AMENDMENT NO. 12 TO AGREEMENT FOR INVENTORY FINANCING
Exhibit 10.2
This Amendment No. 12 (“Amendment”) to the Agreement for Inventory Financing is made as
of March 30, 2011 by and among IBM Credit LLC, a Delaware limited liability company (“IBM Credit”),
Business Supplies Distributors Holdings, LLC, a limited liability company duly organized under the
laws of the state of Delaware (“Holdings”), Supplies Distributors, Inc. (formerly known as BSD
Acquisition Corp.), a corporation duly organized under the laws of the state of Delaware
(“Borrower”), Priority Fulfillment Services, Inc., a corporation duly organized under the laws of
the state of Delaware (“PFS”) and PFSweb, Inc., a corporation duly organized under the laws of the
state of Delaware (“PFSweb”) (Borrower, Holdings, PFS, PFSweb, and any other entity that executes
this Agreement or any Other Document, including without limitation all Guarantors, are each
individually referred to as a “Loan Party” and collectively referred to as “Loan Parties”).
RECITALS:
A. Each Loan Party and IBM Credit have entered into that certain Agreement for Inventory
Financing dated as of March 29, 2002 (as amended, supplemented or otherwise modified from time to
time, the “Agreement”); and
B. The parties have agreed to modify the Agreement as more specifically set forth below, upon
and subject to the terms and conditions set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Borrower, the other Loan Parties and IBM
Credit hereby agree as follows:
Section 1. Definitions. All capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Agreement.
Section 2. Amendment.
Subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the
Agreement is hereby amended as follows:
A. The definition of “Termination Date” is amended and restated in its entirety to read as
follows:
“Termination Date”: shall mean March 31, 2012 or such other date as IBM Credit and the Loan
Parties may agree to in writing from time to time.
B. Section 8.6 of the Agreement is hereby amended by amending this Section to read in its
entirety as follows:
“8.6. Restricted Payments. Borrower will not, directly or indirectly make any of the
following payments (“Restricted Payments”) without prior written consent from IBM Credit, which
shall not be unreasonably delayed or denied: (i) declare or pay any dividend (other than dividends
payable solely in common stock of Borrower) on, or make any payment on account of, or set apart
assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement
or other acquisition of, any shares of any class of capital stock of Borrower or any warrants,
options or rights to purchase any such capital stock or Equity Interests, whether now or hereafter
outstanding, or make any other distribution in respect thereof,
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either directly or indirectly, whether in cash or property or in obligations of Borrower; or (ii) make any
optional payment or prepayment on or redemption (including, without limitation, by making payments
to a sinking or analogous fund) or repurchase of any Indebtedness (other than the Obligations),
provided, however, that Borrower (a) may in the ordinary course of administration thereof
make payments on the revolving loans made by Xxxxx Fargo Bank, National Association, acting through
its Xxxxx Fargo Business Credit operating division (as successor to Wachovia Bank, National
Association, which, in turn, was successor to Congress Financial Corporation (Southwest) (“Xxxxx
Fargo”), pursuant to the Congress Credit Agreement, as permitted by the Amended and Restated Notes
Payable Subordination Agreement; (b) may in calendar year 2011 pay cash dividends not to exceed one
hundred percent of Borrower’s calendar year 2010 net income according to GAAP, plus all cash
dividends received from its subsidiaries; and (c) may permit Supplies Distributors of Canada, Inc.
to make a one-time payment in an amount not to exceed Four Hundred Thousand Dollars ($400,000.00)
in 2011. Holdings is also permitted to pay cash dividends in calendar year 2011 equal to all cash
dividends it receives in calendar year 2011 from its subsidiaries provided such distributions do
not cause an event of default.
C. 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:
(i) Section II. Fees, Rates and Repayment Terms, subsection (A) is amended and restated in its
entirety to read as follows:
| (A) | Credit Line: Twenty-five Million Dollars ($25,000,000) In the event that the amount of any Participation is reduced or any Participation Agreement expires or is terminated for any reason, the Credit Line shall be reduced, upon forty-five (45) days written notice by IBM Credit to Borrower, by an amount equal to the amount that is no longer subject to a Participation Agreement as determined by IBM Credit pursuant to Section 2.1 of the Agreement. |
Section 3. Conditions of Effectiveness of Amendment. This Amendment shall become effective upon
the receipt by IBM Credit of this Amendment which shall have been authorized, executed and
delivered by each of the parties hereto and IBM Credit shall have received a copy of a fully
executed Amendment.
Section 4. Representations and Warranties. Each Loan Party makes to IBM Credit the following
representations and warranties all of which are material and are made to induce IBM Credit to enter
into this Amendment.
Section 4.1 Accuracy and Completeness of Warranties and Representations. All representations made
by the Loan Party 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 the Loan Party in the
Agreement are true, accurate and complete in every material respect as of the date hereof, and do
not fail to disclose any material fact necessary to make representations not misleading.
Section 4.2 Violation of Other Agreements and Consent. The execution and delivery of this
Amendment and the performance and observance of the covenants to be performed and observed
hereunder (a) do not violate or cause any Loan Party not to be in compliance with the terms of any
agreement to which such Loan Party is a party, and (b) require the consent of any Person.
Section 4.3 Litigation. Except as has been disclosed by the Loan Parties to IBM Credit in writing,
there is no litigation, proceeding, investigation or labor dispute pending or threatened against
any Loan Party, which, if adversely determined, would materially adversely affect the Loan Party’s
ability to perform such
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Loan Party’s obligations under the Agreement and the other documents, instruments and agreements
executed in connection therewith or pursuant hereto.
Section 4.4 Enforceability of Amendment. This Amendment has been duly authorized, executed and
delivered by each Loan Party and is enforceable against each Loan Party in accordance with its
terms.
Section 5. Ratification of Agreement. Except as specifically amended hereby, all of the provisions
of the Agreement shall remain unamended and in full force and effect. Each Loan Party hereby
ratifies, confirms and agrees that the Agreement, as amended hereby, represents a valid and
enforceable obligation of such Loan Party, and is not subject to any claims, offsets or defenses.
Section 6. Ratification of Guaranty and Notes Payable Subordination Agreement. Each of Holdings,
PFSweb and PFS hereby ratify and confirm their respective guaranties in favor of IBM Credit and
agree that such guaranties remain in full force and effect and that the term “Liabilities”, as used
therein include, without limitation the indebtedness liabilities and obligations of the Borrower
under the Agreement as amended hereby.
Section 7. Governing Law. This Amendment shall be governed by and interpreted in accordance with
the laws which govern the Agreement.
Section 8. 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, each Loan Party has read this entire Amendment, and has caused its
authorized representatives to execute this Amendment and has caused its corporate seal, if any, to
be affixed hereto as of the date first written above.
| IBM Credit LLC | Supplies Distributors, Inc. | |||||||||
By:
|
By: | |||||||||
| Print Name: | Print Name: | |||||||||
| Title: | Title: | |||||||||
| Business Supplies Distributors Holdings, LLC | Priority Fulfillment Services, Inc. | |||||||||
| By: as Managing Member | ||||||||||
By:
|
By: | |||||||||
| Print Name: | Print Name: | |||||||||
| Title: | Title: | |||||||||
| PFSweb, Inc. | ||||||||||
| By: | ||||||||||
| Print Name: | ||||||||||
| Title: | ||||||||||
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EFFECTIVE DATE OF THIS ATTACHMENT A: March 30, 2011
SECTION I. BORROWER/LOAN PARTIES:
| ORGANIZATION NO. (Assigned by State of Org). | ||||
(A) BORROWER: |
||||
Supplies Distributors, Inc. |
3416326 | |||
(B) ADDITIONAL LOAN PARTIES: |
||||
Business Supplies Distributors Holdings, LLC |
3410894 | |||
Priority Fulfillment Services, Inc. |
2606094 | |||
PFSweb, Inc. |
3062550 | |||
SECTION II. FEES, RATES AND REPAYMENT TERMS:
| (A) | Credit Line: Twenty-five Million Dollars ($25,000,000) In the event that the amount of any Participation is reduced or any Participation Agreement expires or is terminated for any reason, the Credit Line shall be reduced, upon forty-five (45) days written notice by IBM Credit to Borrower, by an amount equal to the amount that is no longer subject to a Participation Agreement as determined by IBM Credit pursuant to Section 2.1 of the Agreement. |
||
| (B) | Borrowing Base: | ||
| (i) | 100% of the Borrower’s inventory in the Borrower’s possession as of the date of determination as reflected in the Borrower’s most recent Collateral Management Report constituting Products (other than service parts) financed through a Product Advance by IBM Credit, so long as (1) IBM Credit has a first priority security interest in such Products and (2) such Products are in new and un-opened boxes; | ||
| (ii) | 80% of price protection payments, credits, discounts, incentive payments, rebated and refunds relating to IBM Products (“Accounts”) in the aggregate not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000.00) provided that (i) Borrower obtains (and provides to IBM Credit along with the monthly Collateral Management Report required under Section 7.1 (O)) from IBM written confirmation (a) acknowledging the obligation of IBM to pay such amount or that they have received the billing from the Borrower, (b) stating the date the amount is due to be paid and (c) IBM waiving its right to setoff such amounts owed to Borrower with any amount Borrower may owe to IBM, (ii) such Accounts do not remain unpaid for more than sixty (60) days from the date the obligation of IBM occurred; and (iii) such Accounts are delivered directly to IBM Credit. | ||
| (C) | Product Financing Charge: Prime Rate plus 0.50% | ||
| (D) | Product Financing Period: 90 days | ||
| (E) | Collateral Insurance Amount: Twenty-five Million Dollars ($25,000,000.00) | ||
| (F) | PRO Finance Charge: Prime Rate plus 0.50% |
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| (G) | Delinquency Fee Rate: Prime Rate plus 6.500% | ||
| (I) | Free Financing Period Exclusion Fee: Product Advance multiplied by 0.25% | ||
| (J) | Other Charges: | ||
| (i) Monthly Service Fee: $1,000.00 | |||
| (ii) Annual Renewal Fee: $15,000.00 |
SECTION III. FINANCIAL COVENANTS:
(A) Definitions: The following terms shall have the following respective meanings in this
Attachment. All amounts shall be determined in accordance with generally accepted accounting
principles (GAAP).
“Consolidated Net Income” shall mean, for any period, the net income (or loss), after taxes,
of Borrower on a consolidated basis for such period determined in accordance with GAAP.
“Current” shall mean within the ongoing twelve month period.
“Current Assets” shall mean assets that are cash, restricted cash applicable to cash
received into a lockbox from collections of trade accounts receivable or expected to become
cash within the ongoing twelve months.
“Current Liabilities” shall mean payment obligations resulting from past or current
transactions that require settlement within the ongoing twelve month period. All
indebtedness to IBM Credit and Congress shall be considered a Current Liability for purposes
of determining compliance with the Financial Covenants. All subordinated indebtedness shall
not be considered current liabilities.
“EBITDA” shall mean, for any period (determined on a consolidated basis in accordance with
GAAP), (a) the Consolidated Net Income of Borrower for such period, plus (b) each of the
following to the extent reflected as an expense in the determination of such Consolidated
Net Income: (i) the Borrower’s 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 Borrower for such period.
“Fixed Charges” shall mean, for any period, an amount equal to the sum, without duplication,
of the amounts for such as determined for the Borrower 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, (v)
leasehold improvement expenditures and (vi) all provisions for U.S. and non U.S. Federal,
state and local taxes.
“Fixed Charge Coverage Ratio” shall mean the ratio as of the last day of any fiscal period
of (i) EBITDA as of the last day of such fiscal period to (ii) Fixed Charges.
“Interest Expense” shall mean, for any period, the aggregate consolidated interest expense
of Borrower 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.
“Long Term” shall mean beyond the ongoing 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.
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“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.
“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 Borrower’s indebtedness to third parties as evidenced by an
executed Notes Payable Subordination Agreement in favor of IBM Credit.
“Tangible Net Worth” shall mean Total Net Worth minus goodwill.
“Total Assets” shall mean the total of Current Assets and Long Term Assets. For the purpose
of calculating Total Assets for Borrower, the accumulated earnings and foreign currency
translation adjustments applicable to Borrower’s Canadian and European subsidiaries are
excluded.
“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. For the purpose of calculating Total Net
Worth of Borrower, following shall be excluded (i) accumulated earnings and unrealized
foreign currency translation adjustments applicable to Borrower’s Canadian and European
subsidiaries and (ii) all income and losses applicable to foreign currency adjustments for
each period but not excluding such foreign currency adjustments for annual periods that must
comply with GAAP.
“Working Capital” shall mean Current Assets minus Current Liabilities.
(B) 1. Borrower will be required to maintain the following financial ratios, percentages and
amounts as of the last day of the fiscal period under review (quarterly, annually) by IBM Credit:
| Covenant | Covenant Requirement | |||
(i)
|
Revenue on an Annual Basis* (i.e. the current fiscal year-to-date Revenue annualized) to Working Capital | Greater than Zero and Equal to or Less than 37.0:1.0 | ||
| * Annualized Revenue from intercompany sales are excluded from this calculation. | ||||
(ii)
|
Net Profit after Tax to Revenue** | Equal to or Greater than 0.20 percent | ||
| ** Excluding all income and losses applicable to (a) 100% ownership in Canadian and European subsidiaries and (b) foreign currency adjustments for each period but not excluding such foreign currency adjustments for annual periods that must comply with GAAP and excluding revenue from intercompany sales. |
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| Covenant | Covenant Requirement | |||
(iii)
|
Total Liabilities to Tangible Net Worth*** ***Accumulated earnings and unrealized foreign currency translation adjustments applicable to Borrower’s Canadian and European subsidiaries are excluded from calculation of Borrower’s Total Assets and Total Net Worth. |
Greater than Zero and Equal to or Less than 7.0:1.0 |
2. Business Supplies Distributors Holdings, LLC will be required to maintain the following
financial ratios, percentages and amounts as of the last day of the fiscal period under review
(quarterly, annually) by IBM Credit:
| Covenant | Covenant Requirement | |||
(i)
|
Revenue on an Annual Basis (i.e. the current fiscal year-to-date Revenue annualized) to Working Capital | Greater than Zero and Equal to or Less than 37.0:1.0 | ||
(ii)
|
Net Profit after Tax to Revenue* *Excluding all (a) income and losses applicable to foreign currency adjustments for each period but not excluding such foreign currency adjustments for annual periods that must comply with GAAP and (b) revenue from intercompany sales. |
Equal to or Greater than 0.15 percent | ||
(iii)
|
Total Liabilities to Tangible Net Worth | Greater than Zero and Equal to or Less than 7.0:1.0 |
3. PFSweb, Inc. will be required to maintain the following financial ratios, percentages and
amounts as of the last day of the fiscal period under review (quarterly, annually) by IBM Credit:
| Covenant | Covenant Requirement | As of Date | ||||||
Minimum Tangible Net Worth |
$ | 18,000,000.00 | 03/31/03 and thereafter | |||||
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