1
CREDIT AGREEMENT
among
SOFTWARE SPECTRUM, INC.
as Borrower,
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
as Agent,
and
the lenders named herein
13 May 1996
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TABLE OF CONTENTS
ARTICLE 1 - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.3 Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.4 Time of Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 2 - Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.1 Revolving Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.2 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.3 Repayment of Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.4 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.5 Revolving Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.6 Reduction or Termination of Revolving Commitments
and Extension of Revolving Termination Date . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.7 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Commitment to Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Letter of Credit Request Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(c) Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Funding of Drawings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) Reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(f) Reimbursement Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(g) Issuer Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 3 - Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.1 Term Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.2 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.3 Repayment of Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.4 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4 - Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.1 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.2 Determinations of Margins and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.3 Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.4 Default Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.5 Conversions and Continuations of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.6 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 5 - Administrative Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.1 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.2 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.3 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.4 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Mandatory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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(i) Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(ii) Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Optional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.5 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.6 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.7 Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.8 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.9 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.10 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.11 Participation Obligations Absolute; Failure to Fund Participation. . . . . . . . . . . . 30
Section 5.12 Release of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.13 Collateral Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 6 - Yield Protection and Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.1 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.2 Limitation on Libor Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.3 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.4 Treatment of Affected Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.6 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 7 - Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.1 Initial Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(b) Incumbency Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(c) Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(d) Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(e) Governmental Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(f) Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(g) Collateral Documents and Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(h) Termination of Prior Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(i) Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(j) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(k) Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(l) Borrowing Base Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(m) Pro Forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(n) Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(o) Egghead Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(p) Letter of Direction and Funds Flow Memorandum . . . . . . . . . . . . . . . . . . . . . . . 37
(q) Attorneys' Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.2 All Loans and Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(a) No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(b) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(c) Additional Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 8 - Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Section 8.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.2 Financial Statements; ProForma; Projections. . . . . . . . . . . . . . . . . . . . . . . 38
(a) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(b) Pro Forma and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.3 Corporate Action; No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.4 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.5 Litigation and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.6 Rights in Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.7 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.8 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.9 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.11 Margin Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.13 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.15 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.16 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.17 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.18 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.20 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.21 Benefit Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.22 Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 9 - Positive Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.1 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(a) Annual Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(b) Quarterly Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(d) Borrowing Base Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(e) Annual Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(f) Management Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(g) Notice of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(h) Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(i) ERISA Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(j) Reports to Other Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(k) Notice of Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(l) Proxy Statements, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(m) General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.2 Maintenance of Existence; Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.4 Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.6 Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.7 Keeping Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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Section 9.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.9 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.10 Further Assurances and Collateral Matters . . . . . . . . . . . . . . . . . . . . . . . . . 47
(a) Further Assurance and Exceptions to Perfection . . . . . . . . . . . . . . . . . . . . . . 47
(b) Granting Subsidiary Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(c) Borrower Pledge of Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(d) Post-Closing Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 10 - Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.1 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.2 Limitation on Liens and Restrictions on Subsidiaries . . . . . . . . . . . . . . . . . . . 50
Section 10.3 Mergers, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.4 Restrictions on Dividends and other Distributions . . . . . . . . . . . . . . . . . . . . . 52
Section 10.5 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.6 Limitation on Issuance of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.7 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.8 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.9 Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.10 Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 11 - Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.1 Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.2 Funded Debt to EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.3 Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 12 - Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 12.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 12.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(a) Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(b) Termination of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(c) Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(d) Foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(e) Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.3 Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.4 Performance by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.5 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 13 - The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 13.1 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 13.2 Rights of Agent as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 13.3 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 13.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 13.5 Independent Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 13.6 Several Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 13.7 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
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Section 13.8 Agent Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 14 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 14.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 14.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 14.3 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 14.4 No Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 14.5 No Fiduciary Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 14.6 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 14.7 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 14.8 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(a) Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(b) Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(c) Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
(d) Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
(e) Pledge to Federal Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 14.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 14.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 14.11 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.12 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.13 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 14.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 14.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 14.16 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 14.17 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 14.18 Non-Application of Chapter 15 of Texas Credit Code . . . . . . . . . . . . . . . . . . . . 70
Section 14.19 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 14.20 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 14.21 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
v
7
INDEX TO EXHIBITS
Exhibit Description of Exhibit
------- ----------------------
"A" Revolving Note
"B" Term Note
"C" Borrowing Base Report
"D" Guaranty
"E" Borrower Security Agreement
"F" Borrower Pledge Agreement
"G" Subsidiary Security Agreement
"H" Assignment and Acceptance
"I" Compliance Certificate
INDEX TO SCHEDULES
Schedule Description of Schedule
-------- -----------------------
1.1 (a) Approved Foreign Account Debtors;
Approved Account Debtors and
Concentration Account Debtors
8.14 List of Subsidiaries
10.1 Debt
10.2 Existing Liens
10.5 Existing Investments
vi
8
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement"), dated as of May 3, 1996, is
among SOFTWARE SPECTRUM, INC., a corporation duly organized and validly
existing under the laws of the State of Texas (the "Borrower"), each of the
banks or other lending institutions which is or which may from time to time
become a signatory hereto or any successor or assignee thereof (individually, a
"Bank" and, collectively, the "Banks") and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, individually as a Bank and as agent for itself and the other Banks
(in its capacity as agent, together with its successors in such capacity, the
"Agent").
R E C I T A L S:
The Borrower has requested that the Banks extend credit to the
Borrower in the form of a revolving credit facility and a term loan facility.
The Banks are willing to extend such credit to the Borrower upon the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. As used in this Agreement, the
following terms have the following meanings:
"Account" means either a Base Rate Account or a Libor Account.
"Acquisitions" means the Egghead Acquisition and the Essentially
Acquisition.
"Additional Costs" has the meaning specified in Section 6.1.
"Adjusted EBITDA" means, for any period after June 30, 1996, the sum
of the following calculated for such period: (a) EBITDA plus (b) all
Nonrecurring Charges deducted in determining Net Income for such period. The
term "Nonrecurring Charges" means, for any period, the actual amount of the
nonrecurring cash charges to the earnings of Borrower and the Subsidiaries for
such period arising in connection with, or as a result of, the Acquisitions
(e.g., transition costs, costs of temporary workers and the cost arising as a
result of the Borrower's obligations under the Asset Purchase Agreement and the
fulfilment agreement executed in connection therewith); provided that for
purposes of this definition: (a) such charges shall not exceed in the
aggregate, for all periods of calculation, Two Million Five Hundred Thousand
CREDIT AGREEMENT - PAGE 1
9
Dollars ($2,500,000) and (b) for any period after the anniversary of the
Closing Date, such charges shall at all times equal zero.
"Adjusted Debt Ratio" has the meaning specified in Section 5.12.
"Adjusted Libor Rate" means, for any Libor Account for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) determined by the Agent to be equal to the Libor Rate for
such Libor Account for such Interest Period divided by 1 minus the Reserve
Requirement for such Libor Account for such Interest Period.
"Adjustment Date" has the meaning specified in Section 4.2.
"Affiliate" means, as to any Person, any other Person (a) that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person; (b) that directly
or indirectly beneficially owns or holds five percent (5%) or more of any class
of voting stock of such Person; or (c) five percent (5%) or more of the voting
stock of which is directly or indirectly beneficially owned or held by the
Person in question. The term "control" means the possession, directly or
indirectly, of the power to direct or cause direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise; provided, however, in no event shall the Agent or any
Bank be deemed an Affiliate of the Borrower or any Subsidiaries.
"Agent" has the meaning set forth in the introductory paragraph of
this Agreement.
"Agreement" has the meaning set forth in the introductory paragraph of
this Agreement.
"Annual Projections" means Borrower's forecasted profit and loss
statements prepared on a line of business basis and otherwise consistent with
Borrower's historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.
"Annualized EBITDA" has the meaning set forth in Section 11.2.
"Applicable Lending Office" means for each Bank and each Type of
Account, the lending office of such Bank (or of an Affiliate of such Bank)
designated for such Account below its name on the signature pages hereof or
such other office of such Bank (or of an Affiliate of such Bank) as such Bank
may from time to time specify to the Borrower and the Agent as the office by
which its Loans subject to Accounts of such Type are to be made and maintained.
"Applicable Rate" has the meaning set forth in Section 4.1.
"Approved Account Debtor" has the meaning set forth in the Eligible
Account definition.
"Approved Foreign Account Debtor" has the meaning set forth in the
Eligible Account definition.
CREDIT AGREEMENT - PAGE 2
10
"Asset Purchase Agreement" means that certain Asset Purchase Agreement
dated as of March 23, 1996 among Egghead, Inc., DJ&J Software Corporation and
Borrower, as the same may be amended or otherwise modified in accordance with
the provisions hereof.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Bank and its assignee and accepted by the Agent pursuant to Section
14.8, in substantially the form of Exhibit "H" hereto.
"Average Funded Debt" has the meaning specified in Section 5.12.
"Bank" has the meaning set forth in the introductory paragraph of this
Agreement.
"Base Margin" has the meaning specified in Section 4.2.
"Base Rate" means, for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1% or (b) the Prime Rate
in effect on such day. For purposes hereof, "Prime Rate" shall mean the rate
of interest per annum then most recently publicly announced from time to time
by Texas Commerce as its prime rate in effect at its Principal Office; each
change in the Prime Rate shall be effective on the date such change is publicly
announced as effective. "Federal Funds Effective Rate" shall mean, for any
day, the weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds brokers,
as released on the next succeeding Business Day by the Federal Reserve Bank of
New York, or, if such rate is not so released for any day which is a Business
Day, the arithmetic average (rounded upwards to the next 1/100th of 1%), as
determined by the Agent, of the quotations for the day of such transactions
received by the Agent from three federal funds brokers of recognized standing
selected by it. If for any reason the Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Federal Funds Effective Rate for any reason, including the
inability of the Agent to obtain sufficient quotations in accordance with the
terms thereof, the Base Rate shall be determined without regard to clause (a)
of the first sentence of this definition until the circumstances giving rise to
such inability no longer exist. Any change in the Base Rate due to a change in
the Prime Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively. The Base Rate may not be any Bank's best or favored rate
and the Banks may make other Loans to other Persons at rates lower than the
Base Rate.
"Base Rate Account" means a portion of a Loan that bears interest at a
rate based upon the Base Rate.
"Borrower" has the meaning set forth in the introductory paragraph of
this Agreement.
"Borrower Pledge Agreement" means the pledge agreement between the
Borrower and the Agent for the benefit of itself and the Banks, in
substantially the form of Exhibit "F", as the same may be amended or otherwise
modified.
CREDIT AGREEMENT - PAGE 3
11
"Borrower Security Agreement" means the security agreement between the
Borrower and Agent for the benefit of itself and the Banks, in substantially
the form of Exhibit "E", as the same may be amended or otherwise modified.
"Borrowing Base" means, at any time, an amount equal to the sum of (a)
the sum of (i) eighty-five percent (85%) of the aggregate amount of Eligible
Accounts plus (ii) one hundred percent (100%) of the market value of the assets
held in or pursuant to the Collateral Account minus (b) the outstanding
principal balance of the Term Loans.
"Business Day" means (a) any day excluding Saturday, Sunday, and any
day which either is a legal holiday under the laws of the State of Texas or is
a day on which banking institutions located in the State of Texas are closed,
and (b), with respect to all borrowings, payments, Conversions, Continuations,
Interest Periods, and notices in connection with Loans subject to Libor
Accounts, any day which is a Business Day described in clause (a) above and
which is also a day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Calculation Period" has the meaning specified in Section 4.2.
"Capital Expenditures" means, for any period, all expenditures of the
Borrower and its Subsidiaries which are classified as capital expenditures in
accordance with GAAP including all such expenditures associated with Capital
Lease Obligations but excluding any such expenditures made on the Closing Date
in connection with the Acquisitions.
"Capital Lease Obligations" means, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) real and/or personal property, which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP. For purposes of this Agreement,
the amount of such Capital Lease Obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Closing Date" means May 13, 1996.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" means the property in which Liens have been granted
pursuant to the Borrower Security Agreement, the Borrower Pledge Agreement and
the Subsidiary Security Agreements whether such Liens are now existing or
hereafter arise.
"Collateral Account" means the deposit, brokerage or investment
account or accounts established at the Agent in the name of Agent pursuant to
Section 5.13 over which the Borrower shall have no right of withdrawal except
as provided in Section 5.13.
"Commercial Letter of Credit" means a Letter of Credit issued to
facilitate payment under a contract for the sale of goods.
CREDIT AGREEMENT - PAGE 4
12
"Commitment Fee Rate" means the per annum rate determined in
accordance with Section 4.2.
"Commitment Percentage" means, as to any Bank, the percentage
equivalent of a fraction the numerator of which is the amount of the
Commitments of such Bank and the denominator of which is the aggregate amount
of the Commitments of all of the Banks.
"Commitments" means, as to each Bank, such Bank's Revolving Commitment
and Term Commitment.
"Compliance Certificate" means a certificate in substantially the form
of Exhibit "I" properly completed and executed by the chief financial officer
of the Borrower.
"Concentration Account Debtor" has the meaning specified in the
Eligible Account definition.
"Consolidated Net Worth" has the meaning specified in Section 11.1.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 4.5 of a Libor Account as a Libor Account from
one Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 4.5 or Article 6 of one Type of Account into the other Type
of Account.
"Debt" means as to any Person at any time (without duplication): (a)
all obligations of such Person for borrowed money; (b) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments; (c)
all obligations of such Person to pay the deferred purchase price of property
or services, except trade accounts payable of such Person arising in the
ordinary course of business that are not past due by more than one hundred
twenty (120) days or that are past due by more than one hundred twenty (120)
days but are being contested in good faith by appropriate proceedings
diligently pursued; (d) all Capital Lease Obligations of such Person; (e) all
Debt or other obligations of others Guaranteed by such Person; (f) all
obligations secured by a Lien existing on property owned by such Person,
whether or not the obligations secured thereby have been assumed by such Person
or are non-recourse to the credit of such Person; (g) all reimbursement
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, bankers' acceptances, surety or other bonds, and similar
instruments; and (h) all liabilities of such Person in respect of unfunded
vested benefits under any Plan.
"Default" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event of
Default.
"Default Rate" means, in respect of any principal of any Loan, any
Reimbursement Obligation, or any other amount payable by the Borrower under any
Loan Document which is not paid when due (whether at stated maturity, by
acceleration, or otherwise), a rate per annum during the period commencing on
the due date until such amount is paid in full equal to the sum of two
CREDIT AGREEMENT - PAGE 5
13
percent (2%) plus the Applicable Rate for Base Rate Accounts as in effect from
time to time (provided, that if such amount in default is principal of a Loan
subject to a Libor Account and the due date is a day other than the last day of
an Interest Period therefor, the "Default Rate" for such principal shall be,
for the period from and including the due date and to but excluding the last
day of the Interest Period therefor, two percent (2%) plus the interest rate
for such Loan for such Interest Period as provided in Section 4.1 hereof, and,
thereafter, the rate provided for above in this definition).
"Dollars" and "$" mean lawful money of the United States of America.
"EBITDA" means, for any period, the total of the following each
calculated for Borrower and the Subsidiaries without duplication on a
consolidated basis for such period: (a) Net Income; plus (b) any provision for
(or less any benefit from) income or franchise taxes included in determining
Net Income; plus (c) Interest Expense deducted in determining Net Income; plus
(d) amortization and depreciation expense deducted in determining Net Income.
"Egghead Acquisition" means the acquisition by Borrower of the assets
of the corporate, educational and governmental products division of Egghead
Inc. pursuant to the Asset Purchase Agreement.
"Eligible Accounts" means the aggregate of all accounts receivable of
the Borrower and a Granting Subsidiary that satisfy the following conditions:
(a) are due and payable within one hundred twenty (120) days if owed by a
Person or Persons that are citizens of or organized under the laws of the
United States or any State thereof or within ninety (90) days if owed by an
Approved Foreign Account Debtor (as defined below); (b) have been outstanding
less than one hundred twenty (120) days past the original date of invoice if
owed by a Person or Persons that are citizens of or organized under the laws of
the United States or any State thereof or less than ninety (90) days past the
original date of invoice if owed by an Approved Foreign Account Debtor; (c)
have arisen in the ordinary course of business from (i) the sale by the
Borrower or a Granting Subsidiary of goods in which the Borrower or a Granting
Subsidiary had sole ownership where such goods have been shipped or delivered
to the account debtor or (ii) the performance of services by the Borrower or a
Granting Subsidiary; (d) represent complete bona fide transactions which
require no further act under any circumstances on the part of the Borrower or a
Granting Subsidiary to make such accounts receivable payable by the account
debtor; (e) the goods of sale which gave rise to such accounts receivable were
shipped or delivered to the account debtor on an absolute sale basis and not on
consignment, a sale or return basis, a guaranteed sale basis, a bill and hold
basis, or on the basis of any similar understanding; (f) the goods of sale
which gave rise to such accounts receivable were not, at the time of sale
thereof, subject to any Lien, except the security interest in favor of the
Agent created by the Loan Documents; (g) are not subject to any provision
prohibiting assignment or requiring notice of or consent to such assignment;
(h) are subject to a perfected, first priority security interest in favor of
the Agent unless the security interest of the Agent therein is released in
accordance with the provisions of Section 5.12 and are not subject to any other
Lien; (i) are not subject to any asserted claim relating to a setoff,
counterclaim, defense, allowance, dispute, or adjustment other than normal
discounts for prompt payment, and the goods of sale which gave rise to such
accounts receivable have not been returned, rejected, repossessed, lost, or
damaged; (j) the account debtor is not
CREDIT AGREEMENT - PAGE 6
14
insolvent or the subject of any bankruptcy or insolvency proceeding and has not
made an assignment for the benefit of creditors, suspended normal business
operations, dissolved, liquidated, terminated its existence, ceased to pay its
debts as they become due, or suffered a receiver or trustee to be appointed for
any of its assets or affairs; (k) are not evidenced by chattel paper or an
instrument of any kind; (l) are owed by a Person or Persons that are citizens
of or organized under the laws of the United States or any State thereof and
are not owed by any Person located outside of the United States of America
unless (i) supported by a letter of credit issued by a bank acceptable to the
Agent or (ii) owed by an Approved Foreign Account Debtor; (m) if any accounts
receivable are owed by a Governmental Authority, all requirements arising under
law or contract applicable to the assignment thereof (e.g.,with respect to the
United States of America or any agency or department thereof, the requirements
under the Federal Assignment of Claims Act) shall have been complied with
unless the security interest of the Agent in the Collateral shall have been
released; (n) are not owed by an Affiliate of the Borrower or a Granting
Subsidiary; provided that for purposes of this clause (n) any mutual fund or
manager of a mutual fund who holds five percent (5%) or more but less than ten
percent (10%) of the capital stock of Borrower shall not be deemed an Affiliate
of Borrower; (o) are payable in Dollars; (p) the accounts receivable comply
with all applicable laws, rules and regulations, including, without limitation,
usury laws; (q) the Borrower's or the applicable Granting Subsidiary's
performance of the contracts to which the accounts receivable relate are not
assured by an performance completion or other bond and no portion of the
Borrower's or the applicable Granting Subsidiary's performance thereunder has
been subcontracted to a third party; and (s) the accounts receivable are not
Excluded Accounts. The term "Excluded Account" means an account that has been
identified by the Agent (by a notice to the Borrower) as being unacceptable for
inclusion in the Borrowing Base because the Agent has determined that the
account debtor obligated on such account is not creditworthy or that the Agent
might not otherwise be able to receive the full amount of the account within a
reasonable period of time and at a reasonable cost of collection if it sought
to realize on its security interest therein, such determination to be made in
the Agent's judgment, in good faith and based on information which, in its
judgment, supports such determination. Accounts receivable owed by an account
debtor (other than a Concentration Account Debtor, as defined below) to the
extent that such accounts receivable exceed in the aggregate an amount equal to
ten percent (10%) of the aggregate of all accounts receivable of the Borrower
and the Granting Subsidiaries at said date shall be excluded from Eligible
Accounts (but only to the extent of the excess). Accounts receivable owed by a
Concentration Account Debtor to the extent that such accounts receivable exceed
in the aggregate an amount equal to twenty percent (20%) of the aggregate of
all accounts receivable of the Borrower and the Granting Subsidiaries at such
date shall be excluded from Eligible Accounts (but only to the extent of the
excess). No account receivable owed by an account debtor to the Borrower or a
Granting Subsidiary shall be included as an Eligible Account if more than
twenty percent (20%) of the balances then outstanding on accounts receivable
owed by such account debtor and its Affiliates to the Borrower or such Granting
Subsidiary are ineligible as a result of the operation of clause (b) of this
definition unless such account debtor is an Approved Account Debtor (as defined
below). The accounts receivable of an Approved Account Debtor shall not be
subject to the twenty percent (20%) rule set forth in the forgoing sentence.
The amount of any Eligible Accounts owed by an account debtor to the Borrower
or a Granting Subsidiary shall be reduced by the amount of all "contra
accounts" owed by the Borrower or such Granting Subsidiary to such account
debtor. The term "Approved Account Debtor" means a Person identified on
CREDIT AGREEMENT - PAGE 7
15
Schedule 1.1(a) in Section II thereof, any Person whose senior unsecured debt
is rated in one of the four highest rating categories of Standard and Poor's
Corporation or Moody's Investors Service, Inc or any other Person approved in
writing by Agent as an Approved Account Debtor at the request of Borrower made
from time to time. The term "Approved Foreign Account Debtor" means a Person
identified on Schedule 1.1(a) in Section I thereof or any other Person approved
in writing by Agent as an Approved Foreign Account Debtor at the request of
Borrower made from time to time. The term "Concentration Account Debtor" means
a Person identified on Schedule 1.1(a) in Section III thereof or any other
Person approved in writing by Agent as a Concentration Account Debtor at the
request of Borrower made from time to time. The Agent may revoke an account
debtor's designation as an Approved Account Debtor, an Approved Foreign Account
Debtor or a Concentration Account Debtor if the Agent has determined that the
account debtor is no longer entitled to such designation based on a
deterioration of such account debtor's creditworthiness.
"Eligible Assignee" means one or more commercial bank, savings and
loan association, savings bank, finance company, insurance company, pension
fund, mutual fund, or other financial institution (whether a corporation,
partnership, or other entity) which is qualified to make Loans hereunder and
has a combined capital and surplus of at least One Hundred Million Dollars
($100,000,000).
"Environmental Laws" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the environment,
as such laws, regulations, and requirements may be amended or supplemented from
time to time.
"Environmental Liabilities" means, as to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs, and expenses,
(including, without limitation, all reasonable fees, disbursements and expenses
of counsel, expert and consulting fees and costs of investigation and
feasibility studies), fines, penalties, sanctions, and interest incurred as a
result of any claim or demand, by any Person, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute,
including any Environmental Law, permit, order, or agreement with any
Governmental Authority or other Person, arising from environmental, health, or
safety conditions or the Release or threatened Release of a Hazardous Material
into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is
a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"Essentially Acquisition" means the acquisition by Software Spectrum
(NZ) Limited and Borrower of certain assets pursuant to the Purchase and Sale
Agreement.
CREDIT AGREEMENT - PAGE 8
16
"Event of Default" has the meaning specified in Section 12.1.
"Excess Cash Flow" means, for any Fiscal Year, the total of the
following for the Borrower and its Subsidiaries on a consolidated basis, each
calculated for such period (without duplication): (a) EBITDA; less (b) any cash
income or franchise taxes included in the determination of Net Income; less (c)
the unfinanced portion of Capital Expenditures (including those funded with
advances under the Revolving Loan); less (d) scheduled amortization of Debt
actually paid; less (e) the aggregate of all voluntary prepayments of the Term
Loans made in accordance with Section 5.4; less (f) Interest Expense; less (g)
dividends and other distributions paid on the capital stock of the Borrower;
less (h) all repurchases by Borrower of its capital stock; provided that, the
aggregate amount subtracted from EBITDA pursuant to clauses (g) and (h) of this
definition shall not exceed Two Million Five Hundred Thousand Dollars
($2,500,000) for any Fiscal Year.
"Federal Funds Effective Rate" has the meaning set forth in the
definition of Base Rate.
"Fiscal Quarters" means the four (4) periods falling in each Fiscal
Year, each such period three calendar months in duration with the first such
period in any Fiscal Year beginning on the first day of April and the last such
period in any Fiscal Year ending on the last day of March.
"Fiscal Year" means twelve (12) month period beginning on the first
day of April and ending on the last day of March of the following year.
"Foreign Loan and Guaranty Amount" has the meaning set forth in
Section 10.1.
"Foreign Loan and Guaranty Limit" has the meaning set forth in Section
10.1
"Foreign Subsidiary" means any Subsidiary which is organized under the
laws of a country or province other than the United States or a State thereof.
"Foreign Venture" means a joint venture or partnership organized
outside the United States of America in which the Borrower or a Subsidiary has
an ownership interest (but which is not a Subsidiary) that is engaged in the
same or similar lines of business as the Borrower and the Subsidiaries.
"Funded Debt" means, at the time of determination, the sum of all the
Debt of the Borrower and the Subsidiaries (determined on a consolidated basis)
of the type described in clauses (a), (b), (d), and (g) of the definition of
Debt. Funded Debt in any event shall not include Debt owed by a Subsidiary to
the Borrower or another Subsidiary.
"Funded Debt to EBITDA Ratio" means the ratio of Funded Debt to
Adjusted EBITDA or to Annualized EBITDA as determined and calculated in
accordance with Section 11.2.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board and/or their
CREDIT AGREEMENT - PAGE 9
17
respective successors and which are applicable in the circumstances as of the
date in question. Accounting principles are applied on a "consistent basis"
when the accounting principles applied in a current period are comparable in
all material respects to those accounting principles applied in a preceding
period.
"Governmental Authority" means any nation or government, any state or
political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or pertaining
to government.
"Granting Subsidiary" means any Subsidiary wholly and directly owned
by Borrower which is organized under the laws of the United States or one of
the States thereof.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment
thereof or to protect the obligee against loss in respect thereof (in whole or
in part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guaranty" means the guaranty of a Granting Subsidiary in favor of the
Agent and the Banks, in substantially the form of Exhibit "D" hereto, as the
same may be amended or otherwise modified from time to time.
"Hazardous Material" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law.
"Interest Expense" means, for any period, the aggregate of all
interest paid or accrued by Borrower and the Subsidiaries, including all
interest, fees and costs payable with respect to the Obligations or other Debt
and the interest portion of Capital Leases Obligations, all as determined in
accordance with GAAP on a consolidated basis.
"Interest Period" means with respect to any Libor Accounts, each
period commencing on the date such Account is established or Converted from a
Base Rate Account or the last day of the next preceding Interest Period with
respect to such Libor Account, and ending on the numerically corresponding day
in the first, second or third calendar month thereafter, as the Borrower may
select as provided in Section 4.5 or 5.1, except that each such Interest Period
which commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month. Notwithstanding the foregoing: (a) each Interest
Period which would otherwise end on a day which is not a Business Day shall end
on the
CREDIT AGREEMENT - PAGE 10
18
next succeeding Business Day (or if such succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); (b) any
Interest Period in existence under a Loan which would otherwise extend beyond
the Termination Date applicable to such Loan shall end on the Termination Date
applicable to such Loan; (c) no more than six (6) Interest Periods shall be in
effect at the same time; (d) no Interest Period for any Libor Account shall
have a duration of less than one (1) month and, if the Interest Period would
otherwise be a shorter period, the related Libor Account shall not be available
hereunder; and (e) no Interest Period in respect of Term Loans may extend
beyond a principal repayment date thereof unless, after giving effect thereto,
the aggregate principal amount of such Loans, as the case may be, subject to
Libor Accounts having Interest Periods that end after such principal payment
date shall be equal to or less than such Loans to be outstanding hereunder
after such principal payment date.
"LC Fee Rate" has the meaning specified in Section 4.2.
"Letter of Credit Liabilities" means, at any time, the aggregate face
amounts of all outstanding Letters of Credit and all unreimbursed drawings
under Letters of Credit.
"Letters of Credit" has the meaning specified in Section 2.7(a).
"Libor Account" means a portion of a Loan that bears interest at a
rate based upon the Adjusted Libor Rate.
"Libor Rate" means, for any Libor Account for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) offered to Texas Commerce or one of its Affiliates at
approximately 11:00 a.m. London time (or as soon thereafter as practicable) two
Business Days prior to the first day of such Interest Period by leading banks
in the London interbank market of Dollar deposits in immediately available
funds having a term comparable to such Interest Period and in an amount
comparable to the principal amount of the Libor Account applicable to Texas
Commerce to which such Interest Period relates. If Texas Commerce is not
participating in a Libor Account during any Interest Period therefor (pursuant
to Section 6.4 or for any other reason), the Adjusted Libor Rate for such
Account for such Interest Period shall be determined by reference to the amount
of the Account which Texas Commerce would have been allocated if it had been
participating in such Account.
"Libor Rate Margin" has the meaning specified in Section 4.2.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment, preference,
priority, or other encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or title retention agreement), whether
arising by contract, operation of law, or otherwise.
"Loans" means Revolving Loans and Term Loans.
"Loan Documents" means this Agreement, the Notes, the Borrower
Security Agreement, the Borrower Pledge Agreement, the Guaranties, the
Subsidiary Security Agreements, the Letters of Credit, applications for Letters
of Credit and all other promissory notes, security agreements,
CREDIT AGREEMENT - PAGE 11
19
deeds of trust, assignments, guaranties, letters of credit, and other
instruments, agreements, and other documentation executed and delivered
pursuant to or in connection with this Agreement, as such instruments,
agreements, and other documentation may be amended or otherwise modified.
"Material Adverse Effect" means (a) a material adverse effect on the
business, condition (financial or otherwise), operations, prospects, or
properties of the Borrower and the Subsidiaries taken as a whole or (b) a
material adverse effect on the validity, perfection, priority, or ability of
the Agent to enforce the Agent's Lien on the Collateral or of the ability of
the Agent or any Bank to enforce a material provision of the Loan Documents.
In determining whether any individual event could reasonably be expected to
result in a Material Adverse Effect, notwithstanding that such event does not
itself have such effect, a Material Adverse Effect shall be deemed to have
occurred if the cumulative effect of such event and all other then existing
events could reasonably be expected to result in a Material Adverse Effect.
"Maximum Rate" means, at any time and with respect to any Bank, the
maximum rate of nonusurious interest under applicable law that such Bank may
charge the Borrower. The Maximum Rate shall be calculated in a manner that
takes into account any and all fees, payments, and other charges contracted
for, charged, or received in connection with the Loan Documents that constitute
interest under applicable law. Each change in any interest rate provided for
herein based upon the Maximum Rate resulting from a change in the Maximum Rate
shall take effect without notice to the Borrower at the time of such change in
the Maximum Rate. For purposes of determining the Maximum Rate under Texas
law, the applicable rate ceiling shall be the indicated rate ceiling described
in, and computed in accordance with, Article 5069-1.04, Vernon's Texas Civil
Statutes.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Borrower or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Income" means, for any period and any Person, such Person's
consolidated net income (or loss) determined in conformity with GAAP, but
excluding: (a) the income of any other Person (other than its subsidiaries) in
which such Person or any of its subsidiaries has an ownership interest, unless
received by such Person or its subsidiary in a cash distribution; (b) any
after-tax gains attributable to fixed asset dispositions; provided that, in
connection with any fixed asset disposition in the ordinary course of business,
if the gain realized therefrom is in an amount equal to or less than Fifty
Thousand Dollars ($50,000), then such gain shall not be excluded from the
calculation of net income during such period but if the gain from any such
fixed asset disposition exceeds Fifty Thousand Dollars ($50,000), the total
amount of the related after-tax gain shall be excluded from the calculation of
net income; and (c) to the extent not included in clauses (a) and (b) above,
any after-tax extraordinary, non-cash, or nonrecurring gains.
"Notes" means the Revolving Notes and the Term Notes.
"Obligated Party" means the Granting Subsidiaries or any other Person
(exclusive of the Borrower) who is or becomes party to any agreement that
guarantees or secures payment and performance of the Obligations or any part
thereof.
CREDIT AGREEMENT - PAGE 12
20
"Obligation" means all obligations, indebtedness, and liabilities of
the Borrower to the Agent and the Banks, or any of them, arising pursuant to
any of the Loan Documents, pursuant to any interest rate swap, interest rate
caps, interest rate collars, or other similar agreements entered into by Agent
or any Bank with the Borrower or any Subsidiary enabling Borrower or a
Subsidiary to fix or limit its interest expense or pursuant to any foreign
exchange, currency hedging, commodity hedging, or other agreement entered into
by Agent or any Bank with the Borrower or any Subsidiary enabling Borrower or a
Subsidiary to limit the market risk of holding currency in either the cash or
futures markets, whether now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, including, without limitation, the
obligation of the Borrower to repay the Loans, the Reimbursement Obligations,
interest on the Loans and Reimbursement Obligations, and all fees, costs, and
expenses (including attorneys' fees and expenses) provided for in the Loan
Documents or such agreements enabling the Borrower to fix or limit its interest
expense or limit its market risk of holding currency.
"Outstanding Revolving Credit" means, at any time of determination,
the sum of (a) the aggregate amount of Revolving Loans then outstanding; plus
(b) the aggregate amount of Letter of Credit Liabilities (or when calculated
with respect to a Bank, including the Agent as a Bank, such Bank's
participation or other interest in such Letter of Credit Liabilities).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental Authority, or
other entity.
"Plan" means any employee benefit plan established or maintained by
the Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Principal Office" means the principal office of the Agent, located at
1111 Fannin, Houston, Texas.
"Pro Forma" means the unaudited consolidated balance sheet of Borrower
and the Subsidiaries as of the March 31, 1996 after giving effect to the
Transactions.
"Prohibited Transaction" means any transaction set forth in Section
406 or 407 of ERISA or Section 4975(c)(1) of the Code for which there does not
exist a statutory or administrative exemption.
"Purchase and Sale Agreement" means that certain Purchase and Sale
Agreement dated April 2, 1996 among Borrower, Software Spectrum (NZ) Limited,
Essentially Group Limited, Essentially Group (NZ) Limited, Essentially Software
(Wellington) Limited, The McNabb Family Trust, McNabb No. 2 Family Trust,
McNabb No. 3 Family Trust, RMAD Trust, David Colvin and Gary McNabb, as the
same may be amended or otherwise modified in accordance with the provisions
hereof.
CREDIT AGREEMENT - PAGE 13
21
"Quarterly Payment Date" means the last day of March, June, September,
and December of each year, the first of which shall be the first such day after
the date of this Agreement.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulatory Change" means, with respect to any Bank, any change after
the date of this Agreement in United States federal, state, or foreign laws or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives, or requests applying to a class of banks
including such Bank of or under any United States federal or state, or any
foreign, laws or regulations (whether or not having the force of law) by any
Governmental Authority or monetary authority charged with the interpretation or
administration thereof.
"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Agent for any demand for payment or other drawing under a Letter
of Credit.
"Release" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, disbursement, leaching, or
migration of Hazardous Materials into the indoor or outdoor environment or into
or out of property owned by such Person, including, without limitation, the
movement of Hazardous Materials through or in the air, soil, surface water,
ground water, or property in violation of Environmental Laws.
"Remedial Action" means all actions required to (a) cleanup, remove,
treat, or otherwise address Hazardous Materials in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Hazardous Materials so that they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment, or (c) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"Required Banks" means Banks having (a) sixty-six and two-thirds
percent (66 2/3%) or more of the Commitments or (b), if the Term Commitments
have terminated or have otherwise been fulfilled, sixty-six and two-thirds
percent (66 2/3%) or more of the Revolving Commitments and the aggregate
outstanding principal amount of the Term Loans or (c) if all Commitments have
terminated, sixty-six and two-thirds percent (66 2/3%) or more of the
outstanding principal amount of the Loans and direct or participation interest
in the Letters of Credit.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA.
"Reserve Requirement" means, for any Libor Account for any Interest
Period therefor, the average maximum rate at which reserves (including any
marginal, supplemental, or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion Dollars
against "Eurocurrency Liabilities" as such term is used in Regulation D.
Without limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks by
reason of any Regulatory Change against any category of liabilities which
includes deposits by reference to which the Adjusted Libor Rate is
CREDIT AGREEMENT - PAGE 14
22
to be determined or any category of extensions of credit or other assets which
include Libor Accounts.
"Revolving Commitment" means, as to each Bank, the obligation of such
Bank to make advances of funds and purchase participation interests in Letters
of Credit in an aggregate principal amount at any one time outstanding up to
but not exceeding the amount set forth opposite the name of such Bank on the
signature pages hereto under the heading "Revolving Commitment", as the same
may be reduced or terminated pursuant to Section 2.6 or 12.2. The aggregate
amount of the Revolving Commitments of all Banks equals Sixty Million Dollars
($60,000,000).
"Revolving Loans" means, as to any Bank, the advances made by such
Bank pursuant to Section 2.1.
"Revolving Notes" means the promissory notes provided for by Section
2.2 and all amendments or other modifications thereof.
"Revolving Termination Date" means May 3, 1999, such earlier date on
which the Revolving Commitments terminate as provided in this Agreement or such
later date on which the Revolving Commitments terminates as provided in Section
2.6.
"Standby Letter of Credit"means a Letter of Credit that is not a
Commercial Letter of Credit.
"Subsidiary" means any corporation (or other entity) of which at least
a majority of the outstanding shares of stock (or other ownership interests)
having by the terms thereof ordinary voting power to elect a majority of the
board of directors (or similar governing body) of such corporation (or other
entity) (irrespective of whether or not at the time stock (or other ownership
interests) of any other class or classes of such corporation (or other entity)
shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by the
Borrower or one or more of the Subsidiaries or by the Borrower and one or more
of the Subsidiaries.
"Subsidiary Security Agreements" means the security agreement between
a Granting Subsidiary and the Agent for the benefit of itself and the Banks, in
substantially the form of Exhibit "G", as the same may be amended or otherwise
modified.
"Term Commitment" means, as to each Bank, the obligation of such Bank
to make an advance of funds under Section 3.1 in an aggregate principal amount
up to but not exceeding the amount set forth opposite the name of such Bank on
the signature pages hereto under the heading "Term Commitment", as the same may
be terminated pursuant to Section 12.2. The aggregate amount of the Term
Commitments of all Banks equals Thirty Million Dollars ($30,000,000).
"Term Loan" means, as to any Bank, the advance made by such Bank
pursuant to Section 3.1.
CREDIT AGREEMENT - PAGE 15
23
"Term Loan Termination Date" means March 31, 2001, or such earlier
date on which the Term Commitments terminate as provided in this Agreement.
"Term Notes" means the promissory notes provided for by Section 3.2
and all amendments and other modifications thereto.
"Termination Date" means, either the Term Loan Termination Date or the
Revolving Loan Termination Date.
"Texas Commerce" means Texas Commerce Bank National Association in its
individual capacity and not as Agent.
"Transaction" means the Acquisitions (including the Borrower's
issuance of its capital stock in connection therewith) and the advance of funds
on the Closing Date under the Loan Documents.
"Transaction Documents" means Asset Purchase Agreement, the Purchase
and Sale Agreement and all other agreements, instruments and other
documentation executed and delivered in connection with the Acquisitions, as
any of the forgoing may be amended or otherwise modified in accordance with the
provisions of this Agreement.
"Type" means either type of Account (i.e., either a Base Rate Account
or Libor Account).
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas.
Section 1.2 Other Definitional Provisions. All definitions
contained in this Agreement are equally applicable to the singular and plural
forms of the terms defined. The words "hereof", "herein", and "hereunder" and
words of similar import referring to this Agreement refer to this Agreement as
a whole and not to any particular provision of this Agreement. Unless
otherwise specified, all Article and Section references pertain to this
Agreement. Terms used herein that are defined in the UCC, unless otherwise
defined herein, shall have the meanings specified in the UCC.
Section 1.3 Accounting Terms and Determinations. Except as
otherwise expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Agent and the Banks hereunder
shall be prepared, in accordance with GAAP, on a basis consistent with those
used in the preparation of the financial statements referred to in Section 8.2
hereof. All calculations made for the purposes of determining compliance with
the provisions of this Agreement shall be made by application of GAAP, on a
basis consistent with those used in the preparation of the financial statements
referred to in Section 8.2 hereof. To enable the ready and consistent
determination of compliance by the Borrower with its obligations under this
Agreement, the Borrower will not change the manner in which either the last day
of its Fiscal Year or the last days of the first three Fiscal Quarters of its
Fiscal Year is calculated. In the event any changes in accounting principles
required by GAAP or recommended by the Borrower's certified public accountants
and implemented by the Borrower occur and such changes result in a change in
the
CREDIT AGREEMENT - PAGE 16
24
method of the calculation of financial covenants, standards, or terms under
this Agreement, then the Borrower, the Agent, and the Banks agree to enter into
negotiations in order to amend such provisions of this Agreement so as to
equitably reflect such changes with the desired result that the criteria for
evaluating such covenants, standards, or terms shall be the same after such
changes as if such changes had not been made. Until such time as such an
amendment shall have been executed and delivered by the Agent, the Borrower,
and the Banks, all financial covenants, standards, and terms in this Agreement
shall continue to be calculated or construed as if such changes had not
occurred.
Section 1.4 Time of Day. Unless otherwise indicated, all
references in this Agreement to times of day shall be references to Texas time.
ARTICLE 2
Revolving Credit Facility
Section 2.1 Revolving Commitments. Subject to the terms and
conditions of this Agreement, each Bank severally agrees to make one or more
Revolving Loans to the Borrower from time to time from and including the
Closing Date to but excluding the Revolving Termination Date in an aggregate
principal amount at any time outstanding up to but not exceeding the amount of
such Bank's Revolving Commitment as then in effect; provided, however, (a) the
Outstanding Revolving Credit applicable to a Bank (including the Agent as a
Bank) shall not at any time exceed such Bank's Revolving Commitment and (b) the
Outstanding Revolving Credit shall not at any time exceed the lesser of (i) the
aggregate Revolving Commitments or (ii) the Borrowing Base. Subject to the
foregoing limitations, and the other terms and provisions of this Agreement,
the Borrower may borrow, prepay, and reborrow hereunder the amount of the
Revolving Commitments and may establish Base Rate Accounts and Libor Accounts
thereunder and, until the Revolving Termination Date, the Borrower may Continue
Libor Accounts established under the Revolving Loans or Convert Accounts
established under the Revolving Loans of one Type into Accounts of the other
Type. Accounts of each Type under the Revolving Loan made by each Bank shall
be established and maintained at such Bank's Applicable Lending Office for
Revolving Loans of such Type.
Section 2.2 Notes. The Revolving Loans made by a Bank shall be
evidenced by a single promissory note of the Borrower in substantially the form
of Exhibit "A" hereto, dated the date hereof, payable to the order of such Bank
in a principal amount equal to its Revolving Commitment as originally in effect
and otherwise duly completed.
Section 2.3 Repayment of Revolving Loans. The Borrower shall pay
to the Agent for the account of the Banks the outstanding principal amount of
all of the Revolving Loans on the Revolving Termination Date.
CREDIT AGREEMENT - PAGE 17
25
Section 2.4 Use of Proceeds. The proceeds of the Revolving Loans
shall be used by the Borrower for working capital in the ordinary course of
business, including, without limitation, the satisfaction of Reimbursement
Obligations in accordance with subsection 2.7(b), and other general corporate
purposes.
Section 2.5 Revolving Commitment Fee. The Borrower agrees to pay
to the Agent for the account of each Bank a commitment fee on the daily average
unused amount of such Bank's Revolving Commitment for the period from and
including the Closing Date to and including the Revolving Termination Date, at
a rate equal to the Commitment Fee Rate as determined in accordance with
subsection 4.2(b). For the purpose of calculating the commitment fee
hereunder, the Revolving Commitments shall be deemed utilized by all
outstanding Revolving Loans and all Letter of Credit Liabilities. Accrued
commitment fees under this Section 2.5 shall be payable in arrears on each
Quarterly Payment Date and on the Revolving Termination Date.
Section 2.6 Reduction or Termination of Revolving Commitments and
Extension of Revolving Termination Date. The Borrower shall have the right to
terminate or reduce in part the unused portion of the Revolving Commitments at
any time and from time to time, provided that: (a) the Borrower shall give
notice of each such termination or reduction as provided in Section 5.3; and
(b) each partial reduction shall be in an aggregate amount at least equal to
Five Million Dollars ($5,000,000). The Revolving Commitments may not be
reinstated after they have been terminated or reduced. The Banks shall have no
obligation or commitment to extend the Revolving Termination Date but during
April of each year that the Revolving Commitments are outstanding, at the
request of Borrower, the Banks will conduct a review of Borrower and the
Subsidiaries to determine whether to extend the Revolving Termination Date to a
date one year from the then current Revolving Termination Date. The Banks'
determination as to the extension of the Revolving Termination Date shall be
made by the Banks in their sole, independent discretion and shall be effective
only after an amendment to the definition of Revolving Termination Date is
executed by Borrower, Agent and all the Banks.
Section 2.7 Letters of Credit.
(a) Commitment to Issue. The Borrower may utilize the
Revolving Commitments by requesting that the Agent issue, and the
Agent, subject to the terms and conditions of this Agreement, shall
issue, letters of credit for the Borrower's or one of its
Subsidiaries' account (such letters of credit being hereinafter
referred to as the "Letters of Credit"); provided, however, (i) the
aggregate amount of outstanding Letter of Credit Liabilities shall not
at any time exceed Thirty Million Dollars ($30,000,000); (ii) the
Outstanding Revolving Credit shall not at any time exceed the lesser
of (A) the aggregate Revolving Commitments or (B) the Borrowing Base;
(iii) the Outstanding Revolving Credit applicable to a Bank shall not
at any time exceed such Bank's Revolving Commitment; (iv) the
aggregate amount of outstanding Letter of Credit Liabilities
applicable to Commercial Letters of Credit shall not at any time
exceed Five Million Dollars ($5,000,000); (v) each Commercial Letter
of Credit shall be in a minimum face amount of One Hundred Thousand
Dollars ($100,000); and (vi) the aggregate amount of outstanding
Letter of Credit Liabilities applicable to all Letters of Credit other
than Commercial Letters of Credit shall not at any time exceed
Twenty-Five Million Dollars
CREDIT AGREEMENT - PAGE 18
26
($25,000,000). Upon the date of issue of a Letter of Credit, the
Agent shall be deemed, without further action by any party hereto, to
have sold to each other Bank, and each other Bank shall be deemed,
without further action by any party hereto, to have purchased from the
Agent a participation to the extent of such Bank's Commitment
Percentage in such Letter of Credit and the related Letter of Credit
Liabilities.
(b) Letter of Credit Request Procedure. The Borrower
shall give the Agent at least five (5) Business Days irrevocable prior
notice (effective upon receipt) specifying the date of each Letter of
Credit and the nature of the transactions to be supported thereby.
Upon receipt of such notice the Agent shall promptly notify each other
Bank of the contents thereof and of such Bank's Commitment Percentage
of the amount of the proposed Letter of Credit. Each Letter of Credit
shall have an expiration date that does not extend beyond a date which
is thirty (30) days prior to the Revolving Termination Date, shall be
payable in Dollars, must support a transaction entered into in the
ordinary course of the Borrower's business, must be satisfactory in
form and substance to the Agent, and shall be issued pursuant to such
documentation as the Agent may require, including, without limitation,
the Agent's standard form letter of credit request and reimbursement
agreement; provided, that, in the event of any conflict between the
terms of such agreement and the other Loan Documents, the terms of the
other Loan Documents shall control.
(c) Letter of Credit Fees. The Borrower will pay to the
Agent for the account of each Bank a letter of credit fee on such
Bank's Commitment Percentage of the amount available for drawings
under each Letter of Credit, such letter of credit fee (i) to be paid
in advance on the date of the issuance of the Letter of Credit and on
each Quarterly Payment Date thereafter until the date of expiration or
termination thereof (each such date herein a "Payment Date") and (ii)
to be calculated for the period from and including one Payment Date to
and excluding the next at a rate equal to (A) with respect to Standby
Letters of Credit, the LC Fee Rate in effect on the date of payment
(as determined in accordance with Section 4.2) and (B) with respect to
Commercial Letters of Credit, one half (1/2) of the LC Fee Rate in
effect on the date of payment (as determined in accordance with
Section 4.2). After receiving any payment of any letter of credit
fees under this clause (c), the Agent will promptly pay to each Bank
the letter of credit fees then due such Bank. With respect to each
Letter of Credit, the Borrower will also pay to the Agent for its
account only and on the date of the issuance of the Letter of Credit
an issuance fee equal to one eighth of one percent (0.125%) of the
maximum amount available to be drawn under the Letter of Credit, plus
the Agent's reasonable expenses incurred in issuing the Letter of
Credit.
(d) Funding of Drawings. Upon receipt from the
beneficiary of any Standby Letter of Credit of any demand for payment
or other drawing under such Letter of Credit, the Agent shall promptly
notify the Borrower and each Bank as to the amount to be paid as a
result of such demand or drawing and the respective payment date. Not
later than 11:00 a.m. on the applicable payment date, each Bank will
make available to the Agent, at the Principal Office, in immediately
available funds, an amount equal to such Bank's Commitment Percentage
of the amount to be paid as a result of such demand or drawing
CREDIT AGREEMENT - PAGE 19
27
even if the conditions to a Loan under Article 7 have not been
satisfied. Upon receipt from the beneficiary of any Commercial Letter
of Credit of any demand for payment or other drawing under such
Commercial Letter of Credit, the Agent shall promptly notify the
Borrower as to the amount to be paid as a result of such demand or
drawing and the respective payment date. Prior to each Quarterly
Payment Date the Agent shall notify each Bank as to the amount which
has been paid by the Agent as a result of demands for payments or
other drawings under Commercial Letters of Credit since the prior
Quarterly Payment Date (or since the Closing Date with respect to the
first Quarterly Payment Date hereunder) for which the Agent has not
received reimbursement under Section 2.7(e) (the "Unreimbursed
Commercial Draws"). Not later than 11:00 a.m. on the applicable
Quarterly Payment Date, each Bank will make available to the Agent, at
the Principal Office, in immediately available funds, an amount equal
to such Bank's Commitment Percentage of the Unreimbursed Commercial
Draws even if the conditions to a Loan under Article 7 have not been
satisfied.
(e) Reimbursements. The Borrower shall be irrevocably
and unconditionally obligated to immediately reimburse the Agent for
any amounts paid by the Agent upon any demand for payment or drawing
under any Letter of Credit, without presentment, demand, protest, or
other formalities of any kind. All payments on the Reimbursement
Obligations shall be made to the Agent at the Principal Office for the
account of the Agent in Dollars and in immediately available funds,
without setoff, deduction, or counterclaim not later than 3:00 p.m.
on the date of the corresponding payment under the Letter of Credit by
the Agent. Subject to the other terms and conditions of this
Agreement, such reimbursement may be made by the Borrower requesting a
Revolving Loan in accordance with Section 5.1 the proceeds of which
shall be credited against the Borrower's Reimbursement Obligations.
The Agent will pay to each Bank such Bank's Commitment Percentage of
all amounts received from the Borrower for application in payment, in
whole or in part, to the Reimbursement Obligation in respect of any
Letter of Credit, but only to the extent such Bank has made payment to
the Agent in respect of such Letter of Credit pursuant to clause (d)
of this Section 2.7.
(f) Reimbursement Obligations Absolute. The
Reimbursement Obligations of the Borrower under this Agreement shall
be absolute, unconditional, and irrevocable, and shall be performed
strictly in accordance with the terms of the Loan Documents under all
circumstances whatsoever and the Borrower hereby waives any defense to
the payment of the Reimbursement Obligations based on any circumstance
whatsoever, including without limitation, in either case, the
following circumstances: (i) any lack of validity or enforceability of
any Letter of Credit or any other Loan Document; (ii) any amendment or
waiver of or any consent to departure from any Loan Document; (iii)
the existence of any claim, set-off, counterclaim, defense, or other
rights which the Borrower, any Obligated Party, or any other Person
may have at any time against any beneficiary of any Letter of Credit,
the Agent, any Bank, or any other Person, whether in connection with
any Loan Document or any unrelated transaction; (iv) any statement,
draft, or other documentation presented under any Letter of Credit
proving to be forged, fraudulent, invalid, or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect whatsoever; or (v) payment by the Agent under any Letter of
Credit against
CREDIT AGREEMENT - PAGE 20
28
presentation of a draft or other document that does not comply with
the terms of such Letter of Credit; provided, that Reimbursement
Obligations with respect to a Letter of Credit may be subject to
avoidance by the Borrower if the Borrower proves in a final
nonappealable judgment that it was damaged and that such damage arose
directly from the Agent's willful misconduct or gross negligence in
determining whether the documentation presented under the Letter of
Credit in question complied with the terms thereof or in performing
any other express obligation Agent may have under this Agreement or
any other Loan Document in making any payment pursuant to any Letter
of Credit.
(g) Issuer Responsibility. In determining whether to pay
under any Letter of Credit, Agent shall be responsible only to
determine that the documents and certificates (if any) required to be
delivered under the Letter of Credit have been delivered and that they
comply on their face with the requirements of such Letter of Credit.
The Borrower assumes all risks of the acts or omissions of any
beneficiary of any Letter of Credit with respect to its use of such
Letter of Credit. Except as expressly set forth in this Agreement,
neither the Agent, any Bank, nor any of their respective officers or
directors shall have any responsibility or liability to the Borrower
or any other Person for: (a) the failure of any draft to bear any
reference or adequate reference to any Letter of Credit, or the
failure of any documents to accompany any draft at negotiation, or the
failure of any Person to surrender or to take up any Letter of Credit
or to send documents apart from drafts as required by the terms of any
Letter of Credit, or the failure of any Person to note the amount of
any instrument on any Letter of Credit, (b) errors, omissions,
interruptions, or delays in transmission or delivery of any messages;
(c) the validity, sufficiency, or genuineness of any draft or other
document, or any endorsement(s) thereon, even if any such draft,
document, or endorsement should in fact prove to be in any and all
respects invalid, insufficient, fraudulent, or forged or any statement
therein is untrue or inaccurate in any respect; or (d) the payment by
the Agent to the beneficiary of any Letter of Credit against
presentation of any draft or other document that does not comply with
the terms of the Letter of Credit. The Borrower shall have a claim
against the Agent, and the Agent shall be liable to the Borrower, to
the extent of any direct, but not indirect, consequential or punitive,
damages suffered by the Borrower which the Borrower proves in a final
nonappealable judgment were caused by (i) the Agent's willful
misconduct or gross negligence in determining whether documents
presented under any Letter of Credit complied with the terms thereof
or (ii) the Agent's willful failure to pay under any Letter of Credit
after presentation to it of documentation strictly complying with the
terms and conditions of such Letter of Credit. The Agent may accept
documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
CREDIT AGREEMENT - PAGE 21
29
ARTICLE 3
Term Loan
Section 3.1 Term Commitments. Subject to the terms and
conditions of this Agreement, each Bank severally agrees to make an advance of
funds to the Borrower in the amount of its Term Commitment on the Closing Date.
The Borrower may establish Base Rate Accounts or Libor Accounts thereunder and,
until the Term Loan Termination Date, the Borrower may Continue Libor Accounts
established under the Term Loans or Convert Accounts established under the Term
Loans of one Type into Accounts of another Type. Accounts of each Type
established under the Term Loans made by each Bank shall be made and maintained
at such Bank's Applicable Lending Office for Accounts of such Type.
Section 3.2 Notes. The Term Loan made by a Bank shall be
evidenced by a single promissory note of the Borrower in substantially the form
of Exhibit "B" hereto, dated the date hereof, payable to the order of such Bank
in a principal amount equal to its Term Commitment as originally in effect and
otherwise duly completed.
Section 3.3 Repayment of Term Loans. The Borrower shall pay to
the Agent for the account of the Banks the aggregate outstanding principal
amount of all of the Term Loans as follows:
(a) Fifteen (15) consecutive quarterly installments due
and payable on each Quarterly Payment Date as follows:
- --------------------------------------------------------------------
Payment Date Amount
- --------------------------------------------------------------------
June 30, 1997 $1,500,000
- --------------------------------------------------------------------
September 30, 1997 $1,500,000
- --------------------------------------------------------------------
December 31, 1997 $1,500,000
- --------------------------------------------------------------------
March 31, 1998 $1,500,000
- --------------------------------------------------------------------
June 30, 1998 $1,687,500
- --------------------------------------------------------------------
September 30, 1998 $1,687,500
- --------------------------------------------------------------------
December 31, 1998 $1,687,500
- --------------------------------------------------------------------
March 31, 1999 $1,687,500
- --------------------------------------------------------------------
June 30, 1999 $2,062,500
- --------------------------------------------------------------------
September 30, 1999 $2,062,500
- --------------------------------------------------------------------
December 31, 1999 $2,062,500
- --------------------------------------------------------------------
CREDIT AGREEMENT - PAGE 22
30
- --------------------------------------------------------------------
March 31, 2000 $2,062,500
- --------------------------------------------------------------------
June 30, 2000 $2,250,000
- --------------------------------------------------------------------
September 30, 2000 $2,250,000
- --------------------------------------------------------------------
December 31, 2000 $2,250,000
- --------------------------------------------------------------------
(b) one final installment in the amount of all
outstanding principal of the Term Loans due and payable on the Term
Loan Termination Date.
Section 3.4 Use of Proceeds. The proceeds of Term Loans shall be
used by the Borrower to finance the Acquisitions.
ARTICLE 4
Interest and Fees
Section 4.1 Interest Rate. Subject to Section 14.12, the
Borrower shall pay to the Agent for the account of each Bank interest on the
unpaid principal amount of each Loan made by such Bank for the period
commencing on the date of such Loan to but excluding the date such Loan is due,
at a fluctuating rate per annum equal to the Applicable Rate. The term
"Applicable Rate" means (i) during the period that such Loans or portions
thereof are subject to a Base Rate Account, the Base Rate plus the Base Margin
and (ii) during the period that such Loans or portions thereof are subject to a
Libor Account, the Adjusted Libor Rate plus the Libor Rate Margin;
Section 4.2 Determinations of Margins and Fees. The margins
identified in Section 4.1 and the fees payable under Section 2.5 and subsection
2.7(c) shall be defined and determined as follows:
(a) "Base Margin" shall mean (i) during the period
commencing on the Closing Date and ending on but not including the
first Adjustment Date (as defined below), one-quarter of one percent
(0.25%) per annum and (ii) during each period, from and including one
Adjustment Date to but excluding the next Adjustment Date (herein a
"Calculation Period"), the percent per annum set forth in the table
below in this Section 4.2 under the heading "Base Margin" opposite the
Funded Debt to EBITDA Ratio which corresponds to the Funded Debt to
EBITDA Ratio set forth in, and as calculated in accordance with, the
applicable Compliance Certificate.
(b) "Commitment Fee Rate" shall mean (i) during the
period commencing on the Closing Date and ending on but not including
the first Adjustment Date, two-tenths of one percent (0.20%) per annum
and (ii) during each Calculation Period, the percent per annum set
forth in the table below under the heading "Commitment Fee" opposite
the Funded Debt to EBITDA Ratio which corresponds to the Funded Debt
to EBITDA Ratio set forth in, and as calculated in accordance with,
the applicable Compliance Certificate.
CREDIT AGREEMENT - PAGE 23
31
(c) "LC Fee Rate" shall mean (i) during the period
commencing on the Closing Date and ending on but not including the
first Adjustment Date, one and three-eights of one percent (1.375%)
per annum and (ii) during each Calculation Period, the percent per
annum set forth in the table below under the heading "LC Fee" opposite
the Funded Debt to EBITDA Ratio which corresponds to the Funded Debt
to EBITDA Ratio set forth in, and as calculated in accordance with,
the applicable Compliance Certificate.
(d) "Libor Rate Margin" shall mean (i) during the period
commencing on the Closing Date and ending on but not including the
first Adjustment Date, one and three-eighths of one percent (1.375%)
per annum and (ii) during each Calculation Period, the percent per
annum set forth in the table below under the heading Libor Margin
opposite the Funded Debt to EBITDA Ratio which corresponds to the
Funded Debt to EBITDA Ratio set forth in, and as calculated in
accordance with, the applicable Compliance Certificate.
=================================================================================================================
Funded Debt to EBITDA Base Margin Commitment Fee Libor Margin
--------------------- ----------- -------------- ------------
and LC Fee
------------
- -----------------------------------------------------------------------------------------------------------------
Greater than or equal to 3.00 0.75% 0.25% 2.00%
- -----------------------------------------------------------------------------------------------------------------
Greater than or equal to 2.50 but less than 3.00 0.50% 0.25% 1.625%
- -----------------------------------------------------------------------------------------------------------------
Greater than or equal to 2.00 but less than 2.50 0.25% 0.20% 1.375%
- -----------------------------------------------------------------------------------------------------------------
Greater than or equal to 1.50 but less than 2.00 0.00% 0.20% 1.125%
- -----------------------------------------------------------------------------------------------------------------
Greater than or equal to 1.00 but less than 1.50 0.00% 0.125% 1.00%
- -----------------------------------------------------------------------------------------------------------------
Less than 1.00 0.00% 0.125% 0.75%
- -----------------------------------------------------------------------------------------------------------------
Upon delivery of the Compliance Certificate pursuant to subsection 9.1(c) in
connection with the financial statements of the Borrower and the Subsidiaries
required to be delivered pursuant to Section 9.1(b) at the end of each Fiscal
Quarter commencing with such Compliance Certificate delivered at the end of the
Fiscal Quarter ending on September 30, 1996, the Base Margin, the Libor Rate
Margin (for Interest Periods commencing after the applicable Adjustment Date),
the Commitment Fee Rate and the LC Fee Rate shall automatically be adjusted in
accordance with the Funded Debt to EBITDA Ratio set forth therein and the table
set forth above, such automatic adjustment to take effect as of the first
Business Day after the receipt by the Agent of the related Compliance
Certificate pursuant to Section 9.1(c) (each such Business Day when such
margins or fees change pursuant to this sentence or the next following
sentence, herein an "Adjustment Date"). If the Borrower fails to deliver such
Compliance Certificate which so sets forth the Funded Debt to EBITDA Ratio
within the period of time required by subsection 9.1(c): (i) the Base Margin
shall automatically be adjusted to three-quarters of one percent (0.75%) per
annum; (ii) the Libor Rate Margin (for Interest Periods commencing after the
applicable Adjustment Date) shall automatically be adjusted to two percent
(2.00%) per annum; (iii) the Commitment Fee Rate shall automatically be
adjusted to one-quarter of one percent (0.25%); and (iv) the LC Fee Rate shall
automatically be adjusted two percent (2%) per annum, such automatic
adjustments to take effect as of the first Business Day after the last day on
which the Borrower was required to deliver the applicable Compliance
Certificate in accordance with Section 9.1(c) and to remain in effect until
subsequently adjusted in accordance herewith upon the delivery of a Compliance
Certificate.
CREDIT AGREEMENT - PAGE 24
32
Section 4.3 Payment Dates. Accrued interest on the Loans shall
be due and payable as follows: (i) in the case of Loans subject to Base Rate
Accounts, on each Quarterly Payment Date and on the applicable Termination
Date; (ii) in the case of Loans subject to Libor Accounts and with respect to
each such Account, on the last day of the Interest Period with respect thereto
and on the applicable Termination Date.
Section 4.4 Default Interest. Notwithstanding the foregoing, the
Borrower will pay to the Agent for the account of each Bank interest at the
applicable Default Rate on any principal of any Loan made by such Bank, any
Reimbursement Obligation, and (to the fullest extent permitted by law) any
other amount payable by the Borrower under any Loan Document to or for the
account of the Agent or such Bank, that is not paid in full when due (whether
at stated maturity, by acceleration, or otherwise), for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Interest payable at the Default Rate shall be payable from time to time
on demand.
Section 4.5 Conversions and Continuations of Accounts. Subject
to Section 5.2, the Borrower shall have the right from time to time to Convert
all or part of any Base Rate Account in existence under a Loan into a Libor
Account under the same Loan or to Continue Libor Accounts in existence under a
Loan as Libor Accounts under the same Loan, provided that: (a) the Borrower
shall give the Agent notice of each such Conversion or Continuation as provided
in Section 5.3; (b) a Libor Account may only be Converted on the last day of
the Interest Period therefore; and (c) except for Conversions into Base Rate
Accounts, no Conversions or Continuations shall be made while a Default has
occurred and is continuing.
Section 4.6 Computations. Interest and fees payable by the
Borrower hereunder and under the other Loan Documents shall be computed as
follows: (i) with respect to Libor Accounts on the basis of a year of 360 days
and the actual number of days elapsed (including the first day but excluding
the last day) occurring in the period for which payable unless such calculation
would result in a usurious rate, in which case interest shall be calculated on
the basis of a year of 365 or 366 days, as the case may be; (ii) with respect
to Base Rate Accounts (A) if based on the Prime Rate, on the basis of a year of
365/366 days and the actual number of days elapsed (including the first day but
excluding the last day) occurring in the period for which payable or (B) if
based on the Federal Funds Effective Rate on the basis of a year of 360 days
and the actual number of days elapsed (including the first day but excluding
the last day) occurring in the period for which payable unless such calculation
would result in a usurious rate, in which case interest shall be calculated on
the basis of a year of 365 or 366 days, as the case may be.
ARTICLE 5
Administrative Matters
Section 5.1 Borrowing Procedure. The Borrower shall give the
Agent, and the Agent will give the Banks, notice of each borrowing under any
Commitment in accordance with Section 5.3. Not later than 1:00 p.m. on the
date specified for each borrowing under the
CREDIT AGREEMENT - PAGE 25
33
applicable Commitment (or, with respect to the borrowing under the Term
Commitments on the Closing Date, not later than 4:00 p.m. on the Closing Date)
each Bank will make available to the Agent the amount of the Loan to be made by
it on such date, at the Principal Office, in immediately available funds, for
the account of the Borrower. The amount so received by the Agent shall,
subject to the terms and conditions of this Agreement, be made available to the
Borrower by (a) depositing the same, in immediately available funds, in an
account of the Borrower (designated by the Borrower) maintained with the Agent
at the Principal Office or (b) wire transferring such funds to a Person or
Persons designated by the Borrower in writing.
Section 5.2 Minimum Amounts. Except for prepayments pursuant to
Article 6, each borrowing under a Loan and each prepayment of principal of a
Loan shall be in an amount at least equal to the amount set forth below for the
applicable Loan or any larger amounts in the increments set forth below:
-------------------------------------------
Revolving Loan Term Loan
-------------------------------------------
$500,000 $1,000,000
-------------------------------------------
Increments
-------------------------------------------
$100,000 $100,000
-------------------------------------------
Except for Conversions pursuant to Article 6, each Libor Account applicable to
a Loan shall be in a minimum principal amount of One Million Dollars
($1,000,000) or any larger amount in increments of Five Hundred Thousand
Dollars ($500,000).
Section 5.3 Certain Notices. Notices by the Borrower to the
Agent of terminations or reductions of Commitments, of borrowings and
prepayments of Loans, and of Conversions and Continuations of Accounts shall be
irrevocable and shall be effective only if received by the Agent not later than
10:00 a.m. (a) on the Business Day of the borrowing, prepayment or repayment of
Loans subject to Base Rate Accounts or of the Conversion into Base Rate
Accounts and (b) with respect to any other repayments, terminations,
reductions, borrowings, Conversions, Continuations, or prepayments, on the
Business Day which is the number of Business Days prior to the day of the
relevant action specified below:
- ------------------------------------------------------------------------------------------------------------
Action Number of Business Days Prior
to Action
- ------------------------------------------------------------------------------------------------------------
Termination or reduction of Commitments 5
- ------------------------------------------------------------------------------------------------------------
Borrowing of Loans, prepayment of Revolving Loans, or repayment of Loans 3
subject to Libor Accounts, Conversions into or Continuations as Libor
Accounts
- ------------------------------------------------------------------------------------------------------------
CREDIT AGREEMENT - PAGE 26
34
Any notices of the type described in this Section 5.3 which are received by the
Agent after 10:00 a.m. on a Business Day shall be deemed to be received and
shall be effective on the next Business Day. Each such notice of termination
or reduction shall specify the applicable Commitments to be affected and the
amount of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation, or prepayment shall: (a) specify the Loans
to be borrowed or prepaid or the Accounts to be Converted or Continued; (b) the
amount (subject to Section 5.2 hereof) to be borrowed, Converted, Continued, or
prepaid; (c) in the case of a Conversion, the Type of Account to result from
such Conversion; (d) in the case of a borrowing the Type of Account or Accounts
to be applicable to such borrowing and the amounts thereof; (e) in the event a
Libor Account is selected, the duration of the Interest Period therefor; and
(f) the date of borrowing, Conversion, Continuation, or prepayment (which shall
be a Business Day). The Agent shall notify the Banks of the contents of each
such notice on the date of its receipt of the same or, if received on or after
10:00 a.m. on a Business Day, on the next Business Day. In the event the
Borrower fails to select the Type of Account applicable to a Loan, or the
duration of any Interest Period for any Libor Account, within the time period
and otherwise as provided in this Section 5.3, such Account (if outstanding as
a Libor Account) will be automatically Converted into a Base Rate Account on
the last day of the preceding Interest Period for such Account or (if
outstanding as a Base Rate Account) will remain as, or (if not then
outstanding) will be made as, a Base Rate Account. The Borrower may not borrow
any Loans subject to a Libor Account, Convert any Base Rate Accounts into Libor
Accounts, or Continue any Libor Account as a Libor Account if the Applicable
Rate for such Libor Accounts would exceed the Maximum Rate.
Section 5.4 Prepayments.
(a) Mandatory.
(i) Revolving Loans. If at any time the
Outstanding Revolving Credit exceeds the Borrowing Base, the
Borrower shall, within one (1) Business Day after the
occurrence thereof, prepay the outstanding Revolving Loans by
the amount of the excess together with any amount due under
Section 6.5 or if no Revolving Loans are outstanding and the
Outstanding Revolving Credit exceeds the Borrowing Base,
immediately pledge to the Agent cash or cash equivalents in an
amount equal to the excess as security for the Obligations.
(ii) Term Loans. If on any date the Borrowing
Base is a negative number, the Borrower shall, within one (1)
Business Day after the occurrence thereof, prepay the Term
Loans in an aggregate principal amount sufficient to cause the
Borrowing Base to equal or exceed zero. Within one hundred
twenty (120) days after the end of each Fiscal Year beginning
with the Fiscal Year ending March 31, 1997, Borrower shall
prepay the Term Loans in an amount equal to twenty-five
percent (25%) of the Excess Cash Flow for such prior Fiscal
Year calculated on the basis of the audited financial
statement for such Fiscal Year delivered to Agent pursuant to
Section 9.1(a). Each prepayment under this subsection
5.4(a)(ii) shall be accompanied with accrued and unpaid
interest on the amount prepaid to the date of prepayment and
any amounts payable under Section
CREDIT AGREEMENT - PAGE 27
35
6.5 and shall be applied to the installments of principal due
under the Term Loans in the inverse order of maturity.
(b) Optional. Subject to Section 5.2 and the provisions
of this clause (b), the Borrower may, at any time and from time to
time without premium or penalty upon prior notice to the Agent as
specified in Section 5.3, prepay or repay any Loan in full or in part.
Any optional prepayment of the Term Loan shall be accompanied with
accrued interest on the amount prepaid to the date of prepayment and
any partial prepayments thereof shall be applied to the principal
installments due in the inverse order of maturity. Loans subject to a
Libor Account may be prepaid or repaid only on the last day of the
Interest Period applicable thereto unless (i) the Borrower pays to the
Agent for the account of the applicable Banks any amounts due under
Section 6.5 as a result of such prepayment or repayment or (ii) after
giving effect to such prepayment or repayment the aggregate principal
amount of the Libor Accounts applicable to the Loan being prepaid or
repaid having Interest Periods that end after such payment date shall
be equal to or less than the principal amount of such Loan after such
prepayment or repayment.
Section 5.5 Method of Payment. Except as otherwise expressly
provided herein, all payments of principal, interest, and other amounts to be
made by the Borrower or any Obligated Party under the Loan Documents shall be
made to the Agent at the Principal Office for the account of each Bank's
Applicable Lending Office in Dollars and in immediately available funds,
without setoff, deduction, or counterclaim, not later than 1:00 p.m. on the
date on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day). The Borrower and each Obligated Party shall, at the time of
making each such payment, specify to the Agent the sums payable under the Loan
Documents to which such payment is to be applied (and in the event that the
Borrower fails to so specify, or if an Event of Default has occurred and is
continuing, the Agent may apply such payment and any proceeds of any Collateral
to the Obligations in such order and manner as it may elect in its sole
discretion, subject to Section 5.6 hereof). Each payment received by the Agent
under any Loan Document for the account of a Bank shall be paid to such Bank by
3:00 p.m. on the date the payment is deemed made to the Agent in immediately
available funds, for the account of such Bank's Applicable Lending Office.
Whenever any payment under any Loan Document shall be stated to be due on a day
that is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of the payment of interest and commitment fee, as the case may be.
Section 5.6 Pro Rata Treatment. Except to the extent otherwise
provided herein: (a) each Loan shall be made by the Banks, each payment of
commitment fees under Section 2.5 and letter of credit fees under subsection
2.7(c) shall be made for the account of the Banks, and each termination or
reduction of the Commitments shall be applied to the Commitments of the Banks,
pro rata according to their respective Commitment Percentages; (b) the making,
Conversion, and Continuation of Accounts of a particular Type (other than
Conversions provided for by Section 6.4) shall be made pro rata among the Banks
holding Accounts of such Type according to their respective Commitment
Percentages; (c) each payment and prepayment of principal of or interest on
Loans or Reimbursement Obligations by the Borrower shall be made to the Agent
for the account of the Agent or the Banks holding such Loans or Reimbursement
Obligations (or
CREDIT AGREEMENT - PAGE 28
36
participation interests therein) pro rata in accordance with the respective
unpaid principal amounts of such Loans or participation interests held by the
Agent or such Banks; (d) proceeds of Collateral shall be shared by the Agent
and the Banks pro rata in accordance with the respective unpaid principal
amounts of and interest on the Obligations then due the Agent and the Banks;
and (e) the Banks (other than the Agent) shall purchase from the Agent
participations in the Letters of Credit to the extent of their respective
Commitment Percentages. If at any time payment, in whole or in part, of any
amount distributed by the Agent hereunder is rescinded or must otherwise be
restored or returned by Agent as a preference, fraudulent conveyance, or
otherwise under any bankruptcy, insolvency, or similar law, then each Person
receiving any portion of such amount agrees, upon demand, to return the portion
of such amount it has received to the Agent.
Section 5.7 Sharing of Payments. If a Bank shall obtain payment
of any principal of or interest on any of the Obligations due to such Bank
hereunder directly (and not through the Agent) through the exercise of any
right of set-off, banker's lien, counterclaim, or similar right, or otherwise,
it shall promptly purchase from the other Banks participations in the
Obligations held by the other Banks in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that all the
Banks shall share the benefit of such payment pro rata in accordance with the
unpaid principal of and interest on the Obligations then due to each of them.
To such end, all of the Banks shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if all or any
portion of such excess payment is thereafter rescinded or must otherwise be
restored. The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any Bank so purchasing a participation in the
Obligations held by the other Banks may exercise all rights of set-off,
banker's lien, counterclaim, or similar rights with respect to such
participation as fully as if such Bank were a direct holder of Obligations in
the amount of such participation. Nothing contained herein shall require any
Bank to exercise any such right or shall affect the right of any Bank to
exercise, and retain the benefits of exercising, any such right with respect to
any other indebtedness or obligation of the Borrower.
Section 5.8 Non-Receipt of Funds by the Agent. Unless the Agent
shall have been notified by a Bank or the Borrower (the "Payor") prior to the
date on which such Bank is to make payment to the Agent hereunder or the
Borrower is to make a payment to the Agent for the account of one or more of
the Banks, as the case may be (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt, that the Payor does
not intend to make the Required Payment to the Agent, the Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient on such date and, if the Payor has not in fact made the
Required Payment to the Agent, (a) the recipient of such payment shall, on
demand, pay to the Agent the amount made available to it together with interest
thereon in respect of the period commencing on the date such amount was so made
available by the Agent until the date the Agent recovers such amount at a rate
per annum equal to the Federal Funds Effective Rate for such period and (b) the
Agent shall be entitled to offset against any and all sums to be paid to such
recipient, the amount calculated in accordance with the foregoing clause (a).
Section 5.9 Withholding Taxes. All payments by the Borrower of
amounts payable under any Loan Document shall be payable without deduction for
or on account of any present
CREDIT AGREEMENT - PAGE 29
37
or future taxes, duties, or other charges levied or imposed by the United
States of America or by the government of any jurisdiction outside the United
States of America or by any political subdivision or taxing authority of or in
any of the foregoing through withholding or deduction with respect to any such
payments (but excluding any tax imposed on or measured by the net income or
profit of a Bank pursuant to the laws of the jurisdiction in which it is
organized or in which the principal office or Applicable Lending Office of such
Bank is located or any subdivision thereof or therein). If any such taxes,
duties, or other charges are so levied or imposed, the Borrower will make
additional payments in such amounts so that every net payment of amounts
payable by it under any Loan Document, after withholding or deduction for or on
account of any such present or future taxes, duties, or other charges, will not
be less than the amount provided for herein or therein, provided that the
Borrower may withhold to the extent required by law and shall have no
obligation to pay such additional amounts to any Bank to the extent that such
taxes, duties, or other charges are levied or imposed by reason of the failure
or inability of such Bank to comply with the provisions of Section 5.10. The
Borrower shall furnish promptly to the Agent for distribution to each affected
Bank, as the case may be, official receipts evidencing any such withholding or
reduction.
Section 5.10 Withholding Tax Exemption. Each Bank that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Borrower and the Agent two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224 (or a
successor form), certifying in either case that such Bank is entitled to
receive payments from the Borrower under any Loan Document without deduction or
withholding of any United States federal income taxes. Each Bank which so
delivers a Form 1001 or 4224 further undertakes to deliver to the Borrower and
the Agent two (2) additional copies of such form (or a successor form) on or
before the date such form expires or becomes obsolete or after the occurrence
of any event requiring a change in the most recent form so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, in each case certifying that such Bank
is entitled to receive payments from the Borrower under any Loan Document
without deduction or withholding of any United States federal income taxes,
unless an event (including without limitation any change in treaty, law, or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Bank from duly completing and delivering any such form with
respect to it and such Bank advises the Borrower and the Agent that it is not
capable of receiving such payments without any deduction or withholding of
United States federal income tax.
Section 5.11 Participation Obligations Absolute; Failure to Fund
Participation. The obligations of a Bank to fund its participation in the
Letters of Credit in accordance with the terms hereof shall be absolute,
unconditional, and irrevocable and shall be performed strictly in accordance
with the terms of the Loan Documents under all circumstances whatsoever,
including without limitation, the following circumstances: (a) any lack of
validity of any Loan Document; (b) the occurrence of any Default; (c) the
existence of any claim, set-off, counterclaim, defenses, or other rights which
such Bank, the Borrower, any Obligated Party, or any other Person may have; (d)
the occurrence of any event that has or could reasonably be expected to have a
Material Adverse Effect; (e) the failure of any condition to a Loan under
Article 7 to be satisfied; (f) the fact that after giving effect to the funding
of the participation the Outstanding Revolving Credit
CREDIT AGREEMENT - PAGE 30
38
may exceed the Borrowing Base; or (g) any other circumstance whatsoever,
whether or not similar to any of the foregoing; provided that, the obligations
of a Bank to fund its participation in a Letter of Credit may be subject to
avoidance by a Bank if such Bank proves in a final nonappealable judgment that
it was damaged and that such damage arose directly from the Agent's willful
misconduct or gross negligence in determining whether (i) the conditions set
forth in Article 7 to the issuance of the Letter of Credit in question were
satisfied at the time of such issuance or (ii) the documentation presented
under the Letter of Credit in question complied with the terms thereof. If a
Bank fails to fund its participation in a Letter of Credit as required hereby,
such Bank shall, subject to the foregoing proviso, remain obligated to pay to
the Agent the amount it failed to fund on demand together with interest thereon
in respect of the period commencing on the date such amount should have been
funded until the date the amount was actually funded to the Agent at a rate per
annum equal to the Federal Funds Effective Rate for such period and the Agent
shall be entitled to offset against any and all sums to be paid to such Bank
hereunder the amount due the Agent under this sentence.
Section 5.12 Release of Collateral. Agent and each Bank agrees
that if as of the end of any Fiscal Quarter beginning with the Fiscal Quarter
ending December 31, 1996, the Adjusted Debt Ratio calculated as of such Fiscal
Quarter end and as calculated for the previous Fiscal Quarter end is less than
2.0 to 1.0 for each such Fiscal Quarter end, then Borrower shall notify Agent
and within sixty (60) days of Agent's receipt of such notice if no Default
exists, Agent shall release all the Liens on the Collateral and it shall not be
necessary for the Agent to obtain any further consent or agreement from any
Bank for such release. The term "Adjusted Debt Ratio" means, as of any Fiscal
Quarter end, the ratio of Average Funded Debt to Adjusted EBITDA, both
calculated for the Fiscal Quarter then ending. "Average Funded Debt" means for
any period, the daily average balance of Funded Debt for such period.
Section 5.13 Collateral Account. No assets are required to be
held in or subject to the Collateral Account on the Closing Date. However, in
order to create additional availability under the Borrowing Base or to
otherwise comply with its obligations under Section 5.4(a)(i), the Borrower has
the option of creating (or shall create if required under Section 5.4(a)(i))
the Collateral Account and deposit cash or other assets therein. The cash
deposited in the Collateral Account may be invested by the Agent as directed by
Borrower in accordance with the Agent's standard investment agreements and
Section 10.5 hereof. All interest and other income earned on the assets held
in or subject to the Collateral Account shall be redeposited therein. As long
as the Outstanding Revolving Credit is supported through the Borrowing Base by
the value of the assets held in the Collateral Account or as long as a Default
exists, the Agent shall have no obligation to release its Lien in the
Collateral Account or the assets held therein or pursuant thereto except as may
otherwise be provided in Section 5.12 or as provided in the next sentence. If
at any time the Borrowing Base exceeds the Outstanding Revolving Credit and no
Default exists, within five (5) days of Agent's receipt of Borrower's written
request, the Agent shall release from the Collateral Account and the Liens
relating thereto, so much of the assets held in the Collateral Account that
have a market value equal to the amount of the excess and it shall not be
necessary for the Agent to obtain any further consent or agreement from any
Bank for such release.
CREDIT AGREEMENT - PAGE 31
39
ARTICLE 6
Yield Protection and Illegality
Section 6.1 Additional Costs.
(a) The Borrower shall pay directly to each Bank from
time to time such amounts as such Bank may determine to be necessary
to compensate it for any reasonable costs incurred by such Bank which
such Bank determines are attributable to its making or maintaining of
any Loans subject to Libor Accounts or Letters of Credit hereunder or
its obligation to make any of such Loans hereunder or issue or
participate in any Letter of Credit, or any reduction in any amount
receivable by such Bank hereunder in respect of any such Loans or
Letters of Credit or such obligation (such increases in costs and
reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts
payable to such Bank under this Agreement or its Notes in
respect of any of such Loans (other than franchise taxes and
taxes imposed on the overall net income of such Bank or its
Applicable Lending Office for any of such Loans by the United
States of America or the jurisdiction in which such Bank has
its Principal Office or such Applicable Lending Office);
(ii) imposes or modifies any reserve, special
deposit, minimum capital, capital ratio, or similar
requirement relating to any extensions of credit or other
assets of, or any deposits with or other liabilities or
commitments of, such Bank (including any of such Loans or any
deposits referred to in the definition of "Libor Rate" in
Section 1.1 hereof); or
(iii) imposes any other condition affecting this
Agreement or the Notes or any of such extensions of credit or
liabilities or commitments.
Each Bank will notify the Borrower (with a copy to the Agent) of any
event occurring after the date of this Agreement which will entitle
such Bank to compensation pursuant to this subsection 6.1(a) as
promptly as practicable after it obtains knowledge thereof and
determines to request such compensation, and will designate a
different Applicable Lending Office for the Loans affected by such
event if such designation will avoid the need for, or reduce the
amount of, such compensation and will not, in the sole opinion of such
Bank, violate any law, rule, or regulation or be in any way
disadvantageous to such Bank. Each Bank will furnish the Borrower
with a certificate setting forth the basis and the amount of each
request of such Bank for compensation under this subsection 6.1(a). If
any Bank requests compensation from the Borrower under this subsection
6.1(a), the Borrower may, by notice to such Bank (with a copy to the
Agent) suspend the obligation of such
CREDIT AGREEMENT - PAGE 32
40
Bank to issue or participate in Letters of Credit or to make Loans
subject to Libor Accounts or Continue Libor Accounts as Libor Accounts
or Convert Base Rate Accounts into Libor Accounts until the Regulatory
Change giving rise to such request ceases to be in effect (in which
case the provisions of Section 6.4 hereof shall be applicable with
respect to such Libor Accounts).
(b) Without limiting the effect of the foregoing
provisions of this Section 6.1, in the event that, by reason of any
Regulatory Change, any Bank either (i) incurs Additional Costs based
on or measured by the excess above a specified level of the amount of
a category of deposits or other liabilities of such Bank which
includes deposits by reference to which the interest rate on the Loans
subject to Libor Accounts is determined as provided in this Agreement
or a category of extensions of credit or other assets of such Bank
which includes Loans subject to Libor Accounts or (ii) becomes subject
to restrictions on the amount of such a category of liabilities or
assets which it may hold, then, if such Bank so elects by notice to
the Borrower (with a copy to the Agent), the obligation of such Bank
to make Loans subject to Libor Accounts or Continue Libor Accounts as
Libor Accounts or Convert Base Rate Accounts into Libor Accounts
hereunder shall be suspended until the Regulatory Change giving rise
to such request ceases to be in effect (in which case the provisions
of Section 6.4 hereof shall be applicable).
(c) Determinations and allocations by any Bank for
purposes of this Section 6.1 of the effect of any Regulatory Change on
its costs of maintaining its obligation to make Loans or issue or
participate in Letters of Credit or of making or maintaining Loans or
issuing or participating in Letters of Credit or on amounts receivable
by it in respect of Loans or Letters of Credit, and of the additional
amounts required to compensate such Bank in respect of any Additional
Costs, shall, absent manifest error, be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
Section 6.2 Limitation on Libor Accounts. Anything herein to the
contrary notwithstanding, if with respect to any Libor Accounts under a Loan
for any Interest Period therefor:
(a) The Agent determines (which determination shall be
conclusive) that quotations of interest rates for the relevant
deposits referred to in the definition of "Libor Rate" in Section 1.1
hereof are not being provided in the relative amounts or for the
relative maturities for purposes of determining the rate of interest
for the Loans subject to such Libor Accounts as provided in this
Agreement; or
(b) Required Banks determine (which determination shall
be conclusive) and notify the Agent that the relevant rates of
interest referred to in the definition of "Adjusted Libor Rate" in
Section 1.1 hereof on the basis of which the rate of interest for such
Loans for such Interest Period is to be determined do not accurately
reflect the cost to the Banks of making or maintaining such Loans for
such Interest Period;
CREDIT AGREEMENT - PAGE 33
41
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Libor Account and the relevant amounts or periods, and so long as such
condition remains in effect, the Banks shall be under no obligation to make
additional Loans subject to a Libor Account or to Convert Base Rate Accounts
into Libor Accounts and the Borrower shall, on the last day(s) of the then
current Interest Period(s) for the outstanding Libor Accounts, either prepay
the Loans subject to such Libor Accounts or Convert such Libor Accounts into
Base Rate Accounts in accordance with the terms of this Agreement.
Determinations made under this Section 6.2 shall be made on a reasonable basis.
Section 6.3 Illegality. Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for any Bank or its
Applicable Lending Office to (a) honor its obligation to make Loans subject to
a Libor Account hereunder or (b) maintain Loans subject to a Libor Account
hereunder, then such Bank shall promptly notify the Borrower (with a copy to
the Agent) thereof and such Bank's obligation to make or maintain Loans subject
to a Libor Account and to Convert Base Rate Accounts into Libor Accounts
hereunder shall be suspended until such time as such Bank may again make and
maintain Loans subject to a Libor Account (in which case the provisions of
Section 6.4 hereof shall be applicable).
Section 6.4 Treatment of Affected Loans. If the Accounts
applicable to a Loan of any Bank (hereinafter called "Affected Accounts") are
to be Converted pursuant to Section 6.1 or 6.3 hereof, the Bank's Affected
Accounts shall be automatically Converted into Base Rate Accounts on the last
day(s) of the then current Interest Period(s) (or, in the case of a Conversion
required by subsection 6.1(b) or Section 6.3 hereof, on such earlier date as
such Bank may specify to the Borrower with a copy to the Agent) and, unless and
until such Bank gives notice as provided below that the circumstances specified
in Section 6.1 or 6.3 hereof which gave rise to such Conversion no longer
exist: (a) to the extent that such Bank's Affected Accounts have been so
Converted, all payments and prepayments of principal which would otherwise be
applied to such Bank's Affected Accounts shall be applied instead to its Base
Rate Accounts; and (b) all Accounts which would otherwise be established or
Continued by such Bank as Libor Accounts shall be made as or Converted into
Base Rate Accounts and all Accounts of such Bank which would otherwise be
Converted into Libor Accounts shall be Converted instead into (or shall remain
as) Base Rate Accounts. If such Bank gives notice to the Borrower (with a copy
to the Agent) that the circumstances specified in Section 6.1 or 6.3 hereof
which gave rise to the Conversion of such Bank's Affected Accounts pursuant to
this Section 6.4 no longer exist (which such Bank agrees to do promptly upon
such circumstances ceasing to exist) at a time when Libor Accounts are
outstanding, such Bank's Base Rate Accounts shall be automatically Converted,
on the first day(s) of the next succeeding Interest Period(s) for such
outstanding Libor Accounts to the extent necessary so that, after giving effect
thereto, all Accounts held by the Banks holding Libor Accounts and by such Bank
are held pro rata (as to principal amounts, Types, and Interest Periods) in
accordance with their respective Commitment Percentages.
Section 6.5 Compensation. The Borrower shall pay to the Agent
for the account of each Bank, upon the request of such Bank, such amount or
amounts as shall be sufficient (in the reasonable opinion of such Bank) to
compensate it for any loss, cost, or expense incurred by it as a result of:
CREDIT AGREEMENT - PAGE 34
42
(a) Any payment or prepayment of a Loan subject to a
Libor Account or Conversion of a Libor Account for any reason
(including, without limitation, the acceleration of the outstanding
Loans pursuant to subsection 12.2(a)) on a date other than the last
day of an Interest Period for the applicable Libor Account; or
(b) Any failure by the Borrower for any reason
(including, without limitation, the failure of any conditions
precedent specified in Article 7 to be satisfied) to borrow or prepay
a Loan subject to a Libor Account, or Convert a Base Rate Account to a
Libor Account on the date for such borrowing, Conversion, or
prepayment specified in the relevant notice of borrowing, prepayment,
or Conversion under this Agreement.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid or Converted
or not borrowed for the period from the date of such payment, Conversion, or
failure to borrow to the last day of the Interest Period for such Libor Account
(or, in the case of a failure to borrow, the Interest Period for such Libor
Account which would have commenced on the date specified for such borrowing) at
the applicable rate of interest for such Libor Account provided for herein over
(ii) the interest component of the amount such Bank would have bid in the
London interbank market for Dollar deposits of leading banks and amounts
comparable to such principal amount and with maturities comparable to such
period.
Section 6.6 Capital Adequacy. If after the date hereof, any Bank
shall have determined that any Regulatory Change has or would have the effect
of reducing the rate of return on such Bank's (or its parent's) capital as a
consequence of its obligations hereunder or the transactions contemplated
hereby to a level below that which such Bank (or its parent) could have
achieved but for such adoption, implementation, change, or compliance (taking
into consideration such Bank's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, within ten
(10) Business Days after demand by such Bank (with a copy to the Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank (or its parent) for such reduction. A certificate of such
Bank claiming compensation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive, provided that
the determination thereof is made on a reasonable basis. In determining such
amount or amounts, such Bank may use any reasonable averaging and attribution
methods.
ARTICLE 7
Conditions Precedent
Section 7.1 Initial Loan. The obligation of each Bank to make
its initial Loan and the obligations of the Agent to issue the initial Letter
of Credit are subject to the condition precedent that the Agent shall have
received on or before the day of any such Loan or Letter of Credit all of the
following, each dated (unless otherwise indicated) the date hereof, in form and
substance satisfactory to the Agent:
CREDIT AGREEMENT - PAGE 35
43
(a) Resolutions. Resolutions of the Board of Directors
(or other similar authorizing documents) of the Borrower and each
Granting Subsidiary certified by its Secretary or an Assistant
Secretary (or other similar officer) which authorize its execution,
delivery, and performance of the Loan Documents to which it is or is
to be a party.
(b) Incumbency Certificate. A certificate of incumbency
certified by the Secretary or an Assistant Secretary (or similar
officer) of the Borrower and each Granting Subsidiary certifying the
name of each of its officers (i) who are authorized to sign the Loan
Documents to which it is or is to be a party (including the
certificates contemplated herein) together with specimen signatures of
each such officers and (ii) who will, until replaced by other officers
duly authorized for that purpose, act as its representative for the
purposes of signing documentation and giving notices and other
communications in connection with the Loan Documents.
(c) Articles of Incorporation. The articles of
incorporation (or similar governing document) of the Borrower and each
directly owned Subsidiary of Borrower (other than Software Spectrum
Limited) certified by the Secretary of State of the state of its
incorporation (or the other appropriate governmental officials of its
jurisdiction of organization) and dated a current date.
(d) Bylaws. The bylaws (or similar governing document)
of the Borrower and each directly owned Subsidiary of Borrower (other
than Software Spectrum Limited) certified by its Secretary or an
Assistant Secretary.
(e) Governmental Certificates. Certificates of the
appropriate government officials of the state of incorporation (or the
other appropriate governmental officials of its jurisdiction of
organization) of the Borrower and each directly owned Subsidiary of
Borrower (other than Software Spectrum Limited) as to its existence
and good standing and certificates of the appropriate government
officials of each jurisdiction in which the Borrower and each such
Subsidiary is required to qualify to do business and where failure to
so qualify could reasonably be expected to have a Material Adverse
Effect, as to the Borrower's and each such Subsidiary's qualification
to do business and good standing in such jurisdiction, all dated a
current date.
(f) Notes. The Notes executed by the Borrower.
(g) Collateral Documents and Collateral. The Borrower
Security Agreement and the Borrower Pledge Agreement executed by the
Borrower, the Subsidiary Security Agreements and the Guaranties
executed by the Granting Subsidiaries; certificates representing the
capital stock of the Subsidiaries (other than Software Spectrum B.V.)
pledged pursuant to the Borrower Pledge Agreement together with
undated stock powers duly executed in blank (other than the stock of
Software Spectrum Limited), UCC, tax and judgment Lien search reports
listing all documentation on file against the Borrower and the
Granting Subsidiaries in each jurisdiction in which the Borrower, any
Granting Subsidiary or any Collateral (other than inventory held by
third parties) is located or registered; and, except as set forth in
Section 9.10 (d), such executed documentation as
CREDIT AGREEMENT - PAGE 36
44
the Agent may deem necessary to perfect or protect its Liens,
including, without limitation, financing statements under the UCC and
other applicable documentation under the laws of any jurisdiction with
respect to the perfection of Liens (except with respect to inventory
held by third parties).
(h) Termination of Prior Liens. Duly executed UCC-3
termination statements, mortgage releases, and such other
documentation as shall be necessary to terminate or release all Liens
other than those permitted by Section 10.2.
(i) Insurance Policies. Certificates of insurance
summarizing the insurance policies of the Borrower and the Granting
Subsidiaries required by this Agreement and reflecting the Agent as
additional insured under such policies and as loss payee with respect
to all policies covering Collateral.
(j) Opinion of Counsel. Favorable opinions of legal
counsel to the Borrower and the Granting Subsidiaries, as to such
matters as the Agent may reasonably request.
(k) Fees. The fees due on the Closing Date as described
in the letters dated April 16, 1996 from Chase Securities, Inc. and
Texas Commerce to the Borrower.
(l) Borrowing Base Report. An initial Borrowing Base
Report in the form of Exhibit "C" hereto together with the accounts
receivable aging required thereby.
(m) Pro Forma. The Pro Forma.
(n) Projections. The Borrower's forecasted consolidated
balance sheet, profit and loss statement and capitalization statement
prepared on a basis consistent with Borrower's historical financial
statements (together with appropriate supporting details and a
statement of underlying assumptions) for the period commencing on the
date hereof and concluding on the Term Loan Termination Date.
(o) Egghead Acquisition. Evidence of the expiration of
the applicable waiting period without adverse action under the
Hart-Scott-Rodino Anti-Trust Improvements Act relating to the Egghead
Acquisition, evidence that all other conditions precedent to the
Egghead Acquisition have been satisfied and evidence that the Egghead
Acquisition will close simultaneously with the initial advance under
the Term Loan.
(p) Letter of Direction and Funds Flow Memorandum. A
letter of direction from Borrower addressed to Agent, with respect to
the disbursement of the proceeds of the Term Loan, the initial advance
under the Revolving Loan and any Letter of Credit to be issued on the
Closing Date and containing a certification as to the sources and uses
of funds utilized to consummate the Egghead Acquisition.
(q) Attorneys' Fees and Expenses. Evidence that the
costs and expenses (including attorneys' fees) referred to in Section
14.1, to the extent incurred, shall have been paid in full by the
Borrower.
CREDIT AGREEMENT - PAGE 37
45
Section 7.2 All Loans and Letters of Credit. The obligation of
each Bank to make any Loan (including the initial Loan) and the obligation of
the Agent to issue any Letter of Credit is subject to the following additional
conditions precedent:
(a) No Default. No Default shall have occurred and be
continuing, or would result from such Loan or Letter of Credit;
(b) Representations and Warranties. All of the
representations and warranties contained in Article 8 hereof and in
the other Loan Documents shall be true and correct on and as of the
date of such Loan or Letter of Credit with the same force and effect
as if such representations and warranties had been made on and as of
such date except to the extent that such representations and
warranties relate specifically to another date; and
(c) Additional Documentation. The Agent shall have
received such additional approvals, opinions, or documents as the
Agent may reasonably request.
Each notice of borrowing by the Borrower hereunder, and each request for the
issuance of a Letter of Credit, shall constitute a representation and warranty
by the Borrower that the conditions precedent set forth in subsections 7.2(a)
and (b) have been satisfied (both as of the date of such notice and, unless the
Borrower otherwise notifies the Agent prior to the date of such borrowing or
Letter of Credit, as of the date of such borrowing or Letter of Credit).
ARTICLE 8
Representations and Warranties
To induce the Agent and the Banks to enter into this Agreement, the
Borrower represents and warrants to the Agent and the Banks that after giving
effect to the Transactions:
Section 8.1 Corporate Existence. The Borrower and each
Subsidiary (a) is a corporation or other entity (as reflected on Schedule 8.14)
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or organization, (b) has all requisite power
and authority to own its assets and carry on its business as now being or as
proposed to be conducted, and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a Material Adverse Effect.
The Borrower and each Subsidiary has the corporate power and authority to
execute, deliver, and perform their respective obligations under the
Transaction Documents and Loan Documents to which it is or may become a party.
Section 8.2 Financial Statements; ProForma; Projections.
(a) Financial Statements. The Borrower has delivered to
the Agent and the Banks audited consolidated financial statements of the
Borrower and the Subsidiaries as at and for the Fiscal Year ended March 31,
1995 and unaudited consolidated financial statements of the
CREDIT AGREEMENT - PAGE 38
46
Borrower and the Subsidiaries for the nine (9) month period ended December 31,
1995. Such financial statements, have been prepared in accordance with GAAP,
and present fairly, on a consolidated basis, the financial condition of the
Borrower and the Subsidiaries as of the respective dates indicated therein and
the results of operations for the respective periods indicated therein.
Neither the Borrower nor any of the Subsidiaries has any material contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments,
or unrealized or anticipated losses from any unfavorable commitments except as
referred to or reflected in such financial statements. There has been no
material adverse change in the business, condition (financial or otherwise),
operations, prospects, or properties of the Borrower and the Subsidiaries taken
as a whole since the effective date of the most recent financial statements
referred to in this Section.
(b) Pro Forma and Projections. The Pro Forma and the
projections described in Section 7.1(n) were prepared by Borrower based on the
most recent financial statements of Borrower, Egghead, Inc. and Essentially
Group Limited, in light of the past operations of Borrower, Egghead, Inc. and
Essentially Group Limited and were prepared in accordance with GAAP (except
without footnotes, disclosures and accounting policy that may be required in
accordance with GAAP), with only such adjustments thereto as would be required
in accordance with GAAP. The projections described in Section 7.1(n)
represent, as of the date thereof, the good faith estimate of Borrower and its
senior management concerning the projected performance of Borrower's business
based on the supporting details and assumptions set forth in such projections
after giving effect to the Transactions.
Section 8.3 Corporate Action; No Breach. The execution,
delivery, and performance by the Borrower and each Subsidiary of the
Transaction Documents and Loan Documents to which each is or may become a party
and compliance with the terms and provisions hereof and thereof have been duly
authorized by all requisite action on the part of the Borrower and each
Subsidiary and do not and will not (a) violate or conflict with, or result in a
breach of, or require any consent under (i) the articles of incorporation,
bylaws or other governing documents of the Borrower or any of the Subsidiaries,
(ii) any applicable law, rule, or regulation or any order, writ, injunction, or
decree of any Governmental Authority or arbitrator or (iii) any material
agreement or instrument to which the Borrower or any Subsidiary is a party or
by which any of them or any of their property is bound or subject, or (b)
constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien (except as provided herein) upon any of the
revenues or assets of the Borrower or any Subsidiary. The Borrower's capital
stock issued in connection with the Essentially Acquisition will be duly
authorized, validly issued, fully paid and nonassessable. The issuance and
sale of such stock is exempt from the registration and qualification
requirements of applicable federal, state and foreign securities laws.
Section 8.4 Operation of Business. The Borrower and each of the
Subsidiaries possess all licenses, permits, franchises, patents, copyrights,
trademarks, and tradenames, or rights thereto, necessary to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted except those that the failure to so possess could not
reasonably be expected to have a Material Adverse Effect, and the Borrower and
each of its Subsidiaries are not in violation of any valid rights of others
with respect to any of the foregoing except violations that could not
reasonably be expected to have a Material Adverse Effect.
CREDIT AGREEMENT - PAGE 39
47
Section 8.5 Litigation and Judgments. Except as disclosed in the
Borrower's most recent Annual Report on Form 10K filed prior to the Closing
Date under the Securities Exchange Act of 1934, as amended, there is no action,
suit, investigation, or proceeding before or by any Governmental Authority or
arbitrator pending, or to the knowledge of the Borrower, threatened against or
affecting the Borrower or any Subsidiary, that would, if adversely determined,
have a Material Adverse Effect. There are no outstanding judgments against the
Borrower or any Subsidiary.
Section 8.6 Rights in Properties; Liens. The Borrower and each
Subsidiary have good title to or valid leasehold interests in their respective
properties and assets, real and personal, including the properties, assets, and
leasehold interests reflected in the financial statements described in Section
8.2, and none of the properties, assets, or leasehold interests of the Borrower
or any Subsidiary is subject to any Lien, except as permitted by Section 10.2.
Section 8.7 Enforceability. The Transaction Documents and Loan
Documents to which the Borrower or any Subsidiary is a party, when delivered,
shall constitute the legal, valid, and binding obligations of the Borrower or
the Subsidiary, as applicable, enforceable against the Borrower or the
applicable Subsidiary in accordance with their respective terms, except as
limited by bankruptcy, insolvency, or other laws of general application
relating to the enforcement of creditors' rights and general principles of
equity.
Section 8.8 Approvals. All authorizations, approvals, and
consents of, and all filings or registrations with, any Governmental Authority
or third party necessary for the execution, delivery, or performance by the
Borrower or any Subsidiary of the Transaction Documents and Loan Documents to
which each is or may become a party or for the validity or enforceability
thereof have been obtained or made except for the consent described in Section
9.10(d)(ii). The waiting period applicable to the Egghead Acquisition under
the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976 has expired without
any adverse action.
Section 8.9 Debt. The Borrower and the Subsidiaries have no
Debt, except as permitted by Section 10.1.
Section 8.10 Taxes. The Borrower and each Subsidiary have filed
all material tax returns (federal, state, and local) required to be filed,
including all income, franchise, employment, property, and sales tax returns,
and have paid all of their respective liabilities for taxes, assessments,
governmental charges, and other levies that are due and payable other than
those being contested in good faith by appropriate proceedings diligently
pursued for which adequate reserves have been established. The Borrower knows
of no pending investigation of the Borrower or any Subsidiary by any taxing
authority or of any pending but unassessed tax liability of the Borrower or any
Subsidiary.
Section 8.11 Margin Securities. Neither the Borrower nor any
Subsidiary is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T, U, or X of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
Loan will
CREDIT AGREEMENT - PAGE 40
48
be used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying margin stock.
Section 8.12 ERISA. The Borrower and each Subsidiary are in
compliance with all applicable provisions of ERISA except for such events of
noncompliance that will not have a Material Adverse Effect. Neither a
Reportable Event nor a Prohibited Transaction has occurred and is continuing
with respect to any Plan. No notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated. No circumstances exist which
constitute grounds entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings. Neither the Borrower nor any ERISA Affiliate has completely or
partially withdrawn from a Multiemployer Plan. The Borrower and each ERISA
Affiliate have met their minimum funding requirements under ERISA with respect
to all of their Plans except for those instances of noncompliance with such
requirements that will not have a Material Adverse Effect. The present value
of all vested benefits under each Plan do not exceed the fair market value of
all Plan assets allocable to such benefits, as determined on the most recent
valuation date of the Plan and in accordance with ERISA, by an amount that will
have a Material Adverse Effect. Neither the Borrower nor any ERISA Affiliate
has incurred any liability to the PBGC under ERISA.
Section 8.13 Disclosure. All factual information furnished by or
on behalf of the Borrower in writing to the Agent or any Bank (including,
without limitation, all information contained in the Transaction Documents and
the Loan Documents) for purposes of or in connection with this Agreement, the
other Loan Documents or any transaction contemplated herein or therein is, and
all other such factual information hereafter furnished by or on behalf of the
Borrower to the Agent or any Bank, 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 fact necessary to make such information not
misleading in any material respect at such time in light of the circumstances
under which such information was provided; provided, however, that the
representations and warranties in this Section 8.13 are made only to the best
of the knowledge of Borrower with respect to any information provided to
Borrower by any selling party under the Transaction Documents.
Section 8.14 Subsidiaries. As of the Closing Date, the Borrower
has no Subsidiaries other than those listed on Schedule 8.14 hereto. Schedule
8.14 sets forth the type of each Subsidiary listed thereon, the jurisdiction of
incorporation or organization of each such Subsidiary, the percentage of the
Borrower's ownership of the outstanding voting stock (or other ownership
interests) of each such Subsidiary and with respect to each such Subsidiary
that is a corporation, the authorized, issued, and outstanding capital stock of
each such Subsidiary. All of the outstanding capital stock of each Subsidiary
listed on Schedule 8.14 has been validly issued, is fully paid, and is
nonassessable. There are no outstanding subscriptions, options, warrants,
calls, or rights (including preemptive rights) to acquire, and no outstanding
securities or instruments convertible into, capital stock of any Subsidiary
listed on Schedule 8.14. No certificates have been issued to evidence the
capital stock Borrower owns of Software Spectrum B.V.
CREDIT AGREEMENT - PAGE 41
49
Section 8.15 Agreements. Neither the Borrower nor any Subsidiary
is a party to any indenture, loan, or credit agreement, or to any lease or
other agreement or instrument, or subject to any charter or corporate
restriction that could reasonably be expected to have a Material Adverse
Effect. Neither the Borrower nor any Subsidiary is in default in any respect
in the performance, observance, or fulfillment of any of the obligations,
covenants, or conditions contained in any agreement or instrument to which it
is a party other than defaults which will not have a Material Adverse Effect.
Section 8.16 Compliance with Laws. Neither the Borrower nor any
Subsidiary is in violation of any law, rule, regulation, order, or decree of
any Governmental Authority or arbitrator other than violations which will not
have a Material Adverse Effect.
Section 8.17 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 8.18 Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of
a "holding company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
Section 8.19 Environmental Matters. Except for those matters
which will not have a Material Adverse Effect:
(a) The Borrower, each Subsidiary, and all of their
respective properties, assets, and operations are in full compliance
with all Environmental Laws. The Borrower is not aware of, nor has
the Borrower received written notice of, any past, present, or future
conditions, events, activities, practices, or incidents which may
interfere with or prevent the compliance or continued compliance of
the Borrower and the Subsidiaries with all Environmental Laws;
(b) The Borrower and each Subsidiary have obtained all
permits, licenses, and authorizations that are required under
applicable Environmental Laws, and all such permits are in good
standing and the Borrower and its Subsidiaries are in compliance with
all of the terms and conditions of such permits;
(c) No Hazardous Materials have been used, generated,
stored, transported, disposed of on, or Released from any of the
properties or assets of the Borrower or any Subsidiary, and to the
knowledge of Borrower, no Hazardous Materials are present at such
properties, except in compliance with Environmental Laws. The use
which the Borrower and the Subsidiaries make and intend to make of
their respective properties and assets will not result in the use,
generation, storage, transportation, accumulation, disposal, or
Release of any Hazardous Material on, in, or from any of their
properties or assets except in compliance with Environmental Laws;
(d) Neither the Borrower nor any of the Subsidiaries nor
any of their respective currently or previously owned or leased
properties or operations is subject to any
CREDIT AGREEMENT - PAGE 42
50
outstanding or, to the best of its knowledge, threatened order from or
agreement with any Governmental Authority or other Person or subject
to any judicial or administrative proceeding with respect to (i)
failure to comply with Environmental Laws, (ii) Remedial Action, or
(iii) any Environmental Liabilities arising from a Release or
threatened Release;
(e) Neither the Borrower nor any of the Subsidiaries is a
treatment, storage, or disposal facility requiring a permit under the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., regulations thereunder or any comparable provision of state law.
The Borrower and the Subsidiaries are in compliance with all
applicable financial responsibility requirements of all Environmental
Laws;
(f) Neither the Borrower nor any of the Subsidiaries has
filed or failed to file any notice required under applicable
Environmental Law reporting a Release; and
(g) No Lien arising under any Environmental Law has
attached to any property or revenues of the Borrower or the
Subsidiaries.
Section 8.20 Solvency. Borrower and each Granting Subsidiary,
both individually and on a consolidated basis: (a) owns and will own assets the
fair saleable value of which are (i) greater than the total amount of its
liabilities (including contingent liabilities) and (ii) greater than the amount
that will be required to pay probable liabilities of then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to it; (b) has capital that is not
unreasonably small in relation to its business as presently conducted; and (c)
does not intend to incur and does not believe that it will incur debts beyond
its ability to pay such debts as they become due.
Section 8.21 Benefit Received. Borrower and the Subsidiaries will
receive reasonably equivalent value in exchange for the obligations incurred
under the Transaction Documents and Loan Documents to which each is a party.
Borrower and Subsidiaries will derive substantial benefit from the consummation
of the Transaction in an amount at least equal to its obligations under the
Transaction Documents and Loan Documents to which it is a party.
Section 8.22 Transaction Documents. As of the Closing Date, the
Transaction Documents are in full force and effect, have not been amended in
any material respect (except for such amendments disclosed to the Agent), no
party thereto has failed to perform any material obligation thereunder and no
defenses exist to the performance by the parties thereto of their obligations
thereunder. Each of the representations and warranties given by Borrower or a
Subsidiary under the Transaction Documents are true and correct in all material
respects as of the date hereof and as of the Closing Date (but without giving
effect to the transactions contemplated by the Transaction Documents except
where such representations or warranties expressly speak as of a time after
such transactions have been given effect) and such representations and
warranties are hereby incorporated herein by this reference as of such dates
with the same effect as though set forth in their entirety herein. To the best
of Borrower's knowledge, the representations and warranties made by each of the
selling parties in the Transaction Documents were true and correct when made
and as of the Closing Date (but without giving effect to the transactions
contemplated
CREDIT AGREEMENT - PAGE 43
51
by the Transaction Documents except where such representations or warranties
expressly speak as of a time after such transactions have been given effect).
ARTICLE 9
Positive Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Bank has any Commitment hereunder, the
Borrower will perform and observe the following positive covenants:
Section 9.1 Reporting Requirements. The Borrower will furnish to
the Agent and each Bank:
(a) Annual Financial Statements. As soon as available,
and in any event within ninety (90) days after the end of each Fiscal
Year of the Borrower, beginning with the Fiscal Year ending on March
31, 1996, (i) a copy of the annual audit report of the Borrower and
the Subsidiaries for such Fiscal Year containing, on a consolidated
basis, balance sheets and statements of income, retained earnings, and
cash flow as at the end of such Fiscal Year and for the Fiscal Year
then ended, in each case setting forth in comparative form the figures
for the preceding Fiscal Year, all in reasonable detail and audited
and certified by independent certified public accountants of
recognized standing acceptable to the Agent, to the effect that such
report has been prepared in accordance with GAAP;
(b) Quarterly Financial Statements. As soon as
available, and in any event within forty-five (45) days after the end
of each Fiscal Quarter: (i) a copy of an unaudited financial report
of the Borrower and the Subsidiaries as of the end of such period and
for the Fiscal Quarter then ended containing, on a consolidated basis,
a balance sheet and statements of income, retained earnings, and cash
flow, in each case setting forth in comparative form the figures for
the corresponding Fiscal Quarter of the preceding Fiscal Year, all in
reasonable detail certified by the chief financial officer of the
Borrower to have been prepared in accordance with GAAP and to fairly
present (subject to year-end audit adjustments) the financial
condition and results of operations of the Borrower and the
Subsidiaries, on a consolidated basis, at the date and for the periods
indicated therein and (ii) a copy of an unaudited financial report of
each Foreign Subsidiary as of the end of such period and for the
Fiscal Quarter then ending containing a balance sheet and statement of
income in reasonable detail certified by the chief financial officer
of Borrower to have been prepared in accordance with the generally
accepted accounting principles established in the jurisdiction of the
applicable Foreign Subsidiary's organization and to fairly present
(subject to year-end audit adjustments) the financial condition and
results of the operation of the applicable Foreign Subsidiary at the
date and for the periods indicated therein;
CREDIT AGREEMENT - PAGE 44
52
(c) Compliance Certificate. Within forty-five (45) days
after the end of each Fiscal Quarter of each Fiscal Year, or with
respect to the last Fiscal Quarter of each Fiscal Year, within ninety
(90) days of the end of such Fiscal Quarter, a Compliance Certificate;
(d) Borrowing Base Report. As soon as available, and in
any event within thirty (30) days after the end of each month, a
Borrowing Base Report, in substantially the form of Exhibit "C"
hereto, certified by the chief financial officer or treasurer of the
Borrower together with the accounts receivable aging required thereby;
(e) Annual Projections. As soon as available and in any
event within forty-five (45) days after the beginning of each Fiscal
Year of the Borrower, the Borrower will deliver Annual Projections on
a Fiscal Quarter by Fiscal Quarter basis for the current Fiscal Year
and a proforma projection of the Borrower's compliance with the
financial covenants in this Agreement for the same period;
(f) Management Letters. Promptly upon receipt thereof, a
copy of any management letter or written report submitted to the
Borrower or any Subsidiary by independent certified public accountants
with respect to the business, condition (financial or otherwise),
operations, prospects, or properties of the Borrower or any
Subsidiary;
(g) Notice of Litigation. Promptly after the
commencement thereof, notice of all actions, suits, and proceedings
before any Governmental Authority or arbitrator affecting the Borrower
or any Subsidiary which, if determined adversely to the Borrower or
such Subsidiary, could reasonably be expected to have a Material
Adverse Effect;
(h) Notice of Default. As soon as possible and in any
event within five (5) Business Days after an officer of the Borrower
has knowledge of the occurrence of each Default, a written notice
setting forth the details of such Default and the action that the
Borrower has taken and proposes to take with respect thereto;
(i) ERISA Reports. If requested by the Agent, promptly
after the filing or receipt thereof, copies of all reports, including
annual reports, and notices which the Borrower or any Subsidiary files
with or receives from the PBGC or the U.S. Department of Labor under
ERISA; and as soon as possible and in any event within five (5)
Business Days after the Borrower or any Subsidiary knows or has reason
to know that any Reportable Event or Prohibited Transaction has
occurred with respect to any Plan or that the PBGC or the Borrower or
any Subsidiary has instituted or will institute proceedings under
Title IV of ERISA to terminate any Plan, a certificate of the chief
financial officer of the Borrower setting forth the details as to such
Reportable Event or Prohibited Transaction or Plan termination and the
action that the Borrower proposes to take with respect thereto;
(j) Reports to Other Creditors. Promptly after the
furnishing thereof, copies of any statement or report furnished to any
other party pursuant to the terms of any indenture, loan, or credit or
similar agreement and not otherwise required to be furnished to the
Agent and the Banks pursuant to any other clause of this Section;
CREDIT AGREEMENT - PAGE 45
53
(k) Notice of Material Adverse Effect. As soon as
possible and in any event within five (5) Business Days after an
officer of the Borrower has knowledge of the occurrence thereof,
written notice of any matter that could reasonably be expected to have
a Material Adverse Effect;
(l) Proxy Statements, Etc. As soon as available, one
copy of each financial statement, report, notice or proxy statement
sent by the Borrower or any Subsidiary to its stockholders generally
and one copy of each regular, periodic, or special report,
registration statement, or prospectus filed by the Borrower or any
Subsidiary with any securities exchange or the Securities and Exchange
Commission or any successor agency; and
(m) General Information. Promptly, such other
information concerning the Borrower or any Subsidiary as the Agent or
any Bank may from time to time reasonably request.
Section 9.2 Maintenance of Existence; Conduct of Business. The
Borrower will, and will cause each Subsidiary to, preserve and maintain (i) its
corporate existence (except as permitted by Section 10.3) and (ii) all of its
leases, privileges, licenses, permits, franchises, qualifications, and rights
that are necessary or desirable in the ordinary conduct of its business. The
Borrower will, and will cause each Subsidiary to, conduct its business in an
orderly and efficient manner in accordance with good business practices.
Section 9.3 Maintenance of Properties. The Borrower will, and
will cause each Subsidiary to, maintain, keep, and preserve all of its material
properties necessary in the conduct of its business in good working order and
condition (exclusive of ordinary wear and tear).
Section 9.4 Taxes and Claims. The Borrower will, and will cause
each Subsidiary to, pay or discharge at or before maturity or before becoming
delinquent (a) all taxes, levies, assessments, and governmental charges imposed
on it or its income or profits or any of its property, and (b) all valid and
lawful claims for labor, material, and supplies, which, if unpaid, might become
a Lien upon any of its property; provided, however, that neither the Borrower
nor any Subsidiary shall be required to pay or discharge any tax, levy,
assessment, or governmental charge which is being contested in good faith by
appropriate proceedings diligently pursued, and for which adequate reserves
have been established.
Section 9.5 Insurance. The Borrower will, and will cause each
Subsidiary to, maintain insurance with financially sound and reputable
insurance companies in such amounts and covering such risks as are usually
carried by corporations engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower and the Subsidiaries
operate, provided that in any event the Borrower will maintain and cause each
Subsidiary to maintain workmen's compensation insurance (or alternate
comparable coverage as required by law), property insurance, comprehensive
general liability insurance and products liability insurance reasonably
satisfactory to the Agent. Each general liability insurance policy shall name
the Agent as additional insured, each insurance policy covering Collateral
shall name the Agent as loss payee
CREDIT AGREEMENT - PAGE 46
54
and shall provide that such policy will not be canceled or materially changed
without thirty (30) days prior written notice to the Agent.
Section 9.6 Inspection Rights. At any reasonable time and from
time to time prior to a Default upon two (2) Business Day's prior notice and at
any reasonable time after the occurrence and during the continuance of a
Default, the Borrower will, and will cause each Subsidiary to, permit
representatives of the Agent and each Bank to examine, copy, and make extracts
from its books and records, to visit and inspect its properties, and to discuss
its business, operations, and financial condition with its officers, employees,
and independent certified public accountants.
Section 9.7 Keeping Books and Records. The Borrower will, and
will cause each Subsidiary to, maintain proper books of record and account in
which full, true, and correct entries in conformity with GAAP shall be made of
all dealings and transactions in relation to its business and activities.
Section 9.8 Compliance with Laws. The Borrower will, and will
cause each Subsidiary to, comply with all applicable laws (including, without
limitation, all Environmental Laws), rules, regulations, orders, and decrees of
any Governmental Authority or arbitrator other than such noncompliance which
will not have a Material Adverse Effect.
Section 9.9 Compliance with Agreements. The Borrower will, and
will cause each Subsidiary to, comply with all agreements, contracts, and
instruments binding on it or affecting its properties or business (including
without limitation the Transaction Documents) other than such noncompliance
which will not have a Material Adverse Effect.
Section 9.10 Further Assurances and Collateral Matters.
(a) Further Assurance and Exceptions to Perfection. The Borrower
will, and will cause each Subsidiary to, execute and deliver such further
documentation and take such further action as may be requested by the Agent to
carry out the provisions and purposes of the Loan Documents and to create,
preserve, and perfect the Liens of the Agent for the benefit of itself and the
Banks in the Collateral; provided that prior to the occurrence of a Default
neither Borrower nor any Granting Subsidiary shall be required to:
(i) obtain any landlord or mortgage waivers or
subordinations except from the landlords of their inventory
distribution centers (other than the inventory distribution center
located in Elmhurst, Illinois if no inventory is located at such
center by June 30, 1996); or
(ii) obtain any documentation from any third party in
possession of any inventory or otherwise perfect or protect the
Agent's Lien therein as long as the aggregate book value of such
inventory of Borrower and the Granting Subsidiaries does not exceed
Two Million Five Hundred Thousand Dollars ($2,500,000) in the
aggregate; or
(iii) obtain the consent or authorization from any third
party who has entered into a reseller, volume licensing, maintenance
or similar agreement with Borrower or a
CREDIT AGREEMENT - PAGE 47
55
Granting Subsidiary or who may otherwise have intellectual property
rights in any inventory of Borrower or a Granting Subsidiary.
If a Default occurs, the Borrower shall notify the Agent and shall
take such action as the Agent may request to perfect and protect the Liens of
the Agent in the applicable Collateral. If a Default has not occurred but the
book value of inventory of Borrower and the Granting Subsidiaries held by third
parties exceeds Two Million Five Hundred Thousand Dollars ($2,500,000) in the
aggregate, then the Borrower shall notify the Agent and shall take such action
as the Agent may request to perfect and protect the Liens of the Agent in the
inventory at each location where the book value of the inventory at such
location equals or exceeds Five Hundred Thousand Dollars ($500,000).
(b) Granting Subsidiary Pledge. Upon the creation or acquisition
of any Granting Subsidiary, the Borrower shall cause such Granting Subsidiary
to execute and deliver a Guaranty, a Subsidiary Security Agreement and such
other documentation as the Agent may request to cause such Granting Subsidiary
to evidence, perfect, or otherwise implement the guaranty and security for
repayment of the Obligations contemplated by a Guaranty and Subsidiary Security
Agreement.
(c) Borrower Pledge of Subsidiary Stock. If any Subsidiary is
created or acquired after the Closing Date, the Borrower shall execute and
deliver to the Agent an amendment to the Borrower Pledge Agreement describing
as collateral thereunder the stock of or other ownership interests in the new
Subsidiary and the Borrower shall deliver the certificates representing such
stock or other interests to the Agent together with undated stock or other
powers duly executed in blank; provided, however, that with respect to any
Foreign Subsidiary such Collateral shall include no more than sixty-six and
two-thirds percent (66 2/3%) of the outstanding stock or other ownership
interests of such Foreign Subsidiary.
(d) Post-Closing Matters. Borrower shall:
(i) use all reasonable efforts to provide Agent by June
30,1996 landlord waivers or subordinations in form and substance
acceptable to the Agent from the landlord of each of Borrower's and
any Granting Subsidiaries' inventory distribution centers (excluding
the inventory distribution center located in Elmhurst, Illinois if no
inventory is located at such center by June 30, 1996);
(ii) use all reasonable efforts to provide Agent by June
30,1996 the required consents of the applicable Governmental
Authorities in Ireland to the pledge by Borrower of the capital stock
of Software Spectrum Limited;
(iii) use all reasonable efforts to provide Agent by June
30, 1996, the stock certificates of Software Spectrum Limited which
have been pledged to Agent under the Borrower Pledge Agreement, the
articles of incorporation or similar governing document of Software
Spectrum Limited certified by the appropriate governmental officials
of Ireland, the bylaws or similar governing document of Software
Spectrum Limited certified by its secretary or assistant secretary and
certificates of the appropriate governmental
CREDIT AGREEMENT - PAGE 48
56
authorities of Ireland as to the existence and good standing of
Software Spectrum Limited; and
(iv) except as provided in clause (ii) of this Section
9.10(d) provide Agent by May 31, 1996 such documentation as the Agent
may reasonably request (A) to ensure that the Borrower Pledge
Agreement creates in favor of Agent an enforceable first priority
pledge of the Collateral described therein under the laws of each
jurisdiction in which each issuer of the capital stock pledged
thereunder is organized and (B) to protect and enforce such pledge;
and
(v) provide Agent by May 31, 1996 legal opinions from
counsel in each jurisdiction in which the Foreign Subsidiaries are
organized as to such matters as the Agent may reasonably request.
Section 9.11 ERISA. The Borrower will, and will cause each
Subsidiary to, comply with all minimum funding requirements and all other
requirements of ERISA, if applicable, so as not to give rise to any liability
which will have a Material Adverse Effect.
ARTICLE 10
Negative Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Bank has any Commitment hereunder, the
Borrower will perform and observe the following negative covenants:
Section 10.1 Debt. The Borrower will not, and will not permit any
Subsidiary to, incur, create, assume, or permit to exist any Debt, except:
(a) Debt to the Agent and Banks pursuant to the Loan
Documents and existing Debt described on Schedule 10.1;
(b) Intercompany Debt owed by a Subsidiary to Borrower or
owed by a Subsidiary to its parent incurred in accordance with the
restrictions set forth in Section 10.5; provided that (i) the
obligations of each obligor of such Debt must be subordinated in right
of payment to any liability such obligor may have for the Obligations
from and after such time as any portion of the Obligations shall
become due and payable (whether at stated maturity, by acceleration or
otherwise) and (ii) such Debt must be incurred in the ordinary course
of business and on terms customary for intercompany borrowings among
Borrower and the Subsidiaries or must be made on such other terms and
provisions as the Agent may reasonably require;
(c) Debt not to exceed One Million Dollars ($1,000,000)
in the aggregate at any time outstanding secured by purchase money
Liens permitted by Section 10.2;
CREDIT AGREEMENT - PAGE 49
57
(d) Capital Lease Obligations permitted to be incurred in
accordance with the restrictions resulting from the financial
covenants of this Agreement;
(e) Guaranties incurred in the ordinary course of
business with respect to surety and appeal bonds, performance and
return-of-money bonds, and other similar obligations not exceeding at
any time outstanding One Million Dollars ($1,000,000) in aggregate
liability;
(f) Guarantees of (i) trade accounts payable owed by the
Subsidiaries and arising in the ordinary course of business and (ii)
Debt of Subsidiaries and Foreign Ventures; provided that: (A) the
Debt guaranteed is otherwise permitted hereunder; (B) no Default
exists or would result from such Guarantee; and (C) the sum of the
aggregate outstanding principal amount of the Debt of Foreign
Subsidiaries and Foreign Ventures guaranteed plus the aggregate
outstanding principal amount of the loans, advances and other
extensions of credit made to Foreign Subsidiaries and Foreign Ventures
by Borrower and the Subsidiaries (such sum the "Foreign Loan and
Guaranty Amount") shall not at any time exceed the sum of (i) Thirty
Million Dollars ($30,000,000) minus (ii) the outstanding face amount
of all Letters of Credit issued to secure Debts of Foreign
Subsidiaries (the sum of clause (i) and (ii), herein the "Foreign Loan
and Guaranty Limit");
(g) Debt arising in connection with foreign exchange or
currency hedging transactions entered into in the ordinary course of
business to enable Borrower or a Subsidiary to limit the market risk
of holding currency in either the cash or futures market;
(h) Debt arising in connection with interest rate swap,
cap, collar or similar agreements entered into in the ordinary course
of business to fix or limit Borrower's or any Subsidiaries' interest
expense;
(i) Debt of Subsidiaries the principal amount of which is
secured in full by Letters of Credit; and
(j) Debts, other than the Debts specifically described in
clauses (a) through (i) of this Section 10.1, which in the aggregate
do not exceed Five Million Dollars ($5,000,000) at any time
outstanding.
Section 10.2 Limitation on Liens and Restrictions on Subsidiaries.
The Borrower will not, and will not permit any Subsidiary to, incur, create,
assume, or permit to exist any Lien upon any of its property, assets, or
revenues, whether now owned or hereafter acquired, except the following, none
of which shall encumber the Collateral other than those Liens described in
clauses (b), (d), (e) and (h):
(a) Existing Liens disclosed on Schedule 10.2 hereto;
(b) Liens in favor of the Agent for the benefit of itself
and the Banks pursuant to the Loan Documents;
CREDIT AGREEMENT - PAGE 50
58
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of real property that
do not (individually or in the aggregate) materially affect the value
of the assets encumbered thereby or materially impair the ability of
the Borrower or the Subsidiaries to use such assets in their
respective businesses, and none of which is violated in any material
respect by existing or proposed structures or land use;
(d) Liens (other than Liens relating to Environmental
Liabilities or ERISA) for taxes, assessments, or other governmental
charges that are not delinquent or which are being contested in good
faith and for which adequate reserves have been established;
(e) Liens of mechanics, materialmen, warehousemen,
carriers, landlords, or other similar statutory Liens securing
obligations that are not yet due and are incurred in the ordinary
course of business or which are being contested in good faith and for
which adequate reserves have been established;
(f) Liens resulting from good faith deposits to secure
payments of workmen's compensation or other social security programs
or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, and contracts (other than for payment of
Debt);
(g) Liens for purchase money obligations and Capital
Lease Obligations which do not encumber the Collateral; provided that:
(i) the Debt secured by any such Lien is permitted under Section 10.1;
and (ii) any such Lien encumbers only the asset so purchased;
(h) Liens related to any attachment or judgment not
constituting an Event of Default; and
(i) Liens arising from filing UCC financing statements
regarding leases permitted by this Agreement.
Neither the Borrower nor any Subsidiary shall enter into or assume any
agreement (other than the Loan Documents) prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired; provided that, in connection with the creation of purchase
money Liens, the Borrower or the Subsidiary may agree that it will not permit
any other Liens to encumber the asset subject to such purchase money Lien.
Except as provided herein, the Borrower will not and will not permit any
Subsidiaries directly or indirectly to create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Subsidiary to: (1) pay dividends or make any other
distribution on any of such Subsidiary's capital stock owned by the Borrower or
any Subsidiary; (2) subject to subordination provisions, pay any Debt owed to
the Borrower or any other Subsidiary; (3) make loans or advances to the
Borrower or any other Subsidiary; or (4) transfer any of its property or assets
to the Borrower or any other Subsidiary.
CREDIT AGREEMENT - PAGE 51
59
Section 10.3 Mergers, Etc. The Borrower will not, and will not
permit any Subsidiary to, become a party to a merger or consolidation, or
purchase or otherwise acquire all or a substantial part of the business or
assets of any Person or any shares or other evidence of beneficial ownership of
any Person, or wind-up, dissolve, or liquidate itself; provided that, (i) the
Borrower and the Subsidiaries may acquire assets or shares or other evidence of
beneficial ownership of a Person in accordance with the restrictions set forth
in subsection 10.5; (ii) any Subsidiary may merge into or consolidate with
Borrower or any other Subsidiary if the surviving Person assumes the
obligations of the applicable Subsidiary under the Loan Documents and is
solvent as contemplated under Section 8.20 hereunder after giving effect to
such merger or consolidation, except that a Granting Subsidiary may not be
merged into or consolidated with a Foreign Subsidiary; and (iii) the Borrower
or any Subsidiary (the "Acquiring Company") may acquire all or substantially
all of the assets of any Subsidiary (a "Transferring Subsidiary") if the
Acquiring Company assumes all the Transferring Subsidiary's liabilities,
including without limitation, all liabilities of the Transferring Subsidiary
under the Loan Documents to which it is a party and if all of the capital stock
of the Transferring Subsidiary is owned directly or indirectly by the Acquiring
Company(and, following such assignment and assumption, such Transferring
Subsidiary may wind up, dissolve and liquidate).
Section 10.4 Restrictions on Dividends and other Distributions.
The Borrower will not and will not permit any Subsidiary to directly or
indirectly declare, order, pay, make or set apart any sum for (a) any dividend
or other distribution, direct or indirect, on account of any shares of any
class of stock of the Borrower or any Subsidiary now or hereafter outstanding,
except a dividend payable solely in shares of stock; (b) any redemption,
conversion, exchange, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
stock of the Borrower or any Subsidiary now or hereafter outstanding; or (c)
any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options, or other rights to acquire shares of any class of stock of
the Borrower or any of its Subsidiaries now or hereafter outstanding; except
that (i) Subsidiaries of the Borrower may make, declare, and pay dividends and
make other distributions to Borrower or to other Subsidiaries with respect to
their common or ordinary stock in the ordinary course of business and to allow
Borrower to pay dividends permitted hereunder; and (ii) Borrower may make,
declare and pay cash dividends out of earned surplus in accordance with
applicable law and may purchase and set apart sums to purchase any of its
capital stock as long as Borrower shall have sufficient funds to make the
mandatory Excess Cash Flow payments required hereby and no Default exists or
would otherwise result therefrom.
Section 10.5 Investments. The Borrower will not, and will not
permit any Subsidiary to, make or permit to remain outstanding any advance,
loan, other extension of credit, or capital contribution to or investment in
any Person, or purchase or own any stock, bonds, notes, debentures, or other
securities of any Person, or be or become a joint venturer with or partner of
any Person, except:
(a) readily marketable direct obligations of the United
States of America or any agency thereof with maturities of one year or
less from the date of acquisition and any other securities issued or
guaranteed as to timely payment by any governmental agency of the
United States of America;
CREDIT AGREEMENT - PAGE 52
60
(b) fully insured certificates of deposit with maturities
of one year or less from the date of acquisition issued by any
commercial bank operating in the United States of America having
capital and surplus in excess of Fifty Million Dollars ($50,000,000);
(c) commercial paper or bonds of a domestic issuer if at
the time of purchase such paper or bonds are rated in one of the two
highest rating categories of Standard and Poor's Corporation or
Moody's Investors Service, Inc.;
(d) loans and advances to employees for business expenses
incurred in the ordinary course of business;
(e) existing investments described on Schedule 10.5
hereto;
(f) loans, advances and other extensions of credit to
Granting Subsidiaries made in accordance with the restrictions set
forth in Section 10.1 (b); provided that, at the time any such loan,
advance or other extension of credit is made, no Default exists or
would result therefrom;
(g) loans, advances and other extensions of credit to
Foreign Subsidiaries and Foreign Ventures made in accordance with the
restrictions set forth in Section 10.1(b); provided that, (i) at the
time of any such advance, loan or other extension of credit, no
Default exists or would result therefrom and (ii) at no time shall the
Foreign Loan and Guaranty Amount exceed the Foreign Loan and Guaranty
Limit (both as defined in Section 10.1(f));
(h) capital contributions and investments in Granting
Subsidiaries as long as at the time a capital contribution or
investment is made, no Default exists or would result therefrom and
Borrower complies with its obligations under Section 9.10 hereof and
under Section 2.4 of the Borrower Pledge Agreement;
(i) capital contributions and equity investments in
Foreign Subsidiaries and Foreign Ventures; provided that, (i) at the
time any such capital contribution or investment is made, no Default
exists or would result therefrom; (ii) at no time shall the aggregate
book value of all equity investments and capital contributions in
Foreign Subsidiaries and Foreign Ventures exceed an amount equal to
fifteen percent (15%) of the Borrower's Consolidated Net Worth; and
(iii) Borrower complies with its obligations under Section 9.10 hereof
and under Section 2.4 of the Borrower Pledge Agreement;
(j) investments by Foreign Subsidiaries which are held or
made outside the United States of America of the same or similar
quality as the investments described in clauses (a), (b) and (c) of
this Section 10.5;
(k) Guarantees permitted by Section 10.1;
(l) purchases by Borrower of its capital stock permitted
by section 10.4; and
CREDIT AGREEMENT - PAGE 53
61
(m) advances, loans, other extensions of credit or
capital contributions to and investments in any Person, other than
those described in clause (a) through (l) of this Section 10.5, with
an aggregate outstanding book value of not more than One Hundred
Thousand Dollars ($100,000) at any time.
Section 10.6 Limitation on Issuance of Capital Stock. Except as
permitted by Section 10.4 and except for issuances, sales, assignments or other
disposition to Borrower, or to a Subsidiary which is the parent of the issuer,
the Borrower will not permit any Subsidiary to, at any time issue, sell,
assign, or otherwise dispose of (a) any of its capital stock, (b) any
securities exchangeable for or convertible into or carrying any rights to
acquire any of its capital stock, or (c) any option, warrant, or other right to
acquire any of its capital stock.
Section 10.7 Transactions With Affiliates. The Borrower will not,
and will not permit any Subsidiary to, enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the
rendering of any service, with any Affiliate of the Borrower or such
Subsidiary, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than
would be obtained in a comparable arms-length transaction with a Person not an
Affiliate of the Borrower or such Subsidiary.
Section 10.8 Disposition of Assets. The Borrower will not, and
will not permit any Subsidiary to, sell, lease, assign, transfer, or otherwise
dispose of any of its assets, except (a) dispositions of inventory in the
ordinary course of business; (b) dispositions of unnecessary, obsolete or worn
out equipment; and (c) other dispositions of assets if the aggregate book value
of the assets disposed of does not exceed One Million Dollars ($1,000,000) in
the aggregate during any twelve (12) month period.
Section 10.9 Lines of Business. The Borrower will not, and will
not permit any Subsidiary to, engage in any line or lines of business activity
other than the businesses in which they are engaged on the date hereof and any
businesses which are similar or related to those currently engaged in by the
Borrower and the Subsidiaries.
Section 10.10 Transaction Documents. Borrower shall not and shall
not permit any Subsidiary to amend, supplement or otherwise modify in any
material respect or waive any material rights under the Transaction Documents
as they exist on the Closing Date and Borrower shall, and shall cause the
Subsidiaries, at all times to diligently pursue and enforce all material rights
and material claims under the Transaction Documents, including, without
limitation, any material right to any indemnification. If Borrower or Agent
requests that a Bank consent to a material modification to a Transaction
Document or a waiver of any material right thereunder, such Bank will be deemed
to have consented to such modification or waiver unless it shall have notified
the Borrower and Agent that it does not consent within ten (10) Business Days
of its receipt of the written request for the consent.
CREDIT AGREEMENT - PAGE 54
62
ARTICLE 11
Financial Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Bank has any Commitment hereunder, the
Borrower will perform and observe the following financial covenants:
Section 11.1 Consolidated Net Worth. The Borrower will at all
times maintain Consolidated Net Worth (as defined below) in an amount not less
than the sum of (a) ninety percent of the Borrower's Consolidated Net Worth as
of March 31, 1996; plus (b) fifty percent (50%) of the Borrower's Net Income
for each Fiscal Quarter to have completely elapsed since March 31, 1996; plus
(c) one hundred percent (100%) of the net cash proceeds of any sale of equity
securities or other contributions to the capital of the Borrower received by
Borrower since March 31, 1996, calculated without duplication. If Net Income
for a Fiscal Quarter is zero or less, no adjustment to the requisite level of
Consolidated Net Worth shall be made. The phrase "Consolidated Net Worth"
means, at any particular time, all amounts which, in conformity with GAAP,
would be included as stockholders' equity on a consolidated balance sheet of
the Borrower and the Subsidiaries.
Section 11.2 Funded Debt to EBITDA. The Borrower shall not permit
the ratio of its outstanding Funded Debt to its Annualized EBITDA to exceed:
(a) 4.00 to 1.00 for the Fiscal Quarter ending September 30, 1996; (b) 4.00 to
1.00 for the Fiscal Quarter ending December 31, 1996; and (c) 4.00 to 1.00 for
the Fiscal Quarter ending March 31, 1997. For each of the calculations set
forth above, outstanding Funded Debt shall be calculated as of the last day of
the applicable Fiscal Quarter. The term "Annualized EBITDA" means, as of any
Fiscal Quarter end, a Dollar amount calculated by determining the Adjusted
EBITDA for the period from June 30, 1996 through the applicable Fiscal Quarter
end and multiplying the amount thereof by (i) four (4) for the Fiscal Quarter
ending September 30, 1996 or (ii) two (2) for the Fiscal Quarter ending
December 31, 1996 or (iii) four thirds (4/3) for the Fiscal Quarter ending
March 31,1997. As of the end of each subsequent Fiscal Quarter, the Borrower
shall not permit the ratio of its Funded Debt outstanding on the last day of
such Fiscal Quarter to Adjusted EBITDA for the four (4) Fiscal Quarters then
ending to exceed (i) 4.00 to 1.00 for the Fiscal Quarter ending September 30,
1997 and (ii) 3.50 to 1.00 for each Fiscal Quarter thereafter.
Section 11.3 Fixed Charge Coverage. The Borrower shall not
permit the ratio of Cash Flow to Fixed Charges to be less than the following as
of the applicable Fiscal Quarter end: (a) 1.2 to 1.00 computed on the basis of
the Cash Flow and Fixed Charges for the period from June 30, 1996 through
September 30, 1996;(b) 1.2 to 1.00 computed on the basis of the Cash Flow and
Fixed Charges for the period from
CREDIT AGREEMENT - PAGE 55
63
June 30, 1996 through December 31, 1996; and (c) 1.2 to 1.00 computed on the
basis of the Cash Flow and Fixed Charges for the period from June 30, 1996
through March 31, 1997. As of the end of each subsequent Fiscal Quarter, the
Borrower shall not permit the ratio of Cash Flow to Fixed Charges to be less
than 1.20 to 1.00 computed on the basis of the Cash Flow and Fixed Charges for
the four (4) Fiscal Quarters then ended. The phrase "Cash Flow" means, for any
period, the total of the following for the Borrower and the Subsidiaries
calculated on a consolidated basis without duplication for such period: (A)
Adjusted EBITDA; minus (B) any provision for (or plus any benefit from) cash
income or franchise taxes included in determine Net Income. The phrase "Fixed
Charges" means, for any period, the total of the following for the Borrower and
the Subsidiaries calculated on a consolidated basis without duplication for
such period: (A) Interest Expense; plus (B) scheduled amortization of Debt
paid or payable (excluding, to the extent included, nonpermanent principal
repayments under the Revolving Loans); plus (C) the Calculated Amount of
Capital Expenditures; plus (D) cash dividends and other cash distributions made
by Borrower on account of its capital stock. The phrase "Calculated Amount of
Capital Expenditures" means (A) for the period ending September 30, 1996, the
quotient obtained by dividing by three (3) the sum of the following: (i) the
actual Capital Expenditures for the period from June 30, 1996 through September
30, 1996; plus (ii) the budgeted amount of Capital Expenditures for the period
from September 30, 1996 through March 31, 1997 as set forth in the projections
delivered on the Closing Date under Section 7.1(n) and (B) for any other
period, the actual Capital Expenditures for such period.
ARTICLE 12
Default
Section 12.1 Events of Default. Each of the following shall be
deemed an "Event of Default":
(a) The Borrower shall fail to pay (i) when due any
principal payable under any Loan Document or any part thereof; (ii)
within three (3) Business Days of the date due any interest or fees
payable under the Loan Documents or any part thereof; and (iii) within
five (5) Business Days of the date due any other Obligation or any
part thereof.
(b) Any representation, warranty, or certification made
or deemed made by the Borrower or any Obligated Party (or any of their
respective officers) in any Loan Document or in any certificate,
report, notice, or financial statement furnished at any time in
connection with any Loan Document shall be false, misleading, or
erroneous in any material respect when made or deemed to have been
made.
(c) The Borrower shall fail to perform, observe, or
comply with any covenant, agreement, or term contained in clause (i)
of the first sentence of Section 9.2, Sections 9.5 or 9.6, Article 10
or Article 11 of this Agreement or Sections 2.4 or 2.5 of the Borrower
Pledge Agreement or Article IV of the Borrower Security Agreement.
Any Granting Subsidiary shall fail to perform, observe, or comply with
any covenant, agreement, or term contained in Section IV of the
Subsidiary Security Agreement to which it is a party or paragraph 11
of the Guaranty to which it is a party.
CREDIT AGREEMENT - PAGE 56
64
(d) The Borrower or any Obligated Party shall fail to
perform, observe, or comply with any covenant, agreement, or term
contained in any Loan Document (other than covenants to pay the
Obligations and the covenants described in subsection 12.1(c)) and
such failure shall continue for a period of fifteen (15) Business Days
after the earlier of (i) the date the Agent or any Bank provides the
Borrower with notice thereof or (ii) the date the Borrower should have
notified the Agent thereof in accordance with subsection 9.1(h).
(e) The Borrower, any Subsidiary, or any Obligated Party
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee, examiner, liquidator,
or the like of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the United States Bankruptcy Code (as
now or hereafter in effect, the "Bankruptcy Code"), (iv) institute any
proceeding or file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, winding-up, or composition or readjustment of debts, (v)
fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under
the Bankruptcy Code, (vi) admit in writing its inability to, or be
generally unable to pay its debts as such debts become due, or (vii)
take any corporate action for the purpose of effecting any of the
foregoing.
(f) A proceeding or case shall be commenced, without the
application, approval, or consent of the Borrower, any Subsidiary, or
any Obligated Party, in any court of competent jurisdiction, seeking
(i) its reorganization, liquidation, dissolution, arrangement, or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a receiver, custodian, trustee, examiner, liquidator,
or the like of the Borrower or such Subsidiary or Obligated Party or
of all or any substantial part of its property, or (iii) similar
relief in respect of the Borrower or such Subsidiary or Obligated
Party under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and
such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of sixty
(60) or more days, or an order for relief against the Borrower, any
Subsidiary, or any Obligated Party shall be entered in an involuntary
case under the Bankruptcy Code.
(g) The Borrower, any Subsidiary, or any Obligated Party
shall fail to discharge within a period of thirty (30) days after the
commencement thereof any attachment, sequestration, forfeiture, or
similar proceeding or proceedings involving an aggregate amount in
excess of Five Million Dollars ($5,000,000) against any of its assets
or properties.
(h) A final judgment or judgments for the payment of
money in excess of Five Million Dollars ($5,000,000) in the aggregate
shall be rendered by a court or courts against the Borrower, any
Subsidiaries, or any Obligated Party and the same shall not be
discharged (or provision shall not be made for such discharge), or a
stay of execution thereof shall not be procured, within thirty (30)
days from the date of entry thereof, and
CREDIT AGREEMENT - PAGE 57
65
the Borrower or the relevant Subsidiary or Obligated Party shall not,
within said period of thirty (30) days, or such longer period during
which execution of the same shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal.
(i) The Borrower, any Subsidiary, or any Obligated Party
shall fail to pay when due any principal of or interest on any Debt if
the aggregate principal amount of the affected Debt equals or exceeds
One Million Dollars ($1,000,000) (other than the Obligations), or the
maturity of any such Debt shall have been accelerated, or any such
Debt shall have been required to be prepaid prior to the stated
maturity thereof or any event shall have occurred with respect to any
Debt in the aggregate principal amount equal to or in excess of Five
Million Dollars ($5,000,000) that permits (or, with the giving of
notice or lapse of time or both, would permit) any holder or holders
of such Debt or any Person acting on behalf of such holder or holders
to accelerate the maturity thereof or require any such prepayment.
(j) This Agreement shall cease to be in full force and
effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by the
Borrower, any Subsidiary, or any Obligated Party or the Borrower or
any Obligated Party shall deny that it has any further liability or
obligation under any of the Loan Documents, or any lien or security
interest created by the Loan Documents shall for any reason (other
than the negligence of the Agent or the release thereof in accordance
with the Loan Documents) cease to be a valid, first priority perfected
security interest in and lien upon any of the Collateral purported to
be covered thereby.
(k) Any of the following events shall occur or exist with
respect to the Borrower or any ERISA Affiliate: (i) any Prohibited
Transaction involving any Plan; (ii) any Reportable Event with respect
to any Plan; (iii) the filing under Section 4041 of ERISA of a notice
of intent to terminate any Plan or the termination of any Plan; (iv)
any event or circumstance that might constitute grounds entitling the
PBGC to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any
Plan, or the institution by the PBGC of any such proceedings; or (v)
complete or partial withdrawal under Section 4201 or 4204 of ERISA
from a Multiemployer Plan or the reorganization, insolvency, or
termination of any Multiemployer Plan; and in each case above, such
event or condition, together with all other events or conditions, if
any, have subjected or could in the reasonable opinion of Required
Banks subject the Borrower to any tax, penalty, or other liability to
a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any
combination thereof) which in the aggregate exceed or could reasonably
be expected to exceed One Million Dollars ($1,000,000).
(l) The Egghead Acquisition shall fail to be consummated
on the Closing Date.
Section 12.2 Remedies. If any Event of Default shall occur and be
continuing, the Agent may (and if directed by Required Banks, shall) do any one
or more of the following:
CREDIT AGREEMENT - PAGE 58
66
(a) Acceleration. By notice to the Borrower, declare all
outstanding principal of and accrued and unpaid interest on the Notes
and all other amounts payable by the Borrower under the Loan Documents
immediately due and payable, and the same shall thereupon become
immediately due and payable, without further notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, protest, or other formalities of any kind, all
of which are hereby expressly waived by the Borrower.
(b) Termination of Commitments. Terminate the
Commitments, including, without limitation, the obligation of the
Agent to issue Letters of Credit, without notice to the Borrower.
(c) Judgment. Reduce any claim to judgment.
(d) Foreclosure. Foreclose or otherwise enforce any Lien
granted to the Agent for the benefit of itself and the Banks to secure
payment and performance of the Obligations in accordance with the
terms of the Loan Documents.
(e) Rights. Exercise any and all rights and remedies
afforded by the laws of the State of Texas or any other jurisdiction,
by any of the Loan Documents, by equity, or otherwise.
Provided, however, that upon the occurrence of an Event of Default under
Section 12.1(e) or (f), the Commitments of all of the Banks shall automatically
terminate (including, without limitation, the obligation of the Agent to issue
Letters of Credit), and the outstanding principal of and accrued and unpaid
interest on the Notes and all other amounts payable by the Borrower under the
Loan Documents shall thereupon become immediately due and payable without
notice, demand, presentment, notice of dishonor, notice of acceleration, notice
of intent to accelerate, protest, or other formalities of any kind, all of
which are hereby expressly waived by the Borrower.
Section 12.3 Cash Collateral. If an Event of Default shall have
occurred and be continuing the Borrower shall, if requested by the Agent or
Required Banks, pledge to the Agent as security for the Obligations an amount
in immediately available funds equal to the then outstanding Letter of Credit
Liabilities, such funds to be held in the Collateral Account at the Agent
without any right of withdrawal by the Borrower.
Section 12.4 Performance by the Agent. If the Borrower shall fail
to perform any covenant or agreement in accordance with the terms of the Loan
Documents, the Agent may, at the direction of Required Banks, perform or
attempt to perform such covenant or agreement on behalf of the Borrower. In
such event, the Borrower shall, at the request of the Agent, promptly pay any
amount expended by the Agent or the Banks in connection with such performance
or attempted performance to the Agent at the Principal Office, together with
interest thereon at the applicable Default Rate from and including the date of
such expenditure to but excluding the date such expenditure is paid in full.
Notwithstanding the foregoing, it is expressly agreed that neither
CREDIT AGREEMENT - PAGE 59
67
the Agent nor any Bank shall have any liability or responsibility for the
performance of any obligation of the Borrower under any Loan Document.
Section 12.5 Setoff. If an Event of Default shall have occurred
and be continuing, each Bank is hereby authorized at any time and from time to
time, without notice to the Borrower (any such notice being hereby expressly
waived by the Borrower), to set off and apply any and all deposits (general,
time, demand, provisional, or final) at any time held and other indebtedness at
any time owing by such Bank to or for the credit or the account of the Borrower
against any and all of the Obligations, irrespective of whether or not the
Agent or such Bank shall have made any demand under such Loan Documents and
although such Obligations may be unmatured. Each Bank agrees promptly to
notify the Borrower (with a copy to the Agent) after any such setoff and
application; provided, that the failure to give such notice shall not affect
the validity of such setoff and application. The rights and remedies of each
Bank hereunder are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which such Bank may have.
ARTICLE 13
The Agent
Section 13.1 Appointment, Powers and Immunities. Each Bank hereby
appoints and authorizes Texas Commerce to act as its agent hereunder and under
the other Loan Documents with such powers as are specifically delegated to the
Agent by the terms of the Loan Documents, together with such other powers as
are reasonably incidental thereto. Neither the Agent nor any of its
Affiliates, officers, directors, employees, attorneys, or agents shall be
liable for any action taken or omitted to be taken by any of them hereunder or
otherwise in connection with any Loan Document or any of the other Loan
Documents except for its or their own gross negligence or willful misconduct.
Without limiting the generality of the preceding sentence, the Agent (i) may
treat the payee of any Note as the holder thereof until it receives written
notice of the assignment or transfer thereof signed by such payee and in form
satisfactory to the Agent; (ii) shall have no duties or responsibilities except
those expressly set forth in the Loan Documents, and shall not by reason of any
Loan Document be a trustee or fiduciary for any Bank; (iii) shall not be
required to initiate any litigation or collection proceedings under any Loan
Document except to the extent requested by Required Banks; (iv) shall not be
responsible to the Banks for any recitals, statements, representations, or
warranties contained in any Loan Document, or any certificate or other
documentation referred to or provided for in, or received by any of them under,
any Loan Document, or for the value, validity, effectiveness, enforceability,
or sufficiency of any Loan Document or any other documentation referred to or
provided for therein or for any failure by any Person to perform any of its
obligations thereunder; (v) may consult with legal counsel (including counsel
for the Borrower), independent public accountants, and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants, or
experts; and (vi) shall incur no liability under or in respect of any Loan
Document by acting upon any notice, consent, certificate, or other instrument
or writing believed by it to be genuine and signed or sent by the proper party
or parties. As to any matters not expressly provided for by any Loan Document,
the Agent shall in
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68
all cases be fully protected in acting, or in refraining from acting, hereunder
in accordance with instructions signed by Required Banks, and such instructions
of Required Banks and any action taken or failure to act pursuant thereto shall
be binding on all of the Banks; provided, however, that the Agent shall not be
required to take any action which exposes it to personal liability or which is
contrary to any Loan Document or applicable law.
Section 13.2 Rights of Agent as a Bank. With respect to its
Commitment, the Loans made by it and the Note issued to it, Texas Commerce (and
any successor acting as the Agent) in its capacity as a Bank hereunder shall
have the same rights and powers hereunder as any other Bank and may exercise
the same as though it were not acting as the Agent, and the term "Bank" or
"Banks" shall, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent and its Affiliates may (without having to
account therefor to any Bank) accept deposits from, lend money to, act as
trustee under indentures of, provide merchant banking services to, and
generally engage in any kind of banking, trust, or other business with the
Borrower, any of its Subsidiaries, any Obligated Party, and any other Person
who may do business with or own securities of the Borrower, any Subsidiary, or
any Obligated Party, all as if it were not acting as the Agent and without any
duty to account therefor to the Banks.
Section 13.3 Defaults. The Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default (other than the non-payment
of principal of or interest on the Loans or of commitment fees) unless the
Agent has received notice from a Bank or the Borrower specifying such Default
and stating that such notice is a "Notice of Default." In the event that the
Agent receives such a notice of the occurrence of a Default, the Agent shall
give prompt notice thereof to the Banks (and shall give each Bank prompt notice
of each such non-payment). The Agent shall (subject to Section 13.1) take such
action with respect to such Default as shall be directed by Required Banks,
provided that unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable and
in the best interest of the Banks.
Section 13.4 Indemnification. THE BANKS HEREBY AGREE TO INDEMNIFY
THE AGENT FROM AND HOLD THE AGENT HARMLESS AGAINST (TO THE EXTENT NOT
REIMBURSED UNDER SECTIONS 14.1 AND 14.2, BUT WITHOUT LIMITING THE OBLIGATIONS
OF THE BORROWER UNDER SECTIONS 14.1 AND 14.2), RATABLY IN ACCORDANCE WITH THEIR
RESPECTIVE COMMITMENT PERCENTAGES, ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS,
EXPENSES (INCLUDING ATTORNEYS' FEES AND EXPENSES), AND DISBURSEMENTS OF ANY
KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR THE TRANSACTION DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO BE
TAKEN BY THE AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS; PROVIDED,
THAT NO BANK SHALL BE LIABLE FOR ANY PORTION OF THE FOREGOING TO THE EXTENT
CAUSED BY THE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT
LIMITATION OF THE FOREGOING, IT IS THE EXPRESS INTENTION OF THE BANKS THAT THE
AGENT
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69
SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES AND EXPENSES),
AND DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE AGENT. WITHOUT
LIMITING ANY OTHER PROVISION OF THIS SECTION, EACH BANK AGREES TO REIMBURSE THE
AGENT PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE (CALCULATED ON THE BASIS OF
THE COMMITMENTS PERCENTAGES) OF ANY AND ALL OUT- OF-POCKET EXPENSES (INCLUDING
ATTORNEYS' FEES AND EXPENSES) INCURRED BY THE AGENT IN CONNECTION WITH THE
PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR
ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF,
OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN
DOCUMENTS OR THE TRANSACTION DOCUMENTS, TO THE EXTENT THAT THE AGENT IS NOT
REIMBURSED FOR SUCH EXPENSES BY THE BORROWER.
Section 13.5 Independent Credit Decisions. Each Bank agrees that
it has independently and without reliance on the Agent or any other Bank, and
based on such documentation and information as it has deemed appropriate, made
its own credit analysis of the Borrower and decision to enter into any Loan
Document and that it will, independently and without reliance upon the Agent or
any other Bank, and based upon such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under any Loan Document. Except as otherwise
specifically set forth herein, the Agent shall not be required to keep itself
informed as to the performance or observance by the Borrower or any Obligated
Party of any Loan Document or to inspect the properties or books of the
Borrower or any Obligated Party. Except for notices, reports, and other
documents and information expressly required to be furnished to the Banks by
the Agent hereunder or under the other Loan Documents, the Agent shall not have
any duty or responsibility to provide any Bank with any credit or other
financial information concerning the affairs, financial condition, or business
of the Borrower or any Obligated Party (or any of their Affiliates) which may
come into the possession of the Agent or any of its Affiliates.
Section 13.6 Several Commitments. The Commitments and other
obligations of the Banks under any Loan Document are several. The default by
any Bank in making a Loan in accordance with its Commitment shall not relieve
the other Banks of their obligations under any Loan Document. In the event of
any default by any Bank in making any Loan, each nondefaulting bank shall be
obligated to make its Loan but shall not be obligated to advance the amount
which the defaulting Bank was required to advance hereunder. No Bank shall be
responsible for any act or omission of any other Bank.
Section 13.7 Successor Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Banks and the Borrower, and the Agent may
be removed at any time by Required Banks if it has breached its obligations
under the Loan Documents. Upon any such resignation or removal, Required Banks
will have the right to appoint a successor Agent with the Borrower's consent,
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70
which shall not be unreasonably withheld. If no successor Agent shall have
been so appointed by Required Banks and shall have accepted such appointment
within thirty (30) days after the retiring Agent's giving of notice of
resignation or the Required Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States of
America or any State thereof and having combined capital and surplus of at
least One Hundred Million Dollars ($100,000,000). Upon the acceptance of its
appointment as successor Agent, such successor Agent shall thereupon succeed to
and become vested with all rights, powers, privileges, immunities, contractual
obligations, and duties of the resigning or removed Agent including all
obligations under any Letters of Credit, and the resigning or removed Agent
shall be discharged from its duties and obligations under the Loan Documents,
including, without limitation, its obligations under all Letters of Credit.
After any Agent's resignation or removal as Agent, the provisions of this
Article 13 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was the Agent.
Section 13.8 Agent Fee. The Borrower agrees to pay to the Agent,
on each anniversary of the Closing Date, the administrative fee set forth in
the letter dated April 16, 1996 from Chase Securities, Inc. and Texas Commerce
to the Borrower.
ARTICLE 14
Miscellaneous
Section 14.1 Expenses. The Borrower hereby agrees to pay on
demand: (a) all costs and expenses of the Agent arising in connection with the
preparation, negotiation, execution, and delivery of the Loan Documents and
Transaction Documents executed and delivered on the Closing Date, including,
without limitation, the fees and expenses of legal counsel for the Agent
charged in accordance with that certain letter dated April 23,1996 from the
legal counsel for the Agent to the Agent; (b) all costs and expenses of the
Agent arising in connection with (i) the preparation, negotiation, execution,
and delivery of any of the Loan Documents and Transaction Documents executed
and delivered after the Closing Date and any and all amendments or other
modifications to the Loan Documents and Transaction Documents and (ii) the
syndication of the Loans, including in all instances, without limitation, the
fees and expenses of legal counsel for the Agent; (b) all fees, costs, and
expenses of the Agent arising in connection with any Letter of Credit,
including the Agent's customary fees for amendments, transfers, and drawings on
Letters of Credit; (c) all costs and expenses of the Agent and the Banks in
connection with any Default and the enforcement of any Loan Document,
including, without limitation, the fees and expenses of legal counsel for the
Agent and the Banks; (d) all transfer, stamp, documentary, or other similar
taxes, assessments, or charges levied by any Governmental Authority in respect
of any Loan Document; (e) all costs, expenses, assessments, and other charges
incurred in connection with any filing, registration, recording, or perfection
of any security interest or Lien contemplated by any Loan Document; and (f) all
other costs and expenses incurred by the Agent in connection with any Loan
Document or any Transaction Document, including, without limitation, all costs,
CREDIT AGREEMENT - PAGE 63
71
expenses, and other charges incurred in connection with obtaining any audit or
appraisal in respect of the Collateral.
Section 14.2 Indemnification. THE BORROWER SHALL INDEMNIFY THE
AGENT AND EACH BANK AND EACH AFFILIATE (INCLUDING WITHOUT LIMITATION, CHASE
SECURITIES, INC.) THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS,
COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES AND EXPENSES) TO WHICH ANY OF
THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO
(A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR
ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS OR TRANSACTION DOCUMENTS, (B) ANY OF
THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS OR TRANSACTION DOCUMENTS,
(C) ANY BREACH BY THE BORROWER OR ANY OBLIGATED PARTY OF ANY REPRESENTATION,
WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS,
(D) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF
ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE
PROPERTIES OR ASSETS OF THE BORROWER OR ANY SUBSIDIARY, (E) THE USE OR PROPOSED
USE OF ANY LETTER OF CREDIT OR ANY PAYMENT OR FAILURE TO PAY WITH RESPECT TO
ANY LETTER OF CREDIT, (G) ANY AND ALL TAXES, LEVIES, DEDUCTIONS, AND CHARGES
IMPOSED ON THE AGENT OR ANY BANK IN RESPECT OF ANY LETTER OF CREDIT, OR (G) ANY
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION,
ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING RELATING TO ANY
OF THE FOREGOING; PROVIDED THAT THE PERSON ENTITLED TO BE INDEMNIFIED UNDER
THIS SECTION SHALL NOT BE INDEMNIFIED FROM OR HELD HARMLESS AGAINST ANY LOSSES,
LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, OR
EXPENSES ARISING OUT OF OR RESULTING FROM ITS GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITING ANY PROVISION OF ANY LOAN DOCUMENT, IT IS THE
EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED
UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND
ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS,
COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES AND EXPENSES) ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON.
Section 14.3 Limitation of Liability. None of the Agent, any
Bank, or any Affiliate, officer, director, employee, attorney, or agent thereof
shall have any liability with respect to, and the Borrower and, by the
execution of the Loan Documents to which it is a party each Obligated Party,
hereby waives, releases, and agrees not to sue any of them upon, any claim for
any special, indirect, incidental, consequential, or punitive damages suffered
or incurred by the Borrower or any Obligated Party in connection with, arising
out of, or in any way related to any of the Loan Documents, or any of the
transactions contemplated by any of the Loan Documents.
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72
Section 14.4 No Duty. All attorneys, accountants, appraisers, and
other professional Persons and consultants retained by the Agent or any Bank
shall have the right to act exclusively in the interest of the Agent and the
Banks and shall have no duty of disclosure, duty of loyalty, duty of care, or
other duty or obligation of any type or nature whatsoever to the Borrower or
any of the Borrower's shareholders or any other Person.
Section 14.5 No Fiduciary Relationship. The relationship between
the Borrower and the Obligated Parties on the one hand and the Agent and each
Bank on the other is solely that of debtor and creditor, and neither the Agent
nor any Bank has any fiduciary or other special relationship with the Borrower
or any Obligated Parties, and no term or condition of any of the Loan Documents
shall be construed so as to deem the relationship between the Borrower and the
Obligated Parties on the one hand and the Agent and each Bank on the other and
any Bank to be other than that of debtor and creditor.
Section 14.6 Equitable Relief. The Borrower recognizes that in the
event the Borrower or any Obligated Party fails to pay, perform, observe, or
discharge any or all of the obligations under the Loan Documents, any remedy at
law may prove to be inadequate relief to the Agent and the Banks. The Borrower
therefore agrees that the Agent and the Banks, if the Agent or the Required
Banks so request, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
Section 14.7 No Waiver; Cumulative Remedies. No failure on the
part of the Agent or any Bank to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power, or privilege under any
Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power, or privilege under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege. The rights and remedies provided for in the Loan
Documents are cumulative and not exclusive of any rights and remedies provided
by law.
Section 14.8 Successors and Assigns.
(a) Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns. The Borrower may not assign or transfer any
of its rights or obligations hereunder without the prior written
consent of the Agent and all of the Banks.
(b) Participations. Any Bank may sell participations to
one or more banks or other institutions in or to all or a portion of
its rights and obligations under the Loan Documents (including,
without limitation, all or a portion of its Commitments, the Loans
owing to it and the Letter of Credit Liabilities which it has made or
in which it has a participating interest); provided, however, that (i)
such Bank's obligations under the Loan Documents (including, without
limitation, its Commitments) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the Borrower for the performance of
such obligations, (iii) such Bank shall remain the holder of its Notes
and owner of its participation or other interests in Letter of Credit
Liabilities for all purposes of any Loan Document, (iv) the Borrower
shall continue to deal solely and directly with such Bank in
CREDIT AGREEMENT - PAGE 65
73
connection with such Bank's rights and obligations under the Loan
Documents, and (v) such Bank shall not sell a participation that
conveys to the participant the right to vote or give or withhold
consents under any Loan Document, other than the right to vote upon or
consent to (1) any increase of such Bank's Commitments, (2) any
reduction of the principal amount of, or interest to be paid on, the
Loans or other Obligations of such Bank, (3) any reduction of any
commitment fee, letter of credit fee, or other amount payable to such
Bank under any Loan Document, (4) any postponement of any date for the
payment of any amount payable in respect of the Loans or other
Obligations of such Bank, or (5) the release of Borrower, any
Obligated Party or any Collateral.
(c) Assignments. The Borrower and each of the Banks
agree that any Bank (the "Assigning Bank") may at any time assign to
an Eligible Assignee all, or a proportionate part of all, of its
rights and obligations under the Loan Documents (including, without
limitation, its Commitments, Loans and participation interests) (each
an "Assignee"); provided, however, that (i) each such assignment shall
be of a consistent, and not a varying, percentage of all of the
assigning Bank's rights and obligations under the Loan Documents, (ii)
except in the case of an assignment of all of a Bank's rights and
obligations under the Loan Documents, the amount of the Commitments of
the assigning Bank being assigned or if any Commitment has terminated,
the outstanding principal amount of the related Loans, pursuant to
each assignment (determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall in no event be less
than Five Million Dollars ($5,000,000), (iii) the parties to each such
assignment shall execute and deliver to the Agent for its acceptance
and recording in the Register (as defined below), an Assignment and
Acceptance, together with the Notes subject to such assignment, and a
processing and recordation fee of Three Thousand Dollars ($3,000)
payable by the assignor or assignee (and not the Borrower); provided
that such fee shall not be payable to Agent if the Assigning Bank is
making an assignment to one of its Affiliates; and (iv) the Borrower
and the Agent must consent to such assignment, which consent shall not
be unreasonably withheld, with such consents to be evidenced by the
Borrower's and the Agent's execution of the Assignment and Acceptance;
provided that Borrower's consent will not be necessary if the
Assigning Bank is making an assignment to one of its Affiliates. Upon
such execution, delivery, acceptance, and recording, from and after
the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the
execution thereof, or, if so specified in such Assignment and
Acceptance, the date of acceptance thereof by the Agent, (x) the
assignee thereunder shall be a party hereto as a "Bank" and, to the
extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder and under the Loan Documents, and (y)
the Bank that is an assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to
such Assignment and Acceptance, relinquish its rights and be released
from its obligations under the Loan Documents (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of a
Bank's rights and obligations under the Loan Documents, such Bank
shall cease to be a party thereto). The Agent shall maintain at its
Principal Office a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and
addresses of the Banks and the Commitments of, and
CREDIT AGREEMENT - PAGE 66
74
principal amount of the Loans owing to and Letter of Credit
Liabilities participated in by, each Bank from time to time (the
"Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Agent, and the Banks may treat each Person whose name is recorded in
the Register as a Bank hereunder for all purposes under the Loan
Documents. The Register shall be available for inspection by the
Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice. Upon its receipt of an Assignment and
Acceptance executed by an Assigning Bank and Assignee representing
that it is an Eligible Assignee, together with any Notes subject to
such assignment, the Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit "H"
hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register, and (iii) give prompt
written notice thereof to the Borrower. Within five (5) Business Days
after its receipt of such notice the Borrower, at its expense, shall
execute and deliver to the Agent in exchange for the surrendered Notes
new Notes to the order of such Eligible Assignee in an amount equal to
the Commitments or Loans assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Bank has retained Commitments or
Loans, Notes to the order of the assigning Bank in an amount equal to
the Commitments and Loans retained by it hereunder (each such
promissory note shall constitute a "Note" for purposes of the Loan
Documents). Such new Notes shall be in an aggregate principal amount
of the surrendered Notes, shall be dated the effective date of such
Assignment and Acceptance, and shall otherwise be in substantially the
form of the applicable Exhibit hereto.
(d) Information. Any Bank may, in connection with any
assignment or participation or proposed assignment or participation
pursuant to this Section, disclose to the assignee or participant or
proposed assignee or participant, any information relating to the
Borrower or its Subsidiaries furnished to such Bank by or on behalf of
the Borrower or its Subsidiaries.
(e) Pledge to Federal Reserve. Notwithstanding anything
in this Section 14.8 to the contrary, any Bank may, in the ordinary
course of its business, pledge its Notes to any United States Federal
Reserve Bank to secure advances made by such Federal Reserve Bank to
such Bank.
Section 14.9 Survival. All representations and warranties made in
any Loan Document or in any document, statement, or certificate furnished in
connection with any Loan Document shall survive the execution and delivery of
the Loan Documents and no investigation by the Agent or any Bank or any closing
shall affect the representations and warranties or the right of the Agent or
any Bank to rely upon them. Without prejudice to the survival of any other
obligation of the Borrower hereunder, the obligations of the Borrower under
Article 6 and Sections 14.1 and 14.2 shall survive repayment of the Notes and
termination of the Commitments and the Letters of Credit.
Section 14.10 Entire Agreement. THIS AGREEMENT, THE NOTES, AND THE
OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT
AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR
CREDIT AGREEMENT - PAGE 67
75
COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN
OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES HERETO.
Section 14.11 Amendments. No amendment or waiver of any provision
of any Loan Document to which the Borrower is a party, nor any consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be agreed or consented to by Required Banks and the Borrower, and
each such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided, that no amendment,
waiver, or consent shall, unless in writing and signed by all of the Banks and
the Borrower, do any of the following: (a) increase Commitments of the Banks;
(b) reduce the principal of, or interest on, the Notes, the Reimbursement
Obligations, or any fees or other amounts payable hereunder; (c) postpone any
date fixed for any payment of principal of, or interest on, the Notes, the
Reimbursement Obligations, or any fees or other amounts payable hereunder; (d)
waive or amend any of the conditions specified in Article 7; (e) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes or the Letter of Credit Liabilities or the number of Banks which
shall be required for the Banks or any of them to take any action under any
Loan Document; (f) change any provision contained in this Section 14.11; or (g)
release any Collateral or release the Borrower or any Obligated Party from
liability. Notwithstanding anything to the contrary contained in this Section,
no amendment waiver, or consent shall be made with respect to Section 2.7 or
Article 13 hereof without the prior written consent of the Agent.
Section 14.12 Maximum Interest Rate.
(a) No interest rate specified in any Loan Document shall
at any time exceed the Maximum Rate. If at any time the interest rate
(the "Contract Rate") for any Obligation shall exceed the Maximum
Rate, thereby causing the interest accruing on such Obligation to be
limited to the Maximum Rate, then any subsequent reduction in the
Contract Rate for such Obligation shall not reduce the rate of
interest on such Obligation below the Maximum Rate until the aggregate
amount of interest accrued on such Obligation equals the aggregate
amount of interest which would have accrued on such Obligation if the
Contract Rate for such Obligation had at all times been in effect.
(b) No provision of any Loan Document shall require the
payment or the collection of interest in excess of the maximum amount
permitted by applicable law. If any excess of interest in such
respect is hereby provided for, or shall be adjudicated to be so
provided, in any Loan Document or otherwise in connection with this
loan transaction, the provisions of this Section shall govern and
prevail and neither the Borrower nor the sureties, guarantors,
successors, or assigns of the Borrower shall be obligated to pay the
excess amount of such interest or any other excess sum paid for the
use, forbearance, or detention of sums loaned pursuant hereto. In the
event any Bank ever receives, collects, or applies as interest any
such sum, such amount which would be in excess of the maximum amount
permitted by applicable law shall be applied as a payment and
reduction
CREDIT AGREEMENT - PAGE 68
76
of the principal of the Obligations, and, if the principal of the
Obligations has been paid in full, any remaining excess shall
forthwith be paid to the Borrower. In determining whether or not the
interest paid or payable exceeds the Maximum Rate, the Borrower and
each Bank shall, to the extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee, or premium
rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) amortize, prorate, allocate, and spread in
equal or unequal parts the total amount of interest throughout the
entire contemplated term of the Obligations so that interest for the
entire term does not exceed the Maximum Rate.
Section 14.13 Notices. All notices and other communications
provided for in any Loan Document to which the Borrower or any Obligated Party
is a party shall be given or made in writing and telecopied, mailed by
certified mail return receipt requested, or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof and, if to an Obligated Party, at the address for notices for the
Borrower, or, as to any party, at such other address as shall be designated by
such party in a notice to each other party given in accordance with this
Section. Except as otherwise provided in any Loan Document, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, three (3) Business Days after
being duly deposited in the mails, in each case given or addressed as
aforesaid; provided, however, notices to the Agent pursuant to Section 2.7 or
5.3 shall not be effective until received by the Agent.
Section 14.14 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas and the
applicable laws of the United States of America.
Section 14.15 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
Section 14.16 Severability. Any provision of any Loan Document
held by a court of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of any Loan Document and the effect
thereof shall be confined to the provision held to be invalid or illegal.
CREDIT AGREEMENT - PAGE 69
77
Section 14.17 Headings. The headings, captions, and arrangements
used in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 14.18 Non-Application of Chapter 15 of Texas Credit Code.
The provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto not
to be applicable to any Loan Documents or to the transactions contemplated
thereby.
Section 14.19 Construction. The Borrower, each Obligated Party (by
its execution of the Loan Documents to which its is a party), the Agent, and
each Bank acknowledges that each of them has had the benefit of legal counsel
of its own choice and has been afforded an opportunity to review the Loan
Documents with its legal counsel and that the Loan Documents shall be construed
as if jointly drafted by the parties thereto.
Section 14.20 Independence of Covenants. All covenants under the
Loan Documents shall be given independent effect so that if a particular action
or condition is not permitted by any of such covenants, the fact that it would
be permitted by an exception to, or be otherwise within the limitations of,
another covenant shall not avoid the occurrence of a Default if such action is
taken or such condition exists.
Section 14.21 Waiver of Jury Trial. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF
OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY OR THE ACTIONS OF THE AGENT OR ANY BANK IN THE NEGOTIATION,
ADMINISTRATION, OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
--------
SOFTWARE SPECTRUM, INC.
By: /s/ Deborah A. Nugent
-----------------------------------
Deborah A. Nugent
Vice President of Finance
Address for Notices:
2140 Merritt Drive
Garland, Texas 75041
Fax No.: 214-864-5120
Telephone No.: 214- 840-6600
Attention: Chief Financial Officer
CREDIT AGREEMENT - PAGE 70
78
AGENT:
-----
Revolving Commitment: TEXAS COMMERCE BANK NATIONAL
-------------------- ASSOCIATION, individually as a Bank
and as the Agent
$60,000,000.00
Term Commitment: By: /s/ J. Scot Brunke
--------------- -----------------------------------
J. Scot Brunke
$30,000,000.00 Senior Vice President
Address for Notices:
-------------------
1111 Fannin, 9th Floor, MS46
Houston, Texas 77002
Fax No.: 713 750-3810
Telephone No.: 713 750-2784
Attention: Loan Syndication Services
re: Software Spectrum
With a copy to:
P.O. Box 660197
2200 Ross Avenue
Dallas, Texas 75266-0197
Fax No.:214-922-2608
Telephone No.:214-922-2997
Attention: Corporate Banking Group
Lending Office for Base Rate
Accounts and Libor Accounts:
---------------------------
1111 Fannin
Houston, Texas 77002
CREDIT AGREEMENT - PAGE 71
79
INDEX TO EXHIBITS
Exhibit Description of Exhibit
------- ----------------------
"A" Revolving Note
"B" Term Note
"C" Borrowing Base Report
"D" Guaranty
"E" Borrower Security Agreement
"F" Borrower Pledge Agreement
"G" Subsidiary Security Agreement
"H" Assignment and Acceptance
"I" Compliance Certificate
INDEX TO SCHEDULES
Schedule Description of Schedule
-------- -----------------------
1.1 (a) Approved Foreign Account Debtors; Approved
Account Debtors and Concentration Account
Debtors
8.14 List of Subsidiaries
10.1 Debt
10.2 Existing Liens
10.5 Existing Investments
CREDIT AGREEMENT - PAGE 72
80
EXHIBIT "A"
TO
SOFTWARE SPECTRUM, INC.
CREDIT AGREEMENT
Revolving Note
81
REVOLVING NOTE
$________________ Dallas, Texas May 3, 1996
FOR VALUE RECEIVED, the undersigned, SOFTWARE SPECTRUM, INC., a Texas
corporation (the "Borrower"), hereby promises to pay to the order of
________________ (the "Bank"), at the Principal Office of the Agent, in lawful
money of the United States of America and in immediately available funds, the
principal amount of ______________________ ($___________) or such lesser amount
as shall equal the aggregate unpaid principal amount of the Revolving Loans
made by the Bank to the Borrower under the Credit Agreement referred to below,
on the dates and in the principal amounts provided in the Credit Agreement, and
to pay interest on the unpaid principal amount of each such Revolving Loan, at
such office, in like money and funds, for the period commencing on the date of
such Revolving Loan until such Revolving Loan shall be paid in full, at the
rates per annum and on the dates provided in the Credit Agreement.
The Borrower hereby authorizes the Bank to record in its records the
amount of each Revolving Loan and Type of Accounts established under each
Revolving Loan and all Continuations, Conversions and payments of principal in
respect thereof, which records shall, in the absence of manifest error, be
conclusive; provided, however, that the failure to make such notation with
respect to any such Revolving Loan or payment shall not limit or otherwise
affect the obligations of the Borrower under the Credit Agreement or this
Revolving Note.
This Revolving Note is one of the Revolving Notes referred to in the
Credit Agreement dated as of May 3, 1996, among the Borrower, the Bank, the
other banks named therein and Texas Commerce Bank National Association, as
agent for such banks ("Agent") (such Credit Agreement, as the same may be
amended or otherwise modified from time to time, being referred to herein as
the "Credit Agreement"), and evidences Revolving Loans made by the Bank
thereunder. The Credit Agreement, among other things, contains provisions for
acceleration of the maturity of this Revolving Note upon the happening of
certain stated events and for prepayments of Revolving Loans prior to the
maturity of this Revolving Note upon the terms and conditions specified in the
Credit Agreement. Capitalized terms used in this Revolving Note have the
respective meanings assigned to them in the Credit Agreement.
This Revolving Note shall be governed by and construed in accordance
with the laws of the State of Texas and the applicable laws of the United
States of America.
The Borrower and each surety, guarantor, endorser and other party ever
liable for payment of any sums of money payable on this Revolving Note jointly
and severally waive notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent
to accelerate, notice of intent to demand, diligence in collecting, grace and
all other formalities of any kind, and consent to all extensions without notice
for any period or periods of time and partial payments, before or after
maturity, and any impairment of
REVOLVING NOTE - Page 1
82
any collateral securing this Revolving Note, all without prejudice to the
holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release any such party or to release or substitute
part or all of the collateral securing this Revolving Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
SOFTWARE SPECTRUM, INC.
By:
------------------------------------
Name:
------------------------
Title:
-----------------------
REVOLVING NOTE - Page 2
83
EXHIBIT "B"
TO
SOFTWARE SPECTRUM, INC.
CREDIT AGREEMENT
Term Note
84
TERM NOTE
$________________ Dallas, Texas May 3, 1996
FOR VALUE RECEIVED, the undersigned, SOFTWARE SPECTRUM, INC., a Texas
corporation (the "Borrower"), hereby promises to pay to the order of
________________ (the "Bank"), at the Principal Office of the Agent, in lawful
money of the United States of America and in immediately available funds, the
principal amount of ______________________ ($___________) or such lesser amount
as shall equal the aggregate unpaid principal amount of the Term Loan made by
the Bank to the Borrower under the Credit Agreement referred to below, on the
dates and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of the Term Loan, at such office, in
like money and funds, for the period commencing on the date of such Term Loan
until such Term Loan shall be paid in full, at the rates per annum and on the
dates provided in the Credit Agreement.
The Borrower hereby authorizes the Bank to record in its records the
amount of the Term Loan and Type of Accounts established thereunder and all
Continuations, Conversions and payments of principal in respect thereto, which
records shall, in the absence of manifest error, be conclusive; provided,
however, that the failure to make such notation with respect to the Term Loan,
or such Accounts or payment shall not limit or otherwise affect the obligations
of the Borrower under the Credit Agreement or this Term Note.
This Term Note is one of the Term Notes referred to in the Credit
Agreement dated as of May 3, 1996, among the Borrower, the Bank, the other
banks named therein and Texas Commerce Bank National Association, as agent for
such banks ("Agent") (such Credit Agreement, as the same may be amended or
otherwise modified from time to time, being referred to herein as the "Credit
Agreement") and evidences the Term Loan made by the Bank thereunder. The
Credit Agreement, among other things, contains provisions for acceleration of
the maturity of this Term Note upon the happening of certain stated events and
for prepayments of Term Loans prior to the maturity of this Term Note upon the
terms and conditions specified in the Credit Agreement. Capitalized terms used
in this Term Note have the respective meanings assigned to them in the Credit
Agreement.
This Term Note shall be governed by and construed in accordance with
the laws of the State of Texas and the applicable laws of the United States of
America.
The Borrower and each surety, guarantor, endorser and other party ever
liable for payment of any sums of money payable on this Term Note jointly and
severally waive notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent
to accelerate, notice of intent to demand, diligence in collecting, grace and
all other formalities of any kind, and consent to all extensions without notice
for any period or periods of time and partial payments, before or after
maturity, and any impairment of any collateral securing this Term Note, all
without prejudice to the holder. The holder shall similarly have the right to
deal in any way, at any time, with one or more of the foregoing parties without
notice to any other party,
TERM NOTE - Page 1
85
and to grant any such party any extensions of time for payment of any of said
indebtedness, or to release any such party or release or substitute part or all
of the collateral securing this Term Note, or to grant any other indulgences or
forbearances whatsoever, without notice to any other party and without in any
way affecting the personal liability of any party hereunder.
SOFTWARE SPECTRUM, INC.
By:
------------------------------------
Name:
------------------------
Title:
-----------------------
TERM NOTE - Page 2
86
EXHIBIT "C"
TO
SOFTWARE SPECTRUM, INC.
CREDIT AGREEMENT
Borrowing Base Certificate
87
BORROWING BASE CERTIFICATE
TO: Texas Commerce Bank
National Association, as Agent
1111 Fannin, 9th Floor MS46
Houston, Texas 77002
with a copy to
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
and each Bank
Ladies/Gentlemen:
This Borrowing Base Report for the month ending ____________________,
19___, is executed and delivered by SOFTWARE SPECTRUM, INC. (the "Borrower") to
TEXAS COMMERCE BANK NATIONAL ASSOCIATION (the "Agent"), pursuant to that
certain Credit Agreement (the "Credit Agreement") dated as of May 3, 1996,
among the Borrower, the Agent and the Banks named therein. All terms used
herein shall have the meanings assigned to them in the Credit Agreement.
The Borrower represents and warrants to the Agent and the Banks that
all information contained herein is true, correct, and complete, and that the
total Eligible Accounts referred to below represent the Eligible Accounts that
qualify for purposes of determining the Borrowing Base under the Credit
Agreement. The Borrower further represents and warrants to the Lender that
attached hereto as Schedule 1 is a list of all accounts of the Borrower and the
Granting Subsidiaries for the month ending _______________, 19___, showing all
accounts aged in 30, 60, and 90 day intervals and specifying the names and
balance due for each account debtor and the contra accounts owing to such
account debtors.
1. Gross Accounts ending balance for period ended ___________,
199__ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $___________
2. Less: Ineligible Accounts (determined pursuant to the
definition of Eligible Account in the Credit Agreement,
without duplication) . . . . . . . . . . . . . . . . . . . . . $___________
(a) Foreign Accounts not due and payable within 90 days . $___________
(b) Domestic Accounts not due and payable within 120 days $___________
BORROWING BASE CERTIFICATE - Page 1
88
(c) Foreign Accounts outstanding for more than 90 days
past the original date of invoice . . . . . . . . . . $___________
(d) Domestic Accounts outstanding for more than 120 days
past the original date of invoice . . . . . . . . . . $___________
(e) Accounts created outside of the ordinary course of
business . . . . . . . . . . . . . . . . . . . . . . . $___________
(f) Accounts relating to unenforceable or incomplete
contracts . . . . . . . . . . . . . . . . . . . . . . $___________
(g) Accounts from sales on bill-and-hold, guaranteed
sale, sale-and-return, or similar basis . . . . . . . $___________
(h) Accounts subject to, or arising from the sale of goods
subject to, a Lien other than Liens held by the Agent. $___________
(i) Accounts as to which the Agent does not have first
priority Lien (unless Agent's Lien released pursuant $___________
to Section 5.12) . . . . . . . . . . . . . . . . . . .
(j) Accounts subject to anti-assignment provisions (e.g.
state government accounts unless assignment approved) $___________
(k) Accounts subject to asserted set-off, dispute, etc. . $___________
(l) Accounts owed by account debtors subject to bankruptcy $___________
(m) Accounts evidenced by chattel paper or instruments . . $___________
(n) Any Government Accounts unless the applicable
assignment of claims laws shall have been complied $___________
with or unless Agent's Lien released pursuant to
Section 5.12 . . . . . . . . . . . . . . . . . . . . .
(o) Accounts owed by Affiliates etc. . . . . . . . . . . . $___________
(p) Accounts not payable in Dollars . . . . . . . . . . . $___________
(q) Accounts owed by foreign account debtors (other than
Approved Foreign Account Debtors) not supported by an $___________
acceptable letter of credit . . . . . . . . . . . . .
(r) Accounts subject to the 10% concentration rule . . . . $___________
(s) Accounts subject to the 20% concentration rule (i.e.
Concentration Account Debtors) . . . . . . . . . . . . $___________
(t) Accounts subject to 20% past due rule (except Accounts
of Approved Account Debtors) . . . . . . . . . . . . . $___________
(u) Contra accounts owed to the account debtors . . . . . $___________
(v) Excluded Accounts . . . . . . . . . . . . . . . . . . $___________
(w) Accounts that do not comply with laws, etc . . . . . . $___________
(x) Accounts back by performance, completion or other
bonds or performance subcontracted . . . . . . . . . . $____________
BORROWING BASE CERTIFICATE - Page 2
89
3. Total Ineligible Accounts (total of 2(a) through (w)) . . . . . $____________
4. Total Eligible Accounts (1 minus 3) . . . . . . . . . . . . . . $____________
5. 85% of line 4 . . . . . . . . . . . . . . . . . . . . . . . . $____________
6. Market value of cash and cash equivalents held in Cash
Collateral Account (market value detailed on Schedule 2 $____________
hereto) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Outstanding Principal Balance of the Term Loans . . . . . . . . $____________
8. Borrowing Base: Line 5 plus Line 6 minus Line 7 . . . . . . . . $_____________
9. Outstanding Revolving Credit
(a) Revolving Loans . . . . . . . . . . . . . . . . . . . $____________
(b) Letter of Credit Liabilities . . . . . . . . . . . . . $____________
(c) TOTAL . . . . . . . . . . . . . . . . . . . . . . . . $_____________
10. Available Credit Amount [(the lesser of the amount of the
Revolving Commitments or line 8) minus line 9(c) . . . . . . . $_____________
The Borrower represents and warrants to the Banks that the
representations and warranties of the Borrower contained in Article 8 of the
Credit Agreement and the other Loan Documents are true and correct on and as of
the date of this Borrowing Base Report as if made on and as of the date hereof
except to the extent that such representations and warranties speak to a
specific date, and that no Default has occurred and is continuing.
Date: __________, 19__.
BORROWER:
SOFTWARE SPECTRUM, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BORROWING BASE CERTIFICATE - Page 3
90
EXHIBIT "D"
TO
SOFTWARE SPECTRUM, INC.
CREDIT AGREEMENT
Guaranty Agreement
91
GUARANTY AGREEMENT
(____________________)
WHEREAS, SOFTWARE SPECTRUM, INC., a Texas corporation ("Borrower") has
entered into that certain Credit Agreement of even date herewith, among
Borrower, the banks named therein and Texas Commerce Bank National Association,
as agent for such banks ("Agent") (such Credit Agreement, as it may hereafter
be amended or otherwise modified from time to time, being hereinafter referred
to as the "Credit Agreement" and capitalized terms not otherwise defined herein
shall have the same meaning as set forth in the Credit Agreement);
WHEREAS, the execution of this Guaranty Agreement is a condition to
each Bank's obligations under the Credit Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the undersigned, ________________, a
________________ corporation (the "Guarantor"), hereby irrevocably and
unconditionally guarantees to the Agent and the Banks the full and prompt
payment and performance of the Guaranteed Indebtedness (hereinafter defined),
this Guaranty Agreement being upon the following terms:
1. The term "Guaranteed Indebtedness", as used herein means all
of the "Obligations", as defined in the Credit Agreement and shall include any
and all post-petition interest and expenses (including attorneys' fees) whether
or not allowed under any bankruptcy, insolvency, or other similar law; provided
that the Guaranteed Indebtedness shall be limited to an aggregate amount equal
to the largest amount that would not render Guarantor's obligations hereunder
subject to avoidance under Section 544 or 548 of the United States Bankruptcy
Code or under any applicable state law relating to fraudulent transfers or
conveyances.
2. Guarantor under this Guaranty, and each guarantor under other
guaranties, if any, relating to the Credit Agreement (the "Related Guaranties")
which contain a contribution provision similar to that set forth in this
paragraph 2, together desire to allocate among themselves (collectively, the
"Contributing Guarantors"), in a fair and equitable manner, their obligations
arising under this Guaranty and the Related Guaranties. Accordingly, in the
event any payment or distribution is made by Guarantor under this Guaranty or a
guarantor under a Related Guaranty (a "Funding Guarantor") that exceeds its
Fair Share (as defined below), that Funding Guarantor shall be entitled to a
contribution from each of the other Contributing Guarantors in the amount of
such other contributing Guarantor's Fair Share Shortfall (as defined below),
with the result that all such contributions will cause each Contributing
Guarantor's Aggregate Payments (as defined below) to equal its Fair Share.
"Fair Share" means, with respect to a Contributing Guarantor as of any date of
determination, an amount equal to (i) the ratio of (x) the Adjusted Maximum
Amount (as defined below) with respect to such Contributing Guarantor to (y)
the aggregate of the Adjusted Maximum Amounts with respect to all Contributing
Guarantors, multiplied by (ii) the aggregate amount paid or distributed on or
before such date by all Funding Guarantors under this Guaranty and the Related
Guaranties in respect of the obligations guarantied. "Fair Share
GUARANTY AGREEMENT (________________________) - Page 1
92
Shortfall" means, with respect to a Contributing Guarantor as of any date of
determination, the excess, if any, of the Fair Share of such Contributing
Guarantor over the Aggregate Payments of such Contributing Guarantor.
"Adjusted Maximum Amount" means, with respect to a Contributing Guarantor as of
any date of determination, the maximum aggregate amount of the obligations of
such Contributing Guarantor under this Guaranty and the Related Guaranties, in
each case determined in accordance with the provisions hereof and thereof;
provided that, solely for purposes of calculating the "Adjusted Maximum Amount"
with respect to any Contributing Guarantor for purposes of this paragraph 2,
the assets or liabilities arising by virtue of any rights to or obligation of
contribution hereunder or under any similar provision contained in a Related
Guaranty shall not be considered as assets or liabilities of such Contributing
Guarantor. "Aggregate Payments" means, with respect to a Contributing
Guarantor as of any date of determination, the aggregate amount of all payments
and distributions made on or before such date by such Contributing Guarantor in
respect of this Guaranty and the Related Guaranties (including, without
limitation, in respect of this paragraph 2 or any similar provision contained
in a Related Guaranty). The amounts payable as contributions hereunder and
under similar provisions in the Related Guaranties shall be determined as of
the date on which the related payment or distribution is made by the applicable
Funding Guarantor. The allocation among Contributing Guarantors of their
obligations as set forth in this paragraph 2 or any similar provision contained
in a Related Guaranty shall not be construed in any way to limit the liability
to the Agent and the Banks of any Contributing Guarantor hereunder or under a
Related Guaranty. Each Contributing Guarantor under a Related Guaranty is a
third party beneficiary to the contribution agreement set forth in this
paragraph 2.
3. This instrument shall be an absolute, continuing, irrevocable
and unconditional guaranty of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its obligations hereunder
until the payment and performance in full of the Guaranteed Indebtedness. No
set-off, counterclaim, recoupment, reduction, or diminution of any obligation,
or any defense of any kind or nature which Borrower may have against Agent, any
Bank or any other party, or which Guarantor may have against Borrower, Agent,
any Bank or any other party, shall be available to, or shall be asserted by,
Guarantor against Agent, any Bank or any subsequent holder of the Guaranteed
Indebtedness or any part thereof or against payment of the Guaranteed
Indebtedness or any part thereof.
4. If Guarantor becomes liable for any indebtedness owing by
Borrower to Agent or any Bank by endorsement or otherwise, other than under
this Guaranty Agreement, such liability shall not be in any manner impaired or
affected hereby, and the rights of Agent and Banks hereunder shall be
cumulative of any and all other rights that Agent and Banks may ever have
against Guarantor. The exercise by Agent and Banks of any right or remedy
hereunder or under any other instrument, or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or remedy.
5. In the event of default by Borrower in payment or performance
of the Guaranteed Indebtedness, or any part thereof, when such Guaranteed
Indebtedness becomes due, whether by its terms, by acceleration, or otherwise,
Guarantor shall promptly pay the amount due thereon to
GUARANTY AGREEMENT (________________________) - Page 2
93
Agent and Banks without notice or demand in lawful currency of the United
States of America and it shall not be necessary for Agent and Banks, in order
to enforce such payment by Guarantor, first to institute suit or exhaust its
remedies against Borrower or others liable on such Guaranteed Indebtedness, or
to enforce any rights against any collateral which shall ever have been given
to secure such Guaranteed Indebtedness. In the event such payment is made by
Guarantor, then Guarantor shall be subrogated to the rights then held by Agent
and any Bank with respect to the Guaranteed Indebtedness to the extent to which
the Guaranteed Indebtedness was discharged by Guarantor and, in addition, upon
payment by Guarantor of any sums to Agent and any Bank hereunder, all rights of
Guarantor against Borrower or any Collateral arising as a result therefrom by
way of right of subrogation, reimbursement, or otherwise shall in all respects
be subordinate and junior in right of payment to the prior indefeasible payment
in full of the Guaranteed Indebtedness.
6. If acceleration of the time for payment of any amount payable
by Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject
to acceleration under the terms of the Guaranteed Indebtedness shall
nonetheless be payable by Guarantor hereunder forthwith on demand by Agent or
any Bank.
7. Guarantor hereby agrees that its obligations under this
Guaranty Agreement shall not be released, discharged, diminished, impaired,
reduced, or affected for any reason or by the occurrence of any event,
including, without limitation, one or more of the following events, whether or
not with notice to or the consent of Guarantor: (a) the taking or accepting of
collateral as security for any or all of the Guaranteed Indebtedness or the
release, surrender, exchange, or subordination of any collateral now or
hereafter securing any or all of the Guaranteed Indebtedness; (b) any partial
release of the liability of Guarantor hereunder, or the full or partial release
of any other guarantor from liability for any or all of the Guaranteed
Indebtedness; (c) any disability of Borrower, or the dissolution, insolvency,
or bankruptcy of Borrower, Guarantor, or any other party at any time liable for
the payment of any or all of the Guaranteed Indebtedness; (d) any renewal,
extension, modification, waiver, amendment, or rearrangement of any or all of
the Guaranteed Indebtedness or any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (e) any adjustment, indulgence, forbearance, waiver, or
compromise that may be granted or given by Agent or any Bank to Borrower,
Guarantor, or any other party ever liable for any or all of the Guaranteed
Indebtedness; (f) any neglect, delay, omission, failure, or refusal of Agent or
any Bank to take or prosecute any action for the collection of any of the
Guaranteed Indebtedness or to foreclose or take or prosecute any action in
connection with any instrument, document, or agreement evidencing, securing, or
otherwise relating to any or all of the Guaranteed Indebtedness; (g) the
unenforceability or invalidity of any or all of the Guaranteed Indebtedness or
of any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Guaranteed Indebtedness; (h) any payment by
Borrower or any other party to Agent or any Bank is held to constitute a
preference under applicable bankruptcy or insolvency law or if for any other
reason Agent or any Bank is required to refund any payment or pay the amount
thereof to someone else; (i) the settlement or compromise of any of the
Guaranteed Indebtedness; (j) the non-perfection of
GUARANTY AGREEMENT (________________________) - Page 3
94
any security interest or lien securing any or all of the Guaranteed
Indebtedness; (k) any impairment of any collateral securing any or all of the
Guaranteed Indebtedness; (l) the failure of Agent or any Bank to sell any
collateral securing any or all of the Guaranteed Indebtedness in a commercially
reasonable manner or as otherwise required by law; (m) any change in the
corporate existence, structure, or ownership of Borrower; or (n) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower or Guarantor.
8. Guarantor represents and warrants to Agent and Banks as
follows:
(a) All representations and warranties in the Credit
Agreement relating to Guarantor are true and correct.
(b) The value of the consideration received and to be
received by Guarantor as a result of Borrower, Agent and Banks
entering into the Credit Agreement and Guarantor executing and
delivering this Guaranty Agreement and the other Loan Documents to
which it is a party is reasonably worth at least as much as the
liability and obligation of Guarantor hereunder and thereunder, and
the Credit Agreement and the liability and obligation of Guarantor in
connection therewith have benefitted and may reasonably be expected to
benefit Guarantor directly or indirectly.
(c) Guarantor has, independently and without reliance
upon Agent or any Bank and based upon such documents and information
as Guarantor has deemed appropriate, made its own analysis and
decision to enter into the Loan Documents to which it is a party.
(d) Guarantor has adequate means to obtain from Borrower
on a continuing basis information concerning the financial condition
and assets of Borrower and Guarantor is not relying upon Agent or the
Banks to provide (and neither the Agent nor any Bank shall have any
duty to provide) any such information to Guarantor either now or in
the future.
9. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Bank has any commitment
under the Credit Agreement, Guarantor will comply with all covenants set forth
in the Credit Agreement specifically applicable to Guarantor.
10. When an Event of Default exists, Agent and Banks shall have
the right to set-off and apply against this Guaranty Agreement or the
Guaranteed Indebtedness or both, at any time and without notice to Guarantor,
any and all deposits (general or special, time or demand, provisional or final)
or other sums at any time credited by or owing from Agent and Banks to
Guarantor whether or not the Guaranteed Indebtedness is then due and
irrespective of whether or not Agent or any Bank shall have made any demand
under this Guaranty Agreement. The rights and remedies of Agent and the Banks
hereunder are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which Agent or any Bank may have.
GUARANTY AGREEMENT (________________________) - Page 4
95
11. (a) Guarantor hereby agrees that the Subordinated
Indebtedness (as defined below) shall be subordinate and junior in right of
payment to the prior payment in full of all Guaranteed Indebtedness as herein
provided. The Subordinated Indebtedness shall not be payable, and no payment
of principal, interest or other amounts on account thereof, and no property or
guarantee of any nature to secure or pay the Subordinated Indebtedness shall be
made or given, directly or indirectly by or on behalf of any Debtor (hereafter
defined) or received, accepted, retained or applied by Guarantor unless and
until the Guaranteed Indebtedness shall have been paid in full in cash; except
that so long as an Event of Default does not exist, Guarantor shall have the
right to receive regularly scheduled installments of principal and interest on
any Subordinated Indebtedness. During the continuation of an Event of Default,
no payments of principal or interest on any Subordinated Indebtedness may be
made or given, directly or indirectly, by or on behalf of any Debtor or
received, accepted, retained or applied by Guarantor unless and until the
Guaranteed Indebtedness shall have been paid in full in cash. If any sums
shall be paid to Guarantor by any Debtor or any other Person on account of the
Subordinated Indebtedness when such payment is not permitted hereunder, such
sums shall be held in trust by Guarantor for the benefit of Agent and the Banks
and shall forthwith be paid to Agent without affecting the liability of
Guarantor under this Guaranty Agreement and may be applied by Agent against the
Guaranteed Indebtedness in accordance with the Credit Agreement. Upon the
request of Agent, Guarantor shall execute, deliver, and endorse to Agent such
documentation as Agent may request to perfect, preserve, and enforce its rights
hereunder. For purposes of this Guaranty Agreement, the term "Subordinated
Indebtedness" means all indebtedness, liabilities, and obligations of Borrower
or any Obligated Party other than Guarantor (Borrower and such Obligated
Parties herein the "Debtors") to Guarantor, whether such indebtedness,
liabilities, and obligations now exist or are hereafter incurred or arise, or
are direct, indirect, contingent, primary, secondary, several, joint and
several, or otherwise, and irrespective of whether such indebtedness,
liabilities, or obligations are evidenced by a note, contract, open account, or
otherwise, and irrespective of the Person or Persons in whose favor such
indebtedness, obligations, or liabilities may, at their inception, have been,
or may hereafter be created, or the manner in which they have been or may
hereafter be acquired by Guarantor.
(b) Guarantor agrees that any and all Liens of Guarantor
(including any judgment liens), upon any Debtor's assets securing payment of
any Subordinated Indebtedness shall be and remain inferior and subordinate to
any and all Liens upon any Debtor's assets securing payment of the Guaranteed
Indebtedness or any part thereof, regardless of whether such Liens in favor of
Guarantor, Agent or any Bank presently exist or are hereafter created or
attached. Without the prior written consent of Agent, Guarantor shall not (i)
file suit against any Debtor or exercise or enforce any other creditor's right
it may have against any Debtor, or (ii) foreclose, repossess, sequester, or
otherwise take steps or institute any action or proceedings (judicial or
otherwise, including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding) to enforce any obligations of any Debtor to Guarantor or any Liens
held by Guarantor on assets of any Debtor.
(c) In the event of any receivership, bankruptcy,
reorganization, rearrangement, debtor's relief, or other insolvency proceeding
involving any Debtor as debtor,
GUARANTY AGREEMENT (________________________) - Page 5
96
Agent shall have the right to prove and vote any claim under the Subordinated
Indebtedness and to receive directly from the receiver, trustee or other court
custodian all dividends, distributions, and payments made in respect of the
Subordinated Indebtedness until the Guaranteed Indebtedness has been paid in
full in cash. Agent may apply any such dividends, distributions, and payments
against the Guaranteed Indebtedness in accordance with the Credit Agreement.
12. No amendment or waiver of any provision of this Guaranty
Agreement or consent to any departure by the Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by Agent and
Required Banks except as otherwise provided in the Credit Agreement. No
failure on the part of Agent or any Bank to exercise, and no delay in
exercising, any right, power, or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law.
13. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by Borrower or others (including
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against Agent or any Bank shall
have commenced to run, toll the running of such statute of limitations and, if
the period of such statute of limitations shall have expired, prevent the
operation of such statute of limitations.
14. This Guaranty Agreement is for the benefit of Agent and the
Banks and their successors and assigns, and in the event of an assignment of
the Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guaranty Agreement is binding not
only on Guarantor, but on Guarantor's successors and assigns.
15. Guarantor recognizes that Agent and the Banks are relying upon
this Guaranty Agreement and the undertakings of Guarantor hereunder and under
the other Loan Documents to which it is a party in making extensions of credit
to Borrower under the Credit Agreement and further recognizes that the
execution and delivery of this Guaranty Agreement and the other Loan Documents
to which it is a party is a material inducement to Agent and the Banks in
entering into the Credit Agreement and continuing to extend credit thereunder.
Guarantor hereby acknowledges that there are no conditions to the full
effectiveness of this Guaranty Agreement or any other Loan Document to which it
is a party.
16. Any notice or demand to Guarantor under or in connection with
this Guaranty Agreement or any other Loan Document to which it is a party shall
be deemed effective if given to Guarantor, in care of Borrower at its address
in accordance with the notice provisions in the Credit Agreement.
GUARANTY AGREEMENT (________________________) - Page 6
97
17. Guarantor shall pay on demand all attorneys' fees and all
other costs and expenses incurred by Agent and Banks in connection with the
administration, enforcement, or collection of this Guaranty Agreement.
18. Guarantor hereby waives promptness, diligence, notice of any
default under the Guaranteed Indebtedness, demand of payment, notice of
acceptance of this Guaranty Agreement, presentment, notice of protest, notice
of dishonor, notice of the incurring by Borrower of additional indebtedness,
and all other notices and demands with respect to the Guaranteed Indebtedness
and this Guaranty Agreement.
19. The Credit Agreement, and all of the terms thereof, are
incorporated herein by reference, the same as if stated verbatim herein, and
Guarantor agrees that Agent and the Banks may exercise any and all rights
granted to any of them under the Credit Agreement and the other Loan Documents
without affecting the validity or enforceability of this Guaranty Agreement.
20. THIS GUARANTY AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT
OF GUARANTOR, AGENT AND BANKS WITH RESPECT TO GUARANTOR'S GUARANTY OF THE
GUARANTEED INDEBTEDNESS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY AGREEMENT IS INTENDED BY
GUARANTOR, AGENT AND BANKS AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF
THE GUARANTY AGREEMENT, AND NO COURSE OF DEALING AMONG GUARANTOR, AGENT AND
BANKS, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC
EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY
ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS AMONG
GUARANTOR, AGENT AND BANKS.
EXECUTED as of the 3rd day of May 1996.
GUARANTOR:
--------------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
GUARANTY AGREEMENT (________________________) - Page 7
98
EXHIBIT "E"
TO
SOFTWARE SPECTRUM, INC.
CREDIT AGREEMENT
Borrower Security Agreement
99
SECURITY AGREEMENT
(Borrower)
THIS SECURITY AGREEMENT (the "Agreement") dated as of May 3, 1996 is
by and between SOFTWARE SPECTRUM, INC., a Texas corporation (the "Debtor") and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as agent for itself and the other
Banks (as defined in the hereafter defined Credit Agreement) (the "Secured
Party").
R E C I T A L S:
A. The Debtor, the banks named therein, and the Secured Party
have entered into that certain Credit Agreement of even date herewith (such
Credit Agreement, as the same may be amended or otherwise modified from time to
time, being hereinafter referred to as the "Credit Agreement"; terms defined in
the Credit Agreement and not otherwise defined herein are used herein as
defined therein).
B. The Secured Party and the Banks have conditioned their
obligations under the Credit Agreement upon the execution and delivery of this
Agreement by the Debtor.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. As used in this Agreement, the
following terms have the following meanings:
"Account" means any "account", as such term is defined in
Section 9.106 of the UCC, whether now owned or hereafter acquired by
the Debtor, and, in any event, shall include, without limitation, each
of the following, whether now owned or hereafter acquired by the
Debtor: (a) all rights of the Debtor to payment for goods sold or
leased or services rendered, whether or not earned by performance; (b)
all accounts receivable of the Debtor; (c) all security pledged,
assigned, or granted to or held by the Debtor to secure any of the
foregoing; (d) all letters of credit securing, guaranties of, or
indemnifications with respect to, any of the foregoing; and (e) all
rights of the Debtor as an unpaid seller of goods or services,
including, but not limited to, all rights of stoppage in transit,
replevin, reclamation and resale.
SECURITY AGREEMENT (BORROWER) - Page 1
100
"Cash and Cash Equivalent Collateral" means all of the
following whether now owned or hereafter acquired by Debtor: (a) the
deposit, brokerage, investment or other account or accounts
established at Secured Party by Debtor pursuant to Section 5.13 of the
Credit Agreement (the "Collateral Account"); (b) all money deposited
in, held pursuant to or credited to the Collateral Account; (c)
all financial assets and securities held in or subject to the
Collateral Account or otherwise held by Secured Party as collateral
pursuant to the provisions of Section 5.13 of the Credit Agreement;
(d) all securities entitlements carried in or relating to the
Collateral Account and all other investment property, money,
securities (both certificated and uncertificated) and instruments held
by Secured Party in, which are issued to Debtor out of, which are
otherwise subject to or which otherwise relate to the Collateral
Account.
"Collateral" has the meaning specified in Section 2.1 of this
Agreement.
"General Intangibles" means any "general intangibles", as such
term is defined in Section 9.106 of the UCC, whether now owned or
hereafter acquired by the Debtor and, in any event, shall include,
without limitation, each of the following, whether now owned or
hereafter acquired by the Debtor: (a) to the extent assignable or to
the extent a consent to assignment has been obtained, all of the
Debtor's books, records, data, plans, manuals, computer software,
computer tapes, computer disks, computer programs, source codes,
object codes and all rights of the Debtor to retrieve data and other
information from third parties; (b) to the extent assignable or to the
extent a consent to assignment has been obtained, all of the Debtor's
contract rights, including without limitation, all right, title and
interest of Debtor in and to any reseller, volume licensing,
maintenance or similar agreement relating to Inventory; (c) all rights
of the Debtor to payment under letters of credit and similar
agreements; (d) all choses in action and causes of action of the
Debtor (whether arising in contract, tort, or otherwise and whether or
not currently in litigation) and all judgments in favor of the Debtor;
(e) all rights and claims of the Debtor under warranties and
indemnities; and (f) all rights of the Debtor under any insurance,
surety, or similar contract or arrangement.
"Inventory" means any "inventory", as such term is defined in
Section 9.109(4) of the UCC, whether now owned or hereafter acquired
by the Debtor, and, in any event, shall include, without limitation,
each of the following, whether now owned or hereafter acquired by the
Debtor: (a) all goods and other personal property of the Debtor that
are held for sale or lease or to be furnished under any contract of
service; (b) all raw materials, work-in-process, finished goods,
inventory, supplies and materials of the Debtor; (c) all wrapping,
packaging, advertising and shipping materials of the Debtor; and (d)
all goods that have been returned to, repossessed by, or stopped in
transit by the Debtor.
"Proceeds" means any "proceeds", as such term is defined in
Section 9.306 of the UCC and, in any event, shall include, but not be
limited to: (a) any and all proceeds of any insurance, indemnity,
warranty, or guaranty payable to the Debtor from time to time
SECURITY AGREEMENT (BORROWER) - Page 2
101
with respect to any of the Collateral; (b) any and all payments (in
any form whatsoever) made or due and payable to the Debtor from time
to time in connection with any requisition, confiscation,
condemnation, seizure, or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting under
color of Governmental Authority); (c) all instruments, documents,
chattel paper and General Intangibles received or arising in
connection with a disposition of the Collateral; and (d) any and all
other amounts from time to time paid or payable under or in connection
with any of the Collateral.
"UCC" means the Uniform Commercial Code as in effect in the
State of Texas; provided, that if by mandatory provisions of law, the
perfection or effect of perfection or non-perfection of the security
interest created hereunder in any Collateral is governed by the
Uniform Commercial Code as in effect on or after the date hereof in
any other jurisdiction, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provision hereof
relating to such perfection or the effect of perfection or
non-perfection.
Section 1.2 Other Definitional Provisions. References to
"Sections", "subsections", "Exhibits" and "Schedules" shall be to Sections,
subsections, Exhibits and Schedules, respectively, of this Agreement unless
otherwise specifically provided. All definitions contained in this Agreement
are equally applicable to the singular and plural forms of the terms defined.
All references to statutes and regulations shall include any amendments of the
same and any successor statutes and regulations. Terms used herein, which are
defined in the UCC, unless otherwise defined herein or in the Credit Agreement,
shall have the meanings as set forth in the UCC.
ARTICLE II
Security Interest
Section 2.1 Security Interest. As collateral security for the
prompt payment and performance in full when due of the Obligations (whether at
stated maturity, by acceleration, or otherwise), the Debtor hereby collaterally
assigns to Secured Party, and grants to the Secured Party a security interest
in, all of the Debtor's right, title and interest in and to the following,
whether now owned or hereafter arising or acquired and wherever located
(collectively, the "Collateral"):
(a) all Accounts;
(b) all Inventory;
(c) all Cash and Cash Equivalent Collateral;
SECURITY AGREEMENT (BORROWER) - Page 3
102
(d) all instruments, documents, chattel paper and General
Intangibles evidencing or otherwise relating to the Accounts,
the Inventory and the Cash and Cash Equivalent Collateral; and
(e) all Proceeds and products of any or all of the foregoing.
Section 2.2 Debtor Remains Liable. Notwithstanding anything to
the contrary contained herein, (a) the Debtor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Secured Party of any of its rights hereunder shall not release the Debtor from
any of its duties or obligations under the contracts and agreements included in
the Collateral and (c) the Secured Party shall not have any obligation or
liability under any of the contracts and agreements included in the Collateral
by reason of this Agreement, nor shall the Secured Party be obligated to
perform any of the obligations or duties of the Debtor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
ARTICLE III
Representations and Warranties
To induce the Secured Party to enter into this Agreement and the
Credit Agreement, the Debtor represents and warrants to the Secured Party and
the Banks that:
Section 3.1 Accounts. Unless the Debtor has given the Secured
Party written notice to the contrary, whenever the security interest granted
hereunder attaches to an Account, the Debtor shall be deemed to have
represented and warranted to the Secured Party as to each of its Accounts that
(a) each Account is genuine and in all respects what it purports to be, (b)
each Account represents the legal, valid and binding obligation of the account
debtor evidencing indebtedness unpaid and owed by such account debtor, (c) the
amount of each Account represented as owing is the correct amount actually and
unconditionally owing except for normal trade discounts granted and contra
accounts, in each case, arising in the ordinary course of business and (d) no
Account is subject to any offset, counterclaim, or other defense.
Section 3.2 Financing Statements. No financing statement,
security agreement or other Lien instrument covering all or any part of the
Collateral is on file in any public office, except as may have been filed in
favor of the Secured Party pursuant to this Agreement. The Debtor does not do
business and has not done business within the past five (5) years under a trade
name or any name other than (a) the name set forth at the beginning of this
Agreement which is its exact name as set forth in its certificate of
incorporation and (b) the names set forth on Schedule 1 hereto.
Section 3.3 Principal Place of Business. The principal place of
business and chief executive office of the Debtor, and the office where the
Debtor keeps its books and records, is located at the "Address for Notices" for
Debtor set forth in the Credit Agreement.
SECURITY AGREEMENT (BORROWER) - Page 4
103
Section 3.4 Location of Collateral. Schedule 1 attached hereto
sets forth all locations where the Debtor has a place of business and where the
Debtor maintains Collateral other than (A) In-Transit Inventory (as defined in
Section 4.2) and (B) Inventory held by customers or Inventory otherwise held by
third parties with an aggregate book value that does not exceed the sum of Two
Million Five Hundred Thousand Dollars ($2,500,000) minus the book value of all
such inventory owned by all the Granting Subsidiaries (any such Inventory
described in this clause (B) herein the "Excluded Sale on Approval Inventory").
The Debtor does not carry on any business in any location other than as set
forth on Schedule 1. No Inventory (other than In-Transit Inventory and
Excluded Sale on Approval Inventory) of Debtor is held at any location other
than the locations set forth in Section II on Schedule I. Schedule 1 correctly
identifies the landlords or mortgagees, if any, of the property where the
Debtor's Inventory (other than Excluded Sale on Approval Inventory) is located.
No Persons other than the Debtor and the Secured Party have possession of any
of the Collateral except as disclosed on Schedule 1 and except for In-Transit
Inventory and Excluded Sale on Approval Inventory. No Collateral has been
located in any state or county other than as disclosed on Schedule 1 within the
last four (4) months from the date hereof other than In-Transit Inventory and
Excluded Sale on Approval Inventory. All instruments, documents, letters of
credit and chattel paper which constitute Collateral of the Debtor have been
delivered to the Secured Party except as permitted by Section 4.5.
Section 3.5 Perfection. Upon the filing of Uniform Commercial
Code financing statements in the jurisdictions listed on Schedule 2 attached
hereto and upon the Secured Party's obtaining possession of all money,
instruments, documents and chattel paper pledged hereunder, the security
interest in favor of the Secured Party created herein will constitute a valid
and perfected Lien upon and security interest in all the Collateral other than
the Excluded Sale on Approval Inventory, subject to no equal or prior Liens
other than Liens permitted by the Credit Agreement.
ARTICLE IV
Covenants
The Debtor covenants and agrees with the Secured Party that until the
Obligations are paid and performed in full and all Commitments of the Banks and
the Secured Party to the Debtor have terminated:
Section 4.1 Modification of Accounts. The Debtor shall, in
accordance with prudent business practices, endeavor to collect or cause to be
collected from each account debtor under its Accounts, as and when due, any and
all amounts owing under such Accounts. The Debtor shall not, except in the
ordinary course of business, (a) grant any extension of time for any payment
with respect to any of the Accounts, (b) compromise, compound, or settle any of
the Accounts for less than the full amount thereof, (c) release, in whole or in
part, any Person liable for payment of any of the Accounts, (d) allow any
credit or discount for payment with respect to any Account other than trade
discounts granted in the ordinary course of business, or (e) release any Lien
or guaranty securing any Account (any of the foregoing an "Account
Modification").
SECURITY AGREEMENT (BORROWER) - Page 5
104
If any Account Modification by Debtor hereunder or a similar modification by a
Granting Subsidiary of its accounts causes an Eligible Account to no longer
meet the conditions of eligibility under the Credit Agreement and as a result
the Borrowing Base decreases by a material amount or the Outstanding Revolving
Credit exceeds the Borrowing Base after giving effect to such Account
Modification, Borrower agrees to promptly deliver to Secured Party a revised
Borrowing Base Report under the Credit Agreement.
Section 4.2 Bailees. If any of the Collateral is at any time in
the possession or control of any warehouseman, bailee, any of the Debtor's
agents or processors or any other third Person, the Debtor shall notify such
warehouseman, bailee, agent, processor or third Person of the security interest
created hereunder, shall instruct such Person to hold such Collateral for the
Secured Party's account subject to the Secured Party's instructions and shall
take all actions deemed necessary or desirable by Secured Party to protect and
perfect its security interest in the Collateral such Person is to hold with the
priority required by the Loan Documents; provided that prior to the occurrence
of a Default, Debtor shall not be required to take any of the foregoing actions
or any other action necessary to protect or perfect the Agent's security
interest in (a) any Inventory (or documents relating to Inventory) held by a
freight forwarder or shipper which is subject to an enforceable contract for
sale and is in transit to the purchaser thereof (any such Inventory herein the
"In-Transit Inventory") or (b) any Excluded Sale on Approval Inventory.
Section 4.3 Corporate Changes. The Debtor shall not change its
name, Federal Tax Identification Number, identity, or corporate structure in
any manner that might make any financing statement filed in connection with
this Agreement seriously misleading unless the Debtor shall have given the
Secured Party thirty (30) days prior written notice thereof and shall have
taken all action reasonably deemed necessary or desirable by the Secured Party
to make each financing statement not seriously misleading. The Debtor shall
not change its principal place of business, chief executive office, or the
place where it keeps its books and records unless it shall have given the
Secured Party thirty (30) days prior written notice thereof and shall have
taken all action reasonably deemed necessary or desirable by the Secured Party
to cause its security interest in the Collateral to be perfected with the
priority required by the Loan Documents.
Section 4.4 Inventory. The Debtor shall keep all Inventory (other
than In-Transit Inventory and Excluded Sale on Approval Inventory) at one or
more of the locations specified in Section II on Schedule 1 hereto or, upon
thirty (30) days prior written notice to the Secured Party, at such other
places within the United States of America where all action required to perfect
the Secured Party's security interest in the Inventory with the priority
required by the Loan Documents shall have been taken. The Debtor shall
maintain the Inventory in good condition and repair (ordinary wear and tear
excepted). The Debtor shall not permit any waste of the Inventory or any part
thereof (reasonable obsolescence excepted). The Debtor shall not permit the
Inventory to be used in violation of any law, rule, or regulation or
inconsistently with the terms of any policy of insurance. The Debtor shall not
use or permit any of the Inventory to be used in any manner or for any purpose
that would impair its value or expose it to unusual risk.
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105
Section 4.5 Collection of Accounts; Delivery of Collateral.
Except as otherwise provided in this Section or in Section 5.13 of the Credit
Agreement, the Debtor shall have the right to collect and receive payments on
the Accounts, instruments, letters of credit and chattel paper included in the
Collateral, to receive and further negotiate in the ordinary course of business
all documents (including, without limitation, documents of title) evidencing
Inventory, and to receive, retain and draw under, in the ordinary course of
business, all letters of credit included in the Collateral, but Debtor shall
promptly deliver all other Collateral (the possession of which is necessary to
perfect the security interest therein) and all proceeds of Collateral (other
than the proceeds that the Debtor is entitled to retain as described previously
in this sentence) to Secured Party. In connection with the collections on
Accounts, the Debtor may take (and, at the Secured Party's direction, shall
take) such actions as the Debtor or the Secured Party reasonably may deem
necessary or advisable to enforce collection of the Accounts. If an Event of
Default shall have occurred and be continuing, the Debtor shall, upon the
request of the Secured Party, deliver all letters of credit and documents
constituting Collateral to Secured Party and instruct all account debtors and
other Persons obligated in respect of the Collateral to make all payments
thereon either (a) directly to the Secured Party (by instructing that such
payments be remitted to a post office box which shall be in the name and under
the control of the Secured Party), or (b) to one or more other banks in the
United States of America (by instructing that such payments be remitted to a
post office box which shall be in the name or under the control of the Secured
Party) under arrangements in form and substance satisfactory to the Secured
Party pursuant to which the Debtor shall have irrevocably instructed such other
bank (and such other bank shall have agreed) to remit all such payments
directly to the Secured Party. In addition to the foregoing, the Debtor agrees
that if any Proceeds of any Collateral (including payments made in respect of
Accounts) shall be received by the Debtor while an Event of Default exists, the
Debtor shall promptly deliver such Proceeds to the Secured Party with any
necessary endorsements. Until such Proceeds are delivered to the Secured
Party, such Proceeds shall be held in trust by the Debtor for the benefit of
the Secured Party and shall not be commingled with any other funds or property
of the Debtor. All Proceeds of Collateral received by the Secured Party
pursuant to this Section may be applied by the Secured Party to the Obligations
in such order and manner as the Secured Party may elect in accordance with the
Credit Agreement. The Secured Party may in connection with any asset audit of
Debtor contact account debtors to verify the existence, amounts and terms of
the Accounts.
ARTICLE V
Rights of the Secured Party
Section 5.1 POWER OF ATTORNEY. THE DEBTOR HEREBY IRREVOCABLY
CONSTITUTES AND APPOINTS THE SECURED PARTY AND ANY OFFICER OR AGENT THEREOF,
WITH FULL POWER OF SUBSTITUTION, AS ITS TRUE AND LAWFUL ATTORNEY-IN-FACT WITH
FULL IRREVOCABLE POWER AND AUTHORITY IN THE NAME OF THE DEBTOR OR IN ITS OWN
NAME, TO TAKE AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF
DEFAULT, ANY AND ALL ACTION AND TO EXECUTE ANY AND ALL DOCUMENTS AND
INSTRUMENTS WHICH
SECURITY AGREEMENT (BORROWER) - Page 7
106
THE SECURED PARTY AT ANY TIME AND FROM TIME TO TIME DEEMS NECESSARY OR
DESIRABLE TO ACCOMPLISH THE PURPOSES OF THIS AGREEMENT AND, WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THE DEBTOR HEREBY GIVES THE SECURED PARTY THE
POWER AND RIGHT ON BEHALF OF THE DEBTOR AND IN ITS OWN NAME TO DO ANY OF THE
FOLLOWING AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF
DEFAULT, WITHOUT NOTICE TO OR THE CONSENT OF THE DEBTOR:
(i) to demand, sue for, collect, or receive in
the name of the Debtor or in its own name, any money or property at any time
payable or receivable on account of or in exchange for any of the Collateral
and, in connection therewith, endorse checks, notes, drafts, acceptances, money
orders, documents of title, or any other instruments for the payment of money
under the Collateral or any policy of insurance;
(ii) to pay or discharge taxes, Liens, or other
encumbrances levied or placed on or threatened against the Collateral;
(iii) to notify post office authorities to change
the address for delivery of mail of the Debtor to an address designated by the
Secured Party and to receive, open and dispose of mail addressed to the Debtor;
(iv) (A) to direct account debtors and any other
parties liable for any payment under any of the Collateral to make payment of
any and all monies due and to become due thereunder directly to the Secured
Party or as the Secured Party shall direct; (B) to receive payment of and
receipt for any and all monies, claims and other amounts due and to become due
at any time in respect of or arising out of any Collateral; (C) to sign and
endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments and notices in
connection with accounts and other documents relating to the Collateral; (D) to
commence and prosecute any suit, action, or proceeding at law or in equity in
any court of competent jurisdiction to collect the Collateral or any part
thereof and to enforce any other right in respect of any Collateral; (E) to
participate in the defense of, or if Debtor fails to defend, to defend any
suit, action, or proceeding brought against the Debtor with respect to any
Collateral; (F) to settle, compromise, or adjust any suit, action, or
proceeding described in clause (D) and clause (E) above if, in the case of
clause (E), Secured Party is conducting the applicable defense and, in
connection therewith, to give such discharges or releases as the Secured Party
may deem appropriate; (G) to exchange any of the Collateral for other property
upon any merger, consolidation, reorganization, recapitalization, or other
readjustment of the issuer thereof and, in connection therewith, deposit any of
the Collateral with any committee, depositary, transfer agent, registrar, or
other designated agency upon such terms as the Secured Party may determine; (H)
to add or release any guarantor, indorser, surety, or other party to any of the
Collateral; (I) to renew, extend, or otherwise change the terms and conditions
of any of the Collateral; (J) to make, settle, compromise, or adjust any claims
under or pertaining to any of the Collateral (including claims under any policy
of insurance); and (K) to sell, transfer, pledge, convey, make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as
SECURITY AGREEMENT (BORROWER) - Page 8
107
though the Secured Party were the absolute owner thereof for all purposes, and
to do, at the Secured Party's option and the Debtor's expense, at any time, or
from time to time, all acts and things which the Secured Party deems necessary
to protect, preserve, maintain, or realize upon the Collateral and the Secured
Party's security interest therein.
THIS POWER OF ATTORNEY IS A POWER COUPLED WITH AN INTEREST AND SHALL
BE IRREVOCABLE. The Secured Party shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and options
expressly or implicitly granted to the Secured Party in this Agreement, and the
Secured Party shall not be liable for any failure to do so or any delay in
doing so. Neither the Secured Party nor any Person designated by the Secured
Party shall be liable for any act or omission or for any error of judgment or
any mistake of fact or law. This power of attorney is conferred on the Secured
Party solely to protect, preserve, maintain and realize upon its security
interest in the Collateral. The Secured Party shall not be responsible for any
decline in the value of the Collateral and shall not be required to take any
steps to preserve rights against prior parties or to protect, preserve, or
maintain any Lien given to secure the Collateral.
Section 5.2 Assignment by the Secured Party. Subject to the
terms of the Credit Agreement, the Secured Party may at any time assign or
otherwise transfer all or any portion of its rights and obligations under the
Loan Documents (including, without limitation, the Obligations) to any other
Person, and such Person shall thereupon become vested with all the benefits
thereof granted to the Secured Party herein or otherwise.
ARTICLE VI
Default
Section 6.1 Rights and Remedies. If an Event of Default shall
have occurred and be continuing, the Secured Party shall have the following
rights and remedies:
(a) In addition to all other rights and remedies granted
to the Secured Party in this Agreement or in any other Loan Document or by
applicable law, the Secured Party shall have all of the rights and remedies of
a secured party under the UCC (whether or not the UCC applies to the affected
Collateral). Without limiting the generality of the foregoing, the Secured
Party may (i) without demand or notice to the Debtor, set off against, collect,
receive, or take possession of the Collateral or any part thereof and for that
purpose the Secured Party may enter upon any premises on which the Collateral
is located and remove the Collateral therefrom or render it inoperable and/or
(ii) sell, lease, or otherwise dispose of the Collateral, or any part thereof,
in one or more parcels at public or private sale or sales, at the Secured
Party's offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Secured Party may deem commercially reasonable.
The Secured Party shall have the right at any public
SECURITY AGREEMENT (BORROWER) - Page 9
108
sale or sales, and, to the extent permitted by applicable law, at any private
sale or sales, to bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) and become a purchaser of the Collateral or any
part thereof free of any right or equity of redemption on the part of the
Debtor, which right or equity of redemption is hereby expressly waived and
released by the Debtor. Upon the request of the Secured Party, the Debtor
shall assemble the Collateral and make it available to the Secured Party at any
place designated by the Secured Party that is reasonably convenient to the
Debtor and the Secured Party. The Debtor agrees that the Secured Party shall
not be obligated to give more than ten (10) days prior written notice of the
time and place of any public sale or of the time after which any private sale
may take place and that such notice shall constitute reasonable notice of such
matters. Secured Party shall not be obligated to give Debtor any notice of the
sale of any Collateral that threatens to decline speedily in value or is of a
type customarily sold on a recognized market. The Secured Party shall not be
obligated to make any sale of Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of Collateral may have been given.
The Secured Party may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. The Debtor shall be liable for all reasonable expenses of retaking,
holding, preparing for sale, or the like, and all reasonable attorneys' fees,
legal expenses and other costs and expenses incurred by the Secured Party in
connection with the collection of the Obligations and the enforcement of the
Secured Party's rights under this Agreement. The Debtor shall remain liable
for any deficiency if the Proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Obligations in full. The Secured Party
may apply the Collateral against the Obligations in such order and manner as
the Secured Party may elect in its sole discretion. The Debtor waives all
rights of marshaling, valuation and appraisal in respect of the Collateral.
(b) The Secured Party may cause any or all of the
Collateral held by it to be transferred into the name of the Secured Party or
the name or names of the Secured Party's nominee or nominees.
(c) The Secured Party may exercise any and all rights and
remedies of the Debtor under or in respect of the Collateral, including,
without limitation, any and all rights of the Debtor to demand or otherwise
require payment of any amount under, or performance of any provision of, any of
the Collateral and any and all voting rights and corporate powers in respect of
the Collateral.
(d) The Secured Party may collect or receive all money or
property at any time payable or receivable on account of or in exchange for any
of the Collateral, but shall be under no obligation to do so.
(e) On any sale of the Collateral, the Secured Party is
hereby authorized to comply with any limitation or restriction with which
compliance is necessary, in the view of the Secured Party's counsel, in order
to avoid any violation of applicable law or in order to obtain any required
approval of the purchaser or purchasers by any applicable Governmental
Authority.
SECURITY AGREEMENT (BORROWER) - Page 10
109
ARTICLE VII
Miscellaneous
Section 7.1 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Debtor and the Secured Party and
their respective successors and assigns, except that the Debtor may not assign
any of its rights or obligations under this Agreement without the prior written
consent of the Secured Party.
Section 7.2 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES
THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Agreement may be
amended or waived only by an agreement in writing signed by the parties hereto.
Section 7.3 Notices. All notices and other communications
provided for in this Agreement shall be given in accordance with the notice
provisions set forth in the Credit Agreement.
Section 7.4 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas and the
applicable laws of the United States of America.
Section 7.5 Headings. The headings, captions and arrangements
used in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 7.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
Section 7.7 Waiver of Bond. In the event the Secured Party seeks
to take possession of any or all of the Collateral by judicial process, the
Debtor hereby irrevocably waives any bonds and any surety or security relating
thereto that may be required by applicable law as an incident to such
possession, and waives any demand for possession prior to the commencement of
any such suit or action.
SECURITY AGREEMENT (BORROWER) - Page 11
110
Section 7.8 Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTOR:
SOFTWARE SPECTRUM, INC.
By:
---------------------------------------
Deborah A. Nugent Vice
President of Finance
SECURED PARTY:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, as agent
By:
---------------------------------------
J. Scot Brunke
Senior Vice President
SECURITY AGREEMENT (BORROWER) - Page 12
111
Schedule 1
to
Borrower Security Agreement
Locations of Collateral
I. ASSUMED NAMES
Software Spectrum, Inc. changed its name from The Software
Store, Inc. in May 1991.
II. LOCATIONS OF INVENTORY
- --------------------------------------------------------------------------------
Name and Address of Landlord or
Address Lease/Own Mortgagee of Premises (if any)
- --------------------------------------------------------------------------------
Software Spectrum, Inc. Lease Trammell Crow Dallas/Ft. Worth
Corporate Headquarters 2200 Ross Avenue, suite 3700
2140 Merritt Drive Dallas, Texas 75201
Garland, Texas 75041
- --------------------------------------------------------------------------------
Software Spectrum, Inc. Lease Riverport Commerce Center, Inc.
7107-C Intermodal Drive P.O. Box 58098
Louisville, Kentucky 40258 Louisville, Kentucky 40288
- --------------------------------------------------------------------------------
Software Spectrum, Inc. Lease LaSalle National Trust, N.A.
596 Lamont Road c/o Greenpoint Partnership
Elmhurst, Illinois 60126 c/o JPS Interests
30 West Monroe Street
Chicago, Illinois 60603
- --------------------------------------------------------------------------------
III. OTHER BUSINESS LOCATIONS
- --------------------------------------------------------------------------------
Address Lease/Own Mortgagee of Premises (if any)
- --------------------------------------------------------------------------------
Software Spectrum, Inc. Lease Compass Management and Leasing,
Corporate Headquarters 12377 Merritt Drive, Suite 1400
2220 Merritt Drive Dallas, Texas 75251
Garland, Texas 75041
- --------------------------------------------------------------------------------
Software Spectrum, Inc. Lease DJ&J Software Corporation
1707 N. Signal 22705 E. Mission
Liberty Lake, Washington 99019 Liberty Lake, Washington 99019
- --------------------------------------------------------------------------------
Schedule 1 to Security Agreement - Page Solo
112
Schedule 2
to
Borrower Security Agreement
Jurisdictions for Filing
UCC-1 Financing Statements
1. Secretary of State of Illinois
2. Secretary of State of the Commonwealth of Kentucky
3. Jefferson County Clerk, Kentucky
4. Secretary of State of Texas
5. Department of Licensing of State of Washington
Schedule 2 to Security Agreement - Solo Page
113
EXHIBIT "F"
TO
SOFTWARE SPECTRUM, INC.
CREDIT AGREEMENT
Pledge Agreement
114
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Agreement") dated as of May 3, 1996 is by
and between SOFTWARE SPECTRUM, INC., a Texas corporation ("Pledgor") and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, as agent for itself and the other Banks
(the "Secured Party").
RECITALS:
A. Pledgor, the certain lenders ("Banks") and Secured Party have
entered into that certain Credit Agreement of even date herewith (such Credit
Agreement, as the same may be amended or otherwise modified from time to time,
being hereinafter referred to as the "Credit Agreement"; terms defined in the
Credit Agreement and not otherwise defined herein being used as defined
therein).
B. Secured Party and the Banks have conditioned their obligations
under the Credit Agreement upon the execution and delivery of this Agreement by
Pledgor.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Security Interest and Pledge
Section 1.1 Security Interest and Pledge. As collateral security for
the prompt payment in full when due of the Obligations (whether at stated
maturity, by acceleration, or otherwise), Pledgor hereby pledges and grants to
Secured Party a first priority security interest in the following property
(such property being hereinafter sometimes called the "Collateral"):
(a) all of Pledgor's right, title and interest in and to
the capital stock or other ownership interests specifically described
on Schedule 1 hereto (the issuers of such stock or other interests
herein the "Foreign Subsidiaries") and so much of Pledgor's right,
title and interest in any other capital stock or other ownership
interests in the Foreign Subsidiaries, whether now owned or hereafter
acquired, as is necessary so that not more than and not less than
sixty-six and two-thirds percent (66 2/3%) of the capital stock or
other ownership interest in each such Foreign Subsidiary is pledged in
total hereunder;
(b) all of Pledgor's right, title and interest in all
shares of capital stock of Spectrum Integrated Services, Inc. a Texas
corporation, whether now owned or hereafter acquired, including
without limitation, the shares of capital stock of Spectrum Integrated
Services, Inc. described on Schedule 1;
PLEDGE AGREEMENT - Page 1
115
(c) all products, proceeds, revenues, distributions,
dividends, stock dividends, securities and other property, rights and
interests that Pledgor receives or is at any time entitled to receive
on account of the same; and
(d) the property of Borrower and each Granting Subsidiary
described on Schedule 2 hereto which is hereby pledged to secure the
Obligations in accordance with, and in all respects subject to, the
terms of the Borrower Security Agreement and each Subsidiary Security
Agreement.
ARTICLE 2
Affirmative and Negative Covenants
Pledgor covenants and agrees with Secured Party that:
Section 2.1 Delivery. Prior to or concurrently with the execution
and delivery of this Agreement, Pledgor shall deliver to Secured Party all
certificate(s) identified in Schedule 1 hereof, accompanied by undated stock
powers duly executed in blank.
Section 2.2 Encumbrances. Pledgor shall not create, permit, or
suffer to exist, and shall defend the Collateral against, any Lien, security
interest, or other encumbrance on the Collateral except the pledge and security
interest of Secured Party hereunder, and Pledgor shall defend Pledgor's rights
in the Collateral and Secured Party's security interest in the Collateral
against the claims of all Persons.
Section 2.3 Sale of Collateral. Pledgor shall not sell, assign, or
otherwise dispose of the Collateral or any part thereof without the prior
written consent of Secured Party.
Section 2.4 Distributions. If Pledgor shall become entitled to
receive or shall receive: (i) any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase, or reduction of capital or
issued in connection with any reorganization), option or rights, whether as an
addition to, in substitution of, or in exchange for any Collateral; (ii) any
sums paid in respect of the Collateral upon the liquidation or dissolution of
the issuer thereof; (iii) any other distribution of capital made on or in
respect of the Collateral or any other property distributed upon or in respect
of the Collateral pursuant to any recapitalization or reclassification of the
capital of the issuer thereof or pursuant to any reorganization of the issuer
thereof; or (iv), subject to the right of Pledgor to receive cash dividends
under Section 3.3 hereof, any other Collateral the possession of which is
necessary to perfect the security interest of Secured Party therein, then
Pledgor agrees to accept the same as Secured Party's agent and to hold the same
in trust for Secured Party, and to deliver the same forthwith to Secured Party
in the exact form received, with the appropriate endorsement of Pledgor when
necessary and/or appropriate undated stock powers duly executed in blank, to be
held by Secured Party as additional Collateral for the Obligations, subject to
the terms hereof. All sums of money and property so paid or distributed in
respect of the Collateral that are received
PLEDGE AGREEMENT - Page 2
116
by Pledgor shall, until paid or delivered to Secured Party, be held by Pledgor
in trust as additional security for the Obligations.
Section 2.5 Director Consents. Borrower agrees to cause the
directors of each issuer of the stock described on Schedule 1 to pass
resolutions to authorize the pledge and other transfers contemplated hereby
both as of the date of this Agreement and on any date the Secured Party
exercises its rights under Section 4.1 of this Agreement.
Section 2.6 Additional Securities. Except for issuances to Pledgor
which, to the extent required by Section 2.4, are pledged and delivered to
Secured Party hereunder, Pledgor shall not consent to or approve the issuance
of any additional shares of any class of capital stock of any issuer of the
Collateral, or any securities convertible into, or exchangeable for, any such
shares or any warrants, options, rights, or other commitments entitling any
Person to purchase or otherwise acquire any such shares.
ARTICLE 3
Rights of Secured Party and Pledgor
Section 3.1 Power of Attorney. PLEDGOR HEREBY IRREVOCABLY
CONSTITUTES AND APPOINTS SECURED PARTY AND ANY OFFICER OR AGENT THEREOF, WITH
FULL POWER OF SUBSTITUTION, AS ITS TRUE AND LAWFUL ATTORNEY-IN-FACT WITH FULL
IRREVOCABLE POWER AND AUTHORITY IN THE PLACE AND STEAD AND IN THE NAME OF
PLEDGOR OR IN ITS OWN NAME, IN SECURED PARTY'S DISCRETION, TO TAKE, AFTER THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, ANY AND ALL
ACTION AND TO EXECUTE ANY AND ALL DOCUMENTS AND INSTRUMENTS WHICH MAY BE
NECESSARY OR DESIRABLE TO ACCOMPLISH THE PURPOSES OF THIS AGREEMENT AND,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY GIVES SECURED PARTY
THE POWER AND RIGHT ON BEHALF OF PLEDGOR AND IN ITS OWN NAME TO DO, AFTER THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, ANY OF THE
FOLLOWING WITHOUT NOTICE TO OR THE CONSENT OF PLEDGOR:
(a) to demand, sue for, collect, or receive in the name
of Pledgor or in its own name, any money or property at any time
payable or receivable on account of or in exchange for any of the
Collateral and, in connection therewith, endorse checks, notes,
drafts, acceptances, money orders, or any other instruments for the
payment of money under the Collateral;
(b) to pay or discharge taxes, Liens, security interests,
or other encumbrances levied or placed on or threatened against the
Collateral;
(c) (i) to direct account debtors and any other parties
liable for any payment under any of the Collateral to make payment of
any and all monies due and to become due
PLEDGE AGREEMENT - Page 3
117
thereunder directly to Secured Party or as Secured Party shall direct;
(ii) to receive payment of and receipt for any and all monies, claims,
and other amounts due and to become due at any time in respect of or
arising out of any Collateral; (iii) to sign and endorse any drafts,
assignments, proxies, stock powers, verifications, notices, and other
documents relating to the Collateral; (iv) to commence and prosecute
any suit, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof
and to enforce any other right in respect of any Collateral; (v) to
participate in the defense of, or if Pledgor fails to defend, to
defend any suit, action, or proceeding brought against Pledgor with
respect to any Collateral; (vi) to settle, compromise, or adjust any
suit, action, or proceeding described in clauses (iv) or (v) above,
if, in the case of clauses (v), Secured Party is conducting the
applicable defense and, in connection therewith, to give such
discharges or releases as Secured Party may deem appropriate; (vii) to
exchange any of the Collateral for other property upon any merger,
consolidation, reorganization, recapitalization, or other readjustment
of the issuer thereof and, in connection therewith, deposit any of the
Collateral with any committee, depositary, transfer agent, registrar,
or other designated agency upon such terms as Secured Party may
determine; (viii) to add or release any guarantor, indorser, surety,
or other party to any of the Collateral; (ix) to renew, extend, or
otherwise change the terms and conditions of any of the Collateral;
(x) to insure any of the Collateral; and (xi) to sell, transfer,
pledge, make any agreement with respect to or otherwise deal with any
of the Collateral as fully and completely as though Secured Party were
the absolute owner thereof for all purposes, and to do, at Secured
Party's option and Pledgor's expense, at any time, or from time to
time, all acts and things which Secured Party deems necessary to
protect, preserve, or realize upon the Collateral and Secured Party's
security interest therein.
THIS POWER OF ATTORNEY IS A POWER COUPLED WITH AN INTEREST AND SHALL
BE IRREVOCABLE. Secured Party shall be under no duty to exercise or withhold
the exercise of any of the rights, powers, privileges and options expressly or
implicitly granted to Secured Party in this Agreement, and Secured Party shall
not be liable for any failure to do so or any delay in doing so. Secured Party
shall not be liable for any act or omission or for any error of judgment or any
mistake of fact or law in its individual capacity or in its capacity as
attorney-in-fact except acts or omissions resulting from its willful
misconduct. This power of attorney is conferred on Secured Party solely to
protect, preserve and realize upon its security interest in the Collateral.
Section 3.2 Voting Rights. Unless and until an Event of Default
shall have occurred and is continuing, Pledgor shall be entitled to exercise
any and all voting rights pertaining to the Collateral or any part thereof for
any purpose not inconsistent with the terms of this Agreement or the Credit
Agreement. Secured Party shall execute and deliver to the Pledgor all such
proxies and other instruments as Pledgor may reasonably request for the purpose
of enabling Pledgor to exercise the voting rights which it is entitled to
exercise pursuant to this Section.
Section 3.3 Dividends. Unless and until an Event of Default shall
have occurred and is continuing, Pledgor shall be entitled to receive and
retain any dividends on the Collateral paid in
PLEDGE AGREEMENT - Page 4
118
cash out of earned surplus to the extent and only to the extent that such
dividends are permitted by the Credit Agreement.
Section 3.4 Secured Party's Duty of Care. Other than the exercise of
reasonable care in the physical custody of the Collateral while held by Secured
Party hereunder, Secured Party shall have no responsibility for or obligation
or duty with respect to all or any part of the Collateral or any matter or
proceeding arising out of or relating thereto, including, without limitation,
any obligation or duty to collect any sums due in respect thereof or to protect
or preserve any rights against prior parties or any other rights pertaining
thereto, it being understood and agreed that Pledgor shall be responsible for
preservation of all rights in the Collateral. Without limiting the generality
of the foregoing, Secured Party shall be conclusively deemed to have exercised
reasonable care in the custody of the Collateral if Secured Party takes such
action, for purposes of preserving rights in the Collateral, as Pledgor may
reasonably request in writing, but no failure or omission or delay by Secured
Party in complying with any such request by Pledgor, and no refusal by Secured
Party to comply with any such request by Pledgor, shall be deemed to be a
failure to exercise reasonable care.
Section 3.5 Assignment by Secured Party. Subject to the terms of the
Credit Agreement, Secured Party may at any time and from time to time assign
the Obligations and any portion thereof and/or the Collateral and any portion
thereof, and the assignee shall be entitled to all of the rights and remedies
of Secured Party under this Agreement in relation thereto.
ARTICLE 4
Default
Section 4.1 Rights and Remedies. If any Event of Default shall occur
and be continuing, Secured Party shall have the following rights and remedies:
(a) In addition to all other rights and remedies granted
to Secured Party in this Agreement and in any other instrument or
agreement securing, evidencing, or relating to the Obligations,
Secured Party shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code as adopted by the State of
Texas or of a creditor with a lien or charge on the Collateral under
the laws of the jurisdiction of the organization of the issuer of any
of the Collateral. Without limiting the generality of the foregoing,
Secured Party may (i) without demand or notice to Pledgor, collect,
receive, or take possession of the Collateral or any part thereof,
(ii) sell or otherwise dispose of the Collateral, or any part thereof,
in one or more parcels at public or private sale or sales, at Secured
Party's offices or elsewhere, for cash, on credit, or for future
delivery and/or (iii) bid and become a purchaser at any sale free of
any right or equity of redemption in Pledgor, which right or equity is
hereby expressly waived and released by Pledgor. Upon the request of
Secured Party, Pledgor shall assemble the Collateral and make it
available to Secured Party at any place designated by Secured Party
that is reasonably convenient to Pledgor and Secured Party. Pledgor
agrees that Secured Party shall not be obligated to give more than ten
(10) days prior written notice of the time and place of any public
PLEDGE AGREEMENT - Page 5
119
sale or of the time after which any private sale may take place and
that such notice shall constitute reasonable notice of such matters.
Secured Party shall not be obligated to make any sale of the
Collateral regardless of notice of sale having been given. Secured
Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned. Pledgor shall be liable for all reasonable expenses of
retaking, holding, preparing for sale, or the like, and all reasonable
attorneys' fees and other expenses incurred by Secured Party in
connection with the collection of the Obligations and the enforcement
of Secured Party's rights under this Agreement, all of which expenses
and fees shall constitute additional Obligations secured by this
Agreement. Secured Party may apply the Collateral against the
Obligations in accordance with the Credit Agreement. Pledgor shall
remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay the Obligations.
Pledgor waives all rights of marshaling in respect of the Collateral.
(b) Secured Party may cause any or all of the Collateral
held by it to be transferred into the name of Secured Party or the
name or names of Secured Party's nominee or nominees.
(c) Secured Party may collect or receive all money or
property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation
to do so.
(d) Secured Party shall have the right, but shall not be
obligated to, exercise or cause to be exercised all voting, consensual
and other powers of ownership pertaining to the Collateral, and
Pledgor shall deliver to Secured Party, if requested by Secured Party,
irrevocable proxies with respect to the Collateral in form
satisfactory to Secured Party. Notwithstanding the Articles of
Incorporation of Software Spectrum B.V., Pledgor, as the sole
shareholder of Software Spectrum B.V., hereby grants its approval for
the pledge contemplated hereby and for Secured Party to exercise the
voting rights in respect of the Collateral issued by Software Spectrum
B.V. under the terms of this Section 4.1(d).
(e) Pledgor hereby acknowledges and confirms that Secured
Party may be unable to effect a public sale of any or all of the
Collateral by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, and applicable state or foreign
securities laws and may be compelled to resort to one or more private
sales thereof to a restricted group of purchasers who will be
obligated to agree, among other things, to acquire any shares of the
Collateral for their own respective accounts for investment and not
with a view to distribution or resale thereof. Pledgor further
acknowledges and confirms that any such private sale may result in
prices or other terms less favorable to the seller than if such sale
were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a
commercially reasonable manner, and Secured Party shall be under no
obligation to take any steps in order to permit the Collateral to be
sold at a public sale. Secured Party shall be under no obligation to
delay a sale of any of the Collateral for any period of time necessary
to
PLEDGE AGREEMENT - Page 6
120
permit any issuer thereof to register such Collateral for public sale
under the Securities Act of 1933, as amended, or under applicable
state or foreign securities laws.
(f) On any sale of the Collateral, Secured Party is
hereby authorized to comply with any limitation or restriction with
which compliance is necessary, in the view of Secured Party's counsel,
in order to avoid any violation of applicable law or in order to
obtain any required approval of the purchaser or purchasers by any
applicable governmental authority.
(g) On any sale of the Collateral, Secured Party shall
not be required to make the announcements referred to in Article 3:249
and 3:252 of the Dutch Civil Code.
ARTICLE 5
Miscellaneous
Section 5.1 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Pledgor and Secured Party and their respective
heirs, successors and assigns, except that Pledgor may not assign any of its
rights or obligations under this Agreement without the prior written consent of
Secured Party.
Section 5.2 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto.
Section 5.3 Notices. All notices and other communications provided
for in this Agreement shall be given or made in accordance with the Credit
Agreement.
Section 5.4 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas and the applicable
laws of the United States of America.
Section 5.5 Headings. The headings, captions and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 5.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
PLEDGE AGREEMENT - Page 7
121
Section 5.7 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 5.8 Additional Pledge Agreements. As a result of its
obligations under Section 9.10(d)(iv) of the Credit Agreement, Pledgor may be
required to execute additional deeds of pledge, pledge agreements or other
documentation (the "Additional Pledge Documents") as the Secured Party may
request to ensure that this Agreement creates in favor of Secured Party an
enforceable first priority pledge of the Collateral under the laws of each
jurisdiction in which each issuer of the stock pledged hereunder is organized.
Pledgor and Secured Party agree that unless specifically set forth in the
applicable Additional Pledge Documents, the Additional Pledge Documents shall
be in addition to and not in substitution for this Agreement or any provision
hereof and in the event of any conflict between this Agreement and any
Additional Pledge Documents, the provisions of this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
PLEDGOR:
-------
SOFTWARE SPECTRUM, INC.
By:
-----------------------------------
Deborah A. Nugent
Vice President of Finance
SECURED PARTY:
-------------
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, as Agent
By:
-----------------------------------
J. Scot Brunke
Senior Vice President
PLEDGE AGREEMENT - Page 8
122
Schedule 1
to
Pledge Agreement
========================================================================================================================
Subsidiary Jurisdiction of Type of Par Value No. of Certificate No.
Organization Ownership Shares
Interest
========================================================================================================================
1. Software Spectrum Pty, Ltd. Australia Ordinary Shares $1.00 75,668 3
- ------------------------------------------------------------------------------------------------------------------------
2. Software Spectrum Canada, Ltd. Ontario, Canada Common Shares None 666 C-2
- ------------------------------------------------------------------------------------------------------------------------
3. Software Spectrum Limited Ireland Ordinary Shares IRL. 1 93,333 5
- ------------------------------------------------------------------------------------------------------------------------
4. Software Spectrum B.V. Netherlands Shares of One Thousand 26 (uncertificated)
Capital Stock Dutch
Guilders
(NGL 1,000)
- ------------------------------------------------------------------------------------------------------------------------
5. Spectrum Integrated Common Stock $.01 518,880 1
Services, Inc. Texas
========================================================================================================================
Schedule 1 - Solo Page
123
Schedule 2
to
Pledge Agreement
All right, title and interest of Borrower and each Granting Subsidiary
(collectively the "Debtor") in and to the following whether now owned or
hereafter arising or acquired (such property being hereinafter sometimes called
the "Collateral"):
(a) all Accounts;
(b) all Inventory;
(c) all Cash and Cash Equivalent Collateral;
(d) all instruments, documents, chattel paper and General
Intangibles evidencing or otherwise relating to the Accounts,
Inventory and the Cash and Cash Equivalent Collateral;
(f) all products and Proceeds of the foregoing.
As used above, the following terms shall have the following meaning:
"Account" means any "account", as such term is defined in Section
9.106 of the UCC, whether now owned or hereafter acquired by the Debtor, and,
in any event, shall include, without limitation, each of the following, whether
now owned or hereafter acquired by the Debtor: (a) all rights of the Debtor to
payment for goods sold or leased or services rendered, whether or not earned by
performance; (b) all accounts receivable of the Debtor; (c) all security
pledged, assigned, or granted to or held by the Debtor to secure any of the
foregoing; (d) all letters of credit securing, guaranties of, or
indemnifications with respect to, any of the foregoing; and (e) all rights of
the Debtor as an unpaid seller of goods or services, including, but not limited
to, all rights of stoppage in transit, replevin, reclamation and resale.
"Cash and Cash Equivalent Collateral" means all of the following
whether now owned or hereafter acquired by Borrower: (a) the deposit,
brokerage, investment or other account or accounts established at Secured Party
by Borrower pursuant to Section 5.13 of the Credit Agreement (the "Collateral
Account"); (b) all money deposited in, held pursuant to or credited to the
Collateral Account; (c) all financial assets and securities held in or subject
to the Collateral Account or otherwise held by Secured Party as collateral
pursuant to the provisions of Section 5.13 of the Credit Agreement; (d) all
securities entitlements carried in or relating to the Collateral Account and
all other investment property, money, securities (both certificated and
uncertificated) and instruments held by Secured Party in, which are issued to
Borrower out of, which are otherwise subject to or which otherwise relate to
the Collateral Account.
Schedule 2 - Page 1 of 3
124
"General Intangibles" means any "general intangibles", as such term is
defined in Section 9.106 of the UCC, whether now owned or hereafter acquired by
the Debtor and, in any event, shall include, without limitation, each of the
following, whether now owned or hereafter acquired by the Debtor: (a) to the
extent assignable or to the extent a consent to assignment has been obtained,
all of the Debtor's books, records, data, plans, manuals, computer software,
computer tapes, computer disks, computer programs, source codes, object codes
and all rights of the Debtor to retrieve data and other information from third
parties; (b) to the extent assignable or to the extent a consent to assignment
has been obtained, all of the Debtor's contract rights, including without
limitation, all right, title and interest of Debtor in and to any reseller,
volume licensing, maintenance or similar agreement relating to Inventory; (c)
all rights of the Debtor to payment under letters of credit and similar
agreements; (d) all choses in action and causes of action of the Debtor
(whether arising in contract, tort, or otherwise and whether or not currently
in litigation) and all judgments in favor of the Debtor; (e) all rights and
claims of the Debtor under warranties and indemnities; and (f) all rights of
the Debtor under any insurance, surety, or similar contract or arrangement.
"Governmental Authority" means any nation or government, any state or
political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or pertaining
to government.
"Inventory" means any "inventory", as such term is defined in Section
9.109(4) of the UCC, whether now owned or hereafter acquired by the Debtor,
and, in any event, shall include, without limitation, each of the following,
whether now owned or hereafter acquired by the Debtor: (a) all goods and other
personal property of the Debtor that are held for sale or lease or to be
furnished under any contract of service; (b) all raw materials,
work-in-process, finished goods, inventory, supplies and materials of the
Debtor; (c) all wrapping, packaging, advertising and shipping materials of the
Debtor; and (d) all goods that have been returned to, repossessed by, or
stopped in transit by the Debtor.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental Authority, or
other entity.
"Proceeds" means any "proceeds", as such term is defined in Section
9.306 of the UCC and, in any event, shall include, but not be limited to: (a)
any and all proceeds of any insurance, indemnity, warranty, or guaranty payable
to the Debtor from time to time with respect to any of the Collateral; (b) any
and all payments (in any form whatsoever) made or due and payable to the Debtor
from time to time in connection with any requisition, confiscation,
condemnation, seizure, or forfeiture of all or any part of the Collateral by
any Governmental Authority (or any Person acting under color of Governmental
Authority); (c) all instruments, documents, chattel paper and General
Intangibles received or arising in connection with a disposition of the
Collateral; and (d) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas; provided, that if by mandatory provisions of law, the perfection or
effect of perfection or non-perfection of
Schedule 2 - Page 2 of 3
125
the security interest created hereunder in any Collateral is governed by the
Uniform Commercial Code as in effect on or after the date hereof in any other
jurisdiction, "UCC" means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provision hereof relating to such
perfection or the effect of perfection or non- perfection.
Schedule 2 - Page 3 of 3
126
EXHIBIT "G"
TO
SOFTWARE SPECTRUM, INC.
CREDIT AGREEMENT
Subsidiary Security Agreement
127
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") dated as of ____________ is
by and between _________ ("Debtor") and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as agent for itself and the other Banks (as defined below) (the
"Secured Party").
R E C I T A L S:
A. Software Spectrum, Inc., a Texas corporation (the "Borrower"),
the lenders named therein (the "Banks") and the Secured Party have entered into
that certain Credit Agreement dated May 3, 1996 (such Credit Agreement, as the
same may be amended or otherwise modified from time to time, being hereinafter
referred to as the "Credit Agreement"; terms defined in the Credit Agreement
and not otherwise defined herein are used herein as defined therein).
B. The Secured Party and the Banks have conditioned their
obligations under the Credit Agreement upon the execution and delivery of this
Agreement by the Debtor.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. As used in this Agreement, the
following terms have the following meanings:
"Account" means any "account", as such term is defined in
Section 9.106 of the UCC, whether now owned or hereafter acquired by
the Debtor, and, in any event, shall include, without limitation, each
of the following, whether now owned or hereafter acquired by the
Debtor: (a) all rights of the Debtor to payment for goods sold or
leased or services rendered, whether or not earned by performance; (b)
all accounts receivable of the Debtor; (c) all security pledged,
assigned, or granted to or held by the Debtor to secure any of the
foregoing; (d) all letters of credit securing, all guaranties of, or
indemnifications with respect to, any of the foregoing; and (e) all
rights of the Debtor as an unpaid seller of goods or services,
including, but not limited to, all rights of stoppage in transit,
replevin, reclamation, and resale.
"Collateral" has the meaning specified in Section 2.1 of this
Agreement.
SECURITY AGREEMENT (SUBSIDIARY)- Page 1
128
"General Intangibles" means any "general intangibles", as such
term is defined in Section 9.106 of the UCC, whether now owned or
hereafter acquired by the Debtor and, in any event, shall include,
without limitation, each of the following, whether now owned or
hereafter acquired by the Debtor: (a) to the extent assignable or to
the extent a consent to assignment has been obtained, all of the
Debtor's books, records, data, plans, manuals, computer software,
computer tapes, computer disks, computer programs, source codes,
object codes and all rights of the Debtor to retrieve data and other
information from third parties; (b) to the extent assignable or to the
extent a consent to assignment has been obtained, all of the Debtor's
contract rights; (c) all rights of the Debtor to payment under letters
of credit and similar agreements; (d) all choses in action and causes
of action of the Debtor (whether arising in contract, tort, or
otherwise and whether or not currently in litigation) and all
judgments in favor of the Debtor; (e) all rights and claims of the
Debtor under warranties and indemnities; and (f) all rights of the
Debtor under any insurance, surety, or similar contract or
arrangement.
"Inventory" means any "inventory", as such term is defined in
Section 9.109(4) of the UCC, whether now owned or hereafter acquired
by the Debtor, and, in any event, shall include, without limitation,
each of the following, whether now owned or hereafter acquired by the
Debtor: (a) all goods and other personal property of the Debtor that
are held for sale or lease or to be furnished under any contract of
service; (b) all raw materials, work-in-process, finished goods,
inventory, supplies and materials of the Debtor; (c) all wrapping,
packaging, advertising and shipping materials of the Debtor; and (d)
all goods that have been returned to, repossessed by, or stopped in
transit by the Debtor.
"Obligations" means all present and future indebtedness,
liabilities and obligations of the Debtor to the Secured Party under
the Loan Documents, including, without limitation, the "Guaranteed
Indebtedness" as defined in the Guaranty to which Debtor is a party.
"Proceeds" means any "proceeds", as such term is defined in
Section 9.306 of the UCC and, in any event, shall include, but not be
limited to, (a) any and all proceeds of any insurance, indemnity,
warranty, or guaranty payable to the Debtor from time to time with
respect to any of the Collateral; (b) any and all payments (in any
form whatsoever) made or due and payable to the Debtor from time to
time in connection with any requisition, confiscation, condemnation,
seizure, or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any Person acting under color of
Governmental Authority); (c) all instruments, documents, chattel paper
and General Intangibles received or arising in connection with a
disposition of the Collateral; and (d) any and all other amounts from
time to time paid or payable under or in connection with any of the
Collateral.
SECURITY AGREEMENT (SUBSIDIARY)- Page 2
129
"UCC" means the Uniform Commercial Code as in effect in the
State of Texas; provided, that if by mandatory provisions of law, the
perfection or effect of perfection or non-perfection of the security
interest created hereunder in any Collateral is governed by the
Uniform Commercial Code as in effect on or after the date hereof in
any other jurisdiction, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provision hereof
relating to such perfection or the effect of perfection or
non-perfection.
Section 1.2 Other Definitional Provisions. References to
"Sections", "subsections", "Exhibits" and "Schedules" shall be to Sections,
subsections, Exhibits and Schedules, respectively, of this Agreement unless
otherwise specifically provided. All definitions contained in this Agreement
are equally applicable to the singular and plural forms of the terms defined.
All references to statutes and regulations shall include any amendments of the
same and any successor statutes and regulations. Terms used herein, which are
defined in the UCC, unless otherwise defined herein or in the Credit Agreement,
shall have the meanings as set forth in the UCC.
ARTICLE II
Security Interest
Section 2.1 Security Interest. As collateral security for the
prompt payment and performance in full when due of the Obligations (whether at
stated maturity, by acceleration, or otherwise), the Debtor hereby collaterally
assigns to Secured Party, and grants to the Secured Party a security interest
in, all of the Debtor's right, title and interest in and to the following,
whether now owned or hereafter arising or acquired and wherever located
(collectively, the "Collateral"):
(a) all Accounts;
(b) all Inventory;
(c) all instruments, documents, chattel paper and General
Intangibles evidencing or otherwise relating to the Accounts
and Inventory; and
(d) all Proceeds and products of any or all of the foregoing.
Section 2.2 Debtor Remains Liable. Notwithstanding anything to
the contrary contained herein, (a) the Debtor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Secured Party of any of its rights hereunder shall not release the Debtor from
any of its duties or obligations
SECURITY AGREEMENT (SUBSIDIARY)- Page 3
130
under the contracts and agreements included in the Collateral and (c) the
Secured Party shall not have any obligation or liability under any of the
contracts and agreements included in the Collateral by reason of this
Agreement, nor shall the Secured Party be obligated to perform any of the
obligations or duties of the Debtor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
ARTICLE III
Representations and Warranties
To induce the Secured Party to enter into this Agreement and the
Credit Agreement, the Debtor represents and warrants to the Secured Party that:
Section 3.1 Representations and Warranties in the Credit
Agreement. All representations and warranties relating to the Debtor in the
Credit Agreement are true and correct.
Section 3.2 Accounts. Unless the Debtor has given the Secured
Party written notice to the contrary, whenever the security interest granted
hereunder attaches to an Account, the Debtor shall be deemed to have
represented and warranted to the Secured Party as to each of its Accounts that
(a) each Account is genuine and in all respects what it purports to be, (b)
each Account represents the legal, valid and binding obligation of the account
debtor evidencing indebtedness unpaid and owed by such account debtor, (c) the
amount of each Account represented as owing is the correct amount actually and
unconditionally owing except for normal trade discounts granted and contra
accounts, in each case, arising in the ordinary course of business and (d) no
Account is subject to any offset, counter claim, or other defense.
Section 3.3 Financing Statements. No financing statement,
security agreement, or other Lien instrument covering all or any part of the
Collateral is on file in any public office, except as may have been filed in
favor of the Secured Party pursuant to this Agreement. The Debtor does not do
business and has not done business within the past five (5) years under a trade
name or any name other than (a) the name set forth at the beginning of this
Agreement which is its exact name set forth in its certificate of incorporation
and (b) the names set forth on Schedule 1 hereto.
Section 3.4 Principal Place of Business. The principal place of
business and chief executive office of the Debtor, and the office where the
Debtor keeps its books and records, is located at the "Address for Notices" for
Borrower set forth in the Credit Agreement.
Section 3.5 Location of Collateral. Schedule I attached hereto
sets forth all locations where Debtor has a place of business and where the
Debtor maintains Collateral other than (A) In-Transit Inventory (as defined in
Section 4.4 below) and (B) Inventory held by customers or Inventory otherwise
held by third parties with an aggregate book value that does not exceed at any
time the sum of Two Million Five Hundred Thousand Dollars ($2,500,000) minus
the book value
SECURITY AGREEMENT (SUBSIDIARY)- Page 4
131
of all such inventory owned by Borrower and all other Granting Subsidiaries
(any such Inventory described in this clause (B) herein the "Excluded Sale on
Approval Inventory"). The Debtor does not carry on any business in any
location other than as set forth on Schedule 1. Schedule 1 correctly
identifies the landlords or mortgagees, if any, of the property where the
Debtor's Inventory (other than Excluded Sale on Approval Inventory) is located.
No Persons other than the Debtor and the Secured Party have possession of any
of the Collateral except for In-Transit Inventory and Excluded Sale on Approval
Inventory. No Collateral has been located in any state or county other than as
disclosed on Schedule 1 within the last four (4) months from the date hereof
other than In-Transit Inventory and Excluded Sale on Approval Inventory. All
instruments, documents, letters of credit and chattel paper which constitute
Collateral of the Debtor have been delivered to the Secured Party except as
permitted by Section 4.8.
Section 3.6 Perfection. Upon the filing of Uniform Commercial
Code financing statements in the jurisdictions listed on Schedule 2 attached
hereto and upon the Secured Party's obtaining possession of all instruments,
documents and chattel paper pledged hereunder, the security interest in favor
of the Secured Party created herein will constitute a valid and perfected Lien
upon and security interest in all the Collateral other than the Excluded Sale
on Approval Inventory, subject to no equal or prior Liens other than Liens
permitted by the Credit Agreement.
ARTICLE IV
Covenants
The Debtor covenants and agrees with the Secured Party that until the
Obligations are paid and performed in full and all Commitments of the Banks and
the Secured Party to the Borrower and the Debtor have terminated:
Section 4.1 Credit Agreement Covenants. The Debtor shall observe
all covenants relating to the Debtor set forth in the Credit Agreement.
Section 4.2 Modification of Accounts. The Debtor shall, in
accordance with prudent business practices, endeavor to collect or cause to be
collected from each account debtor under its Accounts, as and when due, any and
all amounts owing under such Accounts. The Debtor shall not, except in the
ordinary course of business (a) grant any extension of time for any payment
with respect to any of the Accounts, (b) compromise, compound, or settle any of
the Accounts for less than the full amount thereof, (c) release, in whole or in
part, any Person liable for payment of any of the Accounts, (d) allow any
credit or discount for payment with respect to any Account other than trade
discounts granted in the ordinary course of business, or (e) release any Lien
or guaranty securing any Account.
Section 4.3 Further Assurances. At any time and from time to
time, upon the request of the Secured Party, and at the sole expense of the
Debtor, the Debtor shall promptly execute and
SECURITY AGREEMENT (SUBSIDIARY)- Page 5
132
deliver all such further instruments, agreements and documents and take such
further action as the Secured Party may deem necessary or desirable to preserve
and perfect its security interest in the Collateral and carry out the
provisions and purposes of this Agreement subject to Section 9.10 of the Credit
Agreement.
Section 4.4 Bailees. If any of the Collateral is at any time in
the possession or control of any warehouseman, bailee, any of the Debtor's
agents or processors or any other third Person, the Debtor shall notify such
warehouseman, bailee, agent, processor or third Person of the security interest
created hereunder and shall instruct such Person to hold such Collateral for
the Secured Party's account subject to the Secured Party's instructions and
shall take all actions deemed necessary or desirable by Secured Party to
protect and perfect its security interest in the Collateral such Person is to
hold with the priority required by the Loan Documents; provided that prior to
the occurrence of a Default, Debtor shall not be required to take any of the
foregoing actions or any other action necessary to protect or perfect the
Agent's security interest in (a) any Inventory (or documents relating to
Inventory) held by a freight forwarder or shipper which is subject to an
enforceable contract for sale and is in transit to the purchaser thereof (any
such Inventory herein the "In-Transit Inventory") or (b) any Excluded Sale on
Approval Inventory.
Section 4.5 Inspection Rights. The Debtor shall permit the
Secured Party and its representatives to examine, inspect and audit the
Collateral and to examine and inspect the Debtor's books and records at any
reasonable time and as the Secured Party may desire. The Secured Party may in
connection with any asset audit of Debtor contact account debtors to verify the
existence, amounts and terms of the Accounts.
Section 4.6 Corporate Changes. The Debtor shall not change its
name, Federal Tax Identifier Number, identity, or corporate structure in any
manner that might make any financing statement filed in connection with this
Agreement seriously misleading unless the Debtor shall have given the Secured
Party thirty (30) days prior written notice thereof and shall have taken all
action reasonably deemed necessary or desirable by the Secured Party to make
each financing statement not seriously misleading. The Debtor shall not change
its principal place of business, chief executive office, or the place where it
keeps its books and records unless it shall have given the Secured Party thirty
(30) days prior written notice thereof and shall have taken all action
reasonably deemed necessary or desirable by the Secured Party to cause its
security interest in the Collateral to be perfected with the priority required
by the Loan Documents.
Section 4.7 Inventory. The Debtor shall keep all Inventory
(other than In-Transit Inventory and Excluded Sale on Approval Inventory) at
one or more of the locations specified on Schedule 1 hereto or, upon thirty
(30) days prior written notice to the Secured Party, at such other places
within the United States of America where all action required to perfect the
Secured Party's security interest in the Inventory with the priority required
by this Agreement shall have been taken. The Debtor shall maintain the
Inventory in good condition and repair (ordinary wear and tear excepted). The
Debtor shall not permit any waste of the Inventory or any part thereof
SECURITY AGREEMENT (SUBSIDIARY)- Page 6
133
(reasonable obsolesence excepted). The Debtor shall not permit the Inventory to
be used in violation of any law, rule, or regulation or inconsistently with the
terms of any policy of insurance. The Debtor shall not use or permit any of
the Inventory to be used in any manner or for any purpose that would impair its
value or expose it to unusual risk.
Section 4.8 Collection of Accounts; Delivery of Collateral.
Except as otherwise provided in this Section, the Debtor shall have the right
to collect and receive payments on the Accounts, instruments, letters of credit
and chattel paper included in the Collateral, to receive and further negotiate
in the ordinary course of business all documents (including, without
limitation, documents of title) evidencing Inventory, and to receive, retain
and draw under, in the ordinary course of business, all letters of credit
included in the Collateral, but Debtor shall promptly deliver all other
Collateral (the possession of which is necessary to perfect the security
interest therein) and all proceeds of Collateral (other than the proceeds which
the Debtor is entitled to retain as described previously in this sentence) to
Secured Party. In connection with the collections on Accounts, the Debtor may
take (and, at the Secured Party's direction, shall take) such actions as the
Debtor or the Secured Party reasonably may deem necessary or advisable to
enforce collection of the Accounts. If an Event of Default shall have occurred
and be continuing, the Debtor shall, upon the request of the Secured Party,
deliver all letters of credit and documents constituting Collateral to Secured
Party and instruct all account debtors and other Persons obligated in respect
of the Collateral to make all payments thereon either (a) directly to the
Secured Party (by instructing that such payments be remitted to a post office
box which shall be in the name and under the control of the Secured Party), or
(b) to one or more other banks in the United States of America (by instructing
that such payments be remitted to a post office box which shall be in the name
or under the control of the Secured Party) under arrangements in form and
substance satisfactory to the Secured Party pursuant to which the Debtor shall
have irrevocably instructed such other bank (and such other bank shall have
agreed) to remit all such payments directly to the Secured Party. In addition
to the foregoing, the Debtor agrees that if any Proceeds of any Collateral
(including payments made in respect of Accounts) shall be received by the
Debtor while an Event of Default exists, the Debtor shall promptly deliver such
Proceeds to the Secured Party with any necessary endorsements. Until such
Proceeds are delivered to the Secured Party, such Proceeds shall be held in
trust by the Debtor for the benefit of the Secured Party and shall not be
commingled with any other funds or property of the Debtor. All Proceeds of
Collateral received by the Secured Party pursuant to this Section may be
applied by the Secured Party to the Obligations in such order and manner as the
Secured Party may elect in accordance with the Credit Agreement.
SECURITY AGREEMENT (SUBSIDIARY)- Page 7
134
ARTICLE V
Rights of the Secured Party
Section 5.1 POWER OF ATTORNEY. THE DEBTOR HEREBY IRREVOCABLY
CONSTITUTES AND APPOINTS THE SECURED PARTY AND ANY OFFICER OR AGENT THEREOF,
WITH FULL POWER OF SUBSTITUTION, AS ITS TRUE AND LAWFUL ATTORNEY-IN-FACT WITH
FULL IRREVOCABLE POWER AND AUTHORITY IN THE NAME OF THE DEBTOR OR IN ITS OWN
NAME, TO TAKE AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF
DEFAULT, ANY AND ALL ACTION AND TO EXECUTE ANY AND ALL DOCUMENTS AND
INSTRUMENTS WHICH THE SECURED PARTY AT ANY TIME AND FROM TIME TO TIME DEEMS
NECESSARY OR DESIRABLE TO ACCOMPLISH THE PURPOSES OF THIS AGREEMENT AND,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE DEBTOR HEREBY GIVES THE
SECURED PARTY THE POWER AND RIGHT ON BEHALF OF THE DEBTOR AND IN ITS OWN NAME
TO DO ANY OF THE FOLLOWING AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF
AN EVENT OF DEFAULT, WITHOUT NOTICE TO OR THE CONSENT OF THE DEBTOR:
(i) to demand, sue for, collect, or receive in
the name of the Debtor or in its own name, any money or property at
any time payable or receivable on account of or in exchange for any of
the Collateral and, in connection therewith, endorse checks, notes,
drafts, acceptances, money orders, documents of title, or any other
instruments for the payment of money under the Collateral or any
policy of insurance;
(ii) to pay or discharge taxes, Liens, or other
encumbrances levied or placed on or threatened against the Collateral;
(iii) to notify post office authorities to change
the address for delivery of mail of the Debtor to an address
designated by the Secured Party and to receive, open and dispose of
mail addressed to the Debtor;
(iv) (A) to direct account debtors and any other
parties liable for any payment under any of the Collateral to make
payment of any and all monies due and to become due thereunder
directly to the Secured Party or as the Secured Party shall direct;
(B) to receive payment of and receipt for any and all monies, claims
and other amounts due and to become due at any time in respect of or
arising out of any Collateral; (C) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications and
notices in connection with accounts and other documents relating to
the Collateral; (D) to commence and prosecute any suit, action, or
proceeding at law or in equity in any court of competent jurisdiction
to collect the Collateral or any part thereof and to enforce any other
right in
SECURITY AGREEMENT (SUBSIDIARY)- Page 8
135
respect of any Collateral; (E) to participate in the defense of, or if
Debtor fails to defend, to defend any suit, action, or proceeding
brought against the Debtor with respect to any Collateral; (F) to
settle, compromise, or adjust any suit, action, or proceeding
described in clause (D) and clause (E) above if, in the case of clause
(E) Secured Party is conducting the applicable defense and, in
connection therewith, to give such discharges or releases as the
Secured Party may deem appropriate; (G) to exchange any of the
Collateral for other property upon any merger, consolidation,
reorganization, recapitalization, or other readjustment of the issuer
thereof and, in connection therewith, deposit any of the Collateral
with any committee, depositary, transfer agent, registrar, or other
designated agency upon such terms as the Secured Party may determine;
(H) to add or release any guarantor, indorser, surety, or other party
to any of the Collateral; (I) to renew, extend, or otherwise change
the terms and conditions of any of the Collateral; (J) to make,
settle, compromise, or adjust any claims under or pertaining to any of
the Collateral (including claims under any policy of insurance); and
(K) to sell, transfer, pledge, convey, make any agreement with respect
to or otherwise deal with any of the Collateral as fully and
completely as though the Secured Party were the absolute owner thereof
for all purposes, and to do, at the Secured Party's option and the
Debtor's expense, at any time, or from time to time, all acts and
things which the Secured Party deems necessary to protect, preserve,
maintain, or realize upon the Collateral and the Secured Party's
security interest therein.
THIS POWER OF ATTORNEY IS A POWER COUPLED WITH AN INTEREST AND SHALL
BE IRREVOCABLE. The Secured Party shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and options
expressly or implicitly granted to the Secured Party in this Agreement, and the
Secured Party shall not be liable for any failure to do so or any delay in
doing so. Neither the Secured Party nor any Person designated by the Secured
Party shall be liable for any act or omission or for any error of judgment or
any mistake of fact or law. This power of attorney is conferred on the Secured
Party solely to protect, preserve, maintain and realize upon its security
interest in the Collateral. The Secured Party shall not be responsible for any
decline in the value of the Collateral and shall not be required to take any
steps to preserve rights against prior parties or to protect, preserve, or
maintain any Lien given to secure the Collateral.
Section 5.2 Assignment by the Secured Party. Subject to the
terms of the Credit Agreement, the Secured Party may at any time assign or
otherwise transfer all or any portion of its rights and obligations under the
Loan Documents (including, without limitation, the Obligations) to any other
Person, and such Person shall thereupon become vested with all the benefits
thereof granted to the Secured Party herein or otherwise.
Section 5.3 Performance by the Secured Party. If the Debtor
shall fail to perform any covenant or agreement contained in this Agreement,
the Secured Party may perform or attempt to perform such covenant or agreement
on behalf of the Debtor. In such event, the Debtor shall,
SECURITY AGREEMENT (SUBSIDIARY)- Page 9
136
at the request of the Secured Party, promptly pay any amount expended by the
Secured Party in connection with such performance or attempted performance to
the Secured Party, together with interest thereon at the Default Rate from and
including the date of such expenditure to but excluding the date such
expenditure is paid in full. Notwithstanding the foregoing, it is expressly
agreed that the Secured Party shall not have any liability or responsibility
for the performance of any obligation of the Debtor under this Agreement.
ARTICLE VI
Default
Section 6.1 Rights and Remedies. If an Event of Default shall
have occurred and be continuing, the Secured Party shall have the following
rights and remedies:
(i) In addition to all other rights and remedies
granted to the Secured Party in this Agreement or in any other Loan
Document or by applicable law, the Secured Party shall have all of the
rights and remedies of a secured party under the UCC (whether or not
the UCC applies to the affected Collateral). Without limiting the
generality of the foregoing, the Secured Party may (A) without demand
or notice to the Debtor, collect, receive, or take possession of the
Collateral or any part thereof and for that purpose the Secured Party
may enter upon any premises on which the Collateral is located and
remove the Collateral therefrom or render it inoperable, and/or (B)
sell, lease, or otherwise dispose of the Collateral, or any part
thereof, in one or more parcels at public or private sale or sales, at
the Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Secured Party may
deem commercially reasonable. The Secured Party shall have the right
at any public sale or sales, and, to the extent permitted by
applicable law, at any private sale or sales, to bid (which bid may
be, in whole or in part, in the form of cancellation of indebtedness)
and become a purchaser of the Collateral or any part thereof free of
any right or equity of redemption on the part of the Debtor, which
right or equity of redemption is hereby expressly waived and released
by the Debtor. Upon the request of the Secured Party, the Debtor
shall assemble the Collateral and make it available to the Secured
Party at any place designated by the Secured Party that is reasonably
convenient to the Debtor and the Secured Party. The Debtor agrees
that the Secured Party shall not be obligated to give more than ten
(10) days prior written notice of the time and place of any public
sale or of the time after which any private sale may take place and
that such notice shall constitute reasonable notice of such matters.
The Secured Party shall not be obligated to make any sale of
Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of Collateral may have been given. The Secured
Party may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the
same was so adjourned. The Debtor shall be liable for all
SECURITY AGREEMENT (SUBSIDIARY)- Page 10
137
reasonable expenses of retaking, holding, preparing for sale, or the
like, and all reasonable attorneys' fees, legal expenses and other
costs and expenses incurred by the Secured Party in connection with
the collection of the Obligations and the enforcement of the Secured
Party's rights under this Agreement. The Debtor shall remain liable
for any deficiency if the Proceeds of any sale or other disposition of
the Collateral are insufficient to pay the Obligations in full. The
Secured Party may apply the Collateral against the Obligations in such
order and manner as the Secured Party may elect in its sole
discretion. The Debtor waives all rights of marshaling, valuation and
appraisal in respect of the Collateral.
(ii) The Secured Party may cause any or all of the
Collateral held by it to be transferred into the name of the Secured
Party or the name or names of the Secured Party's nominee or nominees.
(iii) The Secured Party may exercise any and all
rights and remedies of the Debtor under or in respect of the
Collateral, including, without limitation, any and all rights of the
Debtor to demand or otherwise require payment of any amount under, or
performance of any provision of, any of the Collateral and any and all
voting rights and corporate powers in respect of the Collateral.
(iv) The Secured Party may collect or receive all
money or property at any time payable or receivable on account of or
in exchange for any of the Collateral, but shall be under no
obligation to do so.
(v) On any sale of the Collateral, the Secured
Party is hereby authorized to comply with any limitation or
restriction with which compliance is necessary, in the view of the
Secured Party's counsel, in order to avoid any violation of applicable
law or in order to obtain any required approval of the purchaser or
purchasers by any applicable Governmental Authority.
ARTICLE VII
Miscellaneous
Section 7.1 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Debtor and the Secured Party and
their respective successors and assigns, except that the Debtor may not assign
any of its rights or obligations under this Agreement without the prior written
consent of the Secured Party.
Section 7.2 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES
THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL,
SECURITY AGREEMENT (SUBSIDIARY)- Page 11
138
ARTICLE VII
Miscellaneous
Section 7.1 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Debtor and the Secured Party and
their respective successors and assigns, except that the Debtor may not assign
any of its rights or obligations under this Agreement without the prior written
consent of the Secured Party.
Section 7.2 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES
THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL,
SECURITY AGREEMENT (SUBSIDIARY)- Page 12
139
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES HERETO. The provisions of this Agreement may be amended or waived only
by an agreement in writing signed by the parties hereto.
Section 7.3 Notices. All notices and other communications
provided for in this Agreement shall be given to the Debtor in care of the
Borrower in accordance with the notice provisions set forth in the Credit
Agreement.
Section 7.4 Governing Law. This Agreement and the other Loan
Documents shall be governed by, and construed in accordance with the laws of
the State of Texas and the applicable laws of the United States of America.
Section 7.5 Headings. The headings, captions and arrangements
used in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 7.6 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by the Secured Party shall affect the
representations and warranties or the right of the Secured Party to rely upon
them.
Section 7.7 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
Section 7.8 Waiver of Bond. In the event the Secured Party seeks
to take possession of any or all of the Collateral by judicial process, the
Debtor hereby irrevocably waives any bonds and any surety or security relating
thereto that may be required by applicable law as an incident to such
possession, and waives any demand for possession prior to the commencement of
any such suit or action.
Section 7.9 Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
Section 7.10 Obligations Absolute. All rights and remedies of the
Secured Party hereunder, and all obligations of the Debtor hereunder, shall be
absolute and unconditional irrespective of:
SECURITY AGREEMENT (SUBSIDIARY)- Page 12
140
(a) any lack of validity or enforceability of the Credit
Agreement or any of the other Loan Documents;
(b) any change in the time, manner, or place of payment
of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the
Credit Agreement or any of the other Loan Documents;
(c) any exchange, release, or nonperfection of any
Collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Obligations; or
(d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, a third party
pledgor.
Section 7.11 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE DEBTOR HEREBY IRREVOCABLY AND EXPRESSLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY OR THE ACTIONS OF THE SECURED PARTY IN THE NEGOTIATION, ADMINISTRATION,
OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTOR:
------
--------------------------------------
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
SECURED PARTY:
-------------
SECURITY AGREEMENT (SUBSIDIARY)- Page 13
141
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, as Agent
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
SECURITY AGREEMENT (SUBSIDIARY)- Page 14
142
Schedule 1
to
Security Agreement
Locations of Inventory
I. Assumed Names
II. Locations
- -------------------------------------------------------------------------------------------------------------------------
Name and Address of Landlord or Mortgagee of
Address Lease/Own Premises (if any)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Schedule 1 to Security Agreement - Solo Page
143
Schedule 2
to
Security Agreement
Jurisdictions for Filing
UCC-1 Financing Statements
144
EXHIBIT "H"
TO
SOFTWARE SPECTRUM, INC.
CREDIT AGREEMENT
Assignment and Acceptance
145
ASSIGNMENT AND ACCEPTANCE
Dated _______________, 19__
Reference is made to the Credit Agreement dated as of May 3, 1996 (as
the same may be amended and in effect from time to time, the "Credit
Agreement"), among Software Spectrum, Inc., a Texas corporation (the
"Borrower"), the banks named therein (the "Banks") and Texas Commerce Bank
National Association, as agent for the Banks (the "Agent"). Capitalized terms
used herein and not otherwise defined shall have the meanings assigned to such
terms in the Credit Agreement. This Assignment and Acceptance is being
executed pursuant to Section 14.8 the Credit Agreement.
________________________________ (the "Assignor") and _________________________
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee without
recourse, representation or warranty except as specifically
set forth herein, and the Assignee hereby purchases and
assumes from the Assignor, a ___________% interest in and to
all the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents as of the Effective
Date (as defined below) (including, without limitation, such
percentage interest in the Commitments of the Assignor on the
Effective Date and such percentage interest in the Loans owing
to, and Letter of Credit Liabilities (including participations
purchased pursuant to the Credit Agreement) held by, the
Assignor outstanding on the Effective Date together with such
percentage interest in all unpaid interest and fees accrued
from the Effective Date).
2. The Assignor (i) represents that as of the date hereof, its
Revolving Commitment is $_____________, the outstanding
principal balance of its Revolving Loans is $_____________,
and the outstanding Letter of Credit Liabilities (including
participations purchased pursuant to the Credit Agreement)
held by it is $____________, and the outstanding principal
balance of its Term Loan is $____________ (all as unreduced by
any assignments which have not yet become effective); (ii)
makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit
Agreement or any other Loan Document or the execution,
legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other Loan Document,
other than that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest
is free and clear of any adverse claim; (iii) makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any
Obligated Party or the performance or observance by the
Borrower or any Obligated Party of any of their obligations
under the Agreement or any other Loan Document;
ASSIGNMENT AND ACCEPTANCE - Page 1
146
and (iv) attaches the Notes held by Assignor and requests that
the Agent exchange such Notes for new Notes payable to the
order of (A) Assignee in amounts equal to the Commitments
assumed by the Assignee pursuant hereto and the outstanding
principal amount of the Loans assigned to Assignee pursuant
hereto, as applicable, and (B) the Assignor in amounts equal
to the Commitments and Loans retained by the Assignor under
the Credit Agreement, as specified above.
3. The Assignee (i) represents and warrants that it is legally
authorized to enter in this Assignment and Acceptance; (ii)
confirms that it has received a copy of the Credit Agreement,
together with copies of the most recent financial statements
delivered pursuant to Section 9.1 thereof, and such other
documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this
Assignment and Acceptance; (iii) agrees that it will,
independently and without reliance upon the Agent, the
Assignor, or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking
action under the Credit Agreement and the other Loan
Documents; (iv) confirms that it is eligible to be an
Assignee; (v) appoints authorizes the Agent to take such
action on its behalf and to exercise such powers under the
Loan Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably
incidental thereto; (vi) agrees that it will perform in
accordance with their terms all obligations which by the terms
of the Credit Agreement and the other Loan Documents are
required to be performed by it as a Bank; [and (vii) attaches
the forms prescribed by the Internal Revenue Service of the
United States certifying as to the Assignee's exemption from
United States withholding taxes with respect to all payments
to be made to the Assignee under the Credit Agreement or such
other documents as are necessary to indicate that all such
payments are subject to such tax at a rate reduced by an
applicable tax treaty].1
4. The effective date for this Assignment and Acceptance shall be
_______________, 19__ (the "Effective Date").2 Following the
execution of this Assignment and Acceptance, it will be
delivered to the Agent for acceptance and recording by the
Agent.
5. Upon such acceptance and recording, from and after the
Effective Date, (i) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this
Assignment and Acceptance, shall have the rights and
obligations of a Bank thereunder and under the other Loan
Documents and (ii) the Assignor shall, to the extent provided
in this Assignment and Acceptance, relinquish its rights and
be
_________________________
(1) If the Assignee is organized under the laws of a jurisdiction outside
the United States.
(2) Such date shall be at least Three (3) Business Days after the
execution of this Assignment and Acceptance and delivery thereof to
the Agent.
ASSIGNMENT AND ACCEPTANCE - Page 2
147
released from its obligations under the Credit Agreement and
the other Loan Documents.
6. Upon such acceptance and recording, from and after the
Effective Date, the Agent shall make all payments in respect
of the interest assigned hereby (including payments of
principal, interest, fees, and other amounts) to the Assignee.
The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the
Note for periods prior to the Effective Date directly between
themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Texas
and applicable laws of the United States of America.
[NAME OF ASSIGNOR]
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
[NAME OF ASSIGNEE]
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
ACCEPTED BY:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, as Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SOFTWARE SPECTRUM, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
ASSIGNMENT AND ACCEPTANCE - Page 3
148
EXHIBIT "I"
to
SOFTWARE SPECTRUM, INC.
CREDIT AGREEMENT
Compliance Certificate
149
COMPLIANCE CERTIFICATE
for the
quarter ending ________ __, ____
To: Texas Commerce Bank
National Association, as agent
1111 Fannin, 9th Floor MS46
Houston, Texas 77002
with a copy to
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
and each Bank
Ladies and Gentlemen:
This Compliance Certificate (the "Certificate") is being delivered
pursuant to Section 9.1(c) of that certain Credit Agreement (as amended, the
"Agreement") dated as of May 3, 1996 among SOFTWARE SPECTRUM, INC. (the
"Borrower"), TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as agent and the Banks
named therein. All capitalized terms, unless otherwise defined herein, shall
have the same meanings as in the Agreement. All the calculations set forth
below shall be made pursuant to the terms of the Agreement.
The undersigned, an authorized financial officer of the Borrower, does
hereby certify to the Agent and the Banks that:
1. DEFAULT.
No Default has occurred and is continuing or if a Default has
occurred and is continuing, I have described on the attached
Exhibit "A" the nature thereof and the steps taken or proposed to
remedy such Default.
Compliance
----------
2. SECTION 9.1 - FINANCIAL STATEMENTS AND RECORDS
(a) Annual audited financial statements of Borrower on Yes No N/A
or before 90 days after the end of each Fiscal Year.
(b) Quarterly unaudited financial statements of Borrower Yes No N/A
on a consolidated basis and each Foreign Subsidiary
within 45 days after each Fiscal Quarter end.
COMPLIANCE CERTIFICATE - Page 1
150
(c) Borrowing Base Report together with an aging of Yes No N/A
accounts receivables within 30 days of each month
end.
3. SECTION 10.1 - DEBT
No Additional Debt except:
(a) Purchase money not to exceed: $1,000,000
Actual Outstanding: $________ Yes No
(b) Guaranties of surety and other bonds not to exceed: $1,000,000
Actual Outstanding: $________ Yes No
(c) Outstanding Guaranties of permitted Debt of Foreign
Subs and Foreign Ventures $________
(i) Outstanding Loans, advances and other
extensions of credit to Foreign Subs and $________
Foreign Ventures $________
(ii) Letters of Credit backing Foreign Sub Debt $________
(iii) Limit: $30,000,000 minus c (i) and c $5,000,000 Yes No
(ii) $________
(d) Other Debt not to exceed
Actual Outstanding:
4. SECTION 10.5 - INVESTMENTS
--------------------------
(a) Outstanding Loans, advances and extensions of credit
to Foreign Subs and Foreign Ventures $________
(i) Outstanding Guaranties of permitted Foreign
Subs and Foreign Ventures $________
(ii) Letters of Credit backing Foreign Sub debt $________
(iii) Limit: $30,000,000 minus (a) (i) and $________ Yes No
(a) (ii) $________
(b) Consolidated Net Worth (from 5(h)) $________
(c) 15% of 4(b) $________ Yes No
(d) Investments and capital contributions in Foreign $100,000 Yes No
Subs and Foreign Ventures (limited to 4(c)) $________
(e) Other investments limited to $________
(f) Actual book value
5. SCHEDULE 11.1 - CONSOLIDATED NET WORTH
---------------------------------------
(a) $________ (i.e., 90% of 3/31/96 Consolidated Net
Worth) $_________
(b) Net Income for current Fiscal Quarter
(c) Aggregate positive Net Income since 3/31/96 Fiscal $_________
Quarter end (excluding current Fiscal Quarter) $_________
(d) 5(b) plus 5(c) = $_________
(e) 50% of 5(d) =
(f) Net process of the sale of all capital stock $_________
of Borrower received since 3/31/96
(g) Required Consolidated Net Worth: 5(a) plus 5(e) $_________
plus 5(f) $_________ Yes No
(h) Actual Consolidated Net Worth
COMPLIANCE CERTIFICATE - Page 2
151
6. SECTION 11.2 -FUNDED DEBT TO ADJUSTED EBITDA OR
-----------------------------------------------
ANNUALIZED EBITDA
-----------------
(a) Debt for borrowed money $_________
(b) Debt evidenced by bond, notes, etc. $_________
(c) Capital Lease Obligations $_________
(d) Letters of Credit $_________
(e) Total Funded Debt (sum of (a) through (d)) $_________
(f) Net Income for last 4 Fiscal Quarters (or since $_________
6/30/96 if less)
(g) Plus provisions for tax $_________
(h) less benefit from tax $_________
(i) Plus Interest Expense $_________
(j) Plus amortization $_________
(k) Plus depreciation $_________
(l) Borrower EBITDA: 6(f) plus 6(g), 6(i), 6(j) and 6(k) $_________
less 6(h)
(m) Nonrecurring Changes $_________
(n) Adjusted EBITDA (line 6(l) plus line 6(m) $_________
(o) Annualized EBITDA (line 6(n) x 4, 2 or 4/3 as $_________
determined pursuant to Section 11.2) $_________
(p) 6(e) / 6(n) (or if applicable 6(o)) = Yes No
(q) Maximum Funded Debt to Adjusted EBITDA (or if, :1.00
applicable, Annualized EBITDA) ____:1.00
(r) Has the Average Funded Debt to Adjust EBITDA ratio
been less than 2.00 to 1.00 for the last 2 Fiscal
Quarters for purposes of and as calculated in
accordance with Section 5.12? Yes No
7. SECTION 11.3 - FIXED CHARGE COVERAGE
------------------------------------
(a) Cash Flow for last 4 Fiscal Quarters or since
6/30/96, if less
(i) Adjusted EBITDA (from 6(n)) $__________
(ii) minus federal and state income or franchise
taxes paid $__________
(iii) 7(a)(i) minus 7(a)(ii) $__________
(b) Fixed Charges for last 4 Fiscal Quarters or since
6/30/96, if less
(i) Interest Expense $__________
(ii) Scheduled amortization of Debt $__________
(iii) Cash dividends and distributions $__________
(iv) Calculated Amount of Capital Expenditures $__________
(v) Total 7(b)(i) plus 7(b)(ii) plus 7(b)(iii)
plus 7(b)(iv) $__________
(c) Actual Fixed Charge Coverage: 7(a)(iii) / 7(b)(v)= :1.00
(d) Minimum Fixed Charge Coverage 1.20:1.00 Yes No
COMPLIANCE CERTIFICATE - Page 3
152
8. DETERMINATION OF MARGIN AND FEES
--------------------------------
(a) Funded Debt to EBITDA Ratio (from 6(q)) _____:1.00
(b) Adjustment to margin and fees required by Section Yes No
4.2?
(c) If adjustment required, set forth below new margins
and fees in accordance with Section 4.2: _______%
(i) Base Margin _______%
(ii) Commitment Fee Rate _______%
(iii) Libor Rate Margin
9. ATTACHED SCHEDULES
Attached hereto as schedules are the calculations supporting the
computation set forth above in this Certificate. All information
contained herein and on the attached schedules is true and correct.
10. FINANCIAL STATEMENTS
The unaudited financial statements attached hereto were prepared in
accordance with GAAP (or the generally accepted accounting
principles of the jurisdiction of organization of the applicable
Person) and fairly present (subject to year end audit adjustments) the
financial conditions and the results of the operations of the
Persons reflected thereon, at the date and for the periods
indicated therein.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
effective this _______ day of ____________, 199__.
SOFTWARE SPECTRUM, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
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COMPLIANCE CERTIFICATE - Page 4