<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------
FORM 10-Q
-----------------
(Mark One)
( X ) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarterly
Period Ended July 1, 1995
OR
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number: 0-16114
INACOM CORP.
(Exact name of registrant as specified in its charter)
Delaware 47-0681813
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10810 Farnam, Suite 200
Omaha, Nebraska 68154
(Address of principal executive offices)
Telephone number (402) 392-3900
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve months, and (2) has
been subject to such filing requirements for the past ninety days:
Yes (X) No ( )
As of August 1, 1995 there were 9,994,668 common shares of the
registrant outstanding.
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<TABLE>
<CAPTION>
InaCom Corp. and Subsidiaries
Condensed and Consolidated Balance Sheets
(Unaudited)
(Amounts in Thousands)
July 1, December 31,
1995 1994
----- -----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 17,944 10,514
Accounts receivable, net 101,871 184,973
Inventories 253,097 228,652
Other current assets 6,138 6,097
-------- --------
Total current assets 379,050 430,236
-------- --------
Other assets, net 16,775 18,702
Cost in excess of net assets of business
acquired, net of accumulated amortization 25,319 26,081
Property and equipment, net 41,311 44,856
-------- --------
$ 462,455 519,875
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 233,359 226,121
Short term borrowings
and current portion of long-term debt 35,667 96,710
Other current liabilities 26,678 28,646
------- -------
Total current liabilities 295,704 351,477
------- -------
Long-term debt 23,667 30,333
Other long-term liabilities 2,475 2,475
Stockholders' equity:
Capital stock:
Class A preferred stock of $1 par value.
Authorized 1,000,000 shares; none issued -- --
Common stock of $.10 par value. Authorized
30,000,000 shares; issued
10,040,000 shares 1,004 1,004
Additional paid-in capital 89,265 89,314
Retained earnings 51,856 47,167
------- -------
142,125 137,485
Less:
Cost of common shares in treasury of
108,282 in 1995 and 176,182 in 1994 936 1,533
Unearned restricted stock 580 362
------- -------
Total stockholders' equity 140,609 135,590
------- -------
$ 462,455 519,875
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
InaCom Corp. and Subsidiaries
Condensed and Consolidated Statement of Operations
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
THIRTEEN WEEKS TWENTY-SIX WEEKS
ENDED ENDED
July 1, June 25, July 1, June 25,
1995 1994 1995 1994
------- -------- ------- --------
<S> <C> <C> <C> <C>
Revenues:
Independent reseller channel
and distribution facilities $ 268,883 213,678 510,247 427,732
Company-owned business centers 235,018 178,995 456,704 350,111
Other 23,008 15,970 43,914 30,094
------- ------- --------- -------
526,909 408,643 1,010,865 807,937
------- ------- --------- -------
Direct costs:
Independent reseller channel
and distribution facilities 259,984 207,288 493,237 407,918
Company-owned business centers 200,975 156,802 390,196 300,736
Other 17,562 11,775 33,128 21,882
------- ------- ------- -------
478,521 375,865 916,561 730,536
------- ------- ------- -------
Gross margin 48,388 32,778 94,304 77,401
Selling, general and
administrative expenses 40,361 43,292 79,877 81,012
------ ------ ------ ------
Operating income (loss) 8,027 (10,514) 14,427 (3,611)
Interest expense 3,663 2,872 6,480 5,317
----- ------ ------ -----
Earnings (loss) before income tax 4,364 (13,386) 7,947 (8,928)
Income tax expense (benefit) 1,789 (5,488) 3,258 (3,660)
----- ------- ----- -------
Net earnings (loss) $ 2,575 (7,898) 4,689 (5,268)
===== ======= ===== =======
Earnings (loss) per share $ .25 (.77) .46 (.51)
===== ======= ====== =======
Weighted average shares outstanding 10,300 10,300 10,300 10,300
====== ======= ====== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
InaCom Corp. and Subsidiaries
Condensed and Consolidated Statement of Cash Flows
(Unaudited)
(Amounts in Thousands)
TWENTY-SIX WEEKS ENDED
July 1, June 25,
1995 1994
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 4,689 (5,268)
Adjustments to reconcile net earnings (loss)
to net cash (used in) provided by
operating activities:
Depreciation and amortization 9,831 9,455
(Increase) decrease in accounts receivable (16,898) 28,603
Increase in inventories (24,445) (7,708)
Increase in other current assets (41) (4,971)
Increase in accounts payable 7,238 7,321
(Decrease)increase in other current
liabilities (1,968) 9,629
Decrease in long-term liabilities -- (1,102)
------ ------
Net cash (used in) provided by
operating activities (21,594) 35,959
------ ------
Cash flows from investing activities:
Additions to property and equipment (3,197) (9,672)
Proceeds from notes receivable 568 361
(Increase) decrease in other assets (711) 716
------- -------
Net cash used in investing activities (3,340) (8,595)
------- -------
Cash flows from financing activities:
(Payments of) proceeds from long-term debt (6,667) 17,000
Proceeds from receivables sold 100,000 --
Payments of short-term borrowings (61,043) (44,990)
Proceeds from exercise of stock options 74 414
------- --------
Net cash provided by (used in)
financing activities 32,364 (27,576)
------- --------
Net increase (decrease) in cash and cash
equivalents 7,430 (212)
Cash and cash equivalents, beginning of the
period 10,514 9,672
------ -----
Cash and cash equivalents, end of the period $ 17,944 9,460
====== =====
</TABLE>
<PAGE>
InaCom Corp. and Subsidiaries
Notes to Condensed and Consolidated Financial Statements
(Unaudited)
1. Condensed and Consolidated Financial Statements
The condensed and consolidated financial statements are unaudited and
reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for
the interim periods. The condensed and consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto contained in the Company's
Annual Report to Stockholders incorporated by reference in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994. The results of operations for the six months ended
July 1, 1995 are not necessarily indicative of the results for the
entire fiscal year ending December 30, 1995.
2. Accounts Receivable
In June 1995, the Company entered into an agreement to sell $100
million of accounts receivable, with limited recourse, to an unrelated
financial institution. New qualifying receivables are sold to the
financial institution as collections reduce previously sold
receivables in order to maintain a balance of $100 million sold
receivables. On July 1, 1995, $21.4 million of additional accounts
receivable were designated to offset potential obligations under
limited recourse provisions; however, historical losses on Company
receivables have been substantially less than such additional amount. At
July 1, 1995, the interest rate was 7.92%
3. Inventories
Inventories are stated at the lower of cost (first-in, first-out
method) or market and consist of computer hardware, software, voice
and data equipment and related materials.
4. Common Stock
Earnings per share of common stock have been computed on the basis of
the weighted average number of shares of common stock outstanding
during each period presented.
5. Supplemental Disclosures of Cash Flow Information
For purposes of the condensed and consolidated statement of cash
flows, the Company considers cash and cash investments with a maturity
of three months or less to be cash equivalents.
Interest and income taxes paid are summarized as follows (dollars in
thousands):
1995 1994
------ -----
Interest paid $ 7,203 5,460
Income taxes paid $ 1,526 441
===== =====
6. Marketing Development Funds
Primary vendors of the Company provide various incentives, in cash or
credit against obligations, for promoting and marketing their product
offerings. The funds or credits received are based on the purchases
or sales of the vendor's products and are earned through performance
of specific marketing programs or upon completion of objectives
outlined by the vendors. Funds or credits earned are applied to
direct costs or selling, general and administrative expenses depending
on the objectives of the program. Funds or credits from the Company's
primary vendors typically range from 1% to 3% of purchases from these
vendors.
<PAGE>
Management's Discussion and Analysis
of
Financial Condition and Results of Operations
Results of Operations
- ---------------------
Revenues for the second quarter and first six months of 1995 increased
$118 million or 28.9% and $203 million or 25.1% over the second
quarter and first six months of 1994, respectively. Revenue growth
resulted primarily from the Company-owned business centers where
revenue increased $56 million (31.3%) and $106.6 million (30.5%) over
the second quarter and first six months of 1994, respectively.
Revenue from the independent reseller channel increased $55.2 million
(25.8%) and $82.5 million (19.3%) over the second quarter and first
six months of 1994, respectively. Revenue from other sources
increased $7 million (44.1%)and $13.8 million (45.9%) over the second
quarter and first six months of 1994, respectively.
Revenues from the Company-owned business centers increased as a result
of broad based revenue growth across all regional locations. Revenues
from the independent reseller channel increased as a result of broad
based growth within the Company's
existing reseller channel, an increase in products shipped directly to
the end-user customer on instruction from the reseller and an increase
in second source revenue. Second source revenue is generated from
sales to independent resellers who are not InaCom resellers by
contract. These revenues are primarily a result of open sourcing
which resulted from certain manufacturers, during 1994, lessening or
eliminating requirements from independent resellers to purchase
product from one source. Revenue from other sources increased as a
result of the growth in voice and data equipment sales as well as
growth in product liquidation sales.
The sales backlog at July 1, 1995 was $37.3 million compared to $87.5
million at the end of the same quarter of the previous year. The
decrease in backlog is the result of better product availability from
the manufacturers. Such backlog orders are not necessarily firm since
large end-user customers may place orders with several computer
resellers and accept products from the first computer reseller to
provide delivery.
Gross margin dollars for the second quarter and first six months of
1995 increased $15.6 million (47.6%) and $16.9 million (21.8%) over
the second quarter and first six months of 1994, respectively. The
gross margin percentage was 9.2% for the second quarter of 1995
compared to 8.0% for the second quarter of 1994, and 9.3% for the
first six months of 1995 versus 9.6% for the comparable period of
1994. The gross margin percentage for the independent reseller
channel was 3.3% in the second quarter of 1995 compared to 3.0% for
the second quarter of 1994, and 3.3% for the first six months of 1995
versus 4.6% for the comparable period of 1994. The gross margin
percentage for the Company-owned business centers was 14.5% in the
second quarter of 1995 compared to 12.4% in the second quarter of
1994, and 14.6% for the first six months of 1995 versus 14.1% for the
comparable period of 1994. The gross margin percentage from other
sources was 23.7% in the second quarter of 1995 compared to 26.3% in
the second quarter of 1994, and 24.6% for the first six months of 1995
versus 27.3% for the comparable period in 1994.
During the second quarter of 1994 the Company reported a loss due in
part to non-recurring charges relating to (i) a Department of Defense
contract, $4.5 million; (ii) settlement of certain warranty claims,
$1.0 million; (iii) a receivable from a supplier that filed
bankruptcy, $1.3 million; and (iv) severance costs for corporate staff
reductions, $320,000. A more detailed description of such charges was
included in the Company's 10-K report for the fiscal year ended
December 31, 1994.
Excluding the impact of the non-recurring charges recognized in the
second quarter of 1994, gross margin dollars for the second quarter
and first six months of 1995 increased $10.5 million (27.8%) and $11.8
million (14.3%) over the second quarter and first six months of 1994,
respectively. The gross margin percentage for the second quarter and
first six months of 1995, exclusive of non-recurring charges
recognized in the second quarter of 1994, decreased 0.1 and 0.9
percentage points over the second quarter and first six months of
1994, respectively. The gross margin percentages for the independent
reseller channel for the second quarter and first six months of 1995,
exclusive of non-recurring charges recognized in the
<PAGE>
Management's Discussion and Analysis
of
Financial Condition and Results of Operations
(Continued)
second quarter of 1994, decreased 0.8 and 1.9 percentage points over
the second quarter and first six months of 1994, respectively. The
gross margin percentage for the Company-owned business centers for the
second quarter and first six months of 1995, exclusive of non-
recurring charges recognized in the second quarter of 1994, increased
0.5 percentage points and decreased 0.3 percentage points over the
second quarter and first six months of 1994, respectively.
The decrease in gross margin percentages for the independent reseller
channel resulted from market pricing pressures. These market pricing
pressures are primarily attributable to open sourcing which began in
the second quarter of 1994. The gross margin percentage in the
independent reseller channel was 3.3% in the second quarter of 1995,
3.4% in the first quarter of 1995 and 3.3% in the fourth quarter of
1994.
The increase in gross margin percentages for the Company-owned
business centers in the second quarter of 1995 is a result of a better
mix of sales of higher margin services, technical and consulting,
versus sales of lower margin hardware and software products. The
decrease in gross margin percentage for the first six months of 1995
versus the same period in the prior year is due to a decrease in
hardware and software margins. The decrease in hardware and software
margins is a result of lower margins obtained on selling products in
larger volumes to customers.
The decrease in gross margin percentage from other sources in the
second quarter and first six months of 1995 when compared to the same
periods in 1994 is primarily a result of the increase in lower margin
product liquidation sales in relation to higher margin voice and data
communications equipment, service and rental revenues.
Selling, general and administrative (SG&A) expenses for the second
quarter and first six months of 1995 decreased $2.9 million (6.8%) and
$1.1 million (1.4%)over the second quarter and first six months of
1994, respectively. SG&A as a percent of revenue was 7.6% in the
second quarter of 1995 compared to 10.6% in the second quarter of
1994, and 7.9% for the first six months of 1995 compared to 10.0% for
the comparable period in 1994. Excluding the impact of non-recurring
charges recognized in the second quarter of 1994, SG&A expenses for
the second quarter and first six months of 1995 decreased $0.9 million
(2.2%) and increased $0.9 million (1.1%) over the second quarter and
first six months of 1994, respectively. SG&A as a percent of revenue
decreased 2.4 and 1.9 percentage points over the second quarter and
first six months of 1994 excluding the impact of non-recurring charges
recognized in the second quarter of 1994.
The decrease in spending for the second quarter of 1995 versus the
same period in 1994 resulted primarily from holding expense levels and
an increase in market development funds earned from various vendors
and credited against SG&A. The increase in vendor funds resulted from
higher revenues in the second quarter of 1995 compared to the same
period in 1994. The increase in spending for the first six months of
1995 compared to the same period in 1994 resulted primarily from
spending due to the increased revenues. The decrease in SG&A as a
percent of revenue for the second quarter and first six months of 1995
versus the same periods in 1994 resulted from the increase in market
development funds earned, as mentioned above, as well as the
operational efficiencies achieved through investments in distribution
center automation and information systems.
Interest expense was $3.7 million in the second quarter of 1995
compared to $2.9 million in the second quarter of 1994, and $6.5
million for the six months ended July 1, 1995 compared to $5.3 million
for the comparable period in 1994. Interest expense increased due to
higher average borrowing rates. Average daily borrowings for the
second quarter of 1995 were $24.5 million less than the average
borrowings for the same period in the prior year, and $32.8 million
less for the first six months of 1995 than the average borrowings for
the same period in 1994. The average borrowing rate for the second
quarter of 1995 increased approximately 1.9 percentage points from the
same period in the prior year, and 1.7 percentage points for first six
months of 1995 versus the same period in 1994.
The effective tax (benefit) rate was 41.0% for the second quarter and
first six months of 1995 and 41.0% for the comparable periods in 1994.
<PAGE>
Management's Discussion and Analysis
of
Financial Condition and Results of Operations
(Continued)
Net earnings were $2.6 million or $.25 per share for the quarter ended
July 1, 1995 versus a net loss of $7.9 million or $.77 per share for
the corresponding period in 1994. The net earnings were $4.7 million
or $.46 per share for the six months ending July 1, 1995 versus a net
loss of $5.3 million or $.51 per share for the comparable period in
1994. Excluding the non-recurring charges recognized in the second
quarter of 1994, the net loss for the second quarter of 1994 was $3.7
million or $.36 per share, and $1.0 million or $.10 per share for the
first six months of 1994. The changes in net earnings result from the
factors discussed above.
Liquidity and Capital Resources
- -------------------------------
The Company's primary sources of liquidity are provided through a
working capital financing agreement for $350.0 million and $30.3
million in private placement loans.
In June 1995 the Company entered into a working capital financing
agreement with IBM Credit Corporation and terminated the previous
revolving credit facilities. The $350.0 million working capital
financing agreement expires June 29, 1998. At
July 1, 1995, $29.0 million was outstanding under the working capital
line and the interest rate was 7.92%.
The two private placement notes are held by unaffiliated insurance
companies. The principal amount of the first note, $13.3 million, is
payable in two annual installments of $6.7 million commencing on May
31, 1996 and bears interest at 10.31% payable quarterly. The
principal amount of the second note, $17 million, is payable in five
annual installments of $3.4 million commencing on February 28, 1997
and bears interest at 6.83% payable quarterly.
The working capital and debt agreements contain certain restrictive
covenants, including the maintenance of minimum levels of working
capital, tangible net worth, fixed charge coverage, limitations on
incurring additional indebtedness and restrictions on the amount of
net loss that the Company can incur. The Company was in compliance
with the covenants contained in the working capital and debt
agreements at July 1, 1995.
Long-term debt was 14.4% of total long-term debt and equity at July 1,
1995 versus 18.7% at June 25, 1994. The decrease is primarily a
result of the reduction in long term debt due to the scheduled payment
of $6.7 million on one of the private placement notes.
In June 1995, the Company entered into an agreement to sell $100
million of accounts receivable, with limited recourse, to an unrelated
financial institution. New qualifying receivables are sold to the
financial institution as collections reduce previously sold
receivables in order to maintain a balance of $100 million sold
receivables. On July 1, 1995, $21.4 million of additional accounts
receivable were designated to offset potential obligations under
limited recourse provisions; however, historical losses on Company
receivables have been substantially less than such additional amount. At
July 1, 1995, the interest rate was 7.92%
During the first half of 1995 the Company used $21.6 million of cash
in operations. Inventory increased by $24.4 million during the first
six months with a portion of the increase financed through an increase
in accounts payable of $7.2 million. Inventory increased during the
first half of 1995 as a result of inventory positions taken on new
product lines of several major manufacturers. Accounts payable
increased as a result of the increase in inventory as well as the
Company's continued focus on matching accounts payable and inventory
levels. Accounts receivable levels also increased $16.9 million due
to the increased revenues.
Cash used in investing activities for the first half of 1995 totaled
$3.3 million, of which $3.2 million resulted from additions to
property and equipment.
<PAGE>
Management's Discussion and Analysis
of
Financial Condition and Results of Operations
(Continued)
Net cash provided by financing for the first half of 1995 totaled
$32.4 of which $100 million was provided from the sale of accounts
receivable. Proceeds were used to reduce long term and short term
borrowings by $6.7 million and $61.0 million, respectively.
The Company believes the funding expected to be generated from
operations and provided by the credit facilities will be sufficient to
meet working capital and capital investment needs in 1995.
<PAGE>
InaCom Corp. and Subsidiaries
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits. 10.1 Inventory Working Capital Financing Agreement dated
June 29, 1995 between InaCom and IBM Credit Corporation.
10.2 Receivable Purchase Agreement dated June 28, 1995
between InaCom, InaCom Finance Corp. and certain
financial institutions.
27 Financial Data Schedule
b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended July 1, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
and by the undersigned hereunto duly authorized.
INACOM CORP.
David C. Guenthner
Executive Vice President and
Chief Financial Officer
Dated this 11th day of August, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUL-01-1995
<CASH> 17,944
<SECURITIES> 0
<RECEIVABLES> 101,871
<ALLOWANCES> 2,709
<INVENTORY> 253,097
<CURRENT-ASSETS> 379,050
<PP&E> 41,311
<DEPRECIATION> 36,811
<TOTAL-ASSETS> 462,455
<CURRENT-LIABILITIES> 295,704
<BONDS> 0
<COMMON> 1,004
0
0
<OTHER-SE> 139,605
<TOTAL-LIABILITY-AND-EQUITY> 462,455
<SALES> 1,010,865
<TOTAL-REVENUES> 1,010,865
<CGS> 916,561
<TOTAL-COSTS> 916,561
<OTHER-EXPENSES> 79,877
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,480
<INCOME-PRETAX> 7,947
<INCOME-TAX> 3,258
<INCOME-CONTINUING> 4,689
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,689
<EPS-PRIMARY> .46
<EPS-DILUTED> 0
</TABLE>
INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT
dated this 29th day of June, 1995
by and between
InaCom Corp.
and
IBM Credit Corporation
- ------------------
TABLE OF CONTENTS
- ------------------
Section 1. DEFINITIONS.. .. . . . . . . . . . . . . . . . . 1
1.1 Special Definitions. . . . . . . . . . . . . . . . . . 1
1.2 Other Defined Terms. . . . . . . . . . . . . . . . . ... 12
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES. . ... 13
2.1 Credit Line. . . .. . . . . . . . . . . . . . . . . . .. 13
2.2 Product Advances .. . . . . . . . . . . . . . . . . . .. 13
2.3 A/R Advances . . .. . . . . . . . . . . . . . . . . . .. 15
2.4 Finance and Other Charges. . . . . . . . . . . . . . .. 16
2.5 Statements Regarding Customer's Account. . . . . . . .. 17
2.6 Shortfall.. . . .. . . . . . . . . . . . . . . . ... 18
2.7 Application of Payments. . . . . . . . . . . . . . . .. 18
2.8 Prepayment and Reborrowing By Customer . . . . . . . ... 18
2.9 Letters of Credit.. . . . . . . . . . . . . . . . . . .. 18
Section 3. CREDIT LINE ADDITIONAL PROVISIONS. . . . . . . .. 19
3.1 Ineligible Accounts. . . . . . . . . . . . . . . . . ... 19
3.2 Reimbursement for Charges. . . . . . . . . . . . . . ... 21
Section 4. CONDITIONS PRECEDENT . . . . . . . . . . . . ... 21
4.1 Conditions Precedent to the Effectiveness of This
Agreement.. . .. . . . . . . . . . . . . . . .. . .. .. 21
4.2 Conditions to Each Advance . . . . . . . . . . . .. .... 23
Section 5. REPRESENTATIONS AND WARRANTIES . . . . . . ... .. 24
5.1 Organization and Qualifications. . . . . . . . . .. .... 24
5.2 Rights in Collateral; Priority of Liens. . . . . .. .... 24
5.3 No Conflicts . . .. . . . . . . . . . . . . . . . . .... 25
5.4 Enforceability . .. . . . . . . . . . . . . . . . . .... 25
5.5 Locations of Offices . . . . . . . . . . . . . . .. .... 25
5.6 Fictitious Business Names. . . . . . . . . . . . .. .... 26
5.7 Organization . . . . . . . . . . . . . . . . . . .. .... 26
5.8 No Judgments or Litigation . . . . . . . . . . . .. .... 26
5.9 No Defaults. . . . . . . . . . . . . . . . . . . .. .... 26
5.10 Labor Matters. . . . . . . . . . . . . . . . . . . .. .. 26
5.11 Compliance with Law. . . . . . . . . . . . . . . . .. .. 26
5.12 ERISA. . . . . . . . . . . . . . . . . . . . . . . .. .. 27
5.13 Compliance with Environmental Laws . . . . . . . . .. .. 27
5.14 Intellectual Property. . . . . . . . . . . . . . . .. .. 28
5.15 Licenses and Permits . . . . . . . . . . . . . . . .. .. 28
5.16 Investment Company . . . . . . . . . . . . . . . . .. .. 28
5.17 Taxes and Tax Returns. . . . . . . . . . . . . . . .. .. 28
5.18 Status of Accounts . . . . . . . . . . . . . .. . . . .. 29
5.19 Affiliate/Subsidiary Transactions. . . . . . . . . .. .. 29
5.20 Accuracy and Completeness of Information . . . . . .. .. 29
5.21 Recording Taxes. . . . . . . . . . . . . . . . . . .. .. 29
5.22 Indebtedness . . . . . . . . . . . . . . . . . . . .. .. 29
Section 6. AFFIRMATIVE COVENANTS. . . . . . . . .. . . .. .. 30
6.1 Financial and Other Information. . . . . . . . . . .. .. 30
6.2 Location of Collateral . . . . . . . . . . . . . . .. .. 32
6.3 Changes in Customer. . . . . . . . . . . . . . . . .. .. 32
6.4 Corporate Existence. . . . . . . . . . . . . . . . .. .. 32
6.5 ERISA. . . . . . . . . . . . . . . . . . . . . . . .. .. 33
6.6 Environmental Matters. . . . . . . . . . . . . . . .. .. 33
6.7 Collateral Books and Records/Collateral Audit. . . .. .. 34
6.8 Insurance; Casualty Loss . . . . . . . . . . . . . .. .. 34
6.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . .. .. 35
6.10 Compliance With Laws . . . . . . . . . . . . . . . .. .. 35
6.11 Fiscal Year/Fiscal Quarter . . . . . . . . . . . . .. .. 35
6.12 Intellectual Property. . . . . . . . . . . . . . . .. .. 35
6.13 Maintenance of Property. . . . . . . . . . . . . . .. .. 35
6.14 Collateral . . . . . . . . . . . . . . . . . . . . .. .. 35
6.15 Subsidiaries . . . . . . . . . . . . . . . . . . . .. .. 37
6.16 Report of Material Event . . . . . . . . . . . . . .. .. 37
Section 7. NEGATIVE COVENANTS . . . . . . . . . . .. . .. .. 37
7.1 Liens. . . . . . . . . . . . . . . . . . . . . . . .. .. 37
7.2 Disposition of Assets. . . . . . . . . . . . . . . .. .. 38
7.3 Corporate Changes. . . . . . . . . . . . . . ... . .. .. 38
7.4 Guaranties . . . . . . . . . . . . . . . . . . . . .. .. 38
7.5 Restricted Payments. . . . . . . . . . . . . . . . .. .. 39
7.6 Investments. . . . . . . . . . . . . . . . . . . . .. .. 39
7.7 Affiliate/Subsidiary Transactions. . . . . . . . . .. .. 40
7.8. ERISA . . . . . . . . . . . . . . . . . . . . . . .. .. 40
7.9 Additional Negative Pledges. . . . . . . . . . . . .. .. 40
7.10 Storage of Collateral with Bailees and Warehousemen .... 40
7.11 Use of Proceeds. . . . . . . . . . . . . . . . . . .. .. 41
7.12 Retained Accounts. . . . . . . . . . . . . . . . . .. .. 41
7.13 Indebtedness . . . . . . . . . . . . . . . . . . . .. .. 41
7.14 Loans. . . . . . . . . . . . . . . . . . . . . . . .. .. 41
Section 8. DEFAULT. . . . . . . . . . . . . . . . .. . .. .. 41
8.1 Event of Default . . . . . . . . . . . . . . . . . .. .. 41
8.2 Acceleration . . . . . . . . . . . . . . . . . . . .. .. 44
8.3 Remedies . . . . . . . . . . . . . . . . . . . . . .. .. 44
8.4 Waiver . . . . . . . . . . . . . . . . . . . . . . .. .. 44
Section 9. MISCELLANEOUS. . . . . . . . . . . . . .. . .. .. 44
9.1 Term; Termination. . . . . . . . . . . . . . . . . .. .. 44
9.2 Indemnification. . . . . . . . . . . . . . . . . . .. .. 44
9.3 Additional Obligations . . . . . . . . . . . . . . .. .. 45
9.4 LIMITATION OF LIABILITY. . . . . . . . . . . . . . .. .. 45
9.5 Alteration/Waiver. . . . . . . . . . . . . . . . . .. .. 45
9.6 Severability . . . . . . . . . . . . . . . . . . . .. .. 46
9.7 One Loan . . . . . . . . . . . . . . . . . . . . . .. .. 46
9.8 No Merger or Novations . . . . . . . . . . . . . . .. .. 46
9.9 Paragraph Titles. . . . .. . . . . . . . . . . . . .. .. 47
9.10 Binding Effect; Assignment . . . . . . . . . . . . . .. 47
9.11 Notices. . .. .. . . . . . . . . . . . . . . . . . . .. 47
9.12 Counterparts. .. . . . . . . . . . . . . . . . . . . .. 48
9.13 ATTACHMENT A MODIFICATIONS . . . . . . . . . . . . . .. 48
9.14 SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW.48
9.15 JURY TRIAL WAIVER. . . . . . . . . . . . . . ..... . .. 49
-----------------------------
INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT
-----------------------------
This INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT (as amended,
supplemented or otherwise modified from time to time,
this "Agreement") restates, amends and supersedes that certain Addendum
to Agreement for Wholesale Financing dated August 2, 1991, as
amended and supplemented prior to the date hereof (the "Financing
Agreement") and is hereby made this 29th day of June, 1995, by and
between IBM CREDIT CORPORATION with a place of business at 2707 W.
Butterfield Road; Oak Brook, IL 60521 ("IBM Credit"), and InaCom
Corp. with a place of business at 10810 Farnam Drive; Omaha,
Nebraska 68154 ("Customer").
W I T N E S S E T H
-------------------
WHEREAS, IBM Credit and Customer are parties to that certain
Financing Agreement pursuant to which IBM Credit finances Customer's
acquisition of inventory and equipment;
WHEREAS, in the course of Customer's operations, Customer intends to
purchase from Persons approved in writing by IBM Credit for the purposes
of this Agreement (the "Authorized Suppliers") computer hardware and
software products manufactured or distributed by or bearing any trademark
or trade name of such Authorized Suppliers for distribution throughout
the United States (the "Products") (as of the date hereof the Authorized
Suppliers are as set forth on Attachment E hereto);
WHEREAS, Customer has requested that IBM Credit provide a credit facility
in support of Customer's inventory financing of its purchase of Products
from Authorized Suppliers and its accounts receivable financing and
financing for general corporate purposes, and IBM Credit is willing to
provide such financing to Customer subject to the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree that the
Financing Agreement is hereby restated, amended and superseded in
its entirety as follows:
- ------------------------
Section 1. DEFINITIONS
- ------------------------
1.1 Special Definitions. The following terms shall have the
following respective meaning in this Agreement:
"A/R Advance": any loan or advance of funds made by IBM Credit to
Customer pursuant to Section 2.3 of this Agreement, including, as
the context may require, an Overnight Advance, a Fixed Rate Advance
and a PAE Advance.
"A/R Advance Date": the Business Day on which IBM Credit makes an
A/R Advance under this Agreement.
"A/R Advance Term": shall be the collective or individual reference,
as the context may require, to a PAE Advance Term, an Overnight Advance
Term and a Fixed Rate Advance Term.
"A/R Finance Charges": as defined on Attachment A.
"Accounts": as defined in the U.C.C.
"Advance": any loan or other extension of credit by IBM Credit to
Customer pursuant to this Agreement including, without limitation,
(i) Product Advances and (ii) A/R Advances.
"Affiliate": when used with a Person, means any other Person controlling,
controlled by, or under common control with, such Person. For purposes of
this definition, "control" (including the correlative meaning of the term
"controlled by" or "under control with") with respect to any Person shall
mean possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership or voting securities or by contract or otherwise.
"Auditors": a nationally recognized firm of independent certified
public accountants as recommended by the Customer's audit committee
and approved by Customer's Board of Directors.
"Authorized Supplier": Companies, and their wholly owned subsidiaries
unless specifically excluded, listed in Attachment E,
together with their successors and any other Person which manufactures,
sells or distributes products purchased by Customer that are approved for
financing under this Agreement by IBM Credit in writing, in each case so
long as Customer is not notified in writing at least sixty (60) days in
advance to the contrary by IBM Credit in its sole discretion.
"Available Credit": at any time, (1) the Maximum Advance Amount
less (2) the Outstanding Advances at such time.
"Average Daily Balance": the sum of the Outstanding Product Advances or
Outstanding A/R Advances, as the case may be, as of the end of each day
during a calendar month, divided by the number of days in the calendar month.
"Back-up Liquidity Adjustment Fee": a fee, as specified in Attachment A,
which is due once per fiscal year to IBM Credit by Customer on the next
Payment Date after IBM Credit notifies Customer of the amount due.
Such Fee is not applicable if IBM Credit's credit rating is reduced so
that IBM Credit is no longer eligible to perform as a back-up liquidity
provider to Clipper.
"Base Rate": as defined in Attachment A. Base Rate will be determined on
a calendar month by calendar month basis. For the purposes of determining
the Base Rate for a particular calendar month, LIBOR will be the 30-day
average of the one month (01M) LIBOR for the immediately preceding
calendar month as published in Bloomberg.
"Bloomberg": the on-line service provided by Bloomberg Financial Services.
"Borrowing Base": as defined in Attachment A.
"Business Day": any day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are generally
closed or on which IBM Credit is closed.
"Clipper": Clipper Receivables Corporation.
"Clipper Outstandings": the total dollar amount Clipper has paid
to acquire a percentage interest in the IFC pool of receivables.
"Closing Date": the date on which the conditions precedent to
the effectiveness of this Agreement set forth in Section 4.1 hereof
are satisfied or waived in writing by IBM Credit.
"Code": the Internal Revenue Code of 1986, as amended or any
successor statute.
"Collateral": as defined in the Pledge and Security Agreement.
"Collateral Agent": as defined in the Collateral, Agency and
Intercreditor Agreement.
"Collateral, Agency and Intercreditor Agreement": that certain
Collateral, Agency and Intercreditor Agreement dated June 28, 1995
between InaCom Corp, the Guarantors and IBM Credit as Collateral Agent.
"Collateral Management Report": a report to be delivered by Customer to
IBM Credit from time to time, as provided herein,
signed by an executive officer, as listed in Customer's most recent
Form 10-K, 10-Q or 8-K, whichever is latest, in form and substance
reasonably satisfactory to IBM Credit (it being understood that the
form and substance of and the detail contained in Attachment F is
satisfactory) detailing and certifying, among other items: a summary of
Customer's inventory on hand financed by IBM Credit and
Customer's Eligible Accounts, amounts and aging of such Customer's
Accounts, Authorized Supplier's invoice price to Customer and the
total of the line item values for all inventory listed on the
report, the amounts and aging of Customer's accounts payable as of
a specified date, Private Placement Debt subject to an intercreditor
agreement with IBM Credit, all of Customer's IBM Credit borrowing activity,
including accounts for inventory received for which payables are not yet
booked, during a specified period and the total amount of Customer's
Borrowing Base as well as Customer's Outstanding A/R Advances, Outstanding
Product Advances, Clipper Outstandings, Available Credit and any Shortfall
Amount as of a specified date.
"Compliance Certificate": a certificate substantially in the form
of Attachment C.
"Credit Line": as defined in Section 2.1.
"Default": either (1) an Event of Default or (2) any event or
condition which, but for the requirement that notice be given or
time lapse or both, would be an Event of Default.
"Delinquency Fee Rate": as defined on Attachment A.
"Eligible Account": as defined in Section 3.1.
"Environmental Laws": all statutes, laws, judicial decisions,
regulations, ordinances, and other governmental restrictions relating to
pollution, the protection of the environment, occupational health and safety,
or to emissions, discharges or release of pollutants, contaminants, hazardous
substances or wastes into the environment.
"Environmental Liability": any claim, demand, obligation, cause of
action, allegation, order, violation, injury, judgment, penalty or
fine, cost or expense, resulting from the violation or alleged
violation of any Environmental Laws or the imposition of any Lien
pursuant to any Environmental Laws.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended, or any successor statutes.
"Event of Default": as defined in Section 8.1.
"Financial Statements": the consolidated and consolidating balance
sheets, statements of operations, statements of cash flows and
statements of changes in shareholder's equity of Customer and its
Subsidiaries for the period specified, prepared in accordance with
GAAP and consistent with prior practices.
"Floor Plan Lender": any Person who now or hereinafter provides
inventory financing to Customer and who either (i) provides such
lending on an unsecured basis, (ii) executes an Intercreditor
Agreement (as defined in Section 4.1 of this Agreement) or (iii)
executes a subordination agreement with IBM Credit in form and
substance reasonably satisfactory to IBM Credit.
"FRO Advance": an A/R Advance, with any one of three fixed rate
options ("FRO") and corresponding FRO Advance Terms, for which the
LIBOR portion of the rate of interest paid by Customer is fixed for
the duration of the FRO Advance Term.
"FRO Advance Term": for a certain FRO Advance, a sixty (60),
ninety (90), or one hundred eighty (180) day period, as the case
may be, depending on which LIBOR the Customer requested for that
certain FRO Advance. See Section 2.3 for further clarification.
"Free Financing Period": for each Product Advance, the period, if
any, in which IBM Credit does not charge Customer a financing
charge. IBM Credit shall calculate the Customer's Free Financing
Period utilizing a methodology that is consistent with the methodologies
used for similarly situated customers of IBM Credit.
The Customer understands that IBM Credit may not offer or may cease
to offer a Free Financing Period for the Customer's purchases of
Products if the financing program agreed upon between IBM Credit
and the Authorized Supplier does not enable IBM Credit to offer or
continue to offer a free financing period in connection with IBM
Credit providing Product Advances for Customer's purchase of Products from
the Authorized Supplier. The Free Financing Period includes any extension,
agreed to by IBM Credit or offered by the manufacturer and elected by
Customer, that extends beyond the normal Free Financing Period for a product.
"GAAP": generally accepted accounting principles in the United
States as in effect from time to time.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or
other entity owned or controlled (through stock or capital ownership or
otherwise) by any of the foregoing.
"Guarantor": any Person who may, from time to time, guaranty Customer's
Obligations.
"Hazardous Substances": all substances, wastes or materials, to the
extent subject to regulation as "hazardous substances" or "hazardous waste"
under any Environmental Laws.
"IFC": InaCom Finance Corp.
"Indebtedness": with respect to any Person, (1) all obligations of
such Person for borrowed money or for the deferred purchase price
of property or services (other than trade liabilities incurred in
the ordinary course of business and payable in accordance with
customary practices) or which is evidenced by a note, bond, debenture or
similar instrument, (2) all obligations of such Person under capital
leases, (3) all obligations of such Person in respect of letters of credit,
banker's acceptances or similar obligations issued or created for the
account of such Person (other than letters of credit, banker's
acceptances or similar obligations issued in connection with
purchases of inventory or supplies), (4) liabilities arising under any
interest rate protection, future, option swap, cap or hedge
agreement or arrangement under which such Person is a party or
beneficiary, (5) all obligations under guaranties of such Person and
(6) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become
liable for the payment thereof.
"Investment": with respect to any Person (the "Investor"), (1) any
investment by the Investor in any other Person, whether by means of
share purchase, capital contribution, purchase or other acquisition
of a partnership or joint venture interest, loan, time deposit,
demand deposit or otherwise, and (2) any guaranty by the Investor
of any Indebtedness or other obligation of any other Person.
"Lenders": as defined in the Collateral, Agency and Intercreditor Agreement.
"Letter of Credit": a letter of credit issued by IBM Credit upon
the request of Customer to a beneficiary designated by Customer.
"Letter of Credit Fee": a fee that is charged to Customer for a
twelve month period and shall be incurred when the Letter of Credit
is issued. Such fee will be due and payable in the next billing
period or, for any renewal period, in the next billing period after
the renewal period begins. In the event such Letter of Credit is
terminated during the twelve month period or renewal period, the
fee will not be prorated or refunded.
"Letter of Credit Maximum": the maximum aggregate amount of the
face value of all Letters of Credit issued by IBM Credit on
behalf of Customer and as specified in Section I of Attachment A.
"Letter of Credit Fee Rate": as specified in Section I of Attachment A.
"LIBOR": (i) for FRO Advances, as of the date of determination,
the two-month (02M), three-month (03M) or six-month (06M), as the
case may be, London Interbank Offered Rate published by Bloomberg
as "Ticker LIBORXXM" (where XX with be 02, 03 or 06 depending on
the number of months for which LIBOR is being quoted) and (ii) for
Base Rate, for the calendar month during which the PAE Advance or
OVN Advance, whichever is applicable, is made or continues to be
outstanding, the thirty-day average of the one-month (01M) LIBOR as
published in Bloomberg for the previous calendar month. LIBOR is
based on a 360-day calendar year so that 01M, 02M, 03M and 06M
represent 30, 60, 90 and 180 days respectively.
"Lien(s)": any lien, claim, charge, pledge, security interest,
deed of trust, mortgage, other encumbrance or other arrangement
having the practical effect of the foregoing, including the interest of a
vendor or lessor under any conditional sale agreement, capital lease or
other title retention agreement.
"Material Adverse Effect": a material adverse effect on (1) the
aggregate value of the Collateral or the aggregate amount which IBM
Credit would be likely to receive (after giving consideration to reasonably
likely delays in payment and reasonable costs of enforcement) in the
liquidation of such Collateral to recover the Obligations in full, (2) the
ability of Customer to perform its obligations under this
Agreement, or (3) the rights and remedies of IBM Credit under this
Agreement.
"Maximum Advance Amount": at any time, the lesser of (1) the
Credit Line and (2) the Borrowing Base at such time. See Exhibit
A to Attachment A for an example of how to calculate.
"Maximum Guaranty Amount": as defined in Seciont 7.4 and as specified in
Attachment A.
"Obligations": all covenants, agreements, warranties, duties,
representations, loans, advances, interest (including interest
accruing on or after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding,
relating to Customer, whether or not a claim for post-
filing or post-petition interest is allowed in such proceeding),
fees, reasonable expenses, indemnities, liabilities
and Indebtedness of any kind and nature whatsoever now or
hereafter arising, owing, due or payable from Customer to IBM
Credit, whether primary or secondary, joint or several,
direct, contingent, fixed or otherwise, secured or unsecured arising under
this Agreement and the Other Documents.
"Other Documents": all security agreements, security pledge agreements,
mortgages, leases, instruments, documents, guarantees,
schedules of assignment, contracts and similar agreements executed
by Customer and delivered to IBM Credit, pursuant to this Agreement, and all
amendments, supplements and other modifications to the foregoing from time
to time.
"Other Charges": as set forth in Attachment A.
"Outstanding Advances": at any time of determination, the sum of
(1) the Outstanding Product Advances and (2) the Outstanding A/R Advances.
"Outstanding A/R Advances": at any time of determination, the sum
of (1) the unpaid principal amount of all A/R Advances made by IBM
Credit under this Agreement; and (2) any finance charge, fee,
expense or other amount related to A/R Advances charged to Customer's
account with IBM Credit.
"Outstanding Product Advances": at any time of determination, the
sum of (1) the unpaid principal amount of all Product Advances
made by IBM Credit under this Agreement; and (2) any finance charge, fee,
expense or other amount related to Product Advances
charged to Customer's account with IBM Credit.
"OVN Advance": as defined in Section 2.3.
"OVN Advance Term": for each OVN Advance, a period of sixty (60)
days commencing on the A/R Advance Date for such OVN Advance.
"PAE Advance": an A/R Advance, which is a Product Advance extension,
automatically made by IBM Credit to itself on behalf of
Customer at the end of a Product Advance Term, to repay all or a
portion of a Product Advance that is due and payable unless Customer makes a
payment in full to IBM Credit for such Product
Advance on or before the last day of its Product Advance Period.
The Payment Date for such PAE Advance will be the last day of the
PAE Advance Term.
"PAE Advance Term": for each PAE Advance, a period of 90 days to
commence on the day immediately following the expiration of the
Free Financing Period.
"Payment Date": the date on which payment is due and is calculated. For
each FRO Advance, OVN Advance, PAE Advance and Product Advance, the Payment
Date is the last day of the FRO Advance Period, OVN Advance Period, PAE
Advance Period or Free Financing Period, whichever is applicable. For
each finance and other charge, the Payment Date is due as specified
in Section 2.4(C).
"Permitted Indebtedness": any of the following:
(1) Indebtedness to IBM Credit;
(2) Indebtedness described in Section VII of Attachment B;
(3) Indebtedness to any Floor Plan Lender;
(4) Purchase Money Indebtedness;
(5) guaranties in favor of IBM Credit;
(6) Indebtedness to a Person who is not and will not have a security
interest on Customer's assets;
(7) Indebtedness of a Person who has a perfected security interest in
Customer's assets and has subordinated such security
interest to IBM Credit through a subordination document reasonably
satisfactory to IBM Credit;
(8) pre-existing Indebtedness of an entity acquired by Customer
after the Closing Date;
(9) Indebtedness to the third-party credit facility described in
Section 7.1;
(10) Guarantees as permitted in Section 7.4:
(11) Other Indebtedness consented to by IBM Credit in writing
prior to the incurrence thereof; and
(12) extensions, renewals and replacements of the foregoing (1)
through (10).
"Permitted Liens": any of the following:
(1) Liens which are the subject of an Intercreditor Agreement, in
effect from time to time between IBM Credit and any other secured
creditor;
(2) Purchase Money Security Interests;
(3) Liens described in Section I of Attachment B;
(4) Liens of warehousemen, mechanics, materialmen, workers, repairmen,
common carriers, landlords and other similar Liens
arising by operation of law or otherwise, not waived in connection
herewith, for amounts that are not yet due and payable or being
contested in good faith by appropriate proceedings
promptly instituted and diligently conducted if an adequate reserve or
other appropriate provisions shall have been made therefor as
required to be in conformity with GAAP and an
adverse determination in such proceedings could not reasonably be
expected to have a Material Adverse Effect;
(5) attachment or judgment Liens individually or in the aggregate
not in excess of $1,000,000 (exclusive of (A) any amounts that are
duly bonded to the satisfaction of IBM Credit or (B) any amount
fully covered by insurance as to which the insurance company has
acknowledged its obligation to pay such judgment in full or (C)
with respect to which execution has been stayed);
(6) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in
the aggregate, are not substantial in amount and which do not
materially detract from the value of the property subject thereto
or materially interfere with the ordinary conduct of the business
of Customer;
(7) Liens arising from deposits or pledges to secure bids, tenders,
contracts, leases, surety and appeal bonds and other
obligations of like nature arising in the ordinary course of the
Customer's business;
(8) Liens for taxes, assessments or governmental charges not
delinquent or being contested, in good faith, by
appropriate proceedings promptly instituted and diligently conducted
if an adequate reserve or other appropriate provisions shall have been
made therefor as required in order to be in conformity with GAAP
and an adverse determination in such proceedings
could not reasonably be expected to have a Material Adverse Effect;
(9) Liens arising out of deposits in connection with workers'
compensation, unemployment insurance or other social security or
similar legislation;
(10) pre-existing Liens on entities acquired by Customer after the Closing
Date;
(11) Liens to any Person who have subordinated such Liens to IBM Credit; and
(12) other Liens consented to by IBM Credit in writing prior to
the incurrence thereof.
(13) extensions, renewals and replacements of the foregoing permitted Liens;
provided that (A) the aggregate amount of such
extended, renewed or replaced Liens do not exceed the original
principal amount of the Indebtedness for which it secures, (B)
such Liens do not extend to any property other than
property already previously subject to the Lien and (C) such extended,
renewed or replaced Liens are on terms and conditions no more
restrictive than the terms and conditions of the Liens
being extended, renewed or replaced;
"Person": any individual, association, firm, corporation, partnership,
trust, unincorporated organization or other entity whatsoever.
"Pledge and Security Agreement": that certain Pledge and Security
Agreement dated June 28, 1995 between InaCom Corp, the Guarantors
and IBM Credit as the Collateral Agent.
"Policies": all policies of insurance required to be maintained
by Customer under this Agreement or any of the Other Documents.
"Private Placement Debt": the aggregate amount, at any point in
time owed by Customer under the 10.31% Senior Note issued to Principal
Mutual Life Insurance Company (its successors and assigns) and the 6.83%
Senior Note issued to Principal Mutual Life Insurance Company and TMG life
Insurance Company and their respective successors and assigns.
"Product Advance": any advance of funds made or committed to be
made by IBM Credit for the account of Customer to an Authorized
Supplier in respect of an invoice delivered by such Authorized
Supplier to IBM Credit describing Products purchased by Customer,
including any such advance made or committed to be made as of the
date hereof pursuant to the Financing Agreement.
"Product Financing Period": for each Product Advance, a period of
days equal to that set forth in Attachment A from time to time,
commencing on the invoice date of such Product Advance.
"Purchase Money Indebtedness": any Indebtedness (including capital leases)
incurred to finance the acquisition of assets
(other than assets manufactured or distributed by or bearing any
trademark or trade name of any Authorized Supplier) to be used in
the Customer's business not to exceed the lesser of
(1) the purchase price or acquisition cost of such asset and (2) the fair
market value of such asset.
"Purchase Money Security Interest": any security interest securing
Purchase Money Indebtedness, which security interest
applies solely to the particular asset acquired with the Purchase
Money Indebtedness and any allowable proceeds of such asset as
defined under the applicable Uniform Commercial Code.
"Receivables Purchase Agreement": the Receivables Purchase Agreement
dated June 28, 1995 among IFC, Customer, Clipper, State
Street Boston Capital Corporation and Norwest Bank Minnesota, N.A.
"Request for A/R Advance": as defined in Section 2.3.
"Requirement of Law": as to any Person, the articles or certificate of
incorporation and by-laws of such Person, and any law, treaty, rule or
regulation or determination of an arbitrator or a court or other
governmental authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject.
"Retained Accounts": Accounts which are not sold to IFC. Retained
Accounts are Eligible Accounts and are included in the Borrowing
Base as are Federal government Accounts, which must not be sold to
IFC to the extent that they are to be used as part of the Borrowing Base.
"Seasonal Credit Line Uplift": unless an Event of Default has
occurred and is continuing, Customer's Credit Line will be increased by
(i) thirty percent (30%) for the months of September,
October, November, December and January of each year and (ii)
fifteen percent (15%) for the month of February of each year.
"Subsidiary": with respect to any Person, any corporation or
other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions are at the
time directly or indirectly owned by such Person.
"Tier 1 Period": as defined in Section IV of Attachment A.
"Tier 2 Period": as defined in Section IV of Attachment A.
"Termination Date": shall mean (i) the third anniversary of the
date of this Agreement (such first three years being the "Original
Term") and the Termination Date shall automatically be extended
each year on the anniversary of this Agreement for an additional
year (each such new three year period being a "Renewal Term")
unless IBM Credit provides written notice at least sixty (60) days
prior to the end of the first year of the then current Original
Term or Renewal Term, whichever is applicable, such notice to be
delivered by registered or certified mail addressed to Customer at
its principal place of business as designated in this Agreement.
"Uniform Commercial Code": the Uniform Commercial Code as in
effect from time to time in the State of New York or any jurisdiction
where the Collateral is located.
"Voting Stock": securities, the holders of which are ordinarily,
in the absence of contingencies, entitled to elect the corporate
directors (or persons performing similar functions).
1.2 Other Defined Terms. Terms not otherwise defined in this
Agreement which are defined in the Uniform Commercial Code as in
effect in the State of New York (the "U.C.C.") shall have the
meanings assigned to them therein.
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Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES
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2.1 Credit Line. Subject to the terms and conditions set forth
in this Agreement, on and after the Closing Date to but
not including the date that is the earlier of (x) the date
on which this Agreement is terminated pursuant to Section
9.1 and (y) the date on which IBM Credit terminates the Credit Line
pursuant to Section 8.2, IBM Credit agrees to extend to the
Customer a credit line ("Credit Line") in the amount set forth in
Attachment A pursuant to which IBM Credit will make
to the Customer, from time to time, Advances in an aggregate amount at any
one time outstanding not to exceed the Maximum Advance
Amount.
2.2 Product Advances. (A) Subject to the terms and conditions of
this Agreement, IBM Credit shall, as requested by Customer, make
Product Advances in connection with Customer's purchase of Products from
Authorized Suppliers. Customer hereby authorizes and directs IBM Credit
to pay the proceeds of Product Advances directly to the applicable
Authorized Supplier in respect of invoices delivered to IBM Credit for
such Products by such Authorized Supplier and acknowledges that each such
Product Advance constitutes a loan by IBM Credit to Customer
pursuant to this Agreement as if the Customer received the
proceeds of the Product Advance directly from IBM Credit.
(B) No finance charge shall accrue on any Product Advance
during the Free Financing Period, if any, applicable to such Product Advance.
If Customer does not repay a Product Advance on
the applicable Payment Date for such Product Advance, a PAE Advance shall
automatically be extended to Customer in an amount
equal to such Product Advance. Customer shall repay
each PAE Advance no later than the applicable Payment Date for such PAE
Advance. Customer may, at its option, repay each PAE Advance by
requesting IBM Credit to apply all or any part of the principal
amount of an A/R Advance to the Outstanding PAE Advances. Customer's request
for such application shall be made in accordance with Section 2.3. When
so requested and subject to the terms and conditions of this Agreement,
IBM Credit shall apply the amount so requested to the amounts due in respect
of the Outstanding PAE Advances. Nothing contained herein shall relieve
Customer of its obligation to repay PAE Advances when due. Each PAE Advance
shall accrue a finance charge on the Average Daily Balance thereof from
the beginning of the PAE Advance Period until the end of the PAE Advance
Term, at a per annum rate equal to the lesser of (a) the finance
charge set forth in Attachment A to this Agreement as the "Base
Rate" and (b) the highest rate from time to time permitted by
applicable law. Customer may prepay a PAE Advance at any time
without incurring a prepayment fee.
(C) Customer acknowledges that IBM Credit does not warrant
the Collateral. Customer shall be obligated to pay IBM Credit in
full even if the Collateral is defective or fails to conform to
the warranties extended by the Authorized Supplier. The Obligations of
Customer shall not be affected by any dispute Customer may have with any
manufacturer, distributor or Authorized Supplier. Customer will not assert
any claim or defense which it may have against any manufacturer, distributor
or Authorized Supplier against IBM Credit. Customer does not waive any
product liability claims it may have against the manufacturer of such product.
(D) Customer hereby authorizes IBM Credit to collect directly from any
Authorized Supplier any credits, rebates, bonuses or discounts owed by
such Authorized Supplier to Customer ("Supplier Credits"). IBM Credit will
contact Customer to determine how Customer wants such amounts to be applied.
If Customer does not advise IBM Credit how the amounts are to be
applied, IBM Credit may apply the amounts to the Outstanding Advances in
such order as IBM Credit, in its sole discretion, determines; provided,
however, that IBM Credit will inform Customer as to how such amounts have
been applied. Any Supplier Credits collected by IBM Credit shall in no way
reduce Customer's debt to IBM Credit in respect of the Outstanding
Advances until such Supplier Credits are applied by IBM Credit.
Customer will receive the benefit of such Supplier Credits
effective on the day after IBM Credit receives such Supplier Credits.
(E) IBM Credit may apply any payments and Supplier Credits
received by IBM Credit to reduce finance charges first and then to
principal amounts of Advances owed by Customer. IBM Credit may
apply principal payments to the oldest (earliest) invoices (and
related Product Advances) first, but, in any case, all principal
payments will be applied in respect of the Outstanding Product
Advances made for Products which have been sold, lost, stolen,
destroyed, damaged or otherwise disposed of prior to any other
application thereof.
(F) Customer will indemnify and hold IBM Credit harmless
from and against any claims or demands asserted by any Person
relating to or arising from the Collateral for any reason whatsoever,
including, without limitation, the condition of the
Collateral, any misrepresentation made about the Collateral by any
authorized representative of Customer, or any act or failure to
act by Customer except to the extent such claims or demands are
directly attributable to IBM Credit's gross negligence or willful
misconduct. Nothing contained in the foregoing shall impair any
rights or claims which the Customer may have against any manufacturer,
distributor or Authorized Supplier.
2.3 A/R Advances. (A) Whenever Customer shall desire IBM Credit
to provide an A/R Advance, Customer shall deliver to IBM Credit
written notice of Customer's request for such an Advance ("Request
for A/R Advance") in form and substance reasonably satisfactory to
IBM Credit (it being understood that the form and substance of and
the detail contained in Attachment D is satisfactory). For any requested
A/R Advance pursuant to which monies will be disbursed only to Customer or
IBM Credit, a Request for A/R Advance, other than a FRO Advance, shall
be delivered to IBM Credit on or prior to 1:00 p.m. (Stamford, CT
time) on the day such A/R Advance is required by Customer. For a
FRO Advance, a Request for A/R Advance shall be delivered to IBM
Credit on or prior to 1:00 p.m. (Stamford, CT time) two
Business Days prior to the requested A/R Advance Date. The Request for
A/R Advance shall specify (i) the requested A/R Advance Date; (ii)
the amount of the requested A/R Advance; (iii) whether such A/R
Advance is an FRO Advance or an OVN Advance; (iv) for each FRO
Advance, the FRO Advance Term for such FRO Advance; and (vi) if
applicable, the amount of the requested A/R Advance that should be
applied to the Outstanding PAE Advances. Customer may deliver a
Request for A/R Advance via facsimile or the internet. Any
Request for A/R Advance delivered to IBM Credit shall be irrevocable.
(B) Subject to the terms and conditions of this Agreement,
on the A/R Advance Date specified in a Request for A/R Advance,
IBM Credit shall make the principal amount of each A/R Advance
available to the Customer in immediately available funds to an
account maintained and designated in writing by Customer. If IBM
Credit is making an A/R Advance hereunder on a day on which Customer is
to repay all or any part of an Outstanding Advance (or
any other amount owing hereunder), IBM Credit shall apply the
proceeds of the A/R Advance to such repayment and only an amount
equal to the difference, if any, between the amount of the A/R
Advance and the amount being repaid shall be made available to
Customer as provided in the immediately preceding sentence.
(C) Each A/R Advance shall accrue a finance charge on the unpaid principal
amount thereof, at a per annum rate equal to the lesser of (a) the finance
charge set forth in Attachment A to this Agreement under the caption
"A/R Finance Charge" for such type of A/R Advance, and (b) the highest rate
from time to time permitted by applicable law. If it is determined that
amounts received from the Customer were in excess of such highest rate,
then the amount representing such excess shall be considered
reductions to principal of Advances.
(D) Unless otherwise due and payable at an earlier date, the
unpaid principal amount of each A/R Advance shall be due and payable on the
applicable Payment Date.
(E) OVN Advances will be in increments of $100,000. The
maximum aggregate amount for all outstanding OVN Advances at any
point in time ("Maximum OVN Advances Total") will be as shown on
Attachment A. Customer may prepay OVN Advances without incurring
a prepayment fee.
(F) FRO Advances will be in increments of $5,000,000. A prepayment fee
equal to .05% per month, prorated if applicable, will be due for the period
that the payment precedes the due date. For purposes of such prepayment
fee, a month shall be defined as 30 days.
(G) Using the Available Credit calculated as of the last day
of the prior month and after taking into account all Advances and
payments that transpired during the current month, IBM Credit does
not require that each Request for Advance include a statement by
the President, Executive Vice President or Treasurer of Customer
that there is sufficient Collateral to support such Request for
Advance. Customer agrees, however, that under
the above calculation, if the Available Credit is determined to have been
reduced by fifty percent (50%) during the current month, Customer will make
such certification with each Request for Advance for the remainder of
such current month.
2.4 Finance and Other Charges. (A) Finance charges shall be
calculated by multiplying the applicable Delinquency Fee Rate,
Base Rate or A/R Finance Charge provided for in this Agreement by
Customer's applicable Average Daily Balance. The Delinquency Fee
Rate, the Base Rate and the various A/R Finance Charges provided
for in this Agreement are each computed on the basis of an actual
day, 360 day year.
(B) The Customer hereby agrees to pay to IBM Credit the
charges set forth as "Other Charges" in Attachment A. The Customer also
agrees to pay IBM Credit additional charges for any
returned items of payment received by Customer. The Customer
hereby acknowledges that any such charges are not interest but
that such charges, if unpaid, will constitute part of the Outstanding
Advances.
(C) The finance charges and Other Charges owed under this
Agreement, and any charges hereafter agreed to in writing by the
parties, are payable monthly on the later of (i) the fifteenth
calendar day of the month in which IBM Credit's bill or statement
is received and (ii) seven days after receipt of such bill or
statement by Customer. IBM Credit may, in its sole discretion, add
unpaid finance charges and Other Charges to the Customer's outstanding
Advances. Customer shall be deemed to have received
such bill or statement three (3) business days from the date IBM
credit mails such bill or statement by United States first class
mail, postage prepaid, and properly addressed to Customer.
(D) If any amount owed under this Agreement, including, without limitation,
any Advance, is not paid when due (whether at
maturity, by acceleration or otherwise), the unpaid amount thereof
will bear a late charge from and including its due date to but not
including the date IBM Credit receives payment thereof, at a per
annum rate equal to the lesser of (a) the amount set forth in
Attachment A to this Agreement as the "Delinquency Fee Rate" and
(b) the highest rate from time to time permitted by applicable
law. In addition, if any Shortfall Amount shall not be paid when
due pursuant to Section 2.6 hereof, Customer shall pay IBM Credit
an additional late charge equal to the product of the Shortfall
Amount multiplied by thirty (30) basis points. If it is
determined that amounts received from Customer were in excess of
such highest rate, then the amount representing such excess shall
be considered reductions to principal of Advances.
(E) The Customer hereby agrees to pay a monthly fee ("Unused
Line Fee") whenever the average aggregate sum of all outstanding
OVN Advances and FRO Advances for a calendar month is below $45,000,000.
The fee will be calculated by multiplying the Unused
Line Fee Rate, specified in Attachment A, times the difference
between the average aggregate amount for such month and $45,000,000.
(F) The Customer hereby agrees that if IBM Credit assumes
Clipper's obligation to purchase an undivided percentage interest
in IFC's pool of accounts receivable under the Receivables Purchase
Agreement Customer will (i) pay to IBM Credit rates which
will equal the rates that Customer is paying to IBM Credit for A/R
Advances under this Agreement and (2) execute and deliver instruments and
documents and take such further action as IBM
Credit may reasonably request for the purpose of obtaining a fully
perfected first priority security interest in IFC. Any Indebtedness owed
to IBM Credit under this Section 2.4(F) shall be secured solely by the
assets owned by IFC.
2.5 Statements Regarding Customer's Account. IBM Credit will
send statements of each transaction hereunder as well as monthly
billing statements to Customer with respect to Advances and other
charges due on Customer's account with IBM Credit. Each statement
of transaction and monthly billing statement shall be deemed,
absent manifest error, to be correct and shall constitute an account stated
with respect to each transaction or amount described therein unless
within seven (7) calendar days after such statement of transaction or
billing statement is received by Customer, Customer provides IBM Credit
written notice objecting that such amount or transaction is incorrectly
described therein and specifying the error(s), if any, contained
therein. IBM Credit may at any time adjust such statements of transaction or
billing statements to comply with applicable law and this Agreement.
2.6 Shortfall. If, on any date, the Outstanding Advances shall
exceed the Maximum Advance Amount (such excess, the "Shortfall
Amount"), then the Customer shall repay, within five (5) business
days of the date of the Shortfall (which date shall be considered
the Payment Date for the Shortfall Amount), the Outstanding Advances in an
amount equal to such Shortfall Amount.
2.7 Application of Payments. The Customer hereby agrees that all
checks and other instruments delivered to IBM Credit on account of
Customer's Obligations shall constitute conditional payment until
such items are actually collected by IBM Credit. IBM Credit will
contact Customer to determine how Customer wants such payments to
be applied. If Customer does not advise IBM Credit how a payment
is to be applied, the Customer waives the right to direct the
application of such payment and agrees that IBM Credit shall
have the right to apply and reapply such payments to
Customer's Obligations in such manner as IBM Credit may deem advisable
notwithstanding any entry by IBM Credit upon any of its books and
records. Customer agrees to make all payments to IBM Credit via
ACH or as otherwise agreed to by Customer and IBM Credit.
2.8 Prepayment and Reborrowing By Customer. (A) Customer may at
any time prepay, without notice or penalty, in whole or in part
amounts owed, other than amounts owed as FRO Advances, under this
Agreement. IBM Credit may apply payments made to it (whether by
the Customer or otherwise) to pay finance charges
and other amounts owing under this Agreement first and then to the principal
amount owed by the Customer. (B) Subject to the terms and conditions of
this Agreement, any amount prepaid or repaid to IBM Credit in
respect to the Outstanding Advances may be reborrowed by Customer in
accordance with the provisions of this Agreement.
2.9 Letters of Credit. Customer may request that IBM Credit
provide one or more Letters of Credit. If so requested the Customer hereby
agrees to pay the Letter of Credit Fee for each
Letter of Credit which is computed by multiplying the Letter of
Credit Fee Rate by the dollar amount of the Letter of Credit. The
dollar amount of the Letter of Credit shall be subtracted from the
Borrowing Base. Any amount that IBM Credit has to pay the other
creditor for a loss incurred by such other creditor shall be considered an
OVN Advance in the amount of the payment and shall
be added to the Customer's Outstandings. The Letter of Credit
Maximum is as specified in Section I of Attachment A.
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Section 3. CREDIT LINE ADDITIONAL PROVISIONS
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3.1 Ineligible Accounts. IBM Credit and Customer agree that IBM
Credit shall have the right to reasonably determine eligibility of
Accounts from an Account obligor for purposes of determining the
Borrowing Base; however, without limiting such right, the following Accounts
will be deemed to be ineligible for purposes of determining the Borrowing
Base:
(A) Accounts created from the sale of goods and/or performance of services
on terms not standard in the industry or
that allow for payment to be made more than forty five (45) days
from the invoice date of such sale or performance of services;
(B) Accounts unpaid more than one hundred twenty (120) days
from date of invoice except that if a violation of any covenant,
as defined in Section III of Attachment A, or any other Event of
Default has occurred and is continuing, accounts unpaid more than
ninety (90) days from the date of invoice;
(C) Accounts payable by an account debtor if fifty percent
(50%) or more of the aggregate outstanding balance of all such
Accounts remain unpaid for more than one hundred twenty (120) days
from the date of invoice except that if a violation of any covenant, as
defined in Section III of Attachment A, or any other
Event of Default has occurred and is continuing, the balance of
all such Accounts remain unpaid more than ninety (90) days from
the date of invoice;
(D) Accounts payable by an account debtor that is
an Affiliate of Customer or an officer, employee, guarantor, or is
related to or has common officers or directors (except for directors of
publically-traded companies) with Customer;
(E) Accounts arising from consignment sales;
(F) Except for state, local and United States government
institutions and public educational institutions, accounts with
respect to which the payment by the account debtor is or may be
conditional;
(G) accounts with respect to which the account debtor is not a resident of
the United States;
(H) Other than the exclusions allowed for in subsection 3.1(W) below,
Accounts payable by any account debtor to which
Customer is or may become liable for goods sold or
services rendered by such account debtor to Customer;
(I) Accounts arising from the sale or lease of goods purchased for a
personal, family or household purpose;
(J) Accounts arising from the sale or other disposition of
goods that has been used for demonstration purposes or loaned or
leased by the Customer to another party;
(K) Accounts which are progress payment accounts;
(L) Accounts upon which IBM Credit does not have a valid,
perfected, first priority security interest (this does not apply
to accounts held by IFC or accounts in which IBM Credit shares a
pari passu interest as a result of an intercreditor with another
creditor);
(M) Accounts payable by an account debtor that is or Customer knows will
become, subject to proceedings under United
States Bankruptcy Law or other law for the relief of debtors;
(N) Accounts that are not payable in US dollars;
(O) Accounts payable by any account debtor that is a
remarketer of computer hardware and software products and whose
purchases of such products from Customer have been financed by
another person who pays the proceeds of such financing directly to
Customer on behalf of such obligor where such financing person has
not waived its right of off set with Customer;
(P) Accounts arising from the sale or lease of goods which
are billed to any account debtor but have not yet been shipped by
Customer;
(Q) Accounts with respect to which Customer has permitted or
agreed to any extension, where such extension is greater than
sixty (60) days, or agreed to any compromise or settlement, or
made any other change or modification of any kind
or nature, including, but not limited to, any change or modification to the
terms relating thereto. To the extent that the the
aggregate effect of such compromises, settlements, changes or modifications
exceeds one percent (1%) of the eligible trade accounts receivable
of Customer, such excess shall be ineligible;
(R) Accounts that do not arise from undisputed bona
fide transactions;
(S) Accounts that are discounted for payment in less time
than the full payment term specified in Customer's terms and conditions
with its account debtors;
(T) Accounts on cash on delivery (C.O.D.) terms;
(U) Accounts arising from maintenance or service contracts
that are billed in advance of full performance of service;
(V) Accounts arising from bartered transactions;
(W) if a violation of any covenant, as defined in Section
III of Attachment A, occurs and is continuing or any other Event
or Default has occurred and is continuing, Accounts arising from
incentive payments, rebates, discounts, credits, and refunds
from a supplier; and
(X) Any and all other Accounts that IBM Credit deems, in its reasonable
discretion, to be ineligible.
The aggregate of all Accounts that are not
ineligible Accounts together with the aggregate of all receivables
arising from incentive payments, rebates, discounts and refunds from
suppliers shall hereinafter be referred to as "Eligible
Accounts".
3.2 Reimbursement for Charges.
Provided that there shall be Retained Accounts, Customer agrees to pay for
all costs and expenses of Customer's bank in respect
to collection of checks and other items of payment, all fees relating to the
use and maintenance of the Lockbox and the Special
Account (each as defined in the Collateral Agent and Intercreditor
Agreement) and with respect to remittances of proceeds of the
Advances hereunder.
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Section 4. CONDITIONS PRECEDENT
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4.1 Conditions Precedent to the Effectiveness of This Agreement.
The effectiveness of this Agreement is subject to the receipt by
IBM Credit of, or waiver in writing by IBM Credit of compliance
with, the following conditions precedent:
(A) this Agreement executed and delivered by Customer and
IBM Credit;
(B) (i) copies of the resolutions of the Board of Directors
of Customer certified by the secretary or assistant secretary of
Customer authorizing the execution, delivery and performance of
this Agreement and each Other Agreement executed and delivered in
connection herewith, (ii) a certificate of the secretary or an
assistant secretary of Customer, in form and substance reasonably
satisfactory to IBM Credit, certifying the names and
true signatures of the officers of Customer authorized to sign this
Agreement and the Other Documents and (iii) copies
of the certificate of incorporation and by-laws of Customer certified by
the secretary or assistant secretary of Customer;
(C) certificates dated as of a recent date from the Secretary
of State or other appropriate authority evidencing the good standing of
Customer and IFC in the jurisdictions of (i) the state
in which each of Customer and its Subsidiaries are incorporated,
(ii) the state in which each of Customer and its Subsidiaries has
its principal place of business and chief executive office, and
(iii) in the states, as agreed to by IBM Credit, in which Customer's and
its Subsidiaries maintain significant portions of their assets;
(D) copies of all approvals and consents from any Person, in
each case in form and substance reasonably satisfactory to IBM
Credit, which are required to enable Customer to authorize, or
required in connection with, (a) the execution, delivery or performance of
this Agreement and each of the Other Documents, and
(b) the legality, validity, binding effect or enforceability of
this Agreement and each of the Other Documents;
(E) the Collateral, Agency and Intercreditor Agreement in form and substance
satisfactory to IBM Credit as Collateral Agent,
executed by Customer, Lenders, Guarantors and IBM Credit in favor
of Collateral Agent;
(F) the Pledge and Security Agreement in form and substance
satisfactory to IBM Credit as Collateral Agent, executed by Customer and
the Guarantors;
(G) provided that there shall be Retained Accounts, a lockbox
agreement executed by Customer and each Bank in favor of Collateral
Agent, in form and substance reasonably satisfactory to IBM Credit
as Collateral Agent;
(H) provided that there shall be Retained Accounts, a
contingent blocked account agreement executed by Customer and each
Bank in favor of Collateral Agent in form and substance reasonably
satisfactory to IBM Credit as Collateral Agent;
(I) a favorable opinion of counsel for Customer in substantially the form
of Attachment I;
(J) a copy of each and every item in the form and substance
reasonably satisfactory to IBM Credit required by the Administrator
as conditions precedent under Section 4.1 (a) through and including
(p) of the Receivables Purchase Agreement. Such items shall include
but will not be limited to, all agreements, Transaction Documents,
closing documents, resolutions, certificates, organization
documents, financing statements, reports, audits, opinions of
counsel, information packages, approvals, letters, and all other
instruments and documents specified in said Section 4.1 (a) through and
including (p) except that this Condition Precedent (J)
must be satisfied prior to the sale of trade receivables to IFC;
(K) acknowledgement copies of UCC-1 financing statements
(or other evidence of presentation for filing reasonably acceptable to IBM
Credit) filed against Customer and the Collateral specified herein naming
IBM Credit, as Collateral Agent, as secured party and signed
by Customer and Guarantor, as applicable, as debtor. Said filings shall be
made in the jurisdictions set forth on Attachment I;
(L) copies of Requests for information or copies (Form UCC11)
(or a similar search report by a party reasonably acceptable to
IBM Credit as Collateral Agent, dated prior to and reasonably near
the Closing Date) listing all effective financing statements which
name the Customer and Guarantor, as applicable, as debtor and IBM
Credit, as Collateral Agent, as secured party and which are filed
in the jurisdictions in which filings were made pursuant to subsection
4.1(K) above, together with copies of such financing
statements.
(N) the statements, certificates, documents, instruments, financing
statements, agreements and information set forth in
Attachment A and Attachment B;
(O) all mortgage recording taxes, recording fees and other
charges payable in connection with the filing and recording of any
documents or instruments under this Agreement have either been
paid in full by Customer or arrangements for the payment of such
amounts reasonably satisfactory to IBM Credit shall have been made
(Customer agrees that, if IBM Credit pays such taxes, fees and
changes on behalf of Customer, such payments will be considered an
OVN Advance and will become part of Customer's Outstandings; and
(P) all such other statements, certificates, documents, instruments,
financing statements, agreements and other information with respect to
the matters contemplated by this Agreement which IBM Credit has reasonably
requested shall have been satisfied.
4.2 Conditions to Each Advance. No Advance will be required to
be made or renewed by IBM Credit under this Agreement unless, on
and as of the date of such Advance, the following statements shall
be true to the satisfaction of IBM Credit:
(A) The representations and warranties contained in (i) this
Agreement or in any document, instrument or agreement executed in
connection herewith and (ii) the Receivables Purchase Agreement,
are true and correct in all material respects on and
as of the date of such Advance as though made on and as of
such date;
(B) No event has occurred and is continuing or after giving
effect to such Advance or the application of the proceeds thereof
would result in or would constitute a Default under this Agreement
or a Event of Bankruptcy under the Receivables Purchase Agreement;
(C) No event has occurred and is continuing which could reasonably be
expected to have a Material Adverse Effect under
this Agreement or an Event of Bankruptcy under the Receivables
Purchase Agreement;
(D) Both before and after giving effect to the making of
such Advance, no Shortfall Amount exists.
Except as Customer has otherwise disclosed to IBM Credit in writing prior
to each request, each request (or deemed request pursuant to
Section 2.3 (D)) for an Advance hereunder and the receipt (or deemed
receipt) by the Customer of the proceeds of any Advance hereunder shall be
deemed to be a representation and warranty by Customer that, as
of and on the date of such Advance, the statements set forth in (A)
through (D) above are true and correct. No such disclosures by Customer to
IBM Credit shall in any manner be deemed to satisfy the conditions
precedent to each Advance that are set forth in this Section 4.2.
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Section 5. REPRESENTATIONS AND WARRANTIES
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To induce IBM Credit to enter into this Agreement, Customer represents and
warrants to IBM Credit as follows:
5.1 Organization and Qualifications. Customer and each of its
Subsidiaries (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the power and authority to own its properties and
assets and to transact the businesses in which it
presently is engaged and (iii) is duly qualified and is authorized
to do business and is in good standing in each jurisdiction where
it presently is engaged in business and is required to be so qualified.
5.2 Rights in Collateral; Priority of Liens. Customer and each
of its Subsidiaries owns the property granted by it respectively
as Collateral to IBM Credit as Collateral Agent, free and clear of
any and all Liens in favor of third parties except for the Liens
otherwise permitted pursuant to Section 7.1. The Liens granted by
the Customer and each of its Subsidiaries pursuant to
this Agreement, the Guaranties and the Other Documents in the Collateral
constitute the valid and enforceable first, prior and
perfected Liens on the Collateral, except to the extent any Liens
that are prior to IBM Credit's Liens are (i) the subject of an
Intercreditor Agreement, (ii) Purchase Money Security Interests in
product of a brand that is not financed by IBM Credit or (iii)
Permitted Liens.
5.3 No Conflicts. The execution, delivery and performance by
Customer of this Agreement and each of the Other Documents (i) are
within its corporate power; (ii) are duly authorized by all necessary
corporate action; (iii) are not in contravention in any
material respect of any Requirement of Law or any
indenture, contract, lease, agreement, instrument or other commitment to
which it is a party or by which it or any of its properties are
bound; (iv) do not require the consent, registration or approval
of any Governmental Authority or any other Person (except such as
have been duly obtained, made or given, and are in full force and
effect); and (v) will not, except as contemplated herein, result
in the imposition of any Liens upon any of its properties.
5.4 Enforceability. This Agreement and all of the other documents executed
and delivered by the Customer in connection herewith are the legal, valid
and binding obligations of Customer, and are enforceable in accordance
with their terms, except as such enforceability may be limited by the
effect of any applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws affecting creditors'
rights generally or the general equitable principles relating thereto.
5.5 Locations of Offices, Records and Inventory. The address of
the principal place of business and chief executive office of
Customer is as set forth on Attachment B or on any notice provided
by Customer to IBM Credit pursuant to Section 6.7(C) of this Agreement.
The books and records of Customer, and all of its
chattel paper (other than the chattel paper delivered to the Collateral
Agent pursuant to the Collateral, Agency and Intercreditor Agreement)
and records of Accounts, are maintained exclusively at such location.
Except as set forth below, there is
no jurisdiction in which Customer has any assets, equipment or
inventory which is included in the calculation or the Borrowing
Base (except for vehicles and inventory in transit for processing)
other than those jurisdictions identified on Attachment B or on
any notice provided by Customer to IBM Credit pursuant to Section
6.7(C) of this Agreement. Customer and IBM agree that, with respect to the
immediately preceeding sentence, (i) when Customer
is in a Tier 1 Period, the Customer may omit locations from the
list on Attachment B so long as the aggregate value of the Collateral in
locations which are not listed in Attachment B is
less than $10,000,000, and the value of the Collateral in any
single location not listed is less than $5,000,000 and (ii) when
Customer is in a Tier 2 Period, the Customer may omit locations
from the list on Attachment B so long as the list of locations
includes all locations in which the value of the Collateral is
greater than $5,000,000 and that IBM Credit has Customer's permission to
file applicable UCC financing statements for such
locations included in this subsection 5.5(ii).
Attachment B, as amended from time to time by any notice provided
by Customer to IBM Credit in accordance with Section 6.7(C) of
this Agreement, also contains a complete list of the legal names
and addresses of each warehouse at which the Customer's inventory
is stored. None of the receipts received by Customer from any
warehouseman states that the goods covered thereby are to be delivered
to bearer or to the order of a named person or to a named person
and such named person's assigns.
5.6 Fictitious Business Names. Customer has not
used any corporate or fictitious name during the five (5) years preceding
the date of this Agreement, other than those listed on Attachment B.
5.7 Organization. To the best of Customer's knowledge and after
due diligence, all of the outstanding capital stock of Customer
has been validly issued, is fully paid and nonassessable.
5.8 No Judgments or Litigation. Except as set forth on Attachment B,
no judgments, orders, writs or decrees are outstanding against
Customer which could reasonably be expected to have a Material Adverse
Effect nor is there now pending or, to the
best of Customer's knowledge after due inquiry, threatened, any
litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against Customer which could reasonably be
expected to have a Material Adverse Effect.
5.9 No Defaults. The Customer is not in default under any term
of any indenture, contract, lease, agreement, instrument or other
commitment to which it is a party or by which it, or any of its
properties are bound that could reasonably be likely to have a
Material Adverse Effect. Customer has no knowledge of any
dispute regarding any such indenture, contract, lease,
agreement, instrument or other commitment where such default could reasonably
be expected to have a Material Adverse Effect. No Default or
Event of Default has occurred and is continuing.
5.10 Labor Matters. Except as set forth on any notice provided by
Customer to IBM Credit pursuant to Section 6.1(G)
of this Agreement, the Customer is not a party to any labor dispute where
such dispute could reasonably be expected to have a Material Adverse Effect.
There are no strikes or walkouts or labor controversies pending or
threatened against the Customer which could reasonably be expected to have
a Material Adverse Effect.
5.11 Compliance with Law. Customer has not violated or failed to
comply with any Requirement of Law or any requirement of any self
regulatory organization where such violation or failure to comply
could reasonably be expected to have a Material Adverse Effect.
5.12 ERISA. Each "employee benefit plan",
"employee pension benefit plan", "defined benefit plan", or "multi employer
benefit plan", which Customer has established, maintained,
or to which it is required to contribute (collectively, the
"Plans") is in compliance with all material applicable provisions of ERISA
and the Code and the rules and regulations thereunder
as well as the Plan's terms and conditions. There have been no
"prohibited transactions" and no "reportable event" within the last 60 months
with respect to any Plan where such event could reasonably be
likely to have a Material Adverse Effect. Customer has no "multi-
employer benefit plan". As used in this Agreement
the terms "employee benefit plan", "employee pension benefit plan", "defined
benefit plan", and "multi-employer benefit plan"
have the respective meanings assigned to them in Section 3 of ERISA and any
applicable rules and regulations thereunder. The Customer has not
incurred any "accumulated funding deficiency" within the meaning
of ERISA or incurred any liability to the Pension Benefit Guaranty
Corporation (the "PBGC") in connection with a Plan (other than for
premiums due in the ordinary course) where such deficiency or
liability could reasonably be likely to have a Material Adverse Effect.
5.13 Compliance with Environmental Laws. Except as otherwise
disclosed in Attachment B:
(A) The Customer has obtained all government approvals required with respect
to the operation of their businesses under any Environmental Law.
(B) any of the following for which such condition could
reasonably be expected to have a Material Adverse Effect, (i) the
Customer has not generated, transported or disposed of any Hazardous
Substance; (ii) the Customer is not currently generating, transporting
or disposing of any Hazardous Substance; (iii) the Customer has no knowledge
that (a) any of its real property (whether owned, leased, or
otherwise directly or indirectly controlled) has
been used for the disposal of or has been contaminated by any Hazardous
Substance, or (b) any of its business operations have contaminated lands or
waters of others with any Hazardous Substance; (iv) the Customer
and its respective assets are not subject to any Environmental
Liability and, to the best of the Customer's knowledge, any threatened
Environmental Liability; (v) the Customer has not received any
notice of or otherwise learned of any governmental
investigation evaluating whether any remedial action is necessary to
respond to a release or threatened release of any Hazardous Substance
for which the Customer may be liable; (vi) the Customer is not
in violation of any Environmental Law; (vii) there are no
proceedings or investigations pending against
Customer with respect to any violation or alleged
violation of any Environmental Law; provided however, that the parties
acknowledge that any generation, transportation, use, storage and
disposal of certain such Hazardous Substances in
Customer's or its Subsidiaries' business shall be excluded from
representations (i) and (ii) above, provided, further, that Customer
is at all times generating, transporting, utilizing, storing and
disposing such Hazardous Substances in accordance with all
applicable Environmental Laws and in a manner designed to minimize the risk
of any spill, contamination, release or discharge of Hazardous
Substances other than as authorized by Environmental Laws.
5.14 Intellectual Property. Customer possesses such assets, licenses,
patents, patent applications, copyrights, service marks,
trademarks, trade names and trade secrets and all rights and other
property relating thereto or arising therefrom ("Intellectual
Property") as are necessary to continue to conduct its present and
proposed business activities.
5.15 Licenses and Permits. Customer has obtained and holds in
full force and effect all franchises, licenses, leases, permits,
certificates, authorizations, qualifications, easements, rights of
way and other rights and approvals which are necessary for the
operation of its businesses as presently conducted. Customer is
not in violation of any material terms of any such franchise,
license, lease, permit, certificate, authorization, qualification,
easement, right of way, right or approval where such violation
could be reasonably likely to have a Material Adverse Effect.
5.16 Investment Company. The Customer is not (i) an investment
company or a company controlled by an investment company within
the meaning of the Investment Company Act of 1940, as amended,
(ii) a holding company or a subsidiary of a holding company, or an
Affiliate of a holding company or of a subsidiary of a holding
company, within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or (iii) subject to any other law which
purports to regulate or restrict its ability to borrow money or to
consummate the transactions contemplated by this Agreement or the
Other Documents or to perform its obligations hereunder or thereunder.
5.17 Taxes and Tax Returns. Customer has timely filed all federal, state,
and local tax returns, or extensions thereto, and
other reports which it is required by law to file, and has either
duly paid all taxes, fees and other governmental charges indicated
to be due on the basis of such reports and returns or pursuant to
any assessment received by the Customer, or made provision for the
payment thereof in accordance with GAAP. The charges and reserves
on the books of the Customer in respect of taxes or other governmental
charges are in accordance with GAAP. No tax liens
have been filed against Customer or any of its property which have
not been stayed or which have not been satisfied with seven (7)
days of such filing.
5.18 Status of Accounts. Each Account is based on an actual and
bona fide sale and delivery of goods or rendition of services to
customers, made by Customer, in the ordinary course of its business; the
goods and inventory being sold and the Accounts
created are its exclusive property and are not and shall not be
subject to any Lien (except for those Liens and interests contemplated under
the Receivables Purchase Agreement), consignment arrangement,
encumbrance, security interest or financing
statement whatsoever (other than Permitted Liens). The
Customer's customers have accepted goods or services and owe and
are obligated to pay the full amounts stated in
the invoices according to their terms subject to Customer's customer disputes
as in the normal course of business. Except as previously disclosed to
IBM Credit, there are no proceedings or actions known to Customer which are
pending or threatened against any Material Account Obligor (as defined in
Section 6.14(B) of this Agreement) of any of the Accounts included in the
calculation of the Borrowing Base which could reasonably be
expected to result in a Material Adverse Effect on the obligor's ability
to pay the full amounts due to Customer.
5.19 Affiliate/Subsidiary Transactions. Customer is not a party
to or bound by any agreement or arrangement (whether oral or written) to
which any Affiliate or Subsidiary of the Customer is a
party except (i) in the ordinary course of and pursuant to the
reasonable requirements of Customer's business and (ii) upon fair
and reasonable terms no less favorable to Customer than it could
obtain in a comparable arm's-length transaction with an unaffiliated Person.
5.20 Accuracy and Completeness of Information. All factual information
furnished by or on behalf of the Customer to IBM Credit or the Auditors
pursuant to this Agreement or any Other Agreement, or any transaction
contemplated hereby or thereby is or
will be true and accurate in all material respects on the date as
of which such information is dated or certified and not incomplete
by omitting to state any material fact necessary to make such
information not misleading in light of the circumstances under
which such information was provided.
5.21 Recording Taxes. All recording taxes, recording fees, filing
fees and other charges payable in connection with the
filing and recording of this Agreement have either been paid
in full by Customer or arrangements for the
payment of such amounts by Customer have been made
to the satisfaction of IBM Credit.
5.22 Indebtedness. Customer (i) has no Indebtedness,
other than Permitted Indebtedness; and (ii) has
not guaranteed the obligations of any other Person
(except as permitted by Section 7.4).
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Section 6. AFFIRMATIVE COVENANTS
- ---------------------------------
Until termination of this Agreement and the indefeasible payment
and satisfaction of all Obligations:
6.1 Financial and Other Information. Customer shall cause to be
furnished to IBM Credit the following information within the following time
periods:
(A) as soon as available and in any event within
ninety (90) days after the end of each fiscal year of
Customer (i) a copy of Customer's Form 10-K for that fiscal year; (ii)
a statement reasonably acceptable to IBM Credit which provides
expense, asset, liability and equity information concerning IFC,
as of yearend of such fiscal year; and (iii) a Compliance
Certificate signed by the President, Executive Vice President or Treasurer
of Customer, along with a schedule in form and substance
reasonably satisfactory to IBM Credit (it being understood that the form and
substance provided in Attachment C is satisfactory) of the calculations,
which includes the performance of IFC for such fiscal year, used
in determining, as of the end of such fiscal
year, whether Customer is in compliance with the
financial covenants set forth in Attachment A;
(B) as soon as available and in any event within fortyfive (45) days after
the end of each fiscal quarter of Customer (i) a copy of Customer's
Form 10-Q for such fiscal quarter; (ii) a statement reasonably acceptable to
IBM Credit which provides expense, asset, liability
and equity information concerning IFC, as of quarter-end of such fiscal
quarter; (iii) a Compliance Certificate signed by the
President, Executivew Vice President or Treasurer of Customer, along with a
schedule, in form and substance reasonably satisfactory to
IBM Credit (it being understood that the form and substance provided in
Attachment C is satisfactory), of the calculations, which
includes the performance of IFC for such fiscal quarter, used in
determining, as of the end of such fiscal quarter, whether Customer is in
compliance with the financial covenants set forth in Attachment A;
and (iv) a statement signed by such executive officer stating
the dollar value of the following intangibles: organizational
expenses, pre- paid expenses, deferred taxes, leasehold expenses,
franchise investments, licenses and rights in any
thereof, and other similar intangibles (collectively the "Additional
Intangibles");
(D) promptly after Customer obtains knowledge of (i) the
occurrence of a Default or Event of Default, or (ii) the existence
of any condition or event which would result in the Customer's
failure to satisfy the conditions precedent to Advances set forth
in Section 4, a certificate of the President,
Executive Vice President or Treasurer of Customer specifying the nature
thereof and the Customer's proposed response thereto, each in reasonable
detail;
(E) promptly after Customer obtains knowledge of (i) any
proceeding(s) being instituted or threatened to be instituted by
or against Customer in any federal, state, local or foreign court
or before any commission or other regulatory body (federal, state,
local or foreign)which, in any such case, could reasonably be
expected to have a Material Adverse Effect, or (ii) any actual or
prospective change, development or event which, in any such case,
has had or could reasonably be expected to have a Material Adverse
Effect, a certificate of the President, Executive Vice President
or Treasurer of Customer specifying the nature thereof and the
Customer's proposed response thereto, each in reasonable detail;
(F) promptly after Customer obtains knowledge that (i) any
order, judgment or decree in excess of $1,000,000 shall have been
entered against Customer or any of its properties or assets, or
(ii) it has received any notification of a material violation of
any Requirement of Law from any Governmental Authority, a certificate of the
President, Executive Vice President or Treasurer of Customer
specifying the nature thereof and the Customer's proposed response thereto,
each in reasonable detail;
(G) promptly after Customer learns of any material labor
dispute to which Customer may become a party, any
strikes or walkouts relating to any of its plants
or other facilities, and the expiration of any labor contract to which
Customer is a party or by which it is bound, a certificate of the
President, Executive Vice President or Treasurer of Customer specifying
the nature thereof and the Customer's proposed response thereto, each in
reasonable detail;
(H) within five (5) Business Days after request by IBM
Credit, any written certificates, schedules and reports together
with all supporting documents as IBM Credit may reasonably request
relating to the Collateral or the Customer's or any guarantor's
business affairs and financial condition;
(I) by the fifth (5th) day of each month, or as otherwise
agreed in writing, a Collateral Management Report as of a date no
earlier than the last day of the immediately preceding month;
(J) if an Event of Default has occurred and is continuing,
along with the Form 10-K and Form 10-Q set forth in Section 6.1(A)
and (B), the name, address and phone number of each of its account
debtors' primary contacts for each Account on the Accounts aging
report contained in its most recent Collateral Management Report; and
(K) within fifteen (15) days after Customer becomes aware
that the Additional Intangibles has increased more than thirty
(30) percent (the "Maximum Increase Level") in any one fiscal year
of Customer. When such event occurs, Tangible Net Worth will be
reduced for purposes of determining compliance with the financial
ratios for that fiscal year or fiscal quarter, depending on when
the Maximum Increase Level is exceeded, by the amount which the
Additional Intangibles for that fiscal year or fiscal quarter, as
applicable, exceeds the Maximum Increase Level. For purposes of
determining compliance with the financial ratio of Tangible New
Worth for any fiscal period, the Maximum Increase Level for a
fiscal year will be calculated using the lesser of the Maximum
Increase Level and the actual Additional Intangibles for the prior
fiscal year.
Each certificate, schedule and report provided by Customer to IBM Credit
shall be signed by an authorized officer of Customer, and which signature
shall be deemed a representation and warranty by
the Customer that the information contained in such certificate,
schedule or report is true and accurate in all material respects
on the date as of which such certificate, schedule or report is
made and does not omit to state a material fact necessary in order
to make the statements contained therein not misleading at such
time. Each Form 10-K and Form 10-Q delivered pursuant to this
Section 6.1 shall be prepared in accordance with GAAP applied
consistently throughout the periods reflected therein and with
prior periods except for such inconsistencies as noted therein.
6.2 Location of Collateral. The inventory, equipment and other
tangible Collateral shall be kept or sold at the addresses as set
forth on Attachment B or on any notice provided by Customer to IBM
Credit in accordance with Section 6.7(C). Such locations shall be
certified quarterly to IBM Credit substantially in the form of
Attachment G.
6.3 Changes in Customer. Customer shall provide 30 days prior
written notice to IBM Credit of any change in Customer's name,
chief executive office and principal place of business, organization, form
of ownership or corporate structure; provided,
however, that Customer's compliance with this covenant shall not
relieve it of any of its other obligations or any other provisions
under this Agreement or any Other Agreement limiting actions of
the type described in this Section.
6.4 Corporate Existence. Customer shall (A) maintain its corporate
existence, maintain in full force and effect all material licenses, bonds,
franchises, leases and qualifications to do business, and all contracts
and other rights necessary to the
profitable conduct of its business, (B) continue in, and limit its
operations to, the same general lines of business as presently
conducted by it unless otherwise permitted in writing by IBM Credit and (C)
comply with all material Requirements of Law.
6.5 ERISA. Customer shall promptly notify IBM Credit in writing
after it learns of the occurrence of any event which would constitute a
"reportable event" under ERISA or any regulations thereunder with respect
to any Plan, or that the PBGC has instituted or will institute proceedings
to terminate any Plan. Notwithstanding the foregoing, the Customer shall
have no obligation to notify IBM Credit as to any "reportable event" as to
which the 30-day notice requirement of Section 4043(b)
has been waived by the PBGC, until such time as such Customer is required
to notify the PBGC of such reportable event. Such notification
shall include a certificate of the President,
Executive Vice President or Treasurer of Customer setting forth details as to
such "reportable event" and the action which Customer proposes to
take with respect thereto, together with a copy of any notice of
such "reportable event" which may be required to be filed with the
PBGC, or any notice delivered by the PBGC evidencing its intent to
institute such proceedings. Upon request of IBM Credit, Customer
shall furnish, or cause the plan administrator to furnish, to IBM
Credit the most recently filed annual report for each Plan.
6.6 Environmental Matters. (A) Customer and any other Person
under Customer's control (including, without limitation, agents
and Affiliates under such control) shall (i) comply with all Environmental
Laws in all material respects, and (ii) undertake to
use commercially reasonable efforts to prevent any
unlawful release of any Hazardous Substance by Customer or such Person
into, upon, over or under any property now or hereinafter owned,
leased or otherwise controlled (directly or indirectly) by Customer.
(B) Customer shall notify IBM Credit, promptly upon its
obtaining knowledge of (i) any non-routine
proceeding or investigation by any Governmental Authority with respect to the
presence of any Hazardous Substances on or in any property now or
hereinafter owned, leased or otherwise controlled (directly or
indirectly) by Customer, (ii) all claims made or threatened by any
Person or Governmental Authority against Customer
or any of Customer's assets relating to any loss or injury resulting from
any Hazardous Substance, (iii) Customer's discovery of evidence of
unlawful disposal of or environmental contamination by any Hazardous
Substance on any property now or hereinafter owned,
leased or otherwise controlled (directly or indirectly) by Customer, and
(iv) any occurrence or condition which could constitute a violation of
any Environmental Law.
6.7 Collateral Books and Records/Collateral Audit. (A) Customer
agrees to maintain books and records pertaining to the Collateral
in such detail, form and scope as is consistent with good business
practice, and agrees that such books and records will reflect the
Collateral Agent's interest in the Accounts.
(B) Customer agrees that IBM Credit or its agents may enter
upon the premises of Customer at any time and from time to time,
during normal business hours and upon five (5) days notice under
the circumstances, for the purposes of (i) inspecting the Collateral, (ii)
inspecting and/or copying (at Customer's expense)
any and all records pertaining thereto, (iii) discussing the affairs,
finances and business of Customer with any officers and
employees of Customer or with the Auditors and (iv) verifying
Eligible Accounts and other Collateral. Except for after the
occurrence and during an Event of Default, such activities specified in
(i), (ii), (iii) and (iv) in the immediately preceding sentence will be at
no additional charge by IBM Credit to the Customer. Customer also agrees to
provide IBM Credit with such reasonable information and documentation that
IBM Credit deems necessary to conduct the foregoing activities, including,
without limitation, reasonably requested samplings of purchase
orders, invoices and evidences of delivery or other performance.
Upon the occurrence and during the continuance of an Event of
Default which has not been waived by IBM Credit in writing, IBM
Credit may conduct any of the foregoing activities in any manner
that IBM Credit deems reasonably necessary.
(C) Customer shall give IBM Credit as Collateral Agent
thirty (30) days prior written notice of any change in the location of any
Collateral, the location of its books and records or in the location of its
chief executive office or place of business from the locations specified
in Attachment B, and will execute in advance of such change and cause to be
filed and/or delivered to IBM Credit as Collateral Agent any
financing statements, landlord or other lien waivers, or other documents
reasonably required by IBM Credit, all in form and substance reasonably
satisfactory to IBM Credit as Collateral Agent.
(D) Customer agrees to advise IBM Credit promptly, in reasonably sufficient
detail, of any substantial change relating to the type, quantity or quality
of the Collateral, or any event which could reasonably be expected to have a
Material Adverse Effect on the value of the Collateral or on the
security interests granted to IBM Credit therein.
6.8 Insurance; Casualty Loss. Customer will maintain with financially
sound and reputable insurance companies: (i) insurance on its properties,
(ii) public liability insurance against claims
for personal injury or death as a result of the
use of any products sold by it and (iii) insurance coverage against other
business risks, in each case, in at least such amounts and against
at least such risks as are usually and prudently insured against
in the same general geographical area by companies of established
repute engaged in the same or a similar business. Customer will
furnish to IBM Credit, upon its written request, the insurance
certificates with respect to such insurance. In addition, all
Policies so maintained are to name IBM Credit as an additional
insured as its interest may appear.
6.9 Taxes. Customer agrees to pay, when due, all taxes lawfully
levied or assessed against Customer or any of the
Collateral before any penalty or interest accrues thereon unless such taxes
are being contested, in good faith, by appropriate proceedings
promptly instituted and diligently conducted and an adequate reserve or
other appropriate provisions have been made therefor as
required in order to be in conformity with GAAP and an adverse
determination in such proceedings could not reasonably be expected
to have a Material Adverse Effect.
6.10 Compliance With Laws. Customer agrees to comply in all material
respects with all Requirements of Law applicable to the
Collateral or any part thereof, or to the operation of its business.
6.11 Fiscal Year/Fiscal Quarter. Customer agrees to maintain its
fiscal year as a year ending on the last Saturday of
December of each calendar year and each fiscal quarter for the
following fiscal year to be thirteen calendar
weeks, each first fiscal quarter of a fiscal year
starting with the Sunday immediately
following last day of the just ended fiscal year, unless Customer
provides IBM Credit at least thirty (30) days prior written notice
of any change thereof.
6.12 Intellectual Property. Customer shall do and cause to be
done all things necessary to preserve and keep in full force and
effect all registrations of Intellectual Property which the failure to do
or cause to be done could reasonably be expected to have a Material Adverse
Effect.
6.13 Maintenance of Property. Customer shall maintain all of its
material properties (business and otherwise) in good condition and
repair (ordinary wear and tear excepted) and pay and discharge all
costs of repair and maintenance thereof and all rental and mortgage
payments and related charges pertaining thereto and not
commit or permit any waste with respect to any of its material properties.
6.14 Collateral. Customer shall:
(A) if from time to time reasonably required by IBM Credit,
provide IBM Credit with access to copies of all invoices, delivery
evidences and other such documents relating to each Account;
(B) promptly upon Customer's obtaining knowledge thereof,
furnish to and inform IBM Credit of all material
adverse information relating to the financial condition of any Account
obligor whose outstanding obligations to Customer constitute two
percent (2%) or more of the Accounts at such time (a "Material
Account Obligor");
(C) promptly upon Customer's learning thereof, notify IBM
Credit in writing of any event which would cause any obligation of
a Material Account Obligor to become an Ineligible Account;
(D) keep all goods rejected or returned by any account
debtor and all goods repossessed or stopped in transit by Customer
from any account debtor segregated from other property of Customer,
holding the same in trust for the Collateral Agent until
Customer applies a credit against such account
debtor's outstanding obligations to Customer or sells such goods in the
ordinary course of business, whichever occurs earlier;
(E) use commercially reasonable efforts to collect all
Retained Accounts owed;
(F) promptly notify IBM Credit of any loss, theft or
destruction of or damage to any of the Collateral where such loss,
theft, destruction or damage could reasonably be expected to have
a Material Adverse Effect. Customer shall diligently file and
prosecute its claim for any award or payment in connection with
any such loss, theft, destruction of or damage to Collateral.
Customer shall, upon demand of IBM Credit, make,
execute and deliver any assignments and other instruments sufficient for the
purpose of assigning any such award or payment to the Collateral
Agent, free of any encumbrances of any kind whatsoever;
(G) consistent with reasonable commercial practice, observe
and perform all matters and things necessary or expedient to be
observed or performed under or by virtue of any lease, license,
concession or franchise forming part of the Collateral in order to
preserve, protect and maintain all the material rights of the
Collateral Agent thereunder;
(H) consistent with reasonable commercial practice, maintain, use and
operate the Collateral and carry on and conduct
its business in a proper and efficient manner so as to preserve
and protect the Collateral and the earnings, incomes, rents, issues and
profits thereof; and
(I) at any time and from time to time, upon the reasonable
request of IBM Credit, and at the sole expense of
Customer, Customer will promptly and duly execute and deliver such further
instruments and documents and take such further action as IBM
Credit may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform
Commercial Code in effect in any jurisdiction with respect
to the security interests granted to the Collateral Agent and the
payment of any and all recording taxes and filing fees in connection therewith.
6.15 Subsidiaries. IBM Credit may require that any Subsidiaries,
other than IFC and Boston Computer Exchange
Corporation, of Customer become parties to this Agreement or any other
agreement executed in connection with this Agreement as
guarantors or sureties. Customer will comply, and cause all Subsidiaries of
Customer to comply with Sections 6 and 7 of this Agreement, as if
such sections applied directly to such Subsidiaries.
6.16 Report of Material Event. Within five (5) days of Customer
obtaining knowledge thereof, Customer agrees to disclose any event
which could reasonably be likely to have a material effect on the
financial condition or the results of operations of Customer.
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Section 7. NEGATIVE COVENANTS
- ------------------------------
Until termination of this Agreement and the indefeasible payment
and satisfaction of all Obligations due hereunder:
7.1 Liens. The Customer will not, directly or indirectly mortgage, assign,
pledge, transfer, create, incur, assume, permit
to exist or otherwise permit any Lien or judgment to exist on any
of its property, assets, revenues or goods, whether real, personal
or mixed, whether now owned or hereafter acquired, except for
Permitted Liens. It is understood that a Person who has a Permitted Lien on
Customer's assets may enter into a participation
agreement, relating to such Permitted Lien, with another Person.
As part of Permitted Liens, Customer may, subsequent to the effective date
of this Agreement, allow a thirdparty credit facility, which will be
represented by one entity in all negotiations and documentation with IBM
Credit, to extend secured financing to Customer, provided that, for the
period that this Agreement is in effect, such secured financing is
no greater than the lessor of (1) $40,000,000 and (2) an amount
equal to the then agregate sum of the PAE Advances, OVN Advances and
FRO Advances. IBM Credit agrees to negotiate an intercreditor
agreement, reasonably acceptable to IBM Credit, which will provide for
pari passu distribution of proceeds from Customer assets in which IBM
Credit has a security interest provided that each
party has perfected its security interest in such
assets. Such intercreditor will not include any assets or interest acquired
by IBM Credit under the Receivables Purchase Agreement.
7.2 Disposition of Assets. The Customer will not, directly or
indirectly, sell, lease, assign, transfer or otherwise dispose of
any assets other than (i) sales of receivables and related assets
only to IFC, pursuant to the Receivables Purchase Agreement, (ii)
sales of inventory in the ordinary course of business and short
term rental of inventory as demonstrations in amounts not material
to Customer, and (iii) voluntary dispositions of individual assets
or business units, and obsolete or worn out property
in the ordinary course of business, provided, that the aggregate book
value of all such assets and property so sold or disposed of under
this section 8.2 (iii) in any fiscal year shall not exceed 5% of
the consolidated assets of the Customer as of the beginning of such fiscal
year. Off balance sheet financing through sales of any assets, other than
those permitted in this section 8.2(i) is not permitted without the written
consent of IBM Credit.
7.3 Corporate Changes. Provided Customer is in a Tier 2 Period
or if any of the following activities would reasonably be likely
to cause Customer to move from a Tier 1 Period to a Tier 2 Period,
the Customer will not, without the prior written consent of IBM
Credit, directly or indirectly, merge, consolidate, liquidate,
dissolve or enter into or engage in any operation or activity
materially different from that presently being conducted by Customer.
IBM Credit's consent will not be unreasonably withheld
and IBM Credit's decision will be based solely on IBM Credit's
evaluation as to (1) how such merger, consolidation, liquidation
or dissolution will affect the financial condition of the Customer
as it relates to this Agreement or (2) how such change in operation or
activity affects the financing contemplated by this
agreement. If Customer is in a Tier 1 Period and the above name
activities in this Section 7.3 would not reasonably be likely to
move the Customer into a Tier 2 Period, Customer will notify IBM
Credit at least five (5) days in advance of any such activities.
7.4 Guaranties. The Customer will not exceed, in the aggregate,
the maximum guaranty amount as specified in Attachment A ("Maximum
Guaranty Amount") by, directly or indirectly,
assuming, guarantying, endorsing, or otherwise becoming liable upon the
obligations of any other Person, except (i) by the endorsement of
negotiable instruments for deposit or collection
or similar transactions in the ordinary course of
business, (ii) by the giving of indemnities in connection with the sale of
inventory or other asset dispositions permitted hereunder, and
(iii) for guaranties in favor of IBM Credit.
7.5 Restricted Payments. If in a Tier 2 Period or if the event
that any of the following actions could reasonably be expected to
cause Customer to move from a Tier 1 Period to a Tier 2 period,
the Customer will not, directly or indirectly, without IBM Credit's prior
written consent: (i) declare or pay any dividend
(other than dividends payable solely in common stock of Customer)
on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption,
defeasance, retirement or other acquisition of, any shares of any
class of capital stock of Customer or any warrants, options or
rights to purchase any such capital stock, whether
now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of Customer; or (ii) make any optional
payment or prepayment on or redemption (including,
without limitation, by making payments to a sinking or analogous fund) or
repurchase of any Indebtedness (other than the Obligations).
7.6 Investments. If the Customer is in a Tier 2 Period, or if
such action would cause Customer to enter a Tier 2
Period, Customer will not, directly or indirectly, without IBM Credit's
prior written consent, make, maintain or acquire any Investment in
any Person other than:
(A) interest bearing deposit accounts (including
certificates of deposit) which are insured by the Federal Deposit
Insurance Corporation ("FDIC") or a similar federal insurance program;
(B) direct obligations of the government of the United
States of America or any agency or instrumentality thereof or
obligations guaranteed as to principal and interest by the United
States of America or any agency thereof;
(C) stock or obligations issued to Customer in settlement of
claims against others by reason of an event of bankruptcy or a
composition or the readjustment of debt or a reorganization of any
debtor of Customer; and
(D) commercial paper of any corporation organized under the
laws of any State of the United States or any bank organized or
licensed to conduct a banking business under the
laws of the United States or any State thereof having the short term highest
rating then given by Moody's Investor's Services, Inc. or Standard
& Poor's Corporation.
7.7 Affiliate/Subsidiary Transactions. The Customer will not,
directly or indirectly, enter into any transaction
with any Affiliate or Subsidiary, including,
without limitation, the purchase, sale or exchange of property or the
rendering of any service to any Affiliate or Subsidiary of Customer
except in the ordinary course of business and pursuant to the
reasonable requirements of Customer's business upon fair and reasonable terms
no less favorable to Customer than could be obtained in a comparable
arm's-length transaction with an unaffiliated Person.
7.8. ERISA. The Customer will not (A) terminate any Plan so as
to incur a material liability to the PBGC, (B)
permit any "prohibited transaction" involving any Plan (other than a "multi-
employer benefit plan") which would subject the Customer to a
material tax or penalty on "prohibited transactions" under the
Code or ERISA, (C) fail to pay to any Plan any contribution which
they are obligated to pay under the terms of such Plan, if such
failure would result in a material "accumulated funding deficiency",
whether or not waived, (D) allow or suffer to exist
any occurrence and during the continuance of a "reportable event"
or any other event or condition, which presents a material risk of
termination by the PBGC of any Plan (other than a "multi employer
benefit plan"), or (E) fail to notify IBM Credit as required in
Section 6.5. As used in this Agreement, the terms "accumulated
funding deficiency" and "reportable event" shall
have the respective meanings assigned to them in
ERISA, and the term "prohibited transaction" shall have the meaning
assigned to it in the Code and ERISA. For purposes of this Section
7.8, the terms material liability, tax, penalty, accumulated
funding deficiency and risk of termination shall mean a liability,
tax, penalty, accumulated funding deficiency or risk of
termination which could reasonably be expected to have a Material Adverse
Effect.
7.9 Additional Negative Pledges. Customer will not, directly or
indirectly, create or otherwise cause or permit to exist or become
effective any contractual obligation which may restrict or inhibit
the Collateral Agent's rights or ability to sell or otherwise
dispose of the Collateral or any part thereof after the occurrence
and during the continuance of an Event of Default.
7.10 Storage of Collateral with Bailees and Warehousemen. Collateral shall
not be stored with a bailee, warehouseman or
similar party without the prior written consent of IBM Credit
unless Customer will, concurrently with the
delivery of such Collateral to such party, cause such party to issue and
deliver to the Collateral Agent, warehouse receipts in the name of IBM Credit
evidencing the storage of such Collateral.
7.11 Use of Proceeds. The Customer shall not use any portion of
the proceeds of any Advances other than to acquire Products from
Authorized Suppliers, for its accounts receivable
financing requirements and for its general corporate purposes.
7.12 Retained Accounts. Provided that there shall be Retained
Accounts, the Customer shall not permit or agree to any extension,
compromise or settlement or make any change or modification of any
kind or nature with respect to any Retained Account, including any
of the terms relating thereto, which would affect the Collateral
Agent's ability to collect payment on any Retained Account in
whole or in part, except for such extensions,
compromises or settlements expressly allowed to be made by Customer herewith,
provided, however, that the aggregate amount of such extensions,
compromises or settlements does not exceed five percent (5%) of
the Customer's Retained Accounts at any time.
7.13 Indebtedness. The Customer will not create, incur, assume or
permit to exist any Indebtedness, except for Permitted Indebtedness.
7.14 Loans. The Customer will not make any loans,
advances, contributions or payments of money or goods to any Subsidiary,
Affiliate or parent corporation or to any officer, director or
stockholder of Customer or of any such corporation (except for
compensation for personal services actually rendered), other than
in the normal course of business, except for transactions expressly
authorized in this Agreement. The restriction in this Section 7.14 on loans
to officers and employees of Customer will
not apply if the aggregate amount of such loans does not exceed $1,000,000.
- -------------------
Section 8. DEFAULT
- -------------------
8.1 Event of Default. Any one or more of the following events
shall constitute an Event of Default by the Customer under this
Agreement and the Other Documents:
(A) The failure to make timely payment of the Obligations or
any part thereof when due and payable provided that there will be
a cure period of five (5) days for failure by Customer to pay on
such due date;
(B) Customer fails to comply with or observe any term,
covenant or agreement contained in this Agreement
when such failure could reasonably be expected to cause a Material Adverse
Effect, provided that there will be a cure period of forty five
(45) days for failure by Customer to meet the financial covenants
specified in Section III of Attachment A;
(C) Any representation, warranty, statement, report or certificate made or
delivered by or on behalf of Customer or any
of its officers, employees or agents or by or on behalf of any
Guarantor to IBM Credit was false in any material respect at the
time when made or deemed made;
(D) Customer, IFC or any other Subsidiary or any Guarantor
shall generally not pay its debts as such debts become
due, become or otherwise declare itself insolvent, file a
voluntary petition for bankruptcy protection, have filed against it
any involuntary bankruptcy petition, cease to do business as a
going concern, make any assignment for the benefit of creditors, or a
custodian, receiver, trustee, liquidator,
administrator or person with similar powers shall
be appointed for Customer where the sum total
of such assets represent at least five percent (5%) of the total
assets of Customer, any Subsidiary or any Guarantor or any of its
respective properties or have any of its respective properties seized or
attached where the sum total of such properties represent al least
five percent (5%) of the total assets of Customer, or take any action to
authorize, or for the purpose of effectuating, the foregoing, provided,
however, that Customer, any Subsidiary except IFC or any
Guarantor shall have a period of forty-five (45) days within which to
discharge any involuntary petition for bankruptcy or similar proceeding;
(E) The use of any funds borrowed from IBM Credit under this
Agreement for any purpose other than as provided in this Agreement;
(F) The entry of any judgment against Customer or
any Guarantor in an amount in excess of $1,000,000 and such judgment
is not satisfied, dismissed, stayed or superseded by bond within
thirty (30) days after the day of entry thereof (and in the event
of a stay or supersedeas bond, such judgment is not discharged
within thirty (30) days after termination of any such stay or
bond) or such judgment is not fully covered by insurance as to
which the insurance company has acknowledged its obligation to pay
such judgment in full;
(G) The dissolution or liquidation of Customer,
IFC or any Guarantor, or if the directors or stockholders of the Customer,
IFC or any Guarantor shall take any action to
dissolve or liquidate said Customer, IFC or any Guarantor except that a
dissolution into Customer or any Guarantor is permitted;
(H) Any "going concern" or like qualification or exception,
or qualification arising out of the scope of an
audit by an Auditor of his opinion relative to any
Financial Statement delivered to IBM Credit under
this Agreement;
(I) There issues a warrant of distress for any rent or taxes
with respect to any premises occupied by Customer in or upon which
the Collateral which is being used to establish the Borrowing
Base, or any part thereof, may at any time be situated and such
warrant shall continue for a period of ten (10) Business Days from
the date such warrant is issued unless IBM Credit has waived this
provision for such premises (it being understood that (i) if Customer is in
a Tier 1 Period, the aggregate value of such warrants described in this
subsection 8.1(I) must be greater than
$10,000,000 and (ii) if Customer is in a Tier 2
Period, the aggregate value of such warrants must be greater than $10,000,000
or any single warrant must be greater than
$5,000,000);
(J) Customer suspends business;
(K) The occurrence of any event or condition which enables
the holder of any Indebtedness arising in one or more related or
unrelated transactions, in aggregate principal amount exceeding
$1,000,000 to accelerate the maturity thereof which either (i) is
an event or condition shall have continued unremedied, uncured or
unwaived for a period of 45 days after the holder
of such Indebtedness has knowledge thereof, or (ii) is the failure of
Customer to pay when due any such Indebtedness;
(L) Any guaranty of any or all of the Customer's Obligations
executed by any guarantor in favor of IBM Credit, shall at any
time for any reason cease to be in full force and effect or shall
be declared to be null and void by a court of competent jurisdiction or the
validity or enforceability thereof shall be
contested or denied by any such guarantor, or any such guarantor
shall deny that it has any further liability or
obligation thereunder or any such guarantor shall fail to comply with or
observe any of the terms, provisions or conditions contained in
any such guaranty;
(M) Customer is in default under the material terms of any of
the Other Documents after the expiration of any applicable cure
periods;
(N) There shall occur a "reportable event" with
respect to any Plan, or any Plan shall be subject to termination proceedings
(whether voluntary or involuntary) and there shall result from
such "reportable event" or termination proceedings a liability of
Customer to the PBGC which in the reasonable opinion of IBM Credit
will have a Material Adverse Effect;
(O) Any "person" (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) acquires a beneficial
interest in 50% or more of the Voting Stock of Customer without
the approval of Customer's Board of Directors or
when such acquisition could reasonably be expected to cause a Material
Adverse Effect; or
(P) The occurrence of an event of bankruptcy.
8.2 Acceleration. Upon the occurrence and during the continuance
of an Event of Default which has not been waived in writing by IBM
Credit, IBM Credit may, in its sole discretion, take any or all of
the following actions, without prejudice to any other rights it
may have at law or under this Agreement to enforce its claims
against the Customer: (a) declare all Obligations
to be immediately due and payable (except with respect to any Event of
Default set forth in Section 8.1(E) hereof, in which case all
Obligations shall automatically become immediately due and payable
without the necessity of any notice or other
demand) without presentment, demand, protest or any other action or
obligation of IBM Credit; and
(b) immediately terminate the Credit Line hereunder.
8.3 Remedies. Upon the occurrence and during the continuance of
any Event of Default which has not been waived in writing by IBM
Credit, IBM Credit may exercise all of its rights and remedies.
8.4 Waiver. Customer waives to the extent
permitted by applicable law all rights of set-off it may have against IBM
Credit. Customer further waives to the extent permitted by applicable law
presentment, demand and protest, and notices of nonpayment, non-performance,
any right of contribution, dishonor, and any other demands, and notices
required by law.
- -------------------------
Section 9. MISCELLANEOUS
- -------------------------
9.1 Term; Termination. (A) This Agreement shall remain in
force until the earlier of (i) the Termination Date,
(ii) the date specified in a written notice by the Customer that they
intend to terminate this Agreement which date shall be no
less than 90 days following the receipt by IBM Credit of such
written notice, and (iii) termination by IBM Credit after the
occurrence and during the continuance of an Event of Default. Upon the
date that this Agreement is terminated, all of Customer's
Obligations shall be immediately due and payable in their entirety,
even if they are not yet due under their terms.
(B) Until the indefeasible payment in full of all
of Customer's Obligations, no termination of this Agreement or any of
the Other Documents shall in any way affect or
impair the Customer's Obligations to IBM Credit including,
without limitation, any transaction or event
occurring prior to such termination, and IBM
Credit's security interest in the Collateral.
9.2 Indemnification. The Customer hereby agrees to indemnify and
hold harmless IBM Credit and each of its officers, directors,
agents and assigns (collectively, the "Indemnified
Persons") against all losses, claims, damages, liabilities or other expenses
(including reasonable attorneys' fees and court
costs now or hereinafter arising from the enforcement of this Agreement, the
"Losses") to which any of them may become subject insofar as such
Losses arise out of or are based upon any event, circumstance or
condition (a) occurring or existing on or before the date of this
Agreement relating to any financing arrangements IBM Credit may
from time to time have with (i) Customer, (ii) any Person that
shall be acquired by Customer or (iii) any Person that Customer
may acquire all or substantially all of the assets of, or (b)
directly or indirectly, relating to the execution, delivery or
performance of this Agreement or the consummation
of the transactions contemplated hereby or thereby
or to any of the Collateral or to any act or omission of the Customer in
connection therewith. Notwithstanding the foregoing, the
Customer shall not be obligated to indemnify IBM Credit for any
Losses incurred by IBM Credit which are a result of IBM Credit's
gross negligence or willful misconduct. The indemnity provided herein
shall survive the termination of this Agreement.
9.3 Additional Obligations. IBM Credit, without
waiving or releasing any Obligation or Default of the Customer, may perform
any Obligations of the Customer that the Customer shall fail or
refuse to perform and IBM Credit may, at any time or times hereafter, but
shall be under no obligation so to do, pay, acquire
or accept any assignment of any security interest,
lien, encumbrance or claim against the Collateral
asserted by any person. All sums paid by IBM Credit in performing in
satisfaction or on account of the foregoing and any expenses,
including reasonable attorney's fees, court costs,
and other charges relating thereto, shall be
payable on demand.
9.4 LIMITATION OF LIABILITY. NEITHER IBM CREDIT NOR ANY OTHER
INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO ANY
SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY CUSTOMER IN
CONNECTION WITH THIS AGREEMENT, ANY OTHER AGREEMENT OR ANY CLAIMS
IN ANY MANNER RELATED THERETO. NOR SHALL IBM CREDIT OR ANY OTHER
INDEMNIFIED PERSON HAVE ANY LIABILITY TO CUSTOMER OR ANY OTHER
PERSON FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY IT OR THEM
HEREUNDER, EXCEPT FOR ITS OR THEIR OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
9.5 Alteration/Waiver. This Agreement and the Other Documents
may not be altered or amended except by an agreement in writing
signed by the Customer and by IBM Credit. No delay or omission of
IBM Credit to exercise any right or remedy hereunder, whether
before or after the occurrence of any Event of Default, shall
impair any such right or remedy or shall operate
as a waiver thereof or as a waiver of any such Event of Default. In the
event that IBM Credit at any time or from time to time
dispenses with any one or more of the requirements specified in
this Agreement or any of the Other Documents, such dispensation
may be revoked by IBM Credit at any time and shall not be deemed to
constitute a waiver of any such requirement subsequent thereto.
IBM Credit's failure at any time or times to require strict
compliance and performance by the Customer of any undertakings,
agreements, covenants, warranties and representations of this Agreement or
any Other Document shall not waive, affect or diminish any right of
IBM Credit thereafter to demand strict compliance
and performance thereof. Any waiver by IBM Credit of
any Default by the Customer under this Agreement or any of the
Other Documents shall not waive or affect any other Default by the
Customer under this Agreement or any of the Other
Documents, whether such Default is prior or subsequent to such other Default
and whether of the same or a different type. None
of the undertakings, agreements, warranties,
covenants, and representations of the Customer contained in this Agreement
or the Other Documents and no Default by the Customer shall be deemed
waived by IBM Credit unless such waiver is in writing signed by an
authorized representative of IBM Credit.
9.6 Severability. If any provision of this Agreement or the
Other Documents or the application thereof to any
Person or circumstance is held invalid or unenforceable, the remainder of
this Agreement and the Other Documents and the application of such
provision to other Persons or circumstances will not be affected
thereby, the provisions of this Agreement and the Other Documents
being severable in any such instance.
9.7 One Loan. All Advances heretofore, now or at any time or
times hereafter made by IBM Credit to the Customer under this
Agreement or the Other Documents shall constitute one loan secured
by security interests in the Collateral granted to the Collateral
Agent now or from time to time.
9.8 No Merger or Novations. (A) Notwithstanding anything contained in
any document to the contrary, it is understood and
agreed by the Customer and IBM Credit that the claims of IBM Credit
arising hereunder and existing as of the date hereof constitute
continuing claims arising out of the Obligations of
Customer under the Financing Agreement and any Other Document
Customer acknowledges and agrees that such Obligations outstanding
as of the date hereof have not been satisfied or discharged and
that this Agreement is not intended to effect a novation of the
Customer's Obligations under the Financing Agreement or any Other
Document.
(B) Neither the obtaining of any judgment nor the exercise
of any power of seizure or sale shall operate to extinguish the
Obligations of the Customer to IBM Credit secured
by this Agreement and shall not operate as a merger of any covenant in
this Agreement, and the acceptance of any payment or alternate
security shall not constitute or create a novation
and the obtaining of a judgment or judgments under
a covenant herein contained shall not operate as a merger of that covenant
or affect IBM Credit's rights under this Agreement.
9.9 Paragraph Titles. The Section titles used in this Agreement
and the Other Documents are for convenience only and do not define
or limit the contents of any Section.
9.10 Binding Effect; Assignment. This Agreement and the Other
Documents shall be binding upon and inure to the benefit of IBM
Credit and the Customer and their respective successors and assigns;
provided, that the Customer shall have no right to assign
this Agreement or any of the Other Documents without the prior
written consent of IBM Credit, which consent will
not be unreasonably withheld. IBM Credit shall have no right to assign
or grant a participation in this Agreement or any of the Other
Documents, other than an assignment in connection
with a securitization of IBM Credit's assets, without the
prior written consent of Customer, which consent will not be
unreasonably withheld.
9.11 Notices. Except as otherwise expressly provided in this
Agreement, any notice required or desired to be served, given or
delivered hereunder shall be in writing, and shall be deemed to
have been validly served, given or delivered (A) upon receipt if
deposited in the United States mails, first class
mail, with proper postage prepaid, (B) upon
receipt of confirmation or answerback if sent by
telecopy, or other similar facsimile transmission,
(C) one Business Day after deposit with a
reputable overnight courier with all charges prepaid, or (D) when delivered,
if hand-delivered by messenger, all of which shall be properly
addressed to the party to be notified and sent to the address or
number indicated as follows:
(i) If to IBM Credit at:
IBM Credit Corporation
2707 W. Butterfield Rd.
Oak Brook, IL 60521
Attention: Remarketer Finance Center
Manager Telecopy: (708) 573-7560
(ii) If to Customer at:
InaCom Corp.
10810 Farnam Drive
Omaha, Nebraska 68154
Attention: Treasurer
Telecopy: (402) 392-3619
or to such other address or number as each party designates to the
other in the manner prescribed herein.
9.12 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto were upon the same instrument.
9.13 ATTACHMENT A MODIFICATIONS. IBM Credit may
modify the Collateral Insurance Amount set forth in Attachment A from time to
time by providing Customer with a new Attachment A. Any such new
Attachment A shall be effective as of the date specified in the
new Attachment A.
9.14 SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW. TO
INDUCE IBM CREDIT TO ACCEPT THIS AGREEMENT AND THE
OTHER DOCUMENTS, THE CUSTOMER HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND ANY OTHER AGREEMENT, OR
FOR THE RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS
OF THE STATE OF NEW YORK AND ANY FEDERAL DISTRICT COURT IN NEW YORK.
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING
MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREINAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN
ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME.
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY
BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED
OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL),
POSTAGE PREPAID, TO CUSTOMER AT ITS ADDRESS SET FORTH IN SECTION
9.11 OR AT SUCH OTHER ADDRESS OF WHICH IBM CREDIT SHALL HAVE BEEN
NOTIFIED PURSUANT THERETO;
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
(E) AGREES THAT THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS (WITHOUT GIVING
EFFECT TO CONFLICT OF LAW PROVISIONS) OF THE STATE OF NEW YORK.
9.15 JURY TRIAL WAIVER. EACH OF IBM CREDIT AND
THE CUSTOMER HEREBY IRREVOCABLY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
(INCLUDING ANY COUNTERCLAIM) OF ANY TYPE IN
WHICH IBM CREDIT AND THE CUSTOMER ARE PARTIES AS TO ALL MATTERS
ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
AGREEMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT
EXECUTED IN CONNECTION HEREWITH.
IN WITNESS WHEREOF, the Customer has read this entire Agreement,
and has caused its authorized representatives to execute this
Agreement and has caused its corporate seal to be affixed hereto
as of the date first written above.
INACOM CORP.
By: Gary Goldsberry
Title: Treasurer
ACCEPTED this 29th day of June, 1995,
IBM CREDIT CORPORATION
By: Donald E. Diedo
Title: Remarketer Financing Center Manager
INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT
Dated June 29, 1995
ATTACHMENT A
Effective Date of Attachment A: June 29, 1995
Customer: InaCom Corp.
I. Fees, Rates and Repayment Terms:
--------------------------------
(A) Credit Line: $350,000,000.
(B) Borrowing Base: (see Exhibit A to this Attachment A for example)
(i) 80% of the amount of the Customer's Retained Eligible Accounts
as of the date of determination as reflected in the Customer's most
recent Collateral Management Report.
(ii) 80% of the amount of the Customer's Eligible Accounts as of the
date of determination that have been sold to IFC as reflected in the
Customer's most recent Collateral Management Report.
(iii) 100% of the Customer's inventory in the Customer's possession as
of the date of determination as reflected in the Customer's most recent
Collateral Management Report constituting Products (other than service
parts) financed through a Product Advance by IBM Credit. The value to be
assigned to such inventory shall be based upon the Authorized Supplier's
invoice price to Customer for Financed Products net of all applicable
price reduction credits.
(iv) [*]
(v) [*]
Note: Subtracted from the sum of (i), (ii), (iii), (iv), and (v)
will be (a) the amount of Clipper Outstandings and (b) the
amount required to be set aside by IFC as the "Servicer's Fee"
and the "Administrator Fee", both as defined in the Receivables
Purchase Agreement.
(C) Base Rate: [*]% during a Tier 1 Period, as defined in
Section IV of this Attachment A. During the first consecutive
Tier 2 Period, as defined in Section IV of this Attachment A,
the Base Rate will be increased to [*]%. During the second or
greater than second consecutive Tier 2 Period, the Base Rate
will be increased to [*]%. The adjustments described in the
previous two sentences are defined as "Tier 2 Period
Adjustments". If any of the financial covenants specified in
Section III of this Attachment A are not met, or any other event
of default has occurred and is continuing, pricing and other
terms are subject to change at IBM Credit's reasonable
discretion including all remedies available to IBM Credit under
the Agreement.
(D) Collateral Insurance Amount:_______________________
(F) A/R Finance Charge:
(i) PAE Financing Charge: Base Rate
(ii) OVN Advance Charge: Base Rate
(iii) FRO Advance Charge: [*]% (plus any Tier 2 Period
Adjustments if applicable)[*]
(G) Delinquency Fee Rate: (1) For the first 30 days immediately
following the Payment Date - [*]% and (2) from the 31st day after
the Payment Date until the delinquent payment is made -[*]
(H) Letter of Credit Fee Rate: [*]%
(I) Letter of Credit Maximum: $6,000,000
(J) Other Charges:
(i) Monthly Service Fee: $[*]
(ii) Unused line Fee:[*]%
(iii) Back-up Liquidity Adjustment Fee: The difference
between $200,000 and the actual fees received from IFC for
IBM Credit's commitment to perform as aliquidity bank to
Clipper unless agreed to by IBM Credit. Any Indebtedness
owed to IBM Credit under this Fee shall be secured solely
by the assets owned by IFC. Such Fee is not applicable if
IBM Credit's credit rating is reduced so that IBM Credit is
no longer eligible to perform as a back-up
liquidity provider to Clipper. The Back-up Liquidity Adjustment
Fee will be in effect for a period of three (3) years. The Back-
up Liquidity Adjustment Fee will apply commencing on the date IBM
Credit provides notice to Customer that IBM Credit intends to
perform as a back-up liquidity provider throughout the original
three year period of this Agreement. If commercial paper is not
available for a period of sixty (60) days or more, the Back-up
Liquidity Adjustment Fee will no longer apply.
(I) Maximum OVN Advance Total: $25,000,000
(J) Maximum Guaranty Amount: $10,000,000
II. Bank Account
------------
(A) Customer's Lockbox(es) and Special Account(s) will be
maintained at the following Bank(s):
Name:
Address:
Phone: Not applicable to this Agreement as of the date of this
Attachment A.
Lockbox
Account #:
Special
Account #:
III. Financial Covenants:
--------------------
Definitions: The following terms shall have the following
respective meanings in this Attachment A. All amounts shall be
determined in accordance with GAAP.
Current Assets shall mean, as of any date, all assets which, in
accordance with GAAP, should be classified as current assets on a
balance sheet.
Current Liabilities shall mean, as of any date, all liabilities
which, in accordance with GAAP, should be classified as current
liabilities on a balance sheet; provided however, that all
indebtedness to IBM Credit shall be considered current
liabilities.
Current Ratio shall mean Current Assets divided by Current Liabilities.
Net Profit After Tax shall mean Revenue plus all other
income,minus all costs, including applicable taxes.
Non-Competes shall mean the amount Customer has to pay another
Person for that Person's agreement to not compete with Customer
Revenue shall mean the monetary expression of the aggregate of
products or services transferred by an enterprise to its
customers for which said customers have paid or are obligated to
pay, plus other income as allowed.
Subordinated Debt shall mean the Customer's indebtedness to
officers or owners as evidenced by an executed notes payable
subordination agreement in favor of IBM Credit.
Tangible Net Worth ("TNW") shall mean stockholders equity minus
goodwill and Non-Competes.
Total Assets shall mean, as of any date, all assets which, in
accordance with GAAP, should be classified as assets on a balance
sheet.
Total Liabilities shall mean, as of any date, all obligations
which, in accordance with GAAP, should be classified as
liabilities on a balance sheet less Subordinated Debt resulting
from past or current transactions that require settlement in the
future.
Total Net Worth (the amount of owner's or stockholder's ownership
in an enterprise) is equal to Total Assets minus Total
Liabilities.
Working Capital shall mean Current Assets minus Current Liabilities.
The Customer will be required to maintain the following financial covenants:
(a) Total Liabilities to TNW ratio of less than 6.50:1.0 at all times;
(b) Current Ratio of greater than 1.00:1.0 at all times;
(c) TNW of greater than $90,000,000 at all times;
(d) Net Profit after Tax of (1) no loss greater than 10% of TNW
in any fiscal quarter and (2) no losses for three consecutive
fiscal quarters.
IV.Tier Periods
------------
As used in the definitions of "Tier 1 Period" and "Tier 2 Period"
below, a "period" shall mean an interval of time commencing from
the first day of the calendar month following the date Customer
delivers to IBM Credit or the date when due, whichever is
earliest, the balance sheet and income statement for the fiscal
year or fiscal quarter, as applicable, with respect to a fiscal
period and ending on the last day of the calendar month which
contains the date Customer delivers to IBM Credit or the date
when due, whichever is earliest, the balance sheet and income
statement for the next succeeding fiscal period.
"Tier 1 Period" means each period with respect to which (i) the
ratio of Customer's Total Liabilities to TNW (the "Leverage
Ratio") during the immediately preceding fiscal period is less
than 4.75 to 1, (ii) the Customer's Current Ratio during such
fiscal period is greater than 1.05 to 1, (iii) Customer's TNW
during such fiscal period is greater than $105,000,000 and (iv)
the Customer's Net Profit after Tax ("Profitability") during such
fiscal period is such that (a) there is no loss greater than 5%,
(b) if there is a loss in that fiscal period, it is not the
second or more consecutive fiscal quarter with a loss and (c) on
an on-going basis beginning with October 1, 1995, there is no
cumulative loss for four consecutive fiscal quarters.
"Tier 2 Period" means each period (x) with respect to which (i)
the Customer's Leverage Ratio during the immediately preceding
fiscal period is less than 6.5 to 1, (ii) the Customer's Current
Ratio during such fiscal period is greater than 1.00 to 1, (iii)
Customer's TNW during such fiscal period is greater than
$90,000,000 and (iv) the Customer's Profitability is such that
(a) there is no loss greater than 10% and (b) if there is a loss
in that fiscal period, it is not the third or more consecutive
fiscal quarter with a loss and (y) which is not a Tier 1 Period.
V. Additional Conditions Precedent Pursuant to Section 4.1(M) of the
Agreement:
-----------------------------------------------------------------
.Executed Collateralized Guaranty of InaCom Communications, Inc.
.Executed Collateralized Guaranty of InaCom Business Centers, Inc.
.Executed Collateralized Guaranty of Inacomp Financial Services, Inc.
.Executed Collateralized Guaranty of InaCom Services, Inc.
.Listing of all creditors providing accounts receivable financing
to Customer
.A Collateral Management Report as of the Closing Date
.A Compliance Certificate as to Customer's compliance with
financial covenants set forth in this Attachment A as of the last fiscal
month of Customer for which Form 10-K or Form 10-Q, as applicable,
has been published.
.A Certificate of Location of Collateral whereby the Customer certifies
where Customer presently keeps of sells inventory, equipment and other
tangible Collateral
.An Opinion of Counsel whereby the Customer's counsel states his
or her opinion about the execution, delivery and performance of
the Agreement and other documents by the Customer.
.Executed intercreditor agreement with the Senior Note Holders
and, if applicable, the third party credit facility described in
Section 7.1 of the Agreement
.Termination or release of Uniform Commercial Code filing by
another creditor as required by IBM Credit
.Executed Acknowledgement of Payment and Termination from NBD
Bank
.A copy of an all-risk insurance certificate pursuant to
the Collateral, Agency and Intercreditor Agreement
.Executed Pledge and Security Agreement
[ * confidential information omitted and filed separately with the
Securities and Exchange Commission ]
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 28, 1995
Among
INACOM FINANCE CORP.
as Seller
and
INACOM CORP.
as initial Servicer
and
CERTAIN FINANCIAL INSTITUTIONS PARTIES HERETO
as Purchasers
and
NORWEST BANK MINNESOTA, N.A.
as Agent
- -----------------
TABLE OF CONTENTS
- -----------------
ARTICLE I
PURCHASES AND REINVESTMENTS
SECTION 1.01. Commitments to Purchase; Limits on Purchaser's
Obligations............................................2
SECTION 1.02. Purchase Procedures; Assignment of Asset Interest.... 2
SECTION 1.03. Reinvestments of Certain Collections; Payment
of Remaining Collections............................. 3
SECTION 1.04. Asset Interest....................................... 5
ARTICLE II
COMPUTATIONAL RULES
SECTION 2.01. Computation of Purchasers' Total Investment........... 6
SECTION 2.02. Computation of Concentration Limits and Unpaid
Balance.............................................. 6
SECTION 2.03. Computation of Earned Discount....................... 6
SECTION 2.04. Estimates of Earned Discount Rate, Fees, etc.......... 7
ARTICLE III
SETTLEMENTS
SECTION 3.01. Settlement Procedures................................ 7
SECTION 3.02. Deemed Collections; Reduction of Purchasers'
Total Investment, Etc................................ 10
SECTION 3.03. Payments and Computations, Etc....................... 11
SECTION 3.04. Treatment of Collections and Deemed Collections...... 12
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01. Fees................................................. 12
SECTION 4.02. Yield Protection..................................... 13
SECTION 4.03. Funding Losses....................................... 15
ARTICLE V
CONDITIONS OF PURCHASES
SECTION 5.01. Conditions Precedent to Initial Purchase................ 15
SECTION 5.02. Conditions Precedent to All Purchases and
Reinvestments........................................... 17
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of Seller Parties........ 18
ARTICLE VII
GENERAL COVENANTS OF SELLER PARTIES
SECTION 7.01. Affirmative Covenants of Seller Parties................. 23
SECTION 7.02. Reporting Requirements of Seller Parties................ 25
SECTION 7.03. Negative Covenants of Seller Parties.................... 27
SECTION 7.04. Separate Corporate Existence of Seller.................. 29
SECTION 7.05 Financial Covenants..................................... 32
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. Designation of Servicer................................. 32
SECTION 8.02. Duties of Servicer...................................... 33
SECTION 8.03. Rights of the Agent..................................... 35
SECTION 8.04. Responsibilities of Seller Parties...................... 36
SECTION 8.05. Further Action Evidencing Purchases and
Reinvestments........................................... 37
SECTION 8.06. Application of Collections.............................. 38
ARTICLE IX
SECURITY INTEREST
SECTION 9.01. Grant of Security Interest.............................. 38
SECTION 9.02. Further Assurances...................................... 39
SECTION 9.03. Remedies................................................ 39
ARTICLE X
LIQUIDATION EVENTS
SECTION 10.01. Liquidation Events..................................... 39
SECTION 10.02. Remedies............................................... 42
SECTION 11.01. Authorization and Action............................... 42
SECTION 11.02. Agent's Reliance, Etc.................................. 42
SECTION 11.03. Norwest and Affiliates................................. 43
SECTION 11.04. Indemnity.............................................. 43
SECTION 11.05. Credit Decisions....................................... 44
SECTION 11.06. Notices, etc. to Agent................................. 44
ARTICLE XII
ASSIGNMENT OF A PURCHASER'S INTEREST
SECTION 12.01. Restrictions on Assignments............................ 44
SECTION 12.02. Rights of Assignee..................................... 45
SECTION 12.03. Terms and Evidence of Assignment....................... 45
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. Indemnities by Seller.................................. 45
SECTION 13.02. Indemnities by Servicer................................ 48
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Amendments, Etc........................................ 49
SECTION 14.02. Notices, Etc........................................... 49
SECTION 14.03. No Waiver; Remedies.................................... 49
SECTION 14.04. Binding Effect; Survival............................... 50
SECTION 14.05. Costs, Expenses and Taxes.............................. 50
SECTION 14.06. Set- Off by Purchasers................................. 51
SECTION 14.07. Confidentiality of Seller Information.................. 51
SECTION 14.08. Captions and Cross References.......................... 53
SECTION 14.09. Integration............................................ 54
SECTION 14.10. Governing Law.......................................... 54
SECTION 14.11. Waiver Of Jury Trial................................... 54
SECTION 14.12. Consent To Jurisdiction; Waiver Of Immunities.......... 54
SECTION 14.13. Execution in Counterparts.............................. 55
------------
APPENDICES
------------
APPENDIX A Definitions
-----------
SCHEDULES
-----------
SCHEDULE 6.01(i) Description of Material Adverse Changes
SCHEDULE 6.01(j) Description of Litigation
SCHEDULE 6.01(n) List of Offices of Servicer and Seller where Records Are
Kept
SCHEDULE 6.01(o) List of Lock-Box Banks
SCHEDULE 6.01(p)-1 Forms of Contracts
SCHEDULE 6.01(p)-2 Description of Credit and Collection Policy
--------
EXHIBITS
--------
EXHIBIT 1.02(a) Form of Notice of Purchase
EXHIBIT 3.01(a) Form of Information Package
EXHIBIT 5.01(a) Form of Sale Agreement
EXHIBIT 5.01(f) Form of UCC Financing Statement
EXHIBIT 5.01(h)-1 Form of Lock-Box Agreement
EXHIBIT 5.01(h)-2 Form of Lock-Box Notice
EXHIBIT 5.01(i) Form of Opinion of Special Counsel for Seller Parties
------------------------------
RECEIVABLES PURCHASE AGREEMENT
------------------------------
Dated as of June 28, 1995
THIS IS A RECEIVABLES PURCHASE AGREEMENT, among:
(1) InaCom FINANCE CORP., a Delaware corporation (together
with its successors and permitted assigns, "Seller"),
(2) InaCom CORP., a Delaware corporation (together with its
successors, "InaCom"), as initial servicer hereunder (in such
capacity, together with any successor servicer appointed
pursuant to Section 8.01, "Servicer"; InaCom, in its capacity
as Servicer, together with Seller, each a "Seller Party" and
collectively the "Seller Parties"),
(3) Certain financial institutions that are now, or may
hereafter become, parties hereto as purchasers (together with
their successors and assigns, "Purchasers"), and
(4) NORWEST BANK MINNESOTA, N.A., a national banking
association ("Norwest"), as agent for Purchasers (in such
capacity, together with any successors thereto in such
capacity, the "Agent").
Unless otherwise indicated, capitalized terms used in this
Agreement are defined in Appendix A.
Background
1. Seller is a wholly-owned direct subsidiary of InaCom.
2. InaCom and certain of its Subsidiaries are engaged in the
business of assembling and selling various types of computers
and other information technology products and services.
3. Concurrently herewith, the Originators and Seller are
entering into the Sale Agreement pursuant to which the
Originators will transfer to Seller all of their right, title
and interest in and to the Pool Receivables and certain related
property.
4. Seller has requested Purchasers, and Purchasers have agreed,
subject to the terms and conditions contained in this
Agreement, to cause the Agent, on their behalf, to purchase
from Seller from time to time an undivided percentage interest,
referred to herein as the Asset Interest, in Pool Receivables
and related property.
5. Seller and Purchasers also desire that, subject to the terms
and conditions of this Agreement, certain of the daily
Collections in respect of the Asset Interest be reinvested in
Pool Receivables, which reinvestment shall constitute part of
the Asset Interest.
6. Norwest has been requested, and is willing, to act as the
Agent under this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto hereby agree as
follows:
--------------------------
ARTICLE I
PURCHASES AND REINVESTMENTS
---------------------------
SECTION 1.01. Commitments to Purchase; Limits on Purchaser's
Obligations. Upon the terms and subject to the conditions of
this Agreement (including, without limitation, Article V), from
time to time prior to the Termination Date, Seller may request
that the Agent, for the benefit of Purchasers, purchase from
Seller ownership interests in Pool Receivables and Related
Assets, and each Purchaser severally agrees to fund its
Percentage of such purchase (each being a "Purchase"); provided
that no Purchase shall be funded by any Purchaser if, after
giving effect thereto, either (a) the then Purchasers' Total
Investments would exceed the lesser of (1) $100,000,000 and (2)
85% times the Net Pool Balance, (the "Purchase Limit"), or (b)
the Asset Interest, expressed as a percentage of Net Pool
Balance, would exceed 100% (the "Allocation Limit"), or (c)
such Purchaser's Investment would exceed such Purchaser's
Percentage of the Purchase Limit; and provided, further that
each Purchase made pursuant to this Section 1.01 shall have a
purchase price equal to at least $1,000,000 and shall be an
integral multiple of $100,000.
SECTION 1.02. Purchase Procedures; Assignment of Asset Interest.
(a) Notice of Purchase. Each Purchase from Seller shall be made
on notice from Seller to the Agent received by the Agent not
later than 11:00 a.m. (New York City time) on the Business Day
next preceding the date of such proposed Purchase. Each such
notice of a proposed Purchase shall be substantially in the
form of Exhibit 1.02(a) and shall specify the desired amount
and date of such Purchase.
(b) Funding of Purchase. On the date of each Purchase, each
Purchaser shall, upon satisfaction of the applicable conditions
set forth in Article V, make available its Percentage of the
amount of the Purchase in same day funds, at the office of the
Agent, and after receipt by the Agent of such funds, the Agent
will make such funds immediately available by wire transfer to
an account designated in writing by Seller to the Agent.
(c) Assignment of Asset Interests. Seller hereby sells, assigns
and transfers to the Agent, for the account of the Purchasers,
effective on and as of the date of each Purchase hereunder, the
Asset Interest in the Pool Receivables and Related Assets.
SECTION 1.03. Reinvestments of Certain Collections; Payment of
Remaining Collections. (a) On the close of business on each
day during the period from the date of the first Purchase to
the Termination Date, Servicer will, out of all Collections
received on such day from Pool Receivables and Related Assets:
(i) determine the portion of the Collections attributable to
the Asset Interest by multiplying (A) the amount of such
Collections times (B) the lesser of (x) the Asset Interest and
(y) 100%;
(ii) out of the portion of such Collections allocated to the
Asset Interest pursuant to clause (i), set aside and hold in
trust for Purchasers (but, unless otherwise requested by the
Agent, shall not be required to segregate) an amount equal to
the sum of the estimated amount of Earned Discount accrued in
respect of each Asset Tranche (based on rate information
provided by the Agent pursuant to Section 2.05), all other
amounts due to Purchasers or the Agent hereunder and the
Servicer's Fee (in each case, accrued through such day) and not
so previously set aside;
(iii) apply the Collections allocated to the Asset Interest
pursuant to clause (i) and not required to be set aside
pursuant to clause (ii) to the purchase from Seller of
ownership interests in Pool Receivables and Related Assets
(each such purchase being a "Reinvestment"); provided that:
(A) if (I) the then Asset Interest would exceed the Allocation
Limit or (II) the then Purchasers' Total Investments would
exceed the Purchase Limit, then Servicer shall not reinvest,
but shall set aside and hold for the benefit of Purchasers, a
portion of such Collections which, together with other
Collections previously set aside and then so held, shall equal
the amount necessary to reduce the Purchasers' Total
Investments to the Purchase Limit and the Asset Interest to the
Allocation Limit; and
(B) if any of the conditions precedent to Reinvestment in clause
(a), (b) and (d) of Section 5.02 are not satisfied, then
Servicer shall not reinvest any of such remaining Collections,
but shall; set them aside and hold them in trust for the
benefit of Purchasers; and
(iv) pay to Seller (A) the portion of Collections not
allocated to the Asset Interest pursuant to clause (i) and (B)
the Collections applied to Reinvestment pursuant to clause
(iii).
(b) Unreinvested Collections. Servicer shall set aside and hold
in trust for the benefit of Purchasers all Collections which,
pursuant to clause (iii) of Section 1.03(a), may not be
reinvested in the Pool Receivables and Related Assets, provided
that unless otherwise requested by the Agent, such Collections
need not be held in a segregated account. If the Agent shall
so request in writing, then, within five (5) (or three (3), if
a Liquidation Event or Back-up Servicer Event has occurred and
is continuing) Business Days after receipt of each request,
Servicer shall apply such funds to reduce the Purchasers' Total
Investments in accordance with Section 1.03(c)(iii). If, prior
to the date when such Collections are required to be paid to
the Agent for the benefit of Purchasers pursuant to Section
1.03(c)(iii), the amount of Collections so set aside exceeds
the amount, if any, necessary to reduce the Purchasers' Total
Investments to the Purchase Limit and the Asset Interest to the
Allocation Limit, and the conditions precedent to Reinvestment
set forth in clauses (a), (b) and (d) of Section 5.02 are
satisfied, then the Servicer shall apply such Collections (or,
if less, a portion of such Collections equal to the amount of
such excess) to the making of a Reinvestment.
(c) Payment of Amounts Set Aside.
(i) Servicer shall pay all amounts of Collections set aside
pursuant to Section 1.03(a)(ii) and not applied pursuant to
clause (i) next above to the Agent on the Settlement Date for
each Settlement Period, as provided in Section 3.01, or on such
earlier date or dates as the Agent shall require on at least
one Business Day's written notice to Servicer.
(iii) Servicer shall pay all amounts set aside pursuant to
Section 1.03(b) to the Agent for the account of Purchasers on
the Settlement Date for each Settlement Period, as provided in
Section 3.01, on such earlier date or dates as the Agent shall
require on at least one Business Day's prior written notice to
Servicer.
(d) Funds Under Sale Agreement. Upon the written request of
the Agent given at any time when (A) based on the most recent
Information Package, the Asset Interest would exceed the
Allocation Limit or the Purchasers' Total Investments would
exceed the Purchase Limit, or (B) a Liquidation Event or
Unmatured Liquidation Event shall have occurred and be
continuing, Seller shall set aside all funds that under the
Sale Agreement would be applied to repay principal of any
Initial Purchaser Note (as defined in the Sale Agreement) owing
to any Originator and/or to make loans to any Originator
evidenced by an Originator Note (as defined in the Sale
Agreement). Seller may make withdrawals of such funds only for
the purposes of (i) at any time, purchasing Receivables from
the Originators in accordance with the Sale Agreement; (ii) on
the Settlement Date for any Settlement Period, making payments
in accordance with the last sentence of Section 3.01(c)(ii),
and (iii) on the Settlement Date for any Settlement Period, if,
on the basis of the most recent Information Package, and after
giving effect to any payment made to Servicer on such date
pursuant to the last sentence of Section 3.01(c)(ii), the
Purchasers' Total Investments does not exceed the Purchase
Limit and the Asset Interest does not exceed the Allocation
Limit, and provided that no Liquidation Event or Unmatured
Liquidation Event shall have occurred and be continuing, (x)
repaying principal of the Initial Purchaser Notes and/or (y)
making loans to the Originators evidenced by the Originator
Notes, in each case in accordance with this Agreement and the
Sale Agreement.
SECTION 1.04. Asset Interest. (a) Components of Asset
Interest. On any date the Asset Interest will represent the
undivided percentage ownership interest owned by the Agent, for
the benefit of Purchasers, in all then outstanding Pool
Receivables and all Related Assets with respect to such Pool
Receivables as at such date.
(b) Computation of Asset Interest. On any date, the Asset
Interest will be equal to a percentage, expressed as the
following fraction:
PTI + ACR + LCR + LR + DR
-------------------------
NPB
where:
PTI = the then Purchasers' Total Investments;
ACR = the then Accrued Cost Reserve;
LCR = the then Liquidation Cost Reserve;
LR = the then Loss Reserve;
DR = the then Dilution Reserve; and
NPB = the then Net Pool Balance;
provided, however, that the Asset Interest during the
Liquidation Period shall equal 100%.
(c) Frequency of Computation. The Asset Interest shall be
computed (i) as provided in Section 3.01, as of the Cut-Off
Date for each Settlement Period, and (ii) on the Settlement
Date following such Reporting Date, after giving effect to the
payments made pursuant to Section 3.01. In addition, at any
time, the Agent may require Servicer to provide an Information
Package, based on the information then available to Servicer,
for purposes of computing the Asset Interest or the Purchase
Limit as of any other date, and Servicer agrees to do so within
five (5) (or three (3), if a Liquidation Event or Back-up
Servicer Event has occurred and is continuing) Business Days of its
receipt of the Agent's request.
-------------------
ARTICLE II
COMPUTATIONAL RULES
-------------------
SECTION 2.01. Computation of Purchasers' Total Investments.
In making any determination of Purchasers' Total Investments,
the following rules shall apply:
(a) Purchasers' Total Investments shall not be considered
reduced by any allocation, setting aside or distribution of any
portion of Collections unless such Collections shall have been
actually delivered to the Agent pursuant hereto; and
(b) Purchasers' Total Investments shall not be considered
reduced by any distribution of any portion of Collections if at
any time such distribution is rescinded or must otherwise be
returned for any reason.
SECTION 2.02. Computation of Concentration Limits and Unpaid
Balance. The Obligor Concentration Limits and the aggregate
Unpaid Balance of Pool Receivables of any Obligor and its
Affiliated Obligors (if any) shall be calculated as if such
Obligor and its Affiliated Obligors were one Obligor.
SECTION 2.03. Computation of Earned Discount. In making any
determination of Earned Discount, the following rules shall
apply:
(a) the Agent shall determine the Earned Discount accruing
with respect to each Settlement Period, in accordance with the
definition of Earned Discount;
(b) no provision of this Agreement shall require the payment or
permit the collection of Earned Discount in excess of the
maximum permitted by applicable law; and
(c)Earned Discount shall not be considered paid by any
distribution if at any time such distribution is rescinded or
must otherwise be returned for any reason.
SECTION 2.04. Estimates of Earned Discount Rate, Fees, etc. For
purposes of determining the amounts required to be set aside by
Servicer pursuant to Section 1.03, the Agent shall notify
Servicer from time to time of the Earned Discount Rate
applicable to each Settlement Period and the rates at which
fees and other amounts are accruing hereunder. It is
understood and agreed that (i) the Earned Discount Rate may
change from one applicable Settlement Period to the next, and
the Alternate Base Rate, if applicable, used to calculate the
Earned Discount Rate may change from time to time during an
applicable Settlement Period,
(ii) certain rate information provided by the Agent to Servicer
shall be based upon the Agent's good faith estimate, (iii) the
amount of Earned Discount actually accrued during any
Settlement Period may exceed, or be less than, the amount set
aside with respect thereto by Servicer, and (iv) the amount of
fees or other payables accrued hereunder with respect to any
Settlement Period may exceed, or be less than, the amount set
aside with respect thereto by Servicer. Failure to set aside
any amount so accrued shall not relieve Servicer of its
obligation to remit Collections to the Agent with respect to
such accrued amount, as and to the extent provided in Section
3.01.
-----------
ARTICLE III
SETTLEMENTS
-----------
SECTION 3.01.Settlement Procedures.
The parties hereto will take the following actions with respect
to each Settlement Period:
(a) Information Package. On the Reporting Date for each Fiscal
Month, Servicer shall deliver to the Agent a diskette
containing the information described in Exhibit 3.01(a) and a
report in the form of Exhibit 3.01(a) (each, an "Information
Package").
(b) Earned Discount; Other Amounts Due. On or before 10:00
a.m., Minneapolis, Minnesota time, on the Business Day before
each Reporting Date, the Agent shall notify Servicer of (i) the
amount of Earned Discount accrued during the prior calendar
month, and (ii) all fees and other amounts accrued and payable
by Seller under this Agreement (other than amounts described in
clause (c) below). Servicer shall pay to the Agent the amount
of such Earned Discount, fees and other amounts (to the extent
of Collections attributable to the Asset Interest during such
Settlement Period and not previously paid to the Agent or
reinvested pursuant to Section 1.03) on the Settlement Date for
such month. Such payment shall be made (A) out of amounts set
aside pursuant to Section 1.03 for such payment, (B) in the
case of amounts other than Earned Discount, to the extent that
amounts were not set aside pursuant to Section 1.03 for such
payment, out of funds paid by Servicer to Seller (which amounts
Seller hereby agrees to pay to Servicer), and (C) in the case
of Earned Discount, to the extent that funds were not set aside
pursuant to Section 1.03 for such payment (because the actual
Earned Discount for such month was greater than the estimated
Earned Discount used in calculating the Asset Interest during
such month), out of funds paid by Servicer to Seller (which
amounts Seller hereby agrees to pay to Servicer), up to the
aggregate amount of Collections applied to Reinvestment under
Section 1.03(a) or (b) during such month.
(c) Asset Interest Computations.
(i) On the Reporting Date for each Settlement Period, the
Servicer shall compute, as of the related Cut-Off Date and
based upon the assumptions in the next sentence, (A) the Asset
Interest, (B) the amount of the reduction or increase (if any)
in the Asset Interest since the next preceding Cut-Off Date,
(C) the excess (if any) of the Asset Interest over the
Allocation Limit, and (D) the excess (if any) of the
Purchasers' Total Investments over the Purchase Limit. Such
calculation shall be based upon the assumptions that (x) the
information in the Information Package is correct, and (y)
Collections set aside pursuant to Section 1.03(b) will be paid
to the Agent on the Settlement Date for such Settlement Period.
(ii) If, according to the computations made pursuant to clause
(i) above, the Asset Interest exceeds the Allocation Limit or
the Purchasers' Total Investments exceeds the Purchase Limit,
then on the Settlement Date for such Settlement Period,
Servicer shall pay to the Agent (to the extent of Collections
during the related Settlement Period attributable to all Asset
Tranches and not previously paid to the Agent) the amount
necessary to reduce the Purchasers' Total Investments to the
Purchase Limit and the Asset Interest to the Allocation Limit,
subject, however, to the proviso to Section 1.03(c)(iii). Such
payment shall be made out
of amounts set aside pursuant to Section 1.03 for such purpose
and, to the extent such amounts were not so set aside, the
Seller hereby agrees to pay such amounts to the Servicer to the
extent of Collections applied to Reinvestment under Section
1.03 during the relevant Settlement Period.
(iii) In addition to the payments described in clause (ii)
above, during the Liquidation Period, Servicer shall pay to the
Agent all amounts set aside pursuant to Section 1.03 on the
Settlement Date for each Settlement Period, in an amount not
exceeding the remaining Purchasers' Total Investments.
(d) Order of Application. Upon receipt by the Agent of funds
distributed pursuant to this Section 3.01 on the Settlement
Date with respect to any Settlement Period, the Agent shall
apply them to the items specified in the subclauses below, in
the order of priority of such subclauses:
(i) to Earned Discount accrued during such Settlement Period,
plus any previously accrued Earned Discount not paid on a prior
Settlement Date;
(ii) to accrued and unpaid Servicer's Fee (if Servicer is not
Seller or its Affiliate);
(iii) to the Program Fee and the Administrative Fee accrued
during such Settlement Period, plus any previously accrued
Program Fee and the Administrative Fee not paid on a prior
Settlement Date;
(iv) to the reduction of Purchasers' Total Investments, to the
extent such reduction is required under Section 3.01(c);
(v) to other accrued and unpaid amounts owing to any Purchaser
or the Agent; and
(vi) to accrued and unpaid Servicer's Fee (if Servicer is
Seller or its Affiliate).
(e) Non-Distribution of Servicer's Fee. If the Agent consents
(which consent may be revoked at any time after the occurrence
and during the continuance of a Liquidation Event or Back-up
Servicer Event), the amounts (if any) set aside pursuant to
Section 1.03 in respect of Servicer's Fee may be retained by
Servicer, in which case no distribution shall be made in
respect of Servicer's Fee pursuant to clause (d) above.
(f) Delayed Payment. If on any day described in this
Section 3.01, because Collections during the relevant
Settlement Period were less than the aggregate amounts payable,
Servicer shall not make any payment otherwise required, the
next available Collections in respect of the Asset Interest
shall be applied to such payment, and no Reinvestment shall be
permitted hereunder until such amount payable has been paid in
full.
SECTION 3.02. Deemed Collections; Reduction of Purchasers' Total
Investments, Etc.
(a) Deemed Collections. If on any day
(i) the Unpaid Balance of any Pool Receivable is
(A) reduced as a result of any defective, rejected or returned
merchandise or services, any cash discount, or any other
adjustment by any Seller Party or any Affiliate of any thereof,
(B) reduced or cancelled as a result of a setoff in respect of
any claim by the Obligor thereof (whether such claim arises out
of the same or a related or an unrelated transaction), or
(C) reduced on account of the obligation of any Seller Party or
any Affiliate thereof to pay to the related Obligor any rebate
or refund, or
(D) less than the amount included in calculating the Net Pool
Balance for purposes of any Information Package (for any reason
other than such Receivable becoming a Defaulted Receivable), or
(ii) any of the representations or warranties of Seller set
forth in Section 6.01(l) or (p) were not true when made with
respect to any Pool Receivable, or any of the representations
or warranties of Seller set forth in Section 6.01(l) are no
longer true with respect to any Pool Receivable, or any Pool
Receivable is repurchased by an Originator pursuant to the Sale
Agreement,
then, on such day, Seller shall be deemed to have received a
Collection of such Pool Receivable
(I) in the case of clause (i) above, in the amount of such
reduction or cancellation or the difference between the actual
Unpaid Balance and the amount included in calculating such Net
Pool Balance, as applicable; and
(II) in the case of clause (ii) above, in the amount of the
Unpaid Balance of such Pool Receivable.
Collections deemed received by Seller under this Section
3.02(a) are herein referred to as "Deemed Collections".
(b) Seller's Optional Reduction of Purchasers' Total
Investments. Seller may at any time elect to reduce the
Purchasers' Total Investments as follows:
(i) Seller shall give the Agent at least five (5) Business
Days' prior written notice of such reduction (including the
amount of such proposed reduction and the proposed date on
which such reduction will commence),
(ii) on the proposed date of commencement of such reduction
and on each day thereafter, Servicer shall refrain from
reinvesting Collections pursuant to Section 1.03 until the
amount thereof not so reinvested shall equal the desired amount
of reduction, and
(iii) Servicer shall hold such Collections in trust for
Purchasers, pending payment to the Agent, as provided in
Section 1.03;
provided that:
(A) the amount of any such reduction shall be not less than
$5,000,000 and shall be an integral multiple of $1,000,000, and
(B) Seller shall use reasonable efforts to attempt to choose a
reduction amount, and the date of commencement thereof, so that
such reduction shall commence and conclude in the same
Settlement Period.
SECTION 3.03. Payments and Computations, Etc.
(a) Payments. All amounts to be paid or deposited by Seller or
Servicer to the Agent or any other Person hereunder (other than
amounts payable under Section 4.02) shall be paid or deposited in
accordance with the terms hereof no later than 10:00 a.m. (New
York City time) on the day when due in lawful money of the
United States of America in same day funds to the Agent at its
office in Minneapolis, Minnesota or, to such account as the
Agent may designate by written notice to the Person making such
payment. Promptly upon receipt by the Agent of amounts in
respect of Earned Discount on Purchasers' Total Investments,
the Agent shall distribute such amounts to Purchasers, pro rata
in accordance with their Percentages, to such accounts
designated in writing to the Agent.
(b) Late Payments. Seller or Servicer, as applicable, shall, to
the extent permitted by law, pay to the Agent interest on all
amounts not paid or deposited when due hereunder at 1% per
annum above the Alternate Base Rate, payable on demand,
provided, however, that such interest rate shall not at any
time exceed the maximum rate permitted by applicable law.
(c) Method of Computation. All computations of interest, Earned
Discount, Liquidation Discount, any fees payable under Section
4.01 and any other fees payable by Seller to any Purchaser or
the Agent hereunder shall be made on the basis of a year of 360
days for the actual number of days (including the first day but
excluding the last day) elapsed.
SECTION 3.04. Treatment of Collections and Deemed Collections.
Seller shall forthwith deliver to Servicer all Deemed
Collections, and Servicer shall hold or distribute such Deemed
Collections as Earned Discount, accrued Servicer's Fee,
repayment of Purchasers' Total Investments, and to other
accrued amounts owing hereunder to the same extent as if such
Deemed Collections had actually been received on the date of
such delivery to Servicer. If Collections are then being paid
to the Agent or its designee, or lock boxes or accounts
directly or indirectly owned or controlled by the Agent,
Servicer shall forthwith cause such Deemed Collections to be
paid to the Agent or its designee or to such lock boxes or
accounts, as applicable, or as the Agent shall request. So
long as Seller shall hold any Collections (including Deemed
Collections) required to be paid to Servicer or the Agent, it
shall hold such Collections in trust and shall clearly mark its
records to reflect such trust; provided that unless the Agent
shall have requested it in writing to do so, Seller shall not
be required to hold such Collections in a separate deposit
account containing only such Collections.
------------------------
ARTICLE IV
FEES AND YIELD PROTECTION
-------------------------
SECTION 4.01.Fees. Seller shall pay to Purchasers and the
Agent certain fees from time to time in amounts and payable on
such dates as are set forth in a separate letter dated on or
about the date hereof (as amended from time to time, the "Fee
Letter") among Seller, InaCom and the Agent.
SECTION 4.02.Yield Protection.
(a) If (i) Regulation D or (ii) any Regulatory Change
occurring after the date hereof
(A) shall subject an Affected Party to any tax, duty or other
charge with respect to any Asset Interest owned by or funded by
it, or any obligations or right to make Purchases or
Reinvestments or to provide funding therefor, or shall change
the basis of taxation of payments to the Affected Party of any
Purchasers' Total Investments or Earned Discount owned by, owed
to or funded in whole or in part by it or any other amounts due
under this Agreement in respect of the Asset Interest owned by
or funded by it or its obligations or rights, if any, to make
Purchases or Reinvestments or to provide funding therefor
(except for changes in the rate of tax on or determined by
reference to the overall net income of such Affected Party
imposed by the United States of America, by the jurisdiction in
which such Affected Party's principal executive office is
located and, if such Affected Party's principal executive
office is not in the United States of America, by the
jurisdiction where such Affected Party's principal office in
the United States is located); or
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the
Federal Reserve Board, but excluding any reserve included in
the determination of Earned Discount), special deposit or
similar requirement against assets of any Affected Party,
deposits or obligations with or for the account of any Affected
Party or with or for the account of any affiliate (or entity
deemed by the Federal Reserve Board to be an affiliate) of any
Affected Party, or credit extended by any Affected Party; or
(C) shall change the amount of capital maintained or required or
requested or directed to be maintained by any Affected Party;
or
(D) shall impose any other condition affecting any Asset
Interest owned or funded in whole or in part by any Affected
Party, or its obligations or rights, if any, to make Purchases
or Reinvestments or to provide funding therefor; or
(E) shall change the rate for, or the manner in which the
Federal Deposit Insurance Corporation (or a successor thereto)
assesses, deposit insurance premiums or similar charges;
and the result of any of the foregoing is or would be
(x) to increase the cost to (or in the case of Regulation D
referred to above, to impose a cost on) (I) an Affected Party
funding or making or maintaining any Purchases or
Reinvestments, or any commitment of such Affected Party with
respect to any of the foregoing, or (II) the Agent for
continuing its or Seller's relationship with any Purchaser,
(y) to reduce the amount of any sum received or receivable by an
Affected Party under this Agreement, or
(z) in the reasonable determination of such Affected Party, to
reduce the rate of return on the capital of an Affected Party
as a consequence of its obligations hereunder or arising in
connection herewith to a level below that which such Affected
Party could otherwise have achieved,
then, within thirty days after demand by such Affected Party
(which demand shall be accompanied by a certificate setting
forth the basis of such demand and a calculation of the amounts
claimed by the Affected Party), Seller shall pay directly to
such Affected Party such additional amount or amounts as will
compensate such Affected Party for such additional or increased
cost or such reduction.
(b) Each Affected Party will promptly notify Seller and the
Agent of any event of which it has knowledge (including any
future event that, in the judgment of such Affected Party, is
reasonably certain to occur) which will entitle such Affected
Party to compensation pursuant to this Section 4.02; provided, however, no
failure to give or delay in giving such notification shall
adversely affect the rights of any Affected Party to such
compensation.
(c) In determining any amount provided for or referred to in
this Section 4.02, an Affected Party may use any reasonable
averaging and attribution methods (consistent with its ordinary
business practices) that it (in its reasonable discretion)
shall deem applicable. Any Affected Party when making a claim
under this Section 4.02 shall submit to Seller a certificate as
to such increased cost or reduced return (including calculation
thereof in reasonable detail), which statement shall, in the
absence of demonstrable error, be conclusive and binding upon
Seller.
(d) If at any time, the Seller is required to pay any material
amount to an Affected Party pursuant to this Section 4.02, then
upon request by Seller, such Affected Party shall make all
reasonable efforts to transfer (pursuant to documentation
reasonably satisfactory to the Agent) its rights and
obligations under this Agreement and the other Transaction
Documents to another branch or office of such Affected Party
satisfactory to the Agent, and to take such other steps as may
be available, so that the payment under this Section 4.02 would
no longer by required or the amount of such payment would be
reduced; provided, however, no Affected Party shall be required
under this paragraph (d) to take any action which (A) would be
inconsistent with applicable law or regulations or with such
Affected Party's internal policies or (b) in the judgment of
such Affected Party, would be materially disadvantageous to
such Affected Party.
SECTION 4.03. Funding Losses. In the event that any Purchaser
shall incur any loss or expense (including any loss or expense
incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Purchaser to make any
Purchase or maintain any Purchase) as a result of (i) any
settlement with respect to Purchasers' Total Investments being
made on any day other a Settlement Date, or (ii) any Purchase
not being made in accordance with a request therefor under
Section 1.02, then, upon written notice from the Agent to
Seller and Servicer, Seller shall pay to Servicer, and Servicer
shall pay to the Agent for the Account of such Purchaser, the
amount of such loss or expense. Such written notice (which
shall include calculations in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding upon the
Seller and Servicer.
-----------------------
ARTICLE V
CONDITIONS OF PURCHASES
-----------------------
SECTION 5.01. Conditions Precedent to Initial Purchase. The
initial Purchase hereunder is subject to the condition
precedent that the Agent shall have received, on or before the
date of such Purchase, the following each (unless otherwise
indicated) dated such date in the form and substance reasonably
satisfactory to the Agent:
(a) The Sale Agreement, duly executed by the Servicer, each
Originator and Seller, substantially in the form of Exhibit
5.01(a), together with (i) the closing documents required to be
delivered thereunder, and (ii) an Originator Note, duly
executed by each Originator, respectively, and endorsed by
Seller to the Agent for the benefit of the Purchasers;
(b) A copy of the resolutions of the Board of Directors of each
Seller Party approving this Agreement and the other Transaction
Documents to be delivered by it hereunder and the transactions
contemplated hereby, certified by its Secretary or Assistant
Secretary;
(c) A certificate of the Secretary or Assistant Secretary of
each Seller Party certifying the names and true signatures of
the officers authorized on its behalf to sign this Agreement
and the other Transaction Documents to be delivered by it
hereunder (on which certificate the Agent and each Purchaser
may conclusively rely until such time as the Agent shall
receive from such Seller Party a revised certificate meeting
the requirements of this subsection (c));
(d) The Articles or Certificate of Incorporation of each Seller
Party, duly certified by the Secretary of State of Delaware, as
of a recent date acceptable to Agent, in each case together
with a copy of the by-laws of such Seller Party, duly certified
by the Secretary or an Assistant Secretary of such Seller
Party;
(e) Copies of good standing certificates for each Seller Party,
issued by the Secretaries of State of the state of
incorporation of such Seller Party and the state where such
Seller Party's principal place of business is located;
(f) Acknowledgment copies (or other evidence of filing
reasonably acceptable to the Agent) of (i) proper financing
statements (Form UCC-1), substantially in the form of Annex C
to the Sale Agreement or in such other form as the Agent may
reasonably request, naming each Originator, respectively, as
the debtor and seller of the Receivables and Related Assets,
Seller as the secured party and purchaser thereof and the Agent
as assignee, and (ii) financing statements (Form UCC-1),
substantially in the form of Exhibit 5.01(f) or in such other
form as the Agent may reasonably request, naming Seller as the
debtor and seller of an undivided percentage interest in the
Pool Receivables and Related Assets and the Agent, for the
benefit of Purchasers, as the secured party and purchaser
thereof, or other, similar instruments or documents, as may be
necessary or, in the opinion of the Agent, desirable under the
UCC or any comparable law of all appropriate jurisdictions to
perfect the sale by, each Originator to Seller of, and the
Agents, for the benefit of Purchasers, undivided percentage
interest in, the Pool Receivables and Related Assets;
(g) Search reports provided in writing to the Agent by LEXIS
Document Services, (i) listing all effective financing
statements that name any Seller Party or any Originator as
debtor and that are filed in the jurisdictions in which filings
were made pursuant to subsection (f) above and in such other
jurisdictions that the Agent shall reasonably request, together
with copies of such financing statements (none of which (other
than any of the financing statements described in subsection
(f) above) shall cover any Receivables or Related Assets), and
(ii) listing all tax liens and judgment liens (if any) filed
against any debtor referred to in clause (i) above in the
jurisdictions described therein and showing no such Liens;
(h) Duly executed copies of Lock-Box Agreements with each of
Bank of America Illinois and NBD Bank; duly executed copies of
LockBox Notices to each other Lock-Box Bank;
(i) Favorable opinions of McGrath, North, Mullin & Kratz, P.C.,
special counsel to the Originators and the Seller Parties, in
substantially the form of Exhibit 5.01(i);
(j) A favorable opinion of Mayer, Brown & Platt, special counsel
to the Agent, as to
(i) the existence of a "true sale" of the Receivables from the
Originators to Seller under the Sale Agreement; and
(ii) the inapplicability of the doctrine of substantive
consolidation to Seller and the other Seller Parties in
connection with any bankruptcy proceeding involving any Seller
Party;
(k) A pro forma Information Package, prepared as of the Cut-Off
Date of June 26, 1995;
(l) A report in form and substance satisfactory to the Agent as
to a pre-closing due diligence audit by the Agent;
(m) Letters executed by each of IBM Credit and ITT Commercial
Finance Corp. waiving certain set-off claims; and
(n) Such other agreements, instruments, certificates, opinions
and other documents as the Agent or any Purchaser may
reasonably request.
SECTION 5.02. Conditions Precedent to All Purchases and
Reinvestments. Each Purchase, (including the first Purchase)
and each Reinvestment shall be subject to the further
conditions precedent that on the date of such Purchase or
Reinvestment the following statements shall be true (and
Seller, by accepting the amount of such Purchase or by
receiving the proceeds of such Reinvestment, and each other
Seller Party, upon such acceptance or receipt by Seller, shall
be deemed to have certified that):
(a) the representations and warranties contained in Section 6.01
are correct in all material respects on and as of such day as
though made on and as of such day and shall be deemed to have
been made on such day,
(b) no event has occurred and is continuing, or would result
from such Purchase or Reinvestment, that constitutes a
Liquidation Event or Unmatured Liquidation Event,
(c) after giving effect to each proposed Purchase or
Reinvestment, Purchasers' Total Investments will not exceed the
Purchase Limit and the Asset Interest will not exceed the
Allocation Limit,
(d) the Termination Date shall not have occurred, and
(e) in the case of a Purchase, the Agent shall have timely
received an appropriate notice of the proposed Purchase in
accordance with Section 1.02(a);
provided, however, the absence of the occurrence and
continuance of an Unmatured Liquidation Event shall not be a
condition precedent to any Reinvestment or any Purchase on any
day which does not cause the Purchasers' Total Investments,
after giving effect to such Reinvestment or Purchase, to exceed
the Purchasers' Total Investments as of the opening of business
on such day.
------------------------------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 6.01. Representations and Warranties of Seller Parties.
Each Seller Party jointly and severally represents and warrants
as follows:
(a) Organization and Good Standing; Ownership. Each Seller
Party has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of
Delaware, with power and authority to own its properties and to
conduct its business as such properties are presently owned and
such business is presently conducted. Seller had at all
relevant times, and now has, all necessary power, authority,
and legal right to acquire and own the Pool Receivables.
InaCom owns directly all the issued and outstanding capital
stock of Seller.
(b) Due Qualification. Each Seller Party is duly qualified to
do business as a foreign corporation in good standing, and has
obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of property or
the conduct of its business requires such qualification,
licenses or approvals.
(c) Power and Authority; Due Authorization. Each Seller Party
(i) has all necessary power, authority and legal right (A) to
execute and deliver this Agreement and the other Transaction
Documents to which it is a party, (B) to carry out the terms of
the Transaction Documents to which it is a party, (C) in the
case of Servicer, to service the Receivables and the Related
Assets in accordance with this Agreement and the Sale
Agreement, and (D) in the case of Seller, sell and assign the
Asset Interest on the terms and conditions herein provided, and
(ii) has duly authorized by all necessary corporate action the
execution, delivery and performance of this Agreement and the
other Transaction Documents and, in the case of Seller, the
sales and assignments described in clause (i)(D) above.
(d) Valid Sale; Binding Obligations. (i) This Agreement
constitutes a valid sale, transfer, and assignment of the Asset
Interest to the Agent, for the benefit of Purchasers,
enforceable against creditors of, and purchasers from, Seller,
and (ii) this Agreement constitutes, and each other Transaction
Document to be signed by any Seller Party when duly executed
and delivered will constitute, a legal, valid and binding
obligation of such Seller Party, enforceable in accordance with
its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws
from time to time in effect affecting the enforcement of
creditors' rights generally and by general principles of
equity, regardless of whether such enforceability is considered
in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions
cococontemplated by this Agreement and the other Transaction
Documents and the fulfillment of the terms hereof will not (i)
conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse
of time or both) a default under, the articles or certificate
of incorporation or by-laws of any Seller Party, or any
indenture, loan agreement, receivables purchase agreement,
mortgage, deed of trust, or other agreement or instrument to
which any Seller Party is a party or by which it or any of its
properties is bound, (ii) result in the creation or imposition
of any Lien upon any of Seller Party's properties pursuant to
the terms of any such indenture, loan agreement, receivables
purchase agreement, mortgage, deed of trust, or other agreement
or instrument, other than this Agreement and the other
Transaction Documents, or (iii) violate any law or any order,
rule, or regulation applicable to any Seller Party of any court
or of any federal or state regulatory body, administrative
agency, or other governmental instrumentality having
jurisdiction over such Seller Party or any
of its properties.
(f) No Proceedings. There are no proceedings or investigations
pending, or, to any Seller Party's knowledge, threatened,
before any court, regulatory body, administrative agency, or
other tribunal or governmental instrumentality (i) asserting
the invalidity of this Agreement or any other Transaction
Document, (ii) seeking to prevent the sale and assignment of
the Receivables under the Sale Agreement or of the Asset
Interest under this Agreement or the consummation of any of the
other transactions contemplated by this Agreement or any other
Transaction Document, or (iii) seeking any determination or
ruling that is reasonably likely to have a Material Adverse
Effect.
(g) Bulk Sales Act. No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(h) Government Approvals. No authorization or approval or other
action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution,
delivery and performance by each Seller Party of this Agreement
and each other Transaction Document to which it is a party,
except for (i) the filing of the UCC financing statements
referred to in Article V, and (ii) the filing of any UCC
continuation statements and amendments from time to time
required in relation to any UCC financing statements filed in
connection with this Agreement, as provided in Section 8.05,
all of which, at the time required in Article V or Section
8.05, as applicable, shall have been duly made and shall be in
full force and effect.
(i) Financial Condition. (w) The consolidated balance sheets of
InaCom and its consolidated subsidiaries as at December 31,
1994, and the related statements of income and shareholders'
equity of InaCom and its consolidated subsidiaries for the
fiscal year then ended, certified by KPMG Peat Marwick,
independent certified public accountants, copies of which have
been furnished to the Agent, fairly present in all material
respects the consolidated financial condition of InaCom and its
consolidated subsidiaries as at such date and the consolidated
results of the operations of InaCom and its consolidated
subsidiaries for the period ended on such date, all in
accordance with GAAP consistently applied, (x) since December
31, 1994 through the date hereof there has been no material
adverse change in any such financial condition, business or
operations except as described in Schedule 6.01(i), (y) the
balance sheets of Seller as at the date hereof, certified by an
authorized officer of the Seller, copies of which have been
furnished to the Agent, fairly present in all material respects
the financial condition, assets and liabilities of Seller as at
such date, all in accordance with GAAP consistently applied,
and (z) since the date of Seller's formation, there has been no
material adverse change in Seller's financial condition,
business or operations.
(j) Litigation. No injunction, decree or other decision has
been issued or made by any court, governmental agency or
instrumentality thereof that prevents, and to the knowledge of
any Seller Party, no threat by any person has been made to
attempt to obtain any decision that is reasonably likely to
prevent, any Seller Party from conducting a material part of
its business operations, except as described in Schedule
6.01(j).
(k) Margin Regulations. The use of all funds obtained by any
Seller Party under this Agreement or any other Transaction
Document will not conflict with or contravene any of
Regulations G, T, U and X promulgated by the Board of Governors of the
Federal Reserve System from time to time.
(l) Quality of Title. (i) Each Pool Receivable, together with
the Related Assets, is owned by Seller free and clear of any
Lien (other than any Lien arising solely as the result of any
action taken by Purchaser (or any assignee thereof) or by the
Agent); (ii) when Purchaser makes a Purchase or Reinvestment,
the Agent, for the benefit of Purchasers, shall have acquired
and shall at all times thereafter continuously maintain a valid
and perfected first priority undivided percentage ownership
interest to the extent of the Asset Interest in each Pool
Receivable, each Related Asset and Collections with respect
thereto, free and clear of any Lien (other than any Lien
arising as the result of any action taken by Purchaser (or any
assignee thereof) or by the Agent; and (iii) no financing
statement or other instrument similar in effect covering any
Pool Receivable, any interest therein, the Related Assets or
Collections with respect thereto is on file in any recording
office except such as may be filed (1) in favor of an
Originator in accordance with the Contracts, (2) in favor of
Seller in connection with the Sale Agreement, or (3) in favor
of a Purchaser or the Agent in accordance with this Agreement
or in connection with any Lien arising solely as the result of
any action taken by a Purchaser (or any assignee thereof) or by
the Agent.
(m) Accurate Reports. No Information Package (if prepared by
any Seller Party or its Affiliate, or to the extent information
therein was supplied by any Seller Party or its Affiliate) or
other information, exhibit, financial statement, document,
book, record or report furnished or to be furnished, in each
case in writing, by or on behalf of any Seller Party or its
Affiliates to any Purchaser or the Agent pursuant to this
Agreement was or will be inaccurate in any material respect as
of the date it was or will be dated or (except as otherwise
disclosed to the Agent and each Purchaser at such time) as of
the date so furnished, or contained or (in the case of
information or other materials to be furnished in the future)
will contain any material misstatement of fact or omitted or
(in the case of information or other materials to be furnished
in the future) will omit to state a material fact or any fact
necessary to make the statements contained therein not
materially misleading in light of the circumstances made or
presented.
(n) Offices. The principal places of business and chief
executive offices of Servicer and Seller are located at the
respective addresses set forth under its name on the signature
pages hereof, and the offices where Servicer and Seller keepall their books,
records and documents evidencing Pool Receivables, the related Contracts and
all purchase orders and other agreements related to such Pool Receivables
are located at the addresses specified in Schedule 6.01(n) (or at such
other locations, notified to the Agent in accordance with
Section 7.01(f), in jurisdictions where all action required by
Section 8.05 has been taken and completed).
(o) Lock-Box Accounts. The names and addresses of all the Lock-Box Banks,
together with the account numbers of the lock-box accounts of any Originator
or Seller at such Lock-Box Banks, are specified in Schedule 6.01 (o) (or have
been notified to and approved by the Agent in accordance with
Section 7.03(d)).
(p) Eligible Receivables. Each Receivable included in the Net Pool Balance
as an Eligible Receivable on the date of any Purchase, Reinvestment or
computation of Net Pool Balance shall be an Eligible Receivable on such
date.
(q) Servicing Programs. No licenses or approval is required for the Agent's
use of any program used by Servicer in the servicing of the Receivables,
other than those which have been obtained and are in full force and effect.
(r) Nature of Receivables. Each Receivable constitutes an
"account" as such term is defined in the UCC.
-----------------------------------
ARTICLE VII
GENERAL COVENANTS OF SELLER PARTIES
-----------------------------------
SECTION 7.01. Affirmative Covenants of Seller Parties. From the
date hereof until the Final Payout Date, each Seller Party
will, unless the Agent and the Required Purchasers shall
otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects
with all applicable laws, rules, regulations and orders,
including those with respect to the Pool Receivables and
related Contracts, except where the failure to so comply would
not individually or in the aggregate have a reasonable
possibility of having a Material Adverse Effect.
(b) Preservation of Corporate Existence. Preserve and maintain
its corporate existence, rights, franchises and privileges in
the jurisdiction of its incorporation, and qualify and remain
qualified in good standing as a foreign corporation in each
jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification
might reasonably be expected to have a Material Adverse Effect.
(c) Audits. (i) At any time and from time to time upon not less
than five (5) Business Days' notice (unless a Liquidation Event
has occurred and is continuing (or the Agent believes in good
faith that a Liquidation Event has occurred and is continuing),
in which case no such notice shall be required) during regular
business hours, permit the Agent or any of their agents or
representatives, (A) to examine and make copies of and
abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession
or under the control of such Seller Party relating to Pool
Receivables, including, without limitation, the related
Contracts and purchase orders and other agreements, and (B) to
visit the offices and properties of any Seller Party for the
purpose of examining such materials described in clause (i)(A)
next above, and to discuss matters relating to Pool Receivables
or any Seller Party's performance hereunder with any of the
officers or employees of any Seller Party having knowledge of
such matters; (ii) permit any Purchaser or any of their agents
or representatives, upon not less than five (5) Business Days'
notice from the Agent or such Purchaser (unless a Liquidation
Event has occurred and is continuing (or the Agent believes in
good faith that a Liquidation Event has occurred and is
continuing) in which case no such notice shall be required), to
meet with the independent auditors of the Seller Parties, to
the extent permitted by such auditors, to review such auditors'
work papers and otherwise to review with such auditors the
books and records of the Seller Parties with respect to the
Pool Receivables and Related Assets; and (iii) without limiting
the provisions of clause (i) next above, from time to time, at
the expense of such Seller Party, permit certified public
accountants or other auditors acceptable to the Agent to
conduct a review of any Seller Party's books and records with
respect to the Pool Receivables and Related Assets; provided,
that, so long as no Liquidation Event has occurred and
is continuing, (x) such reviews shall not be done more than
four (4) times in any one calendar year and (y) the Seller
Parties shall only be responsible for the costs and expenses of
one such review in any one calendar year.
(d) Keeping of Records and Books of Account. In the case of
Servicer, maintain and implement administrative and operating
procedures (including, without limitation, an ability to
recreate records evidencing Pool Receivables in the event of
the destruction of the originals thereof), and keep and
maintain, all documents, books, records and other information
reasonably necessary or advisable for the collection of all
Pool Receivables (including, without limitation, records
adequate to permit the daily identification of outstanding
Unpaid Balances by Obligor and related debit and credit details
of the Pool Receivables).
(e) Performance and Compliance with Receivables and Contracts.
At its expense, timely and fully perform and comply with all
material provisions, covenants and other promises, if any,
required to be observed by it under the Contracts related to
the Pool Receivables and all purchase orders and other
agreements related to such Pool Receivables, unless such
requirement is being disputed in good faith (it being
understood that such dispute shall not affect each Seller
Party's obligations under Sections 3.04, 13.01 and 13.02).
(f) Location of Records. Keep its chief place of business and
chief executive office, and the offices where it keeps its
records concerning the Pool Receivables, all related Contracts
and all purchase orders and other agreements related to such
Pool Receivables (and all original documents relating thereto),
at the address(es) of Servicer and Seller referred to in
Section 6.01(n) or, upon 30 days' prior written notice to the
Agent, at such other locations in jurisdictions where all
action required by Section 8.05 shall have been taken and
completed.
(g) Credit and Collection Policies. Comply in all material
respects with the Credit and Collection Policy in regard to
each Pool Receivable and the related Contract.
(h) Collections. In the case of Servicer, instruct all Obligors
to cause all Collections of Pool Receivables to be deposited
directly with a Lock-Box Bank, and in the case of each other
Seller Party, not give any contrary or conflicting
instructions, and, upon the request of Servicer or the Agent,
confirm such instructions by Servicer or take such other action
as may be reasonably required to give effect to such
instructions.
(i) Sale Agreement. Perform and comply in all material respects
with all of its covenants and agreements set forth in the Sale
Agreement.
SECTION 7.02.Reporting Requirements of Seller Parties. From
the date hereof until the Final Payout Date, unless the Agent
and the Required Purchasers shall otherwise consent in writing,
Seller Parties will furnish to the Agent and each Purchaser:
(a) Quarterly Financial Statements. As soon as available and in
any event within 45 days after the end of each of the first
three quarters of each fiscal year of InaCom, copies of the
quarterly financial reports, on Form 10-Q, as filed with the
SEC (or if InaCom is no longer required to file such Form 10-Q,
InaCom shall furnish financial reports containing the
information typically found on Form 10-Q), duly certified by
the chief financial officer or treasurer of InaCom, together
with a certificate from such officer containing a computation
of, and showing compliance
with, the financial restrictions contained in Section 7.05;
(b) Annual Financial Statements. As soon as available and in
any event within 90 days after the end of each fiscal year of
InaCom, copies of the annual report, on Form 10-K, as filed
with the SEC (or if InaCom is no longer required to file such
Form 10-K, InaCom shall furnish such financial reports
containing information typically found on Form 10-K), together
with an audit opinion with respect thereto by KPMG Peat Marwick
or other independent certified public accountants of nationally
recognized standing selected by InaCom, together with a
certificate from such accountants containing a computation of,
and showing compliance with, the financial restrictions
contained in Section 7.05;
(c) Reports to Holders and Exchanges. In addition to the
reports required by subsections (a) and (b) next above,
promptly upon the Agent's request, copies of any reports
specified in such request which any Seller Party sends to any
of its securityholders, and any reports or registration
statements that any Seller Party files with the Securities and
Exchange Commission or any national securities exchange other
than registration statements relating to employee benefit plans
and to registrations of securities for selling securities;
(d) ERISA. Promptly after the filing or receiving thereof,
copies of all reports and notices with respect to any
Reportable Event defined in Article IV of ERISA which any
Seller Party files under ERISA with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or which such Seller Party receives from
the Pension Benefit Guaranty Corporation;
(e) Liquidation Events, etc. As soon as possible and in any
event within five Business Days after obtaining knowledge of
the occurrence of each Liquidation Event and each Unmatured
Liquidation Event or any "Purchase and Sale Termination Event"
under the Sale Agreement, a written statement of the chief
financial officer, treasurer or chief accounting officer of a
Seller Party setting forth details of such event and the action
that such Seller Party take with respect thereto;
(f) Litigation. As soon as possible and in any event within ten
Business Days of any Seller Party's knowledge thereof, notice
of (i) any litigation, investigation or proceeding which may
exist at any time which could reasonably be expected to have a
Material Adverse Effect and (ii) any development in previously
disclosed litigation which development could reasonably be
expected to have a Material Adverse Effect;
(g) Audit of Pool Receivables. As soon as available and in any
event by the end of each fiscal year of Seller, an audit
report, prepared by the Agent or other Person reasonably
acceptable to the Agent, as of the end of such fiscal year,
substantially in the form of the report delivered pursuant to
Section 5.01(l) and covering such other matters as the Agent
may reasonably request in order to protect the interests of the
Agent or any Purchaser under or as contemplated by this
Agreement;
(h) Change in Credit and Collection Policy. Prior to its
effective date, notice of (i) any material change in the
character of any Seller Party's business, and (ii) any material
change in the Credit and Collection Policy; and
(i) Other. Promptly, from time to time, such other information,
documents, records or reports respecting the Receivables or the
condition or operations, financial or otherwise, of any Seller
Party as the Agent or any Purchaser may from time to time
reasonably request in order to protect the interests of the
Agent or any Purchaser under or as contemplated by this
Agreement.
SECTION 7.03. Negative Covenants of Seller Parties. From the
date hereof until the Final Payout Date, no Seller Party will,
without the prior written consent of the Agent and the Required
Purchasers:
(a) Sales, Liens, Etc. (i) Except as otherwise provided herein
and in the other Transaction Documents, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or
create or suffer to exist any Lien upon or with respect to, any
Pool Receivable or any Related Asset, or any interest therein,
or any lock-box account to which any Collections of any Pool
Receivable are sent, or any right to receive income or proceeds
from or in respect of any of the foregoing, and (ii) in the
case of Servicer, not assert any interest in the Receivables,
except as Servicer.
(b) Extension or Amendment of Receivables. Except as otherwise
permitted in Section 8.02(c), extend, amend or otherwise modify
the terms of any Pool Receivable, or amend, modify or waive any
material term or condition of any Contract related thereto.
(c) Change in Business or Credit and Collection Policy. Make or
permit to be made any change in the character of its business
or in the Credit and Collection Policy, which change would, in
either case, impair the collectibility of any significant
portion of the Pool Receivables or otherwise adversely affect
the interests or remedies of the Agent or Purchaser under this
Agreement or any other Transaction Document.
(d) Change in Payment Instructions to Obligors. Add or
terminate any bank as a Lock-Box Bank from those listed in
Schedule 6.01(o) or make any change in its instructions to
Obligors regarding payments to be made to Seller or Servicer or
payments to be made to any Lock-Box Bank (except for a change
in instructions solely for the purpose of directing Obligors to
make such payments to another existing Lock-Box Bank), unless
(i) the Agent shall have received prior written notice of such
addition, termination or change and (ii) the Agent shall have
received duly executed copies of Lock-Box Agreements with each
new Lock-Box Bank.
(e) Deposits to Lock-Box Accounts. Deposit or otherwise credit,
or cause or permit to be so deposited or credited, to any lock
box account or other account covered by any Lock-Box Agreement,
or any other account maintained by Seller or Servicer for the
purpose of receiving Collections on Pool Receivables, any cash
or cash proceeds other than Collections of Pool Receivables.
(f) Changes to Other Documents. Enter into any amendment or
modification of, or supplement to, the Sale Agreement or
Seller's Certificate of Incorporation.
(g) Fundamental Changes. Wind up, liquidate or dissolve its
affairs or enter into any transaction or series of related
transactions of merger or consolidation, acquire all or
substantially all of the assets or any stock of any class of,
or any partnership or joint venture interest in, any other
Person, or convey, sell, lease or otherwise dispose of (or
agree to do any of the foregoing at any future time) its
property or assets in one transaction or a series of related
transactions in an aggregate amount equal to or greater than
10% of the total consolidated assets of InaCom (whether now owned or
hereafter acquired), or in any amount in the case of Seller, except that
(i) any Subsidiary (other than Seller) of InaCom may merge into
InaCom; provided that InaCom shall at all times be the
continuing corporation; (ii) any Subsidiary of InaCom, other
than Seller, may merge into or consolidate with another wholly-
owned Subsidiary of InaCom; (iii) InaCom may merge or
consolidate with any Person other than Seller; provided that
(A) InaCom shall at all times be the continuing or surviving
corporation and (B) no Liquidation Event or Unmatured
Liquidation Event shall have occurred and be continuing or
shall occur as a result of such merger or consolidation; (iv)
Seller Parties may enter into and perform the transactions
contemplated by this Agreement; and (v) InaCom may acquire all
or substantially all of the assets or any stock of any class
of, or any partnership or joint venture interest in, any other
Person, provided that (A) InaCom has given not less than five
(5) Business Days' prior notice of such transaction to the
Agent and (B) no Liquidation Event or Unmatured Liquidation
Event shall have occurred and be continuing or shall occur as a
result of such transaction.
(h) Restricted Payments by Seller. In the case of Seller,
purchase or redeem any shares of the capital stock of Seller,
(A) declare or pay any dividends thereon (other than stock
dividends), make any distribution to stockholders or set aside
any funds for any such purpose, or (B) pay any principal amount
of any Initial Purchaser Note (as defined in the Sale
Agreement), except that Seller may pay all or a portion of such
principal amount on the Settlement Date for any Settlement
Period, after making any payment required to be made by Seller
on such Settlement Date in accordance with the last sentence of
Section 3.01(c)(ii) if after giving effect to such payment the
Purchasers' Total Investments does not exceed the Purchase
Limit and the Asset Interest does not exceed the Allocation
Limit and Seller's net worth (determined in accordance with
GAAP) is not less than $2,000,000.
(i) Seller Indebtedness. In the case of Seller, incur or permit
to exist any indebtedness or liability on account of deposits
or advances or for borrowed money or for the deferred purchase
price of any property or services, except (A) indebtedness of
Seller to the Originators incurred in accordance with the Sale
Agreement, (B) current accounts payable arising under the
Transaction Documents and not overdue and (C) other current
accounts payable arising in the ordinary course of business and
not overdue, in an aggregate amount at any time outstanding not
to exceed $1,000.
(j) Negative Pledges. Enter into or assume any agreement (other
than this Agreement and the other Transaction Documents)
prohibiting the creation or assumption of any Lien upon any
Receivables or Related Assets, whether now owned or hereafter
acquired, except as contemplated by the Transaction Documents,
or otherwise prohibiting or restricting any transaction
contemplated hereby or by the other Transaction Documents.
SECTION 7.04. Separate Corporate Existence of Seller. Each
Seller Party hereby acknowledges that each Purchaser and the
Agent are entering into the transactions contemplated hereby in
reliance upon Seller's identity as a legal entity separate from
Servicer and its other Affiliates. Therefore, each Seller
Party shall take all steps specifically required by the Agent
to continue Seller's identity as a separate legal entity and to
make it apparent to third Persons that Seller is an entity with
assets and liabilities distinct from those of its Affiliates,
and is not a division of InaCom or any other Person. Without
limiting the foregoing, each Seller Party will take such
actions as shall be required in order that:
(i) Seller will be a limited purpose corporation whose primary
activities are restricted in its Certificate of Incorporation
to purchasing or otherwise acquiring from the Originators,
owning, holding, granting security interests, or selling
interests, in Pool Assets, entering into agreements for the
selling and servicing of the Receivables Pool, and conducting
such other activities as it deems necessary or appropriate to
carry out its primary activities;
(ii) Not less than one member of Seller's Board of Directors
(the "Independent Director") shall be an individual who is not,
and never has been, a direct, indirect or beneficial
stockholder, officer, director, employee, affiliate, associate,
material supplier or material customer of InaCom or any of its
Affiliates. The certificate of incorporation of Seller shall
provide that (i) Seller's Board of Directors shall not approve,
or take any other action to cause the filing of, a voluntary
bankruptcy petition with respect to Seller unless the
Independent Director shall approve the taking of such action in
writing prior to the taking of such action and (ii) such
provisions cannot be amended without the prior written consent
of the Independent Director;
(iii) The Independent Director shall not at any time serve as
a trustee in bankruptcy for Seller or any Affiliate thereof;
(iv) Any employee, consultant or agent of Seller will be
compensated from Seller's funds for services provided to
Seller. Seller will not engage any agents other than its
attorneys, auditors and other professionals, and a servicer and
any other agent contemplated by the Transaction Documents for
the Receivables Pool, which servicer will be fully compensated
for its services by payment of the Servicer's Fee;
(v) Seller will contract with Servicer to perform for Seller
all operations required on a daily basis to service the
Receivables Pool. Seller will pay Servicer the Servicer's Fee
pursuant hereto. Seller will not incur any material indirect
or overhead expenses for items shared with InaCom (or any other
Affiliate thereof) which are not reflected in the Servicer's
Fee. To the extent, if any, that Seller (or any other
Affiliate thereof) share items of expenses not reflected in the
Servicer's Fee, for legal, auditing and other professional
services and directors' fees, such expenses will be allocated
to the extent practical on the basis of actual use or the value
of services rendered, and otherwise on a basis reasonably
related to the actual use or the value of services rendered, it
being understood that InaCom shall pay all expenses relating to
the preparation, negotiation, execution and delivery of the
Transaction Documents, including, without limitation, legal,
agency and other fees;
(vi) Seller's operating expenses will not be paid by any other
Seller Party or other Affiliate of Seller;
(vii) Seller will have its own stationery;
(viii) The books of account report's financial and
corporate records of Seller will be maintained separately from
those of Servicer and any other Affiliate of Seller;
(ix) Any financial statements of any Seller Party or
Affiliate thereof which are consolidated to include Seller will
contain detailed notes clearly stating that (A) all of Seller's
assets are owned by Seller, and (B) Seller is a separate
corporate entity with its own separate creditors that will be
entitled to be satisfied out of Seller's assets prior to any
value in Seller becoming available to Seller's equity holders;
and the accounting records and the published financial
statements of the Originators will clearly show that, for
accounting purposes, the Pool Assets have been sold by the
Originators to the Seller;
(x) Seller's assets will be maintained in a manner that
facilitates their identification and segregation from those of
Servicer and the other Affiliates;
(xi) Each Affiliate of Seller will strictly observe
corporate formalities in its dealings with Seller, and funds or
other assets of Seller will not be commingled with those of any
of its Affiliates;
(xii) No Affiliate of Seller will maintain joint bank
accounts with Seller or other depository accounts with Seller
to which any such Affiliate (other than in its capacity as the
Servicer hereunder or under the Sale Agreement) has independent
access;
(xiii) No Affiliate of Seller shall, directly or indirectly,
name Seller or enter into any agreement to name Seller as a
direct or contingent beneficiary or loss payee on any insurance
policy covering the property of any Affiliate of Seller;
(xiv) No Affiliate of Seller will at any time pool any of
its funds with any funds of Seller;
(xv) Each Affiliate of Seller will maintain arm's-length
relationships with Seller, and each Affiliate of Seller that
renders or otherwise furnishes services or merchandise to
Seller will be compensated by Seller at market rates for such
services or merchandise;
(xvi) No Affiliate of Seller will be, nor will it hold
itself out to be, responsible for the debts of Seller or the
decisions or actions in respect of the daily business and
affairs of Seller. InaCom and Seller will immediately correct
any known misrepresentation with respect to the foregoing and
they will not operate or purport to operate as an integrated
single economic unit with respect to each other or in their
dealing with any other entity; and
(xvii) Seller will keep correct and complete books and records
of account and minutes of the meetings and other proceedings of
its stockholder and board of directors, as applicable, and the
resolutions, agreements and other instruments of Seller will be
continuously maintained as official records by Seller; and
(xviii) Each of Seller, on the one hand, and the Originators,
on the other hand, will conduct its business solely in its own
corporate name and in such a separate manner so as not to
mislead others with whom they are dealing.
SECTION 7.05 Financial Covenants. From the date hereof until
the Final Payout Date, InaCom will:
(a) Tangible Net Worth. Maintain a Tangible Net Worth of not
less than $90,000,000.
(b) Liabilities to Tangible Net Worth. Not permit the ratio
of Total Liabilities to Tangible Net Worth to exceed 6.0 to
1.0.
(c) Losses. Not incur losses greater than 8% of Tangible Net
Worth in any fiscal quarter.
(d) Consecutive Losses. Not incur losses in any three (3)
consecutive fiscal quarters.
(e) Receivables Outstanding Ratio. Not permit the Receivables
Outstanding Ratio to exceed 45 days.
For purposes of all calculations with respect to the foregoing
financial covenants, InaCom will include the Receivables as
assets and the Purchasers' Total Investment as short term debt.
-----------------------------
ARTICLE VIII
ADMINISTRATION AND COLLECTION
-----------------------------
SECTION 8.01.Designation of Servicer.
(a) InaCom as Initial Servicer. The servicing, administering
and collection of the Pool Receivables shall be conducted by
the Person designated as Servicer hereunder from time to time
in accordance with this Section 8.01. Until the Agent gives to
InaCom a Successor Notice (as defined in Section 8.01(b)),
InaCom is hereby designated as, and hereby agrees to perform
the duties and obligations of, Servicer pursuant to the terms
hereof.
(b) Successor Notice; Servicer Transfer Events. Upon InaCom's
receipt of a notice from the Agent of the Agent's designation
of a new Servicer (a "Successor Notice"), InaCom agrees that it
will terminate its activities as Servicer hereunder in a manner
that the Agent believes will facilitate the transition of the
performance of such activities to the new Servicer, and the
Agent (or its designee) shall assume each and all of InaCom's
obligations to service and administer such Receivables, on the
terms and subject to the conditions herein set forth, and
InaCom shall use its best efforts to assist the Agent (or its
designee) in assuming such obligations. The Agent agree not to
give InaCom a Successor Notice until after the occurrence and
during the continuance of any Liquidation Event (any such
Liquidation Event being herein called a "Servicer Transfer
Event"), in which case such Successor Notice may be given at
any time in the Agent's discretion. If InaCom disputes the
occurrence of a Servicer Transfer Event, InaCom may take
appropriate action to resolve such dispute; provided that
InaCom must terminate its activities hereunder as Servicer and
allow the newly designated Servicer to perform such activities
on the date provided by the Agent as described above,
notwithstanding the commencement or continuation of any
proceeding to resolve the aforementioned dispute, if the Agent
reasonably determines, in good faith, that such termination is
necessary or advisable to protect Purchasers' interests
hereunder.
(c) Subcontracts. Servicer may, with the prior consent of the
Agent, subcontract with any other Person for servicing,
administering or collecting the Pool Receivables, provided that
Servicer shall remain liable for the performance of the duties
and obligations of Servicer pursuant to the terms hereof and
such subservicing arrangement may be terminated at the Agent's
request at anytime after a Successor Notice has been given.
(d) Back-up Servicer. Within thirty (30) days after the request
of the Agent made after the occurrence of a Back-up Servicer
Event, InaCom shall enter into a back-up servicing agreement,
in form and substance satisfactory to the Agent, with a back-up
servicer experienced in servicing portfolios similar to the
Pool Receivables who is acceptable to the Agent.
SECTION 8.02.Duties of Servicer.
(a) Appointment; Duties in General. Each of Seller, each
Purchaser and the Agent hereby appoints as its agent Servicer,
as from time to time designated pursuant to Section 8.01, to
enforce its rights and interests in and under the Pool
Receivables, the Related Security and the related Contracts.
Servicer shall take or cause to be taken all such actions as
may be necessary or advisable to collect each Pool Receivable
from time to time, all in accordance with applicable laws,
rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy.
(b) Allocation of Collections; Segregation. Servicer shall set
aside for the account of Seller and Purchasers their respective
allocable shares of the Collections of Pool Receivables in
accordance with Section 1.03 but shall not be required (unless
otherwise requested by the Agent) to segregate the funds
constituting such portions of such Collections prior to the
remittance thereof in accordance with said Sections. If
instructed by the Agent, within five (5) (or three (3), if a
Liquidation Event or Back-up Servicer Event has occurred and is
continuing) Business Days of receipt by Servicer of such
instruction, Servicer shall segregate and deposit with a bank
designated by the Agent, with the approval of the Agent,
Purchasers' share of Collections of Pool Receivables, on the
first Business Day following receipt by Servicer of such
Collections in immediately available funds.
(c) Modification of Receivables. So long as no Liquidation
Event and no Unmatured Liquidation Event shall have occurred
and be continuing, InaCom, while it is Servicer, may, in
accordance with the Credit and Collection Policy, (i) extend
the maturity or adjust the Unpaid Balance of any Defaulted
Receivable as InaCom may reasonably determine to be appropriate
to maximize Collections thereof, provided that no Receivable
may be extended for more than 150 days, and (ii) adjust the
Unpaid Balance of any Receivable to reflect the reductions or
cancellations described in the first sentence of Section
3.02(a).
(d) Documents and Records. Each Seller Party shall deliver to
Servicer, and Servicer shall hold in trust for Seller and
Purchasers in accordance with their respective interests, all
documents, instruments and records (including, without
limitation, computer tapes or disks) that evidence or relate to
Pool Receivables.
(e) Certain Duties to Seller. Servicer shall, as soon as
practicable following receipt, turn over to Seller (i) that
portion of Collections of Pool Receivables representing its
undivided percentage interest therein, less, in the event that
neither InaCom nor any other Seller Party or Affiliate thereof
is Servicer, all reasonable and appropriate out-of-pocket costs
and expenses of Servicer of servicing, collecting and
administering the Pool Receivables to the extent not covered by
the Servicer's Fee received by it, and (ii) the Collections of
any Receivable which is not a Pool Receivable. Servicer, if
other than InaCom or any other Seller Party or Affiliate
thereof, shall, as soon as practicable upon demand, deliver to
Seller all documents, instruments and records in its possession
that evidence or relate to Receivables of Seller other than
Pool Receivables, and copies of documents, instruments and
records in its possession that evidence or relate to Pool
Receivables.
(f) Termination. Servicer's authorization under this Agreement
shall terminate upon the Final Payout Date.
(g) Power of Attorney. Seller hereby grants to Servicer an
irrevocable power of attorney, with full power of substitution,
coupled with an interest, to take in the name of Seller all
steps which are necessary or advisable to endorse, negotiate or
otherwise realize on any writing or other right of any kind
held or transmitted by Seller or transmitted or received by the
Agent or any Purchaser (whether or not from Seller) in
connection with any Receivable.
SECTION 8.03. Rights of the Agent.
(a) Notice to Obligors. At any time when a Liquidation Event
has occurred and is continuing, the Agent may notify the
Obligors of Pool Receivables, or any of them, of the ownership
of the Asset Interest by the Agent, for the benefit of
Purchasers.
(b) Notice to Lock-Box Banks. At any time following the earlier
to occur of (i) the occurrence of a Liquidation Event and
(ii) the warranty in Section 6.01(i)(x) shall no longer be
true, the Agent is hereby authorized to give notice to the Lock-
Box Banks, as provided in the Lock-Box Agreements and Lock-Box
Notices, of the transfer to the Agent of dominion and control
over the lock-boxes and related accounts to which the Obligors
of Pool Receivables make payments. Seller and Servicer hereby
transfer to the Agent, effective when the Agent shall give
notice to the Lock-Box Banks as provided in the Lock-Box
Agreements and Lock-Box Notices, the exclusive dominion and
control over such lock-boxes and accounts, and shall take any
further action that the Agent may reasonably request to effect
such transfer.
(c) Rights on Servicer Transfer Event. At any time following
the designation of a Servicer other than InaCom pursuant to
Section 8.01:
(i) The Agent may direct the Obligors of Pool Receivables, or
any of them, to pay all amounts payable under any Pool
Receivable directly to the Agent or its designee.
(ii) Any Seller Party shall, at the Agent's request and at
such Seller Party's expense, give notice of the Agent's, for
the benefit of the Purchasers, ownership and security interests
in the Pool Receivables to each said Obligor and direct that
payments be made directly to the Agent or its designee.
(iii) Each Seller Party shall, at the Agent's request, (A)
assemble all of the documents, instruments and other records
(including, without limitation, computer programs, tapes and
disks) which evidence the Pool Receivables, and the related
Contracts and Related Security, or which are otherwise
necessary or desirable to collect such Pool Receivables, and
make the same available to the successor Servicer at a place
selected by the Agent, and (B) segregate all cash, checks and
other instruments received by it from time to time constituting
Collections of Pool Receivables in a manner acceptable to the
Agent and promptly upon receipt, remit all such cash, checks
and instruments, duly endorsed or with duly executed
instruments of transfer, to the successor Servicer.
(iv) Each Seller Party and each Purchaser hereby authorizes
the Agent, and grants to the Agent an irrevocable power of
attorney (which shall terminate on the Final Payout Date), to
take any and all steps in such Seller Party's name and on
behalf of Seller Parties and Purchasers which are necessary or
desirable, in the determination of the Agent, to collect all
amounts due under any
and all Pool Receivables, including, without limitation,
endorsing any Seller Party's name on checks and other
instruments representing Collections and enforcing such Pool
Receivables and the related Contracts.
SECTION 8.04. Responsibilities of Seller Parties. Anything
herein to the contrary notwithstanding:
(a) Contracts. Each Seller Party shall perform all of its
obligations (if any) under the Contracts related to the Pool
Receivables and under the related purchase orders and other
agreements to the same extent as if the Asset Interest had not
been sold hereunder, and the exercise by the Agent or its
designee of its rights hereunder shall not relieve any Seller
Party from such obligations.
(b) Limitation of Liability. None of the Agent nor any
Purchaser shall not have any obligation or liability with
respect to any Pool Receivables, Contracts related thereto or
any other related purchase orders or other agreements (other
than liability resulting from their gross negligence or willful
misconduct), nor shall any of them be obligated to perform any
of the obligations of any Seller Party or any Originator
thereunder.
SECTION 8.05. Further Action Evidencing Purchases and
Reinvestments.
(a) Further Assurances. Each Seller Party agrees that from time
to time, at its expense, it will promptly execute and deliver
all further instruments and documents, and take all further
action that the Agent or its designee may reasonably request in
order to perfect, protect or more fully evidence the Purchases
hereunder and the resulting Asset Interest, or to enable any
Purchaser or the Agent or its designee to exercise or enforce
any of their respective rights hereunder or under any
Transaction Document in respect thereof. Without limiting the
generality of the foregoing, each Seller Party will:
(i) upon the request of the Agent, execute and file such
financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as
may be necessary or appropriate, in accordance with the terms
of this Agreement;
(ii) upon the request of the Agent after the occurrence and
during the continuance of a Liquidation Event, mark
conspicuously each Contract evidencing each Pool Receivable
with a legend, acceptable to the Agent, evidencing that the
Asset Interest has been sold in accordance with this Agreement;
and
(iii) mark its master data processing records evidencing such
Pool Receivables and related Contracts with a legend,
acceptable to the Agent, evidencing that the Asset Interest has
been sold in accordance with this Agreement.
(b) Additional Financing Statements; Performance by Agent. Each
Seller Party hereby authorizes the Agent or its designee to
file one or more financing or continuation statements, and
amendments thereto and assignments thereof, relative to all or
any of the Pool Receivables and the Related Assets now existing
or hereafter arising in the name of any Seller Party. If any
Seller Party fails to promptly execute and deliver to the Agent
any financing statement or continuation statement or amendment
thereto or assignment thereof requested by the Agent, each
Seller Party hereby authorizes the Agent to execute such
statement on behalf of such Seller Party. If any Seller Party
fails to perform any
of its agreements or obligations under this Agreement, the
Agent or its designee may (but shall not be required to) itself
perform, or cause performance of, such agreement or obligation,
and the reasonable expenses of the Agent or its designee
incurred in connection therewith shall be payable by the Seller
Parties as provided in Section 14.05.
(c) Continuation Statements; Opinion. Without limiting the
generality of subsection (a), Seller will, not earlier than six
(6) months and not later than three (3) months prior to the
fifth anniversary of the date of filing of the financing
statements referred to in Section 5.01(f) or any other
financing statement filed pursuant to this Agreement or in
connection with any Purchase hereunder, if the Final Payout
Date shall not have occurred:
(i) execute and deliver and file or cause to be filed an
appropriate continuation statement with respect to such
financing statement; and
(ii) deliver or cause to be delivered to the Agent an opinion
of the counsel for Seller Parties, in form and substance
reasonably satisfactory to the Agent, confirming and updating
the opinion delivered pursuant to Section 5.01(i)(i) to the
effect that the Asset Interest hereunder continues to be a
valid and perfected ownership or security interest, subject to
no other Liens of record except as provided herein or otherwise
permitted hereunder.
SECTION 8.06. Application of Collections. Any payment by an
Obligor in respect of any indebtedness owed by it to any
Originator or Seller shall, except as otherwise specified by
such Obligor or required by the underlying Contract or law, be
applied, first, as a Collection of any Pool Receivable or
Receivables then outstanding of such Obligor in the order of
the age of such Pool Receivables, starting with the oldest of
such Pool Receivables and, second, to any other indebtedness of
such Obligor.
-----------------
ARTICLE IX
SECURITY INTEREST
-----------------
SECTION 9.01. Grant of Security Interest. To secure all
obligations of Seller arising in connection with this Agreement
and each other Transaction Document, whether now or hereafter
existing, due or to become due, direct or indirect, or absolute
or contingent, including, without limitation, all Indemnified
Amounts, payments on account of Collections received or deemed
to be received and fees, in each case pro rata according to the
respective amounts thereof, Seller hereby assigns and pledges
to the Agent, for the benefit of Purchasers, and hereby grants
to the Agent, for the benefit of Purchasers, a security
interest in, all of Seller's right, title and interest now or
hereafter existing in, to and under (a) all the Pool
Receivables and Related Assets (including specifically any
undivided interest therein retained by Seller hereunder), (b)
the Originator Notes, and (c) all proceeds of any of the
foregoing.
SECTION 9.02. Further Assurances. The provisions of Section
8.05 shall apply to the security interest granted under Section
9.01 as well as to the Purchases, Reinvestments and all the
Asset Interests hereunder.
SECTION 9.03. Remedies. Upon the occurrence of a Liquidation
Event, the Agent and each Purchaser shall have, with respect to
the collateral granted pursuant to Section 9.01, and in
addition to all other rights and remedies available to any
Purchaser or the Agent under this Agreement and the other
Transaction Documents or other applicable law, all the rights
and remedies of a secured party upon default under the UCC.
-------------------
ARTICLE X
LIQUIDATION EVENTS
------------------
SECTION 10.01. Liquidation Events. The following events shall
be "Liquidation Events" hereunder:
(a) Servicer (if any Seller Party or Affiliate thereof is
Servicer) or Seller (in the case of clause (iii) below) (i)
shall fail to perform or observe any term, covenant or
agreement that is an obligation of Servicer hereunder (other
than as referred to in clause (ii) below) and such failure
shall remain unremedied for three (3) Business Days, or (ii)
shall fail to make any payment or deposit to be made by it
hereunder when due; or
(b) Any representation or warranty made or deemed to be made by
any Seller Party (or any of its officers) under or in
connection with this Agreement or any Information Package or
other information or report delivered pursuant hereto shall
prove to have been false or incorrect in any material respect
when made; or
(c) (i) InaCom shall fail to perform its obligations pursuant
to Section 8.01(d), or (ii) any Seller Party shall fail to
perform or observe any other term, covenant or agreement
contained in this Agreement or any of the other Transaction
Documents on its part to be performed or observed and any such
failure shall remain unremedied for thirty (30) Business Days
after (A) written notice thereof shall have been given by the
Agent to any Seller Party or (B) any Seller Party has actual
knowledge thereof; or
(d) (i) A default shall have occurred and be continuing under
any instrument or agreement evidencing, securing or providing
for the issuance of indebtedness for borrowed money in excess
of $500,000 of, or guaranteed by, any Seller Party or any
Material Subsidiary, which default either (A) if unremedied,
uncured, or unwaived (with or without the passage of time or
the giving of notice or both) would permit acceleration of the
maturity of such indebtedness and such default shall have
continued unremedied, uncured or unwaived for a period of 45
days after the related Seller Party or Material Subsidiary has
knowledge thereof or (B) is a failure to pay such indebtedness
at maturity or results in the acceleration of such
indebtedness; (ii) a "Purchase and Sale Termination Event"
shall have occurred and be continuing under the Sale Agreement;
(iii) any default under any other agreement or instrument
relating to the purchase of receivables of any Seller Party or
any Material Subsidiary, or any other event, shall occur and
shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of
such default (A) is to permit the termination of, the
commitment of any party to such agreement or instrument to
purchase receivables or the right of such Seller Party or such
Material Subsidiary to reinvest in receivables the principal
amount paid by any party to such agreement or instrument for
its interest in receivables and such default continues
unremedied, uncured or unwaived for a period of 45 days after
the related Seller Party or Material Subsidiary has knowledge
thereof or (B) is to terminate such commitment or right; or (iv) a default or
trigger event shall occur under any asset securitization
agreement or arrangement entered into by any Seller Party or
Material Subsidiary and such default or trigger event continues
unremedied, uncured or unwaived for a period of 45 days after
the related Seller Party or Material Subsidiary has knowledge
thereof; or
(e) An Event of Bankruptcy shall have occurred and remain
continuing with respect to Servicer, any Seller Party, or any
Material Subsidiary of any Seller Party; or
(f) (i) Any litigation (including, without limitation,
derivative actions), arbitration proceedings or governmental
proceedings not disclosed in writing by Seller Parties to the
Agent and each Purchaser prior to the date of execution and
delivery of this Agreement is pending against any Seller
Parties or any Material Subsidiary and known to a Seller Party
on the date hereof, or (ii) any material development not so
disclosed has occurred in any litigation (including, without
limitation, derivative actions), arbitration proceedings or
governmental proceedings so disclosed, which, in the case of
clause (i) or (ii), in the opinion of the Agent, has a
reasonable likelihood of having a Material Adverse Effect; or
(g) (i) The Dilution Ratio at any Cut-Off Date exceeds 6% or
(ii) the average of the Dilution Ratios for any three
consecutive CutOff Dates exceeds 5%; or
(h) (i) The Default Ratio at any Cut-Off Date exceeds 2% or
(ii) the average of the Default Ratios at any three consecutive
Cut-Off Dates exceeds 1.75%; or
(i) Servicer (if any Seller Party or Affiliate thereof is
Servicer) shall make any material change in the policies as to
origination of Receivables or in the Credit and Collection
Policy without the prior written consent of the Agent; or
(j) On any Settlement Date, after giving effect to the payments
made under Section 3.01(c), (i) the Asset Interest exceeds the
Allocation Limit or (ii) the Purchasers' Total Investments
exceeds the Purchase Limit; or
(k) Either (i) the Default to Liquidation Ratio at any Cut-Off
Date is greater than 2% or (ii) the average of the Default to
Liquidation Ratios at any three consecutive Cut-Off Dates is
greater than 1.75%; or
(l) There shall have occurred any event which materially
adversely impairs the ability of InaCom to originate
Receivables of a credit quality which are at least of the
credit quality of the Receivables included in the first
Purchase; or
(m) Any Seller Party is subject to a Change-in-Control; or
(n) The Internal Revenue Service shall file notice of a lien
pursuant to Section 6323 of the Internal Revenue Code with
regard to any of the Receivables or Related Assets and such
lien shall not have been released within seven (7) days, or the
Pension Benefit Guaranty Corporation shall, or shall indicate
its intention to, file notice of a lien pursuant to Section
4068 of the Employee Retirement Income Security Act of 1974
with regard to any of the Receivables or Related Assets; or
(o) (i) The 31-60 Delinquency Ratio at any Cut-Off Date exceeds
10%, (ii) the 61-90 Delinquency Ratio at any Cut-Off Date
exceeds 3.5% or (iii) the 91-120 Delinquency Ratio at any Cut-
Off Date
exceeds 2.5%.
SECTION 10.02. Remedies.
(a) Optional Liquidation. Upon the occurrence of a Liquidation
Event (other than a Liquidation Event described in subsection
(e) of Section 10.01), the Agent shall, at the request, or may
with the consent, of the Required Purchasers, by notice to
Seller declare the Purchase Termination Date to have occurred
and the Liquidation Period to have commenced.
(b) Automatic Liquidation. Upon the occurrence of a Liquidation
Event described in subsection (e) of Section 10.01, the
Purchase Termination Date shall occur and the Liquidation
Period shall commence automatically.
(c) Additional Remedies. Upon any Purchase Termination Date
pursuant to this Section 10.02, no Purchases or Reinvestments
thereafter will be made, and the Agent and each Purchaser shall
have, in addition to all other rights and remedies under this
Agreement or otherwise, all other rights and remedies provided
under the UCC of each applicable jurisdiction and other
applicable laws, which rights shall be cumulative.
----------
ARTICLE XI
THE AGENT
----------
SECTION 11.01. Authorization and Action. Each Purchaser hereby
appoints and authorizes the Agent (or its designees) to take
such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental
thereto.
SECTION 11.02. Agent's Reliance, Etc. The Agent and its
directors, officers, agents or employees shall not be liable
for any action taken or omitted to be taken by it or them in
good faith under or in connection with the Transaction
Documents (including, without limitation, the servicing,
administering or collecting Pool Receivables as Servicer
pursuant to Section 8.01), except for its or their own breach
of the terms of the applicable terms of the Transaction
Documents or its or their own gross negligence or willful
misconduct. Without limiting the generality of the foregoing,
the Agent: (a) may consult with legal counsel (including
counsel for Seller), independent certified 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; (b) makes no warranty or representation to any
Purchaser or any other holder of any interest in Pool
Receivables and shall not be responsible to any Purchaser or
any such other holder for any statements, warranties or
representations made by any Seller Party in or in connection
with any Transaction Document; (c) shall not have any duty to
ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of any Transaction
Document on the part of any Seller Party or to inspect the
property (including the books and records) of any Seller Party;
(d) shall not be responsible to Purchaser or any other holder
of any interest in Pool Receivables for the due execution,
legality, validity, enforceability, genuineness, sufficiency or
value of any Transaction Document (except by and against the
Agent); and (e) shall incur no liability under or in respect of
this Agreement by acting upon any notice (including notice by
telephone where permitted herein), consent, certificate or other
instrument or writing (which may be by facsimile or telex) in
good faith believed by it to be genuine and signed or sent by
the proper party or parties.
SECTION 11.03. Norwest and Affiliates. Norwest and Norwest and
its Affiliates may generally engage in any kind of business
with any Seller Party or any Obligor, any of their respective
Affiliates and any Person who may do business with or own
securities of any Seller Party or any Obligor or any of their
respective Affiliates, all as if Norwest were not the Agent,
and without any duty to account therefor to Purchaser or any
other holder of an interest in Pool Receivables, but in any
event subject to Section 14.07. Norwest may be a Purchaser
hereunder, and may exercise its rights as a Purchaser as though
it were not the Agent.
SECTION 11.04. Indemnity. Each Purchaser agrees (which
agreement shall survive any termination of this Agreement) to
indemnify the Agent, pro rata according to such Purchaser's
Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever which may at any time be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising
out of this Agreement and the other Transaction Documents,
including the reimbursement of the Agent for all reasonable out-
of-pocket expenses (including attorneys' fees) incurred by the
Agent hereunder or in connection herewith or in enforcing the
obligations of any Seller Party under this Agreement and the
other Transaction Documents, in all cases as to which the Agent
is not reimbursed by the Seller; provided that no Purchaser
shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements determined
by a court of competent jurisdiction in a final proceeding to
have resulted from the Agent's gross negligence or willful
misconduct. The Agent shall not be required to take any action
hereunder or under any other Transaction Document, or to
prosecute or defend any suit in respect of this Agreement or
any other Transaction Document, unless indemnified to its
satisfaction by the Purchasers against loss, costs, liability,
and expense, which indemnity need not indemnify the Agent for
its gross negligence or willful misconduct. If any indemnity
in favor of the Agent shall become impaired, it may call for
additional indemnity and cease to do the acts indemnified
against until such additional indemnity is given. The Agent
may delegate its duties hereunder to Affiliates, agents or
attorneys-in-fact selected in good faith by the Agent.
SECTION 11.05. Credit Decisions. Each Purchaser acknowledges
that it has, independently of the Agent and each other
Purchaser, and based on the financial information referred to
in Section 6.01(i) and such other documents, information, and
investigations as it has deemed appropriate, made its own
credit decision to make its Purchases from time to time. Each
Purchaser also acknowledges that it will, independently of the
Agent and each other Purchaser, and based on such other
documents, information, and investigations as it shall deem
appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time
any rights and privileges available to it under this Agreement
or the other Transaction Documents.
SECTION 11.06. Notices, etc. to Agent. The Agent shall give
prompt notice to each Purchaser of each notice or request given
to the Agent by the Seller pursuant to the terms of this
Agreement and of each Liquidation Event or Unmatured Liquidation
Event of which the Agent has actual knowledge. The Agent will
promptly distribute to each Purchaser copies of all other
communications and financial statements received by the Agent
from the Seller for distribution to the Purchasers by the
Agent in accordance with the terms of this Agreement. The
Agent shall not be deemed to have actual knowledge of any
event unless an authorized corporate officer of the Agent has
discovered or has received actual notice of such event.
------------------------------------
ARTICLE XII
ASSIGNMENT OF A PURCHASER'S INTEREST
------------------------------------
SECTION 12.01. Restrictions on Assignments.
(a) Neither any Seller Party nor Norwest, individually or as the
Agent, may assign its rights, or delegate its duties hereunder
or any interest herein without the prior written consent of the
Required Purchasers. No Purchaser may assign its rights
hereunder (although it may delegate its duties hereunder as
expressly indicated herein) or its interest in the Asset
Interest (or any portion thereof) to any Person without the
prior written consent of Seller, which consent shall not be
unreasonably withheld, and the Agent; provided, however, that
any Purchaser may assign all of its rights and interests in the
Transaction Documents, together with all its interest in the
Asset Interest, to Clipper Receivables Corporation or to any
"bankruptcy remote" special purpose entity, the business of
which is administered by State Street Boston Capital
Corporation or any Affiliate thereof or Norwest, or any
Affiliate of Norwest, and Seller and InaCom hereby agree to
execute and deliver any amendments to this Agreement and the
other Transaction Documents that may be reasonably required to
effect such assignment and to reflect to change in the identity
of Purchaser. IBM Credit hereby agrees to notify Seller and
the Agent, on or before July 31, 1995, of its desire to assign
its interest in the Asset Interest to Clipper Receivables
Corporation and to act as a liquidity bank to Clipper
Receivables Corporation after such assignment. In the event
IBM Credit notifies Seller that IBM Credit does not desire to
assign its interest to Clipper Receivables Corporation and act
as a liquidity bank to Clipper, this Agreement will terminate
on the Termination Date.
(b) Seller agrees to advise the Agent within five Business Days
after notice to Seller of any proposed assignment by a
Purchaser of its interest in the Asset Interest (or any portion
thereof), not otherwise permitted under subsection (a), of
Seller's consent or non-consent to such assignment, and if it
does not consent, the reasons therefor.
SECTION 12.02. Rights of Assignee. Upon the assignment by a
Purchaser in accordance with this Article XII, the assignee
receiving such assignment shall have all of the rights of such
Purchaser with respect to the Transaction Documents and the
Asset Interest (or such portion thereof as has been assigned).
SECTION 12.03. Terms and Evidence of Assignment. Any assignment
of the Asset Interest (or any portion thereof) to any Person
which is otherwise permitted under this Article XII shall be
upon such terms and conditions as the assigning Purchaser and
the assignee may mutually agree, and may be evidenced by such
instrument(s) or document(s) as may be satisfactory to such
Purchaser, the Agent and the assignee.
---------------
ARTICLE XIII
INDEMNIFICATION
---------------
SECTION 13.01. Indemnities by Seller.
(a) General Indemnity. Without limiting any other rights which
any such Person may have hereunder or under applicable law,
Seller hereby agrees to indemnify each of the Agent, each
Purchaser, each of their respective Affiliates, and all
successors, transferees, participants and assigns and all
officers, directors, shareholders, controlling persons,
employees and agents of any of the foregoing (each an
"Indemnified Party"), forthwith on demand, from and against any
and all damages, losses, claims, liabilities and related costs
and expenses, including attorneys' fees and disbursements (all
of the foregoing being collectively referred to as "Indemnified
Amounts") awarded against or incurred by any of them arising
out of or relating to the Transaction Documents or the
ownership or funding of the Asset Interest or in respect of any
Receivable or any Contract, excluding, however, (a) Indemnified
Amounts to the extent determined by a court of competent
jurisdiction to have resulted from gross negligence or willful
misconduct on the part of such Indemnified Party or (b)
recourse (except as otherwise specifically provided in this
Agreement) for Defaulted Receivables. Without limiting the
foregoing, Seller shall indemnify each Indemnified Party for
Indemnified Amounts arising out of or relating to:
(i) the transfer by any Seller Party of any interest in any
Receivable other than the transfer of Receivables and related
property by the Originators to Seller pursuant to the Sale
Agreement, the transfer of an Asset Interest to the Agent, for
the benefit of Purchasers, pursuant to this Agreement and the
grant of a security interest to the Agent, for the benefit of
Purchasers, pursuant to Section 9.01;
(ii) any representation or warranty made by any Seller Party
(or any of its officers or Affiliates) under or in connection
with any Transaction Document, any Information Package or any
other information or report delivered by or on behalf of any
Seller Party pursuant hereto, which shall have been false,
incorrect or misleading in any material respect when made or
deemed made or delivered, as the case may be;
(iii) the failure by any Seller Party to comply with any
applicable law, rule or regulation with respect to any Pool
Receivable or the related Contract, or the nonconformity of any
Pool Receivable or the related Contract with any such
applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Agent, for
the benefit of Purchasers, an undivided percentage ownership
interest, to the extent of the Asset Interest, in the
Receivables in, or purporting to be in, the Receivables Pool,
free and clear of any Lien, other than a Lien arising solely as
a result of an act of a Purchaser or the Agent, whether
existing at the time of any Purchase or Reinvestment of such
Asset Interest or at any time thereafter;
(v) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the
UCC of any applicable jurisdiction or other applicable laws
with respect to any Receivables in, or purporting to be in, the
Receivables Pool, whether at the time of any Purchase or
Reinvestment or at any time thereafter;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool
(including, without limitation, a defense based on such
Receivables or the related Contract not being a legal, valid
and binding obligation of such Obligor enforceable against it
in accordance with its terms), or any other claim resulting
from the sale of the merchandise or services related to such
Receivable or the furnishing or failure to furnish such
merchandise or services;
(vii) any matter described in clause (i) or (ii) of
Section 3.02(a);
(viii) any failure of any Seller Party, as Servicer or
otherwise, to perform its duties or obligations in accordance
with the provisions of Article III or Article VIII;
(ix) any products liability claim arising out of or in
connection with merchandise or services that are the subject of
any Pool Receivable (it being understood that no Seller Party
is waiving its rights against any manufacturers);
(x) any claim of breach by any Seller Party of any related
Contract with respect to any Pool Receivable; or
(xi) any tax or governmental fee or charge (but not including
taxes upon or measured by net income), all interest and
penalties thereon or with respect thereto, and all out-of-
pocket costs and expenses, including the reasonable fees and
expenses of counsel in defending against the same, which may
arise by reason of the purchase or ownership of any Asset
Interest, or any other interest in the Pool Receivables or in
any goods which secure any such Pool Receivables.
(b) Contest of Tax Claim; After-Tax Basis. If any Indemnified
Party shall have notice of any attempt to impose or collect any
tax or governmental fee or charge for which indemnification
will be sought from any Seller Party under Section
13.01(a)(xi), such Indemnified Party shall give prompt and
timely notice of such attempt to Seller and Seller shall have
the right, at its expense, to participate in any proceedings
resisting or objecting to the imposition or collection of any
such tax, governmental fee or charge. Indemnification
hereunder shall be in an amount necessary to make the
Indemnified Party whole after taking into account any tax
consequences to the Indemnified Party of the payment of any of
the aforesaid taxes (including any deduction) and the receipt
of the indemnity provided hereunder or of any refund of any
such tax previously indemnified hereunder, including the effect
of such tax, deduction or refund on the amount of tax measured
by net income or profits which is or was payable by the
Indemnified Party.
(c) Contribution. If for any reason the indemnification
provided above in this Section 13.01 (and subject to the
exceptions set forth therein) is unavailable to an Indemnified
Party or is insufficient to hold an Indemnified Party harmless,
then Seller shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect
not only the relative benefits received by such Indemnified
Party on the one hand and Seller on the other hand but also the
relative fault of such Indemnified Party as well as any other
relevant equitable considerations.
SECTION 13.02. Indemnities by Servicer. Without limiting any
other rights which any Indemnified Party may have hereunder or
under applicable law, the Servicer hereby agrees to indemnify
each of the Indemnified Parties forthwith on demand, from and
against any and all Indemnified Amounts awarded against or
incurred by any of them arising out of or relating to the
Servicer's performance of, or failure to perform, any of its
obligations under or in connection with any Transaction
Document, or any representation or warranty made by Servicer
(or any of its officers) under or in connection with any
Transaction Document, any Information Package or any other
information or report delivered by or on behalf of Servicer,
which shall have been false, incorrect or misleading in any
material respect when made or deemed made or delivered, as the
case may be. Notwithstanding the foregoing, in no event shall
any Indemnified Party be awarded any Indemnified Amounts (a) to
the extent determined by a court of competent jurisdiction to
have resulted from gross negligence or willful misconduct on
the part of such Indemnified Party or (b) recourse for
Defaulted Receivables.
If for any reason the indemnification provided above in this
Section 13.02 (and subject to the exceptions set forth therein)
is unavailable to an Indemnified Party or is insufficient to
hold an Indemnified Party harmless, then the Servicer shall
contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the
relative benefits received by such Indemnified Party on the one
hand and the Servicer on the other hand but also the relative
fault of such Indemnified Party as well as any other relevant
equitable considerations.
-------------
ARTICLE XIV
MISCELLANEOUS
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SECTION 14.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by any
Seller Party therefrom shall in any event be effective unless
the same shall be in writing and signed by (a) each Seller
Party, the Agent and the Required Purchasers (with respect to
an amendment), or (b) the Agent and the Required Purchasers
(with respect to a waiver or consent by them) or any Seller
Party (with respect to a waiver or consent by it), as the case
may be, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which
given.
SECTION 14.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including facsimile
communication) and shall be personally delivered or sent by
express mail or courier or by certified mail, postage prepaid,
or by facsimile, to the intended party at the address or
facsimile number of such party set forth under its name on the
signature pages hereof or at such other address or facsimile
number as shall be designated by such party in a written notice
to the other parties hereto. All such notices and
communications shall be effective, (a) if personally delivered
or sent by express mail or courier or if sent by certified
mail, when received, and (b) if transmitted by facsimile, when
sent, receipt confirmed by telephone or electronic means.
SECTION 14.03. No Waiver; Remedies. No failure on the part of
the Agent, any Indemnified Party, any Purchaser or any other
holder of the Asset Interest (or any portion thereof) to
exercise, and no delay in exercising, any right hereunder shall
operate as a
waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies
provided by law. Without limiting the foregoing, each of
Purchaser, Norwest, individually and as the Agent, is hereby
authorized by Seller at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time
owing by such Purchaser or Norwest to or for the credit or the
account of Seller, now or hereafter existing under this
Agreement, to the Agent, any Affected Party, any Indemnified
Party or any Purchaser, or their respective successors and
assigns.
SECTION 14.04. Binding Effect; Survival. This Agreement shall
be binding upon and inure to the benefit of each Seller Party,
the Agent, each Purchaser and their respective successors and
assigns, and the provisions of Section 4.02 and Article XIII
shall inure to the benefit of the Affected Parties and the
Indemnified Parties, respectively, and their respective
successors and assigns; provided, however, nothing in the
foregoing shall be deemed to authorize any assignment not
permitted by Section 12.01. This Agreement shall create and
constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and
effect until the Final Payout Date. The rights and remedies
with respect to any breach of any representation and warranty
made by Seller pursuant to Article VI and the indemnification
and payment provisions of Article XIII and Sections 4.02,
14.05, 14.06, 14.07, 14.08 and 14.15 shall be continuing and
shall survive any termination of this Agreement.
SECTION 14.05. Costs, Expenses and Taxes. In addition to its
obligations under Article XIII, Seller Parties jointly and
severally agree to pay on demand:
(a) all costs and expenses incurred by the Agent and each
Purchaser and their respective Affiliates in connection with
(i) the negotiation, preparation, execution and delivery of
this Agreement or the other Transaction Documents, any
amendment of or consent or waiver under any of the Transaction
Documents which is requested or proposed by any Seller Party
(whether or not consummated), or the enforcement of, or any
actual or claimed breach of, this Agreement or any of the other
Transaction Documents, including, without limitation, the
reasonable fees and expenses of counsel to any of such Persons
incurred in connection with any of the foregoing or in advising
such Persons as to their respective rights and remedies under
any of the Transaction Documents in connection with any of the
foregoing, and
(ii) the administration (including periodic auditing as
provided for herein) of this Agreement and the other
Transaction Documents, including, without limitation, all
reasonable out-ofpocket expenses (including reasonable fees and
expenses of independent accountants), incurred in connection
with any review of any Seller Party's books and records either
prior to the execution and delivery hereof or pursuant to
Section 7.02(g) or 7.01(c)(iii); and
(b) all stamp and other taxes and fees payable or determined to
be payable in connection with the execution, delivery, filing
and recording of this Agreement or the other Transaction
Documents (and Seller Parties, jointly and severally agree to
indemnify each Indemnified Party against any liabilities with
respect to or
resulting from any delay in paying or omission to pay such
taxes and fees).
SECTION 14.06. Set-Off by Purchasers. All proceeds obtained by
any Purchaser on account of the exercise of, or forbearance to
exercise, any right of setoff, counterclaim or similar right if
applied with regard to Seller's obligations arising under an
agreement for the purchase of Receivables or an agreement for
borrowed money, in whole or in part, shall be applied first to
those arising under this Agreement and hereunder until
exhausted prior to their application to obligations arising
under any such other agreement. Each Purchaser agrees that if
it shall, by exercising or forebearing to exercise any right of
setoff or counterclaim or otherwise, receive proportionate
collections on its Purchaser's Investment which are greater
than the proportionate collections received by any other
Purchaser in respect of the Purchaser's Investment held by such
other Purchaser, the Purchaser receiving such proportionately
greater collections shall purchase participations in the
Purchaser's Investments held by the other Purchasers, and such
other adjustments shall be made as may be required, so that all
such collections with respect to such Purchasers Investments
held by the Purchasers shall be shared by the Purchasers pro
rata according to their respective Percentages; provided
however, that if all or any portion of such collections is
thereafter recovered from such purchasing Purchaser (including,
without limitation, by reason of insolvency or bankruptcy) the
purchase shall be rescinded and the purchase price restored to
the extent of such recovery, but without interest.
SECTION 14.07. Confidentiality of Seller Information.
(a) Confidential Seller Information. Each party hereto (other
than Seller Parties) acknowledges that certain of the
information provided to such party by or on behalf of Seller
Parties in connection with this Agreement and the transactions
contemplated hereby is or may be confidential, and each such
party severally agrees that, unless InaCom shall otherwise
agree in writing, and except as provided in subsection (b),
such party will not disclose to any other person or entity:
(i) any information regarding, or copies of, any non-public
financial statements, reports, schedules and other information
furnished by any Seller Party to any Purchaser or the Agent (A)
prior to the date hereof in connection with such party's due
diligence relating to the Seller Parties and the transactions
contemplated hereby, or (B) pursuant to Section 3.01, 5.01,
6.01(i), 6.01(j), 7.01(c) or 7.02, or
(ii) any other information regarding any Seller Party which is
designated by any Seller Party to such party in writing as
confidential
(the information referred to in clauses (i) and (ii) above,
whether furnished by any Seller Party or any attorney for or
other representative thereof (each a "Seller Information
Provider"), is collectively referred to as the "Seller
Information"); provided, however, "Seller Information" shall
not include any information which is or becomes generally
available to the general public or to such party on a
nonconfidential basis from a source other than any Seller
Information Provider, or which was known to such party on a
nonconfidential basis prior to its disclosure by any Seller
Information Provider.
(b) Disclosure. Notwithstanding subsection (a), each party may
disclose any Seller Information:
(i) to any of such party's independent attorneys, consultants
and auditors, and to any dealer or placement agent for
Purchaser's commercial paper, who (A) in the good faith belief
of such party, have a need to know such Seller Information, and
(B) are informed by such party of the confidential nature of
the Seller Information and the terms of this Section 14.07 and
has agreed, verbally or otherwise, to be bound by the
provisions of this Section 14.07,
(ii) to any actual or potential assignees of, or participants
in, any rights or obligations of any Purchaser, or the Agent
under or in connection with this Agreement who (A) has been
identified to InaCom and (B) has agreed to be bound by the
provisions of this Section 14.07,
(iii) to any rating agency that maintains a rating for any
potential Purchaser's commercial paper or is considering the
issuance of such a rating, for the purposes of reviewing the
credit of such potential Purchaser in connection with such
rating,
(iv) to any other party to this Agreement (and any independent
attorneys, consultants and auditors of such party), for the
purposes contemplated hereby,
(v) as may be required by any municipal, state, federal or
other regulatory body having or claiming to have jurisdiction
over such party, in order to comply with any law, order,
regulation, regulatory request or ruling applicable to such
party,
(vi) subject to subsection (c), in the event such party is
legally compelled (by interrogatories, requests for information
or copies, subpoena, civil investigative demand or similar
process) to disclose such Seller Information, or
(vii) in connection with the enforcement of this Agreement or
any other Transaction Document.
(c) Legal Compulsion. In the event that any party hereto (other
than any Seller Party) or any of its representatives is
requested or becomes legally compelled (by interrogatories,
requests for information or documents, subpoena, civil
investigative demand or similar process) to disclose any of the
Seller Information, such party will (or will cause its
representative to)
(i) provide InaCom with prompt written notice so that (A)
InaCom may seek a protective order or other appropriate remedy,
or (B) InaCom may, if it so chooses, agree that such party (or
its representatives) may disclose such Seller Information
pursuant to such request or legal compulsion; and
(ii) unless InaCom agrees that such Seller Information may be
disclosed, make a timely objection to the request or compulsion
to provide such Seller Information on the basis that such
Seller Information is confidential and subject to the
agreements contained in this Section 14.07.
In the event such protective order or remedy is not obtained,
or InaCom agrees that such Seller Information may be disclosed,
such party will furnish only that portion of the Seller
Information which (in such party's good faith judgment) is
legally required to be furnished and will exercise reasonable
efforts to obtain reliable assurance that confidential
treatment will be afforded the Seller Information.
(d) This Section 14.07 shall survive termination of this
Agreement.
SECTION 14.08. Captions and Cross References. The various
captions (including, without limitation, the table of contents)
in this Agreement are provided solely for convenience of
reference and shall not affect the meaning or interpretation of
any provision of this Agreement. Unless otherwise indicated,
references in this Agreement to any Section, Appendix, Schedule
or Exhibit are to such Section of or Appendix, Schedule or
Exhibit to this Agreement, as the case may be, and references
in any Section, subsection, or clause to any subsection, clause
or subclause are to such subsection, clause or subclause of
such Section, subsection or clause.
SECTION 14.09. Integration. This Agreement, together with the
letter referenced in Section 4.01, contains a final and
complete integration of all prior expressions by the parties
hereto with respect to the subject matter hereof and shall
constitute the entire understanding among the parties hereto
with respect to the subject matter hereof, superseding all
prior oral or written understandings.
SECTION 14.10. Governing Law. THIS AGREEMENT, INCLUDING THE
RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS
OF LAW, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE
INTERESTS OF THE AGENT OR ANY PURCHASER IN THE RECEIVABLES OR
RELATED PROPERTY IS GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
SECTION 14.11. Waiver Of Jury Trial. EACH PARTY HERETO HEREBY
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR UNDER ANY
AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY
BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL NOT BE TRIED BEFORE A JURY.
SECTION 14.12. Consent To Jurisdiction; Waiver Of Immunities.
EACH SELLER PARTY HEREBY ACKNOWLEDGES AND AGREES THAT:
(a) IT IRREVOCABLY (i) SUBMITS TO THE JURISDICTION, FIRST, OF
ANY UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL
JURISDICTION IS NOT AVAILABLE, OF ANY NEW YORK STATE COURT, IN
EITHER CASE SITTING IN NEW YORK COUNTY, NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
(ii) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED ONLY IN SUCH NEW YORK
STATE OR FEDERAL COURT AND NOT IN ANY OTHER COURT, AND (iii)
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING.
(b) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL
PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID TO EXECUTION, EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER OR IN CONNECTION WITH THIS AGREEMENT.
SECTION 14.13. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which
when taken together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly
authorized, as of the date first above written.
INACOM FINANCE CORP., as Seller
By: Gary Goldsberry
Title: Vice President and Treasurer
10810 Farnam Drive
Omaha, Nebraska 68154
Facsimile No.: 402/330-9609
Attention: Treasurer
INACOM CORP., as initial Servicer
By: Gary Goldsberry
Title: Vice President and Treasurer
10810 Farnam Drive
Omaha, Nebraska 68154
Facsimile No.: 402/330-9609
Attention: Treasurer
IBM CREDIT CORPORATION,
as a Purchaser
By: Donald E. Diedo
Title: Remarketer Financing Center Manager
2707 W. Butterfield Road
Suite 205
Oak Brook, Illinois 60521
Facsimile No.: 708/573-7560
Attention: D.E. Diedo
APPENDIX A
DEFINITIONS
This is Appendix A to the Receivables Purchase Agreement dated as
of June 28, 1995 among InaCom Finance Corp., as Seller, InaCom
Corp., as initial Servicer, as Purchasers, and Norwest Bank
Minnesota, N.A., as the Agent (as amended, supplemented or
otherwise modified from time to time, this "Agreement"). Each
reference in this Appendix A to any Section, Appendix or Exhibit
refers to such Section of or Appendix or Exhibit to this
Agreement.
A. Defined Terms. As used in this Agreement, unless the context
requires a different meaning, the following terms have the
meanings indicated hereinbelow:
"Accrued Cost Reserve" means, at any time, the sum of
(a) the aggregate accrued and unpaid Earned Discount with
respect to the Purchasers' Total Investments;
(b) the accrued and unpaid Servicer's Fee; and
(c) the accrued and unpaid Program Fee.
"Administrative Fee" has the meaning set forth in the Fee Letter.
"Affected Party" means each of each Purchaser, any assignee or
participant of any Purchaser, Norwest, any successor to Norwest
as the Agent, and any sub-agent of the Agent.
"Affiliate" when used with respect to a Person means any other
Person controlling, controlled by, or under common control with,
such Person.
"Affiliated Obligor" in relation to any Obligor means an Obligor
that is an Affiliate of such Obligor.
"Agent" has the meaning set forth in the preamble.
"Allocation Limit" has the meaning set forth in Section 1.01.
"Alternate Base Rate" means, on any date, a fluctuating rate of
interest per annum equal to the higher of
(a) the rate of interest most recently announced by Norwest in
Minneapolis, Minnesota, as its base rate for prime loans to
corporate borrowers; and
(b) the Federal Funds Rate (as defined below) most recently
determined by Norwest plus 1.5% per annum.
The Alternate Base Rate is not necessarily intended to be the
lowest rate of interest determined by Norwest in connection with
extensions of credit.
"Asset Interest" means an undivided percentage ownership
interest, determined from time to time as provided in Section
1.04(b), in (i) all then outstanding Pool Receivables and (ii)
all Related Assets.
"Back-up Servicer Event" means any of the following events: (i)
Inacom's Tangible Net Worth is less than $95,000,000; (ii) the
ratio of Total Liabilities to Tangible Net Worth exceeds 5.0 to
1.0 or (iii) Inacom's Current Ratio is less than 1.0 to 1.0.
"Bank Rate" for any Settlement Period means
(a) in the case of any Settlement Period other than a Settlement
Period described in clause (b), an interest rate per annum equal
to the sum of (x) 1.85% per annum, plus (y) LIBOR for such
Settlement Period;
(b) in the case of
(i) any Settlement Period on or prior to the first day of which
any Purchaser or shall have notified the Agent that (A) the
introduction of or any change in or in the interpretation of any
law or regulation makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for such
Purchaser to fund its Purchaser's Investment at the rate
described in clause (a), or (B) due to market conditions
affecting the interbank eurodollar market, funds are not
reasonably available to such Purchaser in such market in order to
enable it to fund its Purchaser's Investment at the rate
described in clause (a) (and in the case of subclause (A) or (B),
such Purchaser shall not have subsequently notified the Agent
that such circumstances no longer exist),
(ii) any Settlement Period commencing more than 60 days after the
date hereof,
an interest rate per annum equal to (x) 1.0% per annum, plus (y)
the Alternate Base Rate in effect from time to time during such
Settlement Period; it being understood that, in the case of
paragraph (b)(i) above, such rate shall only apply to the Person
affected by the circumstances described in such paragraph (b)(i).
"Bloomberg" means the on-line service provided by Bloomberg
Financial Services.
"Business Day" means a day on which commercial banks in New York
City, Minneapolis, Minnesota and Chicago, Illinois, are not
authorized or required to be closed.
"Change in Control" means:
(a)in relation to Inacom the acquisition by any person or group
of persons (within the meaning of Section 13 or 14 of the
Exchange Act), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission
under the Exchange Act) of issued and outstanding shares of the
capital stock of Inacom entitled (without regard to the
occurrence of any contingency) to vote for the election of
members of the board of directors of Inacom and having a then
present right to exercise 50% or more of the voting power for the
election of members of the board of directors of Inacom attached
to all such outstanding shares of capital stock of Inacom, unless
otherwise agreed in writing by the Agent and the Required
Purchasers;
(b)in relation to Seller, the failure of Inacom to own (directly
or through wholly-owned Subsidiaries of Inacom) 100% of the
issued and outstanding shares of the capital stock (including all
warrants, options, conversion rights, and other rights to
purchase or convert into such stock) of Seller on a fully diluted
basis;
"Collections" means, with respect to any Receivable, all funds
which either (a) are received by Seller, an Originator or
Servicer from or on behalf of the related Obligors in payment of
any amounts owed (including, without limitation, purchase prices,
finance charges, interest and all other charges) in respect of
such Receivable, or applied to such amounts owed by such Obligors
(including, without limitation, insurance payments that Seller,
any Originator or Servicer applies in the ordinary course of its
business to amounts owed in respect of such Receivable and net
proceeds of sale or other disposition of repossessed goods or
other collateral or property of the Obligor or any other party
directly or indirectly liable for payment of such Receivable and
available to be applied thereon), or (b) are Deemed Collections;
provided that, prior to such time as Inacom shall cease to be
Servicer, late payment charges, collection fees and extension
fees shall not be deemed to be Collections.
"Contract" means a contract between Seller or any Originator and
any Person, or an invoice sent by Seller or any Originator,
pursuant to or under which such Person shall be obligated to make
payments to Seller or such Originator with respect to the sale of
goods or provision of services by such Originator from time to
time or, in the case of Dealer Financed Receivables, with respect
to the sale or assignment by such Originator of Receivables
described in clause (i) of the definition thereof. A "related"
Contract with respect to the Receivables means a Contract under
which Receivables in the Receivables Pool arise or which is
relevant to the collection or enforcement of such Receivables.
"Credit and Collection Policy" means those credit and collection
policies and practices of Inacom relating to Contracts and
Receivables described in Schedule 6.01(p)-2, as modified without
violating Section 7.03(c).
"Current Assets" means, as of any date all assets which, in
accordance with GAAP, should be classified as current assets on a
consolidated balance sheet of Inacom and its consolidated
Subsidiaries.
"Current Liabilities" means, as of any date, all liabilities
which, in accordance with GAAP, should be classified as current
liabilities on a consolidated balance sheet of Inacom and its
consolidated Subsidiaries; provided, that all liabilities to IBM
Credit shall be considered current liabilities.
"Current Ratio" means, as of any date, the ratio of Current
Assets divided by Current Liabilities.
"Cut-Off Date" means the last day of each Settlement Period.
"Dealer Financed Receivable" means the right to payment from a
Person, whether constituting an account, chattel paper,
instrument or general intangible, arising from the transfer by an
Originator of Receivables, as defined in clause (i) of the
definition thereof, to a Person other than the Agent, and
includes the right to payment of any interest or finance charges
and other obligations of such Person with respect thereto.
"Deemed Collections" has the meaning set forth in Section
3.02(a).
"Defaulted Receivable" means a Receivable: (a) as to which any
payment, or part thereof, remains unpaid for 150 days from the
original due date for such payment; (b) as to which an Event of
Bankruptcy has occurred and remains continuing with respect to
the Obligor thereof; (c) as to which payments have been extended,
or the terms of payment thereof rewritten, other than as
permitted by Section 8.02(c); (d) which has been, or, consistent
with the Credit and Collection Policy would be, written off
Seller's, any Originator's or Servicer's books as uncollectible;
or (e) 10% or more of the aggregate Unpaid Balance of all
Receivables of the related Obligor are Defaulted Receivables.
"Default Ratio" at any time during a Fiscal Month means the ratio
(expressed as a percentage) computed as of the Cut-Off Date for
the next preceding Fiscal Month by dividing (x) the aggregate
Unpaid Balance of all Pool Receivables that are Defaulted
Receivables on such Cut-Off Date by (y) the aggregate Unpaid
Balance of Pool Receivables on such Cut-Off Date.
"Default to Liquidation Ratio" at any time during a Fiscal Month
means the ratio (expressed as a percentage) computed as of the
Cut-Off Date for the next preceding Fiscal Month by dividing (x)
the aggregate Unpaid Balance of all Pool Receivables that are
Defaulted Receivables on such Cut-Off Date by (y) all Collections
received during the Fiscal Month ending on such Cut-Off Date.
"Delinquent Receivable" means a Pool Receivable (a) that is not a
Defaulted Receivable and (b) as to which any payment, or part
thereof, remains unpaid for 61 days or more from the original due
date for such payment.
"Dilution" means the amount of any reduction or cancellation of
the Unpaid Balance of a Pool Receivable as described in Section
3.02(a).
"Dilution Ratio" means the ratio (expressed as of percentage)
computed as of each Cut-Off Date by dividing (x) the aggregate
Dilutions incurred or granted during the Fiscal Month ending on
such Cut-Off Date by (y) the aggregate Unpaid Balance of all Pool
Receivables as of such Cut-Off Date.
"Dilution Reserve" means, on any day in a Settlement Period, an
amount equal to the product of (i) 5% times (ii) the Purchasers'
Total Investments on such day.
"Dollars" means dollars in lawful money of the United States of
America.
"Earned Discount" means, for any Settlement Period:
PTI x ER x ED
------------- + LF
360
where:
PTI =the daily average (calculated at the close of business each
day) of the Purchasers' Total Investments during such Settlement
Period,
ER =the Earned Discount Rate for such Settlement Period,
ED =the actual number of days elapsed during such Settlement
Period, and
LF =the Liquidation Fee, if any, during such Settlement Period.
"Earned Discount Rate" means for any Settlement Period, the Bank
Rate for such Settlement Period; provided, however, that on any
day when any Liquidation Event or Unmatured Liquidation Event
shall have occurred and be continuing, the Earned Discount Rate
for each Asset Tranche shall mean a rate per annum equal to the
Alternate Base Rate plus 1% per annum.
"Eligible Contract" means a Contract which conforms in all
material respects to one of the forms set forth in Schedule
6.01(p)-1 or otherwise approved by the Agent.
"Eligible Receivable" means, at any time, a Receivable:
(a)which is a Pool Receivable arising out of the sale by an
Originator in the ordinary course of its business of computer or
information technology goods owned by such Originator free and
clear of any Lien or other claim or right of any Person (and,
without limiting the foregoing, not out of a sale on consignment)
or out of the provision of services by an Originator or, in the
case of Dealer Financed Receivables, out of the sale or
assignment of Receivables described in clause (i) of the
definition thereof;
(b)as to which the perfection of the Agent's (for the benefit of
Purchasers) undivided ownership interest therein is governed by
the laws of a jurisdiction where the Uniform Commercial Code --
Secured Transactions is in force, and which constitutes an
"account" as defined in the Uniform Commercial Code as in effect
in such jurisdiction;
(c)the Obligor of which is resident of the United States, or any
of its possessions or territories, is not an Affiliate of any of
the parties hereto, and is not a government or a governmental
subdivision or agency;
(d)which is not a Defaulted Receivable or a Delinquent Receivable
at such time;
(e)with regard to which the warranty of Seller in Section 6.01(l)
is true and correct;
(f)the sale of an undivided interest in which does not contravene
or conflict with any law;
(g)which is denominated and payable only in Dollars in the United
States;
(h)which arises under an Eligible Contract that has been duly
authorized and that, together with such Receivable, is in full
force and effect and constitutes the legal, valid and binding
obligation of the Obligor of such Receivable enforceable against
such Obligor in accordance with its terms and is not subject to
any dispute, offset, counterclaim or defense whatsoever;
(i)which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules
and regulations relating to usury, truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair
debt collection practices and privacy) and with respect to which
no party to the Contract related thereto is in violation of any
such law, rule or regulation in any material respect if such
violation would impair the collectibility of such Receivable;
(j)which satisfies in all material respects all applicable
requirements of the Credit and Collection Policy;
(k)which, according to the Contract related thereto, is due and
payable within 60 days from the invoice date of such Receivable;
and
(l) which has been fully earned by performance on the part of
the related Originator and is not subject to any holdback or
contingency.
"ERISA" means the U.S. Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Bankruptcy" shall be deemed to have occurred with
respect to a Person if either:
(a)a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution,
winding up, or composition or readjustment of debts of such
Person, the appointment of a trustee, receiver, custodian,
liquidator, assignee, sequestrator or the like for such Person or
all or substantially all of its assets, or any similar action
with respect to such Person under any law relating to bankruptcy,
insolvency, reorganization, winding up or composition or
adjustment of debts, and such case or proceeding shall continue
undismissed, or unstayed and in effect, for a period of 60
consecutive days; or an order for relief in respect of such
Person shall be entered in an involuntary case under the federal
bankruptcy laws or other similar laws now or hereafter in effect;
or
(b)such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency,
reorganization, debt arrangement, dissolution or other similar
law now or hereafter in effect, or shall consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar
official) for, such Person or for any substantial part of its
property, or shall make any general assignment for the benefit of
creditors, or shall be adjudicated insolvent, or admit in writing
its inability to, pay its debts generally as they become due, or,
if a corporation or similar entity, its board of directors shall
vote to implement any of the foregoing.
"Excess Concentration Amount" means, as of any date, the sum of
the amounts by which the aggregate Unpaid Balance of Receivables
of each Obligor exceeds the Obligor Concentration Limit for such
Obligor.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal (for each day during such period)
to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of Chicago; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by Norwest from three federal funds brokers
of recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any successor thereto or to the
functions thereof.
"Fee Letter" has the meaning set forth in Section 4.01.
"Final Payout Date" means the date following the Termination Date
on which Purchasers' Total Investments shall have been reduced to
zero and all other amounts payable by Seller under the
Transaction Documents shall have been paid in full.
"Fiscal Month" means each period of four (in the case of the
first and third Fiscal Months in each quarter) or five (in the
case of the second Fiscal Month in each quarter) weeks, in each
case ending on a Saturday, determined such that the last Fiscal
Month of each year ends on the last Saturday of December. A
schedule of Fiscal Months is attached hereto as Schedule I.
"GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
accounting profession, which are applicable to the circumstances
as of the date of determination.
"IBM Credit" means IBM Credit Corporation, a Delaware
corporation.
"InaCom" has the meaning set forth in the preamble.
"Indemnified Amounts" has the meaning set forth in Section 13.01.
"Indemnified Party" has the meaning set forth in Section 13.01.
"Information Package" has the meaning set forth in Section
3.01(a).
"LIBOR" means, for any Settlement Period, the thirty-day average
of the one-month London Interbank Offered Rate published by
Bloomberg as "Ticker LIBOR01M" Bloomberg for the previous
calendar month. LIBOR is based on a 360-day calendar year.
"Lien" means any security interest, lien, encumbrance, pledge,
assignment, title retention, claim or similar right or interest.
"Liquidation Cost Reserve" means, on any day during a Settlement
Period, an amount equal to the product of
(a) the sum of (i) 1% over the Alternate Base Rate in effect on
such day, plus (ii) the percentage as may be in effect for the
purposes of calculating the Program Fee applicable to the
Purchasers' Total Investments, plus (iii) 1.00% (or, if greater,
such other percentage as may be in effect for purposes of clause
(b)(x) of the definition of "Servicer's Fee"); times
(b) the Purchasers' Total Investments on such day; divided by
(c)six (6).
"Liquidation Event" has the meaning set forth in Section 10.01.
"Liquidation Fee" means, for each day in any Settlement Period,
the amount, if any, by which:
(a)the additional Earned Discount (calculated without taking into
account any Liquidation Fee) which would have accrued on the
reductions of the Purchasers' Total Investments during such
Settlement Period (as so computed) if such reductions had not
been made, exceeds
(b)the income, if any, received by the Purchasers from investing
the proceeds of such reductions of the Purchasers' Total
Investments.
"Liquidation Period" means the period commencing on the date on
which the conditions precedent to Purchases and Reinvestments set
forth in Section 5.02 are not satisfied (or expressly waived by
Purchaser) and the Agent shall have notified Seller and Servicer
in writing that the Liquidation Period has commenced, and ending
on the Final Payout Date.
"Lock-Box Agreement" means a letter agreement, in substantially
the form of Exhibit 5.01(h)-1, among Servicer, the Agent, Seller
and any Lock-Box Bank.
"Lock-Box Account" means any bank account into which Collections
are deposited or transferred.
"Lock-Box Bank" means any of the banks holding one or more lock-
boxes or Lock-Box Accounts receiving Collections from Pool
Receivables.
"Lock-Box Letter" means a letter, in substantially the form of
Exhibit 5.01(h)-2, addressed to a Lock-Box Bank and executed by
an Originator.
"Loss Reserve" means, on any day during a Settlement Period, an
amount equal to the product of 10% times the Net Pool Balance on
such day.
"Material Adverse Effect" with respect to any event or
circumstance, means a material adverse effect on:
(i) the financial condition of any Seller Party;
(ii) the ability of any Seller Party to perform its obligations
under this Agreement or any other Transaction Document;
(iii) the validity or enforceability of this Agreement or any
other Transaction Document, or the validity, enforceability or
collectibility of the Receivables or the related Contracts; or
(iv) the status, existence, perfection, priority or
enforceability of the Agent's or any Purchaser's interest in the
Pool Receivables.
"Material Subsidiary" means each Subsidiary of Inacom that has
assets with a value in excess of 10% of Inacom's Tangible Net
Worth.
"Net Pool Balance" means, at any time, an amount equal to (i) the
aggregate Unpaid Balance of all Eligible Receivables in the
Receivables Pool at such time, minus (ii) the Excess
Concentration Amount at such time.
"Net Profit After Tax" means all Revenue, plus all other income,
minus all costs, including applicable taxes.
"Norwest" has the meaning set forth in the preamble.
"91-120 Delinquency Ratio" means the ratio (expressed as a
percentage) computed as of each Cut-Off Date by dividing (x) the
aggregate Unpaid Balance of Pool Receivables as to which any
payment, or part thereof, remains unpaid for more than 90, but
less than 121, days from the original due date for such payment
by (y) the aggregate Unpaid Balance of Pool Receivables on such
Cut-Off Date.
"Non-Competes" means the amount Inacom has to pay another Person
for that Person's agreement to not compete with Inacom.
"Obligor" means a Person obligated to make payments with respect
to a Receivable, including any guarantor thereof.
"Obligor Concentration Limit" means, at any time, in relation to
the aggregate Unpaid Balance of Receivables owed by any single
Obligor and its Affiliated Obligors (if any):
(a) in the case of any Special Obligor 10% of the aggregate
Unpaid Balance of Eligible Receivables at such time; and
(b) in the case of any Obligor other than an Obligor described
in clause (a) above, an amount equal to 2% of the aggregate
Unpaid Balance of Eligible Receivables at such time.
"Originator" means each of Inacom, Inacom Business Centers, Inc.
and Inacom Communications, Inc.
"Originator Material Adverse Effect" is defined in Exhibit IV to
the Sale Agreement.
"Originator Note" has the meaning set forth in the Sale
Agreement.
Percentage means (i) 90% in the case of IBM Credit and (ii) 10%
in the case of Norwest.
"Person" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated
association, joint venture, government or any agency or political
subdivision thereof or any other entity.
"Pool Receivable" means a Receivable in the Receivables Pool.
"Program Fee" has the meaning set forth in the Fee Letter.
"Program Fee Percentage" has the meaning set forth in the Fee
Letter.
"Program Information" has the meaning set forth in Section
14.08(a)(i).
"Purchase" has the meaning set forth in Section 1.01.
"Purchase and Sale Termination Date" has the meaning set forth in
Section 1.02(c) of the Sale Agreement.
"Purchase Limit" has the meaning set forth in Section 1.01.
"Purchase Termination Date" means that day on which a Liquidation
Event has occurred and is continuing, and
(a)the Agent declares a Purchase Termination Date in a notice to
Seller in accordance with Section 10.02(a); or
(b)in accordance with Section 10.02(b), becomes the Purchase
Termination Date automatically.
"Purchaser" has the meaning set forth in the preamble.
"Purchaser's Investment" means at any time with respect to any
Purchaser, such Purchaser's Percentage of the Purchasers' Total
Investments at such time.
"Purchasers' Total Investments" means at any time an amount equal
to (a) the aggregate of the amounts theretofore paid to Seller
for Purchases pursuant to Section 1.01, less (b) the aggregate
amount of Collections theretofore received and actually
distributed to Purchasers on account of such Purchasers' Total
Investments pursuant to Section 1.03.
"Receivable" means (i) any right to payment from a Person,
whether constituting an account, chattel paper, instrument or
general intangible, arising from the sale of computer or
technology information merchandise or provision of services by an
Originator, and includes the right to payment of any interest or
finance charges and other obligations of such Person with respect
thereto, provided that the term "Receivable" shall not include
any such right to payment from the United States government, or
an agency or department thereof, so long as the payments related
thereto are not commingled with Collections in the Lock-Box
Accounts and (ii) any Dealer Financed Receivable.
"Receivables Outstanding Ratio" at any time during a Fiscal Month
means the product of (i) the aggregate Unpaid Balance of all Pool
Receivables as of the Cut-Off Date for the preceding Fiscal Month
divided by the aggregate amount of products and services sold by
the Originators during the Fiscal Month ending on such Cut-Off
Date, multiplied by (ii) thirty (30).
"Receivables Pool" means at any time all then outstanding
Receivables which have been sold or contributed as capital by an
Originator to Seller.
"Regulation D" means Regulation D of the Federal Reserve Board,
or any other regulation of the Federal Reserve Board that
prescribes reserve requirements applicable to nonpersonal time
deposits or "Eurocurrency Liabilities" as presently defined in
Regulation D, as in effect from time to time.
"Regulatory Change" means, relative to any Affected Party
(a)any change in (or the adoption, implementation, phase-in or
commencement of effectiveness of) any
(i) United States federal or state law or foreign law applicable
to such Affected Party;
(ii) regulation, interpretation, directive, requirement or
request (whether or not having the force of law) applicable to
such Affected Party of (A) any court, government authority
charged with the interpretation or administration of any law
referred to in clause (a)(i) or of (B) any fiscal, monetary or
other authority having jurisdiction over such Affected Party; or
(iii) GAAP or regulatory accounting principles applicable to
such Affected Party and affecting the application to such
Affected Party of any law, regulation, interpretation, directive,
requirement or request referred to in clause (a)(i) or (a)(ii)
above; or
(b)any change in the application to such Affected Party of any
existing law, regulation, interpretation, directive, requirement,
request or accounting principles referred to in clause (a)(i),
(a)(ii) or (a)(iii) above.
"Reinvestment" has the meaning set forth in Section 1.03(a)(iii).
"Related Assets" means (a) all rights to, but not any obligations
under, all related Contracts and Related Security with respect to
any Pool Receivables, (b) all rights and interests of Seller
under the Sale Agreement in relation to any Pool Receivables, (c)
all books and records evidencing or otherwise relating to any
Pool Receivables, and (d) all Collections in respect of, and
other proceeds of, any Pool Receivables or any other Related
Assets.
"Related Security" means, with respect to any Pool Receivable,
all of Seller's or any Originator's right, title and interest in
and to: (a) all Contracts that relate to such Pool Receivable;
(b) all merchandise (including returned merchandise), if any,
relating to the sale which gave rise to such Pool Receivable; (c)
all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such
Pool Receivable, whether pursuant to the Contract related to such
Pool Receivable or otherwise; (d) all UCC financing statements
covering any collateral securing payment of such Pool Receivable
(but only to the extent of the interest of Purchasers in the
respective Pool Receivable); (e) all guarantees and other
agreements or arrangements of whatever character from time to
time supporting or securing payment of such Pool Receivable
whether pursuant to the Contract related to such Pool Receivable
or otherwise; and (f) all insurance policies, and all claims
thereunder, related to such Pool Receivable. The interest of
Purchasers in any Related Security is only to the extent of
Purchasers' undivided percentage interest, as more fully
described in the definition of Asset Interest.
"Reporting Date" means the third Business Day following each Cut-
Off Date.
"Required Purchasers" means all of the Purchasers.
"Revenue" means the monetary expression of the aggregate of
products or services transferred by an enterprise to its
customers for which such customers have paid or are obligated to
pay, plus other income as allowed.
"Sale Agreement" means the Purchase and Sale Agreement dated as
of the date hereof among the Servicer, the Originators and
Seller, as initial purchaser, substantially in the form of
Exhibit 5.01(a), as it may be amended, supplemented or otherwise
modified in accordance with Section 7.03(f).
"SEC" means the Securities and Exchange Commission.
"Secured Parties" means Purchasers, the Agent, the Indemnified
Parties and the Affected Parties.
"Seller" has the meaning set forth in the preamble.
"Seller Information" has the meaning set forth in Section
14.07(a).
"Seller Information Provider" has the meaning set forth in
Section 14.07(a).
"Seller Party" and "Seller Parties" have the meanings set forth
in the preamble.
"Servicer" has the meaning set forth in the preamble.
"Servicer Transfer Event" has the meaning set forth in Section
8.01(b).
"Servicer's Fee" accrued for any day in a Settlement Period means
(a) an amount equal to (x) 1.0% per annum, times (y) the amount
of the Purchasers' Total Investments at the close of business on
the first day of such Settlement Period, times (z) 1/360; or
(b) on and after Servicer's reasonable request made at any time
when Inacom shall no longer be Servicer, an alternative amount
specified by Servicer not exceeding (x) 110% of Servicer's costs
and expenses of performing its obligations under this Agreement
during the Settlement Period when such day occurs, divided by (y)
the number of days in such Settlement Period.
"Settlement Date" means the tenth Business Day following each Cut-
Off Date.
"Settlement Period" means
(a) the period from the date of the initial Purchase to the last
day of the month in which such date occurs; and
(b)thereafter, each period from the last day of the next
preceding Settlement Period to the last day of the next following
Fiscal Month;
provided, however, that the last Settlement Period shall end on
the Final Payout Date.
"61-90 Delinquency Ratio" means the ratio (expressed as a
percentage) computed as of each Cut-Off Date by dividing (x) the
aggregate Unpaid Balance of Pool Receivables as to which any
payment, or part thereof, remains unpaid for more than 60, but
less than 91, days from the original due date for such payment by
(y) the aggregate Unpaid Balance of Pool Receivables on such Cut-
Off Date.
"Special Obligor" means each Obligor whose short term unsecured
debt is rated at least P-1 by Moody's Investors Service, Inc. and
A-1 by Standard & Poor's Ratings Group.
"Subordinated Debt" means Inacom's indebtedness to officers or
owners as evidenced by an executed notes payable subordination
agreement in favor of IBM Credit.
"Subscription Agreement" is defined in Exhibit I of the Sale
Agreement.
"Subsidiary" of any Person means (i) a corporation more than 50%
of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the
directors of such corporation (irrespective of whether or not at
the time stock of any class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency) is at the time owned or controlled by such Person,
directly or indirectly through Subsidiaries, and (ii) any
partnership, association, joint venture or other entity in which
such Person, directly or indirectly through Subsidiaries, has
more than a 50% equity interest at the time.
"Successor Notice" has the meaning set forth in Section 8.01(b).
"Tangible Net Worth" means stockholders' equity, minus goodwill
and Non-Competes.
"Termination Date" means the earliest of
(a)the Purchase Termination Date;
(b)the date designated by Seller as the "Termination Date" on not
less than five (5) Business Days' notice to the Agent, provided
that on such date the Purchasers' Total Investments has been
reduced to zero, all accrued Earned Discount and fees have been
paid in full and all other amounts due to each Purchaser and the
Agent have been paid in full; and
(c)October 10, 1995.
"31-60 Delinquency Ratio" means the ratio (expressed as a
percentage) computed as of each Cut-Off Date by dividing (x) the
aggregate Unpaid Balance of Pool Receivables as to which any
payment, or part thereof, remains unpaid for more than 30, but
less than 61, days from the original due date for such payment by
(y) the aggregate Unpaid Balance of Pool Receivables on such Cut-
Off Date.
"Total Assets" means, as of any date, all assets which, in
accordance with GAAP, should be classified as assets on a
consolidated balance sheet of Inacom and its consolidated
Subsidiaries.
"Total Liabilities" means, as of any date, all obligations which,
in accordance with GAAP, should be classified as liabilities on a
consolidated balance sheet of Inacom and its consolidated
Subsidiaries, minus Subordinated Debt resulting from past or
current transactions that require settlement in the future.
"Transaction Documents" means this Agreement, the Lock-Box
Agreements, the Lock-Box Notices, the Sale Agreement, the Fee
Letter and the other documents to be executed and delivered in
connection herewith.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the applicable jurisdiction or jurisdictions.
"Unmatured Liquidation Event" means any event which, with the
giving of notice or lapse of time, or both, would become a
Liquidation Event.
"Unpaid Balance" of any Receivable means at any time the unpaid
amount thereof, but excluding all late payment charges,
delinquency charges, and extension or collection fees, all
discounts charged by the Obligor of Dealer Financed Receivables
and all amounts that are recourse to an Originator in the case of
Dealer Financed Receivables.
B.Other Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. All terms
used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such
Article 9.
C.Computation of Time Periods. Unless otherwise stated in this
Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each mean "to
but excluding".
