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EXHIBIT 10.3
[NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION LOGO] CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement") is executed this 1st day of June, 1998
to be effective as of the date described in the first paragraph of the
Background section set forth immediately below (the "Effective Date"), and is
between Norwest Bank Minnesota, National Association (the "Bank") and Datalink
Corporation (the "Borrower").
BACKGROUND
The Borrower has asked the Bank to renew its existing line of credit (the
"Line") in the amount of Ten Million and 00/100 Dollars ($10,000,000.00), to be
effective as of the date that the treasurer of the Borrower has received at
least a net $23,000,000.00 in available funds from the initial public offering
of its common stock offered through certain underwriters led by ▇▇▇▇▇▇▇ &
Company, Inc., Cruttenden ▇▇▇▇ Incorporated, and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company,
Incorporated. (The date that net funds in this amount have been received to be
referred to as the "Effective Date".)
The obligations of the Borrower to the Bank with respect to the Line prior to
the Effective Date of this Agreement were evidenced by a Credit Agreement dated
June 1, 1998 (the "June 1998 Credit Agreement"), which June 1998 Credit
Agreement is to be replaced by this Agreement and will have no further effect.
Borrowings under the Line are currently evidenced by a promissory note dated
June 1, 1998 (the "June 1998 Revolving Note").
The Bank is agreeable to meeting the Borrower's request provided that the
Borrower agrees to the terms and conditions of this Agreement.
The Revolving Note, this Agreement, and all "Security Documents" described in
Exhibit B shall be referred to collectively as the "Documents."
In consideration of the above premises, the Bank and the Borrower agree as
follows:
1. LINE OF CREDIT
1.1 LINE OF CREDIT AMOUNT. During the Line Availability Period defined
below, the Bank agrees to provide a revolving line of credit
(the "Line") to the Borrower. Outstanding amounts under the Line shall
not, at any one time, exceed the lesser of the Borrowing Base or Ten
Million and 00/100 Dollars ($10,000,000.00). The Borrowing Base is
defined in Exhibit A-1 to this Agreement.
1.2 LINE AVAILABILITY PERIOD. The "Line Availability Period" shall mean
the period of time from the Effective Date or the date on which
all conditions precedent described in this Agreement have been met,
whichever is later, to the Line Expiration Date of May 31, 2000.
1.3 THE REVOLVING NOTE. The Borrower's obligation to repay advances under
the Line shall be evidenced by a single promissory note (the
"Revolving Note") dated as of the Effective Date, and in form and
content acceptable to the Bank. The Revolving Note shall replace, but
not be deemed to satisfy, the June 1998 Revolving Note. Reference is
made to the Revolving Note for interest rate and repayment terms.
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1.4 MANDATORY PREPAYMENT. If at any time the principal outstanding under
the Revolving Note plus the face amount of any outstanding Standby
L/Cs and Documentary L/Cs (as defined below) exceed the lesser of the
Borrowing Base or $10,000,000.00, the Borrower must immediately prepay
the Revolving Note in an amount sufficient to eliminate the excess. If
after making this prepayment the face amount of outstanding Standby
L/Cs and Documentary L/Cs continue to exceed this amount, then the
Borrower shall deposit sufficient cash into a non-interest bearing
account to collateralize the excess. The Borrower hereby grants the
Bank a security interest in these funds as security for all of the
Borrower's obligations to the Bank.
1.5 STANDBY LETTERS OF CREDIT
(a) Issuance and Expiration. During the Line Availability Period, the Bank
may in its sole discretion issue standby letters of credit for the
account of the Borrower ("Standby L/Cs"), provided that the Borrower is
in compliance with the terms of this Agreement. Each Standby L/C must
expire no later than the Line Expiration Date. Prior to the issuance
of a Standby L/C, the Borrower will execute the Bank's standard
Application and Agreement for Irrevocable Standby Letter of Credit
("Standby L/C Agreement") and such other documents as the Bank deems
necessary.
(b) Fees. The Borrower will pay a standby letter of credit fee of 1.00% per
annum on the face amount of each Standby L/C subject to a minimum fee of
$200. This fee will be paid annually in advance and is in addition to
all other fees or expenses provided for in the Standby L/C Agreement.
(c) Reduction of Line Availability and Line Advances. The availability under
the Line will be reduced dollar for dollar by the face amount of all
outstanding Standby L/Cs plus any unreimbursed draws. Without limiting
any rights and remedies available to the Bank under any Standby L/C
Agreement, any draw under a Standby L/C may, at the Bank's option, be
repaid through an automatic advance under the Line and the advance will
be repayable per the terms of this Agreement.
(d) Cash Collateralization of Outstanding Standby L/Cs. Should a default
occur under this Agreement, the Bank may require the Borrower to
deposit with it in a non-interest bearing account, immediately
available funds equal to the face amount of outstanding Standby L/Cs.
The Borrower hereby grants the Bank a security interest in the funds
which will be security for all of the Borrower's obligations to the
Bank.
1.6 DOCUMENTARY LETTERS OF CREDIT
(a) Issuance and Expiration. During the Line Availability Period, the Bank
agrees to issue documentary letters of credit for the account of the
Borrower ("Documentary L/Cs"), provided that the Borrower is in
compliance with the terms of this Agreement. Each Documentary L/C must
expire prior to the Line Expiration Date. Prior to the issuance of a
Documentary L/C, the Borrower will execute the Bank's standard Master
Security Agreement for Irrevocable Documentary Letters of Credit (the
"Documentary L/C Agreement") and such other documents as the Bank deems
necessary.
(b) Fees and Expenses. Fees and expenses related to each Documentary L/C
will be agreed upon at issuance.
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(c) Reduction of Line Availability and Line Advances. The availability under
the Line will be reduced dollar for dollar by the face amount of all
outstanding Documentary L/Cs, plus any unreimbursed draws. Without
limiting any rights and remedies available to the Bank under the
Documentary L/C Agreement and related documents, any draw under a
Documentary L/C may, at the Bank's option, be repaid through an
automatic advance under the Line and the advance will be repayable
according to the terms of this Agreement.
(d) Cash Collateralization of Outstanding Documentary L/Cs. Should a default
occur under this Agreement, the Bank may require the Borrower to
deposit with it in a non-interest bearing account, immediately available
funds equal to the face amount of the outstanding Documentary L/Cs. The
Borrower hereby grants the Bank a security interest in the funds which
will be security for all of the Borrower's obligations to the Bank.
2. FEES AND EXPENSES
2.1 COMMITMENT FEE. During the Line Availability Period the Borrower shall
pay the Bank a commitment fee of 0.125% per annum on the average daily
unused amount of the Line. This fee shall be calculated on the basis of
actual days elapsed in a 360 day year and paid quarterly in arrears
beginning the first fiscal quarter end after the Effective Date.
2.2 COLLECTION EXPENSES. In the event the Borrower fails to pay the Bank
any amounts due under this Agreement or under the Documents, the
Borrower will pay all costs of collection, including reasonable
attorneys' fees and legal expenses incurred by the Bank.
2.3 AUDIT EXPENSE. The Borrower agrees to reimburse the Bank for the cost
of periodic audits of all collateral pledged to the Bank which may be
conducted no more frequently than twice each calendar year and at a
cost of no more than $2,000.00 per audit. The audits may be performed
by employees of the Bank or independent contractors retained by the
Bank.
3. ADVANCES AND PAYMENTS
3.1 REQUESTS FOR ADVANCES. Any Line advance permitted under this Agreement
must be requested by telephone or in a writing delivered to the Bank
(or transmitted via facsimile) by any person reasonably believed by the
Bank to be an authorized officer of the Borrower. The Bank will
not consider any such request if there is an event which is, or with
notice or the lapse of time would be, an event of default under this
Agreement. Proceeds will be deposited into the Borrower's account at
the Bank or disbursed in such other manner as the parties agree.
3.2 INTEREST RATE OPTIONS. In addition to interest rates based on the Base
Rate Option defined in the Revolving Note, the Borrower may elect a
fixed rate of interest for a fixed time period and principal amount
agreeable to the Bank and Borrower that is based upon any applicable
margin stated in said promissory note and an interest rate derived from
the current LIBOR rate available to the Bank on national or
international money markets for a similar time period and dollar
amount.
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To elect the LIBOR Rate Option, as defined in the Revolving Note, the
Borrower must request a quote from the Bank two days prior to funding.
This request must designate an amount (the "LIBOR Rate Portion") and a
period (the "LIBOR Interest Period"). The LIBOR Rate Portion must be
at least $100,000 and the LIBOR Interest Period will be for 30, 60 or
90 days or such other period to which the parties may agree. The Bank
shall not be obligated to provide a LIBOR rate quote if it determines
that no deposits with an amount and maturity equal to those for which a
quotation has been requested are available to it in the London
interbank market. The Borrower must orally accept a quote when
received or it will be deemed rejected. If accepted, the LIBOR Rate
Option will remain in effect for the LIBOR Interest Period specified in
the quote. At the end of each LIBOR Interest Period the principal
amount subject to the LIBOR Rate Option shall bear interest at the
Base Rate Option (as defined in the Revolving Note).
3.3 PAYMENTS. All principal, interest and fees due under the Documents
will be paid to the Bank by the direct debit of available funds on
deposit in the Borrower's account with the Bank. The Bank will debit
the account on the dates the payments become due. If a due date
does not fall on a day on which the Bank is open for substantially all
of its business (a "Banking Day", except as otherwise provided), the
Bank will debit the account on the next Banking Day, and interest will
continue to accrue during the extended period. If there are
insufficient funds in the account on the day the Bank enters any debit
authorized by this Agreement, the debit will be reversed and the
payment will be due immediately without necessity of demand by direct
remittance of immediately available funds. For amounts bearing
interest at the LIBOR Rate (if any) a Banking Day is a day on which the
Bank is open for business and on which dealings in U.S. dollar deposits
are carried on in the London interbank market.
4. SECURITY
During the time period that credit is available under this Agreement,
and afterward until all amounts due under the Documents are paid in
full, unless the Bank shall otherwise agree in writing, all amounts
due under this Agreement and the Documents shall be secured at all
times as provided in Exhibit B. The Borrower also hereby grants the
Bank a security interest (independent of the Bank's right of set-off)
in its deposit accounts at the Bank and in any other debt obligations
of the Bank to the Borrower.
5. CONDITIONS PRECEDENT
The Borrower must deliver to the Bank the documents described in
Exhibit B, properly executed and in form and content acceptable to the
Bank, prior to the Bank's initial advance under this Agreement. The
Borrower must also deliver to the Bank, prior to the initial advance
and any subsequent Line advances under this Agreement, a Borrowing Base
Certificate in the form of Exhibit A-2, at the intervals provided in
Section 7.1(d).
6. REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, the Borrower, to the
best of its knowledge and upon due inquiry, makes the representations
and warranties contained in Exhibit C. Each request for an advance
under this Agreement constitutes a reaffirmation of these
representations and warranties.
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7. COVENANTS
7.1 FINANCIAL INFORMATION AND REPORTING. Except as otherwise
stated in this Agreement, all financial information provided to the
Bank shall be compiled using generally accepted accounting principles
consistently applied. During the time period that credit is available
under this Agreement, and afterward until all amounts due under the
Documents are paid in full, unless the Bank shall otherwise agree in
writing, the Borrower agrees to:
(a) Annual Financial Statements. Provide the Bank within 120 days of the
Borrower's fiscal year end, the Borrower's annual financial
statements. The statements must be audited with an unqualified opinion
by a certified public accountant acceptable to the Bank.
(b) Interim Financial Statements. Provide the Bank within 45 days of each
quarter end, the Borrower's interim financial statements prepared by
the Borrower, certified as correct by an officer of the Borrower and in
form acceptable to the Bank.
(c) Compliance Certificate. Provide the Bank concurrently with the interim
financial statements required above, a Compliance Certificate in the
form of Exhibit D, signed by an officer of the Borrower for the
quarterly periods ending on the last day of March, June, September and
December, which: 1) certifies that the statements have been
accurately prepared in accordance with generally accepted accounting
principles applied consistently with the last annual financial
statements provided by the Borrower; 2) demonstrates that the Borrower
remains in compliance with all financial covenants that must be
complied with as of the date of the financial statements; and 3)
certifies that the officer has no knowledge of any event of default
under the Agreement.
(d) Borrowing Base Certificate. Provide the Bank within 45 days of each
quarter end, a Borrowing Base Certificate in the form of Exhibit
A-2 and certified as correct by an officer of the Borrower.
(e) Accounts Receivable Aging. Provide the Bank within 45 days of each
quarter end, an accounts receivable aging report in form acceptable to
the Bank and certified as correct by an officer of the Borrower
acceptable to the Bank.
(f) Inventory List. Provide the Bank within 120 days of each fiscal year
end, an inventory list certified as correct by an officer of the
Borrower and in form acceptable to the Bank.
(g) Notices. Provide the Bank prompt written notice of: 1) any event which
has or might after the passage of time or the giving of notice, or
both, constitute an event of default under the Documents, or 2) any
event that would cause the representations and warranties contained in
this Agreement to be untrue.
(h) Additional Information. Provide the Bank with such other information as
it may reasonably request, and permit the Bank to visit and inspect its
properties and examine its books and records.
7.2 FINANCIAL COVENANTS
During all the time periods that credit is available under this
Agreement, and afterward until all amounts due under the Documents are
paid in full, unless the Bank shall otherwise agree in writing, the
Borrower agrees to comply with the financial covenants described below,
which shall be calculated using generally accepted accounting
principles consistently applied, except as they may be otherwise
modified by the following capitalized definitions:
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(a) Tangible Net Worth plus Subordinated Debt. Maintain a minimum Tangible
Net Worth plus Subordinated Debt of at least $12,000,000.00 as of the
Effective Date, increasing by $1.00 each fiscal quarter thereafter.
"Tangible Net Worth" means total assets less total liabilities and less
the following types of assets: (1) leasehold improvements and computer
software; (2) receivables and other investments in or amounts due from
any shareholder, director, officer, employee or other person or entity
related to or affiliated with the Borrower; (3) goodwill, patents,
copyrights, mailing lists, trade names, trademarks, servicing rights,
organizational and franchise costs, bond underwriting costs and other
like assets properly classified as intangible.
"Subordinated Debt" means debt that is expressly subordinated to the
Bank in a writing acceptable to the Bank.
(b) Total Liabilities to Tangible Net Worth plus Subordinated Debt.
Maintain a ratio of total liabilities less Subordinated Debt to
Tangible Net Worth plus Subordinated Debt of less than 2.00 to 1.0 as
of the end of each fiscal quarter.
7.3 OTHER COVENANTS
(a) Additional Borrowing. Refrain from incurring any indebtedness except:
(1) Trade credit incurred in the ordinary course of business.
(2) Indebtedness in existence on the date of this Agreement
and disclosed in advance to the Bank in writing.
(3) Purchase money indebtedness (including capitalized leases)
for the acquisition of fixed assets, provided that the total
principal amount outstanding at any one time does not exceed
$1,000,000.00.
(b) Other Liens. Refrain from allowing any security interest or lien on
property it owns now or in the future, except:
(1) Liens in favor of the Bank.
(2) Liens for taxes not delinquent or which the Borrower is
contesting in good faith.
(3) Liens outstanding on the date of this Agreement and
disclosed in advance to the Bank in writing.
(4) Liens which secure obligations in a total principal
amount not exceeding $5,000.00.
(5) Liens which secure purchase money indebtedness allowed
under this Agreement.
(c) Capital Expenditures. Refrain from making, or committing to make,
capital expenditures (including the total amount of any capital leases
and the purchase money indebtedness referenced in section 7.3(a)(3))
in an aggregate amount exceeding $1,000,000.00 in any one fiscal year.
(d) Dividends. Refrain from making any cash distributions to its
shareholders.
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(e) Loans to Officers. Refrain from making any loans or advances to any of
its executives, officers, directors, or shareholders.
(f) Sale of Assets. Refrain from selling or leasing during any fiscal year
all or a substantial part of its assets, other than sales of inventory
in the ordinary course of business.
(g) Insurance. Cause its properties to be adequately insured by a reputable
insurance company against loss or damage and to carry such other
insurance (including business interruption insurance) as is usually
carried by persons engaged in the same or similar business. Such
insurance must include a lender's loss payable endorsement in favor of
the Bank in form acceptable to the Bank.
(h) Business Acquisition. Refrain from purchasing or otherwise acquiring
during any fiscal year, all or substantially all, of the assets of any
other person, firm, corporation or other entity in an amount in excess
of $5,000,000.00 for any one acquisition in any single fiscal year,
and in an amount in excess of $15,000,000.00 in the aggregate for all
such acquisitions in any single fiscal year.
(i) Nature of Business. Refrain from engaging in any line of business
materially different from that presently engaged in by the Borrower.
(j) Guaranties. Refrain from assuming, guaranteeing, endorsing, or
otherwise becoming contingently liable for any obligations of any other
person, except for those guaranties outstanding as of the Effective
Date and disclosed to the Bank in writing.
(k) Deposit Accounts. Maintain its principal deposit accounts with the
Bank.
(l) Form of Organization. Refrain from changing its legal form of
organization.
(m) Maintenance of Properties. Make all repairs, renewals or replacements
necessary to keep its plant, properties and equipment in good working
condition.
(n) Books and Records. Maintain adequate books and records in accordance
with generally acceptable accounting principles consistently applied
and refrain from making any material changes in its accounting
procedures whether for tax purposes or otherwise.
(o) Compliance with Laws. Comply in all material respects with all laws
applicable to its business and the ownership of its property.
(p) Preservation of Rights. Maintain and preserve all rights, privileges,
charters and franchises it now has.
These covenants were negotiated by the Bank and Borrower based on
information provided to the Bank by the Borrower. A breach of a
covenant is an indication that the risk of the transaction has
increased. As consideration for any waiver or modification of these
covenants, the Bank may require: additional collateral, guaranties or
other credit support; higher fees or interest rates; and possible
modifications to the Documents and the monitoring of the Agreement.
The waiver or modification of any covenant that has been violated by
the Borrower will be made in the sole discretion of the Bank. These
options do not limit the Bank's right to exercise its rights under
Section 8 of this Agreement.
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8. EVENTS OF DEFAULT AND REMEDIES
8.1 DEFAULT
Upon the occurrence of any one or more of the following events
of default, or at any time afterward unless the default has been cured,
the Bank may declare the Line to be terminated and in its discretion
accelerate and declare the unpaid principal, accrued interest and all
other amounts payable under the Revolving Note to be immediately due
and payable:
(a) Default by the Borrower in the payment when due of any principal or
interest due under the Revolving Note or the Documents, including any
Standby L/C Agreement or Documentary L/C Agreement and continuance for
10 days.
(b) Default by the Borrower in the observance or performance of any
covenant or agreement contained in this Agreement, and continuance
for more than 30 days.
(c) Default by the Borrower in the observance or performance of any
covenant or agreement contained in the Documents, or any of them,
excluding this Agreement, after giving effect to any applicable grace
period.
(d) Default by the Borrower in any agreement with the Bank or any other
lender that relates to indebtedness or contingent liabilities which
would allow the maturity of such indebtedness to be accelerated.
(e) Any representation or warranty made by the Borrower to the Bank is
untrue in any material respect.
(f) Any litigation or governmental proceeding against the Borrower seeking
an amount in excess of $1,000,000.00 which is not insured or subject
to indemnity by a solvent third party either 1) results in a judgment
equal to or in excess of that amount against the Borrower or 2)
remains unresolved on the earlier of the completion of discovery or
the 270th day following its commencement, unless as of that date no
judgment has been rendered and contingent liability arising as a
result is classified as "remote" by the Borrower's counsel as defined
in FASB 5 in a signed opinion addressed to the Bank.
(g) A garnishment, levy or writ of attachment, or any local, state, or
federal notice of tax lien or levy is served upon the Bank for the
attachment of property of the Borrower in the Bank's possession or
indebtedness owed to the Borrower by the Bank.
(h) A material adverse change occurs in the Borrower's financial condition
or ability to repay its obligations to the Bank.
8.2 IMMEDIATE DEFAULT
If, with or without the Borrower's consent, a custodian, trustee or
receiver is appointed for any of the Borrower's properties, or if a
petition is filed by or against the Borrower under the United States
Bankruptcy Code, then the Line shall immediately terminate and the
unpaid principal, accrued interest and all other amounts payable under
the Revolving Note and the Documents will become immediately due
and payable without notice or demand.
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9. MISCELLANEOUS.
(a) 360 Day Year. All interest and fees due under this Agreement will be
calculated on the basis of actual days elapsed in a 360 day year.
(b) GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all calculations for compliance
with financial covenants will be made using generally accepted
accounting principles consistently applied ("GAAP").
(c) No Waiver; Cumulative Remedies. No failure or delay by the Bank in
exercising any rights under this Agreement shall be deemed a waiver of
those rights. The remedies provided for in the Agreement are
cumulative and not exclusive of any remedies provided by law.
(d) Amendments or Modifications. Any amendment or modification of this
Agreement must be in writing and signed by the Bank and Borrower. Any
waiver of any provision in this Agreement must be in writing and signed
by the Bank.
(e) Binding Effect; Assignment. This Agreement and the Documents are
binding on the successors and assigns of the Borrower and Bank. The
Borrower may not assign its rights under this Agreement and the
Documents without the Bank's prior written consent. The Bank may sell
participations in or assign this Agreement and the Documents and
exchange financial information about the Borrower with actual or
potential participants or assignees.
(f) Minnesota Law. This Agreement and the Documents will be governed by the
substantive laws of the State of Minnesota.
(g) Severability of Provisions. If any part of this Agreement or the
Documents are unenforceable, the rest of this Agreement or the Documents
may still be enforced.
(h) Integration. This Agreement and the Documents describe the entire
understanding and agreement of the parties and supersedes all prior
agreements between the Bank and the Borrower relating to each credit
facility subject to this Agreement, whether verbal or in writing.
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ADDRESS FOR NOTICES TO BANK: ADDRESS FOR NOTICES TO BORROWER:
Norwest Bank Minnesota, Datalink Corporation
National Association ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Sixth and Marquette ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Vice President Treasurer
NORWEST BANK MINNESOTA, DATALINK CORPORATION
NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------- ----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, VICE PRESIDENT ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, TREASURER
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Its: President & CEO
-----------------------------
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EXHIBIT A-1
BORROWING BASE DEFINITION
Borrowing Base means the sum of 80% of Eligible Accounts Receivable (as defined
below) plus 35% of Eligible Inventory or $1,250,000.00, whichever is less (as
defined below).
Eligible Accounts Receivable means all accounts receivable except those which
are:
1) Greater Than 90 days past the invoice date.
2) Due from an account debtor, 10% or more of whose accounts owed
to the Borrower are more than 90 days past the invoice date.
3) Owed by a shareholder, subsidiary, affiliate, officer or
employee of the Borrower.
4) Due from a unit of the federal government or any foreign
governmental entity.
5) Due from an account debtor located outside the United States or
Canada and not supported by standby letter of credit acceptable
to the Bank.
6) Subject to offset or dispute, contra accounts or accounts owed
by a shareholder, subsidiary, affiliate, officer or employee of
the Borrower.
Eligible Inventory means all inventory of the Borrower, at the lower of cost or
market as determined by generally accepted accounting principals, except
inventory which is:
1) In transit; or located at any warehouse not approved by the
Bank.
2) Evaluation Inventory
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EXHIBIT A-2
DATALINK CORPORATION
BORROWING BASE CERTIFICATE
TO: Norwest Bank Minnesota,
National Association
Sixth and Marquette
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(the "Bank")
Datalink Corporation (the "Borrower") certifies that the following
computation of the Borrowing Base was performed as of ___________________ in
accordance with the Borrowing Base definitions set forth in Exhibit A-1 to the
Credit Agreement entered into between the Bank and the Borrower dated
______________.
Total A/R $
------------------
Less: 1) Greater than 90 days $
------------------
2) Other ineligibles $
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Eligible A/R $
------------------
80% of Eligible Accts. Receivable $
==================
Total Inventory $
------------------
Less: Ineligible Inventory $
------------------
Eligible inventory $
------------------
Lesser of 35% of Eligible Inventory $
Or $1,250,000.00 ==================
Total Borrowing Base $
==================
Total Line Outstandings ($ )
==================
Excess (Deficit) $
==================
DATALINK CORPORATION
By:
---------------------------
Its:
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EXHIBIT B
CONDITIONS PRECEDENT TO INITIAL ADVANCE AND SECURITY
PLEASE NOTE: This Exhibit describes each Note, Security Document,
Authorizations, Organizational Documents, and all miscellaneous documents,
reports, certificates and other information required as a condition to each
advance or disbursement under the Agreement, whether or not they have
previously been delivered to the Bank.
NOTE
The Revolving Note
SECURITY DOCUMENTS
Each Security Document described below must continue in full force and effect
at all times in accordance with its terms during the time period that credit is
available under this Agreement, and afterward until all amounts due under the
Documents are paid in full. THE FAILURE OF ANY SECURITY DOCUMENT TO MEET THESE
REQUIREMENTS MAY RESULT IN AN EVENT OF DEFAULT UNDER THE AGREEMENT AND THE
ACCELERATION OF ALL OF THE BORROWER'S OBLIGATIONS TO THE BANK EVIDENCED BY THE
DOCUMENTS.
Security Agreement. A Security Agreement dated June 1, 1998 signed by the
Borrower granting the Bank a first lien security interest in the Borrower's
accounts, inventory, equipment and general intangibles. The Borrower will also
execute financing statements sufficient to perfect the security interest
granted to the Bank.
AUTHORIZATION
Corporate Certificate of Authority. A certificate of the Borrower's corporate
secretary as to the incumbency and signatures of the officers of the
Borrower signing the Documents and containing a copy of resolutions of the
Borrower's board of directors authorizing execution of the Documents and
performance in accordance with the terms of the Agreement.
ORGANIZATION
Articles of Incorporation And By-Laws. A certified copy of the Borrower's
Articles of Incorporation and By-Laws and any amendments, if applicable.
Certificate of Good Standing. A copy of the Borrower's Certificate of Good
Standing, recently certified by the Minnesota Secretary of State.
OTHER
Evidence of Insurance. Evidence that the insurance required under the Covenant
Section of this Agreement is in force.
DC138211
14
EXHIBIT C
REPRESENTATIONS AND WARRANTIES
Organizational Status. The Borrower is a corporation duly formed and in good
standing under the laws of the State of Minnesota.
Authorization. This Agreement, and the execution and delivery of the Documents
required hereunder, is within the Borrower's powers, and has been duly
authorized, and does not conflict with any of its organizational papers or any
other agreement by which the Borrower is bound.
Financial Reports. The Borrower has provided the Bank with its annual audited
financial statement dated December 31, 1998 and its unaudited interim financial
statement dated April 31, 1998, and these statements fairly represent the
financial condition of the Borrower as of their respective dates and were
prepared in accordance with GAAP.
Litigation. There is no litigation or governmental proceeding pending or
threatened against the Borrower which could have a material adverse effect on
the Borrower's financial condition or business.
Taxes. The Borrower has paid when due all federal, state and local taxes.
No Default. There is no event which is, or with notice or the lapse of time
would be, an event of default under this Agreement.
ERISA. The Borrower is in compliance in all material respects with ERISA and
has received no notice to the contrary from the PBGC or other governmental
area.
Environmental Matters. 1) The Borrower is in compliance in all material
respects with all health and environmental laws applicable to the Borrower and
its operations and knows of no conditions or circumstances that could interfere
with such compliance in the future; 2) the Borrower has obtained all
environmental permits and approvals required by law for the operation of its
business; and 3) the Borrower has not identified any "recognized environmental
conditions", as that term is defined by the American Society for Testing and
Materials in its standards for environmental due diligence, which could
subject the Borrower to enforcement action if brought to the attention of
appropriate governmental authorities.
15
EXHIBIT D
DATALINK CORPORATION
OFFICER'S CERTIFICATE OF COMPLIANCE
TO: Norwest Bank Minnesota, National Association
Sixth and Marquette
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(the "Bank")
I am an officer of Datalink Corporation (the "Borrower") and under the
terms of a Credit Agreement (the "Agreement") between the Bank and the Borrower
dated ________________, and certify that:
(1) The attached financial statements of the Borrower from ______________
through _______________ (the "Statement Date") are true and correct and have
been accurately prepared in accordance with generally accepted accounting
principles applied consistently with the Borrower's most recent annual
financial statement; and
(2) I have read and am familiar with the Agreement and have no knowledge of an
existing event of default or of any event which after the lapse of time or the
delivery of notice would constitute an event of default under the Agreement.
The calculations regarding each financial covenant, as of the Statement Date,
and regardless of whether the Borrower must be in compliance with each covenant
as of the Statement Date, are as follows:
COVENANT ACTUAL REQUIRED
TANGIBLE NET WORTH PLUS SUB DEBT
Net Worth
---------------
(-) Intangible Assets
---------------
(+) Subordinated Debt
---------------
Tangible Net Worth plus Sub Debt $ at least $12,000,000 as of
=============== the Effective Date increasing
$1 each fiscal quarter thereafter.
TOTAL LIABILITIES TO TNW
PLUS SUB DEBT RATIO
Total liabilities
(-) Subordinated Debt
---------------
Total Liabilities
---------------
Tangible Net Worth
---------------
(+) Subordinated Debt
---------------
TNW plus Sub Debt
---------------
Total Liabilities/TNW plus Sub Debt maximum of 2.00 to 1.0 as
--------------- of each fiscal quarter end
DATALINK CORPORATION
BY:
-------------------------------
ITS:
------------------------------
DC138211
16
[NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION LOGO] REVOLVING NOTE
$10,000,000.00 June 1, 1998
FOR VALUE RECEIVED, Datalink Corporation (the "Borrower") promises to pay to the
order of Norwest Bank Minnesota, National Association (the "Bank"), at its
principal office or such other address as the Bank or holder may designate from
time to time, the principal sum of Ten Million and 00/100 Dollars
($10,000,000.00), or the amount shown on the Bank's records to be outstanding,
plus interest (calculated on the basis of actual days elapsed in a 360-day
year) accruing on the unpaid balance at the annual interest rate defined
below. Absent manifest error the Bank's records will be conclusive evidence of
the principal and accrued interest owing hereunder.
This Revolving Note is issued pursuant to a Credit Agreement of even date
herewith between the Bank and the Borrower (the "Agreement") and replaces but
shall not be deemed to satisfy the June 1998 Revolving Note as defined in the
Agreement. The Agreement, and any amendments or substitutions thereto, contain
additional terms and conditions including default and acceleration provisions.
The terms of the Agreement are incorporated into this Revolving Note by
reference. Capitalized terms not expressly defined herein shall have the
meanings given them in the Agreement.
INTEREST RATE.
BASE RATE OPTION. Unless the Borrower chooses the LIBOR Interest Rate Option
as defined below, the principal balance outstanding under this Revolving Note
shall bear interest at an annual rate equal to the Base Rate, floating (the
"Base Rate Option"). Base Rate means the rate of interest established by the
Bank from time to time as its "base" or "prime" rate of interest at its
principal office in Minneapolis, Minnesota.
LIBOR INTEREST RATE OPTION. Subject to the terms and conditions of the
Agreement the Borrower may elect that all or portions of the principal balance
of this Revolving Note bear interest at the LIBOR Interest Rate plus 1.95% (the
"LIBOR Interest Rate Option"). Specific reference is made to the Interest Rate
Options section of the Agreement for terms governing the designation of interest
periods and rate portions.
The LIBOR Interest Rate shall be computed in accordance with the following
formula.
LIBOR Interest Rate = London Interbank Offered Rate
-----------------------------
1.00 - Reserve Requirement
Where,
(1) "London Interbank Offered Rate" means the Bank's cost of funds as
determined by the Bank's Treasury Division, based upon the average rate
at which U.S. Dollar deposits with a term equal to the applicable LIBOR
Interest Rate Period and in an amount equal to the LIBOR Interest Rate
Portion are available to the Bank at the time or determination on the
London Interbank Market.
(2) "Reserve Requirement" means the Federal Reserve System requirement
(expressed as a percentage) applicable to the dollar deposits used in
calculating the LIBOR Interest Rate above.
17
REPAYMENT TERMS
INTEREST. Interest will be payable on the first day of each month, beginning
July 1, 1998.
PRINCIPAL. Principal and any unpaid interest, will be due on May 31, 2000.
ADDITIONAL TERMS AND CONDITIONS. The Borrower agrees to pay all costs of
collection, including reasonable attorney's fees and legal expenses incurred
by the Bank if this Revolving Note is not paid as provided above. This
Revolving Note shall be governed by the substantive laws of the State of
Minnesota.
WAIVER OF PRESENTMENT AND NOTICE OF DISHONOR. Borrower and any other person
who signs, guarantees or endorses this Revolving Note, to the extent allowed
by law, hereby waives presentment, demand for payment, notice of dishonor,
protest, and any notice relating to the acceleration of the maturity of this
Revolving Note.
DATALINK CORPORATION
BY: ▇▇▇▇ ▇▇▇▇▇▇
----------------------------
ITS: President & CEO
---------------------------
DC138221