AMENDMENT
TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
This AMENDMENT TO THE INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
(this "Amendment") is made as of May 21st, 1999 by and among SAVOIR TECHNOLOGY
GROUP, INC. ("SVTG"), a Delaware corporation, BUSINESS PARTNER SOLUTIONS, INC.,
a Texas corporation, MCBA SYSTEMS, INC., an Alabama corporation ("MCBA") and IBM
CREDIT CORPORATION, a Delaware corporation ("IBM Credit"). (SVTG and BPS and
MCBA are each referred to herein as a "Customer or, collectively, the
"Customers").
RECITALS:
WHEREAS, Customers and IBM Credit have entered into that certain
inventory and Working Capital Financing Agreement dated as of September 4, 1998
(as amended, supplemented or otherwise modified from time to time, the
"Agreement");
WHEREAS, Customers have requested that (i) certain terms of the
Agreement be modified, and (ii) certain financial covenants therein be adjusted,
and IBM Credit is willing to agree to the requests, subject to the terms set
forth in this Amendment.
AGREEMENT
NOW THEREFORE, in consideration of the premises set forth herein, and
for other good and valuable consideration, the value and sufficiency of which is
hereby acknowledged, the parties hereto agree that the Agreement is amended as
follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Agreement.
SECTION 2. AMENDMENT. The Agreement is hereby amended as follows:
A. Section 8.6(D) of the Agreement is deleted in its entirety and the
following substituted in lieu thereof:
"stock or other instruments representing investments in other companies
which exceed $1,000,000.00 at the time of acquisition of such Investment;"
B. Attachment A to the Agreement is hereby amended by deleting such
Attachment A in its entirety and substituting, in lieu thereof, the Attachment A
attached hereto. Such new Attachment A shall be effective as of the date
specified in the new Attachment A. The changes contained in the new Attachment A
include, without limitation, the following:
(a) The Free Financing Period Exclusion Fee is reduced from "Product
Advance multiplied by 0.40%" to "Product Advance multiplied by 0.25%".
Page 1 of 3
(b) Customers shall be required to maintain the following financial ratios,
percentages and amounts as of the last day of the fiscal period under
review by IBM Credit, based on the consolidated financial statements of
Savoir Technology Group, Inc. and in each case measured on a
year-to-date basis through the last day of the fiscal period under
review:
Covenant
Covenant Requirement
-------- -----------
(i) Current Assets to Current
Liabilities Greater than 1.0 : 1.0 (through 12/31/1998)
Greater than 1.05 : 1.0 (1/1/1999 - 12/31/1999)
Greater than 1.10 : 1.0 (1/1/2000 and thereafter)
(ii) Net Profit after Tax
to Revenue Equal to or Greater than 0.9 percent (through 12/31/1998)
Equal to or Greater than 1.0 percent (1/1/1999 - 3/31/1999)
Equal to or Greater than 1.2 percent (4/1/1999 - 6/30/1999)
Equal to or Greater than 1.4 percent (7/1/1999 - 12/31/1999)
Equal to or Greater than 1.5 percent (1/1/2000 and thereafter)
(iii) Tangible Net Worth Equal to or Greater than $0.0 (through 12/31/1998)
Equal to or Greater than $2.0 million (1/1/1999 - 3/31/1999)
Equal to or Greater than $3.4 million (4/1/1999 - 6/30/1999)
Equal to or Greater than $1.1 million (7/1/1999 - 9/30/1999)
Equal to or Greater than $4.2 million (10/1/1999 - 12/31/1999)
Equal to or Greater than $35.0 million (1/1/2000 and thereafter)
(iv) Net Profit before Tax and
Interest Expense to Equal to or Greater than
Interest Expense 2.25 : 1.0
(v) EBITDA to Fixed Charges Equal to or Greater than 1.0 : 1.0
(c) Definitions of accounting terms necessary for the calculation of the
EBITDA to Fixed Charges ratio have been added.
C. The Stated Maturity Date for a Term Loan is changed to September 30,
2000 (from August 31, 1999) and the repayment terms are revised as described in
Attachment A.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Customers make to IBM Credit the
following representations and warranties all of which are material and are made
to induce IBM Credit to enter into this Amendment.
SECTION 3.1. ACCURACY AND COMPLETENESS OF WARRANTIES AND REPRESENTATIONS. All
representations made by Customers in the Agreement were true and accurate and
complete in every respect as of the date made, and, as amended by this
Amendment, all representations made by Customers in the Agreement are true,
accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make representations not
misleading.
Page 2 of 3
SECTION 3.2 VIOLATION OF OTHER AGREEMENTS. The execution and delivery of this
Amendment and the performance and observance of the covenants to be performed
and observed hereunder do not violate or cause Customers not to be in compliance
with the terms of any agreement to which any Customer is a party.
SECTION 3.3 LITIGATION. Except as has been disclosed by Customers to IBM Credit
in writing, there is no litigation, proceeding, investigation or labor dispute
pending or threatened against any Customer, which if adversely determined, would
materially adversely affect such Customer's ability to perform Customer's
obligations under the Agreement and the other documents, instruments and
agreements executed in connection therewith or pursuant hereto.
SECTION 3.4 ENFORCEABILITY OF AMENDMENT. This Amendment has been duly
authorized, executed and delivered by Customers and is enforceable against
Customers in accordance with its terms.
SECTION 4. RATIFICATION OF AGREEMENT. Except as specifically amended hereby, all
of the provisions of the Agreement shall remain unamended and in full force and
effect. Customers hereby, ratify, confirm and agree that the Agreement, as
amended hereby, represents a valid and enforceable obligation of Customers, and
is not subject to any claims, offsets or defenses.
SECTION 5. GOVERNING LAW. This Amendment shall be governed by and interpreted in
accordance with the laws which govern the Agreement.
SECTION 6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been executed by duly authorized
representatives of the undersigned as of the day and year first above written.
SAVOIR TECHNOLOGY GROUP, INC. BUSINESS PARTNER SOLUTIONS, INC.
By: /S/ Xxxxx X. Xxxxx By: /S/ Xxxxx X. Xxxxx
------------------------------------ ----------------------------------
Print Name: Xxxxx X. Xxxxx Print Name: Xxxxx X. Xxxxx
---------------------------- --------------------------
Title: CFO Title: Director
--------------------------------- -------------------------------
Date: May 20, 1999 Date: May 20, 1999
---------------------------------- --------------------------------
IBM CREDIT CORPORATION MCBA SYSTEMS, INC.
By: /S/ Xxxxxx X. Xxxxx By: /S/ Xxxxx X. Xxxxx
----------------------------------- ----------------------------------
Print Name: Xxxxxx X. Xxxxx Print Name: Xxxxx X. Xxxxx
---------------------------- --------------------------
Title: Regional Operations Manager Title: Secretary
--------------------------------- -------------------------------
Date: May 21, 1999 Date: May 20, 1999
---------------------------------- --------------------------------
Page 3 of 3
ATTACHMENT A, EFFECTIVE DATE May 01, 1999 ("IWCF ATTACHMENT A")
TO INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
DATED September 4, 1998
Customers: SAVOIR TECHNOLOGY GROUP, INC.;
BUSINESS PARTNER SOLUTIONS, INC;
MCBA SYSTEMS, INC.
I. Fees, Rates and Repayment Terms:
(A) Credit Line: One Hundred Twenty Five Million Dollars
($125,000,000.00);
(B) Term Loan Commitment:
(i) Term A Loan: Fifteen Million Dollars ($15,000,000.00)
(ii) Term B Loan: Five Million Dollars ($5,000,000.00)
(C) Borrowing Base:
(i) 85% of the amount of the Customers' Eligible Accounts
other than Concentration Accounts as of the date of
determination as reflected in the Customers' most recent
Collateral Management Reports;
(ii) a percentage, determined from time to time by IBM Credit
in its sole discretion, of the amount of Customers'
Concentration Accounts for a specific Concentration Account
Debtor as of the date of determination as reflected in the
Customers' most recent Collateral Management Report; unless
otherwise notified by IBM Credit, in writing, the percentage
for Concentration Accounts for a specific Concentration
Account Debtor shall be the same as the percentage set forth
in paragraph (i) of the Borrowing Base;
(iii) 85% of the amount of the Customers' Eligible Accounts
arising from the sale of goods to or the performance of
services for Customers' clients in Puerto Rico ("Eligible
Puerto Rico Accounts") as of the date of determination as
reflected in the Customers' most recent Collateral Management
Reports, PROVIDED HOWEVER that Eligible Puerto Rico Accounts
shall be limited to the lesser of (a) an amount equal to 10%
of Eligible Accounts, or (b) $25,000.00;
(iv) 100% of amount of the Customer's Eligible IBM Credit
Accounts as of the date of determination as reflected in the
Customer's most recent Collateral Management Report;
(v) 100% of the Customers' inventory in the Customers'
possession as of the date of determination as reflected in the
Customers' most recent Collateral Management Report
constituting Products (other than service parts) financed
through a Product Advance by IBM Credit, provided, however,
IBM Credit has a
Page 1 of 10
IWCF ATTACHMENT A TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
I. Fees, Rates and Repayment Terms (continued):
first priority security interest in such Products and such
Products are in new and in un-opened boxes. The value to be
assigned to such inventory shall be based upon the Authorized
Supplier's invoice price to Customers for Products net of all
applicable price reduction credits;
(vi) 30% of the value of other inventory in which IBM Credit
has a first priority security interest and ordered from
parties other than Authorized Suppliers which are on such
parties' current price list, UP TO a maximum collateral value
of $6,000,000.00. The value to be assigned to such inventory
shall be based upon the supplier's invoice price to Customers
for such products net of all applicable price reduction
credits;
(vii) 20% of the value of Customers' IBM new parts inventory
purchased from IBM. The value to be assigned to such inventory
shall be based upon the supplier's invoice price to Customers
for such products net of all applicable price reduction
credits;
(viii) 75% of used equipment purchased from IBM Credit;
(ix) 75% of verifiable prepaid expenses to IBM Credit End User
Financing for used equipment.
(D) Product Financing Charge: Prime Rate plus 1.625%.
(E) Product Financing Period: 75 days.
(F) Collateral Insurance Amount: Forty Million Dollars
($40,000,000.00). Such insurance shall also include coverage
against earthquake peril for at least 30% of the value of
inventory stored in California.
(G) A/R Finance Charge:
(i) PRO Advance Charge: Prime Rate plus 1.875%.
(ii) WCO Advance Charge: Prime Rate plus 1.875%.
(H) Term Loan Finance Charges:
(i) Term A Loan: Prime Rate plus 2.000%.
(ii) Term B Loan: Prime Rate plus 2.000%.
(Note: Beginning October 1, 1999 through the Stated Maturity
Date, the outstanding Term Loan Advances will be amortized in
equal monthly payments of principal and interest. If the Prime
Rate changes during this period, the monthly payments to repay
the then remaining principal will be recalculated over the
remaining term at the new Term Loan Finance Charge).
Page 2 of 10
IWCF ATTACHMENT A TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
I. Fees, Rates and Repayment Terms (continued):
(I) Delinquency Fee Rate: Prime Rate plus 6.500%
(J) Shortfall Transaction Fee: Shortfall Amount multiplied
by 0.30%
(K) Free Financing Period Exclusion Fee: Product Advance
multiplied by 0.25%
(L) Other Charges:
(i) Monthly Service Fee: $1,500.00.
(ii) Commitment Fee: from and including March 1, 1999
to and including February 29,
2000, one half of one percent
(0.50%) per annum of the
difference between the then
current Credit Line and the
Average of the sum of the Product
Advances, PRO Advances and WCO
Advances calculated and billed at
the end of each month.
(iii) Closing Fee $200,000 payable on the Closing
Date.
Page 3 of 10
II. Bank Account
(A) Customers' Lockbox(es) and Special Account(s) will be maintained at the
following Bank(s):
Name of Bank: Silicon Valley Bank
Address: 0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Phone: (000) 000-0000
Lockbox Address: Dept. CH10917
Xxxxxxxx, XX 00000-0000
Special Account #: 341822772
Name of Bank: Silicon Valley Bank
Address: 0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Phone: (000) 000-0000
Lockbox Address: Dept. LA21955
Xxxxxxxx, XX 00000-0000
Special Account #: 341822772
Name of Bank: Silicon Valley Bank
Address: 0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Phone: (000) 000-0000
Account #: 341822770 (operating account)
Pgae 4 of 10
IWCF ATTACHMENT A TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
III. Financial Covenants:
Definitions: The following terms shall have the following respective meanings in
this Attachment A. All amounts shall be determined in accordance with generally
accepted accounting principles (GAAP).
Current shall mean within the on-going twelve month period.
Current Assets shall mean assets that are cash or expected to become
cash within the on-going twelve months.
Current Liabilities shall mean payment obligations resulting from past
or current transactions that require settlement within the on-going
twelve month period. All indebtedness to IBM Credit shall be considered
a Current Liability for purposes of determining compliance with the
Financial Covenants.
Long Term shall mean beyond the on-going twelve month period.
Long Term Assets shall mean assets that take longer than a year to be
converted to cash. They are divided into four categories: tangible
assets, investments, intangibles and other.
Long Term Debt shall mean payment obligations of indebtedness which
mature more than twelve months from the date of determination, or
mature within twelve months from such date but are renewable or
extendible at the option of the debtor to a date more than twelve
months from the date of determination.
Net Profit after Tax shall mean Revenue plus all other income, minus
all costs, including applicable taxes.
Net Profit before Tax shall mean Revenue plus all other income, minus
all costs, excluding applicable taxes.
Revenue shall mean the monetary expression of the aggregate of products
or services transferred by an enterprise to its customers for which
said customers have paid or are obligated to pay, plus other income as
allowed.
Subordinated Debt shall mean Customers' indebtedness to third parties
as evidenced by an executed Notes Payable Subordination Agreement in
favor of IBM Credit.
Page 5 of 10
IWCF ATTACHMENT A TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
III. Financial Covenants (continued):
Tangible Net Worth shall mean:
Total Net Worth minus;
(a) goodwill, organizational expenses, pre-paid expenses,
deferred charges, research and development expenses,
software development costs, leasehold expenses,
trademarks, trade names, copyrights, patents, patent
applications, privileges, franchises, licenses and
rights in any thereof, and other similar intangibles
(but not including contract rights) and other current
and non-current assets as identified in Customers'
financial statements (except for those assets
identified in Attachment B, Section VII or otherwise
mutually agreed to in writing by Customers and IBM
Credit); and
(b) all accounts receivable from employees, officers,
directors, stockholders and affiliates; and
(c) all callable/redeemable preferred stock (with the
exception of preferred stock redeemable for other
equity securities, and up to $21.6 million of that
preferred stock issued concurrent with the
acquisition of Star Management Services, Inc).
Total Assets shall mean the total of Current Assets and Long Term
Assets.
Total Liabilities shall mean the Current Liabilities and Long Term Debt
less Subordinated Debt, resulting from past or current transactions,
that require settlement in the future.
Total Net Worth (the amount of owner's or stockholder's ownership in an
enterprise) is equal to Total Assets minus Total Liabilities.
Working Capital shall mean Current Assets minus Current Liabilities.
EBITDA shall mean, for any period (determined on a consolidated basis in
accordance with GAAP), (a) the Consolidated Net Income of Customer for such
period, plus (b) each of the following to the extent reflected as an expense in
the determination of such Consolidated Net Income: (i) the Customer's provisions
for taxes based on income for such period; (ii) Interest Expense for such
period; and (iii) depreciation and amortization of tangible and intangible
assets of Customer for such period.
Page 6 of 10
Fixed Charges shall mean, for any period, an amount equal to the sum, without
duplication, of the amounts for such as determined for the Customer on a
consolidated basis, of (i) scheduled repayments of principal of all Indebtedness
(as reduced by repayments thereon previously made), (ii) Interest Expense, (iii)
capital expenditures (iv) dividends, and (v) leasehold improvement expenditures.
Fixed Charge Coverage Ratio shall mean the ratio as of the last day of any
fiscal year of (i) EBITDA as of the last day of such fiscal year to (ii) Fixed
Charges.
Interest Expense shall mean, for any period, the aggregate consolidated interest
expense of Customer during such period in respect of Indebtedness determined on
a consolidated basis in accordance with GAAP, including, without limitation,
amortization of original issue discount on any Indebtedness and of all fees
payable in connection with the incurrence of such Indebtedness (to the extent
included in interest expense), the interest portion of any deferred payment
obligation and the interest component of any capital lease obligations.
Page 7 of 10
IWCF ATTACHMENT A TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
III. Financial Covenants (continued):
Customers will be required to maintain the following financial ratios,
percentages and amounts as of the last day of the fiscal period under review by
IBM Credit, based upon the consolidated financial statements of Savoir
Technology Group, Inc. and in each case measured on a year-to-date basis through
the last day of the fiscal period under review:
a) Current Assets to Current Liabilities ratio greater than 1.0 :
1.0 from on and after the Closing Date through and including
December 31, 1998; greater than 1.05 : 1.0 from on and after
January 1, 1999 through and including December 31, 1999;
greater than 1.10 : 1.0 thereafter;
b) Net Profit after Tax to Revenue percentage equal to or greater
than 0.9 percent from on and after the Closing Date through
and including December 31, 1998; equal to or greater than 1.0
percent from on and after January 1, 1999 through and
including March 31, 1999; 1.20 percent from on and after April
1, 1999 through and including June 30, 1999; 1.4 percent from
on and after July 1, 1999 through and including December 31,
1999; equal to or greater than 1.5 percent thereafter;
c) Tangible Net Worth equal to or greater than $0.00 from on and
after the Closing Date through and including December 31,
1998; equal to or greater than $2.0 million from on and after
January 1, 1999 through and including March 31, 1999; equal to
or greater than ($3.4) million from on and after April 1, 1999
through and including June 30, 1999; equal to or greater than
($1.1) million from on July 1, 1999 through and including
September 30, 1999; equal to or greater than $4.2M from on
October 1, 1999 through and including December 31, 1999; equal
or greater than $35.0 million from on January 1, 2000 and
thereafter;
d) Net Profit before Tax and interest expense to interest expense
ratio equal to or greater than 2.25 : 1.0;
e) EBITDA to Fixed Charges ratio equal to or greater than
1.0 : 1.0
IV. Additional Conditions Precedent Pursuant to Section 5.1 (K) of the
Agreement:
- Executed Contingent Blocked Account Amendments;
- Executed Waiver of Landlord Lien for all premises in which a
landlord has the right of levy for rent;
Page 8 of 10
- Executed Termination Notices of those Intercreditor Agreements
dated 9/30/97 between Canpartners Investments IV, Xxxxxx Xxxxxxx,
Inc. and IBM Credit, and Xxxxxx Xxxxx, C. Xxxxxx Xxxxxxx and IBM
Credit;
- Fiscal year-end financial statements of Customers as of end of
Customers' prior fiscal year audited by an independent certified
public accountant;
- A Certificate of Location of Collateral whereby each Customer
certifies where Customer presently keeps or sells inventory,
equipment and other tangible Collateral;
Page 9 of 10
IWCF ATTACHMENT A TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
IV. Additional Conditions Precedent Pursuant to Section 5.1 (K)
of the Agreement: (continued
- Subordination or Intercreditor Agreements from all creditors
having a lien which is superior to IBM Credit in any assets that
IBM Credit relies on to satisfy Customers' obligations to IBM
Credit;
- Listing of all creditors providing accounts receivable financing
to Customers;
- A Collateral Management Report in the form of Attachment F as of
the Closing Date;
- A Compliance Certificate as to Customers' compliance with the
financial covenants set forth in Attachment A as of the last
fiscal month of Customers for which financial statements have been
published;
- An Opinion of Counsel substantially in the form and substance of
Attachment H whereby the Customers' counsel states his or her
opinion about the execution, delivery and performance of the
Agreement and other documents by the Customers to be delivered to
IBM Credit within 90 days of Closing Date;
- A Corporate Secretary's Certificate from each Customer
substantially in the form and substance of Attachment I certifying
to, among other items, the resolutions of Customer's Board of
Directors authorizing borrowing by Customer;
- Termination or release of Uniform Commercial Code filing by other
creditors as required by IBM Credit;
- A copy of an all-risk insurance certificate pursuant to Section
7.8 (B) of the Agreement;
- Payment of the Closing Fee on the Closing Date;
Page 10 of 10
