August 14, 2000
Mr. John Spielberger
Chief Executive Officer
Information Technology Services, Inc.
20 Precision Drive
Shirley, NY 11967
Dear Mr. Belleau:
IBM Credit Corporation ("IBM Credit") reviews your financial statements on a
regular basis. Our review of the financial statement for the quarter ended June
30, 2000 indicated that Information Technology Services, Inc. ("ITS") did not
meet certain of its financial covenants set forth in Attachment A to the
Inventory and Working Capital Financing Agreement.
<TABLE>
<CAPTION>
Covenant Covenant Requirement Covenant Actual
-------- -------------------- ---------------
<S> <C> <C>
(a) Revenue on an Annual Basis Greater than Zero and
to Working Capital Equal to or less than 15.0:1.0 4.68:1.0
(b) Net Profit after Tax Equal to or
to Revenue Greater than -$500,000.00 -$530,000.00
(c) Total Liabilities to Greater than Zero and
Tangible Net Worth Equal to or Less than 3.0:1.0 1.55:1.0
</TABLE>
IBM Credit hereby waives these defaults for the fiscal quarter ended June 30,
2000 to the extent set forth above. IBM Credit expects ITS to strictly adhere to
the provisions of the financing program agreement and to perform its obligations
thereunder accordingly. Nothing herein shall obligate IBM Credit to waive any
other default now or in the future. If IBM Credit decides to waive any other
default, it may require changes to the financing program agreement including,
but not limited to, increasing the finance charges and fees IBM Credit charges
ITS and/or charge a waiver fee in exchange for our agreement (i) not to
terminate the financial accommodations that IBM Credit extends to ITS and (ii)
not to exercise any and all of IBM Credit's other rights and remedies it may
have under the terms of its financing program agreement with ITS and by law. Any
forbearance or delay by IBM Credit in exercising its rights against ITS, does
not constitute a waiver by IBM Credit or any rights and remedies available to it
or constitute an agreement to continue to forbear or delay in exercising any of
its rights or remedies.
Please contact me at (800) 678-6900 if you have any questions or you wish to
discuss further.
Sincerely,
/s/ Stephen A. Nichols
Stephen A. Nichols
Region Credit Manager
