
Loan Party notifies IBM Credit that all or a portion of the products and/or
services specified in the GSP Invoice will not be financed; 2) Sixty (60) days
has elapsed from the date of the GSP Advance Payment related to such GSP Invoice
and no certificate of acceptance has been received for the products and/or
services specified in the GSP Invoice; 3) IBM Credit has determined that all or
a portion of the products and/or services specified in the GSP Invoice will not
be financed; or 4) the GSP Advance Payment related to such GSP Invoice has been
determined to be erroneous by IBM Credit in its reasonable discretion.
"Parent": MicroAge, Inc.
"Permitted Indebtedness": any of the following:
(1) Indebtedness to IBM Credit;
(2) Indebtedness described in Section VII of Attachment B;
(3) Indebtedness to any Floor Plan Lender;
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(4) Purchase Money Indebtedness;
(5) Capital Leases as defined in Section 10.1 of this Agreement:
(6) guaranties in favor of IBM Credit;
(7) Intercompany Debt; and
(8) other Indebtedness consented to by IBM Credit in writing prior to
incurring such Indebtedness.
"Permitted Liens": 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 I 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 Two Million Five Hundred Thousand Dollars ($2,500,000) (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 each Loan Party;
(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
11
and appeal bonds and other obligations of like nature arising in the ordinary
course of any Loan Party'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;
(11) Liens arising pursuant to this Agreement or pursuant to Permitted
Indebtedness; and
(12) other Liens consented to by IBM Credit in writing prior to incurring
such Lien.
(13) Liens under the Credit Agreement.
"Person" means an individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.
"Policies": all policies of insurance required to be maintained by each Loan
Party under this Agreement or any of the Other Documents.
"Product Advance": any advance of funds made (excluding funds committed to be
made by IBM Credit under this Agreement for which Products have not been
delivered by IBM to any Customer) for the account of any Customer to IBM in
respect of an invoice delivered or to be delivered by IBM to IBM Credit
describing Products purchased by such Customer, including any such advance made
as of the date hereof pursuant to the Pre-Petition Inventory Finance Agreement.
"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 any Loan Party'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, which include Capital
Leases (as defined in Section 10,1 of this Agreement .
"Reorganization Plan": a plan of reorganization in any of the Cases.
"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
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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.
"Security Agreement": the Security Agreement dated as of April 13, 2000 made by
the Grantors referred to therein to Citibank, N.A., as Collateral Agent, as such
agreement may from time to time be amended, supplemented or as otherwise
modified.
"Shortfall Amount": as defined in Section 2.5.
"Shortfall Transaction Fee": as defined in Attachment A.
"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.
"Super-Priority Claim": a claim against any Loan Party in any of the Cases which
is an administrative expense claim having priority over any or all
administrative expenses of the kind specified in Section 503(b) or 507(b) of the
Bankruptcy Code.
"Temporary Locations": 0000-0000 Xxxxxxxxx 00xx Xxxxxx, Xxxxx, Xxxxxxx 00000 and
(ii) 0000 Xxxxxxxxx Xxxxx, Xxxx. 00, Xxxxxxxxxx, Xxxx 00000-0000; provided,
however, any such location shall cease to be an Authorized Location upon a
breach of the covenants specified in Section 7.17 hereof, or upon receipt by any
Loan Party or any Guarantor of a notice described in Section 7.17.
"Termination Date": shall mean October 13, 2001 or such other date as IBM Credit
and Customers may agree in writing from time to time.
"Variance": the difference between the amount of an GSP Invoice included in a
GSP Advance Payment and the COA Amount for such GSP Invoice.
"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).
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
(the "U.C.C.") shall have the meanings assigned to them therein.
1.3. ATTACHMENTS. All attachments, exhibits, schedules and other addenda hereto,
including, but not limited to, Attachment A and Attachment B, are specifically
incorporated herein by reference 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 (i) the date on which this
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Agreement is terminated pursuant to Section 11.1 and (ii) the date on which IBM
Credit terminates the Credit Line pursuant to Section 9.2, IBM Credit agrees to
extend to the Customers a credit line ("Credit Line") in the amount set forth in
Attachment A pursuant to which IBM Credit will make to the Customers, from time
to time, Product Advances in an aggregate amount at any one time outstanding not
to exceed the Available Credit. Notwithstanding any other term or provision of
this Agreement, IBM Credit may, at any time and from time to time, in its sole
and absolute discretion (x) temporarily increase the amount of the Credit Line
set forth in Attachment A and subsequently reset the Credit Line to the original
amount of the Credit Line set forth in Attachment A, in each case upon written
notice to the Customers, and (y) make Product Advances pursuant to this
Agreement upon the request of Customers 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 Customers'
purchase of Products from IBM upon at least a two-day prior written notice from
IBM. Each Customer hereby authorizes and directs IBM Credit to pay the proceeds
of Product Advances directly to IBM in respect of invoices delivered to IBM
Credit for such Products by IBM and acknowledges that (i) any delivery to IBM
Credit of an invoice by IBM shall be deemed as a request for a Product Advance
by such Customer, and (ii) each such Product Advance constitutes a loan by IBM
Credit to the Customers pursuant to this Agreement as if the Customers received
the proceeds of the Product Advance directly from IBM Credit.
(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 in immediately available funds wired to the
account specified in Attachment A or to any other account designated by IBM
Credit in writing the Business Day following the last day of the Free Financing
Period; provided, however, any Shortfall Amount shall be paid in immediately
available funds pursuant to Section 2.5 of this Agreement. In addition, for any
Product Advance with respect to which a Free Financing Period shall not be in
effect, Customer shall pay a Free Financing Period Exclusion Fee. Such fee shall
be due and payable on the date set forth in a statement of transaction or
billing statement for such Product Advance. If it is determined that amounts
received from Customers were in excess of the highest rate permitted by law,
then the amount representing such excess shall be considered reductions to
principal of Product Advances.
(C) Each Customer acknowledges that IBM Credit does not warrant the
Collateral. Customers shall be obligated to pay IBM Credit in full even if the
Collateral is defective or fails to conform to the warranties extended by IBM.
The Obligations of Customers shall not be affected by any dispute a Customer may
have with IBM. No Customer will assert any claim or defense which it may have
against IBM against IBM Credit.
(D) Each Customer hereby authorizes IBM Credit to collect directly from
IBM any credits, rebates, bonuses or discounts owed by IBM to such Customer
("Supplier Credits"). Any Supplier Credits received by IBM Credit for a Customer
may be applied by IBM Credit to the Outstanding Product Advances of such
Customer, provided, however in no event shall IBM Credit refund any proceeds of
a Supplier Credit until the indefeasible payment in full of all of the
Obligations. Any Supplier Credits collected by IBM Credit shall in no way reduce
Customers'
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debt to IBM Credit in respect of the Outstanding Product Advances until such
Supplier Credits are applied by IBM Credit, which in each case shall be applied
promptly by IBM Credit; provided, however, that in the event such discount,
credit, rebate or bonus must be returned or disgorged or is otherwise
unavailable for application, then Customers' obligations will be reinstated as
if such discount, credit, rebate or bonus had never been applied.
(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
Product Advances owed by Customers. 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) Each Loan Party will indemnify and hold IBM Credit harmless from
and against any claims or demands asserted by any Person relating to or arising
from the Collateral for any reason whatsoever, including, without limitation,
the condition of the Collateral, any misrepresentation made about the Collateral
by any representative of either Customer or the Parent or any of their
Subsidiaries, or any act or failure to act by any Loan Party 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 either Customer may have against IBM.
2.3. LATE CHARGES AND OTHER CHARGES .
(A) Late charges pursuant to subsection (D) of this Section 2.3 for a Product
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
Product Advance for the period when such Product Advance is past due during such
calendar month multiplied by (iii) the actual number of days during such
calendar month when such Product Advance is past due divided by (iv) thirty
(30).
(B) The Customers hereby agree to pay to IBM Credit the charges set
forth as "Other Charges" in Attachment A. The Customers also agree to pay IBM
Credit additional charges for any returned items of payment received by IBM
Credit. The Customers hereby acknowledge that any such charges are not interest
but that such charges, if unpaid, will constitute part of the Outstanding
Product Advances.
(C) The late charges and Other Charges owed under this Agreement, and
any charges hereafter agreed to in writing by the parties, are payable monthly
upon receipt of IBM Credit's xxxx or statement therefor or IBM Credit may, in
its sole discretion, add unpaid late charges and Other Charges to the Customers'
Outstanding Product Advances.
(D) If any amount owed under this Agreement, including, without
limitation, any Product 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 it 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.
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In addition, if any Shortfall Amount shall not be paid when due pursuant to
Section 2.5 hereof, Customers shall pay IBM Credit a Shortfall Transaction Fee.
If it is determined that amounts received from Customers were in excess of such
highest rate, then the amount representing such excess, shall be considered
reductions to principal of Product Advances.
2.4. CUSTOMER ACCOUNT STATEMENTS. (A) IBM Credit will send statements of each
transaction ("SOT") hereunder to each Customer with respect to Product Advances
and other charges due on Customer's account with IBM Credit. Each SOT 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 sixty (60) calendar days after such SOT is received by such Customer,
Customer provides IBM Credit written notice specifying the error(s), if any,
contained therein by amount and transaction. In each case, in which a Customer
submits to International Business Machines Corporation ("IBM") a credit request
for a Supplier Credit ("Credit Request"), IBM Credit will add the amount of the
Credit Request to the amount of Available Credit, provided, however, that such
request (i) is verifiable by IBM, and (ii) has been submitted to IBM Credit
according to the dispute process, including but not limited to submitting all
Credit Requests via the Internet within sixty (60) days of the date of invoice,
or within thirty (30) days from the date of return of a Product damaged in
transit. The Available Credit will be decreased by the amount of the Credit
Request if IBM does not deem such Credit Request valid or invalid within thirty
(30) days of receipt of such request. For purposes of this Agreement, Credit
Request shall mean a request for a Supplier Credit to be issued by IBM for
Products (i) invoiced but not delivered, (ii) invoiced in an incorrect amount or
(iii) returned to IBM because damaged intransit.
(B) IBM Credit will send a monthly billing statement to each Customer
with respect to Product Advances late charges and Other Charges due. Each
billing statement shall be deemed, absent manifest error, to be correct and
shall constitute an account stated with respect to each late charge and Other
Charge described therein unless within sixty (60) calendar days after such
billing statement is received by such Customer, Customer provides IBM Credit
written notice objecting that such amount is incorrectly described therein and
specifying the error(s), if any, contained therein.
For each Credit Request submitted by a Customer more than thirty (30) days from
the date of invoice or the date any damaged Product is returned to IBM, a
Delinquency Fee Rate shall be charged on the amount of such Credit Request as
applicable, and IBM Credit shall deduct the amount of such Credit Request from
the Outstanding Product Advances subject to the process set forth in Section 2.4
of this Agreement. IBM Credit may at any time adjust such SOTs or billing
statements to comply with applicable law and this Agreement.
2.5. SHORTFALL. If on any date the Outstanding Product Advances owed by the
Customers to IBM Credit exceeds the Maximum Advance Amount (such excess, the
"Shortfall Amount"), the Customers shall immediately pay to IBM Credit in
immediately available funds an amount equal to such Shortfall Amount.
2.6. APPLICATION OF PAYMENTS. The Customers hereby agree that all checks and
other instruments delivered to IBM Credit on account of Customers' Obligations
shall constitute conditional payment until such items are actually collected by
IBM Credit. Each Customer
16
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 Customers'
Obligations. The Loan Parties agree that IBM Credit shall have the continuing
exclusive right to apply and reapply any and all such payments to Customers'
Obligations in such manner as IBM Credit may deem advisable notwithstanding any
entry by IBM Credit upon any of its books and records.
2.7. PREPAYMENT AND REBORROWING BY CUSTOMERS. (A) Customers 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 Customers or
otherwise) to pay latecharges and other amounts owing under this Agreement first
and then to the principal amount owed by the Customers.
(B) Subject to the terms and conditions of this Agreement, any amount
prepaid or repaid to IBM Credit in respect to the Outstanding Product Advances
may be reborrowed by Customers in accordance with the provisions of this
Agreement.
SECTION 3. CREDIT LINE ADDITIONAL PROVISIONS
3.1. POWER OF ATTORNEY. Each Loan Party 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 such Loan Party 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 and given under this
Agreement and the Other Documents;
upon the occurrence and during the continuance of a Default or an Event of
Default as defined in Section 9.1 hereof:
(B) endorse the name of such Loan Party upon any of the items of
payment of proceeds and deposit the same in the account of IBM Credit for
application to the Obligations; and
(C) sign the name of such Loan Party 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; and
(D) make, settle and adjust claims under the Policies with respect to
the Collateral and endorse such 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.
The power of attorney granted by this Section is for value and coupled with an
interest and is irrevocable so long as this Agreement and the Other Documents
are in effect or any Obligations remain outstanding. Nothing done by IBM Credit
pursuant to such power of attorney will reduce any Loan Parties' Obligations
other than Customers' payment Obligations to the extent IBM Credit has received
monies.
17
SECTION 4. SECURITY -- COLLATERAL
4.1. GRANT. To secure the Loan Parties' full and punctual payment and
performance of the Obligations (including obligations under any leases any Loan
Party may enter into, now or in the future, with IBM Credit) when due (whether
at the stated maturity, by acceleration or otherwise), each Loan Party hereby
grants IBM Credit a security interest in all of each Loan Party's right, title
and interest in and to the following property, whether now owned or hereafter
acquired or existing and wherever located:
(A) all inventory and equipment and all parts thereof, attachments,
accessories and accessions thereto and raw materials and work in progress
therefor, finished goods, thereof and materials used or consumed in manufacture,
production, preparation or shipping thereof, interest in mass or a joint or
other interest or right of any kind (including, without limitation, goods in
which such Loan Party has an interest or right as consignee), products thereof
and documents therefor;
(B) all accounts, contract rights, chattel paper, instruments, deposit
accounts, obligations of any kind owing to such Loan Party, whether or not
arising out of or in connection with the sale or lease of goods or the rendering
of services whether or not earned by performance, and all books, invoices,
documents and other records in any form evidencing or relating to any of the
foregoing;
(C) general intangibles;
(D) all rights now or hereafter existing in and to all mortgages,
security agreements, leases or other contracts securing or otherwise relating to
any of the accounts, contract rights, chattel paper, instruments, deposit
accounts, obligations or general intangibles;
(E) all Security Collateral, Account Collateral and Intellectual
Property Collateral as such terms are defined in the Security Agreement;
(F) the real property located at 0000 Xxxx Xxxxxxxx, Xxxxx, Xxxxxxx
(the "Property"); and
(G) all substitutions and replacements for all of the foregoing, all
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, together with all security interests in property under
any Other Document, shall be collectively defined herein as the "Collateral".
Each Loan Party covenants and agrees with IBM Credit that: (a) the security
created 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 each Loan Party to IBM Credit.
18
4.2. FURTHER ASSURANCES. Each Loan Party 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 reasonably
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 in order to fully consummate all of the
transactions contemplated under this Agreement and the Other Documents. Each
Loan Party shall make appropriate entries on its books and records disclosing
IBM Credit's security interests in the Collateral.
SECTION 5. CONDITIONS PRECEDENT
5.1. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT. The
effectiveness of this Agreement and the obligation of IBM Credit to make an
initial Product Advance is subject to the satisfaction of, or waiver in writing
by IBM Credit of compliance with, the following conditions precedent:
(A) this Agreement executed and delivered by each Customer, the Parent
and IBM Credit;
(B) a favorable opinion of Xxxxx & Xxxxxx, counsel for the Loan
Parties, in form and substance satisfactory to IBM Credit;
(C) a favorable opinion of Xxxxxx, Xxxx & Xxxxxxxx LLP, special
bankruptcy counsel to the Loan Parties, in form and substance satisfactory to
IBM Credit;
(D) a certified copy of an order of the Bankruptcy Court in the form of
Exhibit A (the "Interim Order") and the Interim Order shall be in full force and
effect and shall not have been vacated, reversed, modified or amended and there
shall be no stay of the performance of any obligation of any of the Loan
Parties;
(E) the First Day Orders shall be reasonably satisfactory in form and
substance to IBM Credit;
(F) before giving effect to the transactions contemplated by this
Agreement and the Other Documents and except as disclosed in the Parent's annual
report on Form 10-K for the Fiscal Year ended October 31, 1999 or otherwise
disclosed to IBM Credit in writing prior to the date hereof, there shall have
occurred no Material Adverse Effect since November 1, 1999 (other than the
commencement of the Cases);
(G) (i) the Obligations of the Loan Parties to IBM Credit under the
Citibank Credit Agreement have been irrevocably paid in full and the Obligations
of the Loan Parties under the Pre-Petition Inventory Finance Agreement have been
irrevocably paid in full except as to the Pre-Petition Secured Obligation and
(ii) all fees due and payable under the Fee Letter shall have been paid by wire
transfer of immediately available funds;
(H) all governmental and third party consents and approvals necessary
in connection with the transactions contemplated by this Agreement and the Other
Documents shall have been
19
obtained (without the imposition of any conditions that are not acceptable to
IBM Credit) and shall remain in effect; and no law or regulation shall be
applicable in the judgment of IBM Credit, in each case that restrains, prevents
or imposes materially adverse conditions upon the transactions contemplated by
the this Agreement and the Other Documents or the rights of the Loan Parties or
their Subsidiaries freely to transfer or otherwise dispose of, or to create any
Lien on, any properties now owned or hereafter acquired by any of them other
than the entry by the Bankruptcy Court of the Interim Order or the Final Order,
as applicable;
(I) a certificate of the secretary or an assistant secretary of each
Loan Party, in a form and substance acceptable to IBM Credit, certifying that,
among other items, (i) such Loan Party is a corporation organized under the laws
of the State of its incorporation and has its principal place of business as
stated therein, (ii) such Loan Party is registered to conduct business in
specified states and localities, (iii) true and complete copies of the articles
of incorporation and by-laws of such 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 such Loan Party's Board of
Directors 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 such Loan Party authorized to
sign this Agreement and the Other Documents;
(J) other than the Non-Filing Subsidiaries, a collateralized guaranty,
in form and substance satisfactory to IBM Credit, duly executed by Subsidiaries;
(K) copies of 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;
(L) copies of all approvals and consents from any Person in each case
in form and substance reasonably 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) intercreditor agreements ("Intercreditor Agreement"), in form and
substance satisfactory to IBM Credit, executed by each other secured creditor of
each Loan Party;
(N) UCC-1 financing statements for each jurisdiction reasonably
requested by IBM Credit executed by each Loan Party and each Guarantor whose
guaranty to IBM Credit is intended to be secured by a pledge of its assets;
(O) the information set forth in Attachment B;
(P) the Credit Agreement, with terms and conditions satisfactory to IBM
Credit, shall be executed and delivered by the parties thereto;
(Q) the Termination of the Guaranteed Settlement Program Agreement,
duly executed by the Loan Parties; and
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(R) 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 PRODUCT ADVANCE. No Product Advance will be
required to be made or renewed by IBM Credit under this Agreement unless, on and
as of the date of such Product Advance, the following statements shall be true
to the satisfaction of IBM Credit:
(A) the representations and warranties contained in this Agreement and
in each Other Document are true and correct in all material respects on and as
of the date of such Product Advance as though made on and as of such date;
(B) no Default or Event of Default has occurred and is continuing or
after giving effect to such Product Advance or the application of the proceeds
thereof would result in or would constitute a Default or an Event of Default;
(C) no event has occurred and is continuing which could reasonably be
expected to have a Material Adverse Effect other than the commencement of the
Cases;
(D) the Interim Order shall be in full force and effect and shall not
have been vacated, reversed, modified or amended and there shall be no stay of
the performance of any obligation of any of the Loan Parties, or within 30 days
of the entry of the Interim Order, the Final Order shall have been entered and
shall be in full force and effect, and shall not have been vacated, reversed,
modified, amended and there shall be no stay of the performance of any
obligation of the Loan Parties; and
(E) within three (3) Business Days of the entry of the Final Order, IBM
shall have received a certified copy thereof;
(F) both before and after giving effect to the making of such Product
Advance, no Shortfall Amount exists.
Except as Customers have otherwise disclosed to IBM Credit in writing prior to
each request, each request (or deemed request pursuant to Section 2.2 (A)) for
an Product Advance hereunder shall be deemed to be a representation and warranty
by Customers that, as of and on the date of such Product Advance, the statements
set forth in (A) through (D) above are true statements. No such disclosures by
Customers to IBM Credit shall in any manner be deemed to satisfy the conditions
precedent to each Product Advance that are set forth in this Section 5.2.
5.3. POST CLOSING . On or prior to May 15, 2000, Parent shall deliver to IBM
Credit fully executed counterparts of a deed of trust, mortgage or similar
document (the "Deed of Trust") in form and substance satisfactory to IBM Credit
covering the Property, and counterparts of such Deed of Trust shall have been
recorded upon execution in all places to the extent necessary or desirable, in
the judgment of IBM Credit, to create a valid and enforceable first priority
Lien on
21
the Property in favor of IBM Credit and such other documents (including,
without limitation, a real estate appraisal, and lender's title report) required
by IBM Credit; notwithstanding the foregoing, the grant of the mortgage in the
Property shall be valid pursuant to the Interim Order.
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce IBM Credit to enter into this Agreement, each Loan Party represents
and warrants to IBM Credit as follows:
6.1. ORGANIZATION AND QUALIFICATIONS. Each Loan Party and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (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 except where
the failure to be qualified or authorized would not be resonably likely to have
a Material Adverse Effect.
6.2. SUBSIDIARIES . Set forth in Attachment B hereto is a complete and accurate
list of all Subsidiaries of each Loan Party, showing (as to each such
Subsidiary) the jurisdiction of its incorporation, and its chief executive
office.
6.3. RIGHTS IN COLLATERAL; PRIORITY OF LIENS. (A) Each Loan Party and each of
its Subsidiaries owns the property granted by it respectively as 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 Loan Party and each of its Subsidiaries pursuant to this Agreement, the
Guaranties and the Other Documents in the Collateral constitute the valid and
enforceable first, prior and perfected Liens on the 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 or (iii) a Permitted Lien.
(B) The Interim Order and the Final Order, as applicable, provide that
it creates in favor of IBM Credit, a legal, valid and enforceable security
interest in the Collateral and, the Interim Order and the Final Order, as
applicable, provide that it creates a fully perfected first priority lien on the
IBM Collateral (as defined in the Intercreditor Agreement), and a fully
perfected second priority security interest in, all right, title and interest of
the Loan Parties in all other Collateral in each case prior and superior in
right to any Person, except as otherwise provided in the Interim Order and the
Final Order as applicable. The Loan Parties are the legal and beneficial owners
of the Collateral free and clear of any Lien, except for the liens and security
interests created or permitted under this Agreement or the Other Documents, the
Interim Order and the Final Order.
6.4. NO CONFLICTS. The execution, delivery and performance by each Loan Party of
this Agreement and each of the Other Documents (i) are within its corporate
power; (ii) are duly authorized by all necessary corporate action; (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
22
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 including the entry by the Bankruptcy Court of the
Interim Order or the Final Order, as applicable); and (v) will not, except as
contemplated herein, result in the imposition of any Liens upon any of its
properties.
6.5. ENFORCEABILITY. This Agreement and each of the Other Documents when
delivered hereunder will have been duly executed and delivered by each Loan
Party thereto. This Agreement and each of the Other Documents when delivered
hereunder will be the legal, valid and binding obligations of each Loan Party
thereto, enforceable against such Loan Party in accordance with its terms and
the Interim Order and the Final Order.
6.6. LOCATIONS OF OFFICES, RECORDS AND INVENTORY. The address of the principal
place of business and chief executive office of each Loan Party and each of its
Subsidiaries as set forth on Attachment B or on any notice provided by such Loan
Party to IBM Credit pursuant to Section 7.7(C) of this Agreement. The books and
records of each Loan Party are maintained exclusively at such location.
There is no jurisdiction in which any Loan Party or any of its Subsidiaries 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 the Loan Parties 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 such Loan Party's and its Subsidiaries' inventory is
stored. None of the receipts received by any Loan Party or its Subsidiaries 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.
6.7. FICTITIOUS BUSINESS NAMES. To the best of each Loan Party's knowledge after
due inquiry, no Loan Party nor any of its Subsidiaries has used any corporate or
fictitious name during the five (5) years preceding the date of this Agreement,
other than those listed on Attachment B.
6.8. ORGANIZATION. All of the outstanding capital stock of each Loan Party has
been validly issued, is fully paid and nonassessable.
6.9. NO JUDGMENTS OR LITIGATION. Except as set forth on Attachment B, no
judgments, orders, writs or decrees in excess of Five Million Dollars
($5,000,000) are outstanding against any Loan Party nor is there now pending or,
to the best of such Loan Parties' knowledge after due inquiry, threatened, any
litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against any Loan Party, other than the Interim Order and the
Final Order.
6.10. NO DEFAULTS. Except as set forth in Attachment B and except to the extent
that the filing of a Chapter 11 case by a Loan Party is stated to be a default
under any such document and to the best of each Loan Party's knowledge after due
inquiry, no Loan Party is in default under any term of any indenture, contract,
lease, agreement, instrument or other commitment in excess of
23
Five Million Dollars ($5,000,000) to which it is a party or by which it, or any
of its properties are bound. No Loan Party has 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.
6.11. LABOR MATTERS. Except as set forth on any notice provided by Loan Parties
to IBM Credit pursuant to Section 7.1(H) of this Agreement, no Loan Party is a
party to any labor dispute. There are no strikes or walkouts or labor
controversies pending or threatened against any Loan Party which could
reasonably be expected to have a Material Adverse Effect.
6.12. 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.
6.13. ERISA. Each "employee benefit plan", "employee pension benefit plan",
"defined benefit plan", or "multi-employer benefit plan", which each Customer
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. No Loan Party has a "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 of ERISA and any applicable rules and
regulations thereunder. No Loan Party 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).
6.14. COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as otherwise disclosed in
Attachment B:
(A) Each Loan Party has obtained all government approvals required with
respect to the operation of their businesses under any Environmental Law.
(B) (i) no Loan Party has generated, transported or disposed of any
Hazardous Substances in violation of any Environmental Laws; (ii) no Loan Party
is currently generating, transporting or disposing of any Hazardous Substances
in violation of any Environmental Laws; (iii) no Loan Party has 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 in violation of any Environmental Laws;
or (b) any of its business operations have contaminated lands or waters of
others with any Hazardous Substances in violation of any Environmental Laws;
(iv) no Loan Party and its respective assets are subject to any Environmental
Liability and, to the best of any Loan Party's knowledge, any threatened
Environmental Liability; (v) no Loan Party 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 Substance for which any Loan Party may be liable; (vi) no Loan
Party is in violation of any Environmental Law in violation of any Environmental
Laws; (vii) there are no proceedings or investigations pending against any Loan
24
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 Loan Party's or its Subsidiaries' business shall be excluded from
representations (i) and (ii) above, provided, further, that each 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.
6.15. INTELLECTUAL PROPERTY. Each Loan Party possesses such assets, licenses,
patents, patent applications, copyrights, service marks, trademarks, trade names
and trade secrets and all rights 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.
6.16. 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. No Loan Party is in violation of the terms of any such franchise,
license, lease, permit, certificate, authorization, qualification, easement,
right of way, right or approval.
6.17. 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 Holding 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 to consummate the transactions
contemplated by this Agreement or the Other Documents or to perform its
obligations hereunder or thereunder.
6.18. 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 any 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.
6.19. 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.
6.20. ACCURACY AND COMPLETENESS OF INFORMATION. All factual information
furnished by or on behalf of each Loan Party to IBM Credit or the Auditors for
purposes of or in connection
25
with this Agreement or any of the Other Documents, 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. No Loan Party (i) has Indebtedness, other than Permitted
Indebtedness; and (ii) has guaranteed the obligations of any other Person
(except as permitted by Section 8.5).
SECTION 7. AFFIRMATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations:
7.1. FINANCIAL AND OTHER INFORMATION. Each Loan Party shall cause to be
furnished to IBM Credit the following information within the following time
periods:
(A) Annual Financial Statements. As soon as available (x) in any event
within 45 days after the end of each Fiscal Year, preliminary Consolidated and
Consolidating statements of income and cash flows of the Parent and its
Subsidiaries for such Fiscal Year, in reasonable detail and duly certified
(subject to year-end audit adjustments) by the chief financial officer of the
Parent as having been prepared in accordance with GAAP, together with (i) a
certificate of said officer stating no Default has occurred and is continuing
or, if a Default had occurred and is continuing, a statement as to the nature
thereof and the action that the Parent has taken and proposes to take with
respect thereto and (ii) a schedule in form satisfactory to IBM Credit of the
computations used by the Parent in determining compliance with the covenants
contained in Section 10.2, provided that in the event of any change in GAAP used
in the preparation of such Financial Statements, the Parent shall also provide,
if necessary for the determination of compliance with Section 10.2, a statement
of reconciliation conforming such Financial Statements to GAAP and (y) and in
any event within 90 days after the end of each Fiscal Year, a copy of the annual
audit report for such year for the Parent and its Subsidiaries, including
therein Consolidated balance sheets of the Parent and its Subsidiaries as of the
end of such Fiscal Year and Consolidated statements of income and a Consolidated
statement of cash flows of the Parent and its Subsidiaries for such Fiscal Year,
in each case accompanied by an opinion acceptable to IBM Credit of Auditor,
together with (i) a certificate of such Auditor to IBM Credit stating that in
the course of the regular audit of the business of the Parent and its
Subsidiaries, which audit was conducted by such Auditor in accordance with
generally accepted auditing standards, such Auditor has obtained no knowledge
that a Default has occurred and is continuing, or if, in the opinion of such
Auditor, a Default has occurred and is continuing, a statement as to the nature
thereof, (ii) a schedule in form satisfactory to IBM Credit of the computations
used by such accountants in determining, as of the end of such Fiscal Year,
compliance with the covenants contained in Section 10.2, provided that in the
event of any change in GAAP used in the preparation of such Financial
Statements, the Parent shall also provide, if necessary for the
26
determination of compliance with Section 10.2 a statement of reconciliation
conforming such Financial Statements to GAAP, (iii) Consolidating balance sheets
of the Parent and the Customers as of the end of such Fiscal Year and
Consolidating statements of income and cash flows of the Parent and the
Borrowers for such Fiscal Year, all in reasonable detail and duly certified by
the chief financial officer of the Parent as having been prepared in accordance
with GAAP and (iv) a certificate of the chief financial officer of the Parent
stating that no Default has occurred and is continuing or, if a default has
occurred and is continuing, a statement as to the nature thereof and the action
that the Parent has taken and proposes to take with respect thereto;
(B) Quarterly Financial Statement. As soon as available and in any
event within 45 days after the end of each of the first three quarters of each
Fiscal Year, Consolidated and Consolidating balance sheets of the Parent and its
Subsidiaries as of the end of such quarter and Consolidated and Consolidating
statements of income and a Consolidated statement of cash flows of the Parent
and its Subsidiaries for the period commencing at the end of the previous fiscal
quarter and ending with the end of such fiscal quarter and Consolidated and
Consolidating statements of income and a Consolidated statement of cash flows of
the Parent and its Subsidiaries for the period commencing at the end of the
previous Fiscal Year and ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures for the corresponding
period of the preceding Fiscal Year, all in reasonable detail and duly certified
(subject to year-end audit adjustments) by the chief financial officer of the
Parent as having been prepared in accordance with GAAP, together with (i) a
certificate of said officer stating that no Default has occurred and is
continuing or, if a Default has occurred and is continuing, a statement as to
the nature thereof and the action that the Parent has taken and proposes to take
with respect thereto and (ii) a schedule in form satisfactory to IBM Credit of
the computations used by the Parent in determining compliance with the covenants
contained in Section 10.2, provided that in the event of any change in GAAP used
in the preparation of such Financial Statements, the Parent shall also provide,
if necessary for the determination of compliance with Section 10.2, a statement
of reconciliation conforming such financial statements to GAAP;
(C) Monthly Financial Statement. As soon as available and in any event
within 30 days after the end of each month (other than any month that is the
last month of a Fiscal Year or of the first three fiscal quarters of a Fiscal
Year for which Financial Statements are delivered pursuant to Section 7.1(A) or
(B), as the case may be), a Consolidated balance sheet of the Parent and its
Subsidiaries as of the end of such month and Consolidated and Consolidating
statements of income and a Consolidated statement of cash flows of the Parent
and its Subsidiaries for the period commencing at the end of the previous month
and ending with the end of such month and Consolidated and Consolidating
statements of income and a Consolidated statement of cash flows of the Parent
and its Subsidiaries for the period commencing at the end of the previous Fiscal
Year and ending with the end of such month, setting forth in each case in
comparative form the corresponding figures for the corresponding month of the
preceding Fiscal Year, all in reasonable detail and duly certified by the chief
financial officer or controller of the Parent;
(D) Annual Forecasts. As soon as available and in any event no later
than 45 days after the end of each Fiscal Year, forecasts prepared by management
of the Parent, in form satisfactory to IBM Credit, of balance sheets, income
statements and cash flow statements on a monthly basis for the Fiscal Year
following such Fiscal Year and on an annual basis for each Fiscal Year
thereafter until the Termination Date;
27
(E) as soon as possible and in any event within two (2) days after the
occurrence of each Default or the existence of any condition or event which
would result in such Loan Party's failure to satisfy the conditions precedent to
Product Advances set forth in Section 5, a certificate of the chief executive
officer or chief financial officer of such Loan Party specifying the nature
thereof and the Loan Party's proposed response thereto, each in reasonable
detail;
(F) promptly after any Loan Party obtains knowledge of (i) any
proceeding(s) being instituted or threatened to be instituted by or against such
Loan Party 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 of such
Loan Party specifying the nature thereof and the Loan Party's proposed response
thereto, each in reasonable detail;
(G) promptly after any Loan Party obtains knowledge that (i) any order,
judgment or decree in excess of Two Million Five Hundred Thousand Dollars
($2,500,000) shall have been entered against such Loan Party 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 of such
Loan Party specifying the nature thereof and the Loan Party's proposed response
thereto, each in reasonable detail;
(H) promptly after any Loan Party learns of any material labor dispute
to which such Loan Party 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 the Loan Party is a party or by which it is bound, a certificate of the
chief executive officer or chief financial officer of such Loan Party specifying
the nature thereof and the Loan Party's proposed response thereto, each in
reasonable detail;
(I) 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 any
Loan Party's business affairs and financial condition;
(J) on each Business Day, or as otherwise agreed in writing, a
Collateral Management Report as of the end of the previous Business Day;
(K) promptly after the sending or filing thereof, copies of all proxy
statements, financial statements and reports that any Loan Party or any of its
Subsidiaries sends to its stockholders, and copies of all regular, periodic and
special reports, and all registration statements, that any Loan Party or any of
its Subsidiaries files with the Securities and Exchange Commission or any
governmental authority that may be substituted therefor, or with any national
securities exchange
28
Each certificate, schedule and report provided by any Loan Party to IBM Credit
shall be signed by an authorized officer of such Loan Party, 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 applied consistently throughout the periods reflected therein and with
prior periods.
7.2. LOCATION OF COLLATERAL. The inventory, equipment and other tangible
Collateral shall be kept or sold at an Authorized Location or from the Closing
Date to and including July 14, 2000 a Temporary Location or at an address as set
forth on Attachment B. Such locations shall be certified quarterly to IBM Credit
substantially in the form of Attachment E. Each Loan Party shall certify to IBM
Credit on a monthly basis the legal name and, if any, the fictitious names, of
such Loan Party and all of its Subsidiaries.
7.3. CHANGES IN CUSTOMERS. Each Loan Party shall provide thirty (30) days prior
written notice to IBM Credit of any change in such Loan Party's or any of its
Subsidiaries' name including the addition of fictitious names, chief executive
office and principal place of business, organization, form of ownership or
corporate structure; provided, however, that each 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 of the Other Documents limiting actions
of the type described in this Section.
7.4. CORPORATE EXISTENCE. Each Loan Party shall (A) maintain, and cause each of
its Subsidiaries to maintain, its corporate existence and each Loan Party and
each of its Subsidiaries shall 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, provided,
however, that the Parent and its Subsidiaries may consummate any merger or
consolidation permitted under Section 8.4 and provided further that neither the
Parent nor any of its Subsidiaries shall be required to preserve any right,
permit, license, approval, privilege or franchise if the Board of Directors of
the Parent or such Subsidiary shall determine that the preservation thereof is
no longer desirable in the conduct of the business of the Parent or such
Subsidiary, as the case may be, and that the loss thereof is not disadvantageous
in any material respect to the Parent, such Subsidiary or IBM Credit, (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.
7.5. ERISA. Each Loan Party 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 (as defined in Section 6.12 of this Agreement) has instituted or
will institute proceedings to terminate any Plan. Notwithstanding the foregoing,
no Loan Party shall have the 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's 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
29
"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 Loan Party 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 Loan Party and any other Person under each
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 in violation of any
Environmental Laws by each 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 Loan Party 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 such against any Loan Party or any of
Loan Party's assets relating to any loss or injury resulting from any Hazardous
Substance, (iii) any 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 Loan Party agrees
to maintain books and records pertaining to the 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 Collateral.
(B) Each Loan Party agrees that IBM Credit or its agents may enter upon
the premises of any 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 a Default
or an Event of Default for the purposes of (i) inspecting the Collateral, (ii)
inspecting and/or copying (at Loan Parties' expense) any and all records
pertaining thereto, and (iii) discussing the affairs, finances and business of
the Loan Party with any officers, employees and directors of such Loan Party or
with the Auditors. Each Loan Party also agrees to provide IBM Credit with such
reasonable information and documentation that IBM Credit deems necessary to
conduct the foregoing activities.
Upon the occurrence and during the continuance of a Default or 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) Each Loan Party shall give IBM Credit thirty (30) days prior
written notice of any change in the location of any 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
30
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) Each Loan Party agrees to advise IBM Credit promptly, in reasonably
sufficient detail, of any substantial change relating to the type, quantity or
quality of the Collateral, or any event which could reasonably be expected to
have a Material Adverse Effect on the value of the Collateral or on the security
interests granted to IBM Credit herein.
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, each Loan Party,
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
each Loan Party 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 applied on
account of the Customers' Outstanding Product Advances. Each Customer 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 canceled 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. Each Loan Party hereby agrees to
direct all insurers under the Policies to pay all proceeds with respect to the
Collateral directly to IBM Credit. If any Loan Party fails to pay any cost,
charges or premiums, or if any Loan Party 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 Loan Parties to IBM
Credit and are due and payable immediately upon receipt of an invoice by IBM
Credit.
7.9. TAXES. Each Loan Party 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, including the Bankruptcy Code, the Federal Rules of
Bankruptcy Procedure and the local rules and order of the Bankruptcy Court.
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7.11. FISCAL YEAR. Each Loan Party agrees to maintain its Fiscal Year unless
such Loan Party provides IBM Credit at least thirty (30) days prior written
notice of any change thereof.
7.12. INTELLECTUAL PROPERTY. Each Loan Party 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.
7.14. COLLATERAL. Each Loan Party shall:
(A) promptly notify IBM Credit of any loss, theft or destruction of or
damage to any of the Collateral in excess of One Million Dollars ($1,000,000),
provided, however Loan Party shall promptly notify IBM Credit, in any event, if
such loss, theft or destruction of or damage to any of the Collateral causes a
Shortfall Amount. Each Loan Party 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 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
encumbrances of any kind whatsoever;
(B) 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 in order to preserve, protect and maintain all the rights of IBM
Credit thereunder;
(C) consistent with reasonable commercial practice, maintain, use and
operate the Collateral and carry on and conduct its business in a proper and
efficient manner so as to preserve and protect the Collateral and the earnings,
incomes, rents, issues and profits thereof; and
(D) at any time and from time to time, upon the request of IBM Credit,
and at the sole expense of each Loan Party, 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.
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7.15. BORROWING BASE CERTIFICATE . On a daily basis, a copy of the Borrowing
Base Certificate (as defined in the Credit Agreement) certified by the chief
financial officer, executive vice president, controller, treasurer or assistant
treasurer of the Parent.
7.16. SUBSIDIARIES . IBM Credit may require that a Subsidiary other than an
Immaterial Subsidiary become a party to this Agreement and may require all
Subsidiaries, Immaterial or otherwise, to become a party to any other agreement
executed in connection with this Agreement as a Guarantor or surety. Each
Customer will comply, and cause all Subsidiaries to comply with Sections 7 and 8
of this Agreement, as if such sections applied directly to such Subsidiaries.
Each Non-Filing Subsidiary is an Immaterial Subsidiary (other than MicroAge
Teleservices, L.L.C. and Eleris, Inc.).
7.17. COMPLIANCE WITH TERMS OF LEASEHOLDS . Make all payments and otherwise
perform all obligations in respect of all leases of real property to which any
Loan Party or Guarantor is a party, keep such leases in full force and effect
and not allow such leases to lapse or be terminated or any rights to renew such
leases to be forfeited or canceled except as expressly permitted under Section
365 of the Bankruptcy Code and consented to by IBM Credit in writing prior to
such action being taken (such consent not to be unreasonably withheld), notify
IBM Credit of any default by any party with respect to such leases and promptly,
but in any event, no later than 5 business days provide a copy of any notice of
default or termination received by any party with respect to such leases.
7.18. ADDITIONAL COVENANTS . Each Loan Party acknowledges and agrees that such
Loan Party shall comply with the other covenants set forth in the attachments,
exhibits and other addenda incorporated herein and made a part of this
Agreement. Each Loan Party acknowledges that, pursuant to Section 364(c)(1) of
the Bankruptcy Code, the obligations of the Loan Parties hereunder and under
this Agreement and the Other Documents constitute allowed administrative expense
claims in the Cases having priority over all administrative expenses of the kind
specified in Sections 503(b) or 507(b) of the Bankruptcy Code PROVIDED that such
claims shall be subordinate and junior in right and time of payment to any Super
Priority Claims of the Bank Creditors (as defined in the Intercreditor
Agreement) as set forth in Section 26 of the Intercreditor Agreement.
7.19. JOINT AND SEVERAL GUARANTY . (A) Each Customer hereby jointly and
severally guarantees to IBM Credit the prompt payment when due and the full,
prompt, and faithful performance of any and all Obligations upon which any
Customer is in any manner obligated, heretofore, now, or hereafter owned,
contracted or acquired by IBM Credit pursuant to this Agreement, whether the
same are individual, joint or several, primary, secondary, direct, contingent or
otherwise. Each Customer irrevocably subordinates to the full payment of amounts
due IBM Credit any and all rights to which it may be entitled, by operation of
law or otherwise, upon making any payment hereunder (i) to be subrogated to the
rights of IBM Credit against another Customer hereto with respect to such
payment or otherwise to be reimbursed, indemnified or exonerated by another
Customer in respect thereof, or (ii) to receive any payment, in the nature of
contribution or for any other reason, from another Customer hereto with respect
to such payment.
(B) Notwithstanding any provision herein to the contrary, the liability
of each Customer hereunder shall in no event exceed the maximum amount that is
valid and enforceable in any
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action or proceeding involving any applicable state corporate law or any
applicable state or federal bankruptcy, insolvency, reorganization, fraudulent
conveyance or other law involving the rights of creditors generally.
(C) The liability of each Customer hereunder is direct, absolute and
unconditional and shall not be affected by any extension, renewal or other
change in the terms of payment or performance thereof, or the release,
settlement or compromise of or with any party liable for the payment or
performance thereof, the release or nonperfection of any security thereunder, or
any change in any Customer's financial condition. Each Customer's obligation
pursuant to this Section 7.19 shall continue for so long as any sums owing to
IBM Credit by either Customer remains outstanding and unpaid, unless terminated
in the manner provided herein. Each Customer acknowledges that its obligations
hereunder are in addition to and independent of any agreement or transaction
between IBM Credit and any other Customer or any other Person creating or
reserving any lien, encumbrance or security interest in any property of any
other Customer or any other Person as security for any obligation of such
Customer.
(D) Each Customer has made an independent investigation of the
financial condition of each other Customer and guarantees the Obligations based
on that investigation and not upon any representations made by IBM Credit. Each
Customer acknowledges that it has access to current and future Customer
financial information which will enable each Customer to continuously remain
informed of each other Customer's financial condition. Each Customer also
consents to and agrees that the guarantees provided in this Section 7.19 and the
Obligations shall not be affected by IBM Credit's subsequent increases or
decreases in the credit line that IBM Credit may grant to any Customer;
substitutions, exchanges or releases of all or any part of the Collateral now or
hereafter securing any of the Obligations; sales or other dispositions of any or
all of the Collateral now or hereafter securing any of the Obligations without
demands, advertisement or notice of the time or place of the sales or other
dispositions, realizing on the Collateral to the extent IBM Credit, in its sole
discretion deems proper.
(E) With respect to the guarantees provided hereunder, each Customer,
in its capacity as a guarantor, waives if permitted by applicable law (1)
demand, protest and all notices of protest or dishonor, (2) all notices of
payment and nonpayment, (3) all notices required by law, (4) any and all
defenses, including but not limited to any defense which it may have against any
manufacturer, distributor or Authorized Supplier, (5) any and all rights of
set-off Customers may have against IBM Credit and (6) all notices of nonpayment
at maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guarantees at any time held by IBM Credit on which any Customer may,
in any way, be liable and each Customer hereby ratifies and confirms whatever
IBM Credit may do in that regard.
(F) This guaranty obligation and any and all obligations, liabilities,
terms and provisions herein shall survive any and all bankruptcy or insolvency
proceedings, actions and/or claims brought by or against either Customer,
whether such proceedings, actions and/or claims are federal and/or state.
7.20. PARENT GUARANTY . A. Guaranty. (i) The Parent hereby unconditionally and
irrevocably guarantees the punctual payment when due, whether at scheduled
maturity or on any date of a
34
required prepayment or by acceleration, demand or otherwise, of all Obligations
of each Customer and its Subsidiaries now or hereafter existing under this
Agreement and any Other Document, (including, without limitation, any
extensions, modifications, substitutions, amendments or renewals of any or all
of the foregoing Obligations), whether direct or indirect, absolute or
contingent, and whether for principal, interest, fees, expenses or otherwise
(such Obligations being the "Guaranteed Obligations"), and agrees to pay any and
all expenses (including, without limitation, reasonable counsel fees and
expenses) incurred by IBM Credit in enforcing any rights under this Guaranty or
any Other Document. Without limiting the generality of the foregoing, the
Parent's liability shall extend to all amounts that constitute part of the
Guaranteed Obligations and would be owed by each Customer to IBM Credit under or
in respect of this Agreement or any Other Document but for the fact that they
are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Loan Party.
(ii) The Parent hereby unconditionally and irrevocably agrees that in the event
any payment shall be required to be made to IBM Credit under this Guaranty or
any other guaranty, the Parent will contribute, to the maximum extent permitted
by law, such amounts to each other guarantor so as to maximize the aggregate
amount paid to IBM Credit under or in respect of this Agreement or any Other
Document.
B. Guaranty Absolute. The Parent guarantees that the Guaranteed Obligations will
be paid strictly in accordance with the terms of this Agreement or any Other
Document, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of IBM Credit with
respect thereto. The Obligations of the Parent under this Guaranty are
independent of the Guaranteed Obligations or any other Obligations of any Loan
Party under this Agreement or any Other Document, and a separate action or
actions may be brought and prosecuted against the Parent to enforce this
Guaranty, irrespective of whether any action is brought against any Loan Party
or whether any Loan Party is joined in any such action or actions. The liability
of the Parent under this Guaranty shall be irrevocable, absolute and
unconditional irrespective of, and the Parent hereby irrevocably waives any
defenses it may now or hereinafter have in any way relating to, any or all of
the following:
(i) any lack of validity or enforceability of this Agreement or any Other
Document or any agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Guaranteed Obligations or any other Obligations of any
other Loan Party under this Agreement or any Other Document, or any other
amendment or waiver of or any consent to departure from this Agreement or any
Other Document, including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to any Customer,
the Parent or any of their Subsidiaries or otherwise;
(iii) any taking, exchange, release or non perfection of any collateral, or any
taking, release or amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Guaranteed Obligations;
(iv) any manner of application of collateral, or proceeds thereof, to all or any
of the Guaranteed Obligations, or any manner of sale or other disposition of any
collateral for all or any of the Guaranteed Obligations or any other Obligations
of any other Loan Party under this Agreement or any Other Document or any other
assets of either Customer, the Parent or any of their Subsidiaries;
35
(v) any change, restructuring or termination of the corporate structure or
existence of either Customer, the Parent or any of their Subsidiaries;
(vi) any failure of IBM Credit to disclose to any Loan Party or any of their
Subsidiaries any information relating to the business, condition (financial or
otherwise), operations, performance, properties or prospects of any Loan Party
now or hereafter known to IBM Credit (the Parent waiving any duty on the part of
IBM Credit to disclose such information); or
(vii) any other circumstance (including, without limitation, any statute of
limitations) or any existence of or reliance on any representation by IBM Credit
that might otherwise constitute a defense available to, or a discharge of,
either Customer, the Parent or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by IBM Credit upon the insolvency, bankruptcy or
reorganization of either Customer, the Parent or any of their Subsidiaries or
otherwise, all as though such payment had not been made.
C. Waiver. (i) The Parent hereby unconditionally and irrevocably waives
promptness, diligence, notice of acceptance, presentment, demand for
performance, notice of nonperformance, default, acceleration, protest or
dishonor and any other notice with respect to any of the Guaranteed Obligations
and this Guaranty and any requirement that IBM Credit protect, secure, perfect
or insure any Lien or any property subject thereto or exhaust any right or take
any action against any Loan Party or any other Person or any Collateral.
(ii) The Parent hereby unconditionally and irrevocably waives any right to
revoke this Guaranty and acknowledges that this Guaranty is continuing in nature
and applies to all Guaranteed Obligations, whether existing now or in the
future.
(iii) The Parent hereby unconditionally and irrevocably waives (x) any defense
arising by reason of any claim or defense based upon an election of remedies by
IBM Credit that in any manner impairs, reduces, releases or otherwise adversely
affects the subrogation, reimbursement, exoneration, contribution or
indemnification rights of the Parent or other rights of the Parent to proceed
against any of the Loan Parties, any other guarantor or any other Person or any
Collateral and (y) any defense based on any right of set off or counterclaim
against or in respect of the Obligations of the Parent hereunder.
(iv) The Parent hereby unconditionally and irrevocably waives any duty on the
part of IBM Credit to disclose to the Parent any matter, fact or thing relating
to the business, condition (financial or otherwise), operations, performance,
properties or prospects of any other Loan Party or any of its Subsidiaries now
or hereafter known by IBM Credit.
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(v) The Parent acknowledges that it will receive substantial direct and indirect
benefits from the financing arrangements contemplated by this Agreement and the
Other Documents and that the waivers set forth in Sections 7.18 B. and 7.18 C.
are knowingly made in contemplation of such benefits.
D. Continuing Guaranty; Assignments. This Guaranty is a continuing guaranty and
shall (a) remain in full force and effect until the latest of (i) the cash
payment in full of the Guaranteed Obligations and all other amounts payable
under this Guaranty, (ii) the Termination Date and, (b) be binding upon the
Parent, its successors and assigns and (c) inure to the benefit of and be
enforceable by IBM Credit and its successors, transferees and assigns.
E. Subrogation. The Parent hereby unconditionally and irrevocably agrees not to
exercise any rights that it may now or hereafter acquire against either Customer
or any other insider guarantor that arise from the existence, payment,
performance or enforcement of the Parent's Obligations under this Agreement or
any Other Document, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of IBM Credit against either Customer or any
other insider guarantor or any Collateral, whether or not such claim, remedy or
right arises in equity or under contract, statute or common law, including,
without limitation, the right to take or receive from either Customer or any
other insider guarantor, directly or indirectly, in cash or other property or by
set off or in any other manner, payment or security on account of such claim,
remedy or right, unless and until all of the Guaranteed Obligations and all
other amounts payable under this Guaranty shall have been paid in full in cash.
If any amount shall be paid to the Parent in violation of the preceding sentence
at any time prior to the latest of (a) the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Guaranty, and
(b) the Termination Date such amount shall be received and held in trust for the
benefit of IBM Credit, shall be segregated from other property and funds of the
Parent and shall forthwith be paid to IBM Credit in the same form as so received
(with any necessary endorsement or assignment) to be credited and applied to the
Guaranteed Obligations and all other amounts payable under this Guaranty,
whether matured or unmatured, in accordance with the terms of this Agreement or
any Other Document, or to be held as Collateral for any Guaranteed Obligations
or other amounts payable under this Guaranty thereafter arising. .
SECTION 8. NEGATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations hereunder:
8.1. LIENS. No Loan Party 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 contemplated by the Interim Order and the Final Order.
8.2. DISPOSITION OF ASSETS. No Loan Party will, directly or indirectly, sell,
lease, assign, transfer or otherwise dispose of, or permit any of its
Subsidiaries to sell, assign, transfer or otherwise dispose of any assets other
than (i) sales of inventory in the ordinary course of
37
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 the Loan Party or its Subsidiaries other than its
Non-Filing Subsidiaries as of the beginning of such Fiscal Year; (iii) sales of
assets for cash and for fair market value in an aggregate amount not to exceed
Ten Million Dollars ($10,000,000) in any Fiscal Year; and (iv) sale or other
disposition of the membership interests in, or substantially all of the assets
of MicroAge Teleservices, L.L.C. so long as (A) the purchase price paid to the
Loan Parties shall be no less than the fair market value at the time of such
sale and (B) the purchase price shall be paid to the Loan Parties in cash.
8.3. CORPORATE CHANGES. No Loan Party will, or permit any of its Subsidiaries
to, 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 any Loan
Party or any Guarantor, provided, however, that the Parent and its Subsidiaries
may consummate any merger or consolidation permitted under Section 8.4 of this
Agreement and provided further that neither the Parent nor any of its
Subsidiaries shall be required to preserve any right, permit, license approval,
privilege or franchise if the Board of Directors of the Parent or such
Subsidiary shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Parent or such Subsidiary, as the case may
be, and that the loss thereof is not disadvantageous in any material respect to
the Parent, such Subsidiary or IBM Credit.
8.4. MERGERS, ETC . No Loan Party shall merge into or consolidate with any
Person or permit any Person to merge into it, or permit any of its Subsidiaries
to do so, except in connection with the Reorganization Plan and except that any
Subsidiary (other than a Non-Filing Subsidiary unless with the prior written
consent of IBM Credit) of any Customer may merge into or consolidate with any
other Subsidiary of such Customer, provided that, in the case of any such merger
or consolidation, the Person formed by such merger or consolidation shall be a
wholly owned Subsidiary (other than a Non-Filing Subsidiary unless with the
prior written consent of IBM Credit) of such Customer; provided, however, that
in each case, immediately after giving effect thereto, no event shall occur and
be continuing that constitutes a Default and, in the case of any such merger to
which any Customer is a party, such Customer is the surviving corporation.
8.5. GUARANTIES. No Loan Party 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 solely in favor of
IBM Credit (iv) as provided for under Permitted Indebtedness, (v) any corporate
guaranties and (vi) real estate.
8.6. RESTRICTED PAYMENTS. Except that (A) Parent may (i) declare and pay
dividends and distributions payable only in common stock of the Parent and (ii)
except to the extent the net cash proceeds thereof are required to be applied to
the prepayment of the advances pursuant to Section 2.06(b) of the Credit
Agreement, purchase, redeem, retire, defease or otherwise acquire shares of its
capital stock with the proceeds received contemporaneously from the issue of new
38
shares of its capital stock with equal or inferior voting powers, designations,
preferences and rights, (B) any Subsidiary of any Customer may (i) declare and
pay cash dividends to such Customer and (ii) declare and pay cash dividends to
any other Loan Party of which it is a Subsidiary, (C) the Customers may pay cash
dividends or otherwise transfer funds to the Parent or MCCI. for operating
expenses incurred in the normal course of business by the Parent or MCCI or paid
by the Parent or MCCI on behalf of the Customers. Such expenses include all
payroll and benefits costs for all Subsidiaries of the Parent, telephone,
travel, rent and other occupancy costs, professional expenses, including
consulting, audit, accounting and legal expenses, corporate insurance expenses,
data processing costs and other operating expenses, and (D) the Parent and the
Customers and Eleris, Inc. may issue stock options to the directors and
employees of Eleris, Inc. in an aggregate amount not to exceed 20% of the
capital stock of Eleris Inc., no Loan Party will, directly or indirectly: (i)
declare or pay any dividend (other than dividends payable solely in common stock
of any Loan Party or any Guarantor) 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 any Loan Party or any warrants, options or rights to
purchase any such capital stock, 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 any Loan Party or any
Guarantor; 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. No Loan Party will, directly or indirectly, make, maintain or
acquire any Investment in any Person 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 or any Guarantor 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 or any Guarantors;
(D) commercial paper of any corporation 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;
(E) Investments by the Parent and its Subsidiaries in their
Subsidiaries outstanding on the date hereof;
(F) loans and advances to employees in the ordinary course of the
business of the Parent and its Subsidiaries (other than Non-Filing Subsidiaries)
as presently conducted in an aggregate principal amount not to exceed Five
Hundred Thousand Dollars ($500,000) at any time outstanding;
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(G) Investments by the Parent and its Subsidiaries in cash equivalents
in an aggregate principal amount not to exceed Five Million Dollars ($5,000,000)
at any time outstanding;
(H) Investments existing on the date hereof and described on Attachment
B hereto;
(I) Investments by the Borrowers in Hedge Agreements (as defined in
Section 10 of this Agreement); and
(J) Investments in Subsidiaries not existing on the date hereof that
are formed with an initial capitalization of One Million Dollars ($1,000,000) or
less, provided that the aggregate Investments permitted under this clause (J)
shall not exceed ($5,000,000) in any Fiscal Year.
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 either Customer or
any Guarantor except in the ordinary course of business and pursuant to the
reasonable requirements of any Loan Party's or any Guarantor's business upon
fair and reasonable terms no less favorable to such Loan Party or Guarantor than
could be obtained in a comparable arm's-length transaction with an unaffiliated
Person, provided, however no Loan Party will, or permit any of its Subsidiaries
to, transfer, sell, exchange or dispose of any Collateral to any Affiliate or
Subsidiary of any Loan Party except if such transfer, sale, exchange or
disposition is subject to IBM Credit's security interest in such Collateral.
8.9. ERISA. No Loan Party will (A) terminate any Plan so as to incur a material
liability to the PBGC (as defined in Section 6.12 of this Agreement), (B) permit
any "prohibited transaction" involving any Plan (other than a "multi-employer
benefit plan") which would subject any Loan Party or any Guarantor 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, 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 Collateral or any part thereof after the occurrence and
during the continuance of an Event of Default.
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8.11. STORAGE OF COLLATERAL WITH BAILEES AND WAREHOUSEMEN. Collateral shall not
be stored with a bailee, warehouseman or similar party without the prior written
consent of IBM Credit unless the Loan Party or Guarantor will, concurrently with
the delivery of such Collateral to such party, cause such party to issue and
deliver to IBM Credit, warehouse receipts in the name of IBM Credit evidencing
the storage of such Collateral.
8.12. INDEBTEDNESS. No Loan Party will create, incur, assume or permit to exist
any Indebtedness, except for Permitted Indebtedness.
8.13. LOANS. No Loan Party will make any loans, advances, contributions or
payments of money or goods to any Subsidiary, Affiliate or Parent or to any
officer, director or stockholder of any Loan Party or of any such corporation
(except for compensation for personal services actually rendered), except for
transactions expressly authorized in this Agreement, and (i) stock option plans
(other than in respect of any Non-Filing Subsidiary), (ii) employee loans (other
than in respect of any Non-Filing Subsidiary) and (iii) Permitted Indebtedness.
8.14. AMENDMENT, ETC. OF CREDIT AGREEMENT . No Loan Party shall agree in any
manner to any amendment, modification or change of any term or condition of the
Credit Agreement or take any other action in connection with the Credit
Agreement that would (i) increase the percentages included in clauses (a) or (b)
of the definition of "Loan Value" in the Credit Agreement, (ii) reduce the
dollar amount set forth in Section 3.02(a)(iii) of the Credit Agreement, (iii)
reduce the dollar amount, or otherwise amend the calculation of the liquidation
reserve included in clause (b) of the definition of "Loan Value" in the Credit
Agreement and/or (iv) decrease the liquidation reserve set forth in the Credit
Agreement Borrowing Base Certificate.
8.15. INTERIM ORDER AND FINAL ORDER . No Loan Party shall make or permit to be
made any changes, amendment or modifications, or any application or motion for
any change, amendment or modification to the Interim Order or the Final Order.
The parties acknowledge that the foregoing shall not preclude the entry of any
order of the Bankruptcy Court approving or authorizing an amendment or
modification of this Agreement or the Other Documents or the Interim Order or
the Final Order.
8.16. APPLICATION TO THE BANKRUPTCY COURT . No Loan Party shall apply to the
Bankruptcy Court for the authority to take any action that is prohibited by the
terms of this Agreement and the Other Documents or refrain from taking any
action that is required to be taken by the terms of this Agreement and the Other
Documents.
8.17. CHAPTER 11 CLAIMS . No Loan Party shall incur, create assume, suffer to
exist or permit or make any application or motion for any other Super-Priority
Claim or Lien which is pari passu with or senior to the claims of IBM Credit
pursuant to this Agreement, the Interim Order or the Final Order, other than (a)
as expressly contemplated and permitted by the Interim Order or the Final Order
or (b) a senior Super-Priority Claim or Lien in favor of Citibank, as
Administrative Agent and Collateral Agent under the Credit Agreement.
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8.18. RECLAMATION CLAIMS; BANKRUPTCY CODE SECTION 546(G)* AGREEMENTS . No Loan
Party shall (a) make any payments or transfer any property on account of claims
asserted by vendors of any Loan Party for reclamation in accordance with Section
2-702 of the Uniform Commercial Code and Section 546(c) of the Bankruptcy Code,
and (b) enter into any agreements or file any motion seeking a Bankruptcy Court
order for the return of inventory to any vendor pursuant to Section 546(g)* of
the Bankruptcy Code, other than as expressly contemplated and permitted by the
Interim Order or the Final Order.
8.19. NON-FILING SUBSIDIARIES . No Loan Party will and will permit any of its
Subsidiaries to directly or indirectly (i) purchase, lease, transfer, sell or
exchange any of its property or assets of any kind or the rendering of services
to any Non-Filing Subsidiary, (ii) pay any amounts owing to any Non-Filing
Subsidiary and all such payments owing are hereby subordinate in the payment in
full of all Obligations hereunder, and (iii) make or permit to exist any loans
or advances to Non-Filing Subsidiaries, or (iv) apply to the Bankruptcy Court
for authority to do any of the foregoing: provided, however, the Loan Parties
shall be permitted to make advances to MicroAge Teleservices, L.L.C.
("TeleServices") in the amount and manner permitted in the Credit Agreement.
SECTION 9. DEFAULT
9.1. EVENT OF DEFAULT. Any one or more of the following events shall constitute
an Event of Default by any Loan Party under this Agreement and the Other
Documents:
(A) the failure to pay any Product Advance, Shortfall Amount or any
other Obligation or any part thereof when due and payable;
(B) (i) the failure to comply with or observe the covenant set forth in
Section 8.14 of this Agreement and (ii) the failure to comply with or observe
any other term, covenant or agreement contained in this Agreement or any of the
Other Documents and, in the case of (ii), such failure is not cured within
twenty (20) days after the earlier of the date on which (A) a chief executive
officer, chief financial officer, executive vice president, controller,
treasurer or assistant treasurer of any Loan Party becomes aware of such failure
or (B) written notice thereof shall have been given to the Parent by IBM Credit;
(C) the occurrence of a default or event of default under the Cash
Collateral Stipulation;
(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) any Loan Party or any of its any Subsidiaries or any Guarantor
shall generally not pay its debts as such debts become due (other than with
respect to the Cases), 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
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or person with similar powers shall be appointed for any Loan Party, any
Subsidiary 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
Loan Party or any of its Subsidiaries or any Guarantor shall have a period of
sixty (60) days within which to discharge any involuntary petition for
bankruptcy or similar proceeding;
(F) the use of any funds borrowed from IBM Credit under this Agreement
for any purpose other than as provided in this Agreement;
(G) the entry of any judgment on or after the Petition Date against any
Loan Party or any Guarantor in an amount in excess of Two Million Five Hundred
Thousand Dollars ($2,500,000) 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 superseding 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;
(H) any Loan Party or any of its Subsidiaries shall fail to pay any
principal of, premium or interest on or any amount payable in respect of the
Credit Agreement arising on or after the Petition Date and such failure shall
continue after the applicable cure period, if any, specified in the Credit
Agreement; or any other event shall occur or condition shall exist under the
Credit Agreement or any agreement or instrument relating thereto, if the effect
of such event or condition is to accelerate, or to permit the acceleration of,
the maturity of the Credit Agreement or otherwise to cause the debt to mature;
(I) the dissolution or liquidation of any Loan Party or any of
Subsidiaries or its directors or stockholders shall take any action to dissolve
or liquidate either Customer, any Subsidiary or any Guarantor unless otherwise
provided for herein;
(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) there issues a warrant of distress for any rent or taxes with
respect to the warehouse facilities located in Tempe, AZ, Miami, FL, Paulsboro,
NJ, Sparks, NV, Allen, TX and Cincinnati, OH and any additional warehouse
locations occupied by any Loan Party or any of its Subsidiaries 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;
(L) any Loan Party (other than an Immaterial Subsidiary) suspends
business for a period of five (5) consecutive days;
(M) (i) the occurrence of any event or condition that permits the
holder of any Indebtedness in excess of Two Million Five Hundred Thousand
Dollars ($2,500,000) arising in one or more related or unrelated transactions to
accelerate the maturity thereof or the failure of
43
any Loan Party to pay when due any such Indebtedness or (ii) the occurrence of
an Event of Default under the Credit Agreement;
(N) any Guaranty of any or all of the Obligations executed by any
Guarantor (other than an Immaterial 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 Customer to the PBGC which exceeds Seven Million Five
Hundred Thousand Dollars ($7,500,000);
(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) the Cases shall be dismissed, suspended or converted to a case
under Chapter 7 of the Bankruptcy Code or a trustee shall be appointed in the
Cases or an application shall be filed by any Loan Party for the approval of, or
there shall arise any other claim having priority senior to or pari passu with
the claims of IBM Credit under this Agreement or any other claim having priority
over any or all administrative expenses of the kind specified in Section 503(b)
or 507(b) of the Bankruptcy Code (other than the Carve-Out);
(S) the Bankruptcy Court shall enter an order (i) granting relief from
the automatic stay applicable under Section 362 of the Bankruptcy Code to any
holder of any security interest in any assets in excess of Five Hundred Thousand
Dollars ($500,000) or in the aggregate in excess of One Million Dollars for any
and all such holders other than as expressly contemplated by the Interim Order
or the Final Order or (ii) approving any settlement or other stipulation with
any creditor of any Loan Party other than IBM Credit or otherwise providing for
payments as adequate protection or otherwise to such creditor individually or in
the aggregate in excess of One Million Dollars ($1,000,000) for any and all such
creditors;
(T) any Loan Party shall make any payment (as adequate protection or
otherwise) on account of any claim arising or deemed to have arisen prior to the
Petition Date other than a payment or payments which would not constitute a
default under section 9.1(S)(ii) of this Agreement except as expressly
contemplated by the Interim Order or the Final Order;
(U) the Bankruptcy Court shall enter an order amending, supplementing,
vacating or otherwise modifying the Interim Order or Final Order;
44
(V) the Bankruptcy Court shall enter an order appointing an examiner
with powers beyond the duty to investigate and report as set forth in Section
1106(a)(3) and (4) of the Bankruptcy Code, in the Cases;
(W) the Bankruptcy Court shall fail to enter (or shall vacate) a cash
collateral order satisfactory to IBM Credit with respect to the Pre-Petition
Secured Obligation due under the Pre-Petition Inventory Finance Agreement;
(X) the Bankruptcy Court shall enter an order granting relief pursuant
to Section 362(d) of the Bankruptcy Code other than as permitted under Section
9.1(S)(i);
(Y) the entry of the Final Order shall not have occurred within Thirty
(30) days after the Petition Date;
(Z) any Loan Party or any of its Subsidiaries (other than such Loan
Party or such Subsidiary that is an Immaterial Subsidiary) shall generally not
pay its debts as such debts become due, or (other than with respect to the
Cases) shall admit in writing its inability to pay its debts generally, or shall
make a general assignment for the benefit of creditors; or any proceeding shall
be instituted by or against any Loan Party or any of its Subsidiaries (other
than such Loan Party or such Subsidiary that is an Immaterial Subsidiary)
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official for
it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it) that is being
diligently contested by it in good faith, either such proceeding shall remain
undismissed or unstayed for a period of 30 days or any of the actions sought in
such proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or any substantial part of its property) shall occur; or any
Loan Party or any of its Subsidiaries (other than such Loan Party or such
Subsidiary that is an Immaterial Subsidiary) shall take any corporate or other
action to authorize any of the actions set forth above in Section 6.1 (R) of
this Agreement; and
(AA) any Loan Party shall bring a motion in the Cases: (i) to grant any
Lien other than Permitted Liens upon or affecting any Collateral; or (ii) to
effect any other action or actions adverse to IBM Credit or its rights and
remedies hereunder or their interest in the Collateral that would, individually
or in the aggregate, have a Material Adverse Effect.
(BB) Any challenge by or on behalf of any Loan Party or other Person to
the validity of this Agreement or any Other Document or the applicability or
enforceability of this Agreement or any Other Document or which seeks to void,
avoid, limit, or otherwise adversely affect the security interest created by or
in this Agreement or any Other Document or any payment made pursuant thereto; or
(CC) The determination of any Loan Party, whether by vote of such Loan
Party's board of directors or otherwise, to suspend the operation of such Loan
Party's business in the ordinary course, liquidate all or substantially all of
such Loan Party's assets, or employ an agent or other
45
third party to conduct any so-called "Going-Out-of Business" sales, or the
filing of a motion or other application in the Cases, seeking authority to do
any of the foregoing.
9.2. ACCELERATION. (A) 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(D) 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.
(B) Upon the occurrence and during the continuance of an Event of
Default, the automatic stay provided in Section 362 of the Bankruptcy Code shall
be deemed automatically vacated and IBM Credit, shall, upon forty-eight (48)
business hours' written notice (i.e. 48 hours calculated without reference to
Saturday, Sunday or any other day on which the Bankruptcy Court Clerk's Office
is not open, PROVIDED HOWEVER, that unless notice is received at or before 12:00
Noon, Arizona time, on the day notice is given, IBM Credit's pursuit of remedies
may not commence until the beginning of business on the third Business Day after
the day on which notice is received) to the Loan Parties and any creditors'
committee appointed in the Cases pursuant to Section 1102 of the Bankruptcy
Code, be immediately permitted to, among other things, pursue any and all of its
remedies against any Loan Party or the Collateral and seek payment in respect of
all Obligations.
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, upon forty-eight
(48) business hours' written notice to the Loan Parties (i.e. 48 hours
calculated without reference to Saturday, Sunday or any other day on which the
Bankruptcy Court Clerk's Office is not open, PROVIDED HOWEVER, that unless
notice is received at or before 12:00 Noon, Arizona time, on the day notice is
given, IBM Credit's pursuit of remedies may not commence until the beginning of
business on the third Business Day after the day on which notice is received)
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 Collateral, or
IBM Credit may use (at the expense of the Loan Parties) such of the supplies or
space of the Loan Parties business or otherwise, as may be necessary to properly
administer and control the Collateral or the handling of collections and
realizations thereon; and (ii) 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 an Event of
Default which has not been waived in writing by IBM Credit, upon forty-eight
(48) business hours' written notice to the Loan Parties (i.e. 48 hours
calculated without reference to Saturday, Sunday or any other day
46
on which the Bankruptcy Court Clerk's Office is not open, PROVIDED HOWEVER, that
unless notice is received at or before 12:00 Noon, Arizona time, on the day
notice is given, IBM Credit's pursuit of remedies may not commence until the
beginning of business on the third Business Day after the day on which notice is
received) 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 each 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. Each Loan Party 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 IBM of such Collateral constitutes a
commercially reasonable sale. Each Loan Party agrees, at the request of IBM
Credit, to assemble the Collateral and to make it available to IBM Credit at
places which IBM Credit shall select, whether at the premises of the Loan Party
or elsewhere, and to make available to IBM Credit the premises and facilities of
the Loan Parties for the purpose of IBM Credit's taking possession of, removing
or putting such 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 each
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 Loan Parties' Obligations, whether due or to become due, in such
order as IBM Credit may in it sole discretion elect. Loan Parties shall remain
liable to IBM Credit for any deficiencies, and IBM Credit in turn agrees to
remit to Loan Parties or their 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,
47
demand and protest, and notices of non-payment, non-performance, any right of
contribution, dishonor, and any other demands, and notices required by law.
SECTION 10. FINANCIAL COVENANT DEFINITIONS; FINANCIAL COVENANTS
10.1. FINANCIAL COVENANT DEFINITIONS . Solely for purposes of this Section 10,
the following terms shall have the following meanings:
"Administrative Agent": Citibank, N.A..
"Borrowers": as defined in the Credit Agreement.
"Capital Expenditures": means, for any Person for any period, the sum of,
without duplication, (a) all expenditures made, directly or indirectly, by such
Person or any of its Subsidiaries during such period for equipment, fixed
assets, real property or improvements, or for replacements or substitutions
therefor or additions thereto, that have been or should be, in accordance with
GAAP, reflected as additions to property, plant or equipment on a Consolidated
balance sheet of such Person or have a useful life of more than one year plus
(b) the aggregate principal amount of all Debt (including Obligations under
Capitalized Leases) assumed or incurred in connection with any such
expenditures. For purposes of this definition, the purchase price of equipment
that is purchased simultaneously with the trade-in of existing equipment or with
insurance proceeds shall be included in Capital Expenditures only to the extent
of the gross amount of such purchase price less the credit granted by the seller
of such equipment for the equipment being traded in at such time or the amount
of such proceeds, as the case may be.
"Capitalized Leases": means all leases that have been or should be, in
accordance with GAAP, recorded as capitalized leases.
"Cash Concentration Account": has the meaning specified in the Security
Agreement.
"Contingent Obligation": means, with respect to any Person, any Obligation or
arrangement of such Person to guarantee or intended to guarantee any Debt,
leases, dividends or other payment Obligations ("primary obligations") of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, (a) the direct or indirect guarantee,
endorsement (other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the Obligation of a primary obligor, (b) the Obligation to make
take-or-pay or similar payments, if required, regardless of nonperformance by
any other party or parties to an agreement or (c) any Obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (A) for the purchase or payment of any such primary obligation or
(B) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, assets, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (iv) otherwise to assure
or hold harmless the holder of such primary obligation against loss in respect
thereof. The amount of any Contingent Obligation shall be deemed to be an amount
equal to the stated or determinable amount of the
48
primary obligation in respect of which such Contingent Obligation is made (or,
if less, the maximum amount of such primary obligation for which such Person may
be liable pursuant to the terms of the instrument evidencing such Contingent
Obligation) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder), as determined by such Person in good faith.
"Debt": of any Person means, without duplication for purposes of calculating
financial ratios, (a) all indebtedness of such Person for borrowed money, (b)
all Obligations of such Person for the deferred purchase price of property or
services (other than trade payables not overdue by more than 60 days incurred in
the ordinary course of such Person's business), (c) all Obligations of such
Person evidenced by notes, bonds, debentures or other similar instruments, (d)
all Obligations of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) all Obligations of such Person as lessee under Capitalized
Leases, (f) all Obligations of such Person under acceptance, letter of credit or
similar facilities, (g) all Obligations of such Person to purchase, redeem,
retire, defease or otherwise make any payment in respect of any capital stock of
or other ownership or profit interest in such Person or any other Person or any
warrants, rights or options to acquire such capital stock, valued, in the case
of Redeemable Preferred Stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all Obligations of
such Person in respect of Hedge Agreements, (i) all Contingent Obligations of
such Person and (j) all indebtedness and other payment Obligations referred to
in clauses (a) through (i) above of another Person secured by (or for which the
holder of such Debt has an existing right, contingent or otherwise, to be
secured by) any Lien on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such indebtedness or other payment
Obligations.
"Debt for Borrowed Money": of any Person means all Debt of the types described
in clauses (a) through (e) of the definition of "Debt" less amounts on deposit
in the Cash Concentration Account.
"EBITDA": means, for any period, the sum, determined on a Consolidated basis, of
(a) net income (or net loss), (b) interest expense (including implied interest
expenses incurred under the Receivables Sales Agreement and flooring subsidies,
in each case determined on a basis consisted with past practice, (c) income tax
expense, (d) depreciation expense, (e) amortization expense, (f) extraordinary,
non-recurring, transactional or unusual losses deducted in calculating net
income less extraordinary, non-recurring, transactional or unusual gains added
in calculating net income and (g) any non-cash expenses, non-cash losses or
other non-cash charges resulting from the writedown in the valuation of any
assets in each case of the Parent Guarantor and its Subsidiaries, determined in
accordance with GAAP for such period.
"Fee Letter": means the fee letter dated April 13, 2000 between the Parent
Guarantor and the Administrative Agent, as amended.
"Guarantors" means the Parent Guarantor and the Subsidiary Guarantors.
49
"Hedge Agreements": means interest rate swap, cap or collar agreements, interest
rate future or option contracts, currency swap agreements, currency future or
option contracts and other hedging agreements.
"Hedge Bank": means any Lender Party or an Affiliate of a Lender Party in its
capacity as a party to a Secured Hedge Agreement.
"Interest Coverage Ratio" means, at any date of determination, the ratio of (a)
Consolidated EBITDA to (b) interest payable on, and amortization of debt
discount in respect of, all Debt for Borrowed Money (including expenses incurred
under the Receivables Sales Agreements and flooring subsidiaries, in each case,
of or by the Parent Guarantor and its Subsidiaries during the applicable period
most recently ended for which financial statements are required to the delivered
to IBM Credit pursuant to Section 7.1(A) or (B), as the case may be.
"Issuing Bank": as defined in the Credit Agreement.
"Lender Party": as defined in the Credit Agreement.
"Lenders: as defined in the Credit Agreement.
"Letter of Credit Advance": means an advance made by the Issuing Bank or any
Lender pursuant to Section 2.03(c) of the Credit Agreement.
"Letter of Credit Agreement": has the meaning specified in Section 2.03(a) of
the Credit Agreement.
"Letter of Credit Commitment": means, with respect to the Issuing Bank at any
time, the amount set forth opposite the Issuing Bank's name on Schedule I hereto
under the caption "Letter of Credit Commitment" or, if the Issuing Bank has
entered into one or more Assignment and Acceptances, set forth for the Issuing
Bank in the Register maintained by the Administrative Agent pursuant to Section
9.07(d) of the Credit Agreement as the Issuing Bank's "Letter of Credit
Commitment", as such amount may be reduced at or prior to such time pursuant to
Section 2.05 of the Credit Agreement.
"Letter of Credit Facility": means, at any time, an amount equal to the lesser
of (a) the amount of the Issuing Bank's Letter of Credit Commitment at such time
and (b) $50,000,000, as such amount may be reduced at or prior to such time
pursuant to Section 2.05 of the Credit Agreement.
"Letters of Credit": has the meaning specified in Section 2.01(c) of the Credit
Agreement.
"Lien" means any lien, security interest or other charge or encumbrance of any
kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property.
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"Loan Documents": means (a) for purposes of the Credit Agreement and the Notes
and any amendment, supplement or modification hereof or thereof, (i) this
Agreement, (ii) the Notes, (iii) the Guaranties, (iv) the Collateral Documents,
(v) the Fee Letter, (vi) each Letter of Credit Agreement and (vii) each
Intercreditor Agreement and (b) for purposes of the Guaranties and the
Collateral Documents and for all other purposes other than for purposes of the
Credit Agreement and the Notes, (i) the Credit Agreement, (ii) the Notes, (iii)
the Guaranties, (iv) the Collateral Documents, (v) the Fee Letter, (vi) each
Letter of Credit Agreement, (vii) each Secured Hedge Agreement and (viii) each
Intercreditor Agreement, in each case as amended.
"Loan Parties": means the Borrowers and the Guarantors.
"Note": means a promissory note of any Borrower payable to the order of any
Lender, in substantially the form of Exhibit A to the Credit Agreement,
evidencing the aggregate indebtedness of such Borrower to such Lender resulting
from the Working Capital Advances, Letter of Credit Advances and Swing Line
Advances made by such Lender to such Borrower, as amended.
"Obligation": means, with respect to any Person, any payment, performance or
other obligation of such Person of any kind, including, without limitation, any
liability of such Person on any claim, whether or not the right of any creditor
to payment in respect of such claim is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, disputed, undisputed, legal,
equitable, secured or unsecured, and whether or not such claim is discharged,
stayed or otherwise affected by any proceeding referred to in Section 6.01(f) of
the Credit Agreement. Without limiting the generality of the foregoing, the
Obligations of any Loan Party under the Loan Documents include (a) the
obligation to pay principal, interest, Letter of Credit commissions, charges,
expenses, fees, attorneys' fees and disbursements, indemnities and other amounts
payable by such Loan Party under the Loan Document and (b) the obligation of
such Loan Party to reimburse any amount in respect of any of the foregoing that
any Lender Party, in its sole discretion, may elect to pay or advance on behalf
of such Loan Party.
"Parent Guarantor": MicroAge, Inc..
"Preferred Stock": means, with respect to any corporation, capital stock issued
by such corporation that is entitled to a preference or priority over any other
capital stock issued by such corporation upon any distribution of such
corporation's assets, whether by dividend or upon liquidation.
"Redeemable": means, with respect to any capital stock or other ownership or
profit interest, Debt or other right or Obligation, any such right or Obligation
that (a) the issuer has undertaken to redeem at a fixed or determinable date or
dates, whether by operation of a sinking fund or otherwise, or upon the
occurrence of a condition not solely within the control of the issuer or (b) is
redeemable at the option of the holder.
"Security Agreement": has the meaning specified in Section 3.01(a)(ii) of the
Credit Agreement.
"Subsidiary Guarantors" means all Subsidiaries of the Parent Guarantor and each
other Subsidiary of any of them that shall be required to execute and deliver a
guaranty pursuant to Section 5.01(j) or Section 5.01(k) of the Credit
Agreement.
51
"Swing Line Advance": means an advance made by (a) Citibank, N.A. pursuant to
Section 2.01(b)or (b) any Lender pursuant to Section 2.02(b) of the Credit
Agreement.
"Working Capital Advance": as defined in Section 2.01(a) of the Credit
Agreement.
10.2. FINANCIAL COVENANTS . So long as any Product Advance or any other
Obligation of any Loan Party under this Agreement or any Other Documents shall
remain unpaid, the Parent will:
(a) INTEREST COVERAGE RATIO. Maintain at all times an Interest Coverage
Ratio of not less than the ratio set forth below for each period set forth
below.
--------------------------------------------------------------------------------
PERIOD RATIO
--------------------------------------------------------------------------------
Fiscal Quarter ended July 31, 2000 (1.25:1.00)
--------------------------------------------------------------------------------
Two Fiscal Quarters ended October 31, 2000 (0.80:1.00)
--------------------------------------------------------------------------------
Three Fiscal Quarters ended January 31, 2001 (0.25:1.00)
--------------------------------------------------------------------------------
Four Fiscal Quarters ended April 30, 2001 0.10:1.00
--------------------------------------------------------------------------------
Four Fiscal Quarters ended July 31, 2001 1.00:1.00
--------------------------------------------------------------------------------
Four Fiscal Quarters ended October 31, 2001 1.20:1.00
--------------------------------------------------------------------------------
52
(b) MINIMUM EBITDA. Maintain at all times EBITDA of the Parent
Guarantor and its Subsidiaries not less than the amount set forth below for each
period set forth below.
--------------------------------------------------------------------------------
PERIOD $ AMOUNT
--------------------------------------------------------------------------------
Fiscal Quarter ended July 31, 2000 ($10,000,000)
--------------------------------------------------------------------------------
Two Fiscal Quarters ended October 31, 2000 ($12,000,000)
--------------------------------------------------------------------------------
Three Fiscal Quarters ended January 31, 2001 ($4,500,000)
--------------------------------------------------------------------------------
Four Fiscal Quarters ended April 30, 2001 $2,500,000
--------------------------------------------------------------------------------
Four Fiscal Quarters ended July 31, 2001 $10,000,000
--------------------------------------------------------------------------------
Four Fiscal Quarters ended October 31, 2001 $15,000,000
--------------------------------------------------------------------------------
SECTION 11. MISCELLANEOUS
11.1. 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 the Loan Parties that they intend 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 the 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 the Obligations,
no termination of this Agreement or any of the Other Documents shall in any way
affect or impair (i) the 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 Loan Parties, continue to provide Product Advances hereunder.
11.2. INDEMNIFICATION. Each Loan Party hereby 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) Loan Parties, (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 either Customer
in connection therewith. Notwithstanding the foregoing, no Loan Party 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.
53
11.3. ADDITIONAL OBLIGATIONS . IBM Credit, without waiving or releasing any
Obligation or Default of the Loan Parties, may perform any Obligations of the
Loan Parties that the Loan Parties 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.
11.4. LIMITATION OF LIABILITY . NEITHER IBM CREDIT NOR ANY OTHER INDEMNIFIED
PERSONS 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 PERSONS 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 ANY LOAN PARTY REQUESTS IBM
CREDIT TO EFFECT A WITHDRAWAL OR DEBIT OF FUNDS FROM AN ACCOUNT OF SUCH LOAN
PARTY, 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.
11.5. 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
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 any
Loan Party of any undertakings, agreements, covenants, warranties and
representations of this Agreement or any of the Other Documents 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 such
54
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 each 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.
11.6. 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.
11.7. ENTIRE AGREEMENT . This Agreement and the Other Documents constitute the
entire agreement among the parties relative to the subject matter hereof. Any
previous agreement among the parties with respect hereof is superseded by this
Agreement and the Other Documents.
11.8. ONE LOAN . All Product Advances heretofore, now or at any time or times
hereafter made by IBM Credit to any Loan Party 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 the Loan Parties to
IBM Credit or any assignor of IBM Credit.
11.9. ADDITIONAL COLLATERAL. All monies, reserves and proceeds received or
collected by IBM Credit with respect to 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 the Obligations and
shall be applied promptly by IBM Credit on account of the Obligations; provided,
however, IBM Credit may release to the Loan Parties such portions of such
monies, reserves and proceeds as IBM Credit may from time to time determine, in
its sole discretion.
11.10. NO MERGER OR NOVATIONS . (A) Notwithstanding anything contained in any
document to the contrary, it is understood and agreed by each Loan Party that
the claims of IBM Credit arising hereunder and existing as of the date hereof
constitute continuing claims arising out of the Obligations of the Loan Parties'
under the Pre-Petition Inventory Finance Agreement. 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 the Obligations under the Pre-Petition Inventory Finance Agreement.
(B) Neither the obtaining of any judgment nor the exercise of any power
of seizure or sale shall operate to extinguish the Obligations of each 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.
55
11.11. 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.
11.12. BINDING EFFECT; ASSIGNMENT . This Agreement and the Other Documents shall
be binding upon and inure to the benefit of IBM Credit and the Loan Parties and
their respective successors and assigns; provided, that the Loan Parties shall
have no right to assign this Agreement or any of the Other Documents without the
prior written consent of IBM Credit.
11.13. 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 Customer at:
IBM Credit Corporation MTS Holding Company
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 000 0000 Xxxxx XxxxxXxx Xxx
Xxx Xxxxx, XX Xxxxx, XX 00000
Attention: Region Manager, West Attention: VP, Corporate Counsel
Facsimile: 000-000-0000 Facsimile: 000-000-0000
(iii) If to Customer at: (iv) If to Customer at:
Pinacor, Inc. MicroAge Computer Centers, Inc.
0000 Xxxxx XxxxxXxx Xxx 0000 Xxxxx XxxxxXxx Xxx
Xxxxx, XX 00000 Xxxxx, XX 00000
Attention: VP, Corporate Counsel Attention: VP, Corporate Counsel
Facsimile: 000-000-0000 Facsimile: 000-000-0000
56
(v) If to Parent at: (vi) If to Customer at:
MicroAge, Inc. MicroAge Technology Services, L.L.C.
0000 Xxxxx XxxxxXxx Xxx 0000 Xxxxx XxxxxXxx Xxx
Xxxxx, XX 00000 Xxxxx, XX 00000
Attention: VP, Corporate Counsel Attention: VP, Corporate Counsel
Facsimile: 000-000-0000 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 G ("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
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 each Customer and will require each Loan Party's registration with
IBM Credit before access is provided. After IBM Credit has approved the
registration submitted by each Loan Party, IBM Credit shall provide an ID and
password(s) to an individual designated by each Loan Party ("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 11.13 shall have the
57
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 11.13
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 each Loan Party's, that IBM Credit can reasonably rely on the fact that such
E-Document is properly authorized by each 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. No 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.
LOAN PARTY RECIPIENT INFORMATION for Internet transmissions:
(PLEASE PRINT)
Name of Loan Party's Designated Central Contact Authorized to Receive IDs
and Passwords:
Xxxxx Xxxxx for MTSI
e-mail Address: XXXXXX@XXXXXXXX.XXX
Phone Number: 000- 000-0000
Xxxxx Xxxxx for MCCI
e-mail Address: XXXXXX@XXXXXXXX.XXX
Phone Number: 000-000-0000
Xxxxx Xxxxx for Pinacor
e-mail Address: XXXXXX@XXXXXXXX.XXX
Phone Number: 000-000-0000
Xxxxx Xxxxx for MTS
e-mail Address: XXXXXX@XXXXXXXX.XXX
Phone Number: 000- 000-0000
Xxxxx Xxxxx for MicroAge, Inc.
e-mail Address: XXXXXX@XXXXXXXX.XXX
Phone Number: 000-000-0000
11.14. 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.
11.15. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW . TO INDUCE IBM
CREDIT TO ACCEPT THIS AGREEMENT AND THE OTHER DOCUMENTS, EACH 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 AGREEMENT, OR
58
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 EACH LOAN PARTY AT ITS
ADDRESS SET FORTH IN SECTION 11.13 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 AND THE OTHER DOCUMENTS SHALL BE GOVERNED BY THE LAWS (WITHOUT GIVING
EFFECT TO CONFLICT OF LAW PROVISIONS) OF THE STATE OF NEW YORK.
11.16. 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 THE LOAN
PARTIES ARE PARTIES AS TO ALL MATTERS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
AGREEMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED IN CONNECTION
HEREWITH.
11.17. INTERCREDITOR AGREEMENTS . EACH OF THE PARTIES HERETO HEREBY ACKNOWLEDGES
THAT ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND THE OTHER DOCUMENTS
DEFINED HEREIN ARE SUBJECT OF THE PROVISIONS OF THE INTERCREDITOR AGREEMENT.
59
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63
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 to be affixed hereto as of the date first written
above.
IBM CREDIT CORPORATION MTS HOLDING COMPANY
BY: /s/ Xxxxxx X. Xxxxx BY: /s/ Xxx X. Xxxxxx
------------------------------------ ----------------------------------
PRINT NAME: XXXXXX X. XXXXX PRINT NAME: /s/ Xxx X. Xxxxxx
--------------------------
TITLE: DIR., COMMERCIAL & SPECIALTY TITLE: Vice President and Treasurer
FINANCING AMERICAS -------------------------------
PINACOR, INC. MICROAGE COMPUTER CENTERS, INC.
BY: /s/ Xxx X. Xxxxxx BY: /s/ Xxx X. Xxxxxx
------------------------------------ ----------------------------------
PRINT NAME: /s/ Xxx X. Xxxxxx PRINT NAME: /s/ Xxx X. Xxxxxx
---------------------------- --------------------------
TITLE: Vice President and Treasurer TITLE: Vice President and Treasurer
--------------------------------- -------------------------------
MICROAGE, INC. MICROAGE TECHNOLOGY SERVICES, L.L.C.
BY: /s/ Xxx X. Xxxxxx BY: /s/ Xxx X. Xxxxxx
------------------------------------ ----------------------------------
PRINT NAME: /s/ Xxx X. Xxxxxx PRINT NAME: /s/ Xxx X. Xxxxxx
---------------------------- --------------------------
TITLE: Vice President, CFO and Treasurer TITLE: Vice President and Treasurer
--------------------------------- -------------------------------
