EXHIBIT 10.27
DATATEC INDUSTRIES, INC
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
Table of Contents
Section 1. DEFINITIONS; ATTACHMENTS 1
1.1. Special Definitions. 1
1.2. Other Defined Terms. 8
1.3. Attachments. 8
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES 9
2.1. Credit Line. 9
2.2. Product Advances. 9
2.3. A/R Advances. 10
2.4. Term Loan Advances 11
2.5. Finance and Other Charges. 12
2.6. Customer Account Statements. 12
2.7. Shortfall. 12
2.8. Application of Payments. 13
2.9. Prepayment and Reborrowing By Customer. 13
Section 3. CREDIT LINE ADDITIONAL PROVISIONS 13
3.1. Ineligible Accounts. 13
3.2. Reimbursement for Charges. 15
3.3. Lockbox and Special Account. 15
3.4. Collections. 15
3.5. Application of Remittances and Credits. 15
3.6. Power of Attorney. 15
3.7. Concentration Accounts. 16
Section 4. SECURITY -- COLLATERAL 16
4.1. Grant. 16
4.2. Further Assurances. 17
Section 5. CONDITIONS PRECEDENT 17
5.1. Conditions Precedent to the Effectiveness of this Agreement. 17
5.2. Conditions Precedent to Each Advance. 18
Section 6. REPRESENTATIONS AND WARRANTIES 19
6.1. Organization and Qualifications. 19
6.2. Rights in Collateral; Priority of Liens. 19
6.3. No Conflicts. 19
6.4. Enforceability. 19
6.5. Locations of Offices, Records and Inventory. 19
6.6. Fictitious Business Names. 19
6.7. Organization. 20
6.8. No Judgments or Litigation. 20
6.9. No Defaults. 20
6.10. Labor Matters. 20
6.11. Compliance with Law. 20
6.12. ERISA. 20
6.13. Compliance with Environmental Laws. 20
6.14. Intellectual Property. 21
6.15. Licenses and Permits. 21
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6.16. Investment Company. 21
6.17. Taxes and Tax Returns. 21
6.18. Status of Accounts. 21
6.19. Affiliate/Subsidiary Transactions. 21
6.20. Accuracy and Completeness of Information. 21
6.21. Recording Taxes. 22
6.22. Indebtedness. 22
Section 7. AFFIRMATIVE COVENANTS 22
7.1. Financial and Other Information. 22
7.2. Location of Collateral. 24
7.3. Changes in Customer. 24
7.4. Legal Entity Existence. 24
7.5. ERISA. 24
7.6. Environmental Matters. 24
7.7. Collateral Books and Records/Collateral Audit. 24
7.8. Insurance; Casualty Loss. 25
7.9. Taxes. 26
7.10. Compliance With Laws. 26
7.11. Fiscal Year. 26
7.12. Intellectual Property. 26
7.13. Maintenance of Property. 26
7.14. Collateral. 26
7.15. Subsidiaries. 27
7.16. Financial Covenants; Additional Covenants. 27
Section 8. NEGATIVE COVENANTS 27
8.1. Liens. 27
8.2. Disposition of Assets. 27
8.3. Legal Entity Changes. 27
8.4. Guaranties. 27
8.5. Restricted Payments. 28
8.6. Investments. 28
8.7. Affiliate/Subsidiary Transactions. 28
8.8. ERISA. 28
8.9. Additional Negative Pledges. 29
8.10. Storage of Collateral with Bailees and Warehousemen. 29
8.11. Use of Proceeds. 29
8.12. Accounts. 29
8.13. Indebtedness. 29
8.14. Loans. 29
Section 9. DEFAULT 29
9.1. Event of Default. 29
9.2. Acceleration. 31
9.3. Remedies. 31
9.4. Waiver. 32
Section 10. MISCELLANEOUS 32
10.1. Term; Termination. 32
10.2. Indemnification. 32
10.3. Additional Obligations. 32
10.4. LIMITATION OF LIABILITY. 33
10.5. Alteration/Waiver. 33
10.6. Severability. 33
10.7. One Loan. 33
10.8. Additional Collateral. 33
10.9. No Merger or Novations. 34
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10.10. Paragraph Titles. 34
10.11. Binding Effect; Assignment. 34
10.12. Notices; E-Business Acknowledgment. 34
10.13. Counterparts. 35
10.14. ATTACHMENT A MODIFICATIONS. 35
10.15. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW. 35
10.16. JURY TRIAL WAIVER. 36
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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") and is
hereby made this 10th day of November, 2000, by and between IBM Credit
Corporation, a Delaware corporation with a place of business at 0000 XxxxxXxxx
Xxxxxxx, Xxxxxxx, XX 00000, ("IBM Credit"), and Datatec Industries, Inc., duly
organized under the laws of the State of Delaware, with its principal place of
business at 00 Xxxxxxx Xxxx, Xxxxxxxxx, XX 00000 ("Customer").
WITNESSETH
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 (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 as follows:
SECTION 1. DEFINITIONS; ATTACHMENTS
1.1. SPECIAL DEFINITIONS. The following terms shall have the following
respective meanings in this Agreement (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"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, (ii) A/R Advances and (iii) the Term Loan.
"Affiliate": with respect to any Person, any other Person (the "Affiliate")
meeting one of the following: (i) at least 10% of the Affiliate's equity is
owned, directly or indirectly, by such Person; (ii) at least 10% of such
Person's equity is owned, directly or indirectly, by the Affiliate; or (iii) at
least 10% of such Person's equity and at least 10% of the Affiliate's equity is
owned, directly or indirectly, by the same Person or Persons.
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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": a nationally recognized firm of independent certified public
accountants selected by Customer and satisfactory to IBM Credit.
"Authorized Suppliers": as defined in the recitals of this Agreement.
"Available Credit": at any time (1) the Maximum Advance Amount less (2) the
Outstanding Advances, other than the Outstanding Term Loan at such time.
"Average Daily Balance": for each Advance for a given period of time, the sum of
the unpaid principal of such Advance as of each day during such period of time,
divided by the number of days in such period of time.
"Bank": as defined in Section 3.3.
"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, substantially in the form and
detail 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.
"Concentration Accounts": shall mean an Eligible Account that, individually, or
when aggregated with all other outstanding Accounts of the same Account debtor
and such Account debtor's Affiliates, constitute more than ten percent (10%) of
the net outstanding balance of all Eligible Accounts of the Customer then
outstanding for all Account debtors.
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"Concentration Account Debtor": shall mean, at any time, any Account debtor
obligated to Customer with respect to, or on account of, a Concentration
Account.
"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
(including, without limitation, securities such as stocks and investment bonds),
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, may change 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.
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"HTO"; as defined in Section 2.3.
"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 (including obligations under any leases Customer may enter into,
now or in the future, with IBM Credit), (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 by 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.
"Intellectual Property": as defined in Section 6.14.
"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.
"Lockbox"; as defined in Section 3.3.
"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 Charges": as set forth in Attachment A.
"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.
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"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.
"Outstanding Term Loan": at any time of determination, the sum of (1) the unpaid
principal amount of the Term Loan made by IBM Credit under this Agreement; and
(2) any finance charge, fee, expense or other amount related to the Term Loan
charged to Customer's account with IBM Credit. "PBGC": as defined in Section
6.12.
"Permitted Discretion": discretion exercised in a commercially reasonable
manner.
"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 $250,000 (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);
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(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 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.
"Plans": as defined in Section 6.12.
"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., Chase Manhattan Bank and Bank of America
National Trust & Savings Association (or any other bank which IBM Credit uses in
its normal course of business of determining Prime Rate) 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 creditworthy 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.
"Products": as defined in the recitals of this Agreement.
"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 or to be delivered by such
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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.
"Request for Term Loan Advance": as defined in Section 2.4 of this Agreement.
"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 2.7.
"Shortfall Transaction Fee": as defined in Attachment A.
"Special Account": as defined in Section 3.3.
"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.
"Supplier Credits": as defined in Section 2.2.
"Takeout Advance": upon request by Customer, an A/R Advance made, only on the
Closing Date, to existing creditors of Customer on behalf of Customer, in an
amount sufficient to discharge Customer's indebtedness to such creditor.
"Term Loan": the loan or advance of funds made by IBM Credit to or on behalf of
Customer pursuant to Section 2 .4 of the Agreement.
"Term Loan Commencement Date": as defined in Section 2 .4 of the Agreement.
"Term Loan Commitment": as defined in Schedule A.
"Term Loan Finance Charge": as defined in Schedule A.
"Term Loan Stated Maturity Date": as set forth in Schedule A.
"Termination Date": shall mean the third anniversary of the date of this
Agreement or such other date as IBM Credit and Customer may agree to from time
to time.
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"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.
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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, Product Advances and
A/R 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
written notice to the Customer and (y) make Product Advances and A/R 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 upon at least a two-day prior
written notice 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 (i) any delivery to
IBM Credit of an invoice by an Authorized Supplier shall be deemed as a request
for a Product Advance by Customer, and (ii) 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. IBM Credit may, upon written notice to Customer, cease to include a
supplier as an Authorized Supplier.
(B) No finance charge shall accrue on any Product Advance during the
Free Financing Period, if any, applicable to such Product Advance. Each Product
Advance shall be due and payable on 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 and including the first (1st) day following
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 and including the date of
invoice for such Product Advance, in each case, to and including the date 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
Products. Customer shall be obligated to pay IBM Credit in full even if the
Products are defective or fail 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
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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; provided, however, that in the event any such
Supplier Credits must be returned or disgorged or are otherwise unavailable for
application, then Customer's Obligations will be reinstated as if such Supplier
Credits had never been applied.
(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 Products for any reason whatsoever, including, without limitation, the
condition of the Products, any misrepresentation made about the Products 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. (eastern 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.
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(C) Each A/R Advance shall accrue a finance charge on the Average
Daily Balance thereof, from and including the date of each A/R Advance to and
including the date such A/R Advance is 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 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. TERM LOAN ADVANCES: (A) Subject to the terms and conditions of the
Agreement, IBM Credit shall make loans (the "Term Loans") in a principal amounts
not to exceed in aggregate the Term Loan Commitment to Customer on the dates
(the "Term Loan Commencement Date") specified in written requests to IBM Credit
by Customer for such Term Loans ("Request for Term Loan Advance") in the form of
Schedule B attached hereto. Customer shall deliver each Request for Term Loan
Advance on or prior to 1:00 p.m. (eastern time) one (1) Business Day prior to
each Term Loan Commencement Date. Each Request for Term Loan Advance shall set
forth the principal amount of the Term Loan. Customer may deliver the Request
for Term Loan Advance via facsimile.
(B) Subject to the terms and conditions of this Agreement, IBM
Credit shall make the principal amount of the Term Loan available to Customer on
the Term Loan Commencement Date in immediately available funds to an account
maintained by Customer or as directed by Customer.
(C) (i) The Term Loan shall accrue a finance charge on the unpaid
principal amount thereof, from and including the Term Loan Commencement Date to
and including the date such Term Loan is repaid in full in accordance with the
terms of this Agreement or as otherwise agreed to in writing by IBM Credit, at a
per annum rate equal to the lesser of (a) the Term Loan Finance Charge and (b)
the highest rate from time to time permitted by applicable law.
(ii) If it is determined that the amounts received from Customer
pursuant to this subparagraph (C) shall otherwise be in excess of the highest
rate permitted by applicable law, then the amount representing such excess shall
be considered reductions to principal of Advances.
(iii) The finance charges accrued on the Term Loan shall be paid in
accordance with Section 2.5(C) of the Agreement.
(D) Customer shall pay the principal of each draw under the Term
Loan Commitment in equal monthly installments based upon the number of complete
months remaining between the Term Loan Commencement Date and the Termination
Date of the Term Loan, and in any event, shall pay in full the Outstanding Term
Loan on the Term Loan Stated Maturity Date (or, such earlier date as such Term
Loan may become or be declared due and payable pursuant to Section 9 of the
Agreement).
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(E) Except for (a) any sale of stock to Intel as a result of
negotiations in process prior to the execution of this Agreement or (b) sales of
securities by x-Xxxxxx.xxx or (c) sales which result in proceeds of less than
$5,000,000.00, in the event of, and within three (3) days after (i) a public
offering or private placement of shares of Customer or any of Customer's
subsidiaries or (ii) an offering of public or private debt by Customer or any of
Customer's subsidiaries, Customer shall make a mandatory prepayment of all or a
portion of the Term Loan in an aggregate amount equal to the net cash proceeds
received from such offering or private placement, net of reasonable transaction
costs (including, without limitation, income taxes estimated to be payable as a
result of such offering or placement, any underwriting, brokerage or other
customary selling commissions and reasonable legal, advisory and other fees and
expenses), but not to exceed the Outstanding Term Loan.
2.5. FINANCE AND OTHER CHARGES. (A) Finance charges for an Advance for a
calendar month shall be equal to (i) one twelfth (1/12) of the applicable
Product Financing Charge or A/R Finance Charge multiplied by (ii) the Average
Daily Balance of such Advance for the period when such finance charge accrues
during such calendar month multiplied by (iii) the actual number of days during
such calendar month when such finance charge accrues divided by (iv) thirty
(30).
Late charges pursuant to subsection (D) of this Section 2.5 for an Advance for a
calendar month shall be equal to (i) one twelfth (1/12) of the Delinquency Fee
Rate multiplied by (ii) the Average Daily Balance of such Advance for the period
when such Advance is past due during such calendar month multiplied by (iii) the
actual number of days during such calendar month when such Advance is past due
divided by (iv) thirty (30).
(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 IBM
Credit. 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 the day after such Advance was due and payable to and
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 2.7 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.
2.6. CUSTOMER ACCOUNT STATEMENTS. 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)
Business 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.
2.7. SHORTFALL. If, on any date, the Outstanding Advances other than the
Outstanding Term Loan shall exceed the Maximum Advance Amount (such excess, the
"Shortfall Amount"), then the Customer shall on
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such date prepay the Outstanding Advances other than the Outstanding Term Loan
in an amount equal to such Shortfall Amount.
2.8. APPLICATION OF PAYMENTS. The Customer hereby agrees that all checks and
other instruments delivered to IBM Credit on account of Customer's Obligations
shall constitute conditional payment until such items are actually collected by
IBM Credit. The Customer waives the right to direct the application of any and
all payments at any time or times hereafter received by IBM Credit on account of
the Customer's Obligations. Customer agrees that IBM Credit shall have the
continuing exclusive right to apply and reapply any and all such payments to
Customer's Obligations in such manner as IBM Credit may deem advisable
notwithstanding any entry by IBM Credit upon any of its books and records.
2.9. 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) The Term Loan may not be reborrowed by Customer notwithstanding
repayment or prepayment thereof. Subject to the terms and conditions of this
Agreement, any amount prepaid or repaid to IBM Credit in respect to the
Outstanding Advances other than the Outstanding Term Loan 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 right in its Permitted Discretion 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;
(B) Accounts unpaid more than ninety (90) days from date of invoice,
except for International Business Machines Corporation Accounts, which shall be
deemed ineligible if unpaid more than one hundred twenty (120) days from date of
invoice;
(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, except for International
Business Machines Corporation Accounts, which shall be deemed ineligible if
fifty percent (50%) or more of the outstanding balance is unpaid for more than
one hundred twenty (120) days from 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
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(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 have been used for demonstration purposes or loaned or leased by the
Customer to another party;
(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 ("Third Party Financer") unless (i) such Third Party Financer does not
have a separate financing relationship with Customer or (ii) such Third Party
Financer has a separate financing relationship with Customer and has waived its
right to set off its obligations to Customer;
(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;
(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
Permitted Discretion, to be ineligible.
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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 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 Obligations; and
upon the occurrence and during the continuance of an Event of Default as defined
in Section 9.1 hereof:
Page 15 of 38
(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;
(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.
3.7. CONCENTRATION ACCOUNTS. Without limiting IBM Credit's other rights, IBM
Credit reserves the right to, from time to time in its Permitted Discretion,
modify the percentage of the amount of Customer's Concentration Accounts used in
calculating Customer's Borrowing Base or eliminate Concentration Accounts in
calculating Customer's Borrowing Base.
SECTION 4. SECURITY -- COLLATERAL
4.1. GRANT. To secure Customer's full and punctual payment and performance of
the Obligations (including obligations under any leases Customer may enter into,
now or in the future, with IBM
Page 16 of 38
Credit) 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) a favorable opinion of counsel for Customer in substantially the
form of Attachment H;
(C) a certificate of the secretary or an assistant secretary of
Customer, substantially in the form and substance of Attachment I hereto,
certifying that, among other items, (i) Customer is duly organized under the
laws of the State of its organization or incorporation and has its principal
place of business as stated therein, (ii) Customer is registered to conduct
business in specified states and localities, (iii) true and complete copies of
the articles of incorporation, or corresponding organizational documents, as
applicable, and by-laws of Customer are delivered therewith, together with all
amendments and addenda thereto as in effect on the date thereof, (iv) the
resolution as stated in the certificate is a true, accurate and compared copy of
the resolution adopted by the Customer's Board of Directors or, if Customer is a
limited liability company, by Customer's authorized members, authorizing the
execution, delivery and performance of this Agreement and each Other Document
executed and delivered in
Page 17 of 38
connection herewith, and (v) the names and true signatures of the officers of
Customer authorized to sign this Agreement and the Other Documents;
(D) 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;
(E) 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;
(F) a lockbox agreement executed by Customer and each Bank, in form
and substance satisfactory to IBM Credit;
(G) a contingent blocked account agreement executed by Customer and
each Bank in form and substance satisfactory to IBM Credit;
(H) 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;
(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) Guaranties, in form and substance acceptable to IBM Credit, from
each domestic Subsidiary of Customer or Datatec Systems, Inc., other than
xXxxxxx.xxx, Inc.;
(K) the statements, certificates, documents, instruments, financing
statements, agreements and information set forth in Attachment A and Attachment
B; and
(L) 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 in or
would constitute a Default;
(C) No event has occurred and is continuing which could reasonably
be expected to have a Material Adverse Effect; and
(D) Both before and after giving effect to the making of such
Advance, no Shortfall Amount exists.
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Except as Customer has otherwise disclosed to IBM Credit in writing prior to
each request, each request (or deemed request pursuant to Section 2.2 (A) or 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 duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (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 or
limited liability company power; (ii) are duly authorized by all necessary
corporate or limited liability company actions; (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
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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 company or fictitious
name during the five (5) years preceding the date of this Agreement, other than
those listed on Attachment B.
6.7. ORGANIZATION. If Customer is a corporation, 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(I) 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
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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 Debtor (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.
Page 21 of 38
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 the following
information to be delivered to IBM Credit 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; and (ii) 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; and (ii) 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
Page 22 of 38
prepared in accordance with GAAP; and (ii) 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 current and following fiscal year;
and (ii) if composed, a narrative discussion relating to such projected
Financial Statements;
(E) as soon as available and in any event within thirty (30) days
after the end of each fiscal quarter of Customer, revised projected Financial
Statements, broken down by quarter, for (i) the current fiscal year from the
beginning of such fiscal quarter to the fiscal year end and (ii) the following
fiscal year;
(F) 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;
(G) 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;
(H) promptly after Customer obtains knowledge that (i) any order,
judgment or decree in excess of $250,000 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;
(I) 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;
(J) 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;
(K) 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;
(L) 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
(M) 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.
Page 23 of 38
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. Customer shall cause the audited Financial Statements and accompanying
documents set forth in Section 7.1(A)(i) to be delivered directly by the
Auditors to IBM Credit only via first class mail.
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 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. LEGAL ENTITY EXISTENCE. Customer shall (A) maintain its legal entity
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
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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
Page 25 of 38
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 as a year ending
April 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 would 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;
Page 26 of 38
(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 domestic Subsidiaries of
Customer or Datatec Systems, Inc., other than xXxxxxx.xxx, Inc., 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
domestic Subsidiaries of Customer or Datatec Systems, Inc., other than
xXxxxxx.xxx, Inc., 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 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 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.
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8.3. LEGAL ENTITY 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.
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 dividend (other than dividends payable solely in common stock
of Customer or membership interest if Customer is a limited liability company)
on, or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of any class of capital stock of 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). The
foregoing restrictions shall not apply to domestic Subsidiaries making any such
payments to Customer. With respect to any such payments made by xXxxxxx.xxx Inc.
to Cisco Systems, Inc., xXxxxxx.xxx Inc shall be permitted to make dividend
payments equal to a rate of 6% on its Series A Preferred Stock.
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 company 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.
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 of a "reportable event" or any other event or
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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.
8.11. USE OF PROCEEDS. The Customer shall not use any portion of the proceeds of
any Advances (other than the Term Loan). 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 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 company or to
any officer, director or stockholder of Customer or of any such company (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, if such failure shall remain unremedied for
five (5) days after written notice thereof shall have been given to Customer by
IBM Credit or ten (10) days after such payment is due, whichever is earlier,
during which period Customer shall be charged the Delinquency Fee Rate set forth
in Attachment A beginning on the day after the payment was due and including the
day payment is received;
(B) Customer fails to comply with or observe any term, covenant or
agreement contained in this Agreement or any Other Documents;
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(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;
(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 $250,000 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, any Subsidiary
(excluding Subsidiaries that are not a guarantor) 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 its opinion
relative to any Financial Statement delivered to IBM Credit under this
Agreement;
(J) The issuance of 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 that permits the holder
of any Indebtedness arising in one or more related or unrelated transactions, in
an aggregate principal amount exceeding $250,000.00, 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;
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(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 and reduce to zero the Credit Line and the
Term Loan Commitment 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
Page 31 of 38
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 they intend 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 and
after such termination, or (ii) IBM Credit's rights hereunder, including,
without limitation IBM Credit's security interest in the Collateral. On and
after a Termination Date IBM Credit may, but shall not be obligated to, upon the
request of Customer, continue to provide Advances hereunder.
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
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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 to do so, 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, ANY DELAY, OMISSION OR ERROR IN THE ELECTRONIC TRANSMISSION
OR RECEIPT OF ANY E-DOCUMENT, 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.
IN THE EVENT CUSTOMER REQUESTS IBM CREDIT TO EFFECT A WITHDRAWAL OR DEBIT OF
FUNDS FROM AN ACCOUNT OF CUSTOMER, THEN IN NO EVENT SHALL IBM CREDIT BE LIABLE
FOR ANY AMOUNT IN EXCESS OF ANY AMOUNT INCORRECTLY DEBITED, EXCEPT IN THE EVENT
OF IBM CREDIT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. NO PARTY SHALL BE LIABLE
FOR ANY FAILURE TO PERFORM ITS OBLIGATIONS IN CONNECTION WITH ANY E-DOCUMENT,
WHERE SUCH FAILURE RESULTS FROM ANY ACT OF GOD OR OTHER CAUSE BEYOND SUCH
PARTY'S REASONABLE CONTROL (INCLUDING, WITHOUT LIMITATION, ANY MECHANICAL,
ELECTRONIC OR COMMUNICATIONS FAILURE) WHICH PREVENTS SUCH PARTY FROM
TRANSMITTING OR RECEIVING E-DOCUMENTS.
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
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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; E-BUSINESS ACKNOWLEDGMENT. (A) 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 (i) upon receipt if deposited in the United
States mails, first class mail, with proper postage prepaid, (ii) upon receipt
of confirmation or answerback if sent by telecopy, or other similar facsimile
transmission, (iii) one Business Day after deposit with a reputable overnight
courier with all charges prepaid, or (iv) 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: (ii) If to Customer at:
IBM Credit Corporation Datatec Industries, Inc.
0000 XxxxxXxxx Xxxxxxx 00 Xxxxxxx Xxxx
Xxxxxxx, XX Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Region Manager Attention: Chief Financial Officer
Facsimile: Facsimile:
or to such other address or number as each party designates to the other in the
manner prescribed herein.
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(B) (i) Each party may electronically transmit to or receive from
the other party certain documents set forth in Attachment J ("E-Documents") via
the Internet or electronic data interchange ("EDI"). Any transmission of data
which is not an E-Document shall have no force or effect between the parties.
EDI transmissions may be sent directly or through any third party service
provider ("Provider") with which either party may contract. Each party shall be
liable for the acts or omissions of its Provider while handling E-Documents for
such party, provided, that if both parties use the same Provider, the
originating party shall be liable for the acts or omissions of such Provider as
to such E-Document. Some information to be made available to Customer will be
specific to Customer and will require Customer's registration with IBM Credit
before access is provided. After IBM Credit has approved the registration
submitted by Customer, IBM Credit shall provide an ID and password(s) to an
individual designated by Customer ("Customer Recipient"). Customer accepts
responsibility for the designated individual's distribution of the ID and
password(s) within its organization and Customer will take reasonable measures
to ensure that passwords are not shared or disclosed to unauthorized
individuals. Customer will conduct an annual review of all IDs and passwords to
ensure they are accurate and properly authorized. IBM CREDIT MAY CHANGE OR
DISCONTINUE USE OF AN ID OR PASSWORD AT ITS DISCRETION AT ANY TIME. E-Documents
shall not be deemed to have been properly received, and no E-Document shall give
rise to any obligation, until accessible to the receiving party at such party's
receipt computer at the address specified herein. Upon proper receipt of an
E-Document, the receiving party shall promptly transmit a functional
acknowledgment in return. A functional acknowledgment shall constitute
conclusive evidence that an E-Document has been properly received. If any
transmitted E-Document is received in an unintelligible or garbled form, the
receiving party shall promptly notify the originating party in a reasonable
manner. In the absence of such a notice, the originating party's records of the
contents of such E-Document shall control.
(ii) Each party shall use those security procedures which are reasonably
sufficient to ensure that all transmissions of E-Documents are authorized and to
protect its business records and data from improper access. Any E-Document
received pursuant to this Section 10.12 shall have the same effect as if the
contents of the E-Document had been sent in paper rather than electronic form.
The conduct of the parties pursuant to this Section 10.12 shall, for all legal
purposes, evidence a course of dealing and a course of performance accepted by
the parties. The parties agree not to contest the validity or enforceability of
E-Documents under the provisions of any applicable law relating to whether
certain agreements are to be in writing or signed by the party to be bound
thereby. The parties agree, as to any E-Document accompanied by the Customer's
ID, that IBM Credit can reasonably rely on the fact that such E-Document is
properly authorized by Customer. E-Documents, if introduced as evidence on paper
in any judicial, arbitration, mediation or administrative proceedings, will be
admissible as between the parties to the same extent and under the same
conditions as other business records originated and maintained in documentary
form. Neither party shall contest the admissibility of copies of E-Documents
under either the business records exception to the hearsay rule or the best
evidence rule on the basis that the E-Documents were not originated or
maintained in documentary form.
CUSTOMER RECIPIENT INFORMATION for Internet transmissions:
(PLEASE PRINT)
Name of Customer's Designated Central Contact Authorized to Receive IDs and Passwords:
e-mail Address:
--------------------------------------------------------------
Phone Number:
-----------------------------------------------------------------
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
Page 35 of 38
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 MAILING A COPY THEREOF BY REGISTERED 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, if any, to be affixed hereto as of the date first
written above.
IBM Credit Corporation Datatec Industries, Inc.
By: /s/ Xxxxxxx Xxxxx By: /s/ Xxxxx Xxxx
--------------------------------------- -------------------------------------
Print Name: Xxxxxxx Xxxxx Print Name: Xxxxx Xxxx
------------------------------- ------------------------------
Title: Region Credit Manager Title: Chairman of the Board/CEO
------------------------------------ ----------------------------------
Page 36 of 38
SCHEDULE A
(A) Term Loan Commitment: Three Million Dollars ($3,000,000.00);
(B) Term Loan Finance Charge: Prime Rate plus 0.75%;
(C) Term Loan Minimum Draw Amount: Two Hundred Fifty Thousand Dollars ($250,000.00);
(D) Term Loan Minimum Prepayment Amount: Two Hundred Fifty Thousand Dollars ($250,000.00);
(E) Term Loan Stated Maturity Date: The Termination Date of the Agreement;
(F) Term Loan Finance Charges are due monthly and as set forth in Section 2.5 of the Agreement;
(G) Term Loan Principal Payment Schedule: as set forth in Section 2.4 (D) of the Agreement.
Page 37 of 38
SCHEDULE B
REQUEST FOR TERM LOAN ADVANCE
CUSTOMER NAME: Datatec Industries, Inc.
IBM CREDIT CUSTOMER NUMBER: 55004
REQUESTED TERM LOAN ADVANCE AMOUNT: $ ($250,000 minimum draw)
--------------
REQUESTED DATE OF ACH TRANSFER:
--------------
Datatec Industries, Inc. hereby requests approval of a Term Loan Advance from
IBM Credit Corporation ("IBM Credit") in the amount shown above pursuant to the
Inventory and Working Capital Financing Agreement dated as of _____________ (as
amended, supplemented or otherwise modified from time to time, the "Agreement").
By my signature below, I certify to IBM Credit that, to the best of my knowledge
and belief, as of the date hereof, there as occurred no Event of Default nor any
event which, with the passage of time would create an Event of Default as set
forth in the Agreement.
BY: DATE:
----------------------------------------- -------------
PRINT NAME:
--------------------------------
TITLE:
--------------------------------------
ACCEPTANCE BY IBM CREDIT CORPORATION:
---------------------- -------------- ------------------------------
REGION MANAGER DATE $ AMOUNT OF TERM LOAN ADVANCE
Page 38 of 38
ATTACHMENT A, ("IWCF ATTACHMENT A") TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
DATED 11/13, 2000
Customer Name: Datatec Industries, Inc.
Effective Date of this IWCF Attachment A: 11/13, 2000
I. FEES, RATES AND REPAYMENT TERMS:
(A) Credit Line: Eighteen Million Dollars ($18,000,000.00);
(B) Borrowing Base:
(i) 85% of the amount of the Customer's Eligible Accounts other
than Concentration Accounts as of the date of determination as
reflected in the Customer's most recent Collateral Management
Report;
(ii) a percentage, determined from time to time by IBM Credit in
its sole discretion, of the amount of Customer's Concentration
Accounts for a specific Concentration Account Debtor as of the
date of determination as reflected in the Customer's most recent
Collateral Management Report; unless otherwise notified by IBM
Credit, in writing, the percentage for Concentration Accounts for
a specific Concentration Account Debtor shall be the same as the
percentage set forth in paragraph (i) of the Borrowing Base;
provided that the advance on Eligible Accounts from International
Business Machines Corporation as Concentration Account Debtor is
95%
(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, provided, however, IBM Credit has a first
priority security interest in such Products and such Products are
new and in un-opened boxes. The value to be assigned to such
inventory shall be based upon the Authorized Supplier's invoice
price to Customer for Products net of all applicable price
reduction credits.
(iv) up to 35% of the value of Customer's inventory in the
Customer's possession as of the date of determination as
reflected and identified in the Customer's most recent Collateral
Management Report constituting Products designated by Customer as
"Cable" and not financed through a Product Advance by IBM Credit,
provided, however, IBM Credit has a first priority security
interest in such Products and such Products are new and in
un-opened boxes. The value to be assigned to such inventory shall
be determined by commercially reasonable methods, in IBM's sole
discretion.
(v) up to 25% of the value of 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 not financed through a Product
Advance by IBM Credit, provided, however, IBM Credit has a first
priority security interest in such Products and such Products are
new and in un-opened boxes. The value to be assigned to such
inventory shall be determined by commercially reasonable methods,
in IBM's sole discretion.
(C) Product Financing Charge: Prime Rate plus 0.25%
(D) Product Financing Period: 70 days
Page 1 of 23
(E) Collateral Insurance Amount: Five Million Dollars ($5,000,000.00)
(F) A/R Finance Charge:
(i) PRO Advance Charge: Prime Rate plus 0.25%
(ii) WCO Advance Charge: Prime Rate plus 0.25%
(iii) Takeout Advance Charge: Prime Rate plus 0.25%
(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 0.25%
(J) Other Charges.
(i) Application Processing Fee: $25,000.00 (rec'd 7-28-00)
(ii) Annual Renewal Fee: $20,000.00
(iii) Closing Fee: $50,000.00 (rec'd 11-13-00)
Page 2 of 23
II. BANK ACCOUNT
Customer's Lockbox(es) and Special Account(s) will be maintained at the
following Bank(s):
Name of Bank: FLEET BANK
Address: 000 Xxxxxxx Xxxxxxxx
Xxxxx, XX 00000
Phone: (000) 000-0000
Lockbox Address: Xxx 00000 Xxxxxxxx, Xxxx 06150-1633
Special Account #: ABA# 000000000
ACCNT# 2017208090
--------------------------------------------------------------------------------
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 #:
Page 3 of 23
III. FINANCIAL COVENANTS:
Definitions: The following terms shall have the following respective meanings in
this Attachment. All amounts shall be determined in accordance with generally
accepted accounting principles (GAAP).
"Consolidated Net Income" shall mean, for any period, the net income (or
loss), after taxes, of Customer on a consolidated basis for such period
determined in accordance with GAAP.
"Current" shall mean within the ongoing twelve month period.
"Current Assets" shall mean assets that are cash or expected to become
cash within the ongoing twelve months.
"Current Liabilities" shall mean payment obligations resulting from past
or current transactions that require settlement within the ongoing
twelve month period. All indebtedness to IBM Credit shall be considered
a Current Liability for purposes of determining compliance with the
Financial Covenants.
"EBITDA" shall mean, for any period (determined on a consolidated basis
in accordance with GAAP), (a) the Consolidated Net Income of Customer
for such period, plus (b) each of the following to the extent reflected
as an expense in the determination of such Consolidated Net Income: (i)
the Customer's provisions for taxes based on income for such period;
(ii) Interest Expense for such period; and (iii) depreciation and
amortization of tangible and intangible assets of Customer for such
period.
"Fixed Charges" shall mean, for any period, an amount equal to the sum,
without duplication, of the amounts for such as determined for the
Customer on a consolidated basis, of (i) scheduled repayments of
principal of all Indebtedness (as reduced by repayments thereon
previously made), (ii) Interest Expense, (iii) capital expenditures (iv)
dividends, (v) leasehold improvement expenditures and (vi) all provisions
for U.S. and non U.S. Federal, state and local taxes.
"Fixed Charge Coverage Ratio" shall mean the ratio as of the last day of
any fiscal period of (i) EBITDA as of the last day of such fiscal period
to (ii) Fixed Charges.
"Interest Expense" shall mean, for any period, the aggregate
consolidated interest expense of Customer during such period in respect
of Indebtedness determined on a consolidated basis in accordance with
GAAP, including, without limitation, amortization of original issue
discount on any Indebtedness and of all fees payable in connection with
the incurrence of such Indebtedness (to the extent included in interest
expense), the interest portion of any deferred payment obligation and
the interest component of any capital lease obligations.
"Long Term" shall mean beyond the ongoing twelve month period.
"Long Term Assets" shall mean assets that take longer than a year to be
converted to cash. They are divided into four categories: tangible
assets, investments, intangibles and other.
"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.
Page 4 of 23
"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 third parties
as evidenced by an executed Notes Payable Subordination Agreement in
favor of IBM Credit.
"Tangible Net Worth" shall mean:
Total Net Worth minus;
(a) goodwill, organizational expenses, pre-paid expenses,
deferred charges, research and development expenses,
software development costs, leasehold expenses, trademarks,
trade names, copyrights, patents, patent applications,
privileges, franchises, licenses and rights in any thereof,
and other similar intangibles (but not including contract
rights) and other current and non-current assets as
identified in Customer's financial statements;
(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.
Customer will be required to maintain the following financial ratios,
percentages and amounts as of the last day of the fiscal period under review by
IBM Credit:
Covenant
Covenant Requirement
-------- -----------
(i) Revenue on an Annual Basis
(i.e. the current fiscal Greater than Zero and
year-to-date Revenue annualized) Equal to or Less than 40.0:1.0
to Working Capital
(ii) Net Profit after Tax to Revenue Equal to or Greater than
zero percent
(iii) Total Liabilities to Tangible Greater than Zero and
Net Worth Equal to or Less than 6.0:1.0
(vi) Fixed Charge Coverage Ratio Equal to or Greater than
1.25:1.0 for fiscal year ending
4/30/2000; 1.50:1.0 for fiscal
year ending 4/30/2001;
1.75:1.0 for fiscal year ending
4/30/2002 and thereafter.
Covenants re to be measured
quarterly.
Page 5 of 23
IV. ADDITIONAL CONDITIONS PRECEDENT PURSUANT TO SECTION 5.1 (J) OF THE
AGREEMENT:
o Executed Blocked Account Amendment;
o Executed Corporate Guaranty of Datatec Systems, Inc.;
o Executed Corporate Guaranty of HH Communications, Inc.;
o Fiscal year-end financial statements of Customer as of end of Customer's
prior fiscal year audited by an independent certified public accountant;
o A Certificate of Location of Collateral whereby the Customer certifies
where Customer presently keeps or sells inventory, equipment and other
tangible Collateral;
o 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;
o Listing of all creditors providing accounts receivable financing to
Customer;
o A Collateral Management Report in the form of Attachment F as of the
Closing Date;
o 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;
o An Opinion of Counsel substantially in the form and substance of
Attachment H 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;
o A Corporate Secretary's Certificate substantially in the form and substance
of Attachment I certifying to, among other items, the resolutions of
Customer's Board of Directors authorizing borrowing by Customer;
o Termination or release of Uniform Commercial Code filing by another
creditor as required by IBM Credit;
o A copy of an all-risk insurance certificate pursuant to Section 7.8 (B)
of the Agreement;
o Executed Letter of Direction;
o Executed Letter of Notification;
o Executed Acknowledgment of Payment and Termination from Finova;
Page 6 of 23
IWCF ATTACHMENT B TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
("IWCF AGREEMENT")
CUSTOMER: DATATEC INDUSTRIES INC.
I. LIENS: FINOVA CAPITAL CORP., XXX
XX. LOCATIONS OF OFFICES, RECORDS AND INVENTORY:
(A) PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE:
00 XXXXXXX XXXX, XXXXXXXXX, XX 00000
CEO: XXXXX XXXX
(B) LOCATIONS OF ASSETS, INVENTORY AND EQUIPMENT (INCLUDING WAREHOUSES):
LOCATIONS LEASED (Y/N)
--------- ------------
SEE ATTACHED LISTING
III. FICTITIOUS NAMES:
D/B/A DATATEC SYSTEMS, INC.
IV: ORGANIZATION:
(A) SUBSIDIARIES:
NAME JURISDICTION OWNER % OWNERSHIP
---- ------------ ----- -----------
N/A
(B) AFFILIATES:
NAME CAPACITY
---- --------
DATATEC SYSTEMS, INC. PARENT
xXxxxxx.Xxx, Inc. SISTER
HH COMMUNICATIONS SISTER
DATATEC SYSTEMS, CANADA, LTD. SISTER
V. JUDGMENTS:
N/A
VI. ENVIRONMENTAL MATTERS:
N/A
VII. INDEBTEDNESS:
FINOVA CAPITAL CORP. LINE OF CREDIT $14,000,000
FINOVA CAPITAL CORP. TERM LOAN $ 200,000
PLAN C, LLP. NOTE $ 1,390,000
EDA LOAN $ 250,000
SCHEDULE OF PROPERTY LEASES
AREA OFFICE OCCUP.
LANDLORD AREA LOCATION DATE
-------- ------------- ----
ATLANTA 0000 XXXXXXXX XXXXX, XXXXXXXXXX, XX 00000 12/1/94
LEASE TERM: 12/94 - 12/2014
1/1/98
PEACH STATE PROPERTIES, INC., XXX XXXXX, XX. PROPERTY MGR
RENT CHECK: SUNRISE SQUARE, LC 3/1/99
0000 XXXXXXXXXXXX XXXXXX, XXX X, XXXXXXXX XX 00000 CPI INCR. 2.6%. $466.57 12/1/99
BOSTON XXX XXXX XXXXXX, XXXXXX, XX 00000 9/1/94
LEASE PAYMENTS TO: LEASE TERM: 9/1/94 - 8/31/89
YOUNG REAL ESTATE LLC
00 XXXXXXXXX XX., P.O. BOX 81385 LEASE TERM: 9/1/99 -8/31/01 RENEWAL
XXXXXXXXX, XX 00000 180 DAYS WRITTEN NOTICE TO TERMINATE
ADD'L RENT
CHICAG0 0000 XXXXXXX XXXXX, XXXXX, XX 4/1/97
CHECKS PAYABLE TO: LBC-LCA, L.L.C. LEASE TERM: 4/1/97 - 3/31/03
LBC-LCA, L.L.C.-2100 WESTERN COURT
C/O PRTICHETT REALTY CORPORATION
000 XXXXXX XXXX #00, XXXXXXX XXXXX, XX 00000-0000
LANDLORD RECAPTURING AREAS SET FORTH AS COMMON DOCK
ON EXHIBIT B & C OF THE LEASE - BASE RENT, TAXES & EXPENSES
TO BE ADJUSTED AND EFFECTIVE AS OF JUNE 1 1999.
COLUMBUS* 000 XXXXXXX XXXXXX, XXXXX 000, 4/1/96
ALLSTATE LIFE INSURANCE CO XXXXXXXX, XX 00000
XXXXXXXX XXXXX X0-X, LEASE TERM: 4/1/96 -0/00/00
XXXXX XXXXX, XX 00000
XXXXXX 0000 XXXXXXX XXXX, XXXXX 000, XXXXX, XX 10/1/95
JUPITER TECH CTR LEASE TERM: 10/l/95-10/31/00 10/1/96
c/o JSC REALTY SERVICES, INC. 10/1/97
0000 XXXX XXXXXXXXX XXX, XXXXX #000, XXXXXX, XX 00000 10/1/98
5/1/99
5/1/00
5/1/01
5/1/02
5/1/03
AREA OFFICE LEASE MONTHLY DUE SQUARE FOOTAGE
LANDLORD TERM RENT DATE OFFICE WHSE STAG. TOTAL
-------- ---- ---- ---- ------ ---- ----- -----
ATLANTA $15,852.00 1ST 17,000 1,000 18,000
QTLY PROP ASS $ 155.66
PEACH STATE PROPERTIES, INC., XXX XXXXX, XX. PROPERTY MGR
RENT CHECK: SUNRISE SQUARE, LC NEW OWNERS $17,522.00 1ST
0000 XXXXXXXXXXXX XXXXXX, XXX X, XXXXXXXX XX 00000 $17,977.57
BOSTON $ 2,500.00 1ST 4,400 1,000 5,400
LEASE PAYMENTS TO: TAXES $ 375.00
YOUNO REAL ESTATE LLC OPE XXX
00 XXXXXXXXX XX., X.X. XXX 00000 9/1/99-8/3/01 $ 3,000.00
XXXXXXXXX, XX 00000 TAXES $ 375.00
INSURANCE EXP.
CHICAG0 YR 97-98 $13,685.64 1ST 15,277 15,277
CHECKS PAYABLE TO: LBC-LCA, L.L.C. OPE '98 $ 2,597.09
LBC-LCA, L.L.C.-2100 WESTERN COURT TAXES '98 $ 1,909.63
C/O PRTICHETT REALTY CORPORATION YR 98-99 $14,096.21
000 XXXXXX XXXX #00, XXXXXXX XXXXX, XX 0000-0000 YR 99-00 $14,519.10
6/1/99 XXX.XXXX $14,230.18
LANDLORD RECAPTURING AREAS SET FORTH AS COMMON DOCK YR 00-01 $14,954.67
ON EXHIBIT B & C OF THE LEASE - BASE RENT, TAXES & EXPENSES YR 01-02 $15,403.31
TO BE ADJUSTED AND EFFECTIVE AS OF JUNE 1 1999. YR 02-03 $15,865.41
OPE RATE #REF!
TAXES $ 1,909.63
6/1/99 TAX ADJ $ 1,943.25
OPE $ 2,597.09
6/1/99 OPE ADJ $ 2,994.40
COLUMBUS* YRS 96-98 $ 3,100.55 1ST 5,233 5,233
ALLSTATE LIFE INSURANCE CO OPE '97 $ 1,033.52
XXXXXXXX XXXXX X0-X, XXX '98 $ 781.00
XXXXX XXXXX, XX 00000 YR 99 $ 3,209.57
OPE/ADJ
YRS 00-01 $ 3,318.59
OPE/ADJ
DALLAS 1ST YR $ 4,144.00 1ST 4,663 2,596 7,259
JUPITER TECH CTR 2ND YR $ 4,295.00
c/o JSC REALTY SERVICES, INC. 3RD YR $ 4,446.00
0000 XXXX XXXXXXXXX XXX, XXXXX #000, XXXXXX, XX 00000 4TH YR $ 4,597.00
RENT ADJ./IMPROVE $ 4,991.00
$ 5,142.00
$ 5,293.00
$ 5,444.00
$ 5,595.00
SCHEDULE Of PROPERTY LEASES
AREA OFFICE OCCUP.
LANDLORD AREA LOCATION DATE
-------- ------------- ----
FAIRFIELD* 00 XXXXXXX XXXX, XXXXXXXXX, XX 00000 2/1/90
LEASE TERM: 2/1/90-5/31/00
LEASE TERM: 1/1/97-12/31/06-4TH AMENDMENT 1/1/97
GLENBOR0UGH PROPERTIES, L.P.
XXX XXXXXXXX XXXXX
XXXXXXXXXX, XX 00000
PHONE: 973/000-0000
FLORIDA 00000 XXXXX XXXX 0
XXXXX 000
XXXXXXXXX EXECUTIVE STES INC XXXX XXXXX, XXXXXXX 00000
0000 XX XXXXXXXXX XXXX LEASE TERM: JUNE 1 0000
XXXX XXXXX, XXX 00000
LAKEWOOD 00000 X. XXXXXXX XXXX
XXX 000 & 000, XXXXXXXX, XX 00000
XXXXXXX XXX VENTURES, LLC LEASE TERM: 5/1/99-4/30/02 5/1/99
00000 XXXX XXXXXXX XXXX, XXX 000
XXXXXXXX, XX 00000
ONTARIO. CALIFORNIA* 0000 XXXX XXXXX, XXXXXXXX 00
XXXXXXX, XXXXXXXXXX 00000
SAFARI BUSINESS CENTER LEASE TERM: 3/1/99 - 2/28/00
0000 XXXX XXXXX,
XXXXXXX, XXXXXXXXXX 00000
LA 0000 XXXXXXX,XXXX X, XXXXXX, XX
LEASE TERM: 6/1/97-5/31/02
TUSTIN PACIFIC COMMERE CENTER 6/1/97
X/X XXXXXXXX XXXXXXX
X.X. XXX 000, XXXXXX, XX 00000-000
XXXXXXX XXXXX, XX 00000
MINNEAPOLIS 0000 XXXX 00XX XXXXXX, XXX. 000 XXX XXX
XXXXX, XX 00000
WEST 77 PENTAGON PARK LLC LEASE TERM: 3/1/97-3/1/00
NORCO CORP, NW 7260, X.X. XXX 0000
XXXXXXXXXXX, XX 00000-0000
PHONE: 612/000-0000 XXX: 612/000-0000
AREA OFFICE LEASE MONTHLY DUE SQUARE FOOTAGE
LANDLORD TERM RENT DATE OFFICE WHSE STAG. TOTAL
-------- ---- ---- ---- ------ ---- ----- -----
FAIRFIELD* 1ST 6,000 7,000 23,000 36,000
YRS 97-03 $29,583.33 0XX
XXXXXXX0XXX PROPERTIES, L.P. YRS 04-06 $32,541.67
ONE GATEHALL DRIVE CAM '98 $ 7,710.00
XXXXXXXXXX, XX 00000 CAM '99 $ -
PHONE: 973/000-0000 CAM '00 $ 7,815.94
FLORIDA $ 1,931.83
$ 1,931.83
CORPORATE EXECUTIVE STES INC SECURITY = $ 1,000.00
0000 XX XXXXXXXXX XXXX
XXXX XXXXX, XXX 00000
LAKEWOOD SEC.DEP STE #117
BASE RENT $ 3,000.00 1ST
XXXXXXX XXX VENTURES, LLC 36 MOS $ 3,080.00
00000 XXXX XXXXXXX XXXX, XXX 000
XXXXXXXX, XX 00000
ONTARIO, CALIFORNIA* SEC DEP
BASE RENT 10,185.05 1ST 23,535 23,535
SAFARI BUSINESS CENTER RENT INCLUDES
0000 XXXX XXXXX, $50.00
XXXXXXX, XXXXXXXXXX 00000 $15.00
LA
TUSTIN PACIFIC COMMERE CENTER MOS 1-12 $ 3,600.00 1ST 5,996 5,996
C/O XXXXXXXX XXXXXXX CAM 598.86
X.X. XXX 000, XXXXXX, XX 00000-000 TAXES
XXXXXXX XXXXX, XX 00000 MOS 13-24 $ 3,780.00
MOS 25-36 $ 3,970.00
MOS 37-48 $ 4,165.00
MOS 49-60 $ 4,375.00
MINNEAPOLIS $ 1,172.42 1,279 1,279
97-00 $ 959.25
WEST 77 PENTAGON PARK LLC OPE/TAXES '97 $ 783.39
NORCO CORP, NW 7260, P.O. BOX 1450 OPE/TAXES '98 $ 1,007.12
XXXXXXXXXXX, XX 00000-0000
PHONE: 612/000-0000 XXX: 612/000-0000
AREA OFFICE OCCUP.
LANDLORD AREA LOCATION DATE
-------- ------------- ----
NORTH CAROLINA* 000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Payable to Xxxxxxxx Road, LLC LEASE TERM: 9/l/99-8/31/11 SEC DEP
W. Xxxx Xxxxxxxx RENT
0000 Xxxxx Xxxx, Xxxxxxxxx, XX 00000 RENT
803/283-4484 RENT
RENT 6TH YR
RENT 9TH YR
RENT 10TH YR
RENT 11TH YR
RENT 12TH YR
RENT
RENT
RENT
PARSIPPANY, NJ* 0 XXXXXXXXX XXXX
XXXXXXXX MOVING SYSTEM, INC. (SUB-LESSOR) LEASE TERM: 7/1/99-10/30/00
X.X. XXX 000 0/0/00
XXXXXXXX, XX 00000
AVR REALTY COMPANY (LANDLORD) LEASE TERM: 11/01/00-10/31/02 10/1/00
ONE EXECUTIVE BLVD ANNUAL FIXED
XXXXXXX, XX 00000 & ADD'L RENT
PHOENIX, ARIZONA 0000 XX. 00XX XXXXXX, XXXXX 000 11/24/99
LEASE TERM: 11/1/99-11/1/00
XXXXXXX ASSOCIATES
000 XXXXXX XXXXXXX XXXX, XXXXX 000
XXXXXXXXX, XX 00000-0000
SAN XXXX 00000 XXXXXXX XXXXX, XXX 000/000X, 5/1/97
BEDFORD PROPERTIES INVESTORS INC. XXXXXXX, XX 00000
000 XXXXXXXXX XXXXXX LEASE TERM: 5/1/97-6/l/02
XXXXXXXXX, XX 00000 4/11/97
*OFFICES THAT MAINTAIN INVENTORY
AREA OFFICE LEASE MONTHLY DUE SQUARE FOOTAGE
LANDLORD TERM RENT DATE OFFICE WHSE STAG. TOTAL
-------- ---- ---- ---- ------ ---- ----- -----
NORTH CAROLINA*
Payable to Xxxxxxxx Road, LLC 9/1/99 $ 134,000 95,060 95,060
W. Xxxx Xxxxxxxx 1ST MO. 9/1/1999 $37,408.75
0000 Xxxxx Xxxx, Xxxxxxxxx, XX 00000 2ND/3RD YR $38,004.57
803/283-4484 4TH YR $40,284.84
5TH YR $41,493.39
6TH YR $42,738.19
7TH YR $44,020.33
8TH YR $45,340.94
9TH YR $46,701.17
10TH YR $48,102.21
11TH YR $49,545.27
12TH YR $51,031.63
PARSIPPANY, NJ* RENT $1/SQ FT $10,327.00
BAYSTATE MOVING SYSTEM, INC. (SUB-LESSOR) XXX XXX 0XX
X.X. XXX 000 7/1/99-10/30/00 $18,206.83
XXXXXXXX, XX 00000 CAM/RE TAXES $ 5,958.60
AVR REALTY COMPANY (LANDLORD) SEC DEP $20,250.OO 39,724 39,724
ONE EXECUTIVE BLVD $238,344.00 $19,862.00
XXXXXXX, XX 00000
PHOENIX, ARIZONA SEC DEP + 1ST MO.
11/1/99-11/1/00 $ 998.17 1ST 904 904
XXXXXXX ASSOCIATES
000 XXXXXX XXXXXXX XXXX, XXXXX 000
XXXXXXXXX, XX 00000-0000
SAN XXXX MOS 1-30 $ 6,210.00 1ST 4,600 4,600
BEDFORD PROPERTIES INVESTORS INC. MOS 31-60 $ 6,400.00
000 XXXXXXXXX XXXXXX OPE $ 874.00
XXXXXXXXX, XX 00000 SEC DEP $ 6,440.00
*OFFICES THAT MAINTAIN INVENTORY TOTAL SQ FT 65,352 11,596 181,319 258,267
IWCF ATTACHMENT C
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
COMPLIANCE CERTIFICATE
TO: IBM CREDIT CORPORATION
______________________
______________________
The undersigned authorized officers of DATATEC INDUSTRIES, INC. ("Customer"),
hereby certify on behalf of the Customer, with respect to the Inventory and
Working Capital Financing Agreement executed by and between DATATEC INC. and IBM
Credit Corporation ("IBM Credit") on 11/13 , 2000, as amended from time to time
(the "Agreement"), that (A) 7/31/00 has been in compliance for the period from
7/31, 2000 to 11/13, 2000 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:
Covenant Covenant Requirement Covenant Actual
-------- -------------------- ---------------
(i) Annualized Revenue Greater than Zero and 10.4 : 1.0
to Working Capital Equal to or Less than 25.0:1.0
(ii) Net Profit after Tax Equal to or Greater than .37%
to Revenue zero percent
(iii) Total Liabilities to Greater than Zero and 1.24 : 1.0
Tangible Net Worth Equal to or Less than 4.0:1.0
(iv) Fixed Charge Equal to or Greater than 1.25:1.0
Coverage Ratio for fiscal year ending 4/30/2000; 1.62 : 1.0
1.50:1.0 for fiscal year ending
4/30/2001; 1.75:1.00 for fiscal
year ending 4/30/2002 and thereafter.
Covenants to me measured quarterly.
Page 8 of 23
IWCF ATTACHMENT C
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
(Continued)
II. Calculation of Tangible Net Worth:
Total Assets MINUS Total Liabilities $28,884,187
LESS:
goodwill 0
organizational expenses 0
prepaid expenses $227,500
deferred charges, etc. $2,953,209
leasehold expenses $ 715,743
all other $1,651,007
callable/redeemable preferred stock 0
officer, employee, director, stockholder $ 49,163
and affiliate receivables
Total Tangible Net Worth $23,287,565
Attached hereto are Financial Statements as of and for the end of the fiscal
7/31/00 ended on the applicable date, as required by Section 7.1 of the
Inventory and Working Capital Financing Agreement. "These statements have been
presented to Xx Xxxxx".
Submitted by:
DATATEC, INDUSTRIES, INC.
-------------------------
(Customer Name)
By: /s/ Xxxxx Xxxx
--------------------------
Print Name: Xxxxx Xxxx
Title: Chairman of the Board/CEO
Page 9 of 23
IWCF ATTACHMENT D TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
("IWCF AGREEMENT")
Takeout Advance Option
IWCF TAKEOUT ADVANCE Schedule of Repayments for Datatec Industries, Inc.
* Number of payments will be One (1) with the following percents of the
Takeout Advance amount due on the payment dates indicated below:
Percent of Takeout
Payment # Payment Date Advance Amount Due:
--------- ------------ -------------------
1 12/05/2000 100.0%
Total 100.0%
* Assumes 1 payments and takeout takes place on 09/05/2000
Fee Schedule:
- IWCF Takeout Advance Financing Charge: Prime Rate plus 0.25%
- Delinquency Fee for late payment will be Prime Rate plus 6.500% on ADB.
Page 10 of 23
ATTACHMENT E
IBM Global Financing
IBM Global Financing is pleased to offer financing solutions to qualified
remarketers purchasing products from the following manufacturers and
distributors. Set forth below is the number of no charge days currently
available and are subject to change without notice. The number of no
charge days may vary or be unavailable on certain products. Additional
details describing the specific offerings can be obtained upon request.
(Updated on 09/18/2000.)
Supplier No Charge Days Supplier No Charge Days
-------- -------------- -------- --------------
Access Graphics, Inc. (ACC) 45 Cable & Connector Warehouse (CCW) 30
Acer America, Inc. (ACE) 30 Cabletron Systems, Inc. (CBL) 45
Admor Memory LTD (ADM) 45 Canon Computer Systems, Inc (CAN) 45
Advanced Digital Information Corp. (ADI) 30 CDW Computers, Inc. 30
Advanced Micro Devices (AMI) 45 Centon Electronics, Inc (CEN) 45
Advantage Memory Corporation (ADV) 45 CIE America, Inc. (CIE) 30
Agama Systems (AGA) 30 Citizen America Corporation (CIT) 45
Alltel Supply, Inc, (ALL) 30 CMS Enhancements, Inc (CMS) 30
Alternative Technology, Inc (AT1) 30 Combined Technology Computer Corp. (CTE) 45
Amax Engineering Corporation (AMX) 30 Compaq Computer Corporation (CPQ) 30
Ameriquest Technologies, Inc. (AOS) 30 Compaq Partner Direct (CPD) 30
Anixter, Inc. (ANI) 30 Compucom Systems, Inc. (CPM) 00
XXXXX Xxxxxxx, Inc. (AOP) 45 Computer Graphics Technology, Inc. (CGT) 30
Apple (APE) 21 Comtech Micro System, Inc. (CTH) 30
Applied Technology Ventures, Inc (ATV) 30 Concentric Systems, Inc (CNC) 30
Aqua Systems, Inc. (AQA) 30 Continental Technology, Inc. (CTI) 30
Arrow Electronics, Inc. (ARR) 30 Comstor Corporation (CSR) 30
ASI Corporation, Inc. (ASI) 45 Cranel, Inc (CRA) 30
ATEC Group, Inc 30 Creative Labs (CLB) 45
Attronica Computer, Inc (ATR) 45 CTX International, Inc. (CTX) 30
Avnet, Inc. (AVN) 30 Custom Edge, Inc. (ICM) - formerly Inacom Corp. 30
Bay Networks, Inc. (WEL) 30 Dane-Elec Corporation (XXX) 30
BCM Advanced Research, Inc (BCM) 30 Data I (DAI) 30
BDI Distributors, Inc. (BDI) 30 Data Security Services Corp. (DTS) 30
Xxxx Microproducts, Inc. (BMI) 45 Datalink Corporation (DLC) 45
Bostek, Inc. (BST) 30 Data Storage Marketing (DSM) 30
Brother International Corporation (BRO) 60 Datavision - Prologix, Inc. (DTA) 30
Business Partner Solutions, Inc. (BPS) 45 Decision Support Systems, Inc (DSF) 45
*This document is for informational purposes only and shall not be deemed to
confer any rights or obligations on IBM Credit or any other party. IBM Global
Financing offerings are provided through IBM Credit Corporation in the US, IBM
Canada Ltd. and other IBM subsidiaries or divisions worldwide.
Supplier No Charge Days Supplier No Charge Days
-------- -------------- -------- --------------
Dell Marketing (DEL) 45 IM&R Retail Sales (RRS) 30
Delta Products Corporation (DLT) 30 Ingram Alliance (Div. of Xxxxxx Micro) (IAL) 30
D & H Distributing Company (DHD) 30 Xxxxxx Micro, Inc. (ING) 30
Diamond Flower Instrument (DFI) 30 Initio Corporation (INI) 45
Diamond Multi Media Systems, Inc. (DMS) 30 International Computer Graphics, Inc. (ICG) 30
Xxxxxxx Data Systems, Inc.-Atlanta (DDG) 30 Inteva Technologies, Inc. (ITI) 30
Xxxxxxx Data Systems, Inc.-Dallas (DDT) 45 IT Xchange Corp. (ITX) 30
Digi International, Inc. (DGB) 30 Jaton Corporation (JAT) 30
Dolch American Instruments, Inc- (DOL) 30 Xxxxx Business Systems, Inc. (JNS) 30
DTK Technology, Inc. (DTK) 30 JVC Americas Corporation (JVC) 30
Eastcom Inc. d/b/a Pine Tech (EAT) 30 JVC Imaging Division (JID) 75
En Pointe Technologies, Ink (EDT) None Kingston Technology Corp. (KTC) 45
EMJ America, Inc. (EMJ) 30 Kyocera Electronics, Inc. (KYO) 00
Xxxxx Xxxxxxx, Inc. (EPS) 30 Lexmark International, Inc. (LEX) 45
Equus Computer Systems, Inc. (EDU) 30 Logicare Inc. (LGC) 30
First Source International, Inc. (FSI) 45 MA Laboratories, Inc. (MAL) 00
XXX - Xxxxxxx, Inc. (FMA) 30 Matrix Marketing Inc. (MAT) 30
FMG - New Jersey, Inc. (FMJ) 30 Max Group Corporation (MGC) 30
Fountain Technology, Inc. (FNT) 30 MCBA Systems, Inc. (MBA) 30
Fujitsu Computer Products of America (FUJ)60 XxXxxxx & Associates, Inc. (MCB) 30
Gates / Arrow Distributing (GAT) 30 Golden Ram (Memory Products) (MPM) 30
Gateway 2000 Corporation (GWT) 30 MemoSun, Inc. (MSN) 30
Government Technology Services, Inc (GTS)30 Merisel, Inc. (MER) 30
Graphics Technologies, Inc. (GTI) 30 Merisel Open Computing Alliance (MOCA) 45
Xxxxxxxxx Distribution, Inc. (GLF) 30 MFP Technology Services, Inc. (MFP) 30
H. Co. Computer Products, Inc. (HCO) 00 Xxxxxxxx Xxxxxxxxxxx Xx. (XXX) ** 30
Hartford Computer Group, Inc. (HAR) 30 Micron Electronics, Inc. (MCN) 30
HB Corporation Group (HBC) 30 Microland Electronics Corp (MLD) 30
Hewlett-Packard Company (HPP)-2 tier only30 MicroNet Technology (MNT) 45
Hitachi America, Ltd. (HAL) 30 Micro Distribution Center, Inc (MDC) 30
Hitachi PC Corporation (HIT) 30 Micro Distribution Center of Kansas (MDK) 30
Hotan Corporation, Inc. (HTN) 45 Micro Equipment Corporation, Inc. (MEC) 30
HP ProCurve Networking Business (HPP) 45 Micro Supply, Inc. (MIS) 30
IBM Corporation (MO) 45 Micro Technology Concepts (MTC) 30
IBM Printing Systems Company (PEN) 45 MicroTouch Systems (MTH) 45
IBM Personal Systems Group (PCC) 30 Millenium Electronics, Inc. (MLE) 30
*This document is for informational purposes only and shall not be deemed to
confer any rights or obligations on IBM Credit or any other party. IBM Global
Financing offerings are provided through IBM Credit Corporation in the US, IBM
Canada Ltd. and other IBM subsidiaries or divisions worldwide.
**Remarketer-paid fees
Supplier No Charge Days Supplier No Charge Days
-------- -------------- -------- -------------
Mitsubishi Electronics America, Inc. (MIT) 45 Samsung Anerica, Inc. (SSA) 30
Mitsui Advanced Media (MAM) 30 Samsung Semiconductor, Inc. (SAS) 30
Mitsumi Electronics Corporation (MIM) 00 Xxxxxxx Xxxxxxx-Xxxxxxxxx Xxxxxxx, Inc. (SEM) 30
Multi-Tech Systems, Inc. (MTS) 45 Samsung Electronics America, Inc. (XXX) 30
XXX Xxxxxxxxxxx (NCR) 45 Samsung Information Systems America, Inc. (SIS) 30
NEC Computer System Division (NCS) 45 Scansource, Inc. (SCA) 30
NEC Mitsubishi Electronics Display of
America, Inc. (NME) 45 Scientific & Business Minicomputers, Inc. (SBM) 30
NEC Technologies, Inc. (NEC) Seagate Technology, Inc. (SGT) 30
NEC Technologies, Inc. (NEC) 60
(for Storage Products and Seneca Data Distributors Inc. (SEN) 30
Advance Media Divisions Only) 30 Sharp Cash Registers (SHP) 30
XXXX.xxx, LLC. (NXC) Sharp Copiers & Faxes (SHP) 45
New Wave Technologies, Inc. (NWA) 30 Sharp Scanners/PTRS/PCs (SHP) 45
Nexar Technologies, Inc. (NXR) 30 Simple Technology Incorporated (SIM) 30
Nycom Technologies Distribution, Inc. (NTD) 45 Sidus Computer Corporation (SID) 30
Opal Technologies, Inc. (OPL) 30 Smart Modular Technologies, Inc. (SRT) 30
Optima Technology Corporation (OPT) 30 Sony Electronics, Inc. (SON) 45
Orientec (ORI) 30 Southern Electronics Corporation (SED) 30
P&A Technology Inc. (XXX) 30 Southland Micro Systems, Inc. (SOU) 30
Panasonic Communications and Systems Co (PCS) 30 Star Micronics (STA) 45
Panasonic Industrial Company (PAN) 45 Sun Microsystems Computer Corporation (SUN) 45
Panasonic Personal Computer Company (PSC) 45 Sunnytech, Inc. (SNT) 30
PC Wholesale (PWD) 45 Supercom, Inc.(SCI) 30
Peripheral Enhancement Corp (PER) 30 Symbios Logic, Inc. (SLI) 30
Philips Components (PCO) 30 Synnex Information Technologies, Inc. (IE/SIT) 30
Philips Consumer Electronics, Inc. (PCE) 30 Teac America, Inc. (TEA) 45
Pinacor, Inc. (MIC) 45 Tech Data Corporation (TEC) 30
Pioneer-Standard Electronics, Inc. (PSE) 30 Tech 101 (TOA) 30
Pionex Technologies, Inc. (POI) 45 Technology Works, Inc. (TCW) 45
PNY Technologies, Inc. (PNY) 30 Telxon Corporation (TXN) 60
Powerstar, Inc. (POW) 30 Tektronix, Inc. (TKT) 45
Premio Computer, Inc. (CSI) 30 Time Trend, Inc. (XXX) 30
Procom Technology, Inc. (PTI) 00 Xxxxxxx Xxxxxxx Information Systems, Inc. (TOS) 30
Pulsar Data Systems (PUL) 30 Total Peripherals, Inc. (TOP) 30
Quantum Corporation (QUA) 30 Transcend Information, Inc. (TRA) 30
Riodan and Xxxx, Inc. (RAR) 00 Xxxxx Xxxxxxx International (TAI) None
RMOA-IT (RMO) 30 Twinhead Systems, Inc. (TWI) 45
Sampo Technology, Inc. (STI) 45 Tyan Computer Corporation (TYC) 30
30
*This document is for informational purposes only and shall not be deemed to
confer any rights or obligations on IBM Credit or any other party. IBM Global
Financing offerings are provided through IBM Credit Corporation in the US, IBM
Canada Ltd. and other IBM subsidiaries or divisions worldwide.
Supplier No Charge Days Supplier No Charge Days
-------- -------------- -------- -------------
Unigen Corporation (UNG) 30 Wintec Industries Inc (WIN) 30
US Robotics Mobile Communication Corp.(MEG) 45 Worldwide Discount Computers, Inc. (WDC) 30
ViewSonic Corporation (VIE) 30 Wyle Laboratories (WYL) 45
Viking Components, Inc. (VIK) 45 Wyse Technology, Inc (WYS) 45
VisionTek (VIS) 30 Xylan Corporation (XYL) 30
Westcon, Inc. (WCN) 30 Yamaha Corporation (YAM) 45
Western Digital Corporation (XXX) 45 3 Com Corporation (3CO) 30
*This document is for informational purposes only and shall not be deemed to
confer any rights or obligations on IBM Credit or any other party. IBM Global
Financing offerings are provided through IBM Credit Corporation in the US, IBM
Canada Ltd. and other IBM subsidiaries or divisions worldwide.
ATT. "E"
Datatec Systems, Inc.
Memo
To: Xxxxxx X. Xxxxx, A/R Analyst, IBM Global Financing
From: Xxx Xxxxxxxx, Controller, Datatec Systems, Inc.
CC: File
Date: 11/01/00
Re: Vendors
--------------------------------------------------------------------------------
The following is a fist of those vendors, identified from your listing, that
Datatec Systems, Inc. is currently doing business with and their appropriate
vendor number.
Alltel Supply - #1038
Anixter - #3262
XXX -#00000
Xxxx - #00000
PC Wholesale - #75775
IWCF ATTACHMENT F TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
Customer (Legal Name)_________________
COLLATERAL MANAGEMENT REPORT (CMR)
Accounts as of: __________ (Date)
COLLATERAL STATUS:
----------------- Other Gross Advance Net
Values Collateral % Collateral
------ ---------- -------- ----------
1. Previous assigned AIR balance: $0
(previous CMR line 4) Date:_ /_/_
2. Additions to A/R (2A+B): $0
A. New Xxxxxxxx $0
B. Adjustments $0
3. Deductions from A/R (3A+B+C): $0
A. Cash Receipts $0
B. Credits $0
C. Adjustments $0
4. New Assigned A/R balance (1+2-3): $0
5. A/R Aging Report (Date:_/__/__) $0
**NEW ASSIGNED A/R BALANCE AND A/R AGING
REPORT (LINES 4 AND 5) MUST BE EQUAL**
----------------------------------------- ------ ---------- -------- ----------
6. Less Adjustments: $0
A. Unapplied Cash $0
B. Other $0
7. Adjusted assigned A/R balance (4-6): $0
8. Less Ineligible A/R: $0
A. A/R Over 90 Days $0
B. 50% Rule $0
C. Contra Accts (A/P offsets) $0
D. Other $0
E._________________ $0
F._________________ $0
G._________________ $0
H._________________ $0
9. Total Eligible A/R Collateral: $0 85% $0
(Line 7 - Line 8 X Advance Rate)
10. Other A/R Collateral:
A. IBM _______________ $0 95% $0
B. __________________ $0 $0 $0
11. Inventory Collateral:
A. IBM Credit Financed Eligible Inventory $0 $0 $0
B. Cable $0 35% $0
C. Other Inventory $0 25% $0
12. Other Collateral:
A. RMA $0 $0 $0
B. Price Protection $0 $0 $0
C. _______________ $0 $0 $0
D. _______________ $0 $0 $0
13. Total Net Eligible Collateral (9+10+11+12) $0
----------------------------------------- ------ ---------- -------- ----------
Page 12 of 23
LOAN STATUS:
----------- Other Gross Advance Net
Values Collateral % Collateral
------ ---------- -------- ----------
1. Net IBM Credit Outstandings $0
(1A-(B+C+D+E+F+G+H+I)+J)
X. Xxxxx IBM Credit Outstandings (RFS): $0
Less: $0
B. Suspense $0
C. Disputes $0
D. In Transit (_ Days) $0
E. QSL/QSA $0
F. Other $0
G. ____________ $0
H. ____________ $0
I. ____________ $0
Plus:
J. Product Received Not Billed (RNB) $0
2. Funds in Lockbox (2A+B) $0
A. Cleared Funds (transferred not posted) $0
B. Unavailable Funds (float) $0
3. Loan Balance (Line 1 - Line 2) $0
4. Collateral Excess/Shortfall: $0
(Collateral Line 13 - Loan Line 3:
(Loan balance available)
5. Advances from IBM Credit to Customer $0
(5A+B+C)
A. Cash Advances from Lockbox $0
B. Cash Advances from IBM Credit $0
C. WCO Cash Advance $0
6. New Adjusted O/S Balance (3+5) $0
7. Remaining Credit Line Availability $0
(Collateral Line 13 - Loan Line 6)
8. WCO Payment Advance $0
Signatures:
____________________________________________
Authorized Customer Signature (Date)
____________________________________________
IBM Credit Corporation (Date)
The above officer or delegated individual of_________________ certifies
that he or she is authorized to provide this information on behalf of ________
and agrees that to the best of his or her knowledge the information is
accurate.
Page 13 of 23
DATATEC SYSTEMS, INC. (55004)
COLLATERAL MANAGEMENT REPORT (CMR)
Accounts as of: 11/13/00 Report #: 2
COLLATERAL STATUS OTHER VALUES GROSS COLLATERAL VALUE ADVANCE % NET COLLATERAL VALUE
1. Previous assigned A/R balance:
(previous CMR line 4) Date: 10/31/00 $23,380,702.00
2. Additions to A/R (2A+B): $236,936.08
A. New Xxxxxxxx $236,936.08
B. Adjustments $0.00
3. Deductions from A/R (3A+B+C): $137,560.08
A. Cash Receipts $132,379.67
B. Credits $5,180.41
C. Adjustments
4. New Assigned A/R balance (1+2-3): $23,480,078.00**
5. A/R Aging Report (Date: 11/13/00) $23,480,078.00**
** New Assigned A/R Balance and A/R Aging Report (Lines 4 and 5) must equal.
6. Less Adjustments: $0.00
A. Unapplied Cash $0.00
B. Other $0.00
7. Adjusted assigned A/R balance (4-6): $23,480,078.00
8. Less Ineligible A/R: $1,985,125.00 0.08
A. A/R Over 90 Days (excluding IBM) $1,640,150.00 7%
B. IBM A/R Over 120 Days $344,975.00 1%
C. 50% Rule $0.00 0%
D. Contra Accounts $0.00 0%
E. COD $0.00 0%
F. Extended Terms $0.00 0%
G. $0.00 0%
H. ______________ $0.00 0%
9. Total A/R Eligible Collateral $21,494,953.00 85% $18,270,710.05
(Line 7 - Line 8 X Advance Rate)
10. Other A/R Collateral
A. IBM Acct's Receivable $9,541,917.00 10% $954,191.70
B. ______________ $0.00 1% $0.00
11. Inventory Collateral
A. IBMGF Eligible Inventory $0.00 100% $0.00
B. Cable Inventory $2,796,508.00 35% $978,777.80
C. Other Inventory $2,243,086.00 25% $560,771.50
12. Other Collateral
A. RMA $0.00 100% $0.00
B. Price Protection $0.00 100% $0.00
C. Non-AR Deposits ___________ $1,312.50 100% $1,312.50
D. _____________ $0.00 100% $0.00
13. Total Net Eligible Collateral (9+10+11+12) $20,765,763.55
Page 1 of 2
DATATEC SYSTEMS, INC. (55004)
COLLATERAL MANAGEMENT REPORT (CMR)
Accounts as of: 11/13/00 Report #: 2
LOAN STATUS OTHER VALUES GROSS COLLATERAL VALUE ADVANCE % NET COLLATERAL VALUE
1. Net IBM Credit Outstandings (1A-B-C-D-E-F-G-H-I+J) $15,870,428.25
X. Xxxxx IBM Credit Outstandings (RFS) $15,996,828.25
Less:
B. Suspense $0.00
C. Disputes $0.00
D. In Transit (1 Day) $126,400.00
E. QSA $0.00
F. Other $0.00
G. In Transit (2 Days) $0.00
H. ________________ $0.00
I. ________________ $0.00
Plus:
J. Product Received Not Billed (RNB) $0.00
2. Funds in Lockbox (2A+B) $0.00
A. Cleared Funds (transferred not posted) $0.00
B. Unavailable Funds (float) $0.00
3. Loan Balance (Line 1 - Line 2) $15,870,428.25
4. Collateral Excess/Shortfall (Collateral line 13 - Loan line 3): $4,895,335.30
(Loan balance available)
5. Advances from IBM Credit to Customer (5A+B+C) $0.00
A. Cash Advance from Lockbox $0.00
B. Cash Advance from IBM Credit $0.00
C. WCO Cash Advance $0.00
6. New Adjusted O/S Balance (Line 3 + Line 5) $15,870,428.25
7. Remaining Credit Line Availability $4,895,335.30
(Collateral line 13 - Loan line 6)
8. WCO Payment Advance $0.00
SIGNATURES:
__________________________________________ __________________________________
AUTHORIZED CUSTOMER SIGNATURE (DATE) IBM CREDIT CORPORATION (DATE)
The above officer or delegated individual of the (Customer Legal Name) certifies
that he/she is authorized to provide this information on behalf of (Customer
Legal Name) and agrees that to the best of his/her knowledge the information is
accurate.
This faxed document ff introduced as evidence on paper in any Judicial,
arbitration, mediation or administrative proceedings will be admissible as
between the parties to the same extend and under the same conditions as other
business records originated and maintained in documentary form and when so
executed and delivered (whether by facsimile or otherwise) shall be an original
Page 2 of 2
ATT. "G"
DATATEC SYSTEMS, INC.
November 1, 2000
IBM Credit Corporation
X.X. Xxx 000000
Xxxxxxx, XX 00000-0000
Gentlemen:
Please accept this document as a formal "Certificate of Location" for Datatec
Systems inventory locations as requested in the IWCF Agreement with IBM Credit
Corporation. The locations are as follows:
California
----------
0000 Xxxx Xxxxx, Xxxxxxxx 00
Xxxxxxx, Xxxxxxxxxx 00000
North Carolina
--------------
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
New Jersey
----------
0 Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Sincerely,
/s/ Xxxxx X. Xxxxxxxx
---------------------
Xxxxx X. Xxxxxxxx
ATTACHMENT H
XXXXXX XXXXXXXX FROME XXXXXXXXXX & XXXXXXX LLP
000 XXXX XXXXXX, XXX XXXX, XXX XXXX 00000
(000) 000-0000
November 15, 2000
IBM Credit Corporation
0000 Xxxxx Xxxx Xxxxxxx
Xxxxxxx, XX 00000
Re: Inventory and Working Capital Financing Agreement
-------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Datatec Industries, Inc., a Delaware
corporation (the "Borrower") in connection with (A) the execution and delivery
of that certain Inventory and Working Capital Financing Agreement, dated as of
November 13, 2000 (the "Financing Agreement"), by and among the Borrower and
IBM Credit Corporation ("IBM Credit"), and (B) 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; and
v. Acknowledgment copies of the UCC-1 Financing Statements listed
on Exhibit A
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Page 2
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;
The documents referred to in clauses (iii) through (v) 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 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 New York and express no
opinion as to the laws of any other jurisdiction except the General Corporation
Law of the State of Delaware 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
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November 15, 2000
Page 3
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, deliver, and perform 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 of 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, to
our knowledge, 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 to the
transactions contemplated thereby.
7. Each of the Financing Documents has been duly executed and
delivered by duly authorized officers 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
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Page 4
adequate remedial provisions for the practical realization of the security
purported to be afforded thereby.
8. The Financing Agreement creates a valid security interest in
favor of IBM Credit in the right, title and interest of the Borrower in and to
the Collateral to the extent that Article 9 of UCC is applicable thereto as
security for the obligations purported to be secured thereby. The Financing
Statements are in appropriate form and upon filing thereof pursuant to UCC will
result in the perfection of such security interest in that portion of the
collateral in which a security interest is perfected by filing a financing
statement under UCC.
9. The 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.
The opinions in paragraph 8 are qualified by the following:
(a) in the case of instruments (as such term is defined in Article 9
of the UCC) not constituting part of chattel paper (as such term is defined in
Article 9 of the UCC), the security interests of IBM Credit therein cannot be
perfected by the filing of the Financing Statements but will be perfected if
possession thereof is obtained in accordance with the provisions of Article 9 of
the UCC;
(b) in the case of motor vehicles for which certificates of title
have been issued and for which the exclusive manner of perfecting a security
interest is by noting IBM Credit's security interest on the certificates of
title in accordance with applicable New York or New Jersey law, IBM Credit's
security interest therein cannot be perfected by the filing of the Financing
Statements but will be perfected if IBM Credit's security interest is so noted;
(c) in the case of proceeds, continuation of perfection of IBM
Credit's security interest therein is limited to the extent set forth in Section
9-306 of the UCC;
(d) in the case of all collateral in which the security interests of
IBM Credit have been perfected by the filing of Financing Statements, Article 9
of the UCC requires the filing of continuation statements within the period of
six months prior to the expiration of five years from the date of the original
filings, in order to maintain the effectiveness of the filings referred to in
this paragraph; and
(e) in the case of property that becomes collateral after the date
hereof, Section 552 of the Federal Bankruptcy Code limits the extent to which
property acquired by a debtor after the commencement of a case under the Federal
Bankruptcy Code may be subject to a security interest arising from a security
agreement entered into by the debtor before the commencement of such case.
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Page 5
We call to your attention that the perfection of the above security
interests will be terminated (i) as to any collateral acquired by the Borrower
more than four months after the Borrower so changes its name or identity as to
make the Financing Statements seriously misleading, unless new appropriate
financing statements indicating the new name, identity or corporate structure of
the Borrower are properly filed before the expiration of such four months and
(ii) as to any collateral consisting of accounts, four months after the Borrower
changes its chief executive office to a new jurisdiction unless such security
interests are perfected in such new jurisdiction before such termination.
(The security interests referred to in paragraph 8 above are
referred to herein collectively as the "Security Interests".)
The foregoing opinions in paragraph 8 are subject to the
qualifications that we express no opinion as to:
(i) the Borrower's rights in or title to any Collateral; and
(ii) the validity or perfection of the Security Interests as
they relate to any interest in or claim in or under any policy of insurance,
except a claim to proceeds payable by reason of loss or damage under insurance
policies maintained by the Borrower with respect to equipment and inventory as
required by and in compliance with the Subject Documents.
The opinions set forth above are subject to the following
qualifications:
(a) Our opinions in paragraph 7 above are subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally;
(b) Our opinions in paragraph 7 above are subject to the effect of
general principles of equity, including (without limitation) concepts of
materiality, reasonableness, good faith and fair dealing (regardless of whether
considered in a proceeding in equity or at law);
(c) Our opinions in paragraph 7 above are subject to the
qualification that certain provisions of the Financing Documents relating to the
grant of security interests are or may be unenforceable in whole or in part
under the laws of New York, but the inclusion of such provisions does not affect
the validity of any such agreement and each agreement contains adequate
provisions for the practical realization of the rights and benefits afforded
thereby;
(d) In the case of chattel paper, notes or general intangibles, we
call your attention that the security interest may be subject to the rights of
accounts debtors or other payors, claims or defenses of account debtors or other
payors or terms of agreements with account debtors or other
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November 15, 2000
Page 6
payors; and
(e) We express no opinion as to (i) any of the Financing Documents
insofar as they authorize IBM Credit to set off and apply any deposits at any
time held, and any other indebtedness at any time owing, by IBM Credit to or for
account of the Credit Parties, (ii) the effect of the law of any jurisdiction
wherein IBM Credit may be located or wherein enforcement of the Financing
Documents may be sought that limits the rates of interest legally chargeable or
collectible, (iii) provisions of the Financing Documents expressly, or by
implication, waiving future rights or benefits, rights or defenses to
obligations granted by law or equity, may be enforceable under certain
circumstances where such waivers are against public policy or prohibited by law,
(iv) provisions of the Financing Documents which provide that rights or remedies
are not exclusive, that every right or remedy is cumulative and may be exercised
in addition to or with any other rights or remedy, that election of a particular
remedy or remedies does not preclude recourse to one or more other remedies, and
that any remedy or right may be exercised without notice or failure to exercise
or delay in exercising rights or remedies will not operate as a waiver of any
such right or remedy, (v) the consent of any party to the Financing Documents to
the jurisdiction of any court and (vi) the waiver of any party to the Financing
Documents to the right to a jury trial.
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.
We advise you that Xxxxxx X. Xxxxxxxx, a member of our firm, is a
director, optionholder and stockholder of the sole stockholder of the Borrower.
Other members of this firm are also stockholders of the sole stockholder of the
Borrower.
Very truly yours,
/s/ XXXXXX XXXXXXXX FROME XXXXXXXXXX & XXXXXXX LLP
XXXXXX XXXXXXXX FROME XXXXXXXXXX & XXXXXXX LLP
November 15, 2000
Page 7
EXHIBIT A
TO OPINION OF COUNSEL
UCC-1 FINANCING STATEMENT
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Page 8
EXHIBIT B
TO OPINION OF COUNSEL
MATERIAL CONTRACTS
1. 1990 Stock Option Plan.
2. 1993 Consultant Stock Option Plan.
3. Director's Stock Option Plan.
4. 1996 Employee and Consultant Stock Option Plan.
5. 1996 Stock Option Conversion Plan.
6. 1996 Senior Executive Stock Option Plan.
7. 2000 Stock Option Plan.
8. 1998 Employee Stock Purchase Plan.
9. Form of Rights Agreement, dated as of February 24, 1998, between the
Company and Continental Stock Transfer & Trust Company.
10. Employment Agreement dated May 1, 2000 between the Company and Xxxxx Xxxx.
11. Loan and Security Agreement dated March 17, 1997 between the Company and
Finova Capital Corporation.
12. First Amendment to Loan and Security Agreement dated December 15, 1999
between the Company and Finova Capital Corporation.
13. Second Amendment to Loan and Security Agreement dated March 29, 2000
between the Company and Finova Capital Corporation.
14. Stock Purchase Agreement dated as of February 15, 1996 by and among the
Company, Xxxxx X. Xxxxx and Computer-Aided Software Integration, Inc.
15. Stock Purchase Agreement dated March 9, 1998 by and among Xxxxx X. Xxxxx,
the Company and Computer-Aided Software Integration, Inc., which includes
the Form of Convertible Promissory Note as Exhibit A, the form of
Registration Rights Agreement as Exhibit B, and the form of
Non-Competition Agreement as Exhibit C.
16. Stock Purchase Agreement dated as of July 31, 1996 by and among the
Company, Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxxx, Xxxx Xxxxxx, Xxxxxx Xxxxxxxx
and HH Communications, Inc.
17. Stock Purchase Agreement dated as of October 31, 1996 by and among the
Company, Datatec Industries Inc. and Those Stockholders Listed on Schedule
1.1 Thereto.
18. Notes and Warrant Purchase Agreement dated as of February 18, 1997, by and
between the Company, Tinicum Investors and Xxxxx Xxxxxxx (Exhibit A- Form
of Convertible Note, Exhibit B Form of Warrant, Exhibit C- Form of
Conditional Warrant).
19. Securities Purchase Agreement, dated as of April 30, 1998, by and among the
Company, Xxxxx International and Shepherd Investments International, Ltd.,
which includes (i) the Certificate of Designations of Series E Convertible
Preferred Stock as Exhibit A, (ii) the
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Page 9
form of Common Stock Purchase Warrant dated April 30, 1998 as Exhibit B,
and (iii) the form of Registration Rights Agreement as Exhibit C.
20. Common Stock Purchase Agreement dated January 7, 1994 by and among Direct
Connect International, Inc., the Company and Xxxxx Xxxxxxx.
21. Stock Purchase Agreement dated July 25, 1997 by and among the Company and
the Purchasers listed on the Signature Pages thereto.
22. Stock Purchase Agreement dated June 30, 1997 between the Company and Xxxxx
Xxxxxxx.
23. Amended and Restated License Agreement dated as of July 1, 1997 by and
between CASI and Cumetrix Data Systems Corporation, (formerly Datanet
International Incorporated).
24. Stock Purchase Agreement dated February 25, 1999 by and among the Company
and the Purchasers listed on the signature pages thereto.
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Page 10
EXHIBIT C
TO OPINION OF COUNSEL
MATERIAL ORDERS
None
IWCF ATTACHMENT I TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
CORPORATE SECRETARY'S CERTIFICATE AS TO RESOLUTIONS
AUTHORIZING BORROWING BY CORPORATION
IBM CREDIT CORPORATION
0000 Xxxxx Xxxx Xxxx.
Xxxxxxx, XX 00000
I, Xxxxxx X. Xxxxxxxx certify that I am the Secretary of Datatec Industries,
Inc. ("Customer") and that I am custodian of the Customer's organizational books
and records, including the minutes of the meetings of the Customer's Board of
Directors. I further certify as follows:
1. Customer is a corporation organized under the laws of the State of
New Jersey, and has its principal place of business at 00 Xxxxxxx Xxxx, Xxxxxxxxx,
XX 00000.
2. Customer is registered to conduct business or as otherwise required
in the following states and localities:
Not Applicable
3. True and complete copies of the Customer's Articles of Incorporation
and By-laws ("Governing Documents") are delivered herewith, together with all
amendments and addenda thereto as in effect on the date hereof.
4. The following is a true, accurate and compared copy of a Resolution
(the "Resolution") adopted by the Customer's Board of Directors at a special
meeting thereof held on due notice at which there was present a quorum
authorized to adopt the Resolution and the entire proceedings of which were
proper and in accordance with the Customer's Governing Documents. The Resolution
was duly made, seconded and unanimously adopted, remains in full force and
effect and has not been revoked, annulled, amended or modified in any manner
whatsoever, and each authorization and empowerment contained in the Resolution
is permitted and proper under the Customer's Governing Documents:
"Resolved, that:
(a) Each executive or managing officer and agent of the Company
(each an "Authorized Person") is and shall be authorized and empowered,
separately or collectively, to obtain financing from IBM Credit
Corporation, a Delaware corporation ("IBM Credit") on behalf of the
Company, from time to time, in amounts and upon terms and conditions as
such Authorized Person deems proper, and for that purpose: (1) to execute
notes, financing statements and other evidences of the Company's
indebtedness with respect thereto; (2) to enter into financing agreements,
loan agreements, security agreements, pledge agreements and any other
agreements with IBM Credit and third parties relating to the terms and
conditions upon which any such financing may be obtained and to the
security to be furnished by the Company thereof; (3) to enter into, as
lessor or lessee, or to assign or sell any interest Company may have in,
any lease or similar rental agreement; (4) to modify, supplement or amend
any such agreements, any such terms or conditions in such agreements and
any such security therefor; (5) to xxxxx xxxxxx of attorney, (6) to
pledge, assign, guarantee, mortgage, consign, grant security interest in
and otherwise transfer to IBM Credit as collateral security for any and
all debts and obligations of the Company to IBM Credit or its affiliates,
whenever and however arising, any assets of this Company; (7) to execute
and deliver any and all assignments, schedules, transfers, endorsements,
contracts,
Page 21 of 23
guarantees, agreements, designations, consignments, deeds of trust,
mortgages, instruments of pledge or other instruments in respect thereof
and to make remittances and payments in respect thereof by checks, drafts
or otherwise; and (8) to do and perform all other acts and things deemed
by such Authorized Person to be necessary, convenient or proper to carry
out any of the foregoing.
(b) The authorization contained herein shall apply whether or not
proceeds of any loans or advances made at the request of any Authorized
Person shall be paid or credited by IBM Credit to the Company or shall be
paid or credited to the individual order of any affiliates of the Company
or other third party, and IBM Credit shall be under no obligation to
inquire as to the application or disposition of the proceeds of any such
loan or advance.
(c) Hereby ratified, approved, confirmed and consented to are all
that any Authorized Person has done or may do in the premises."
5. Appearing below are the names, titles and specimen signatures of at
least three Authorized Persons, as defined in the Resolution cited in the
preceding paragraph, (list at least three such Authorized Persons):
Authorized Person(s) Title Signature
(print) (print)
Xxxx Xxxxxxxxx Xx. V.P.Operations /s/ Xxxx Xxxxxxxxx
Xxx Xxxxxxx Sr. V.P. Acct. Mgmt /s/ Xxx Xxxxxxx
Xxxxx Xxxx Chairman/CEO /s/ Xxxxx Xxxx
The foregoing is not intended to be a comprehensive or exclusive list
of the Customer's Authorized Persons. Upon request, Customer will promptly
provide to IBM Credit additional certificates containing the name, title and
specimen signature of other Authorized Persons, and IBM Credit may now and in
the future rely on the signature of any Authorized Person whether or not listed
on this or any other certificate or on the signature page(s) hereof.
Nevertheless, it is hereby certified that each name, title and signature
appearing above or on the signature page(s) hereof, is consistent with the books
and records of the Customer.
IN WITNESS WHEREOF, I have signed this certificate this 13th day of
Nov., 2000.
_________________________
Name: /s/ Xxxxxx Xxxxxxxx
-------------------------
Page 22 of 23
IWCF ATTACHMENT J TO
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT")
E-BUSINESS SCHEDULE A ("SCHEDULE A")
CUSTOMER NAME: DATATEC INDUSTRIES, INC.
EFFECTIVE DATE OF THIS SCHEDULE A: November 13, 2000
E-DOCUMENTS - SUPPLIERS:
------------------------
Invoices
Payment Report/Remittance Advice
E-DOCUMENTS - CUSTOMERS:
------------------------
Invoices
Remittance Advice
Transaction Approval
Billing Statement
Payment Planner
Auto Cash
Statements of Transaction
Common Dispute Form
Page 23 of 23
