INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT
dated this 29th day of June, 1995
by and between
InaCom Corp.
and
IBM Credit Corporation
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TABLE OF CONTENTS
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Section 1. DEFINITIONS.. .. . . . . . . . . . . . . . . . . 1
1.1 Special Definitions. . . . . . . . . . . . . . . . . . 1
1.2 Other Defined Terms. . . . . . . . . . . . . . . . . ... 12
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES. . ... 13
2.1 Credit Line. . . .. . . . . . . . . . . . . . . . . . .. 13
2.2 Product Advances .. . . . . . . . . . . . . . . . . . .. 13
2.3 A/R Advances . . .. . . . . . . . . . . . . . . . . . .. 15
2.4 Finance and Other Charges. . . . . . . . . . . . . . .. 16
2.5 Statements Regarding Customer's Account. . . . . . . .. 17
2.6 Shortfall.. . . .. . . . . . . . . . . . . . . . ... 18
2.7 Application of Payments. . . . . . . . . . . . . . . .. 18
2.8 Prepayment and Reborrowing By Customer . . . . . . . ... 18
2.9 Letters of Credit.. . . . . . . . . . . . . . . . . . .. 18
Section 3. CREDIT LINE ADDITIONAL PROVISIONS. . . . . . . .. 19
3.1 Ineligible Accounts. . . . . . . . . . . . . . . . . ... 19
3.2 Reimbursement for Charges. . . . . . . . . . . . . . ... 21
Section 4. CONDITIONS PRECEDENT . . . . . . . . . . . . ... 21
4.1 Conditions Precedent to the Effectiveness of This
Agreement.. . .. . . . . . . . . . . . . . . .. . .. .. 21
4.2 Conditions to Each Advance . . . . . . . . . . . .. .... 23
Section 5. REPRESENTATIONS AND WARRANTIES . . . . . . ... .. 24
5.1 Organization and Qualifications. . . . . . . . . .. .... 24
5.2 Rights in Collateral; Priority of Liens. . . . . .. .... 24
5.3 No Conflicts . . .. . . . . . . . . . . . . . . . . .... 25
5.4 Enforceability . .. . . . . . . . . . . . . . . . . .... 25
5.5 Locations of Offices . . . . . . . . . . . . . . .. .... 25
5.6 Fictitious Business Names. . . . . . . . . . . . .. .... 26
5.7 Organization . . . . . . . . . . . . . . . . . . .. .... 26
5.8 No Judgments or Litigation . . . . . . . . . . . .. .... 26
5.9 No Defaults. . . . . . . . . . . . . . . . . . . .. .... 26
5.10 Labor Matters. . . . . . . . . . . . . . . . . . . .. .. 26
5.11 Compliance with Law. . . . . . . . . . . . . . . . .. .. 26
5.12 ERISA. . . . . . . . . . . . . . . . . . . . . . . .. .. 27
5.13 Compliance with Environmental Laws . . . . . . . . .. .. 27
5.14 Intellectual Property. . . . . . . . . . . . . . . .. .. 28
5.15 Licenses and Permits . . . . . . . . . . . . . . . .. .. 28
5.16 Investment Company . . . . . . . . . . . . . . . . .. .. 28
5.17 Taxes and Tax Returns. . . . . . . . . . . . . . . .. .. 28
5.18 Status of Accounts . . . . . . . . . . . . . .. . . . .. 29
5.19 Affiliate/Subsidiary Transactions. . . . . . . . . .. .. 29
5.20 Accuracy and Completeness of Information . . . . . .. .. 29
5.21 Recording Taxes. . . . . . . . . . . . . . . . . . .. .. 29
5.22 Indebtedness . . . . . . . . . . . . . . . . . . . .. .. 29
Section 6. AFFIRMATIVE COVENANTS. . . . . . . . .. . . .. .. 30
6.1 Financial and Other Information. . . . . . . . . . .. .. 30
6.2 Location of Collateral . . . . . . . . . . . . . . .. .. 32
6.3 Changes in Customer. . . . . . . . . . . . . . . . .. .. 32
6.4 Corporate Existence. . . . . . . . . . . . . . . . .. .. 32
6.5 ERISA. . . . . . . . . . . . . . . . . . . . . . . .. .. 33
6.6 Environmental Matters. . . . . . . . . . . . . . . .. .. 33
6.7 Collateral Books and Records/Collateral Audit. . . .. .. 34
6.8 Insurance; Casualty Loss . . . . . . . . . . . . . .. .. 34
6.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . .. .. 35
6.10 Compliance With Laws . . . . . . . . . . . . . . . .. .. 35
6.11 Fiscal Year/Fiscal Quarter . . . . . . . . . . . . .. .. 35
6.12 Intellectual Property. . . . . . . . . . . . . . . .. .. 35
6.13 Maintenance of Property. . . . . . . . . . . . . . .. .. 35
6.14 Collateral . . . . . . . . . . . . . . . . . . . . .. .. 35
6.15 Subsidiaries . . . . . . . . . . . . . . . . . . . .. .. 37
6.16 Report of Material Event . . . . . . . . . . . . . .. .. 37
Section 7. NEGATIVE COVENANTS . . . . . . . . . . .. . .. .. 37
7.1 Liens. . . . . . . . . . . . . . . . . . . . . . . .. .. 37
7.2 Disposition of Assets. . . . . . . . . . . . . . . .. .. 38
7.3 Corporate Changes. . . . . . . . . . . . . . ... . .. .. 38
7.4 Guaranties . . . . . . . . . . . . . . . . . . . . .. .. 38
7.5 Restricted Payments. . . . . . . . . . . . . . . . .. .. 39
7.6 Investments. . . . . . . . . . . . . . . . . . . . .. .. 39
7.7 Affiliate/Subsidiary Transactions. . . . . . . . . .. .. 40
7.8. ERISA . . . . . . . . . . . . . . . . . . . . . . .. .. 40
7.9 Additional Negative Pledges. . . . . . . . . . . . .. .. 40
7.10 Storage of Collateral with Bailees and Warehousemen .... 40
7.11 Use of Proceeds. . . . . . . . . . . . . . . . . . .. .. 41
7.12 Retained Accounts. . . . . . . . . . . . . . . . . .. .. 41
7.13 Indebtedness . . . . . . . . . . . . . . . . . . . .. .. 41
7.14 Loans. . . . . . . . . . . . . . . . . . . . . . . .. .. 41
Section 8. DEFAULT. . . . . . . . . . . . . . . . .. . .. .. 41
8.1 Event of Default . . . . . . . . . . . . . . . . . .. .. 41
8.2 Acceleration . . . . . . . . . . . . . . . . . . . .. .. 44
8.3 Remedies . . . . . . . . . . . . . . . . . . . . . .. .. 44
8.4 Waiver . . . . . . . . . . . . . . . . . . . . . . .. .. 44
Section 9. MISCELLANEOUS. . . . . . . . . . . . . .. . .. .. 44
9.1 Term; Termination. . . . . . . . . . . . . . . . . .. .. 44
9.2 Indemnification. . . . . . . . . . . . . . . . . . .. .. 44
9.3 Additional Obligations . . . . . . . . . . . . . . .. .. 45
9.4 LIMITATION OF LIABILITY. . . . . . . . . . . . . . .. .. 45
9.5 Alteration/Waiver. . . . . . . . . . . . . . . . . .. .. 45
9.6 Severability . . . . . . . . . . . . . . . . . . . .. .. 46
9.7 One Loan . . . . . . . . . . . . . . . . . . . . . .. .. 46
9.8 No Merger or Novations . . . . . . . . . . . . . . .. .. 46
9.9 Paragraph Titles. . . . .. . . . . . . . . . . . . .. .. 47
9.10 Binding Effect; Assignment . . . . . . . . . . . . . .. 47
9.11 Notices. . .. .. . . . . . . . . . . . . . . . . . . .. 47
9.12 Counterparts. .. . . . . . . . . . . . . . . . . . . .. 48
9.13 ATTACHMENT A MODIFICATIONS . . . . . . . . . . . . . .. 48
9.14 SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW.48
9.15 JURY TRIAL WAIVER. . . . . . . . . . . . . . ..... . .. 49
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INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT
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This INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT (as amended,
supplemented or otherwise modified from time to time,
this "Agreement") restates, amends and supersedes that certain Addendum
to Agreement for Wholesale Financing dated August 2, 1991, as
amended and supplemented prior to the date hereof (the "Financing
Agreement") and is hereby made this 29th day of June, 1995, by and
between IBM CREDIT CORPORATION with a place of business at 2707 W.
Butterfield Road; Oak Brook, IL 60521 ("IBM Credit"), and InaCom
Corp. with a place of business at 10810 Farnam Drive; Omaha,
Nebraska 68154 ("Customer").
W I T N E S S E T H
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WHEREAS, IBM Credit and Customer are parties to that certain
Financing Agreement pursuant to which IBM Credit finances Customer's
acquisition of inventory and equipment;
WHEREAS, in the course of Customer's operations, Customer intends to
purchase from Persons approved in writing by IBM Credit for the purposes
of this Agreement (the "Authorized Suppliers") computer hardware and
software products manufactured or distributed by or bearing any trademark
or trade name of such Authorized Suppliers for distribution throughout
the United States (the "Products") (as of the date hereof the Authorized
Suppliers are as set forth on Attachment E hereto);
WHEREAS, Customer has requested that IBM Credit provide a credit facility
in support of Customer's inventory financing of its purchase of Products
from Authorized Suppliers and its accounts receivable financing and
financing for general corporate purposes, and IBM Credit is willing to
provide such financing to Customer subject to the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree that the
Financing Agreement is hereby restated, amended and superseded in
its entirety as follows:
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Section 1. DEFINITIONS
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1.1 Special Definitions. The following terms shall have the
following respective meaning in this Agreement:
"A/R Advance": any loan or advance of funds made by IBM Credit to
Customer pursuant to Section 2.3 of this Agreement, including, as
the context may require, an Overnight Advance, a Fixed Rate Advance
and a PAE 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 PAE Advance Term, an Overnight Advance
Term and a Fixed Rate 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
Customer pursuant to this Agreement including, without limitation,
(i) Product Advances and (ii) A/R Advances.
"Affiliate": when used with a Person, means any other Person controlling,
controlled by, or under common control with, such Person. For purposes of
this definition, "control" (including the correlative meaning of the term
"controlled by" or "under control with") with respect to any Person shall
mean possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership or voting securities or by contract or otherwise.
"Auditors": a nationally recognized firm of independent certified
public accountants as recommended by the Customer's audit committee
and approved by Customer's Board of Directors.
"Authorized Supplier": Companies, and their wholly owned subsidiaries
unless specifically excluded, listed in Attachment E,
together with their successors and any other Person which manufactures,
sells or distributes products purchased by Customer that are approved for
financing under this Agreement by IBM Credit in writing, in each case so
long as Customer is not notified in writing at least sixty (60) days in
advance to the contrary by IBM Credit in its sole discretion.
"Available Credit": at any time, (1) the Maximum Advance Amount
less (2) the Outstanding Advances at such time.
"Average Daily Balance": the sum of the Outstanding Product Advances or
Outstanding A/R Advances, as the case may be, as of the end of each day
during a calendar month, divided by the number of days in the calendar month.
"Back-up Liquidity Adjustment Fee": a fee, as specified in Attachment A,
which is due once per fiscal year to IBM Credit by Customer on the next
Payment Date after IBM Credit notifies Customer of the amount due.
Such Fee is not applicable if IBM Credit's credit rating is reduced so
that IBM Credit is no longer eligible to perform as a back-up liquidity
provider to Clipper.
"Base Rate": as defined in Attachment A. Base Rate will be determined on
a calendar month by calendar month basis. For the purposes of determining
the Base Rate for a particular calendar month, LIBOR will be the 30-day
average of the one month (01M) LIBOR for the immediately preceding
calendar month as published in Bloomberg.
"Bloomberg": the on-line service provided by Bloomberg Financial Services.
"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.
"Clipper": Clipper Receivables Corporation.
"Clipper Outstandings": the total dollar amount Clipper has paid
to acquire a percentage interest in the IFC pool of receivables.
"Closing Date": the date on which the conditions precedent to
the effectiveness of this Agreement set forth in Section 4.1 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 the Pledge and Security Agreement.
"Collateral Agent": as defined in the Collateral, Agency and
Intercreditor Agreement.
"Collateral, Agency and Intercreditor Agreement": that certain
Collateral, Agency and Intercreditor Agreement dated June 28, 1995
between InaCom Corp, the Guarantors and IBM Credit as Collateral Agent.
"Collateral Management Report": a report to be delivered by Customer to
IBM Credit from time to time, as provided herein,
signed by an executive officer, as listed in Customer's most recent
Form 10-K, 10-Q or 8-K, whichever is latest, in form and substance
reasonably satisfactory to IBM Credit (it being understood that the
form and substance of and the detail contained in Attachment F is
satisfactory) detailing and certifying, among other items: a summary of
Customer's inventory on hand financed by IBM Credit and
Customer's Eligible Accounts, amounts and aging of such Customer's
Accounts, 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, Private Placement Debt subject to an intercreditor
agreement with IBM Credit, all of Customer's IBM Credit borrowing activity,
including accounts for inventory received for which payables are not yet
booked, 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, Clipper Outstandings, Available Credit and any Shortfall
Amount as of a specified date.
"Compliance Certificate": a certificate substantially in the form
of Attachment C.
"Credit Line": as defined in Section 2.1.
"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 Account": 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 8.1.
"Financial Statements": the consolidated and consolidating balance
sheets, statements of operations, statements of cash flows and
statements of changes in shareholder's equity of Customer and its
Subsidiaries for the period specified, prepared in accordance with
GAAP and consistent with prior practices.
"Floor Plan Lender": any Person who now or hereinafter provides
inventory financing to Customer and who either (i) provides such
lending on an unsecured basis, (ii) executes an Intercreditor
Agreement (as defined in Section 4.1 of this Agreement) or (iii)
executes a subordination agreement with IBM Credit in form and
substance reasonably satisfactory to IBM Credit.
"FRO Advance": an A/R Advance, with any one of three fixed rate
options ("FRO") and corresponding FRO Advance Terms, for which the
LIBOR portion of the rate of interest paid by Customer is fixed for
the duration of the FRO Advance Term.
"FRO Advance Term": for a certain FRO Advance, a sixty (60),
ninety (90), or one hundred eighty (180) day period, as the case
may be, depending on which LIBOR the Customer requested for that
certain FRO Advance. See Section 2.3 for further clarification.
"Free Financing Period": for each Product Advance, the period, if
any, in which IBM Credit does not charge Customer a financing
charge. IBM Credit shall calculate the Customer's Free Financing
Period utilizing a methodology that is consistent with the methodologies
used for similarly situated customers of IBM Credit.
The Customer understands that IBM Credit may not offer or may cease
to offer a Free Financing Period for the Customer's purchases of
Products if the financing program agreed upon between IBM Credit
and the Authorized Supplier does not enable IBM Credit to offer or
continue to offer a free financing period in connection with IBM
Credit providing Product Advances for Customer's purchase of Products from
the Authorized Supplier. The Free Financing Period includes any extension,
agreed to by IBM Credit or offered by the manufacturer and elected by
Customer, that extends beyond the normal Free Financing Period for a product.
"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.
"Guarantor": any Person who may, from time to time, guaranty Customer's
Obligations.
"Hazardous Substances": all substances, wastes or materials, to the
extent subject to regulation as "hazardous substances" or "hazardous waste"
under any Environmental Laws.
"IFC": InaCom Finance Corp.
"Indebtedness": with respect to any Person, (1) all obligations of
such Person for borrowed money or for the deferred purchase price
of property or services (other than trade liabilities incurred in
the ordinary course of business and payable in accordance with
customary practices) or which is evidenced by a note, bond, debenture or
similar instrument, (2) all obligations of such Person under capital
leases, (3) all obligations of such Person in respect of letters of credit,
banker's acceptances or similar obligations issued or created for the
account of such Person (other than letters of credit, banker's
acceptances or similar obligations issued in connection with
purchases of inventory or supplies), (4) liabilities arising under any
interest rate protection, future, option swap, cap or hedge
agreement or arrangement under which such Person is a party or
beneficiary, (5) all obligations under guaranties of such Person and
(6) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become
liable for the payment thereof.
"Investment": with respect to any Person (the "Investor"), (1) any
investment by the Investor in any other Person, whether by means of
share purchase, capital contribution, purchase or other acquisition
of a partnership or joint venture interest, loan, time deposit,
demand deposit or otherwise, and (2) any guaranty by the Investor
of any Indebtedness or other obligation of any other Person.
"Lenders": as defined in the Collateral, Agency and Intercreditor Agreement.
"Letter of Credit": a letter of credit issued by IBM Credit upon
the request of Customer to a beneficiary designated by Customer.
"Letter of Credit Fee": a fee that is charged to Customer for a
twelve month period and shall be incurred when the Letter of Credit
is issued. Such fee will be due and payable in the next billing
period or, for any renewal period, in the next billing period after
the renewal period begins. In the event such Letter of Credit is
terminated during the twelve month period or renewal period, the
fee will not be prorated or refunded.
"Letter of Credit Maximum": the maximum aggregate amount of the
face value of all Letters of Credit issued by IBM Credit on
behalf of Customer and as specified in Section I of Attachment A.
"Letter of Credit Fee Rate": as specified in Section I of Attachment A.
"LIBOR": (i) for FRO Advances, as of the date of determination,
the two-month (02M), three-month (03M) or six-month (06M), as the
case may be, London Interbank Offered Rate published by Bloomberg
as "Ticker LIBORXXM" (where XX with be 02, 03 or 06 depending on
the number of months for which LIBOR is being quoted) and (ii) for
Base Rate, for the calendar month during which the PAE Advance or
OVN Advance, whichever is applicable, is made or continues to be
outstanding, the thirty-day average of the one-month (01M) LIBOR as
published in Bloomberg for the previous calendar month. LIBOR is
based on a 360-day calendar year so that 01M, 02M, 03M and 06M
represent 30, 60, 90 and 180 days respectively.
"Lien(s)": any lien, claim, charge, pledge, security interest,
deed of trust, mortgage, other encumbrance or other arrangement
having the practical effect of the foregoing, including the interest of a
vendor or lessor under any conditional sale agreement, capital lease or
other title retention agreement.
"Material Adverse Effect": a material adverse effect on (1) 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, (2) the
ability of Customer to perform its obligations under this
Agreement, or (3) 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. See Exhibit
A to Attachment A for an example of how to calculate.
"Maximum Guaranty Amount": as defined in Seciont 7.4 and as specified in
Attachment A.
"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, whether primary or secondary, joint or several,
direct, contingent, fixed or otherwise, secured or unsecured arising under
this Agreement and the Other Documents.
"Other Documents": all security agreements, security pledge 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, and all
amendments, supplements and other modifications to the foregoing from time
to time.
"Other Charges": as set forth in Attachment A.
"Outstanding Advances": at any time of determination, the sum of
(1) the Outstanding Product Advances and (2) the Outstanding A/R Advances.
"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.
"OVN Advance": as defined in Section 2.3.
"OVN Advance Term": for each OVN Advance, a period of sixty (60)
days commencing on the A/R Advance Date for such OVN Advance.
"PAE Advance": an A/R Advance, which is a Product Advance extension,
automatically made by IBM Credit to itself on behalf of
Customer at the end of a Product Advance Term, to repay all or a
portion of a Product Advance that is due and payable unless Customer makes a
payment in full to IBM Credit for such Product
Advance on or before the last day of its Product Advance Period.
The Payment Date for such PAE Advance will be the last day of the
PAE Advance Term.
"PAE Advance Term": for each PAE Advance, a period of 90 days to
commence on the day immediately following the expiration of the
Free Financing Period.
"Payment Date": the date on which payment is due and is calculated. For
each FRO Advance, OVN Advance, PAE Advance and Product Advance, the Payment
Date is the last day of the FRO Advance Period, OVN Advance Period, PAE
Advance Period or Free Financing Period, whichever is applicable. For
each finance and other charge, the Payment Date is due as specified
in Section 2.4(C).
"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;
(6) Indebtedness to a Person who is not and will not have a security
interest on Customer's assets;
(7) Indebtedness of a Person who has a perfected security interest in
Customer's assets and has subordinated such security
interest to IBM Credit through a subordination document reasonably
satisfactory to IBM Credit;
(8) pre-existing Indebtedness of an entity acquired by Customer
after the Closing Date;
(9) Indebtedness to the third-party credit facility described in
Section 7.1;
(10) Guarantees as permitted in Section 7.4:
(11) Other Indebtedness consented to by IBM Credit in writing
prior to the incurrence thereof; and
(12) extensions, renewals and replacements of the foregoing (1)
through (10).
"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 $1,000,000 (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 or (C)
with respect to which execution has been stayed);
(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) 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;
(8) 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;
(9) Liens arising out of deposits in connection with workers'
compensation, unemployment insurance or other social security or
similar legislation;
(10) pre-existing Liens on entities acquired by Customer after the Closing
Date;
(11) Liens to any Person who have subordinated such Liens to IBM Credit; and
(12) other Liens consented to by IBM Credit in writing prior to
the incurrence thereof.
(13) extensions, renewals and replacements of the foregoing permitted Liens;
provided that (A) the aggregate amount of such
extended, renewed or replaced Liens do not exceed the original
principal amount of the Indebtedness for which it secures, (B)
such Liens do not extend to any property other than
property already previously subject to the Lien and (C) such extended,
renewed or replaced Liens are on terms and conditions no more
restrictive than the terms and conditions of the Liens
being extended, renewed or replaced;
"Person": any individual, association, firm, corporation, partnership,
trust, unincorporated organization or other entity whatsoever.
"Pledge and Security Agreement": that certain Pledge and Security
Agreement dated June 28, 1995 between InaCom Corp, the Guarantors
and IBM Credit as the Collateral Agent.
"Policies": all policies of insurance required to be maintained
by Customer under this Agreement or any of the Other Documents.
"Private Placement Debt": the aggregate amount, at any point in
time owed by Customer under the 10.31% Senior Note issued to Principal
Mutual Life Insurance Company (its successors and assigns) and the 6.83%
Senior Note issued to Principal Mutual Life Insurance Company and TMG life
Insurance Company and their respective successors and assigns.
"Product Advance": any advance of funds made or committed to be
made by IBM Credit for the account of Customer to an Authorized
Supplier in respect of an invoice delivered by such Authorized
Supplier to IBM Credit describing Products purchased by Customer,
including any such advance made or committed to be made as of the
date hereof pursuant to the Financing Agreement.
"Product Financing 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 and any allowable proceeds of such asset as
defined under the applicable Uniform Commercial Code.
"Receivables Purchase Agreement": the Receivables Purchase Agreement
dated June 28, 1995 among IFC, Customer, Clipper, State
Street Boston Capital Corporation and Norwest Bank Minnesota, N.A.
"Request for A/R Advance": as defined in Section 2.3.
"Requirement of Law": as to any Person, the articles or certificate 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.
"Retained Accounts": Accounts which are not sold to IFC. Retained
Accounts are Eligible Accounts and are included in the Borrowing
Base as are Federal government Accounts, which must not be sold to
IFC to the extent that they are to be used as part of the Borrowing Base.
"Seasonal Credit Line Uplift": unless an Event of Default has
occurred and is continuing, Customer's Credit Line will be increased by
(i) thirty percent (30%) for the months of September,
October, November, December and January of each year and (ii)
fifteen percent (15%) for the month of February of each year.
"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.
"Tier 1 Period": as defined in Section IV of Attachment A.
"Tier 2 Period": as defined in Section IV of Attachment A.
"Termination Date": shall mean (i) the third anniversary of the
date of this Agreement (such first three years being the "Original
Term") and the Termination Date shall automatically be extended
each year on the anniversary of this Agreement for an additional
year (each such new three year period being a "Renewal Term")
unless IBM Credit provides written notice at least sixty (60) days
prior to the end of the first year of the then current Original
Term or Renewal Term, whichever is applicable, such notice to be
delivered by registered or certified mail addressed to Customer at
its principal place of business as designated in this Agreement.
"Uniform Commercial Code": the Uniform Commercial Code as in
effect from time to time in the State of New York or any jurisdiction
where the Collateral is located.
"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).
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.
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Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES
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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
9.1 and (y) the date on which IBM Credit terminates the Credit Line
pursuant to Section 8.2, IBM Credit agrees to extend to the
Customer a credit line ("Credit Line") in the amount set forth in
Attachment A pursuant to which IBM Credit will make
to the Customer, from time to time, Advances in an aggregate amount at any
one time outstanding not to exceed the Maximum Advance
Amount.
2.2 Product Advances. (A) Subject to the terms and conditions of
this Agreement, IBM Credit shall, as requested by Customer, make
Product Advances in connection with Customer's purchase of Products from
Authorized Suppliers. Customer hereby authorizes and directs IBM Credit
to pay the proceeds of Product Advances directly to the applicable
Authorized Supplier in respect of invoices delivered to IBM Credit for
such Products by such Authorized Supplier and acknowledges that each such
Product Advance constitutes a loan by IBM Credit to Customer
pursuant to this Agreement as if the Customer received the
proceeds of the Product Advance directly from IBM Credit.
(B) No finance charge shall accrue on any Product Advance
during the Free Financing Period, if any, applicable to such Product Advance.
If Customer does not repay a Product Advance on
the applicable Payment Date for such Product Advance, a PAE Advance shall
automatically be extended to Customer in an amount
equal to such Product Advance. Customer shall repay
each PAE Advance no later than the applicable Payment Date for such PAE
Advance. Customer may, at its option, repay each PAE Advance by
requesting IBM Credit to apply all or any part of the principal
amount of an A/R Advance to the Outstanding PAE Advances. Customer's request
for such application shall be made in accordance with Section 2.3. 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 PAE Advances. Nothing contained herein shall relieve
Customer of its obligation to repay PAE Advances when due. Each PAE Advance
shall accrue a finance charge on the Average Daily Balance thereof from
the beginning of the PAE Advance Period until the end of the PAE Advance
Term, at a per annum rate equal to the lesser of (a) the finance
charge set forth in Attachment A to this Agreement as the "Base
Rate" and (b) the highest rate from time to time permitted by
applicable law. Customer may prepay a PAE Advance at any time
without incurring a prepayment fee.
(C) Customer acknowledges that IBM Credit does not warrant
the Collateral. Customer shall be obligated to pay IBM Credit in
full even if the Collateral is defective or fails to conform to
the warranties extended by the Authorized Supplier. The Obligations of
Customer shall not be affected by any dispute Customer may have with any
manufacturer, distributor or Authorized Supplier. Customer will not assert
any claim or defense which it may have against any manufacturer, distributor
or Authorized Supplier against IBM Credit. Customer does not waive any
product liability claims it may have against the manufacturer of such product.
(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"). IBM Credit will
contact Customer to determine how Customer wants such amounts to be applied.
If Customer does not advise IBM Credit how the amounts are to be
applied, IBM Credit may apply the amounts to the Outstanding Advances in
such order as IBM Credit, in its sole discretion, determines; provided,
however, that IBM Credit will inform Customer as to how such amounts have
been applied. 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.
Customer will receive the benefit of such Supplier Credits
effective on the day after IBM Credit receives such Supplier Credits.
(E) IBM Credit may apply any payments and Supplier Credits
received by IBM Credit to reduce finance charges first and then to
principal amounts of Advances owed by Customer. IBM Credit may
apply principal payments to the oldest (earliest) invoices (and
related Product Advances) first, but, in any case, all principal
payments will be applied in respect of the Outstanding Product
Advances made for Products which have been sold, lost, stolen,
destroyed, damaged or otherwise disposed of prior to any other
application thereof.
(F) Customer will indemnify and hold IBM Credit harmless
from and against any claims or demands asserted by any Person
relating to or arising from the Collateral for any reason whatsoever,
including, without limitation, the condition of the
Collateral, any misrepresentation made about the Collateral by any
authorized 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") in form and substance reasonably satisfactory to
IBM Credit (it being understood that the form and substance of and
the detail contained in Attachment D is satisfactory). For any requested
A/R Advance pursuant to which monies will be disbursed only to Customer or
IBM Credit, a Request for A/R Advance, other than a FRO Advance, shall
be delivered to IBM Credit on or prior to 1:00 p.m. (Stamford, CT
time) on the day such A/R Advance is required by Customer. For a
FRO Advance, a Request for A/R Advance shall be delivered to IBM
Credit on or prior to 1:00 p.m. (Stamford, CT time) two
Business Days 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 an FRO Advance or an OVN Advance; (iv) for each FRO
Advance, the FRO Advance Term for such FRO Advance; and (vi) if
applicable, the amount of the requested A/R Advance that should be
applied to the Outstanding PAE Advances. Customer may deliver a
Request for A/R Advance via facsimile or the internet. Any
Request for A/R Advance delivered to IBM Credit shall be irrevocable.
(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 and designated in writing by Customer. If IBM
Credit is making an A/R Advance hereunder on a day on which Customer is
to repay all or any part of an Outstanding Advance (or
any other amount owing hereunder), IBM Credit shall apply the
proceeds of the A/R Advance to such repayment and only an amount
equal to the difference, if any, between the amount of the A/R
Advance and the amount being repaid shall be made available to
Customer as provided in the immediately preceding sentence.
(C) Each A/R Advance shall accrue a finance charge on the unpaid principal
amount thereof, at a per annum rate equal to the lesser of (a) the finance
charge set forth in Attachment A to this Agreement under the caption
"A/R Finance Charge" for such type of A/R Advance, and (b) the highest rate
from time to time permitted by applicable law. If it is determined that
amounts received from the Customer were in excess of such highest rate,
then the amount representing such excess shall be considered
reductions to principal of Advances.
(D) Unless otherwise due and payable at an earlier date, the
unpaid principal amount of each A/R Advance shall be due and payable on the
applicable Payment Date.
(E) OVN Advances will be in increments of $100,000. The
maximum aggregate amount for all outstanding OVN Advances at any
point in time ("Maximum OVN Advances Total") will be as shown on
Attachment A. Customer may prepay OVN Advances without incurring
a prepayment fee.
(F) FRO Advances will be in increments of $5,000,000. A prepayment fee
equal to .05% per month, prorated if applicable, will be due for the period
that the payment precedes the due date. For purposes of such prepayment
fee, a month shall be defined as 30 days.
(G) Using the Available Credit calculated as of the last day
of the prior month and after taking into account all Advances and
payments that transpired during the current month, IBM Credit does
not require that each Request for Advance include a statement by
the President, Executive Vice President or Treasurer of Customer
that there is sufficient Collateral to support such Request for
Advance. Customer agrees, however, that under
the above calculation, if the Available Credit is determined to have been
reduced by fifty percent (50%) during the current month, Customer will make
such certification with each Request for Advance for the remainder of
such current month.
2.4 Finance and Other Charges. (A) Finance charges shall be
calculated by multiplying the applicable Delinquency Fee Rate,
Base Rate or A/R Finance Charge provided for in this Agreement by
Customer's applicable Average Daily Balance. The Delinquency Fee
Rate, the Base Rate and the various A/R Finance Charges provided
for in this Agreement are each computed on the basis of an actual
day, 360 day year.
(B) The Customer hereby agrees to pay to IBM Credit the
charges set forth as "Other Charges" in Attachment A. The Customer also
agrees to pay IBM Credit additional charges for any
returned items of payment received by Customer. The Customer
hereby acknowledges that any such charges are not interest but
that such charges, if unpaid, will constitute part of the Outstanding
Advances.
(C) The finance charges and Other Charges owed under this
Agreement, and any charges hereafter agreed to in writing by the
parties, are payable monthly on the later of (i) the fifteenth
calendar day of the month in which IBM Credit's bill or statement
is received and (ii) seven days after receipt of such bill or
statement by Customer. IBM Credit may, in its sole discretion, add
unpaid finance charges and Other Charges to the Customer's outstanding
Advances. Customer shall be deemed to have received
such bill or statement three (3) business days from the date IBM
credit mails such bill or statement by United States first class
mail, postage prepaid, and properly addressed to Customer.
(D) If any amount owed under this Agreement, including, without limitation,
any Advance, is not paid when due (whether at
maturity, by acceleration or otherwise), the unpaid amount thereof
will bear a late charge from and including its due date to but not
including the date IBM Credit receives payment thereof, at a per
annum rate equal to the lesser of (a) the amount set forth in
Attachment A to this Agreement as the "Delinquency Fee Rate" and
(b) the highest rate from time to time permitted by applicable
law. In addition, if any Shortfall Amount shall not be paid when
due pursuant to Section 2.6 hereof, Customer shall pay IBM Credit
an additional late charge equal to the product of the Shortfall
Amount multiplied by thirty (30) basis points. 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.
(E) The Customer hereby agrees to pay a monthly fee ("Unused
Line Fee") whenever the average aggregate sum of all outstanding
OVN Advances and FRO Advances for a calendar month is below $45,000,000.
The fee will be calculated by multiplying the Unused
Line Fee Rate, specified in Attachment A, times the difference
between the average aggregate amount for such month and $45,000,000.
(F) The Customer hereby agrees that if IBM Credit assumes
Clipper's obligation to purchase an undivided percentage interest
in IFC's pool of accounts receivable under the Receivables Purchase
Agreement Customer will (i) pay to IBM Credit rates which
will equal the rates that Customer is paying to IBM Credit for A/R
Advances under this Agreement and (2) execute and deliver instruments and
documents and take such further action as IBM
Credit may reasonably request for the purpose of obtaining a fully
perfected first priority security interest in IFC. Any Indebtedness owed
to IBM Credit under this Section 2.4(F) shall be secured solely by the
assets owned by IFC.
2.5 Statements Regarding Customer's Account. IBM Credit will
send statements of each transaction hereunder as well as monthly
billing statements to Customer with respect to Advances and other
charges due on Customer's account with IBM Credit. Each statement
of transaction and monthly billing statement shall be deemed,
absent manifest error, to be correct and shall constitute an account stated
with respect to each transaction or amount described therein unless
within seven (7) calendar days after such statement of transaction or
billing statement is received by Customer, Customer provides IBM Credit
written notice objecting that such amount or transaction is incorrectly
described therein and specifying the error(s), if any, contained
therein. IBM Credit may at any time adjust such statements of transaction or
billing statements to comply with applicable law and this Agreement.
2.6 Shortfall. If, on any date, the Outstanding Advances shall
exceed the Maximum Advance Amount (such excess, the "Shortfall
Amount"), then the Customer shall repay, within five (5) business
days of the date of the Shortfall (which date shall be considered
the Payment Date for the Shortfall Amount), the Outstanding Advances in an
amount equal to such Shortfall Amount.
2.7 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. IBM Credit will
contact Customer to determine how Customer wants such payments to
be applied. If Customer does not advise IBM Credit how a payment
is to be applied, the Customer waives the right to direct the
application of such payment and agrees that IBM Credit shall
have the right to apply and reapply 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. Customer agrees to make all payments to IBM Credit via
ACH or as otherwise agreed to by Customer and IBM Credit.
2.8 Prepayment and Reborrowing By Customer. (A) Customer may at
any time prepay, without notice or penalty, in whole or in part
amounts owed, other than amounts owed as FRO Advances, under this
Agreement. IBM Credit may apply payments made to it (whether by
the Customer or otherwise) to pay finance charges
and other amounts owing under this Agreement first and then to the principal
amount owed by the Customer. (B) Subject to the terms and conditions of
this Agreement, any amount prepaid or repaid to IBM Credit in
respect to the Outstanding Advances may be reborrowed by Customer in
accordance with the provisions of this Agreement.
2.9 Letters of Credit. Customer may request that IBM Credit
provide one or more Letters of Credit. If so requested the Customer hereby
agrees to pay the Letter of Credit Fee for each
Letter of Credit which is computed by multiplying the Letter of
Credit Fee Rate by the dollar amount of the Letter of Credit. The
dollar amount of the Letter of Credit shall be subtracted from the
Borrowing Base. Any amount that IBM Credit has to pay the other
creditor for a loss incurred by such other creditor shall be considered an
OVN Advance in the amount of the payment and shall
be added to the Customer's Outstandings. The Letter of Credit
Maximum is as specified in Section I of Attachment A.
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Section 3. CREDIT LINE ADDITIONAL PROVISIONS
- ---------------------------------------------
3.1 Ineligible Accounts. IBM Credit and Customer agree that IBM
Credit shall have the right to reasonably determine eligibility of
Accounts from an Account obligor 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 terms not standard in the industry or
that allow for payment to be made more than forty five (45) days
from the invoice date of such sale or performance of services;
(B) Accounts unpaid more than one hundred twenty (120) days
from date of invoice except that if a violation of any covenant,
as defined in Section III of Attachment A, or any other Event of
Default has occurred and is continuing, accounts unpaid more than
ninety (90) days from the 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 one hundred twenty (120) days
from the date of invoice except that if a violation of any covenant, as
defined in Section III of Attachment A, or any other
Event of Default has occurred and is continuing, the balance of
all such Accounts remain unpaid more than ninety (90) days from
the date of invoice;
(D) Accounts payable by an account debtor that is
an Affiliate of Customer or an officer, employee, guarantor, or is
related to or has common officers or directors (except for directors of
publically-traded companies) 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) accounts with respect to which the account debtor is not a resident of
the United States;
(H) Other than the exclusions allowed for in subsection 3.1(W) below,
Accounts payable by any account debtor to which
Customer is or may become liable for goods sold or
services rendered by such account debtor to Customer;
(I) Accounts arising from the sale or lease of goods purchased for a
personal, family or household purpose;
(J) Accounts arising from the sale or other disposition of
goods that has been used for demonstration purposes or loaned or
leased by the Customer to another party;
(K) Accounts which are progress payment accounts;
(L) Accounts upon which IBM Credit does not have a valid,
perfected, first priority security interest (this does not apply
to accounts held by IFC or accounts in which IBM Credit shares a
pari passu interest as a result of an intercreditor with another
creditor);
(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 who pays the proceeds of such financing directly to
Customer on behalf of such obligor where such financing person has
not waived its right of off set with 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, where such extension is greater than
sixty (60) days, or agreed to any compromise or settlement, or
made any other change or modification of any kind
or nature, including, but not limited to, any change or modification to the
terms relating thereto. To the extent that the the
aggregate effect of such compromises, settlements, changes or modifications
exceeds one percent (1%) of the eligible trade accounts receivable
of Customer, such excess shall be ineligible;
(R) Accounts that do not arise from undisputed bona
fide transactions;
(S) Accounts that are discounted for payment in less time
than the full payment term specified in Customer's terms and conditions
with its account debtors;
(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) if a violation of any covenant, as defined in Section
III of Attachment A, occurs and is continuing or any other Event
or Default has occurred and is continuing, 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 reasonable
discretion, to be ineligible.
The aggregate of all Accounts that are not
ineligible Accounts together with the aggregate of all receivables
arising from incentive payments, rebates, discounts and refunds from
suppliers shall hereinafter be referred to as "Eligible
Accounts".
3.2 Reimbursement for Charges.
Provided that there shall be Retained Accounts, Customer agrees to pay for
all costs and expenses of Customer's bank in respect
to collection of checks and other items of payment, all fees relating to the
use and maintenance of the Lockbox and the Special
Account (each as defined in the Collateral Agent and Intercreditor
Agreement) and with respect to remittances of proceeds of the
Advances hereunder.
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Section 4. CONDITIONS PRECEDENT
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4.1 Conditions Precedent to the Effectiveness of This Agreement.
The effectiveness of this Agreement is subject to the receipt by
IBM Credit of, or waiver in writing by IBM Credit of compliance
with, the following conditions precedent:
(A) this Agreement executed and delivered by Customer and
IBM Credit;
(B) (i) copies of the resolutions of the Board of Directors
of Customer certified by the secretary or assistant secretary of
Customer authorizing the execution, delivery and performance of
this Agreement and each Other Agreement executed and delivered in
connection herewith, (ii) a certificate of the secretary or an
assistant secretary of Customer, in form and substance reasonably
satisfactory to IBM Credit, certifying the names and
true signatures of the officers of Customer authorized to sign this
Agreement and the Other Documents and (iii) copies
of the certificate of incorporation and by-laws of Customer certified by
the secretary or assistant secretary of Customer;
(C) certificates dated as of a recent date from the Secretary
of State or other appropriate authority evidencing the good standing of
Customer and IFC in the jurisdictions of (i) the state
in which each of Customer and its Subsidiaries are incorporated,
(ii) the state in which each of Customer and its Subsidiaries has
its principal place of business and chief executive office, and
(iii) in the states, as agreed to by IBM Credit, in which Customer's and
its Subsidiaries maintain significant portions of their assets;
(D) copies of all approvals and consents from any Person, in
each case in form and substance reasonably satisfactory to IBM
Credit, which are required to enable Customer to authorize, or
required in connection with, (a) the execution, delivery or performance of
this Agreement and each of the Other Documents, and
(b) the legality, validity, binding effect or enforceability of
this Agreement and each of the Other Documents;
(E) the Collateral, Agency and Intercreditor Agreement in form and substance
satisfactory to IBM Credit as Collateral Agent,
executed by Customer, Lenders, Guarantors and IBM Credit in favor
of Collateral Agent;
(F) the Pledge and Security Agreement in form and substance
satisfactory to IBM Credit as Collateral Agent, executed by Customer and
the Guarantors;
(G) provided that there shall be Retained Accounts, a lockbox
agreement executed by Customer and each Bank in favor of Collateral
Agent, in form and substance reasonably satisfactory to IBM Credit
as Collateral Agent;
(H) provided that there shall be Retained Accounts, a
contingent blocked account agreement executed by Customer and each
Bank in favor of Collateral Agent in form and substance reasonably
satisfactory to IBM Credit as Collateral Agent;
(I) a favorable opinion of counsel for Customer in substantially the form
of Attachment I;
(J) a copy of each and every item in the form and substance
reasonably satisfactory to IBM Credit required by the Administrator
as conditions precedent under Section 4.1 (a) through and including
(p) of the Receivables Purchase Agreement. Such items shall include
but will not be limited to, all agreements, Transaction Documents,
closing documents, resolutions, certificates, organization
documents, financing statements, reports, audits, opinions of
counsel, information packages, approvals, letters, and all other
instruments and documents specified in said Section 4.1 (a) through and
including (p) except that this Condition Precedent (J)
must be satisfied prior to the sale of trade receivables to IFC;
(K) acknowledgement copies of UCC-1 financing statements
(or other evidence of presentation for filing reasonably acceptable to IBM
Credit) filed against Customer and the Collateral specified herein naming
IBM Credit, as Collateral Agent, as secured party and signed
by Customer and Guarantor, as applicable, as debtor. Said filings shall be
made in the jurisdictions set forth on Attachment I;
(L) copies of Requests for information or copies (Form UCC11)
(or a similar search report by a party reasonably acceptable to
IBM Credit as Collateral Agent, dated prior to and reasonably near
the Closing Date) listing all effective financing statements which
name the Customer and Guarantor, as applicable, as debtor and IBM
Credit, as Collateral Agent, as secured party and which are filed
in the jurisdictions in which filings were made pursuant to subsection
4.1(K) above, together with copies of such financing
statements.
(N) the statements, certificates, documents, instruments, financing
statements, agreements and information set forth in
Attachment A and Attachment B;
(O) all mortgage recording taxes, recording fees and other
charges payable in connection with the filing and recording of any
documents or instruments under this Agreement have either been
paid in full by Customer or arrangements for the payment of such
amounts reasonably satisfactory to IBM Credit shall have been made
(Customer agrees that, if IBM Credit pays such taxes, fees and
changes on behalf of Customer, such payments will be considered an
OVN Advance and will become part of Customer's Outstandings; and
(P) all such other statements, certificates, documents, instruments,
financing statements, agreements and other information with respect to
the matters contemplated by this Agreement which IBM Credit has reasonably
requested shall have been satisfied.
4.2 Conditions 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 (i) this
Agreement or in any document, instrument or agreement executed in
connection herewith and (ii) the Receivables Purchase Agreement,
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 under this Agreement
or a Event of Bankruptcy under the Receivables Purchase Agreement;
(C) No event has occurred and is continuing which could reasonably be
expected to have a Material Adverse Effect under
this Agreement or an Event of Bankruptcy under the Receivables
Purchase Agreement;
(D) Both before and after giving effect to the making of
such Advance, no Shortfall Amount exists.
Except as Customer has otherwise disclosed to IBM Credit in writing prior
to each request, each request (or deemed request pursuant to
Section 2.3 (D)) for an Advance hereunder and the receipt (or deemed
receipt) by the Customer of the proceeds of any Advance hereunder shall be
deemed to be a representation and warranty by Customer that, as
of and on the date of such Advance, the statements set forth in (A)
through (D) above are true and correct. 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 4.2.
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Section 5. REPRESENTATIONS AND WARRANTIES
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To induce IBM Credit to enter into this Agreement, Customer represents and
warrants to IBM Credit as follows:
5.1 Organization and Qualifications. Customer and each of its
Subsidiaries (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the power and authority to own its properties and
assets and to transact the businesses in which it
presently is engaged and (iii) is duly qualified and is authorized
to do business and is in good standing in each jurisdiction where
it presently is engaged in business and is required to be so qualified.
5.2 Rights in Collateral; Priority of Liens. Customer and each
of its Subsidiaries owns the property granted by it respectively
as Collateral to IBM Credit as Collateral Agent, free and clear of
any and all Liens in favor of third parties except for the Liens
otherwise permitted pursuant to Section 7.1. 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, (ii) Purchase Money Security Interests in
product of a brand that is not financed by IBM Credit or (iii)
Permitted Liens.
5.3 No Conflicts. The execution, delivery and performance by
Customer of this Agreement and each of the Other Documents (i) are
within its corporate power; (ii) are duly authorized by all necessary
corporate action; (iii) are not in contravention in any
material 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.
5.4 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.
5.5 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 6.7(C) of this Agreement.
The books and records of Customer, and all of its
chattel paper (other than the chattel paper delivered to the Collateral
Agent pursuant to the Collateral, Agency and Intercreditor Agreement)
and records of Accounts, are maintained exclusively at such location.
Except as set forth below, there is
no jurisdiction in which Customer has any assets, equipment or
inventory which is included in the calculation or the Borrowing
Base (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
6.7(C) of this Agreement. Customer and IBM agree that, with respect to the
immediately preceeding sentence, (i) when Customer
is in a Tier 1 Period, the Customer may omit locations from the
list on Attachment B so long as the aggregate value of the Collateral in
locations which are not listed in Attachment B is
less than $10,000,000, and the value of the Collateral in any
single location not listed is less than $5,000,000 and (ii) when
Customer is in a Tier 2 Period, the Customer may omit locations
from the list on Attachment B so long as the list of locations
includes all locations in which the value of the Collateral is
greater than $5,000,000 and that IBM Credit has Customer's permission to
file applicable UCC financing statements for such
locations included in this subsection 5.5(ii).
Attachment B, as amended from time to time by any notice provided
by Customer to IBM Credit in accordance with Section 6.7(C) of
this Agreement, also contains a complete list of the legal names
and addresses of each warehouse at which the Customer's inventory
is stored. None of the receipts received by Customer from any
warehouseman states that the goods covered thereby are to be delivered
to bearer or to the order of a named person or to a named person
and such named person's assigns.
5.6 Fictitious Business Names. Customer has not
used any corporate or fictitious name during the five (5) years preceding
the date of this Agreement, other than those listed on Attachment B.
5.7 Organization. To the best of Customer's knowledge and after
due diligence, all of the outstanding capital stock of Customer
has been validly issued, is fully paid and nonassessable.
5.8 No Judgments or Litigation. Except as set forth on Attachment B,
no judgments, orders, writs or decrees are outstanding against
Customer which could reasonably be expected to have a Material Adverse
Effect 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 which could reasonably be
expected to have a Material Adverse Effect.
5.9 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 that could reasonably be likely to have a
Material Adverse Effect. Customer has no knowledge of any
dispute regarding any such indenture, contract, lease,
agreement, instrument or other commitment where such default could reasonably
be expected to have a Material Adverse Effect. No Default or
Event of Default has occurred and is continuing.
5.10 Labor Matters. Except as set forth on any notice provided by
Customer to IBM Credit pursuant to Section 6.1(G)
of this Agreement, the Customer is not a party to any labor dispute where
such dispute could reasonably be expected to have a Material Adverse Effect.
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.
5.11 Compliance with Law. Customer has not violated or failed to
comply with any Requirement of Law or any requirement of any self
regulatory organization where such violation or failure to comply
could reasonably be expected to have a Material Adverse Effect.
5.12 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 material 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" within the last 60 months
with respect to any Plan where such event could reasonably be
likely to have a Material Adverse Effect. 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) where such deficiency or
liability could reasonably be likely to have a Material Adverse Effect.
5.13 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) any of the following for which such condition could
reasonably be expected to have a Material Adverse Effect, (i) the
Customer has not generated, transported or disposed of any Hazardous
Substance; (ii) the Customer is not currently generating, transporting
or disposing of any Hazardous Substance; (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
Substance, or (b) any of its business operations have contaminated lands or
waters of others with any Hazardous Substance; (iv) the Customer
and its respective assets are not subject to any Environmental
Liability and, to the best of the Customer's knowledge, any threatened
Environmental Liability; (v) the Customer has not received any
notice of or otherwise learned of any governmental
investigation evaluating whether any remedial action is necessary to
respond to a release or threatened release of any Hazardous Substance
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.
5.14 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 to continue to conduct its present and
proposed business activities.
5.15 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 any material terms of any such franchise,
license, lease, permit, certificate, authorization, qualification,
easement, right of way, right or approval where such violation
could be reasonably likely to have a Material Adverse Effect.
5.16 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.
5.17 Taxes and Tax Returns. Customer has timely filed all federal, state,
and local tax returns, or extensions thereto, 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 which have
not been stayed or which have not been satisfied with seven (7)
days of such filing.
5.18 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 (except for those Liens and interests contemplated under
the Receivables Purchase Agreement), 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 subject to Customer's customer disputes
as in the normal course of business. Except as previously disclosed to
IBM Credit, there are no proceedings or actions known to Customer which are
pending or threatened against any Material Account Obligor (as defined in
Section 6.14(B) of this Agreement) of any of the Accounts included in the
calculation of the Borrowing Base which could reasonably be
expected to result in a Material Adverse Effect on the obligor's ability
to pay the full amounts due to Customer.
5.19 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.
5.20 Accuracy and Completeness of Information. All factual information
furnished by or on behalf of the Customer to IBM Credit or the Auditors
pursuant to this Agreement or any Other Agreement, 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 in light of the circumstances under
which such information was provided.
5.21 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.
5.22 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 7.4).
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Section 6. AFFIRMATIVE COVENANTS
- ---------------------------------
Until termination of this Agreement and the indefeasible payment
and satisfaction of all Obligations:
6.1 Financial and Other Information. Customer shall cause to be
furnished to IBM Credit the following information within the following time
periods:
(A) as soon as available and in any event within
ninety (90) days after the end of each fiscal year of
Customer (i) a copy of Customer's Form 10-K for that fiscal year; (ii)
a statement reasonably acceptable to IBM Credit which provides
expense, asset, liability and equity information concerning IFC,
as of yearend of such fiscal year; and (iii) a Compliance
Certificate signed by the President, Executive Vice President or Treasurer
of Customer, along with a schedule in form and substance
reasonably satisfactory to IBM Credit (it being understood that the form and
substance provided in Attachment C is satisfactory) of the calculations,
which includes the performance of IFC for such fiscal year, 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 fortyfive (45) days after
the end of each fiscal quarter of Customer (i) a copy of Customer's
Form 10-Q for such fiscal quarter; (ii) a statement reasonably acceptable to
IBM Credit which provides expense, asset, liability
and equity information concerning IFC, as of quarter-end of such fiscal
quarter; (iii) a Compliance Certificate signed by the
President, Executivew Vice President or Treasurer of Customer, along with a
schedule, in form and substance reasonably satisfactory to
IBM Credit (it being understood that the form and substance provided in
Attachment C is satisfactory), of the calculations, which
includes the performance of IFC for such fiscal quarter, 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;
and (iv) a statement signed by such executive officer stating
the dollar value of the following intangibles: organizational
expenses, pre- paid expenses, deferred taxes, leasehold expenses,
franchise investments, licenses and rights in any
thereof, and other similar intangibles (collectively the "Additional
Intangibles");
(D) 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 4, a certificate of the President,
Executive Vice President or Treasurer of Customer specifying the nature
thereof and the Customer's proposed response thereto, each in reasonable
detail;
(E) 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)which, in any such case, could reasonably be
expected to have a Material Adverse Effect, 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 President, Executive Vice President
or Treasurer of Customer specifying the nature thereof and the
Customer's proposed response thereto, each in reasonable detail;
(F) promptly after Customer obtains knowledge that (i) any
order, judgment or decree in excess of $1,000,000 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
President, Executive Vice President or Treasurer of Customer
specifying the nature thereof and the Customer's proposed response thereto,
each in reasonable detail;
(G) 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
President, Executive Vice President or Treasurer of Customer specifying
the nature thereof and the Customer's proposed response thereto, each in
reasonable detail;
(H) 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;
(I) 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;
(J) if an Event of Default has occurred and is continuing,
along with the Form 10-K and Form 10-Q set forth in Section 6.1(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
(K) within fifteen (15) days after Customer becomes aware
that the Additional Intangibles has increased more than thirty
(30) percent (the "Maximum Increase Level") in any one fiscal year
of Customer. When such event occurs, Tangible Net Worth will be
reduced for purposes of determining compliance with the financial
ratios for that fiscal year or fiscal quarter, depending on when
the Maximum Increase Level is exceeded, by the amount which the
Additional Intangibles for that fiscal year or fiscal quarter, as
applicable, exceeds the Maximum Increase Level. For purposes of
determining compliance with the financial ratio of Tangible New
Worth for any fiscal period, the Maximum Increase Level for a
fiscal year will be calculated using the lesser of the Maximum
Increase Level and the actual Additional Intangibles for the prior
fiscal year.
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 by
the Customer 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 Form 10-K and Form 10-Q delivered pursuant to this
Section 6.1 shall be prepared in accordance with GAAP applied
consistently throughout the periods reflected therein and with
prior periods except for such inconsistencies as noted therein.
6.2 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 6.7(C). Such locations shall be
certified quarterly to IBM Credit substantially in the form of
Attachment G.
6.3 Changes in Customer. Customer shall provide 30 days prior
written notice to IBM Credit of any change in Customer's name,
chief executive office and principal place of business, organization, form
of ownership or corporate structure; provided,
however, that Customer's compliance with this covenant shall not
relieve it of any of its other obligations or any other provisions
under this Agreement or any Other Agreement limiting actions of
the type described in this Section.
6.4 Corporate Existence. Customer shall (A) maintain its corporate
existence, maintain in full force and effect all material 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 material Requirements of Law.
6.5 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 President,
Executive Vice President or Treasurer 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.
6.6 Environmental Matters. (A) Customer and any other Person
under Customer's control (including, without limitation, agents
and Affiliates under such control) shall (i) comply with all Environmental
Laws in all material respects, and (ii) undertake to
use commercially reasonable efforts to prevent any
unlawful release of any Hazardous Substance by Customer or such Person
into, upon, over or under any property now or hereinafter owned,
leased or otherwise controlled (directly or indirectly) by Customer.
(B) Customer shall notify IBM Credit, promptly upon its
obtaining knowledge of (i) any non-routine
proceeding or investigation by any Governmental Authority with respect to the
presence of any Hazardous Substances on or in any property now or
hereinafter owned, leased or otherwise controlled (directly or
indirectly) by Customer, (ii) all claims made or threatened by any
Person or Governmental Authority against Customer
or any of Customer's assets relating to any loss or injury resulting from
any Hazardous Substance, (iii) Customer's discovery of evidence of
unlawful disposal of or environmental contamination by any Hazardous
Substance on any property now or hereinafter owned,
leased or otherwise controlled (directly or indirectly) by Customer, and
(iv) any occurrence or condition which could constitute a violation of
any Environmental Law.
6.7 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 the
Collateral Agent'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 five (5) days notice under
the circumstances, 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 and
employees of Customer or with the Auditors and (iv) verifying
Eligible Accounts and other Collateral. Except for after the
occurrence and during an Event of Default, such activities specified in
(i), (ii), (iii) and (iv) in the immediately preceding sentence will be at
no additional charge by IBM Credit to the Customer. 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 as Collateral Agent
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 as Collateral Agent 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 as Collateral Agent.
(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.
6.8 Insurance; Casualty Loss. Customer will 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.
6.9 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.
6.10 Compliance With Laws. Customer agrees to comply in all material
respects with all Requirements of Law applicable to the
Collateral or any part thereof, or to the operation of its business.
6.11 Fiscal Year/Fiscal Quarter. Customer agrees to maintain its
fiscal year as a year ending on the last Saturday of
December of each calendar year and each fiscal quarter for the
following fiscal year to be thirteen calendar
weeks, each first fiscal quarter of a fiscal year
starting with the Sunday immediately
following last day of the just ended fiscal year, unless Customer
provides IBM Credit at least thirty (30) days prior written notice
of any change thereof.
6.12 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.
6.13 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.
6.14 Collateral. Customer shall:
(A) if from time to time reasonably required by 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
obligor whose outstanding obligations to Customer constitute two
percent (2%) or more of the Accounts at such time (a "Material
Account Obligor");
(C) promptly upon Customer's learning thereof, notify IBM
Credit in writing of any event which would cause any obligation of
a Material Account Obligor 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 the Collateral Agent 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) use commercially reasonable efforts to collect all
Retained Accounts owed;
(F) promptly notify IBM Credit of any loss, theft or
destruction of or damage to any of the Collateral where such loss,
theft, destruction or damage could reasonably be expected to have
a Material Adverse Effect. 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 the Collateral
Agent, free of any encumbrances of any kind whatsoever;
(G) 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 material rights of the
Collateral Agent thereunder;
(H) 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
(I) at any time and from time to time, upon the reasonable
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 to the Collateral Agent and the
payment of any and all recording taxes and filing fees in connection therewith.
6.15 Subsidiaries. IBM Credit may require that any Subsidiaries,
other than IFC and Boston Computer Exchange
Corporation, of Customer become parties to this Agreement or any other
agreement executed in connection with this Agreement as
guarantors or sureties. Customer will comply, and cause all Subsidiaries of
Customer to comply with Sections 6 and 7 of this Agreement, as if
such sections applied directly to such Subsidiaries.
6.16 Report of Material Event. Within five (5) days of Customer
obtaining knowledge thereof, Customer agrees to disclose any event
which could reasonably be likely to have a material effect on the
financial condition or the results of operations of Customer.
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Section 7. NEGATIVE COVENANTS
- ------------------------------
Until termination of this Agreement and the indefeasible payment
and satisfaction of all Obligations due hereunder:
7.1 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. It is understood that a Person who has a Permitted Lien on
Customer's assets may enter into a participation
agreement, relating to such Permitted Lien, with another Person.
As part of Permitted Liens, Customer may, subsequent to the effective date
of this Agreement, allow a thirdparty credit facility, which will be
represented by one entity in all negotiations and documentation with IBM
Credit, to extend secured financing to Customer, provided that, for the
period that this Agreement is in effect, such secured financing is
no greater than the lessor of (1) $40,000,000 and (2) an amount
equal to the then agregate sum of the PAE Advances, OVN Advances and
FRO Advances. IBM Credit agrees to negotiate an intercreditor
agreement, reasonably acceptable to IBM Credit, which will provide for
pari passu distribution of proceeds from Customer assets in which IBM
Credit has a security interest provided that each
party has perfected its security interest in such
assets. Such intercreditor will not include any assets or interest acquired
by IBM Credit under the Receivables Purchase Agreement.
7.2 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 receivables and related assets
only to IFC, pursuant to the Receivables Purchase Agreement, (ii)
sales of inventory in the ordinary course of business and short
term rental of inventory as demonstrations in amounts not material
to Customer, and (iii) voluntary dispositions of individual assets
or business units, 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 (iii) in any fiscal year shall not exceed 5% of
the consolidated assets of the Customer as of the beginning of such fiscal
year. Off balance sheet financing through sales of any assets, other than
those permitted in this section 8.2(i) is not permitted without the written
consent of IBM Credit.
7.3 Corporate Changes. Provided Customer is in a Tier 2 Period
or if any of the following activities would reasonably be likely
to cause Customer to move from a Tier 1 Period to a Tier 2 Period,
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.
IBM Credit's consent will not be unreasonably withheld
and IBM Credit's decision will be based solely on IBM Credit's
evaluation as to (1) how such merger, consolidation, liquidation
or dissolution will affect the financial condition of the Customer
as it relates to this Agreement or (2) how such change in operation or
activity affects the financing contemplated by this
agreement. If Customer is in a Tier 1 Period and the above name
activities in this Section 7.3 would not reasonably be likely to
move the Customer into a Tier 2 Period, Customer will notify IBM
Credit at least five (5) days in advance of any such activities.
7.4 Guaranties. The Customer will not exceed, in the aggregate,
the maximum guaranty amount as specified in Attachment A ("Maximum
Guaranty Amount") by, directly or indirectly,
assuming, guarantying, endorsing, or otherwise becoming 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.
7.5 Restricted Payments. If in a Tier 2 Period or if the event
that any of the following actions could reasonably be expected to
cause Customer to move from a Tier 1 Period to a Tier 2 period,
the Customer will not, directly or indirectly, without IBM Credit's prior
written consent: (i) declare or pay any dividend
(other than dividends payable solely in common stock of Customer)
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).
7.6 Investments. If the Customer is in a Tier 2 Period, or if
such action would cause Customer to enter a Tier 2
Period, Customer will not, directly or indirectly, without IBM Credit's
prior written consent, make, maintain or acquire any Investment in
any Person other than:
(A) interest bearing deposit accounts (including
certificates of deposit) which are insured by the Federal Deposit
Insurance Corporation ("FDIC") or a similar federal insurance program;
(B) direct obligations of the government of the United
States of America or any agency or instrumentality thereof or
obligations guaranteed as to principal and interest by the United
States of America or any agency thereof;
(C) stock or obligations issued to Customer in settlement of
claims against others by reason of an event of bankruptcy or a
composition or the readjustment of debt or a reorganization of any
debtor of Customer; and
(D) commercial paper of any corporation organized under the
laws of any State of the United States or any bank organized or
licensed to conduct a banking business under the
laws of the United States or any State thereof having the short term highest
rating then given by Moody's Investor's Services, Inc. or Standard
& Poor's Corporation.
7.7 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.
7.8. ERISA. The Customer will not (A) terminate any Plan so as
to incur a material liability to the PBGC, (B)
permit any "prohibited transaction" involving any Plan (other than a "multi-
employer benefit plan") which would subject the Customer to a
material tax or penalty on "prohibited transactions" under the
Code or ERISA, (C) fail to pay to any Plan any contribution which
they are obligated to pay under the terms of such Plan, if such
failure would result in a material "accumulated funding deficiency",
whether or not waived, (D) allow or suffer to exist
any occurrence and during the continuance of a "reportable event"
or any other event or condition, which presents a material risk of
termination by the PBGC of any Plan (other than a "multi employer
benefit plan"), or (E) fail to notify IBM Credit as required in
Section 6.5. 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
7.8, 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.
7.9 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
the Collateral Agent'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.
7.10 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 the Collateral Agent, warehouse receipts in the name of IBM Credit
evidencing the storage of such Collateral.
7.11 Use of Proceeds. The Customer shall not use any portion of
the proceeds of any Advances other than to acquire Products from
Authorized Suppliers, for its accounts receivable
financing requirements and for its general corporate purposes.
7.12 Retained Accounts. Provided that there shall be Retained
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 Retained Account, including any
of the terms relating thereto, which would affect the Collateral
Agent's ability to collect payment on any Retained Account in
whole or in part, except for such extensions,
compromises or settlements expressly allowed to be made by Customer herewith,
provided, however, that the aggregate amount of such extensions,
compromises or settlements does not exceed five percent (5%) of
the Customer's Retained Accounts at any time.
7.13 Indebtedness. The Customer will not create, incur, assume or
permit to exist any Indebtedness, except for Permitted Indebtedness.
7.14 Loans. The Customer will not make any loans,
advances, contributions or payments of money or goods to any Subsidiary,
Affiliate or parent corporation or to any officer, director or
stockholder of Customer or of any such corporation (except for
compensation for personal services actually rendered), other than
in the normal course of business, except for transactions expressly
authorized in this Agreement. The restriction in this Section 7.14 on loans
to officers and employees of Customer will
not apply if the aggregate amount of such loans does not exceed $1,000,000.
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Section 8. DEFAULT
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8.1 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 provided that there will be
a cure period of five (5) days for failure by Customer to pay on
such due date;
(B) Customer fails to comply with or observe any term,
covenant or agreement contained in this Agreement
when such failure could reasonably be expected to cause a Material Adverse
Effect, provided that there will be a cure period of forty five
(45) days for failure by Customer to meet the financial covenants
specified in Section III of Attachment A;
(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) Customer, IFC or any other 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 where the sum total
of such assets represent at least five percent (5%) of the total
assets of Customer, any Subsidiary or any Guarantor or any of its
respective properties or have any of its respective properties seized or
attached where the sum total of such properties represent al least
five percent (5%) of the total assets of Customer, or take any action to
authorize, or for the purpose of effectuating, the foregoing, provided,
however, that Customer, any Subsidiary except IFC or any
Guarantor shall have a period of forty-five (45) days within which to
discharge any involuntary petition for bankruptcy or similar proceeding;
(E) The use of any funds borrowed from IBM Credit under this
Agreement for any purpose other than as provided in this Agreement;
(F) The entry of any judgment against Customer or
any Guarantor in an amount in excess of $1,000,000 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;
(G) The dissolution or liquidation of Customer,
IFC or any Guarantor, or if the directors or stockholders of the Customer,
IFC or any Guarantor shall take any action to
dissolve or liquidate said Customer, IFC or any Guarantor except that a
dissolution into Customer or any Guarantor is permitted;
(H) Any "going concern" or like qualification or exception,
or qualification arising out of the scope of an
audit by an Auditor of his opinion relative to any
Financial Statement delivered to IBM Credit under
this Agreement;
(I) There issues a warrant of distress for any rent or taxes
with respect to any premises occupied by Customer in or upon which
the Collateral which is being used to establish the Borrowing
Base, 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 unless IBM Credit has waived this
provision for such premises (it being understood that (i) if Customer is in
a Tier 1 Period, the aggregate value of such warrants described in this
subsection 8.1(I) must be greater than
$10,000,000 and (ii) if Customer is in a Tier 2
Period, the aggregate value of such warrants must be greater than $10,000,000
or any single warrant must be greater than
$5,000,000);
(J) Customer suspends business;
(K) The occurrence of any event or condition which enables
the holder of any Indebtedness arising in one or more related or
unrelated transactions, in aggregate principal amount exceeding
$1,000,000 to accelerate the maturity thereof which either (i) is
an event or condition shall have continued unremedied, uncured or
unwaived for a period of 45 days after the holder
of such Indebtedness has knowledge thereof, or (ii) is the failure of
Customer to pay when due any such Indebtedness;
(L) 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;
(M) Customer is in default under the material terms of any of
the Other Documents after the expiration of any applicable cure
periods;
(N) 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;
(O) 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 without
the approval of Customer's Board of Directors or
when such acquisition could reasonably be expected to cause a Material
Adverse Effect; or
(P) The occurrence of an event of bankruptcy.
8.2 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 8.1(E) hereof, in which case all
Obligations shall automatically become immediately due and payable
without the necessity of any notice or other
demand) without presentment, demand, protest or any other action or
obligation of IBM Credit; and
(b) immediately terminate the Credit Line hereunder.
8.3 Remedies. 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 of its rights and remedies.
8.4 Waiver. 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 nonpayment, non-performance,
any right of contribution, dishonor, and any other demands, and notices
required by law.
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Section 9. MISCELLANEOUS
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9.1 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 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 the Customer's Obligations to IBM Credit including,
without limitation, any transaction or event
occurring prior to such termination, and IBM
Credit's security interest in the Collateral.
9.2 Indemnification. The Customer hereby agrees to indemnify and
hold harmless IBM Credit and each of its officers, directors,
agents and assigns (collectively, the "Indemnified
Persons") against all losses, claims, damages, liabilities or other expenses
(including reasonable attorneys' fees and court
costs now or hereinafter arising from the enforcement of this Agreement, the
"Losses") to which any of them may become subject insofar as such
Losses arise out of or are based upon any event, circumstance or
condition (a) occurring or existing on or before the date of this
Agreement relating to any financing arrangements IBM Credit may
from time to time have with (i) Customer, (ii) any Person that
shall be acquired by Customer or (iii) any Person that Customer
may acquire all or substantially all of the assets of, or (b)
directly or indirectly, relating to the execution, delivery or
performance of this Agreement or the consummation
of the transactions contemplated hereby or thereby
or to any of the Collateral or to any act or omission of the Customer in
connection therewith. Notwithstanding the foregoing, the
Customer shall not be obligated to indemnify IBM Credit for any
Losses incurred by IBM Credit which are a result of IBM Credit's
gross negligence or willful misconduct. The indemnity provided herein
shall survive the termination of this Agreement.
9.3 Additional Obligations. IBM Credit, without
waiving or releasing any Obligation or Default of the Customer, may perform
any Obligations of the Customer that the Customer shall fail or
refuse to perform and IBM Credit may, at any time or times hereafter, but
shall be under no obligation so to do, pay, acquire
or accept any assignment of any security interest,
lien, encumbrance or claim against the Collateral
asserted by any person. All sums paid by IBM Credit in performing in
satisfaction or on account of the foregoing and any expenses,
including reasonable attorney's fees, court costs,
and other charges relating thereto, shall be
payable on demand.
9.4 LIMITATION OF LIABILITY. NEITHER IBM CREDIT NOR ANY OTHER
INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO ANY
SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY CUSTOMER IN
CONNECTION WITH THIS AGREEMENT, ANY OTHER AGREEMENT OR ANY CLAIMS
IN ANY MANNER RELATED THERETO. NOR SHALL IBM CREDIT OR ANY OTHER
INDEMNIFIED PERSON HAVE ANY LIABILITY TO CUSTOMER OR ANY OTHER
PERSON FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY IT OR THEM
HEREUNDER, EXCEPT FOR ITS OR THEIR OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
9.5 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.
9.6 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.
9.7 One Loan. All Advances heretofore, now or at any time or
times hereafter made by IBM Credit to the Customer under this
Agreement or the Other Documents shall constitute one loan secured
by security interests in the Collateral granted to the Collateral
Agent now or from time to time.
9.8 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.
9.9 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.
9.10 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, which consent will
not be unreasonably withheld. IBM Credit shall have no right to assign
or grant a participation in this Agreement or any of the Other
Documents, other than an assignment in connection
with a securitization of IBM Credit's assets, without the
prior written consent of Customer, which consent will not be
unreasonably withheld.
9.11 Notices. Except as otherwise expressly provided in this
Agreement, any notice required or desired to be served, given or
delivered hereunder shall be in writing, and shall be deemed to
have been validly served, given or delivered (A) upon receipt if
deposited in the United States mails, first class
mail, with proper postage prepaid, (B) upon
receipt of confirmation or answerback if sent by
telecopy, or other similar facsimile transmission,
(C) one Business Day after deposit with a
reputable overnight courier with all charges prepaid, or (D) when delivered,
if hand-delivered by messenger, all of which shall be properly
addressed to the party to be notified and sent to the address or
number indicated as follows:
(i) If to IBM Credit at:
IBM Credit Corporation
2707 W. Butterfield Rd.
Oak Brook, IL 60521
Attention: Remarketer Finance Center
Manager Telecopy: (708) 573-7560
(ii) If to Customer at:
InaCom Corp.
10810 Farnam Drive
Omaha, Nebraska 68154
Attention: Treasurer
Telecopy: (402) 392-3619
or to such other address or number as each party designates to the
other in the manner prescribed herein.
9.12 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.
9.13 ATTACHMENT A MODIFICATIONS. IBM Credit may
modify the Collateral Insurance Amount set forth in Attachment A from time to
time 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.
9.14 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 AGREEMENT, 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
9.11 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 SUE 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.
9.15 JURY TRIAL WAIVER. EACH OF IBM CREDIT AND
THE CUSTOMER HEREBY IRREVOCABLY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
(INCLUDING ANY COUNTERCLAIM) OF ANY TYPE IN
WHICH IBM CREDIT AND THE CUSTOMER ARE PARTIES AS TO ALL MATTERS
ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
AGREEMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT
EXECUTED IN CONNECTION HEREWITH.
IN WITNESS WHEREOF, the Customer has read this entire Agreement,
and has caused its authorized representatives to execute this
Agreement and has caused its corporate seal to be affixed hereto
as of the date first written above.
INACOM CORP.
By: Gary Goldsberry
Title: Treasurer
ACCEPTED this 29th day of June, 1995,
IBM CREDIT CORPORATION
By: Donald E. Diedo
Title: Remarketer Financing Center Manager
INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT
Dated June 29, 1995
ATTACHMENT A
Effective Date of Attachment A: June 29, 1995
Customer: InaCom Corp.
I. Fees, Rates and Repayment Terms:
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(A) Credit Line: $350,000,000.
(B) Borrowing Base: (see Exhibit A to this Attachment A for example)
(i) 80% of the amount of the Customer's Retained Eligible Accounts
as of the date of determination as reflected in the Customer's most
recent Collateral Management Report.
(ii) 80% of the amount of the Customer's Eligible Accounts as of the
date of determination that have been sold to IFC as reflected in the
Customer's most recent Collateral Management Report.
(iii) 100% of the Customer's inventory in the Customer's possession as
of the date of determination as reflected in the Customer's most recent
Collateral Management Report constituting Products (other than service
parts) financed through a Product Advance by IBM Credit. The value to be
assigned to such inventory shall be based upon the Authorized Supplier's
invoice price to Customer for Financed Products net of all applicable
price reduction credits.
(iv) [*]
(v) [*]
Note: Subtracted from the sum of (i), (ii), (iii), (iv), and (v)
will be (a) the amount of Clipper Outstandings and (b) the
amount required to be set aside by IFC as the "Servicer's Fee"
and the "Administrator Fee", both as defined in the Receivables
Purchase Agreement.
(C) Base Rate: [*]% during a Tier 1 Period, as defined in
Section IV of this Attachment A. During the first consecutive
Tier 2 Period, as defined in Section IV of this Attachment A,
the Base Rate will be increased to [*]%. During the second or
greater than second consecutive Tier 2 Period, the Base Rate
will be increased to [*]%. The adjustments described in the
previous two sentences are defined as "Tier 2 Period
Adjustments". If any of the financial covenants specified in
Section III of this Attachment A are not met, or any other event
of default has occurred and is continuing, pricing and other
terms are subject to change at IBM Credit's reasonable
discretion including all remedies available to IBM Credit under
the Agreement.
(D) Collateral Insurance Amount:_______________________
(F) A/R Finance Charge:
(i) PAE Financing Charge: Base Rate
(ii) OVN Advance Charge: Base Rate
(iii) FRO Advance Charge: [*]% (plus any Tier 2 Period
Adjustments if applicable)[*]
(G) Delinquency Fee Rate: (1) For the first 30 days immediately
following the Payment Date - [*]% and (2) from the 31st day after
the Payment Date until the delinquent payment is made -[*]
(H) Letter of Credit Fee Rate: [*]%
(I) Letter of Credit Maximum: $6,000,000
(J) Other Charges:
(i) Monthly Service Fee: $[*]
(ii) Unused line Fee:[*]%
(iii) Back-up Liquidity Adjustment Fee: The difference
between $200,000 and the actual fees received from IFC for
IBM Credit's commitment to perform as aliquidity bank to
Clipper unless agreed to by IBM Credit. Any Indebtedness
owed to IBM Credit under this Fee shall be secured solely
by the assets owned by IFC. Such Fee is not applicable if
IBM Credit's credit rating is reduced so that IBM Credit is
no longer eligible to perform as a back-up
liquidity provider to Clipper. The Back-up Liquidity Adjustment
Fee will be in effect for a period of three (3) years. The Back-
up Liquidity Adjustment Fee will apply commencing on the date IBM
Credit provides notice to Customer that IBM Credit intends to
perform as a back-up liquidity provider throughout the original
three year period of this Agreement. If commercial paper is not
available for a period of sixty (60) days or more, the Back-up
Liquidity Adjustment Fee will no longer apply.
(I) Maximum OVN Advance Total: $25,000,000
(J) Maximum Guaranty Amount: $10,000,000
II. Bank Account
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(A) Customer's Lockbox(es) and Special Account(s) will be
maintained at the following Bank(s):
Name:
Address:
Phone: Not applicable to this Agreement as of the date of this
Attachment A.
Lockbox
Account #:
Special
Account #:
III. Financial Covenants:
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Definitions: The following terms shall have the following
respective meanings in this Attachment A. All amounts shall be
determined in accordance with GAAP.
Current Assets shall mean, as of any date, all assets which, in
accordance with GAAP, should be classified as current assets on a
balance sheet.
Current Liabilities shall mean, as of any date, all liabilities
which, in accordance with GAAP, should be classified as current
liabilities on a balance sheet; provided however, that all
indebtedness to IBM Credit shall be considered current
liabilities.
Current Ratio shall mean Current Assets divided by Current Liabilities.
Net Profit After Tax shall mean Revenue plus all other
income,minus all costs, including applicable taxes.
Non-Competes shall mean the amount Customer has to pay another
Person for that Person's agreement to not compete with Customer
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 the Customer's indebtedness to
officers or owners as evidenced by an executed notes payable
subordination agreement in favor of IBM Credit.
Tangible Net Worth ("TNW") shall mean stockholders equity minus
goodwill and Non-Competes.
Total Assets shall mean, as of any date, all assets which, in
accordance with GAAP, should be classified as assets on a balance
sheet.
Total Liabilities shall mean, as of any date, all obligations
which, in accordance with GAAP, should be classified as
liabilities on a balance sheet 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.
The Customer will be required to maintain the following financial covenants:
(a) Total Liabilities to TNW ratio of less than 6.50:1.0 at all times;
(b) Current Ratio of greater than 1.00:1.0 at all times;
(c) TNW of greater than $90,000,000 at all times;
(d) Net Profit after Tax of (1) no loss greater than 10% of TNW
in any fiscal quarter and (2) no losses for three consecutive
fiscal quarters.
IV.Tier Periods
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As used in the definitions of "Tier 1 Period" and "Tier 2 Period"
below, a "period" shall mean an interval of time commencing from
the first day of the calendar month following the date Customer
delivers to IBM Credit or the date when due, whichever is
earliest, the balance sheet and income statement for the fiscal
year or fiscal quarter, as applicable, with respect to a fiscal
period and ending on the last day of the calendar month which
contains the date Customer delivers to IBM Credit or the date
when due, whichever is earliest, the balance sheet and income
statement for the next succeeding fiscal period.
"Tier 1 Period" means each period with respect to which (i) the
ratio of Customer's Total Liabilities to TNW (the "Leverage
Ratio") during the immediately preceding fiscal period is less
than 4.75 to 1, (ii) the Customer's Current Ratio during such
fiscal period is greater than 1.05 to 1, (iii) Customer's TNW
during such fiscal period is greater than $105,000,000 and (iv)
the Customer's Net Profit after Tax ("Profitability") during such
fiscal period is such that (a) there is no loss greater than 5%,
(b) if there is a loss in that fiscal period, it is not the
second or more consecutive fiscal quarter with a loss and (c) on
an on-going basis beginning with October 1, 1995, there is no
cumulative loss for four consecutive fiscal quarters.
"Tier 2 Period" means each period (x) with respect to which (i)
the Customer's Leverage Ratio during the immediately preceding
fiscal period is less than 6.5 to 1, (ii) the Customer's Current
Ratio during such fiscal period is greater than 1.00 to 1, (iii)
Customer's TNW during such fiscal period is greater than
$90,000,000 and (iv) the Customer's Profitability is such that
(a) there is no loss greater than 10% and (b) if there is a loss
in that fiscal period, it is not the third or more consecutive
fiscal quarter with a loss and (y) which is not a Tier 1 Period.
V. Additional Conditions Precedent Pursuant to Section 4.1(M) of the
Agreement:
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.Executed Collateralized Guaranty of InaCom Communications, Inc.
.Executed Collateralized Guaranty of InaCom Business Centers, Inc.
.Executed Collateralized Guaranty of Inacomp Financial Services, Inc.
.Executed Collateralized Guaranty of InaCom Services, Inc.
.Listing of all creditors providing accounts receivable financing
to Customer
.A Collateral Management Report as of the Closing Date
.A Compliance Certificate as to Customer's compliance with
financial covenants set forth in this Attachment A as of the last fiscal
month of Customer for which Form 10-K or Form 10-Q, as applicable,
has been published.
.A Certificate of Location of Collateral whereby the Customer certifies
where Customer presently keeps of sells inventory, equipment and other
tangible Collateral
.An Opinion of Counsel whereby the Customer's counsel states his
or her opinion about the execution, delivery and performance of
the Agreement and other documents by the Customer.
.Executed intercreditor agreement with the Senior Note Holders
and, if applicable, the third party credit facility described in
Section 7.1 of the Agreement
.Termination or release of Uniform Commercial Code filing by
another creditor as required by IBM Credit
.Executed Acknowledgement of Payment and Termination from NBD
Bank
.A copy of an all-risk insurance certificate pursuant to
the Collateral, Agency and Intercreditor Agreement
.Executed Pledge and Security Agreement
[ * confidential information omitted and filed separately with the
Securities and Exchange Commission ]