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Exhibit 4.1
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (this "First Amendment"),
dated as of June 30, 1997, is by and among Pioneer-Standard Electronics, Inc.,
an Ohio corporation, and its successors and assigns (the "Borrower"), National
City Bank, a national banking association, and the several banks, financial
institutions and other entities from time to time parties to the Agreement
(sometimes collectively, "Lenders" and sometimes individually, a "Lender"), and
National City Bank, not individually, but as "Agent". Capitalized terms used
herein, and not otherwise defined herein, shall have the meaning ascribed to
those terms in the Credit Agreement (as defined herein).
RECITALS
A. Borrower, Lenders and Agent entered into a Credit Agreement dated as
of August 12, 1996 (the "Original Credit Agreement"), whereby Lenders agreed to
make revolving loans available to Borrower in an aggregate principal amount not
to exceed $125,000,000, pursuant to the terms of the Original Credit Agreement.
B. Borrower, Lenders and Agent desire to amend certain terms and
conditions of the Original Credit Agreement.
C. The Original Credit Agreement as modified by this First Amendment
shall hereafter be the "Credit Agreement."
NOW THEREFORE, for mutual consideration, the receipt and sufficiency of
which is acknowledged by Borrower, Lenders and Agent, the parties hereby agree
as follows:
1. The definitions of Consolidated Fixed Charge Coverage Ratio and Loan
Documents in the Original Credit Agreement are hereby deleted and the following
shall be substituted in lieu thereof:
"Consolidated Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio of (a) the sum of Consolidated Pre-Tax Income
plus Consolidated Interest Expense, to (b) Consolidated Debt Service,
all for the four fiscal quarters then ended.
"Loan Documents" means this Agreement, the Notes, the Non-Borrowing and
Non-Pledge Agreements, the Subordination Agreement, and any other
document from time to time evidencing or securing indebtedness incurred
by Borrower under this Agreement, as any of the foregoing may be
amended or modified from time to time.
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2. The following definitions shall be included in the Credit Agreement:
"Additional Receivables Transfer" or "Additional Receivables Transfers"
means one or more transfers of receivables of Borrower to the Limited
Partnership in a maximum aggregate amount not to exceed $30,000,000, on
terms and conditions in accordance with those set forth in SCHEDULE 2
hereto.
"Initial Receivables Transfer" means the receivables transfer of
Borrower to the Limited Partnership in a maximum amount not to exceed
$90,000,000, as described on SCHEDULE 3 hereto.
"Consolidated Pre-Tax Income" means, for any period, Consolidated Net
Income plus the sum of all income and franchise tax expense incurred by
Borrower and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
"Pre-Tax Income" means, for any period, Net Income plus the sum of all
income taxes paid by Borrower for such period.
"Pre-Tax Interest Coverage Ratio" means, as of any date of
determination, the ratio of (a) the sum of Pre-Tax Income plus Interest
Expense, to (b) Interest Expense.
"Subordination Agreement" means a Subordination Agreement, executed by
Borrower and Limited Partnership in favor of Lenders, substantially in
the form of EXHIBIT A attached hereto, as the same may be amended,
supplemented or otherwise modified from time to time.
3. The definition of the terms Fixed Charge Coverage Ratio and Debt
Service shall be deleted from the Credit Agreement in their entirety.
4. Upon execution and delivery of this First Amendment, a written
opinion of Borrower's and Limited Partnership's counsel shall be delivered to
Lenders in substantially the form of EXHIBIT B and EXHIBIT C hereto.
5. Upon execution and delivery of this First Amendment, Borrower and
Limited Partnership shall deliver to Lenders a Subordination Agreement in
substantially the form of EXHIBIT A hereto.
6. As of the date hereof, Borrower hereby affirms each of the
representations and warranties set forth in SECTION 4 of the Original Credit
Agreement.
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7. Schedule 1 (Subsidiaries of Borrower) of the Original Credit
Agreement is deleted in its entirety and Schedule 1 attached hereto is
substituted therefor.
8. Section 5.11 of the Original Credit Agreement shall be deleted in
its entirety and the following shall be substituted in lieu thereof:
5.11 MERGER; SALE OF ASSETS. Other than (a) the Transfer of Assets in
connection with the Corporate Reorganization, (b) the Initial
Receivables Transfer described on Schedule 3 attached hereto and (c)
any Additional Receivables Transfer described on Schedule 2 attached
hereto, Borrower will not, nor will it permit any of its Subsidiaries
to, enter into any merger, consolidation, reorganization or liquidation
or transfer or otherwise dispose of a Substantial Portion of its
Property or business, unless approved in advance by Lenders. The
foregoing notwithstanding, at least thirty (30) days prior to the
effectiveness of any Additional Receivables Transfer as described on
Schedule 2 attached hereto, Borrower shall submit to Lenders the
following: (a) a Financial Compliance Certificate in accordance with
Section 5.1(v) of this Agreement, (b) pro forma consolidated financial
statements projecting the results after the Additional Receivables
Transfer for the following fiscal year, and (c) an affirmation by
Borrower and the Limited Partnership that any debt incurred by Borrower
in favor of the Limited Partnership in connection with the Additional
Receivables Transfer is subject to the Subordination Agreement.
9. Section 5.17 of the Original Credit Agreement shall be deleted in
its entirety and the following shall be substituted in lieu thereof:
5.17 ADDITIONAL INDEBTEDNESS AND FINANCIAL UNDERTAKINGS. Borrower will
not enter into or remain liable upon, any Financial Undertaking, nor
will Borrower incur Indebtedness for Borrowed Money (other than
Indebtedness for Borrowed Money which is incurred under this Agreement,
the Additional Facilities, the Debt Offering, the Initial Receivables
Transfer, or any Additional Receivables Transfers or that consists of
interest rate exchange agreements or interest rate option agreements.
that in the aggregate, at any time, do not create an Aggregate Measured
Credit Risk in excess of $7,500,000). Borrower will not permit any of
its Subsidiaries to enter into or remain liable upon, any Financial
Undertaking, nor will Borrower permit any of its Subsidiaries to incur
Indebtedness for Borrowed Money (other than loans made by Borrower and
permitted by Section 5.26, and current Indebtedness for Borrowed Money
as described on Schedule 6 hereto);
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10. Section 5.24 of the Original Credit Agreement shall be deleted in
its entirety and the following shall be substituted in lieu thereof:
5.24 LEVERAGE RATIO. The Leverage Ratio shall not exceed 4.75 to 1.00
at any time during the period commencing on the Closing Date, and
ending on March 31, 1997, 3.75 to 1.00 at any time during the period
commencing April 1, 1997, and ending on March 31, 1998, and 3.00 to
1.00 at any time during the period commencing on April 1, 1998, and
thereafter.
11. Section 5.25 of the Original Credit Agreement shall be deleted in
its entirety and the following shall be substituted in lieu thereof:
5.25 CONSOLIDATED FIXED CHARGE COVERAGE RATIO; PRE-TAX INTEREST
COVERAGE RATIO. Borrower and its Subsidiaries shall maintain a
Consolidated Fixed Charge Coverage Ratio of no less than 2.0 to 1.0 on
the Closing Date, and on the last calendar day of each fiscal quarter
thereafter until June 30, 1997, and no less than 2.3 to 1.0 on the last
calendar day of each fiscal quarter thereafter, until the Facility
Termination Date. Borrower shall maintain a Pre-Tax Interest Coverage
Ratio of 1.10 to 1 on July 1, 1997, and on the last calendar day of
each fiscal quarter thereafter, until the Facility Termination Date.
12. Section 5.26 of the Original Credit Agreement shall be deleted in
its entirety and the following shall be substituted in lieu thereof:
5.26 INVESTMENT AND LOAN LIMIT. Neither Borrower, nor any of its
Subsidiaries, together or individually, directly or indirectly, in any
instance or in the aggregate over time may: (a) invest in any manner
more than $10,800,000 in Canada, or (b) loan more than an aggregate
principal amount of: (i) $25,000,000 to Canada; (ii) $85,000,000 to
Limited Partnership; (iii) $15,000,000 to Minnesota; (iv) $10,000,000
to Illinois; (v) $55,000,000 to Maryland; and (vi) $1,000,000 to FSC.
13. Section 5.27 of the Original Credit Agreement shall be deleted in
its entirety and the following shall be substituted in lieu thereof:
5.27 ACQUISITION LIMIT. Neither Borrower nor any of its Subsidiaries
shall fund the Acquisitions of Persons, or offer for, any Capital Stock
of Persons, to the extent the aggregate consideration (including
contingent consideration) of all such Acquisitions made after the
Closing Date and until the Facility Termination Date would exceed
$5,000,000.
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14. SECTION 5.30 of the Original Credit Agreement shall be deleted in
its entirety and the following shall be substituted in lieu thereof:
5.30 TANGIBLE ASSETS; ASSETS. As of the Closing Date, and at all times
thereafter until April 30, 1997, Borrower's Tangible Assets shall be
equal to or greater than forty-six (46%) percent of Borrower's Assets,
based on equity method of accounting. As of May 1, 1997, and at all
times thereafter until the Facility Termination Date, Borrower's
Tangible Assets shall be equal to or greater than forty (40%) percent
of the Borrower's Assets, based on equity method of accounting.
15. Borrower represents and warrants that as of the date hereof
Borrower is not in Default under any of the terms and conditions of the Credit
Agreement.
16. All other terms and conditions of the Credit Agreement shall remain
in full force and effect and unmodified hereby.
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17. This Agreement may be executed in any number of counterparts, each
of which shall be an original, and all of which taken together shall constitute
one instrument.
PIONEER-STANDARD ELECTRONICS, INC.
By: /s/ John V. Goodger
Print Name: John V. Goodger
Title: Vice President
4800 East 131st Street
Garfield Heights, Ohio 44105
Phone: (216) 587-3600
Facsimile: (216) 587-3563
Attention: John V. Goodger
NATIONAL CITY BANK,
Individually and as
Agent
By: /s/ Anthony J. DiMare
Print Name: Anthony J. DiMare
Title Senior Vice President
Via Hand Delivery
National City Bank
National City Center, 10th Floor
1900 East Ninth Street
Cleveland, Ohio 44114
Via U.S. Mail
National City Bank
P.O. Box 5756
Cleveland, Ohio 44101-0756
Attention: Anthony J. DiMare
Vice President
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KEYBANK NATIONAL ASSOCIATION
By: /s/ Matthew Tuohey
Print Name: Matthew Tuohey
Title: Assistant Vice President
Via Hand Delivery
KeyBank National Association
Large Corporate Group
Mail Code OH-01-27-0606
127 Public Square
Cleveland, Ohio 44114-1306
Via U.S. Mail
KeyBank National Association
Large Corporate Group
Mail Code OH-01-27-0606
127 Public Square
Cleveland, Ohio 44114-1306
Attention:
Matthew P. Tuohey
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MELLON BANK, N.A.
By: /s/ Mark F. Johnston
Print Name: Mark F. Johnston
Title: AVP
Via Hand Delivery
Mellon Bank, N.A.
Three Mellon Bank Center
Suite 2300
Pittsburgh, PA 15259
Attention: Loan Administration
Theresa Heukeshoven
Via U.S. Mail
Mellon Bank, N.A.
Three Mellon Bank Center
Suite 2300
Pittsburgh, PA 15259
Attention: Loan Administration
Theresa Heukeshoven
With a Copy To:
Via Hand Delivery
Mellon Bank, N.A.
One Mellon Bank Center
Grant Street, Room 4530
Pittsburgh, PA 15258-0001
Via U.S. Mail
Mellon Bank, N.A.
One Mellon Bank Center
Grant Street, Room 4530
Pittsburgh, PA 15258-0001
Attention:
Mark F. Johnston
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STAR BANK, N.A.
By: /s/ John D. Barrett
Print Name: John D. Barrett
Title: Sr. Vice President
Via Hand Delivery
Star Bank, N.A.
1350 Euclid Avenue, Suite 220
Cleveland, Ohio 44115
Via U.S. Mail
Star Bank, N.A.
1350 Euclid Avenue, Suite 220
Mail Location 4432
Cleveland, Ohio 44115
Attention:
John D. Barrett
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SCHEDULE 2
TERMS AND CONDITIONS OF ADDITIONAL RECEIVABLES TRANSFERS
1. The aggregate amount all Additional Receivable Transfers shall not
exceed $30,000,000.
2. The transferee of all such Additional Receivable Transfers shall be
Limited Partnership.
3. The Limited Partnership shall be required to promptly transfer the
funds collected from the collection of such accounts receivable to
Borrower. In accordance with the Initial Receivables Transfer, Limited
Partnership may transfer such funds pursuant to a loan to Borrower,
provided, the repayment of such debt by Borrower is subordinate to the
debt of Borrower arising under the Credit Agreement.
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SCHEDULE 3
DESCRIPTION OF INITIAL RECEIVABLES TRANSFER
Pursuant to the restructuring of Pioneer-Standard Electronics, Inc.
(the (Company"), the Company will transfer directly and indirectly through its
wholly-owned subsidiary Pioneer-Standard Illinois, Inc. ("Pioneer Illinois"), up
to $90,000,000 in accounts receivable (the "Receivables") to Pioneer-Standard
Electronics, Ltd. ("Pioneer LP") (the "Initial Receivables Transfer"). The
Initial Receivables Transfer is scheduled to occur on or about August 1, 1997,
and will be reflected on the financial statements of the Company as a capital
contribution to Pioneer Illinois and the to Pioneer LP. Upon the completion of
the Initial Receivables Transfer, Pioneer LP will own the Receivables and the
proceeds to be collected from the Receivables.
Subsequent to the Initial Receivables Transfer, Pioneer LP will pay the
Company a servicing fee to collect the Receivables on behalf of Pioneer LP.
Pioneer LP will then loan the Company, on a daily basis, as the cash is
collected from customers, the proceeds of the Receivables. It is anticipated
that the Receivables transferred as part of the Initial Receivables Transfer
will be collected and loaned back to the Company within the fifty-day period
commencing with the Initial Receivables Transfer.
After such fifty-day period has elapsed, a loan of up to $90,000,000
from Pioneer LP to the Company will be outstanding and will be evidenced by a
demand note of the Company payable to Pioneer LP.