Table of Contents
INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT
Section 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . .3
1.1. Special Definitions . . . . . . . . . . . . . . . . . .3
1.2. Other Defined Terms . . . . . . . . . . . . . . . . . . 11
1.3. Attachments . . . . . . . . . . . . . . . . . . . . . . 11
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES . . . . . . . 11
2.1. Credit Line . . . . . . . . . . . . . . . . . . . . . . 11
2.2. Product Advances . . . . . . . . . . . . . . . . . . . . 11
2.3. A/R Advances . . . . . . . . . . . . . . . . . . . . . . 13
2.4. Finance and Other Charges . . . . . . . . . . . . . . . 14
2.5. Statements Regarding Customer's Account. . . . . . . . . 15
2.6. Shortfall. . . . . . . . . . . . . . . . . . . . . . . . 15
2.7. Application of Payments. . . . . . . . . . . . . . . . . 15
2.8. Prepayment and Reborrowing By Customer . . . . . . . . . 16
Section 3. CREDIT LINE/ADDITIONAL PROVISIONS . . . . . . . . . . . 16
3.1. Ineligible Accounts. . . . . . . . . . . . . . . . . . . 16
3.2. Reimbursement for Charges. . . . . . . . . . . . . . . . 18
3.3. Lockbox and Special Account. . . . . . . . . . . . . . . 18
3.4. Collections. . . . . . . . . . . . . . . . . . . . . . . 18
3.5. Application of Remittances and Credits . . . . . . . . . 19
3.6. Power of Attorney. . . . . . . . . . . . . . . . . . . . 19
Section 4. SECURITY -- COLLATERAL. . . . . . . . . . . . . . . . . 20
4.1. Grant. . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2. Further Assurances . . . . . . . . . . . . . . . . . . . 21
Section 5. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . 21
5.1. Conditions Precedent to the Effectiveness of
This Agreement . . . . . . . . . . . . . . . . . . . . 21
5.2. Conditions Precedent to Each Advance . . . . . . . . . . 22
Section 6. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . 23
6.1. Organization and Qualifications. . . . . . . . . . . . . 23
6.2. Rights in Collateral; Priority of Liens. . . . . . . . . 23
6.3. No Conflicts . . . . . . . . . . . . . . . . . . . . . . 23
6.4. Enforceability . . . . . . . . . . . . . . . . . . . . . 24
6.5. Locations of Offices, Records and Inventory. . . . . . . 24
6.6. Fictitious Business Names. . . . . . . . . . . . . . . . 24
6.7. Organization . . . . . . . . . . . . . . . . . . . . . . 24
6.8. No Judgments or Litigation . . . . . . . . . . . . . . . 24
6.9. No Defaults. . . . . . . . . . . . . . . . . . . . . . . 24
6.10. Labor Matters . . . . . . . . . . . . . . . . . . . . . 25
6.11. Compliance with Law . . . . . . . . . . . . . . . . . . 25
6.12. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.13. Compliance with Environmental Laws . . . . . . . . . . . 25
6.14. Intellectual Property . . . . . . . . . . . . . . . . . 26
6.15. Licenses and Permits . . . . . . . . . . . . . . . . . . 26
6.16. Investment Company . . . . . . . . . . . . . . . . . . . 26
6.17. Taxes and Tax Returns . . . . . . . . . . . . . . . . . 26
6.18. Status of Accounts . . . . . . . . . . . . . . . . . . . 27
6.19. Affiliate/Subsidiary Transactions . . . . . . . . . . . 27
6.20. Accuracy and Completeness of Information . . . . . . . . 27
6.21. Recording Taxes . . . . . . . . . . . . . . . . . . . . 27
6.22. Indebtedness . . . . . . . . . . . . . . . . . . . . . . 27
Section 7. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . 27
7.1. Financial and Other Information. . . . . . . . . . . . . 27
7.2. Location of Collateral . . . . . . . . . . . . . . . . . 30
7.3. Changes in Customer. . . . . . . . . . . . . . . . . . . 30
7.4. Corporate Existence . . . . . . . . . . . . . . . . . . 31
7.5. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.6. Environmental Matters . . . . . . . . . . . . . . . . . 31
7.7. Collateral Books and Records/Collateral Audit . . . . . 32
7.8. Insurance; Casualty Loss . . . . . . . . . . . . . . . . 32
7.9. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.10. Compliance With Laws . . . . . . . . . . . . . . . . . . 33
7.11. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . 33
7.12. Intellectual Property . . . . . . . . . . . . . . . . . 33
7.13. Maintenance of Property . . . . . . . . . . . . . . . . 34
7.14. Collateral . . . . . . . . . . . . . . . . . . . . . . . 34
7.15. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 35
7.16 Financial Covenants; Additional Covenants . . . . . . . 35
Section 8. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . 35
8.1. Liens . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2. Disposition of Assets . . . . . . . . . . . . . . . . . 36
8.3. Corporate Changes . . . . . . . . . . . . . . . . . . . 36
8.4. Guaranties. . . . . . . . . . . . . . . . . . . . . . . 36
8.5. Restricted Payments . . . . . . . . . . . . . . . . . . 36
8.6. Investments . . . . . . . . . . . . . . . . . . . . . . 36
8.7. Affiliate/Subsidiary Transactions . . . . . . . . . . . 37
8.8. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.9. Additional Negative Pledges . . . . . . . . . . . . . . 37
8.10. Storage of Collateral with Bailees and Warehousemen . . 38
8.11. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 38
8.12. Accounts . . . . . . . . . . . . . . . . . . . . . . . 38
8.13. Indebtedness. . . . . . . . . . . . . . . . . . . . . . 38
8.14. Loans . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . 38
9.1. Event of Default. . . . . . . . . . . . . . . . . . . . 38
9.2. Acceleration. . . . . . . . . . . . . . . . . . . . . . 40
9.3. Remedies. . . . . . . . . . . . . . . . . . . . . . . . 40
9.4. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 42
10.1. Term; Termination . . . . . . . . . . . . . . . . . . .42
10.2. Indemnification . . . . . . . . . . . . . . . . . . . . 43
10.3. Additional Obligations . . . . . . . . . . . . . . . . 43
10.4. Limitation of Liability . . . . . . . . . . . . . . . . 43
10.5. Alteration/Waiver . . . . . . . . . . . . . . . . . . . 44
10.6. Severability . . . . . . . . . . . . . . . . . . . . . 44
10.7. One Loan . . . . . . . . . . . . . . . . . . . . . . . 44
10.8. Additional Collateral . . . . . . . . . . . . . . . . . 44
10.9. No Merger or Novations. . . . . . . . . . . . . . . . . 45
10.10. Paragraph Titles . . . . . . . . . . . . . . . . . . . 45
10.11. Binding Effect; Assignment . . . . . . . . . . . . . . 45
10.12. Notices . . . . . . . . . . . . . . . . . . . . . . . . 45
10.13. Counterparts . . . . . . . . . . . . . . . . . . . . . 46
10.14. Attachment A modifications . . . . . . . . . . . . . . 46
10.15. Submission and Consent to Jurisdiction and
Choice of Law . . . . . . . . . . . . . . . . . . . . 46
10.16. Jury Trial Waiver . . . . . . . . . . . . . . . . . . . 47
INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT
This INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT (as amended, supplemented
or otherwise modified from time to time, this "Agreement") amends and restates
that Agreement for Wholesale Financing dated November 26, 1985 and May 7, 1992
(as amended from time to time, the "Financing Agreement") and is hereby made
this __ day of __________, 1996, by and between IBM Credit Corporation with a
place of business at 0000 XxxxxXxxx Xxxxxxx, Xxxxxxx XX 00000, a Delaware
corporation, ("IBM Credit"), and Information Technology Services, Inc. with a
place of business at 000 Xxxxxx Xxxx., Xxxxxxxxx, XX 00000-0000, a New York
corporation, ("Customer").
WITNESSETH
WHEREAS, IBM Credit and Customer are parties to that certain Financing
Agreement pursuant to which IBM Credit finances Customer's acquisition of
inventory and equipment;
WHEREAS, in the course of Customer's operations, Customer intends to
purchase from Persons approved in writing by IBM Credit for the purposes of this
Agreement (the "Authorized Suppliers") computer hardware and software products
manufactured or distributed by or bearing any trademark or trade name of such
Authorized Suppliers for distribution throughout the United States (the
"Products") (as of the date hereof the Authorized Suppliers are as set forth on
Attachment E hereto);
WHEREAS, Customer has requested that IBM Credit finance its purchase of
Products from such Authorized Suppliers and its working capital requirements,
and IBM Credit is willing to provide such financing to Customer subject to the
terms and conditions set forth in 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 that the Financing Agreement is hereby
amended and restated in its entirety as follows:
Section 1. DEFINITIONS; ATTACHMENTS
1.1 Special Definitions. The following terms shall have the
following respective meaning in this Agreement:
"A/R Advance": any loan or advance of funds made by IBM Credit to or on behalf
of Customer pursuant to Section 2.3 of this Agreement, including, as the context
may require, a WCO Advance, a PRO Advance and a Takeout Advance.
"A/R Advance Date": the Business Day on which IBM Credit makes an A/R Advance
under this Agreement.
"A/R Advance Term": shall be the collective or individual reference, as the
context may require, to a PRO Advance Term and a WCO Advance Term.
"A/R Finance Charges": as defined on Attachment A.
"Accounts": as defined in the U.C.C.
"Advance": any loan or other extension of credit by IBM Credit to or on behalf
of Customer pursuant to this Agreement including, without limitation, (i)
Product Advances and (ii) A/R Advances.
"Affiliate": with respect to the Customer, any Person meeting one of the
following: (i) at least 10% of such Person's equity is owned, directly or
indirectly, by Customer; (ii) at least 10% of Customer'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. All of Customer's officers,
directors, joint venturers, and partners shall also be deemed to be Affiliates
of Customer for purposes of this Agreement.
"Agreement": as defined in the caption.
"Auditors": Albrecht, Viggiano, Zurech & Co., PC, or a nationally recognized
firm of independent certified public accountants selected by Customer and
satisfactory to IBM Credit.
"Available Credit": at any time, (1) the Maximum Advance Amount less (2) the
Outstanding Advances at such time.
"Average Daily Balance": the sum of the Outstanding Product Advances or
Outstanding A/R Advances, as the case may be, as of the end of each day during a
calendar month, divided by the number of days in the calendar month.
"Borrowing Base": as defined in Attachment A.
"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.
"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.
"Code": the Internal Revenue Code of 1986, as amended or any successor statute.
"Collateral": as defined in Section 4.1.
"Collateral Management Report": a report to be delivered by Customer to IBM
Credit from time to time, as provided herein, signed by the chief executive
officer or chief financial officer of Customer, in the form of Attachment F
hereto, detailing and certifying, among other items: a summary of Customer's
inventory on hand financed by IBM Credit and Customer's Eligible Accounts, the
amounts and aging of all of Customer's Accounts, Customer's inventory on hand
financed by IBM Credit by quantity, type, model, Authorized Supplier's invoice
price to Customer and the total of the line item values for all inventory listed
on the report, the amounts and aging of Customer's accounts payable as of a
specified date, all of Customer's IBM Credit borrowing activity during a
specified period and the total amount of
Customer's Borrowing Base as well as Customer's Outstanding A/R Advances,
Outstanding Product Advances, Available Credit and any Shortfall Amount as of a
specified date.
"Common Due Date": (1) the fifth day of a calendar month if the Product
Financing Period or A/R Advance Term, whichever is applicable, expires on the
first through tenth of such calendar month; (2) the fifteenth day of a calendar
month if the Product Financing Period or A/R Advance Term, whichever is
applicable, expires on the eleventh through twentieth of such calendar month;
and (3) the twenty-fifth day of a calendar month if the Product Financing Period
or A/R Advance Term, whichever is applicable, expires on the twenty-first
through the last day of such calendar month.
"Compliance Certificate": a certificate substantially in the form of
Attachment C.
"Credit Line": as defined in Section 2.1.
"Customer": as defined in the caption.
"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.
"Eligible Accounts": as defined in Section 3.1.
"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.
"Environmental Liability": any claim, demand, obligation, cause of action,
allegation, order, violation, injury, judgment, penalty or fine, cost or
expense, resulting from the violation or alleged violation of any Environmental
Laws or the imposition of any Lien pursuant to any Environmental Laws.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended, or any
successor statutes.
"Event of Default": as defined in Section 9.1.
"Financial Statements": the consolidated and consolidating balance sheets,
statements of operations, statements of cash flows and statements of changes in
shareholder's equity of Customer and its Subsidiaries for the period specified,
prepared in accordance with GAAP and consistent with prior practices.
"Floor Plan Lender": any Person who now or hereinafter provides inventory
financing to 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 Customer a financing charge. IBM Credit shall
calculate the Customer's Free Financing Period utilizing a methodology that is
consistent with the methodologies used for similarly situated customers of IBM
Credit. The Customer understands that IBM Credit may not offer or may cease to
offer a Free Financing Period for the Customer's 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 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.
"Hazardous Substances": all substances, wastes or materials, to the extent
subject to regulation as "hazardous substances" or "hazardous waste" under any
Environmental Laws.
"IBM Credit": as defined in the caption.
"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, (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 such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
"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.
"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.
"Material Adverse Effect": a material adverse effect (1) on the business,
operations, results of operations, assets, or financial condition of the
Customer, (2) on the aggregate value of the
Collateral or the aggregate amount which IBM Credit would be likely to receive
(after giving consideration to reasonably likely delays in payment and
reasonable costs of enforcement) in the liquidation of such Collateral to
recover the Obligations in full, or (3) on the rights and remedies of IBM Credit
under this Agreement.
"Maximum Advance Amount": at any time, the lesser of (1) the Credit Line and (2)
the Borrowing Base at such time.
"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 Customer, 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 Customer
to IBM Credit.
"Other Documents": all security agreements, mortgages, leases, instruments,
documents, guarantees, schedules of assignment, contracts and similar agreements
executed by Customer 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 Advances": at any time of determination, the sum of (1) the unpaid
principal amount of all Advances made by IBM Credit under this Agreement, and
(2) any finance charge, fee, expense or other amount related to Advances charged
to Customer's account with IBM Credit.
"Outstanding A/R Advances": at any time of determination, the sum of (1) the
unpaid principal amount of all A/R Advances made by IBM Credit under this
Agreement; and (2) any finance charge, fee, expense or other amount related to
A/R Advances charged to Customer's account with IBM Credit.
"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 Customer's account with IBM Credit.
"Payment Dates": the fifth, fifteenth and twenty-fifth day of each calendar
month.
"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;
(4) Purchase Money Indebtedness;
(5) guaranties in favor of IBM Credit; and
(6) 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 $50,000.00 (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 Customer;
(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 for 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 and appeal bonds and other obligations of like nature arising in
the ordinary course of the Customer'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; and
(12) other Liens consented to by IBM Credit in writing prior to incurring such
Lien.
"Person": any individual, association, firm, corporation, partnership, trust,
unincorporated organization or other entity whatsoever.
"Policies": all policies of insurance required to be maintained by Customer
under this Agreement or any of the Other Documents.
"Prime Rate": as of the date of determination, the average of the rates of
interest announced by Citibank, N.A., The Chase Manhattan Bank, N.A. and Bank of
America National Trust & Savings Association as their prime or base rate, as of
the last Business Day of the calendar month immediately preceding the date of
determination, whether or not such announced rates are the actual rates charged
by such banking institutions to their most credit-worthy borrowers.
"PRO Advance": an A/R Advance, with a PRO Advance Term, made by IBM Credit to
itself on behalf of Customer to repay all or a portion of a Product Advance that
is due and payable.
"PRO Advance Term": for each PRO Advance, a period, in increments of ten days as
specified by Customer in the Request for A/R Advance with respect to such PRO
Advance, but in no event in excess of thirty days, commencing on the A/R Advance
Date for such PRO Advance.
"Product Advance": any advance of funds made or committed to be made by IBM
Credit for the account of Customer to an Authorized Supplier in respect of an
invoice delivered by such Authorized Supplier to IBM Credit describing Products
purchased by Customer, including any such advance made or committed to be made
as of the
date hereof pursuant to the Financing Agreement.
"Product Financing Charge": as defined on Attachment A.
"Product Financing Period": for each Product Advance, a period of days equal to
that set forth in Attachment A from time to time, commencing on the invoice date
of such Product Advance.
"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 the Customer'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.
"Request for A/R Advance": as defined in Section 2.3.
"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 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.
"Shortfall Amount": as defined in Section 2.6.
"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.
"Takeout Advance": an A/R Advance made to existing creditors of Customer on
behalf of Customer, in an amount sufficient to discharge Customer's indebtedness
to such creditor.
"Termination Date": shall mean the date, after the first anniversary of the date
of this Agreement, specified in a written notice by IBM Credit to Customer that
IBM Credit intends to terminate thie Agreement which date shall be no less than
ninety (90) days following date of such notice.
"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).
"WCO Advance": an A/R Advance, with a WCO Advance Term.
"WCO Advance Term": for each WCO Advance, a period of one hundred eighty (180)
days commencing on the A/R Advance Date for such WCO Advance.
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, without limitation, Attachment A and Attachment B, are specifically
incorporated herein 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 (x) the date on which this Agreement is terminated pursuant to
Section 10. and (y) the date on which IBM Credit terminates the Credit Line
pursuant to Section 9., IBM Credit agrees to extend to the Customer a credit
line ("Credit Line") in the amount set forth in Attachment A pursuant to which
IBM Credit will make to the Customer, from time to time, Advances in an
aggregate amount
at any one time outstanding not to exceed the Maximum Advance Amount.
Notwithstanding any other term or provision of this Agreement, IBM Credit may,
at any time and from time to time, in its sole discretion (x) temporarily
increase the amount of the Credit Line above the amount set forth in Attachment
A and decrease the amount of the Credit Line back to the amount of the Credit
Line set forth in Attachment A, in each case upon notice to the Customer and (y)
make Advances pursuant to this Agreement upon the request of Customer 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 Customer's
purchase of Products from Authorized Suppliers. Customer hereby authorizes and
directs IBM Credit to pay the proceeds of Product Advances directly to the
applicable Authorized Supplier in respect of invoices delivered to IBM Credit
for such Products by such Authorized Supplier and acknowledges that each such
Product Advance constitutes a loan by IBM Credit to Customer pursuant to this
Agreement as if the Customer 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. Customer shall
repay each Product Advance no later than the Common Due Date for such Product
Advance. Customer may, at its option, repay each Product Advance by requesting
IBM Credit to apply all or any part of the principal amount of an A/R Advance to
the Outstanding Product Advances. Customer's request for such application shall
be made in accordance with Section 2. When so requested and subject to the terms
and conditions of this Agreement, IBM Credit shall apply the amount so requested
to the amounts due in respect of the Outstanding Product Advances. Nothing
contained herein shall relieve Customer of its obligation to repay Product
Advances when due. Each Product Advance shall accrue a finance charge on the
Average Daily Balance thereof from the end of the Free Financing Period, if any,
for such Product Advance, or if no such Free Financing Period shall be in
effect, from the date of invoice for such Product Advance, in each case,
until such Product Advance shall become due and payable in accordance with the
terms of this Agreement, at a per annum rate equal to the lesser of (a) the
finance charge set forth in Attachment A to this Agreement as the "Product
Financing Charge" and (b) the highest rate from time to time permitted by
applicable law.
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 Common Due Date for such
Product Advance. If it is determined that amounts received from Customer were in
excess of the highest rate permitted by law, then the amount representing such
excess shall be considered reductions to principal of Advances.
(C) Customer acknowledges that IBM Credit does not warrant the Collateral.
Customer shall be obligated to pay IBM Credit in full even if the Collateral is
defective or fails to conform to the warranties extended by the Authorized
Supplier. The Obligations of Customer shall not be affected by any dispute
Customer may have with any manufacturer, distributor or Authorized Supplier.
Customer will not assert any claim or defense which it may have against any
manufacturer, distributor or Authorized Supplier against IBM Credit.
(D) Customer hereby authorizes IBM Credit to collect directly from any
Authorized Supplier any credits, rebates, bonuses or discounts owed by such
Authorized Supplier to Customer ("Supplier Credits"). Any Supplier Credits
received by IBM Credit may be applied by IBM Credit to the Outstanding Advances.
Any Supplier Credits collected by IBM Credit shall in no way reduce Customer's
debt to IBM Credit in respect of the Outstanding Advances until such Supplier
Credits are applied by IBM Credit. Nothing in the Agreement affects Customer's
right to negotiate and resolve issues concerning Supplier Credits with
Authorized Sellers.
(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 Advances
owed by Customer. 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) Customer 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 Customer, or any act or failure to act by Customer 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 the Customer may have against any
manufacturer, distributor or Authorized Supplier.
2.3. A/R Advances. (A) Whenever Customer shall desire IBM Credit to provide an
A/R Advance, Customer shall deliver to IBM Credit written notice of Customer's
request for such an Advance ("Request for A/R Advance"). For any requested A/R
Advance pursuant to which monies will be disbursed to Customer or any Person
other than IBM Credit, a Request for A/R Advance shall be delivered to IBM
Credit on or prior to 1:00 p.m. (Stamford, CT time) one Business Day prior to
the requested A/R Advance Date. The Request for A/R Advance shall specify (i)
the requested A/R Advance Date;
(ii) the amount of the requested A/R Advance; (iii) whether such A/R Advance is
a WCO Advance or a PRO Advance; (iv) if applicable, the PRO Advance Term for
such A/R Advance; (v) for each PRO Advance, the month, day and year of the
Common Due Date, as set forth in Customer's applicable billing statement from
IBM Credit, for the Product Advance to which the PRO Advance is to be applied;
and (vi) if applicable, the amount of the requested A/R Advance that should be
applied to the Outstanding Product Advances (provided that all PRO Advances
shall be applied to Outstanding Product Advances). Customer may deliver a
Request for A/R Advance via facsimile. Any Request for A/R Advance delivered to
IBM Credit shall be irrevocable. Notwithstanding any other provision of this
Agreement, Customer shall not (i)
request more than one PRO Advance in respect of any Product Advance; and (ii)
request a PRO Advance for any Common Due Date on which Customer will take a
discount offered by IBM Credit for invoice amounts paid in full within fifteen
days of the invoice date under IBM Credit's High Turnover Option ("HTO")
Program.
(B) Subject to the terms and conditions of this Agreement, on the A/R
Advance Date specified in a Request for A/R Advance, IBM Credit shall make the
principal amount of each A/R Advance available to the Customer in immediately
available funds to an account maintained by Customer (or in the case of a
Takeout Advance, as directed by Customer). If IBM Credit is making an A/R
Advance hereunder on a day on which Customer is to repay all or any part of an
Outstanding Advance (or any other amount owing hereunder), IBM Credit shall
apply the proceeds of the A/R Advance to such repayment and only an amount equal
to the difference, if any, between the amount of the A/R Advance and the amount
being repaid shall be made available to Customer as provided in the immediately
preceding sentence.
(C) Each A/R Advance shall accrue a finance charge on the unpaid principal
amount thereof, at a per annum rate equal to the lesser of (a) the finance
charge set forth in Attachment A to this Agreement under the caption "A/R
Finance Charge" for such type of A/R Advance, and (b) the highest rate from time
to time permitted by applicable law. If it is determined that amounts received
from the Customer were in excess of such highest rate, then the amount
representing such excess shall be considered reductions to principal of
Advances.
(D) Unless otherwise due and payable at an earlier date, the unpaid
principal amount of each A/R Advance, other than a Takeout Advance, shall be due
and payable on the applicable Common Due Date. Unless otherwise notified by
Customer in writing prior to the day the principal amount of any WCO Advance
becomes due and payable, the Customer shall be deemed to have provided IBM
Credit with a Request for A/R Advance requesting a WCO Advance on the day such
principal amount is due and payable in an amount equal to the unpaid principal
amount of the WCO Advance so due. Subject to the terms and conditions of this
Agreement, the principal amount of such WCO Advance shall automatically renew
for an additional WCO Advance Term. Notwithstanding any other provision of this
Agreement, a Takeout Advance may only be requested on the Closing Date and such
Takeout Advance shall be limited to an amount sufficient to discharge the
indebtedness that is the subject of a Takeout Advance.
Unless otherwise agreed in writing, a Takeout Advance shall be due pursuant to
the Schedule of Repayments in Attachment D to this Agreement.
2.4. Finance and Other Charges. (A) Finance charges shall be calculated by
multiplying the applicable Delinquency Fee Rate, Product Financing Charge or A/R
Finance Charge provided for in this Agreement by Customer's applicable Average
Daily Balance. The Delinquency Fee Rate, the Product Financing Charge and the
various A/R Finance Charges provided for in this Agreement are each computed on
the basis of an actual day, 360 day year.
(B) The Customer hereby agrees to pay to IBM Credit the charges set forth
as "Other Charges" in Attachment A. The Customer also agrees to pay IBM Credit
additional charges for any returned items of payment received by Customer. The
Customer hereby acknowledges that any such charges are not interest but that
such charges, if unpaid, will constitute part of the Outstanding Advances.
(C) The finance charges and Other Charges owed under this Agreement, and
any charges hereafter agreed to in writing by the parties, are payable monthly
on receipt of IBM Credit's xxxx or statement therefor or IBM Credit may, in its
sole discretion, add unpaid finance charges and Other Charges to the Customer's
outstanding Advances.
(D) If any amount owed under this Agreement, including, without limitation,
any 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
its due date to but not 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. In addition, if any
Shortfall Amount shall not be paid when due pursuant to Section 2.6 hereof,
Customer shall pay IBM Credit a Shortfall Transaction Fee. If it is determined
that amounts received from Customer were in excess of such highest rate, then
the amount representing such excess shall be considered reductions to principal
of Advances.
2.5. Statements Regarding Customer's Account. IBM Credit will send statements of
each transaction hereunder as well as monthly billing statements to Customer
with respect to Advances and other charges due on Customer's account with IBM
Credit. Each statement of transaction and monthly billing statement 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 seven (7) calendar days after such statement of transaction or billing
statement is received by Customer, Customer provides IBM Credit written notice
objecting that such amount or transaction is incorrectly described therein and
specifying the error(s), if any, contained therein. IBM Credit may at any time
adjust such statements of transaction or billing statements to comply with
applicable law and this Agreement.
2.6. Shortfall. If, on any date, the Outstanding Advances shall exceed the
Maximum Advance Amount (such excess, the "Shortfall Amount"), then the Customer
shall on such date prepay the Outstanding Advances in an amount equal to such
Shortfall Amount.
2.7. Application of Payments. (A) The Customer hereby agrees that IBM Credit may
from time to time (x) apply any and all monies, reserves and proceeds received
or collected by IBM Credit with respect to Accounts and other Goods or property
of Customer in the possession of IBM Credit at any time or times hereafter,
including without limitation any and all funds collected from the lockboxes, to
pay or prepay, as the case may be, in the following order (i) any Finance
Charges or fees, (ii) any
Takeout Advance due and payable, (iii) any WCO and PRO Advances outstanding, in
order of maturity, whether or not such advantages are then due and payable, (iv)
any Product Advances outstanding, in order of maturity, whether or not such
advances are then due and payable, including prior to the conclusion of any
applicable No-Charge Financing Days and (v) any other amounts owing by Customer
to IBM Credit or (y) in IBM Credit's sole and absolute discretion, disburse any
and all such monies, reserves and proceeds to Customer.
(B) Customer agrees that IBM Credit may, but shall not be obligated to,
cause funds collected from the lockboxes to be swept on a daily basis; provided,
however, that such funds shall be swept no less than once each week.
2.8. Prepayment and Reborrowing By Customer. (A) Customer 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 Customer or
otherwise) to pay finance charges and other amounts owing under this Agreement
first and then to the principal amount owed by the Customer.
(B) Subject to the terms and conditions of this Agreement, any amount
prepaid or repaid to IBM Credit in respect to the Outstanding Advances may be
reborrowed by Customer in accordance with the provisions of this Agreement.
Section 3. CREDIT LINE ADDITIONAL PROVISIONS
3.1. Ineligible Accounts. IBM Credit and Customer agree that IBM Credit shall
have the sole right to determine eligibility of Accounts from an Account debtor
for purposes of determining the Borrowing Base; however, without limiting such
right, the following Accounts will be deemed to be ineligible for purposes of
determining the Borrowing Base:
(A) Accounts created from the sale of goods and/or performance of services
on non-standard terms or that allow for payment to be made more than thirty (30)
days from the date of such sale or performance of services, except for those
Accounts agreed to in writing by IBM Credit;
(B) Accounts unpaid more than ninety (90) days from date of invoice, except
for those Accounts agreed to in writing by IBM Credit;
(C) Accounts payable by an Account debtor if fifty percent (50%) or more of
the aggregate outstanding balance of all such Accounts remain unpaid for more
than ninety (90) days from the date of invoice;
(D) Accounts payable by an Account debtor that is an Affiliate of Customer,
or an officer, employee, agent, guarantor, stockholder of Customer or an
Affiliate of Customer, or is related to or has common shareholders, officers or
directors with Customer;
(E) Accounts arising from consignment sales;
(F) Except for state, local and United States government institutions and
public educational institutions, Accounts with respect to which the payment by
the Account debtor is or may be conditional;
(G) Except for state, local and United States government institutions and
public educational institutions, Accounts with respect to which:
(i) the Account debtor is not a commercial entity, or
(ii) the Account debtor is not a resident of the United
States;
(H) Accounts payable by any Account debtor to which Customer is or may
become liable for goods sold or services rendered by such Account debtor to
Customer;
(I) Accounts arising from the sale or lease of goods purchased for a
personal, family or household purpose;
(J) Accounts arising from the sale or other disposition of goods that has
been used for demonstration purposes or loaned or
leased by the Customer to another party, except for those Accounts agreed to in
writing by IBM Credit;
(K) Accounts which are progress payment accounts or contra accounts;
(L) Accounts upon which IBM Credit does not have a valid, perfected, first
priority security interest;
(M) Accounts payable by an Account debtor that is or Customer knows will
become, subject to proceedings under United States Bankruptcy Law or other law
for the relief of debtors;
(N) Accounts that are not payable in US dollars;
(O) Accounts payable by any Account debtor that is a remarketer of computer
hardware and software products and whose purchases of such products from
Customer have been financed by another person, other than IBM Credit, who pays
the proceeds of such financing directly to Customer on behalf of such debtor;
(P) Accounts arising from the sale or lease of goods which are billed to
any Account debtor but have not yet been shipped by Customer;
(Q) Accounts with respect to which Customer has permitted or agreed to any
extension, compromise or settlement, or made any change or modification of any
kind or nature, including, but not limited to, any change or modification to the
terms relating thereto, except for those Accounts agreed to in writing by IBM
Credit;
(R) Accounts that do not arise from undisputed bona fide transactions
completed in accordance with the terms and conditions contained in the invoices,
purchase orders and contracts relating thereto;
(S) Accounts that are discounted for the full payment term specified in
Customer's terms and conditions with its account debtors, or for any longer
period of time;
(T) Accounts on cash on delivery (C.O.D.) terms;
(U) Accounts arising from maintenance or service contracts that are billed
in advance of full performance of service;
(V) Accounts arising from bartered transactions;
(W) Accounts arising from incentive payments, rebates, discounts, credits,
and refunds from a supplier; and
(X) Any and all other Accounts that IBM Credit deems, in its sole and
absolute discretion, to be ineligible.
The aggregate of all Accounts that are not ineligible Accounts shall hereinafter
be referred to as "Eligible Accounts".
3.2. Reimbursement for Charges. Customer agrees to pay for all costs and
expenses of Customer's bank in respect to collection of checks and other items
of payment, all fees relating to the use and maintenance of the Lockbox and the
Special Account (each as defined in Section 3.3) and with respect to remittances
of proceeds of the Advances hereunder.
3.3. Lockbox and Special Account. Customer shall establish and maintain
lockbox(es) (each, a "Lockbox") at the address(es) set forth in Attachment A
with the financial institution(s) listed in Attachment A (each, a "Bank")
pursuant to an agreement between the Customer and each Bank in form and
substance satisfactory to IBM Credit. Customer shall also establish and maintain
a deposit account which shall contain only proceeds of Customer's Accounts
("Special Account") with each Bank. Customer shall enter into and maintain a
blocked account agreement with each Bank for the benefit of IBM Credit in form
and substance satisfactory to IBM Credit pursuant to which, among other things,
such Bank shall agree that, upon notice from IBM Credit, disbursements from the
Special Account shall be made only as IBM Credit shall direct.
3.4. Collections. Customer shall instruct all Account debtors to remit payments
directly to a Lockbox. In addition, Customer
shall have such instruction printed in conspicuous type on all invoices.
Customer shall instruct such Bank to deposit all remittances to such Bank's
Lockbox into its Special Account. Customer further agrees that it shall not
deposit or permit any deposits of funds other than remittances paid in respect
of the Accounts into the Special Account(s) or permit any commingling of funds
with such remittances in any Lockbox or Special Account. Without limiting the
Customer's foregoing obligations, if, at any time, Customer receives a
remittance directly from an account debtor, then Customer shall make entries on
its books and records in a manner that shall reasonably identify such
remittances and shall keep a separate account on its record books of all
remittances so received and deposit the same into a Special Account. Until so
deposited into the Special Account, Customer shall keep all remittances received
in respect of Accounts separate and apart from Customer's other property so that
they are capable of identification as the proceeds of Accounts in which IBM
Credit has a security interest.
3.5. Application of Remittances and Credits. Customer shall apply all
remittances against the aggregate of Customer's outstanding Accounts no later
than the end of the Business Day on which such remittances are deposited into
the Special Account. Customer also agrees to apply each remittance against its
respective Account no later than three (3) Business Days from the date such
remittance is deposited into the Special Account. In addition, Customer shall
promptly apply any credits owing in respect to any Account when due.
3.6. Power of Attorney. Customer 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 Customer 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 under this Agreement and the
Other Documents;
(B) endorse the name of Customer upon any of the items of payment of
proceeds and deposit the same in the account of IBM Credit for application to
the Obligation; and
upon the occurrence and during the continuance of an Event of Default as defined
in Section 9.1 hereof:
(C) demand payment, enforce payment and otherwise exercise all Customer's
rights and remedies with respect to the collection of any Accounts;
(D) settle, adjust, compromise, extend or renew any
Accounts;
(E) settle, adjust or compromise any legal proceedings
brought to collect any Accounts;
(F) sell or assign any Accounts upon such terms, for such amounts and at
such time or times as IBM Credit may deem advisable;
(G) discharge and release any Accounts;
(H) prepare, file and sign Customer's name on any Proof of Claim in
Bankruptcy or similar document against any Account debtor;
(I) prepare, file and sign Customer's name on any notice of lien, claim of
mechanic's lien, assignment or satisfaction of lien or mechanic's lien, or
similar document in connection with any Accounts;
(J) endorse the name of Customer upon any chattel paper, document,
instrument, invoice, freight xxxx, xxxx of lading or similar document or
agreement relating to any Account or goods pertaining thereto;
(K) endorse the name of Customer upon any of the items of payment of
proceeds and deposit the same in the account of IBM Credit for application to
the Obligation;
(L) sign the name of Customer to requests for verification of Accounts and
notices thereof to Account debtors;
(M) sign the name of Customer 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
(N) make, settle and adjust claims under the Policies with respect to the
Collateral and endorse Customer's name on any check, draft, instrument or other
item of payment of the proceeds of the Policies with respect to the Collateral;
and
(O) take control in any manner of any term of payment or proceeds and for
such purpose to notify the postal authorities to change the address for delivery
of mail addressed to Customer to such address as IBM Credit may designate.
The power of attorney granted by this Section is for value and coupled with an
interest and is irrevocable so long as this Agreement is in effect or any
Obligations remain outstanding. Nothing done by IBM Credit pursuant to such
power of attorney will reduce any of Customer's Obligations other than
Customer's payment Obligations to the extent IBM Credit has received monies.
Section 4. SECURITY -- COLLATERAL
4.1. Grant. To secure Customer's full and punctual payment and performance of
the Obligations when due (whether at the stated maturity, by acceleration or
otherwise), Customer hereby grants IBM Credit a security interest in all of
Customer'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, products thereof and documents therefor;
(B) all accounts, contract rights, chattel paper, instruments, deposit
accounts, obligations of any kind owing to
Customer, whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services 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 foregoing; and
(E) 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 shall be collectively defined herein as the
"Collateral".
Customer covenants and agrees with IBM Credit that: (a) the security constituted
to 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 Customer to IBM Credit.
4.2. Further Assurances. Customer 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 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. Customer 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 is subject to the receipt by IBM Credit of, or
waiver in writing by IBM Credit of compliance with, the following conditions
precedent:
(A) this Agreement executed and delivered by Customer and
IBM Credit;
(B) (i) copies of the resolutions of the Board of Directors of Customer
certified by the secretary or assistant secretary of Customer authorizing the
execution, delivery and performance of this Agreement and each Other Document
executed and delivered in connection herewith, (ii) a certificate of the
secretary or an assistant secretary of Customer, in form and substance
satisfactory to IBM Credit, certifying the names and true signatures of the
officers of Customer authorized to sign this Agreement and the Other Documents
and (iii) copies of the articles of incorporation and by-laws of Customer
certified by the secretary or assistant secretary of Customer;
(C) certificates dated as of a recent date from the Secretary of State or
other appropriate authority evidencing the good standing of Customer 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;
(D) copies of all approvals and consents from any Person, in each case in
form and substance satisfactory to IBM Credit, which are required to enable
Customer 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;
(E) a lockbox agreement executed by Customer and each Bank, in form and
substance satisfactory to IBM Credit;
(F) a contingent blocked account agreement executed by Customer and each
Bank in form and substance satisfactory to IBM Credit;
(G) intercreditor agreements ("Intercreditor Agreement"), in form and
substance satisfactory to IBM Credit, executed by each other secured creditor of
Customer as set forth in Attachment A;
(H) a favorable opinion of counsel for Customer in substantially the form
of Attachment I;
(I) UCC-1 financing statements for each jurisdiction reasonably requested
by IBM Credit executed by Customer and each guarantor whose guaranty to IBM
Credit is intended to be secured by a pledge of its assets;
(J) the statements, certificates, documents, instruments, financing
statements, agreements and information set forth in Attachment A and Attachment
B; and
(K) 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 Advance. No Advance will be required to be
made or renewed by IBM Credit under this Agreement unless, on and as of the date
of such Advance, the following statements shall be true to the satisfaction of
IBM Credit:
(A) The representations and warranties contained in this Agreement or in
any document, instrument or agreement executed in connection herewith, are true
and correct in all material respects on and as of the date of such Advance as
though made on and as of such date;
(B) No event has occurred and is continuing or after giving effect to such
Advance or the application of the proceeds thereof would result which would
constitute a Default;
(C) No event has occurred and is continuing which could reasonably be
expected to have a Material Adverse Effect;
(D) Both before and after giving effect to the making of such Advance, no
Shortfall Amount exists.
Except as Customer has otherwise disclosed to IBM Credit in writing prior to
each request, each request (or deemed request pursuant to Section 2.3 (D)) for
an Advance hereunder and the receipt (or deemed receipt) by the Customer of the
proceeds of any Advance hereunder shall be deemed to be a representation and
warranty by Customer that, as of and on the date of such Advance, the statements
set forth in (A) through (D) above are true statements. No such disclosures by
Customer to IBM Credit shall in any manner be deemed to satisfy the conditions
precedent to each Advance that are set forth in this Section 5.2.
Section 6. REPRESENTATIONS AND WARRANTIES
To induce IBM Credit to enter into this Agreement, Customer represents and
warrants to IBM Credit as follows:
6.1. Organization and Qualifications. Customer 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.
6.2. Rights in Collateral; Priority of Liens. Customer 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 the
Customer 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.
6.3. No Conflicts. The execution, delivery and performance by Customer 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 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); and (v) will not, except as contemplated herein, result in
the imposition of any Liens upon any of its properties.
6.4. Enforceability. This Agreement and all of the other documents executed and
delivered by the Customer in connection herewith are the legal, valid and
binding obligations of Customer, and are enforceable in accordance with their
terms, except as such enforceability may be limited by the effect of any
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting creditors' rights generally or the general
equitable principles relating thereto.
6.5. Locations of Offices, Records and Inventory. The address of the principal
place of business and chief executive office of Customer is as set forth on
Attachment B or on any notice provided by Customer to IBM Credit pursuant to
Section 7.7(C) of this Agreement. The books and records of Customer, and all of
its chattel paper (other than the chattel paper delivered to IBM Credit pursuant
to Section 7.14(E)) and records of Accounts, are maintained exclusively at such
location. There is no jurisdiction in which Customer 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
Customer 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 Customer 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 the Customer's
inventory is stored. None of the receipts received by Customer 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.
6.6. Fictitious Business Names. Customer has not used any corporate or
fictitious name during the five (5) years preceding the date of this Agreement,
other than those listed on Attachment B.
6.7. Organization. All of the outstanding capital stock of Customer has been
validly issued, is fully paid and nonassessable.
6.8. No Judgments or Litigation. Except as set forth on Attachment B, no
judgments, orders, writs or decrees are outstanding against Customer nor is
there now pending or, to the best of Customer's knowledge after due inquiry,
threatened, any litigation, contested claim, investigation, arbitration, or
governmental proceeding by or against Customer.
6.9. No Defaults. The Customer is not in default under any term of 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. Customer has
no 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.
6.10. Labor Matters. Except as set forth on any notice provided by Customer to
IBM Credit pursuant to Section 7.1(G) of this Agreement, the Customer is not a
party to any labor dispute. There are no strikes or walkouts or labor
controversies pending or threatened against the Customer which could reasonably
be expected to have a Material Adverse Effect.
6.11. Compliance with Law. Customer has not violated or failed
to comply with any Requirement of Law or any requirement of any
self regulatory organization.
6.12. ERISA. Each "employee benefit plan", "employee pension benefit plan",
"defined benefit plan", or "multi-employer benefit plan", which 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. Customer
has no "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. The Customer has not 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).
6.13. Compliance with Environmental Laws. Except as otherwise disclosed in
Attachment B:
(A) The Customer has obtained all government approvals required with
respect to the operation of their businesses under any Environmental Law.
(B) (i) the Customer has not generated, transported or disposed of any
Hazardous Substances; (ii) the Customer is not currently generating,
transporting or disposing of any Hazardous Substances; (iii) the Customer has no
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, or (b) any of its business operations
have contaminated lands or waters of others with any Hazardous Substances; (iv)
the Customer and its respective assets are not subject to any Environmental
Liability and, to the best of the Customer's knowledge, any threatened
Environmental Liability; (v) the Customer has not 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 Substances for which the Customer may be liable; (vi) the Customer
is not in violation of any Environmental Law;
(vii) there are no proceedings or investigations pending against Customer 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 Customer's or its
Subsidiaries' business shall be excluded from representations (i) and (ii)
above, provided, further, that Customer 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.
6.14. Intellectual Property. Customer 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.
6.15. Licenses and Permits. Customer 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.
Customer is not in violation of the terms of any such franchise, license, lease,
permit, certificate, authorization, qualification, easement, right of way, right
or approval.
6.16. Investment Company. The Customer is not (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.
6.17. Taxes and Tax Returns. Customer 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 the Customer, or made provision for the payment thereof in
accordance with GAAP. The charges and reserves on the books of the Customer in
respect of taxes or other governmental charges are in accordance with GAAP. No
tax liens have been filed against Customer or any of its property.
6.18. Status of Accounts. Each Account is based on an actual and bona fide sale
and delivery of goods or rendition of services to customers, made by Customer,
in the ordinary course of its business; the goods and inventory being sold and
the Accounts created are its exclusive property and are not and shall not be
subject to any Lien, consignment arrangement, encumbrance, security interest or
financing statement whatsoever (other than Permitted Liens). The Customer's
customers have accepted goods or services and owe and are obligated to pay the
full amounts stated in the invoices according to their terms. There are no
proceedings or actions known to Customer which are pending or threatened against
any Material Account Obligor (as defined in Section 7.14(B) of this Agreement)
of any of the Accounts which could reasonably be expected to result in a
material adverse effect on the debtor's ability to pay the full amounts due to
Customer.
6.19. Affiliate/Subsidiary Transactions. Customer is not a party to or bound by
any agreement or arrangement (whether oral or written) to which any Affiliate or
Subsidiary of the Customer is a party except (i) in the ordinary course of and
pursuant to the reasonable requirements of Customer's business and (ii) upon
fair and reasonable terms no less favorable to Customer 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 the Customer to IBM Credit or the Auditors for
purposes of or in connection with this Agreement or any Other Document, 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 Customer or arrangements for the
payment of such amounts by Customer have been made to the satisfaction of IBM
Credit.
6.22. Indebtedness. Customer (i) has no Indebtedness, other than Permitted
Indebtedness; and (ii) has not guaranteed the obligations of any other Person
(except as permitted by Section 8.4).
Section 7. AFFIRMATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations:
7.1. Financial and Other Information. Customer shall cause to be furnished to
IBM Credit the following information within the following time periods:
(A) as soon as available and in any event within ninety (90) days after the
end of each fiscal year of Customer (i) audited Financial Statements (provided
that, to the extent not otherwise audited by the Auditors, the consolidating
Financial Statements may be unaudited) as of the close of the fiscal year and
for the fiscal year, together with a comparison to the Financial Statements for
the prior year, in each case accompanied by (a) either an opinion of the
Auditors without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit or, if so qualified, an
opinion which shall be in scope and substance reasonably satisfactory to IBM
Credit, (b) such Auditors' "Management Letter" to Customer, if any, (c) a
written statement signed by the Auditors stating that in the course of the
regular audit of the business of Customer and its consolidated Subsidiaries,
which audit was conducted by the Auditors in accordance with generally accepted
auditing standards, the Auditors have not obtained any knowledge of the
existence of any Default under any provision of this Agreement, or, if such
Auditors shall have obtained from such examination any such knowledge, they
shall disclose in such written statement the existence of the Default and the
nature thereof, it being understood that such Auditors shall have no liability,
directly or indirectly, to anyone for failure to obtain knowledge of any such
Default; (ii) if composed, a narrative discussion of the consolidated financial
condition and results of operations and the consolidated liquidity and capital
resources of Customer and its Subsidiaries for such fiscal year prepared by the
chief executive officer or chief financial officer of Customer; and (iii) a
Compliance Certificate along with a schedule, in substantially the form of
Attachment C hereto, of the calculations used in determining, as of the end of
such fiscal year, whether Customer is in compliance with the financial covenants
set forth in Attachment A;
(B) as soon as available and in any event within forty-five (45) days after
the end of each fiscal quarter of Customer (i) Financial Statements as of the
end of such period and for the fiscal year to date, together with a comparison
to the Financial Statements for the same periods in the prior year, all in
reasonable detail and duly certified (subject to normal year-end audit
adjustments and except for the absence of footnotes) by the chief executive
officer or chief financial officer of Customer as having been prepared in
accordance with GAAP; (ii) if composed, a narrative discussion of the
consolidated financial condition and results of operations and the consolidated
liquidity and capital resources of Customer and its Subsidiaries for such period
and for the fiscal year to date prepared by the chief executive officer or chief
financial officer of Customer; and (iii) a Compliance Certificate along with a
schedule, in substantially the form of Attachment C hereto, of the calculations
used in determining, as of the end of such fiscal quarter, whether Customer is
in compliance with the financial covenants set forth in Attachment A;
(C) as soon as available and in any event within thirty (30) days after the
end of each fiscal month of Customer (i) Financial Statements as of the end of
such period and for the fiscal year to date, together with a comparison to the
Financial Statements for the same periods in the prior year, all in reasonable
detail and duly certified (subject to normal year-end audit adjustments and
except for the absence of footnotes) by the chief executive officer or chief
financial officer of Customer as having been prepared in accordance with GAAP;
(ii) if composed, a narrative discussion of the consolidated financial condition
and results of operations and the consolidated liquidity and capital resources
of Customer and its Subsidiaries for such period and for the fiscal year to date
prepared by the chief executive officer or chief financial officer of Customer;
and (iii) a Compliance Certificate along with a schedule, in substantially the
form of Attachment C hereto, of the calculations used in determining, as of the
end of such fiscal month, whether Customer is in compliance with the financial
covenants set forth in Attachment A;
(D) as soon as available and in any event within sixty (60) days after the
end of each fiscal year of Customer (i) projected Financial Statements, broken
down by quarter, for the then current fiscal year; and (ii) if composed, a
narrative discussion relating to such projected Financial Statements;
(E) promptly after Customer obtains knowledge of (i) the occurrence of a
Default or Event of Default, or (ii) the existence of any condition or event
which would result in the Customer's failure to satisfy the conditions precedent
to Advances set forth in Section 5, a certificate of the chief executive officer
or chief financial officer of Customer specifying the nature thereof and the
Customer's proposed response thereto, each in reasonable detail;
(F) promptly after Customer obtains knowledge of (i) any proceeding(s)
being instituted or threatened to be instituted by or against Customer 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 Customer specifying
the nature thereof and the Customer's proposed response thereto, each in
reasonable detail;
(G) promptly after Customer obtains knowledge that (i) any order, judgment
or decree in excess of $50,000.00 shall have been entered against Customer 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
Customer specifying the nature thereof and the Customer's proposed response
thereto, each in reasonable detail;
(H) promptly after Customer learns of any material labor dispute to which
Customer 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
Customer is a party or by which it is bound, a certificate of the chief
executive officer or chief financial officer of Customer specifying the nature
thereof and the Customer'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 the Customer's
or any guarantor's business affairs and financial condition;
(J) by the fifth (5th) day of each month, or as otherwise agreed in
writing, a Collateral Management Report as of a date no earlier than the last
day of the immediately preceding month;
(K) along with the Financial Statements set forth in Section 7.1(A) and
(B), the name, address and phone number of each of its account debtors' primary
contacts for each Account on the Accounts aging report contained in its most
recent Collateral Management Report; and
(L) within five (5) days after the same are sent, copies of all financial
statements and reports which Customer sends to its stockholders, and within five
(5) days after the same are filed, copies of all financial statements and
reports which Customer may make to, or file with, the Securities and Exchange
Commission or any successor or analogous governmental authority.
Each certificate, schedule and report provided by Customer to IBM Credit shall
be signed by an authorized officer of Customer, and 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 the addresses as set forth on Attachment B
or on any notice provided by Customer to IBM Credit in accordance with Section
7.7(C). Such locations shall be certified quarterly to IBM Credit substantially
in the form of Attachment G.
7.3. Changes in Customer. Customer shall provide thirty (30) days prior written
notice to IBM Credit of any change in Customer's name, chief executive office
and principal place of business, organization, form of ownership or corporate
structure; provided, however, that Customer's compliance with this covenant
shall not relieve it of any of its other obligations or any other provisions
under this Agreement or any Other Document limiting actions of the type
described in this Section.
7.4. Corporate Existence. Customer shall (A) maintain its corporate existence,
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, (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. Customer 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
has instituted or will institute proceedings to terminate any Plan.
Notwithstanding the foregoing, the Customer shall have no 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 Customer is required to notify the PBGC of such reportable event. Such
notification shall include a certificate of the chief financial officer of
Customer setting forth details as to such "reportable event" and the action
which Customer proposes to take with respect thereto, together with a copy of
any notice of such "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, Customer 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) Customer and any other Person under Customer'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 by Customer or such Person into,
upon, over or under any property now or hereinafter owned, leased or otherwise
controlled (directly or indirectly) by Customer.
(B) Customer 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 Customer, (ii) all claims made or threatened by any Person or
Governmental Authority against Customer or any of Customer's assets relating to
any loss or injury resulting from any Hazardous Substance, (iii) Customer'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 Customer, and (iv) any
occurrence or condition which could constitute a violation of any Environmental
Law.
7.7. Collateral Books and Records/Collateral Audit. (A) Customer 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 Accounts.
(B) Customer agrees that IBM Credit or its agents may enter upon the
premises of Customer 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 an Event of Default
for the purposes of (i) inspecting the Collateral, (ii) inspecting and/or
copying (at Customer's expense) any and all records pertaining thereto, (iii)
discussing the affairs, finances and business of Customer with any officers,
employees and directors of Customer or with the Auditors and (iv) verifying
Eligible Accounts and other Collateral. Customer also agrees to provide IBM
Credit with such reasonable information and documentation that IBM Credit deems
necessary to conduct the foregoing activities, including, without limitation,
reasonably requested samplings of purchase orders, invoices and evidences of
delivery or other performance.
Upon the occurrence and during the continuance 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) Customer 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 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) Customer 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 therein.
7.8. Insurance; Casualty Loss. (A) Customer 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. Customer 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, Customer 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 Customer, 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
Customer's Outstanding Product Advances first, then to the Outstanding A/R
Advances. 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 cancelled and that no act or default of Customer or any other person
shall affect the right of IBM Credit to recover under the Policies. Customer
hereby agrees to direct all insurers under the Policies to pay all proceeds with
respect to the Collateral directly to IBM Credit.
If Customer fails to pay any cost, charges or premiums, or if Customer 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 Customer to IBM Credit and are due and payable immediately upon receipt of an
invoice by IBM Credit.
7.9. Taxes. Customer agrees to pay, when due, all taxes lawfully levied or
assessed against Customer 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. Customer agrees to comply with all
Requirements of Law applicable to the Collateral or any part
thereof, or to the operation of its business.
7.11. Fiscal Year. Customer agrees to maintain its fiscal year ending September
30 unless Customer provides IBM Credit at least thirty (30) days prior written
notice of any change thereof.
7.12. Intellectual Property. Customer 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. Customer 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. Customer shall:
(A) from time to time upon request of IBM Credit, provide IBM Credit with
access to copies of all invoices, delivery evidences and other such documents
relating to each Account;
(B) promptly upon Customer's obtaining knowledge thereof, furnish to and
inform IBM Credit of all material adverse information relating to the financial
condition of any Account debtor whose outstanding obligations to Customer
constitute two percent (2%) or more of the Accounts at such time (a "Material
Account Debtor");
(C) promptly upon Customer's learning thereof, notify IBM Credit in writing
of any event which could reasonably be expected to cause any obligation of a
Material Account Debtor to become an Ineligible Account;
(D) keep all goods rejected or returned by any Account debtor and all goods
repossessed or stopped in transit by Customer from any account debtor segregated
from other property of Customer, holding the same in trust for IBM Credit until
Customer applies a credit against such Account debtor's outstanding obligations
to Customer or sells such goods in the ordinary course of business, whichever
occurs earlier;
(E) stamp or otherwise xxxx chattel paper and instruments now owned or
hereafter acquired by it in conspicuous type to show that the same are subject
to IBM Credit's security interest and immediately thereafter deliver or cause
such chattel paper and instruments to be delivered to IBM Credit or any agent
designated by IBM Credit with appropriate endorsements and assignments to vest
title and possession in IBM Credit;
(F) use commercially reasonable efforts to collect all Accounts owed;
(G) promptly notify IBM Credit of any loss, theft or destruction of or
damage to any of the Collateral. Customer 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. Customer 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 any encumbrances of any kind whatsoever;
(H) 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;
(I) 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
(J) at any time and from time to time, upon the request of IBM Credit, and
at the sole expense of Customer, Customer 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.
7.15. Subsidiaries. IBM Credit may require that any Subsidiaries of Customer
become parties to this Agreement or any other agreement executed in connection
with this Agreement as guarantors or sureties. Customer will comply, and cause
all Subsidiaries of Customer to comply with Sections 7 and 8 of this Agreement,
as if such sections applied directly to such Subsidiaries.
7.16. Financial Covenants; Additional Covenants. Customer acknowledges
and agrees that Customer shall at all times maintain the financial
covenants and other covenants set forth in the attachments, exhibits and
other addenda incorporated in this Agreement.
Section 8. NEGATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations due hereunder:
8.1. Liens. The Customer will not, 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.
8.2. Disposition of Assets. The Customer will not, directly or indirectly, sell,
lease, assign, transfer or otherwise dispose of any assets other than (i) sales
of inventory in the ordinary course of business and short term rental of
inventory as demonstrations in amounts not material to Customer, 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 Customer
as of the beginning of such fiscal year.
8.3. Corporate Changes. The Customer will not, 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 Customer, or Syscomm International
Corporation, other than the initial public offering contemplated by Customer, or
Syscomm International Corporation, and anticipated to occur prior to December
31, 1996.
8.4. Guaranties. The Customer will not, 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, and (iii) for guaranties in favor of IBM
Credit.
8.5. Restricted Payments. The Customer will not, directly or indirectly: (i)
declare or pay any distribution, if such declaration or payment would cause
Customer to be in violation of its financial covenants or reasonably be expected
to have a Material Adverse Effect with IBM Credit, 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 Customer 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 Customer; 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).
8.6. Investments. The Customer will not, 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 Customer 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 Customer; and
(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.
Investments that do not have a Material Adverse Effect on Customer's financial
condition, and do not cause a violation of the financial covenants established
by IBM Credit for Customer, will be considered by IBM Credit when presented in
writing by Customer.
8.7. Affiliate/Subsidiary Transactions. The Customer will not, 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 Customer except in
the ordinary course of business and pursuant to the reasonable requirements of
Customer's business upon fair and reasonable terms no less favorable to Customer
than could be obtained in a comparable arm's-length transaction with an
unaffiliated Person.
8.8. ERISA. The Customer will not (A) terminate any Plan so as to incur a
material liability to the PBGC, (B) permit any "prohibited transaction"
involving any Plan (other than a "multi-employer benefit plan") which would
subject the Customer 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 and during the continuance 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 8.8, 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.
8.9. Additional Negative Pledges. Customer will not, 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 the Collateral or any part thereof after the occurrence
and during the continuance of an Event of Default.
8.10. 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 Customer 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. Inventory stored in a location controlled by International
Business Machines Corporation shall not be a violation of this Negative
Covenant.
8.11. Use of Proceeds. The Customer shall not use any portion of the proceeds of
any Advances other than to acquire Products from Authorized Suppliers and for
its general working capital requirements.
8.12. Accounts. The Customer shall not permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account, including any of the terms relating thereto,
which would adversely affect IBM Credit's ability to collect payment on any
Account in whole or in part, except for such extensions, compromises or
settlements made by Customer in the ordinary course of its business, provided,
however, that the aggregate amount of such extensions, compromises or
settlements does not exceed five percent (5%) of the Customer's Accounts at any
time.
8.13. Indebtedness. The Customer will not create, incur, assume or permit to
exist any Indebtedness, except for Permitted Indebtedness.
8.14. Loans. The Customer will not make any loans, advances, contributions or
payments of money or goods to any Subsidiary, Affiliate or parent corporation or
to any officer, director or stockholder of Customer or of any such corporation
(except for compensation for personal services actually rendered), except for
transactions expressly authorized in this Agreement.
Section 9. DEFAULT
9.1. Event of Default. Any one or more of the following events
shall constitute an Event of Default by the Customer under this
Agreement and the Other Documents:
(A) The failure to make timely payment of the Obligations or
any part thereof when due and payable;
(B) Customer fails to comply with or observe any term, covenant or
agreement contained in this Agreement or any Other Documents which could
reasonably be expected to have a Material Adverse Effect;
(C) Any representation, warranty, statement, report or certificate made or
delivered by or on behalf of Customer 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 which could reasonably be
expected to have a Material Adverse Effect;
(D) The occurrence of any event or circumstance which could reasonably be
expected to have a Material Adverse Effect;
(E) Customer, any Subsidiary or any guarantor shall generally not pay its
debts as such debts become due, 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 or person with similar powers shall be appointed for
Customer, 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 Customer, any Subsidiary or any guarantor shall have a period of forty-five
(45) 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 against Customer or any guarantor in an
amount in excess of $50,000.00 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 supersedeas 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) The dissolution or liquidation of Customer or any guarantor, or
Customer or any guarantor or its directors or stockholders shall take any action
to dissolve or liquidate Customer or any guarantor;
(I) Any "going concern" or like qualification or exception, or
qualification arising out of the scope of an audit by an Auditor of his opinion
relative to any Financial Statement delivered to IBM Credit under this
Agreement;
(J) There issues a warrant of distress for any rent or taxes with respect
to any premises occupied by Customer 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;
(K) Customer suspends business;
(L) The occurrence of any event or condition which enables the holder of
any Indebtedness arising in one or more related or unrelated transactions to
accelerate the maturity thereof or the failure of Customer to pay when due any
such Indebtedness;
(M) Any guaranty of any or all of the Customer's Obligations executed by
any 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;
(N) Customer is in default under the material terms of any of the Other
Documents after the expiration of any applicable cure periods;
(O) 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 in the reasonable opinion
of IBM Credit will have a Material Adverse Effect;
(P) 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 Customer.
9.2. Acceleration. 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 the Customer: (a) declare all Obligations to be immediately due
and payable (except with respect to any Event of Default set forth in Section
9.1(E) 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.
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, 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 Accounts, or IBM Credit may use (at
the expense of the Customer) such of the supplies or space of the Customer at
Customer's place of business or otherwise, as may be necessary to properly
administer and control the Accounts or the handling of collections and
realizations thereon; (ii) bring suit, in the name of the Customer or IBM Credit
and generally shall have all other rights respecting said Accounts, including
without limitation the right to accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Customer or IBM Credit; (iii)
sell, assign and deliver the Accounts and any returned, reclaimed or repossessed
merchandise, with or without advertisement, at public or private sale, for cash,
on credit or otherwise, at IBM Credit's sole option and discretion, and IBM
Credit may bid or become a purchaser at any such sale; and (iv) 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 any Event of Default
which has not been waived in writing by IBM Credit, 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 Customer 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. The Customer 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 the
manufacturer or any supplier (including any Authorized Supplier) of such
Collateral constitutes a commercially reasonable sale. The Customer 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 Customer or elsewhere, and to make available to IBM Credit the premises
and facilities of the Customer 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 the Customer 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
Customer's Obligations, whether due or to become due, in such order as IBM
Credit may in it sole discretion elect. Customer shall remain liable to IBM
Credit for any deficiencies, and IBM Credit in turn agrees to remit to Customer
or its 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 Customer 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, Customer waives to the extent
permitted by applicable law all rights of set-off it may have against IBM
Credit. Customer further waives to the extent permitted by applicable law
presentment, 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. MISCELLANEOUS
10.1. 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 Customer that Customer intends 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 Customer's 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 Customer's
Obligations, no termination of this Agreement or any of the Other Documents
shall in any way affect or impair (i) Customer's Obligations to IBM Credit
including, without limitation, any transaction or event occurring prior to such
termination, or (ii) IBM Credit's rights hereunder, including, without
limitation IBM Credit's security interest in the Collateral.
10.2. Indemnification. The Customer 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) Customer, (ii) any
Person that shall be acquired by Customer or (iii) any Person that Customer 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 the Customer in connection
therewith. Notwithstanding the foregoing, the Customer shall not 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.
10.3. Additional Obligations. IBM Credit, without waiving or releasing any
Obligation or Default of the Customer, may perform any Obligations of the
Customer that the Customer shall fail or refuse to perform and IBM Credit may,
at any time or times hereafter, but shall be under no obligation so to do, 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.
10.4. LIMITATION OF LIABILITY. NEITHER IBM CREDIT NOR ANY OTHER INDEMNIFIED
PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES SUFFERED BY CUSTOMER IN CONNECTION WITH THIS AGREEMENT,
ANY OTHER AGREEMENT OR ANY CLAIMS IN ANY MANNER RELATED THERETO. NOR SHALL IBM
CREDIT OR ANY OTHER INDEMNIFIED PERSON HAVE ANY LIABILITY TO CUSTOMER 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.
10.5. Alteration/Waiver. This Agreement and the Other Documents may not be
altered or amended except by an agreement in writing signed by the Customer 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 the
Customer of any undertakings, agreements, covenants, warranties and
representations of this Agreement or any Other Document 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 the Customer
under this Agreement or any of the Other Documents shall not waive or affect any
other Default by the Customer 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 the Customer contained in this
Agreement or the Other Documents and no Default by the Customer shall be deemed
waived by IBM Credit unless such waiver is in writing signed by an authorized
representative of IBM Credit.
10.6. 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.
10.7. One Loan. All Advances heretofore, now or at any time or times hereafter
made by IBM Credit to the Customer 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 Customer to IBM
Credit or any assignor of IBM Credit.
10.8. Additional Collateral. All monies, reserves and proceeds received or
collected by IBM Credit with respect to Accounts and other property of the
Customer in possession of IBM Credit at any time or times hereafter are hereby
pledged by Customer to IBM Credit as security for the payment of Customer's
Obligations and shall be applied promptly by IBM Credit on account of the
Customer's Obligations; provided, however, IBM Credit may release to the
Customer such portions of such monies, reserves and proceeds as IBM Credit may
from time to time determine, in its sole discretion.
10.9. No Merger or Novations. (A) Notwithstanding anything contained in any
document to the contrary, it is understood and agreed by the Customer and IBM
Credit that the claims of IBM Credit arising hereunder and existing as of the
date hereof constitute continuing claims arising out of the Obligations of
Customer under the Financing Agreement and any Other Document. Customer
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 Customer's Obligations under the Financing Agreement or
any Other Document.
(B) Neither the obtaining of any judgment nor the exercise of any power of
seizure or sale shall operate to extinguish the Obligations of the Customer 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.
10.10. 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.
10.11. Binding Effect; Assignment. This Agreement and the Other Documents shall
be binding upon and inure to the benefit of IBM Credit and the Customer and
their respective successors and assigns; provided, that the Customer shall have
no right to assign this Agreement or any of the Other Documents without the
prior written consent of IBM Credit.
10.12. Notices. 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
(A) upon receipt if deposited in the United States mails, first class mail, with
proper postage prepaid, (B) upon receipt of confirmation or answerback if sent
by telecopy, or other similar facsimile transmission, (C) one Business Day after
deposit with a reputable overnight courier with all charges prepaid, or (D) 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:
IBM Credit Corporation
0000 XxxxxXxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Remarketer Finance Center Manager
Telecopy: (000) 000-0000
(ii) If to Information Technology Services, Inc. at:
Information Technology Services, Inc.
000 Xxxxxx Xxxx.
Xxxxxxxxx, XX 00000-0000
Attention: Chief Financial Officer
Telecopy: (000) 000-0000
or to such other address or number as each party designates to the other in the
manner prescribed herein.
10.13. 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.
10.14. ATTACHMENT A MODIFICATIONS. IBM Credit may modify the Product Financing
Period set forth in Attachment A from time to time if on at least two occasions
during any three-month period a Shortfall Amount has become due and payable and
may modify the Collateral Insurance Amount set forth in Attachment A from time
to time, in each case, by providing Customer with a new Attachment A. Any such
new Attachment A shall be effective as of the date specified in the new
Attachment A.
10.15. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW. TO INDUCE IBM
CREDIT TO ACCEPT THIS AGREEMENT AND THE OTHER DOCUMENTS, THE CUSTOMER HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT AND ANY OTHER DOCUMENT, OR 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 DELIVERING SUCH PROCESS BY A PROCESS SERVER OR CERTIFIED MAIL (OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO CUSTOMER AT ITS
ADDRESS SET FORTH IN SECTION 10.12 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 SHALL BE GOVERNED BY THE LAWS (WITHOUT GIVING EFFECT TO CONFLICT OF
LAW PROVISIONS) OF THE STATE OF NEW YORK.
10.16. JURY TRIAL WAIVER. EACH OF IBM CREDIT AND THE CUSTOMER 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 CUSTOMER ARE PARTIES AS TO
ALL MATTERS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT OR ANY
DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED IN CONNECTION HEREWITH.
IN WITNESS WHEREOF, the Customer 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.
INFORMATION TECHNOLOGY SERVICES, INC.
By:_____________________________
Print Name:_____________________
Title:__________________________
ACCEPTED this_________day of___________________, 1996.
IBM CREDIT CORPORATION
By:___________________________
Print Name: __________________
Title: _______________________
ATTACHMENT A, EFFECTIVE DATE September 24, 1996 ("IWCF ATTACHMENT A") TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT") DATED
SEPTEMBER 24, 1996
Customer: Information Technology Services, Inc.
I. Fees, Rates and Repayment Terms:
(A) Credit Line:Twenty Seven Million Five Hundred Thousand
($27,500,000.00);
(B) Borrowing Base:
(i) 85% of the amount of the Customer's Eligible Accounts as of the date
of determination as reflected in the Customer's most recent Collateral
Management Report, including A/R from Chase Manhattan Bank aged 90-120
days old; plus
(ii) Upon verification to IBM Credit's satisfaction and Notwithstanding
Section 3.1 of the IWCF, 85% on amounts of Deutsche Bank Accounts over 90
days, through 12/31/96; s to
(iii)100% of the Customer's inventory in the Customer's possession as of
the date of determination as reflected in the Customer's most recent
Collateral Management Report constituting Products (other than service
parts) financed through a Product Advance by IBM Credit. The value to be
assigned to such inventory shall be based upon the Authorized Supplier's
invoice price to Customer for Financed Products net of all applicable
price reduction credits.
(C) Product Financing Charge: Prime Rate plus 1.375%
(D) Product Financing Period: 90 days
(E) Collateral Insurance Amount: Seven Million Dollars ($7,000,000.00)
(F) A/R Finance Charge:
(i) PRO Advance Charge: Prime Rate plus 1.625%
(ii) WCO Advance Charge: Prime Rate plus 1.625%
(G) Delinquency Fee Rate: Prime Rate plus 6.500%
(H) Shortfall Transaction Fee: Shortfall Amount multiplied by 0.30%
(I) Free Financing Period Exclusion Fee: Product Advance multiplied by
0.40%
(J) Other Charges:
(i) Application Processing Fee: N/A
(ii) Monthly Service Fee: $1,500.00
IWCF ATTACHMENT A TO INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF
AGREEMENT")
II. Bank Account
(A) Customer's Lockbox(es) and Special Account(s) will be maintained at the
following Bank(s):
Name of Bank: ___________________________________________________________
Address: ________________________________________________________________
_________________________________________________________________________
Phone: __________________________________________________________________
Lockbox Address: ________________________________________________________
Special Account #: ______________________________________________________
Name of Bank: ___________________________________________________________
Address: ________________________________________________________________
_________________________________________________________________________
Phone: __________________________________________________________________
Lockbox Address: ________________________________________________________
Special Account #: ______________________________________________________
Name of Bank: ___________________________________________________________
Address: ________________________________________________________________
_________________________________________________________________________
Phone: __________________________________________________________________
Lockbox Address: ________________________________________________________
Special Account #: ______________________________________________________
Name of Bank: ___________________________________________________________
Address: ________________________________________________________________
_________________________________________________________________________
Phone: __________________________________________________________________
Lockbox Address: ________________________________________________________
Special Account #: ______________________________________________________
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.
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 Customer's indebtedness to officers or owners
as evidenced by an executed Notes Payable Subordination Agreement in favor
of IBM Credit.
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;
(b) all accounts receivable from employees, officers,
directors, stockholders and affiliates; and
(c) all callable/redeemable preferred stock.
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.
IWCF ATTACHMENT A TO INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF
AGREEMENT")
III. Financial Covenants (continued):
Customer will be required to maintain the following financial
ratios and amounts "AT ALL TIMES:"
a) Revenue on an annual basis (i.e., the current fiscal
year-to-date Revenue annualized) to Working Capital ratio
greater than zero and equal to or less than 37.00:1.0;
b) Net Profit after Tax to Revenue ratio equal to or
greater than 0.50 Percent;
d) Total Liabilities to Tangible Net Worth ratio greater
than zero and equal to or less than 9.8:1.0;
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:
. Executed Contingent Blocked Account Amendment;
. Executed Blocked Account Amendment;
. Executed Collateralized Guaranty of Syscom International, Inc.;
. Executed Notarized Personal Guaranty of Xxxx Xxxxxxxxxxx;
. Executed Notarized Agreement from Non-Guaranteeing Spouse,
Xxxxxxxxx Xxxxxxxxxxx;
. Executed guaranty of any shareholder(s) owning ten (10) percent
or more of the equity of Customer;
. Listing of all creditors providing accounts receivable financing
to Customer;
. A Collateral Management Report in the form of Attachment F as of
the Closing Date;
. A Compliance Certificate as to Customer's compliance with the financial
covenants set forth in Attachment A as of the last fiscal month of Customer
for which financial statements have been published;
. A Certificate of Location of Collateral whereby the Customer
certifies where Customer presently keeps or sells inventory,
equipment and other tangible Collateral;
. An Opinion of Counsel whereby the Customer's counsel states his or
her opinion about the execution, delivery and performance of the
Agreement and other documents by the Customer;
. 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 Customer's obligations to IBM Credit;
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):
A copy of an all-risk insurance certificate pursuant to Section 7.8
(B) of the Agreement.
IWCF ATTACHMENT B TO INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF
AGREEMENT")
I. Liens.
II. Locations of Offices, Records and Inventory.
(A) Principal Place of Business and Chief Executive Office
(B) Locations of Assets, Inventory and Equipment (including warehouses)
Location Leased (Y/N)
III. Fictitious Names.
IV. Organization.
(A) Subsidiaries
Name Jurisdiction Owner Percent
Owned
IWCF ATTACHMENT B TO INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF
AGREEMENT")
(B) Affiliates
Name Capacity
V. Judgments or Litigation.
VI. Environmental Matters.
VII. Indebtedness.
IWCF ATTACHMENT C
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
COMPLIANCE CERTIFICATE
TO: IBM CREDIT CORPORATION
(INSERT RFC ADDRESS)
The undersigned authorized officers of ____________________________
("________________"), hereby certify on behalf of the Customer, with respect to
the Inventory and Working Capital Financing Agreement executed by and between
____________ and IBM Credit Corporation ("IBM Credit") on ______________, 19__,
as amended from time to time (the "Agreement"), that (A) ___________ has been in
compliance for the period from ______________, 19__ to _________ ____, 19__ with
the financial covenants set forth in Attachment A to the Agreement, as
demonstrated below, and (B) no Default has occurred and is continuing as of the
date hereof, except, in either case, as set forth below. All capitalized terms
used herein and not otherwise defined shall have the meanings assigned to them
in the Agreement.
I. Financial Covenants.
FINANCIAL COVENANTS REQUIRED ACTUAL
Annualized Revenue
to Working Capital
Current Assets to
Current Liabilities
Net Profit After
Tax to Revenue
Total Liabilities
to Tangible Net
Worth
Tangible Net Worth
IWCF ATTACHMENT C
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
II. Calculation of Tangible Net Worth.
Total Assets MINUS Total Liabilities _______________________
LESS:
goodwill _______________________
organizational expenses _______________________
pre-paid expenses _______________________
deferred charges, etc. _______________________
leasehold expenses _______________________
all other _______________________
callable/redeemable preferred stock _______________________
officer, employee, director, stockholder _______________________
and affiliate receivables
Total Tangible Net Worth
=======================
Attached hereto are Financial Statements as of and for the end of the
fiscal _____________ ended on the applicable date, as required by Section 7.1 of
the Inventory and Working Capital Financing Agreement.
Submitted by:
-----------------------------------------
(Customer Name)
By:______________________________________
Print Name:______________________________
Title:___________________________________
IWCF ATTACHMENT E TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
AUTHORIZED SUPPLIERS
IWCF ATTACHMENT F TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT')
(Customer Name)
COLLATERAL MANAGEMENT REPORT
FOR THE MONTH ENDING ______________
GROSS NET
COLLATERAL ADVANCE COLLATERAL
VALUE RATE VALUE
--------- ------- ----------
1. TOTAL INVENTORY
- IBM Credit Financed Attach. A $0.00
- In-Transit 0.00
(Obtain from IBM Credit)
- Returned Inventory 0.00
---------
TOTAL INVENTORY $0.00 ___% $0.00
(Attach Inventory Report (A))
2. ELIGIBLE A/R Attach. B
- Gross Receivables $0.00
- Less Ineligibles:
A/R over 90 days 0.00
50% over 90 days 0.00
Other 0.00
---------
ELIGIBLE A/R $0.00 ___% $0.00
(Attach A/R Aging Report (B)) __________
3. TOTAL IBM CREDIT COLLATERAL $0.00
4. LESS NET IBM CREDIT OUTSTANDINGS $0.00
(Obtain from IBM Credit) __________
5. EXCESS COLLATERAL $0.00
(Total Collateral - Net Outstanding (greater) 0)
6. SHORTFALL $0.00
(Total Collateral - Net Outstanding (less than) 0)
(Attach Payment & Remittance Advice)
Signature _________________________________________ Date ___________
Title _________________________________________
IWCF ATTACHMENT G TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT')
CERTIFICATE OF LOCATION OF COLLATERAL
The undersigned, the (insert title of office held) of (insert Customer's
Name) ("insert abbreviated name"), hereby certifies with reference to the
Inventory and Working Capital Financing Agreement, dated (insert date Agreement
signed), between (insert Customer's abbreviated name) and IBM Credit Corporation
as follows:
(a) The following are all the locations where (insert abbreviated name)
presently keeps or sells inventory, equipment or other tangible Collateral:
LOCATION LEASE (YES/NO)
IN WITNESS WHEREOF, I have hereunto set my hand this day of_________
_____________, 19__ .
_____________________________
(Customer Name)
By:__________________________
Title:_______________________
ATTACHMENT I
{LETTERHEAD OF CUSTOMER'S COUNSEL}
{DATE}
IBM Credit Corporation
_______________________
_______________________
Re: ___________________________
Ladies and Gentlemen:
We have acted as counsel for __________________________, a
____________ corporation (the "Borrower") in connection with (A) the execution
and delivery of that certain Inventory and Working Capital Financing Agreement,
dated as of ________________, 19___ (the "Financing Agreement"), by and among
the Borrower and IBM Credit Corporation ("IBM Credit"), and the other
agreements, instruments, and documents executed and delivered by the Borrower in
connection with the Financing Agreement. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings ascribed to such terms in
the Financing Agreement.
In this connection, we have examined the following documents:
(i) The Certificate of Incorporation and the By-laws of the
Borrower, each as amended to date;
(ii) The records of the proceedings taken by the Board of Directors of the
Borrower in connection with the execution, delivery, and performance of the
Financing Documents to which they are a party (as defined below);
(iii) The Financing Agreement;
(iv) The Contingent Blocked Account Amendment;
(v) Acknowledgement copies of the UCC-1 Financing Statements listed on
Exhibit A hereto (the "Financing Statements") executed by the Borrower naming it
as Debtor and IBM Credit as Secured Party and filed in the offices set forth on
Exhibit A;
(vi) {Additional Documents if necessary}
The documents referred to in clauses (iii) through (vi) above are
hereinafter referred to as the Financing Documents.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents, and, regarding documents
executed by parties other than the Borrower, that those parties had the power
and the capacity to enter into, execute, deliver and perform all obligations
under such documents, the due authorization of all requisite action with respect
to such documents, and the validity and binding effect of such documents upon
such other parties.
As to any facts material to this opinion, we have relied upon the
representations and warranties of the Borrower contained in each of of the
Financing Documents, and in certificates delivered by the Borrower pursuant to
each of the Financing Documents, statements, and representations of officers and
other representatives of the Borrower, and, as to the matters addressed therein,
certificates or correspondence from public officials. For purposes of the
opinion set forth in Paragraph 4, the term "Material Contracts" means the
agreements and instruments to which the Borrower is subject which have been
identified to us by officers of the Borrower and set forth on Exhibit B hereto
as the agreements and instruments which are material to the business or
financial condition of the Borrower; and the term "Material Orders" means those
orders and decrees to which the Borrower is subject which have been identified
to us by officers of the Borrower and set forth in Exhibit C hereto as the
orders and decrees, agreements, and instruments which are material to the
business or financial condition of the Borrower.
As used herein, the term "UCC" refers to the Uniform commercial Code
as in effect in the State of New York.
We are members of the bar in the State of ______________ and express
no opinion as to the laws of any other jurisdiction except the General
Corporation Law of the State of ____________ and the federal laws of the United
States of America.
Based on the foregoing, and subject to the assumptions and
qualifications set forth herein, we are of the opinion that:
1. Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and is
duly qualified and authorized to do business and in good standing as a foreign
corporation in each jurisdiction where, to our knowledge, it presently is
engaged in business and is required to be qualified.
2. Borrower has all requisite corporate power and authority (a) to
own, lease, and operate its properties and assets and to carry on its business
as now being conducted; and (b) to execute, delivery, and performance of the
Financing Documents to which it is a party.
3. All corporate action on the part of the Borrower requisite for the
execution, delivery, and performance of the Financing Documents to which it is a
party has been duly taken.
4. The execution, delivery, and performance by the Borrower of the
Financing Documents to which it is a party will not (a) violate, be in conflict
with, result in the breach of, or constitute (with due notice or lapse of time,
or both) a default under (i) the Certificate of Incorporation or By-laws of
Borrower or any resolution of its Board Directors or any committee thereof, (ii)
any Material Contract, or (iii) any federal or state law (including, without
limitation, environmental or occupational health, and safety law), regulation,
rule, Material Order, or legal requirement of any federal, state, or public
authority or agency applicable to Borrower; or (b) result in the creation or
imposition of a lien of any nature whatsoever upon any of the Borrower's
property or assets other than as represented by the Financing Documents.
5. Borrower has obtained any and all consents, approvals, or other
authorizations required to be obtained pursuant to its Certificate of
Incorporation and By-laws in connection with the execution, delivery, and
performance of the Financing Documents. No consent, approval, or authorization
of or by any court, administrative agency, other governmental authority, or any
other Person is required in connection with the execution, delivery, and
performance by the Borrower of the Financing Documents that has not already been
obtained.
6. To our knowledge, there are no actions, proceedings, or
investigations pending or threatened against the Borrower which question the
validity of the
Financing Documents to which it is a party or relating the transactions
contemplated thereby.
7. Each of the Financing Documents has been duly executed and delivered by
duly authorized officer of the Borrower and constitutes the legal, valid, and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms, except that, in each case, (i) enforcement may be
subject to and limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws now or hereafter in effect relating to creditors'
rights generally, (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought, and
(iii) certain of the remedial provisions including waivers with respect to the
exercise of remedies against the Collateral contained in the Financing Documents
may be unenforceable in whole or in part, but the inclusion of such provisions
does not affect the validity of the Financing Documents, each taken as a whole
and, the Financing Documents, each taken as a whole, contain adequate remedial
provisions for the practical realization of the security purported to be
afforded thereby.
8. The Financing Agreement is effective to create in favor of IBM Credit a
valid security interest within the meaning of the UCC in the Collateral as
security for the obligations purported to be secured thereby; and (ii) the
Financing Statements are in appropriate form and have been duly filed resulting
in a perfected security interest (as such term is defined in Section 9-303 of
the UCC) of IBM Credit in the Collateral in which security interests to which
Article 9 of the UCC applies.
9. Borrower is not an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
This opinion is rendered solely to and for the benefit of IBM Credit in
connection with the execution and delivery of the Financing Documents and may
not be relied upon by any other person, firm, or corporation without our prior
written consent, except that it may be furnished to any prospective purchaser of
a participation in the rights of IBM Credit and may be furnished to and relied
upon by any Person which hereafter acquires such a participation.
This opinion is limited to laws as currently in effect on the date hereto
and to the facts as they currently exist. We assume no obligation to revise,
supplement or otherwise update this opinion.
Very truly yours,
EXHIBIT A
UCC-1 FINANCING STATEMENT
EXHIBIT B
MATERIAL CONTRACTS
EXHIBIT C
MATERIAL ORDERS
