ACKNOWLEDGMENT, WAIVER AND AMENDMENT
TO THE
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
This ACKNOWLEDGMENT, WAIVER AND AMENDMENT ("Waiver") TO THE INVENTORY AND
WORKING CAPITAL FINANCING AGREEMENT is made as of March 14, 2002 by and between
Datatec Industries, Inc., a Delaware corporation ("Customer") and IBM Credit
Corporation, a Delaware corporation ("IBM Credit").
RECITALS
WHEREAS, Customer and IBM Credit have entered into that certain Inventory
and Working Capital Financing Agreement dated as of November 10, 2000 (as
amended, supplemented or otherwise modified from time to time, the "Agreement");
WHEREAS, Customer is in default of one or more of its financial covenants
contained in the Agreement (as more specifically explained in Section 2 hereof);
and
WHEREAS, Customer requests that IBM Credit waive such default and amend
certain terms of the Agreement.
WHEREAS, IBM Credit is willing to waive such default and amend the
Agreement subject to the conditions set forth below.
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. Acknowledgment.
Customer acknowledges that the financial covenants set forth in
Attachment A to the Agreement are applicable to the financial results of
Customer for the fiscal quarter ending July 31, 2001, and Customer was required
to maintain such financial covenants at all times. Customer further acknowledges
its actual attainment was as follows:
Covenant Covenant
Covenant Requirement Actual
---------------- ----------------- ---------------
Net Profit after Equal to or greater -9% (the "Default")
Tax to Revenue than 0.1%
Section 3. Waivers to Agreement. IBM Credit hereby waives the Default of
Customer with the terms of the Agreement to the extent such Default is set forth
in Section 2 hereof.
Section 4. Amendment. The Agreement is hereby amended as follows,
notwithstanding any other conditions precedent contained herein:
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A. As of the date hereof, IBM Credit shall not be obligated to make any
Term Loan Advances to Customer. Customer shall make payments to IBM Credit in
accordance with the terms of Section 2.4(D) of the Agreement as revised herein.
B. Section 2.4(D) is hereby amended by deleting it in its entirety and
substituting the following therefor: "(D) Customer shall pay to IBM Credit,
commencing May 30, 2002, monthly installments of $300,000 on the last business
day of every month, until such date whereby the Outstanding Term Loan amount
shall be equal to zero, and in any event shall pay in full the Outstanding Term
Loan on the Term Loan Stated Maturity Date."
C. Schedule A to the Agreement is hereby amended by deleting such Schedule
A in its entirety and substituting it, in lieu thereof, the Schedule A attached
hereto.
D. Attachment A to the Agreement is hereby amended by deleting such
Attachment A in its entirety and substituting it, in lieu thereof, the
Attachment A attached hereto ("Amended Attachment A"). Such Amended Attachment A
shall be effective as of the date specified therein. The changes contained in
the Amended Attachment A shall include, without limitation, the following:
Covenant Covenant Requirement
-------- --------------------
(i) Revenue on an Annual Basis to Greater than 5.0:1.0 and equal to or
Working Capital less than 25.0:1.0
(ii) Net Profit after Tax to Revenue Equal to or greater than 0.10 percent
(iii) Tangible Net Worth Equal to or greater than $2.5 million
(iv) Debt Service Ratio Equal or greater than 2.0:1.0
(v) Debt to Equity (Total Debt to Equity) Equal to or less than 5.0:1.0
E. Attachment C to the Agreement is hereby and amended by deleting such
Attachment C in its entirety and substituting it, in lieu thereof, the
Attachment C attached hereto.
Section 5. Conditions to Effectiveness of Waiver. The waiver set forth in
Section 3 hereof shall become effective upon:
(a) the receipt by IBM Credit from Customer of this Waiver executed by Customer;
and
(b) the payment by Customer to IBM Credit of a waiver fee (the "Waiver Fee"),
payable in immediately available funds, in the amount of $80,000, by no later
than March 18, 2002. The Waiver Fee shall be nonrefundable and shall be in
addition to any other fees IBM Credit may charge customer.
Section 6. Rights and Remedies. Except to the extent specifically waived herein
IBM Credit reserves any and all rights and remedies that IBM Credit now has or
may have in the future with respect to Customer, including any and all rights or
remedies which it may have in the future as a result of Customer's failure to
comply with its financial covenants to IBM Credit. Except to the extent
specifically waived herein neither this Waiver, any of IBM Credit's actions or
IBM Credit's failure to act shall be deemed to be a waiver of any such rights or
remedies.
Section 7. Governing Law. This Waiver shall be governed by and interpreted in
accordance with the laws which govern the Agreement.
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Section 8. Counterparts. This Waiver 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 Waiver has been executed by duly authorized
representatives of the undersigned as of the day and year first above written.
IBM Credit Corporation Datatec Industries, Inc.
By:/s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxx Xxxx
------------------------------------ ----------------------------------
Print Name: Xxxxxx X. Xxxxxxxx Print Name: Xxxxx Xxxx
--------------------------- --------------------------
Title:Manager Special Handling Title:Chairman & CEO
--------------------------------- -------------------------------
Date: 3/15/02 Date: 3/15/02
--------------------------------- -------------------------------
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SCHEDULE A
(A) Term Loan Commitment : Three Million Dollars ($3,000,000.00);
(B) Term Loan Finance Charge: Prime Rate plus 4.25%;
(C) Term Loan Minimum Draw Amount: No additional draws will be permitted;
(D) Term Loan Minimum Prepayment Amount: Two Hundred Fifty Thousand Dollars
($250,000.00);
(E) Term Loan Stated Maturity Date: February 28, 2003;
(F) Term Loan Finance Charges are due monthly and as set forth in Section 2.5
of the Agreement;
(G) Term Loan Principal Payment Schedule: as set forth in Section 2.4 (D) of
the Agreement.
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