EXHIBIT 10.10
AGREEMENT RESTRICTING TRANSFER OF ASSETS
THIS AGREEMENT RESTRICTING TRANSFER OF ASSETS ("Agreement") is made by and
among Creative Computers, Inc., a California corporation ("Borrower") whose
principal place of business is 0000 X. 000xx Xxxxxx, Xxxxxxxx, XX 00000, uBid,
Inc. ("Affiliate") whose principal place of business is 0000 Xxxxx Xxxx, Xxx
Xxxxx, XX 00000, and Deutsche Financial Services Corporation ("DFS") with an
office located at 0000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, XX 00000.
WHEREAS, DFS has filed financing statements pursuant to the Uniform
Commercial Code against Borrower;
WHEREAS, DFS has or may, in its sole discretion, lend monies or grant
financial accommodations to Borrower;
WHEREAS, Affiliate is an affiliate corporation of Borrower through common
ownership;
WHEREAS, DFS will not continue to extend financial accommodations to
Borrower unless each of Borrower and Affiliate agrees not to make certain
transfers of their respective assets which might impair the effectiveness or
enforceability of Borrower's agreements with DFS;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereby agree as follows:
1. Each of Borrower and Affiliate will maintain books, ledgers, accounts
and records on its respective assets which fairly reflect the ownership
and location of such assets and which fairly present the financial
condition of each such entity in accordance with generally accepted
accounting principles.
2. Each of Borrower and Affiliate will segregate all of its inventory and
equipment from the like assets of the other.
3. Each of Borrower and Affiliate will maintain control over all of its
inventory and equipment and will not allow the other, or any other
entity or person except in the ordinary course of business, to maintain
control over such assets.
4. Each of Borrower and Affiliate agrees not to transfer to the other any
of its assets, other than sales of inventory in the ordinary course of
business and consignments of inventory within the limitations set forth
in the following sentence. Borrower may consign inventory to Affiliate
in the ordinary course of their business which in no event shall exceed
at any time $500,000. All sales of inventory between Borrower and
Affiliate shall provide for payment not later than thirty (30) days from
the date of the sale of such inventory. Affiliate agrees to pay DFS
directly, upon notice, for any such inventory purchases, without set off
or deduction of any kind, which Affiliate hereby waives. Borrower agrees
that any such payment directly to DFS shall constitute payment to
Borrower for the corresponding obligation. In connection with such
consignment arrangement, Borrower and Affiliate agree to execute such
other and further documents and agreements, including but not limited to
consignment Uniform Commercial Code financing statements, in such form
as are acceptable to DFS, so as to ensure DFS' continuing first
priority, perfected security interests in such assets and all proceeds
thereof.
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5. Each of Borrower and Affiliate agrees not to form any partnership or
joint venture with the other, or any other person or entity without DFS'
prior written consent.
6. Borrower agrees not to form, assume, purchase or otherwise create any
legally or financially separate entity or subsidiary without DFS' prior
written consent. Affiliate shall provide DFS with forty-five (45) days
prior written notice of the formation, assumption, purchase or other
creation of any legally or financially separate entity or subsidiary.
7. This Agreement may not be amended, modified or altered in any way except
by written agreement of all the parties hereto.
8. DFS may rely on this Agreement in extending or continuing to extend
financial accommodations to Borrower; each of Borrower and Affiliate,
however, agrees that nothing in this Agreement binds DFS to extend or to
continue to extend any financial accommodations to Borrower.
9. Any breach of any term hereunder shall constitute a default under the
agreements of Borrower with DFS, (specifically Section 10(I) of that
certain Business Credit and Security Agreement between DFS and Borrower
dated as of October 14, 1997), and, accordingly, after expiration of the
10 day period therein for the cure of such default, DFS will be entitled
to: (a) terminate any and all financial dealings, accommodations and
agreements between DFS and Borrower; (b) declare all or any amounts due
to DFS from Borrower under any and all agreements immediately due and
payable; (c) exercise any and all other rights accorded it by any
agreement and/or law.
10. DFS' failure at any time to require strict compliance and performance by
Borrower or Affiliate with the terms herein shall not waive, affect or
diminish any right of DFS under this Agreement or any other agreement
nor shall it waive, affect or diminish any right of DFS thereafter to
demand strict compliance and performance by Borrower or Affiliate with
any of all terms hereunder.
11. Notwithstanding anything herein to the contrary, this Agreement shall
become effective upon the effective date of the "IPO" of Affiliate as
defined in that certain letter agreement of even date among DFS,
Borrower and Affiliate, and shall terminate upon the effective date of
the "Spin-off" (as that term is defined in such letter agreement);
provided, however, that such termination will not terminate the
obligations hereunder arising prior to the effective date of such
termination.
IN WITNESS WHEREOF, the duly authorized representatives of each of the
parties have executed this Agreement as of the 23 day of September, 1998.
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Creative Computers, Inc., a California
corporation
ATTEST:
/s/ XXX XXXXXXX By: /s/ XXX XXXXXXX
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Secretary Title: C.F.O.
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ATTEST: uBid, Inc.
/s/ XXXXX XXXXXXX By: /s/ XXX XXXXXXX
---------------------------------- ------------------------------------
Secretary Title: C.F.O.
---------------------------------
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Deutsche Financial Services Corporation
By: /s/ XXXXXX X. XXXXXX
-----------------------------------
Title: /s/ Sr. Regional Vice President
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CREATIVE COMPUTERS, INC.
0000 Xxxx 000xx Xxxxxx
Xxxxxxxx, XX 00000
September 23, 1998
By Telefacsimile
Deutsche Financial Services Corporation
0000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Attention: Regional Vice President
Deutsche Financial Services Corporation
000 Xxxxxxxxx Xxxxxx Xxxxx
Xx. Xxxxx, X0 00000-0000
Attention: General Counsel
Re: Creative Computers, Inc.
Ladies and Gentlemen:
Reference is made to that certain Business Credit and Security Agreement
dated as of October 14, 1997 (as amended, modified or supplemented prior to the
date hereof, the "Credit Agreement") between Creative Computers, Inc., a
California corporation ("Creative Computers") and Deutsche Financial Services
Corporation ("Deutsche"). Capitalized terms used herein without definition have
the meanings assigned thereto in the Credit Agreement.
The purpose of this letter is to request the consent of Deutsche to a
disposition by Creative Computers of its entire interest in uBid, Inc. ("uBid"),
an indirect wholly-owned subsidiary of Creative Computers. The proposed
transaction consists of an initial public offering (the "IPO") of approximately
twenty percent (20%) of the issued and outstanding common stock of uBid. Within
one year after the effectiveness of the IPO, Creative Computers intends to
consummate a tax-free spin-off of the remaining shares of uBid to the
shareholders of Creative Computers (the "Spin-Off"). The IPO and the Spin-Off
are collectively referred to herein as the "Transaction".
We hereby request Deutsche's consent to the Transaction and Deutsche's
waiver or consent under the following terms of the Credit Agreement:
. Section 9.2.1 of the Credit Agreement provides in pertinent part that
"Borrower will not, and will not permit any Subsidiary to, change its
manner of organization, enter into any mergers, consolidations,
reorganizations or recapitalizations without DFS' prior written consent
other than as contemplated herein which consent shall not be
unreasonably withheld."
CREATIVE COMPUTERS, INC.
Deutsche Financial Services Corporation
September 23, 1998
Page Two
. Section 9.2.2 of the Credit Agreement provides that "Except in the
ordinary course of business, or except as consented to in writing by
DFS, Borrower and the Subsidiaries will not sell, transfer, lease
(including sale-leaseback) or otherwise dispose of all or any
substantial part of their assets."
. Section 9.2.8 of the Credit Agreement provides that "Borrower will not
declare or pay any dividends upon its capital stock without DFS' prior
written consent. It is presently expected that the Spin-Off will be
consummated through a dividend to shareholders of Creative Computers.
. Section 6.4 of the Credit Agreement requires that all Subsidiaries of
Creative Computers execute and deliver collateralized guaranties of the
Obligations, secured by a first priority, perfected security interest in
the assets described therein. We request that the collateralized
guaranty executed by uBid be released concurrently with the
effectiveness of the IPO, and that any collateral pledged by uBid be
released at such time.
. The Credit Agreement contains certain restrictions applicable to the
Subsidiaries, and provides that Creative Computers shall cause its
Subsidiaries to take certain actions and to refrain from taking certain
other actions. We request that from and after the effective time of the
IPO, uBid no longer be considered a "Subsidiary" for purposes of the
Credit Agreement, except that from the effective time of the IPO to the
consummation of the Spin-Off, uBid shall continue to be considered a
"Subsidiary" for purposes of Sections 9.1.5, 9.1.7, 9.1.8, 9.1.9,
9.1.10, 9.1.12, 9.2.1, 9.2.4, 9.2.5, 9.2.13, 9.2.16 and 9.3 of the
Credit Agreement.
Please evidence your consent to the Transaction, and specifically consent
to the matters identified above, by signing a counterpart of this letter in the
space provided therefor below and returning a countersigned copy to Creative
Computers by telecopy to (000) 000-0000.
Very truly yours,
CREATIVE COMPUTERS, INC., a
California corporation
By: /s/ X.X. XXXXXXX XX.
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Name: X.X. XXXXXXX XX.
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Title: C.F.O.
---------------------------------
CREATIVE COMPUTERS, INC.
Deutsche Financial Services Corporation
September 23, 1998
Page three
We hereby consent to the Transaction
(and consent to the matters identified above)
this 23 day of September, 1998
DEUTSCHE FINANCIAL SERVICES
CORPORATION
By: /s/ XXXXXX X. XXXXXX
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Name: Xxxxxx X. Xxxxxx
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Title: Sr. Regional Vice President
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