<PAGE>
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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
MARCH 27, 1999
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)
<TABLE>
<S> <C>
DELAWARE 47-0681813
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
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 May 3, 1999, there were 45,228,260 common shares of the registrant
outstanding.
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<PAGE>
INACOM CORP. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 27, DECEMBER 26,
1999 1998
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 88,897 $ 69,939
Accounts receivable, net................. 744,019 705,305
Inventories.............................. 402,859 485,283
Other current assets..................... 64,156 59,345
---------- ------------
Total current assets................... 1,299,931 1,319,872
---------- ------------
Property and equipment, net.............. 156,975 197,130
Cost in excess of net assets of
businesses acquired, net of accumulated
amortization........................... 319,060 314,462
Other assets, net of accumulated
amortization........................... 117,375 49,520
---------- ------------
$1,893,341 1$,880,984
---------- ------------
---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $ 553,826 $554,217
Notes payable and current maturities of
long-term debt......................... 150,186 179,829
Other current liabilities................ 252,323 183,621
---------- ------------
Total current liabilities.............. 956,335 917,667
---------- ------------
Other long-term liabilities................ 1,033 1,178
Long-term debt, less current maturities.... 316,557 201,941
Company-obligated mandatorily redeemable
convertible preferred securities of
subsidiary trust holding solely
convertible subordinated debt securities
of the Company........................... 195,063 194,974
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 100,000,000 shares; issued
shares 45,219,912 in 1999 and
44,795,289 in 1998..................... 4,522 4,480
Additional paid-in capital............... 413,750 407,159
Accumulated other comprehensive income... (1,951) (2,480)
Retained earnings........................ 9,130 157,302
---------- ------------
425,451 566,461
Unearned restricted stock................ (1,098) (1,237)
---------- ------------
Total stockholders' equity............. 424,353 565,224
---------- ------------
$1,893,341 1$,880,984
---------- ------------
---------- ------------
</TABLE>
2
<PAGE>
INACOM CORP. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------
<S> <C> <C>
MARCH 27, MARCH 28,
1999 1998
-------------- --------------
Revenues:
Products....................................................................... $ 1,164,016 $ 1,463,864
Services....................................................................... 202,336 208,024
-------------- --------------
1,366,352 1,671,888
-------------- --------------
Direct costs:
Products....................................................................... 1,127,821 1,364,360
Services....................................................................... 173,540 124,878
-------------- --------------
1,301,361 1,489,238
-------------- --------------
Gross margin..................................................................... 64,991 182,650
Selling, general and administrative expenses..................................... 178,431 135,320
Restructuring charges............................................................ 103,900 --
-------------- --------------
Operating income (loss).......................................................... (217,340) 47,330
Financing expense, net........................................................... 10,224 16,440
-------------- --------------
Earnings (loss) before income taxes and distributions on preferred securities of
trust.......................................................................... (227,564) 30,890
Income tax expense (benefit)..................................................... (81,621) 11,924
-------------- --------------
Earnings (loss) before distributions on preferred securities of trust............ (145,943) 18,966
Distributions on convertible preferred securities of trust, net of income
taxes.......................................................................... 2,229 2,229
-------------- --------------
Net earnings (loss).............................................................. $ (148,172) $ 16,737
-------------- --------------
-------------- --------------
Earnings (loss) per share:
Basic.......................................................................... $ (3.29) $ 0.39
Diluted........................................................................ $ (3.29) $ 0.37
-------------- --------------
-------------- --------------
Common shares and equivalents outstanding:
Basic.......................................................................... 45,000 42,700
Diluted........................................................................ 45,000 48,200
-------------- --------------
-------------- --------------
</TABLE>
3
<PAGE>
INACOM CORP. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------
MARCH 27, MARCH 28,
1999 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)............................................................ $ (148,172) $ 16,737
Adjustments to reconcile net earnings (loss) to net cash provided (used) by
operating activities:
Depreciation and amortization.............................................. 20,707 19,234
Restructuring and unusual charges.......................................... 217,000 --
Deferred taxes related to restructuring and unusual charges................ (77,395) --
Changes in assets and liabilities, net of business combinations and
restructuring and unusual charges
Accounts receivable.................................................... 148,304 (77,941)
Inventories............................................................ 29,090 (69,025)
Prepaid expenses and other assets...................................... 1,265 (73)
Accounts payable....................................................... (391) 49,907
Accrued and other liabilities.......................................... (59,261) 23,309
-------------- --------------
Net cash provided (used) by operating activities......................... 131,147 (37,852)
-------------- --------------
Cash flows from investing activities:
Additions to property and equipment............................................ (7,860) (24,616)
Business combinations.......................................................... (2,237) (10,197)
Receipts from (increases in) notes receivable.................................. 136 (1,735)
Other, including investments in unconsolidated affiliates...................... 1,826 (9,763)
-------------- --------------
Net cash used in investing activities.................................... (8,135) (46,311)
-------------- --------------
Cash flows from financing activities:
Proceeds from notes payable.................................................... 86,617 54,762
Reduction in receivables sold.................................................. (191,000) --
(Payments on) proceeds from long-term debt..................................... (1,644) 1,582
Proceeds from employee stock plans............................................. 2,135 2,836
-------------- --------------
Net cash provided (used) by financing activities......................... (103,892) 59,180
-------------- --------------
Change in cumulative translation adjustment...................................... (162) --
-------------- --------------
Net increase (decrease) in cash and cash equivalents............................. 18,958 (24,983)
Adjustment to conform company year ends.......................................... -- 3,587
Cash and cash equivalents, beginning of year..................................... 69,939 62,068
-------------- --------------
Cash and cash equivalents, end of the period..................................... $ 88,897 $ 40,672
-------------- --------------
-------------- --------------
</TABLE>
4
<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
supplemental consolidated financial statements and notes thereto contained in
the Company's report on Form 8-K dated February 17, 1999, as amended. The
results of operations for the thirteen weeks ended March 27, 1999 are not
necessarily indicative of the results for the entire fiscal year ending December
25, 1999.
On February 17, 1999, the Company issued approximately 28.2 million shares
of common stock for all of the outstanding common stock of Vanstar Corporation,
a provider of products and services to Fortune 1000 companies and other large
enterprises. The merger was accounted for as a pooling-of-interests and,
accordingly, the Company's historical financial statements have been restated to
include the accounts and results of Vanstar as if the companies had operated
together from the beginning of the earliest period presented.
2. ACCOUNTS RECEIVABLE
The Company currently has two separate asset securitization programs, which
allow for funding of up to $250.0 million and $175.0 million, respectively. The
agreements are with two separate, unrelated financial institutions and the
Company, through separate, non-consolidated wholly-owned special purpose
corporations. In connection with these asset securitization programs, the
Company sells on a revolving basis, certain pooled receivables to the special
purpose corporations, which in turn sell a percentage ownership interest in the
pooled receivables to a commercial paper conduit sponsored by the two separate
financial institutions. These transactions have been recorded as a sale in
accordance with Statement of Financial Accounting Standards (SFAS) No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." The Company is retained as servicer of the pooled receivables.
Although management believes that the servicing revenues earned will be adequate
compensation for performing the services, estimating the fair value of the
servicing asset was not considered practicable. Consequently, a servicing asset
has not been recognized. The gross proceeds resulting from the sale of the
percentage ownership interests in the pooled receivables totaled $215.0 million
as of March 27, 1999 and $406.0 million as of December 26, 1998. The proceeds
are reflected as a reduction in accounts receivable. Changes in the amount of
pooled receivables sold are included in cash flows from financing activities in
the consolidated statements of cash flows. On March 27, 1999, the implicit
interest rates on the receivable sale transactions were 5.3% and 5.5%.
3. SEGMENT REPORTING
The Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", in 1998, which changed the way the Company
reports information about its operating segments. The Company has various
management teams and infrastructures, which offer different products and
services. The Company has identified two reportable segments: products and
services. The product segment includes the sales of desktops, laptops, servers,
monitors, printers, operating systems software, phone systems, voice mail, voice
processing, data network equipment and multiple small office-home offerings. The
services segment includes sales of integrated life cycle services, which
encompasses technology planning, procurement, integration, support, and
management.
5
<PAGE>
INACOM CORP. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. SEGMENT REPORTING (CONTINUED)
Summarized financial information concerning the Company's reportable
segments is shown in the following table.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------
<S> <C> <C>
MARCH 27, MARCH 28,
1999 1998
-------------- --------------
Revenues:
Products....................................................................... $ 1,164,016 $ 1,463,864
Services....................................................................... 202,336 208,024
-------------- --------------
Total.......................................................................... $ 1,366,352 $ 1,671,888
-------------- --------------
-------------- --------------
Segment earnings (loss) before taxes:
Products....................................................................... $ (162,352) $ 23,039
Services....................................................................... (65,212) 7,851
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Total.......................................................................... $ (227,564) $ 30,890
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</TABLE>
For the thirteen weeks ended March 27, 1999, segment earnings (loss) before
taxes includes the impact of $217.0 million in restructuring and unusual
charges, of which $158.0 million is in the products segment and $59.0 million is
in the services segment.
4. EARNINGS PER SHARE
Basic earnings per share are computed using the weighted-average number of
shares of common stock outstanding during the period. Diluted earnings per share
are computed using the weighted-average number of shares of common stock
outstanding and dilutive potential common stock outstanding during the period.
The earnings per share calculations are as follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------
<S> <C> <C>
MARCH 27, MARCH 28,
1999 1998
-------------- --------------
BASIC EARNINGS PER SHARE
Net earnings (loss)............................................................ $ (148,172) $ 16,737
-------------- -------
Weighted-average number of common shares outstanding........................... 45,000 42,700
-------------- -------
Earnings (loss) per share...................................................... $ (3.29) $ 0.39
-------------- -------
-------------- -------
DILUTED EARNINGS PER SHARE
Net earnings (loss)............................................................ $ (148,172) $ 16,737
Net after-tax interest savings on convertible subordinated debentures.......... -- 1,061
-------------- -------
Net earnings (loss) used in diluted earnings per share calculation............. $ (148,172) $ 17,798
-------------- -------
Weighted-average number of common shares outstanding........................... 45,000 42,700
Common equivalent shares from stock options and
convertible subordinated debentures.......................................... -- 5,500
-------------- -------
Shares used in diluted earnings per share calculation.......................... 45,000 48,200
-------------- -------
Diluted earnings (loss) per share.............................................. $ (3.29) $ 0.37
-------------- -------
-------------- -------
</TABLE>
For the thirteen weeks ended March 27, 1999, basic and diluted earnings per
share are the same. As a result of the net loss for the period, calculating
diluted earnings per share by adding back the net after-tax interest savings and
including the dilutive potential common shares would have resulted in diluted
earnings per share being anti-dilutive.
6
<PAGE>
INACOM CORP. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. MARKET DEVELOPMENT FUNDS
Primary vendors of the Company provide various incentives, in cash or credit
against obligations, for promoting and marketing their product offerings. Funds
or credits are primarily based on the sales of the vendors' 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 5% of sales on an annual basis.
6. BUSINESS COMBINATIONS
On February 17, 1999, the Company issued approximately 28.2 million shares
of common stock for all of the outstanding common stock of Vanstar Corporation,
a provider of products and services to Fortune 1000 companies and other large
enterprises. The merger was accounted for as a pooling-of-interests and,
accordingly, the Company's historical financial statements have been restated to
include the accounts and results of Vanstar as if the companies had operated
together from the beginning of the earliest period presented.
Also, during the first quarter of 1999, the Company made contingent payments
based on certain performance criteria in relation to business combinations
consummated in prior years. The total contingent payments were $8.7 million,
which included $2.2 million in cash and 333,394 shares of common stock.
7. RESTRUCTURING AND UNUSUAL CHARGES
In conjunction with the merger of Inacom and Vanstar along with the
Company's efforts to address current market conditions, the Company recognized
previously announced restructuring and other unusual charges during the first
quarter of 1999. These charges include items presented as restructuring costs as
defined by Emerging Issues Task Force 94-3 and other unusual charges. The
restructuring charges are in conjunction with the Company's previously announced
plans to integrate and consolidate operations of Inacom and Vanstar following
the February 17, 1999 merger. The restructuring and unusual pre-tax charges
totaled $217.0 million, of which $75.9 million will not require cash payments
and include charges for duplicate fixed assets and duplicate inventory
(including service parts). The remaining $141.1 million will require cash
payments to be made for termination fees upon the closure of duplicate leased
facilities, to employees for severance, for contract terminations and vendor
purchase commitments, and for other direct costs related to the merger with
Vanstar.
RESTRUCTURING CHARGES
Restructuring charges of $103.9 million include the cost of involuntary
employee separation benefits, leased facility closures and consolidations,
losses on abandonment or disposal of leasehold improvements and equipment,
termination of certain contracts and agreements, and professional fees
associated with the merger. Employee separation benefits of $33.6 million
include amounts to be paid for severance, medical, and other benefits for 1,340
permanent full-time employees that will be severed in accordance with
management's integration and consolidation plan. As of March 27, 1999, 717
employees had been severed and $15.6 million in separation benefits had been
paid and subsequently charged against the separation benefits reserve. The
Company estimates all separation activities to be completed by the end of 1999.
Duplicate leased facility closure and consolidation costs of $47.5 million
include amounts to be paid for lease termination fees, losses on abandonment or
disposal of leasehold improvements, equipment, and capitalized software, net of
estimated disposal values in accordance with management's integration and
7
<PAGE>
INACOM CORP. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. RESTRUCTURING AND UNUSUAL CHARGES (CONTINUED)
consolidation plan. As of March 27, 1999, 19 leases have been terminated and
$2.3 million in lease termination fees have been paid and subsequently charged
against the facility closure and consolidation reserve. The Company estimates
all facility closures and consolidations to be completed by June 26, 1999.
Termination costs for certain contracts and agreements of $8.2 million
include the fees to be paid upon the termination and cancellation of contracts
and agreements pursuant to management's integration and consolidation plan.
Other direct costs related to the merger of $14.6 million include fees paid to
financial advisors, legal counsel, and independent auditors. As of March 27,
1999, $3.6 million had been paid pursuant to the termination of contracts and
agreements and to financial advisors, legal counsel, and independent auditors.
Reserves accrued for the restructuring charges are reflected as an increase
in current liabilities on the Company's balance sheet dated March 27, 1999. As
of March 27, 1999 the restructuring charges reserve had a balance of $77.9
million, which includes provision amounts of $103.9 million less charges to the
reserve of $26.0 million.
UNUSUAL CHARGES
Unusual charges of $113.1 million not presented as restructuring charges are
reflected in direct costs ($86.1 million) and selling, general, and
administrative expenses ($27.0 million). In direct costs, the unusual charges
are reflected in the products segment ($46.5 million) and the services segment
($39.6 million). In selling, general, and administrative expenses, the unusual
charges are reflected in the products segment ($23.0 million) and the services
segment ($4.0 million). The unusual charges include non-cash charges primarily
related to the losses incurred on liquidating certain duplicative inventories
(including service parts) and $4.0 million to record estimated losses on the
collection of certain trade accounts in conjunction with the recent developments
regarding such accounts. The unusual charges also include cash charges related
to certain vendor purchase commitments and other integration costs associated
with merger activities.
Losses on the liquidation of certain duplicative inventories and vendor
purchase commitments of $86.1 million include losses on the disposal of
duplicative inventories and service parts of $43.6 million. Additional charges
of $42.5 million include the estimated losses to be realized on the disposal of
other duplicative inventories as additional inventory and service part
facilities are consolidated, in accordance with management's integration and
consolidation plan, along with certain vendor purchase commitments assumed in
the Vanstar merger for which there is no future economic benefit for the
combined company. Cash requirements related to the purchase commitments of $14.0
million in 1999 and $20.0 million in 2000 will be paid from the Company's
revolving credit facility. The reserve established for these estimated losses is
reflected as a contra-asset to inventory on the Company's balance sheet dated
March 27, 1999. The Company estimates that all liquidation and disposal
activities for duplicative inventory and service parts will be completed by the
end of 1999 after all inventory and service part facilities are consolidated.
Integration costs associated with the merger of $23.0 million, which were
paid by March 27, 1999, include the costs incurred by the Company to effect the
Vanstar merger and to integrate the continuing operations of the combined
companies. The costs consist of the expense of furnishing information to
stockholders, fees of certain integration consultants, and expenses related to
the service of certain employees. These costs include both current period costs
and previously deferred costs recognized upon consummation of the merger with
Vanstar.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS REPORT ON FORM 10-Q CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS AND
INFORMATION RELATING TO INACOM THAT ARE BASED ON THE BELIEFS OF INACOM
MANAGEMENT AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO
INACOM MANAGEMENT. SUCH STATEMENTS REFLECT THE CURRENT VIEW OF INACOM WITH
RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND
ASSUMPTIONS, INCLUDING THE CERTAIN BUSINESS FACTORS DESCRIBED IN INACOM'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 26, 1998. SHOULD ONE OR MORE OF
SUCH RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE
INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED HEREIN AS
BELIEVED, ESTIMATED OR EXPECTED.
RESULTS OF OPERATIONS
The following tables set forth, for the indicated periods, revenues, gross
margins, and net earnings (loss) before distributions on convertible preferred
securities of trust and the mix of revenues, gross margins, and net earnings
(loss) before distributions on convertible preferred securities of trust for
each of the Company's operating segments.
SUMMARY OF OPERATING RESULTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------------------------------------
<S> <C> <C> <C> <C>
MARCH 27, MARCH 28, MARCH 27, MARCH 28,
1999(1) 1998 1999(1) 1998
------------ ------------ ----------- -----------
Revenues:
Products................................................... $ 1,164,016 $ 1,463,864 85.2% 87.6%
Services................................................... 202,336 208,024 14.8 12.4
------------ ------------ ----- -----
Total.................................................... $ 1,366,352 $ 1,671,888 100.0% 100.0%
------------ ------------ ----- -----
------------ ------------ ----- -----
Gross margin:
Products................................................... $ 36,195 $ 99,504 55.7% 54.5%
Services................................................... 28,796 83,146 44.3 45.5
------------ ------------ ----- -----
Total.................................................... $ 64,991 $ 182,650 100.0% 100.0%
------------ ------------ ----- -----
------------ ------------ ----- -----
Earnings (loss) before distributions on convertible preferred
securities of trust:
Products................................................... $ (104,121) $ 14,146 71.3% 74.6%
Services................................................... (41,822) 4,820 28.7 25.4
------------ ------------ ----- -----
Total.................................................... $ (145,943) $ 18,966 100.0% 100.0%
------------ ------------ ----- -----
------------ ------------ ----- -----
</TABLE>
- ------------------------
(1) Gross margin includes the impact of $86.1 in unusual charges, of which $46.5
million is in products and $39.6 million is in services. Earnings (loss)
before distributions on convertible preferred securities of trust includes
the impact of $139.6 million after tax in restructuring and unusual charges,
of which $101.7 million is in products and $37.9 million is in services.
9
<PAGE>
The following table sets forth for the indicated periods the gross margin
percentage of the two operating segments and the consolidated gross margin
percentage of the Company.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------------
<S> <C> <C>
MARCH 27, MARCH 28,
1999 (1) 1998
------------- -------------
Gross margin:
Products............................................................. 3.1% 6.8%
Services............................................................. 14.2 40.0
Consolidated gross margin.......................................... 4.8% 10.9%
</TABLE>
- ------------------------
(1) Gross margin includes the impact of $86.1 in unusual charges.
REVENUES
Revenues for the first quarter of 1999 decreased $305.5 million or 18.3%
when compared to the same period in 1998. The decrease in revenues resulted from
a decline in both revenue components. Product revenues for the first quarter of
1999 decreased $299.8 million or 20.5% when compared to the same period in 1998.
Services revenues for the first quarter of 1999 decreased $5.7 million or 2.7%
when compared to the same period in 1998.
In the first quarter of 1999, product revenues decreased primarily as a
result of weak market conditions and reduced sales momentum during the pendency
of the merger with Vanstar. Product revenues through the client direct side of
the business decreased $78.8 million or 7.7% compared to the first quarter of
1998. This decrease was primarily a result of the factors mentioned above.
Product revenues through the independent dealer channel decreased $221.0 million
or 50.6% compared to the first quarter of 1998. Market conditions, including
increased pricing pressures in the independent dealer channel, and the reduced
sales momentum mentioned above contributed to the decline in the independent
dealer channel. Furthermore, with the decrease in inventory levels and the
decrease in manufacturer funded programs and incentives in the first quarter of
1999 compared to the first quarter of 1998, the Company continued to
de-emphasize the high-volume, lower-margin distribution business.
In the first quarter of 1999, revenues from services decreased primarily as
a result of reduced sales momentum during the pendency of the merger with
Vanstar. The factors contributing to a decline in product revenues also
contributed to the decline for services sold with products.
GROSS MARGINS
The Company's consolidated gross margin percentage decreased in the first
quarter of 1999 compared to the same period in 1998. This decrease was due to
$86.1 million in unusual charges recognized by the Company in the first quarter
of 1999 that were reflected in direct costs (see "Restructuring and Unusual
Charges"). Excluding these unusual charges, the Company's consolidated gross
margin percentage increased to 11.1% in the first quarter of 1999 compared to
10.9% in the first quarter of 1998. This increase was primarily due to a change
in the mix of revenues to include more of the higher-margin services along with
an improvement in the gross margin percentage on products. This increase was
partially offset by a decline in the gross margin percentage on services in the
first quarter of 1999 compared to the first quarter of 1998.
The gross margin percentage on products decreased in the first quarter of
1999 compared to the first quarter of 1998 due to $46.5 million in unusual
charges recognized by the Company in the first quarter of 1999 that were
reflected in the direct costs of products (see "Restructuring and Unusual
Charges"). Excluding these unusual charges, the gross margin percentage on
products increased to 7.1% in the first quarter of 1999 compared to 6.8% in the
first quarter of 1998. This increase was primarily due to a change in the mix of
product revenues to include more of the higher-margin client direct revenues
versus lower-margin independent dealer revenues.
10
<PAGE>
The gross margin percentage on services decreased in the first quarter of
1999 compared to the first quarter of 1998 partially due to $39.6 million in
unusual charges recognized by the Company in the first quarter of 1999 that were
reflected in the direct costs of services (see "Restructuring and Unusual
Charges"). Excluding these unusual charges, the gross margin percentage on
services decreased to 33.8% in the first quarter of 1999 compared to 40.0% in
the first quarter of 1998. This decrease was primarily due to a shortfall in
services revenues that resulted in higher direct labor costs as a percentage of
revenues due to lower utilization rates. Also, a shift in the services revenue
mix to include less of the higher-margin professional services contributed to
the decline.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative (SG&A) expenses in the first quarter of
1999 increased $43.1 million or 31.9% compared to the first quarter of 1998.
SG&A as a percent of revenues increased to 13.1% in the first quarter of 1999
compared to 8.1% in the first quarter of 1998. These increases were partially
due to $27.0 million in unusual charges recognized by the Company in the first
quarter of 1999 (see "Restructuring and Unusual Charges"). Excluding these
unusual charges, SG&A increased $16.1 million in the first quarter of 1999
compared to the same period in 1998 and SG&A as a percentage of revenues
increased to 11.1%. The increase in SG&A as a percentage of revenues was
primarily due to the shortfall in revenues.
RESTRUCTURING AND UNUSUAL CHARGES
In conjunction with the merger of Inacom and Vanstar along with the
Company's efforts to address current market conditions, the Company recognized
previously announced restructuring and other unusual charges during the first
quarter of 1999. These charges include items presented as restructuring costs as
defined by Emerging Issues Task Force 94-3 and other unusual charges. The
restructuring charges are in conjunction with the Company's previously announced
plans to integrate and consolidate operations of Inacom and Vanstar following
the February 17, 1999 merger. The restructuring and unusual pre-tax charges
totaled $217.0 million, of which $75.9 million will not require cash payments
and include charges for duplicate fixed assets and duplicate inventory
(including service parts). The remaining $141.1 million will require cash
payments to be made for termination fees upon the closure of duplicate leased
facilities, to employees for severance, for contract terminations and vendor
purchase commitments, and for other direct costs related to the merger with
Vanstar.
RESTRUCTURING CHARGES
Restructuring charges of $103.9 million include the cost of involuntary
employee separation benefits, leased facility closures and consolidations,
losses on abandonment or disposal of leasehold improvements and equipment,
termination of certain contracts and agreements, and professional fees
associated with the merger. Employee separation benefits of $33.6 million
include amounts to be paid for severance, medical, and other benefits for 1,340
permanent full-time employees that will be severed in accordance with
management's integration and consolidation plan. As of March 27, 1999, 717
employees had been severed and $15.6 million in separation benefits had been
paid and subsequently charged against the separation benefits reserve. The
Company estimates all separation activities to be completed by the end of 1999.
Duplicate leased facility closure and consolidation costs of $47.5 million
include amounts to be paid for lease termination fees, losses on abandonment or
disposal of leasehold improvements, equipment, and capitalized software, net of
estimated disposal values in accordance with management's integration and
consolidation plan. As of March 27, 1999, 19 leases have been terminated and
$2.3 million in lease termination fees have been paid and subsequently charged
against the facility closure and consolidation reserve. The Company estimates
all facility closures and consolidations to be completed by June 26, 1999.
Termination costs for certain contracts and agreements of $8.2 million
include the fees to be paid upon the termination and cancellation of contracts
and agreements pursuant to management's integration and consolidation plan.
Other direct costs related to the merger of $14.6 million include fees paid to
11
<PAGE>
financial advisors, legal counsel, and independent auditors. As of March 27,
1999, $3.6 million had been paid pursuant to the termination of contracts and
agreements and to financial advisors, legal counsel, and independent auditors.
Reserves accrued for the restructuring charges are reflected as an increase
in current liabilities on the Company's balance sheet dated March 27, 1999. As
of March 27, 1999 the restructuring charges reserve had a balance of $77.9
million, which includes provision amounts of $103.9 million less charges to the
reserve of $26.0 million.
UNUSUAL CHARGES
Unusual charges of $113.1 million not presented as restructuring charges are
reflected in direct costs ($86.1 million) and selling, general, and
administrative expenses ($27.0 million). In direct costs, the unusual charges
are reflected in the products segment ($46.5 million) and the services segment
($39.6 million). In selling, general, and administrative expenses, the unusual
charges are reflected in the products segment ($23.0 million) and the services
segment ($4.0 million). The unusual charges include non-cash charges primarily
related to the losses incurred on liquidating certain duplicative inventories
(including service parts) and $4.0 million to record estimated losses on the
collection of certain trade accounts in conjunction with the recent developments
regarding such accounts. The unusual charges also include cash charges related
to certain vendor purchase commitments and other integration costs associated
with merger activities.
Losses on the liquidation of certain duplicative inventories and vendor
purchase commitments of $86.1 million include losses on the disposal of
duplicative inventories and service parts of $43.6 million. Additional charges
of $42.5 million include the estimated losses to be realized on the disposal of
other duplicative inventories as additional inventory and service part
facilities are consolidated, in accordance with management's integration and
consolidation plan, along with certain vendor purchase commitments assumed in
the Vanstar merger for which there is no future economic benefit for the
combined company. Cash requirements related to the purchase commitments of $14.0
million in 1999 and $20.0 million in 2000 will be paid from the Company's
revolving credit facility. The reserve established for these estimated losses is
reflected as a contra-asset to inventory on the Company's balance sheet dated
March 27, 1999. The Company estimates that all liquidation and disposal
activities for duplicative inventory and service parts will be completed by the
end of 1999 after all inventory and service part facilities are consolidated.
Integration costs associated with the merger of $23.0 million, which were
paid by March 27, 1999, include the costs incurred by the Company to effect the
Vanstar merger and to integrate the continuing operations of the combined
companies. The costs consist of the expense of furnishing information to
stockholders, fees of certain integration consultants, and expenses related to
the service of certain employees. These costs include both current period costs
and previously deferred costs recognized upon consummation of the merger with
Vanstar.
FINANCING EXPENSE
Financing expense in the first quarter of 1999 decreased $6.2 million to
$10.2 million compared to $16.4 million in the first quarter of 1998. Financing
expense decreased primarily as a result of lower borrowings and lower borrowing
rates. The decrease in borrowings during the first quarter of 1999 resulted from
a reduction in inventory levels. The decrease in the borrowing rates during the
first quarter 1999 resulted primarily from the Company's new financing
agreements entered into in the second and third quarters of 1998, which carried
more favorable rates.
DISTRIBUTION ON CONVERTIBLE PREFERRED SECURITIES OF TRUST, NET OF TAX
In October 1996, the Vanstar Financing Trust (the "Trust"), a special
purpose financing trust formed by Vanstar, issued 4,025,000 6 3/4% trust
convertible preferred securities. Distributions on preferred securities accrue
at an annual rate of 6 3/4% of the liquidation value of $50 per security
($201,250,000 in the
12
<PAGE>
aggregate) and are included in "Distributions on convertible preferred
securities of trust, net of income taxes" in the Consolidated Statements of
Operations. In both the first quarters of 1999 and 1998, the distributions on
convertible preferred securities of trust, net of income taxes, totaled $2.2
million.
NET EARNINGS (LOSS)
Net earnings (loss) are reported after giving effect to the distributions on
convertible preferred securities of trust. Including the impact of the
restructuring and unusual charges recorded by the Company in the first quarter
of 1999 (see "Restructuring and Unusual Charges"), the net loss was $148.2
million, or $3.29 per diluted share, in the first quarter of 1999 compared to
net earnings of $16.7 million, or $0.37 per diluted share, in the same period of
1998. Excluding the restructuring and unusual charges of $139.6 million after
tax, the net loss for the first quarter of 1999 was $8.6 million, or $0.19 per
diluted share. These decreases resulted from the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
On March 27, 1999, the Company's primary sources of liquidity were provided
through a senior secured revolving credit facility entered into in July 1998
with Deutsche Bank, N.A., as agent, of up to $250.0 million, a $350.0 million
inventory and working capital financing agreement with IBM Credit Corp.
("IBMCC"), and asset securitization programs with JP Morgan & Co. and Nesbitt
Burns Securities, Inc. aggregating up to $425.0 million. Capital resources also
included $201.3 million in Company-obligated mandatorily redeemable convertible
preferred securities of a subsidiary trust holding solely convertible
subordinated debt securities of the Company and $141.5 million of convertible
subordinated debentures.
On March 27, 1999, $204.9 million was outstanding under the Company's $350.0
million inventory and working capital financing agreement with IBMCC. Of this
amount, $56.8 million relating to non-interest bearing trade accounts payable
was included in accounts payable and $148.1 million relating to interest-bearing
working capital was classified as short-term borrowings. Borrowings under the
inventory and working capital financing agreement are subject to certain
borrowing base limitations and are secured by certain inventory, accounts
receivable, and other assets of the Company. On March 27, 1999, amounts borrowed
under the interest-bearing working capital portion of the line of credit carried
an interest rate of 6.5% based on LIBOR.
On March 27, 1999, $175.0 million was outstanding under the $250.0 million
senior secured revolving credit facility with Deutsche Bank at an interest rate
of 6.2% based on LIBOR. Certain inventory, accounts receivable, and other assets
of the Company secure this facility.
In December 1996, the Company established an asset securitization facility,
which currently provides the Company with up to $175.0 million in available
credit. Pursuant to this asset securitization facility, the Company sells an
undivided percentage ownership interest in certain accounts receivable. As of
March 27, 1999, the proceeds of this receivable sale transaction totaled $152.0
million. On March 27, 1999, the implicit interest rate on the receivable sale
transaction was 5.5%.
In July 1998, the Company entered into another asset securitization facility
to fund up to $250.0 million by selling certain direct division trade 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. On March 27, 1999, $63.0 million was funded
under the program. On March 27, 1999, the implicit interest rate on the
receivable sale transaction was 5.3%.
The $141.5 million of convertible subordinated debentures consists of $86.25
million of 4.5% convertible subordinated debentures issued in November 1997 and
$55.25 million of 6.0% convertible subordinated debentures issued in June 1996.
The 1997 debentures and the 1996 debentures were subject to redemption at the
option of the holder if there was a Change in Control (as defined in the
indenture) at a price equal to 100% of the principal amount plus accrued
interest at the date of redemption. The merger between InaCom and Vanstar was a
Change in Control. As a result, on May 3, 1999, the Company repurchased the
entire $141.5 million principal amount of the 1997 and 1996 debentures. The 1997
and
13
<PAGE>
1996 debentures have been classified as long-term debt as the Company has
refinanced the debentures under its long-term revolving credit facility.
In October 1996, the Company's subsidiary trust issued certain preferred
securities, raising gross proceeds of $201.3 million. The holders of the
preferred securities are entitled to cumulative cash distributions at an annual
rate of 6 3/4% of the liquidation amount of $50 per security. The distributions
are payable quarterly in arrears in the aggregate amount of approximately $3.5
million per quarter. The aggregate net proceeds to the Company from this
offering totaled $194.4 million after selling expenses, discounts, and
commissions. The preferred securities are convertible at the option of the
holder into InaCom common stock at a conversion rate of 1.113 shares of InaCom
common stock for each preferred security (equivalent to a conversion price of
$44.92 per share).
The Company's credit facilities contain certain restrictive covenants,
including the maintenance of minimum levels of working capital and net worth,
limitations on the amount of funded debt and interest expense, limitations on
incurring additional indebtedness, and restrictions on the amount of dividends
the Company can pay to stockholders. As of March 27, 1999, the Company was in
compliance with or had received written waivers for the covenants contained in
these agreements.
Subsequent to the end of the first quarter of 1999, the Company entered into
a $450.0 million facility in April 1999 with Deutsche Bank, as agent. This new
facility is a combined senior secured $200.0 million amortizing term loan and
$250.0 million revolving credit facility. With this new facility in place, the
previous $250.0 million senior secured revolving credit facility entered into in
July 1998 with Deutsche Bank, as agent, and with other syndicated banks was
terminated. Also, on March 31, 1999, the Company's $350.0 million inventory and
working capital financing agreement with IBMCC expired. The terminated $250.0
million senior secured revolving credit facility with Deutsche Bank and the
working-capital portion of the IBMCC financing agreement were replaced by the
$450.0 million revolving credit and term loan facility with Deutsche Bank, as
agent. The non-interest-bearing floor planning portion of the financing
agreement with IBMCC was transferred to the Company's existing $200.0 million
floor planning facility with IBMCC.
Following the completion of the new $450.0 million revolving credit and term
loan facility and the repurchase of $141.5 million of convertible subordinated
debentures, the Company's primary sources of liquidity are provided through the
$450.0 million revolving credit and term loan facility and asset securitization
programs with JP Morgan & Co. and Nesbitt Burns Securities, Inc. aggregating up
to $425.0 million. Capital resources also include $201.3 million in
Company-obligated mandatorily redeemable convertible preferred securities of a
subsidiary trust holding solely convertible subordinated debt securities of the
Company.
The Company occasionally uses derivative financial instruments to limit the
effect of increases in the interest rates on certain floating-rate debt. The
Company does not hold or issue derivative financial instruments for trading
purposes. As of March 27, 1999, the Company had three separate interest rate
swap agreements each for an aggregate notional amount of $100 million with
unrelated financial institutions, which were entered into in September 1998,
November 1998, and January 1999, and resulted in certain floating-rate interest
payment obligations becoming fixed-rate interest payment obligations at 5.2%,
4.7%, and 5.0%, respectively. The September 1998 interest rate swap agreement is
a one-year agreement with a one-year extension at the provider's option. The
November 1998 interest rate swap is a four-year agreement with a call provision
at the provider's option after three years. The January 1999 interest rate swap
agreement is a three-year agreement with a call provision at the provider's
option after two years. As a result of the above-mentioned swap agreements,
financing expense decreased by approximately $0.1 million in the first quarter
of 1999.
During the first quarter of 1999, the Company generated $131.1 million of
cash from operations. Accounts receivable, excluding the effects of the sales
under the asset securitization programs, decreased $148.3 million. Inventory
decreased by $29.0 million during the first quarter with a portion of the
decrease
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offset by a decrease in accounts payable of $0.4 million. Accrued and other
liabilities decreased $59.3 million. Accounts receivable decreased as a result
of lower revenues. Inventory decreased primarily as a result of the vendors'
changes in terms and conditions and the Company's efforts in managing its
inventory levels.
The Company used $8.1 million in cash for investing activities in the first
quarter of 1999 primarily to purchase $7.9 million in fixtures and equipment.
Net cash used in financing activities in the first quarter of 1999 totaled
$103.9 million, of which $191.0 million was used to reduce amounts outstanding
under the asset securitization programs. This was partially offset by $86.6
million in borrowings under notes payable and $2.1 million in cash provided by
the issuance of stock under employee stock plans.
The Company believes the funding expected to be generated from operations
and provided by the credit facilities existing on May 3, 1999 will be sufficient
to meet working capital and capital investment needs in 1999.
YEAR 2000
InaCom began preparing its computer-based systems for year 2000 ("Y2K")
computer software compliance issues in 1996. Historically, certain computer
programs were written using two digits rather than four to define the applicable
year. As a result, software may recognize a date using the two digits "00" as
1900 rather than the year 2000. Computer programs that do not recognize the
proper date could generate erroneous data or cause systems to fail. InaCom's Y2K
project covers both traditional computer systems and infrastructure ("IT
Systems") and computer-based hardware and software, facilities and equipment
("Non-IT Systems"). InaCom's Y2K project has six phases: inventory, assessment,
renovation, testing, implementation and contingency planning.
InaCom completed the remediation of its critical business systems during the
fourth quarter of 1998. InaCom expects to complete the testing and
implementation of the compliant systems, which replaced non-compliant systems,
by the end of the second quarter of 1999. InaCom will replace non-compliant
systems acquired during our recent merger with Vanstar in the third quarter of
1999. InaCom has also completed an inventory and assessment of its Non-IT
Systems, which are primarily located at its distribution centers and office
locations. InaCom expects to complete the testing and implementation of the
non-IT, compliant systems, which replaced the non-IT, non-compliant systems, by
the end of the second quarter of 1999.
InaCom's Y2K project also considers the readiness of significant customers
and vendors. Such significant vendors have indicated to InaCom an expectation to
be Y2K compliant. However, the non-compliance of such vendors could impair the
ability of InaCom to obtain necessary products or to sell or provide services to
its customers. Disruptions of the computer systems of InaCom's vendors could
have a material adverse effect on InaCom's financial conditions and results of
operations for the period of such disruption.
InaCom believes that the most reasonably likely worst case Y2K scenario is
that a small number of vendors will be unable to supply components for a short
time after January 1, 2000, with a resulting disruption of product shipments and
services to InaCom's customers. As part of its Y2K process, InaCom is developing
contingency plans with respect to such a scenario and the vendors who are either
unable or unwilling to develop remediation plans to become Y2K compliant.
InaCom's contingency plans will contain a combination of actions including
stockpiling of products and components and selective resourcing of business to
Y2K compliant vendors.
InaCom had incurred approximately $5.7 million of Y2K project expenses as of
March 27, 1999. Future expenses are estimated to include approximately $0.7
million of additional costs. Such cost estimates are based upon presently
available information and may change as InaCom continues with its Y2K project.
15
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INACOM CORP. AND SUBSIDIARIES
PART II--OTHER INFORMATION
ITEM 2. SALES OF UNREGISTERED SECURITIES
In connection with certain contingent payments related to the December 1996
acquisition of Gorham Clark, Inc. and the December 1997 acquisition of Computer
Biz, Inc., the Company issued an aggregate of 104,296 shares of common stock in
January 1999. In connection with the contingent payments related to the March
1997 acquisition of Corporate Resources International, Inc., and the July 1998
acquisition of Tobek, Inc., the Company issued an aggregate of 229,098 shares of
common stock in March 1999. The issuances of securities were exempt from
registration under Section 4(2) of the Securities Act of 1933 and Regulation D
thereunder for transactions not involving a public offering.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Company was held on April 22,
1999. Stockholders voted on the following two items:
(a) Election of Directors
<TABLE>
<CAPTION>
DIRECTOR VOTE FOR VOTE WITHHELD
- ----------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Joseph Auerbach.................................................. 36,678,749 166,270
Richard H. Bard.................................................. 36,678,849 166,170
Mogens C. Bay.................................................... 36,678,749 166,270
James Q. Crowe................................................... 36,678,609 166,410
Bill L. Fairfield................................................ 36,678,849 166,170
W. Grant Gregory................................................. 36,678,749 166,270
Joseph T. Inatome................................................ 36,678,849 166,170
Rick Inatome..................................................... 36,678,849 166,170
William H. Janeway............................................... 36,678,849 166,170
John R. Oltman................................................... 36,678,849 166,170
Gary Schwendiman................................................. 36,678,849 166,170
William Y. Tauscher.............................................. 36,678,849 166,170
Linda S. Wilson.................................................. 36,678,749 166,270
</TABLE>
(b) Approval of appointment of independent accountants KPMG LLP for fiscal
year 1999. The shareholder vote on such proposal was: 36,710,478 for;
83,410 against; 51,131 abstain.
16
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.1 Senior Secured Revolving Credit Agreement between InaCom Corp. and
Deutsche Bank dated April 9, 1999.
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a current report on Form 8-K dated February 17,
1999 reporting that InaCom stockholders approved (1) the issuance of
InaCom common stock to Vanstar stockholders pursuant to the Merger
Agreement, (2) an amendment to the InaCom certificate of incorporation to
increase the number of authorized shares of InaCom common stock to
100,000,000 shares and (3) an increase of an additional 10,000,000 shares
of InaCom common stock authorized for issuance under the 1997 InaCom
Stock Plan. The Form 8-K also reported the consummation of the merger by
which Vanstar became a wholly-owned subsidiary of InaCom. The Company
subsequently filed an amendment to the current report on Form 8-K dated
February 17, 1999 reporting, among other matters, (1) supplemental
consolidated financial statements that give retroactive effect to the
Merger, (2) the increase of the size of InaCom Board of Directors from
nine to thirteen members and the election of an additional four members
and (3) certain historical financial statements of Vanstar and combined
pro forma information of InaCom and Vanstar.
The Company filed a current report on Form 8-K dated March 25, 1999
reporting its earnings outlook for the first quarter ending March 27,
1999.
17
<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.
<TABLE>
<S> <C> <C>
INACOM CORP.
By: /s/ David C. Guenthner
-----------------------------------------
David C. Guenthner
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>
Dated this 11th day of May, 1999.
18
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Exhibit 10.1
CREDIT AGREEMENT
among
INACOM CORP.,
VARIOUS LENDING INSTITUTIONS,
IBM CREDIT CORPORATION,
as Documentation Agent,
BANQUE NATIONALE DE PARIS,
as Syndication Agent,
and
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Administrative Agent
--------------------------------
Dated as of April 9, 1999
--------------------------------
$450,000,000
DEUTSCHE BANK SECURITIES INC.,
as Lead Arranger
<PAGE>
CREDIT AGREEMENT, dated as of April 9, 1999, among INACOM
CORP., a Delaware corporation (the "Borrower"), the Banks listed on Annex I from
time to time, IBM CREDIT CORPORATION, as Documentation Agent, BANQUE NATIONALE
DE PARIS, as Syndication Agent, and DEUTSCHE BANK AG, NEW YORK BRANCH ("DBNY"),
as Administrative Agent. Unless otherwise defined herein, all capitalized terms
used herein and defined in Section 10 are used herein as so defined.
W I T N E S S E T H:
WHEREAS, subject to and upon the terms and conditions herein
set forth, the Banks are willing to make available to the Borrower the credit
facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitments. (A) Subject to and upon the terms and
conditions herein set forth, each Bank severally agrees to make a loan or loans
to the Borrower, which loans shall be drawn, to the extent such Bank has a
commitment under such Facility, under the Term Loan Facility and the Revolving
Loan Facility, as set forth below:
(a) each loan under the Term Loan Facility (each, a "Term
Loan" and, collectively, the "Term Loans") (i) shall be incurred by the
Borrower on a single date occurring on or after the Effective Date and
on or prior to April 9, 1999, (ii) shall be denominated in U.S.
Dollars, (iii) except as hereinafter provided, may, at the option of
the Borrower, be incurred and maintained as and/or converted into Base
Rate Loans or Eurodollar Loans, provided, that all Term Loans made
pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, consist entirely of Term Loans of the same Type and
(iv) shall not exceed for any Bank at the time of incurrence thereof
that aggregate principal amount which equals the Term Loan Commitment,
if any, of such Bank at such time. Once repaid, Term Loans may not be
reborrowed.
(b) Each loan under the Revolving Loan Facility (each, a
"Revolving Loan" and, collectively, the "Revolving Loans") (i) may be
incurred by the Borrower at any time and from time to time on and after
the Initial Borrowing Date and prior to the Revolving Loan Maturity
Date, (ii) shall be denominated in U.S. Dollars, (iii) except as
hereinafter provided, may, at the option of the Borrower, be incurred
and maintained as, and/or converted into, Base Rate Loans or Eurodollar
Loans, provided, that all Revolving Loans made as part of the same
Borrowing shall, unless otherwise specifically provided herein, consist
of Revolving Loans of the same Type, (iv) may be repaid and reborrowed
in accordance with the provisions hereof and (v) shall not exceed for
any Bank at any time outstanding that aggregate principal amount which,
when combined with (I) the aggregate principal amount of all other then
outstanding Revolving Loans made by such Bank and (II) such Bank's RL
Percentage, if any, of the Letter of Credit Outstandings (exclusive of
Unpaid Drawings which are repaid with the proceeds of, and
<PAGE>
simultaneously with the incurrence of Revolving Loans) at such time,
equals the Revolving Loan Commitment, if any, of such Bank at such
time.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal
amount of each Borrowing under a Facility shall not be less than the Minimum
Borrowing Amount for such Facility. More than one Borrowing may be incurred on
any day; provided, that at no time shall there be outstanding in the aggregate
more than ten Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to
incur Loans under any Facility, it shall give the Administrative Agent at the
Notice Office written notice (or telephonic notice promptly confirmed in
writing), which notice must be given prior to 11:00 A.M. (New York time) three
Business Days prior to the date of Borrowing in the case of each Borrowing of
Eurodollar Loans and prior to 11:00 A.M. (New York time) on the date of
Borrowing in the case of each Borrowing of Base Rate Loans to be incurred
hereunder. Each such notice (each, a "Notice of Borrowing") shall, except as
provided in Section 1.10, be irrevocable, and, in the case of each written
notice and each confirmation of telephonic notice, shall be in the form of
Exhibit A-1, appropriately completed to specify (i) the Facility pursuant to
which such Borrowing is to be made, (ii) the aggregate principal amount of the
Loans to be made pursuant to such Borrowing, (iii) the date of such Borrowing
(which shall be a Business Day) and (iv) whether the respective Borrowing shall
consist of Base Rate Loans or, to the extent permitted hereunder, Eurodollar
Loans and, if Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Administrative Agent shall promptly give each Bank which is
required to make Loans under the Facility specified in the respective Notice of
Borrowing written notice (or telephonic notice promptly confirmed in writing) of
each proposed Borrowing, of such Lender's proportionate share thereof, if any,
and of the other matters covered by the Notice of Borrowing.
(b) Without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent or the Letter of Credit Issuer (in the case of Letters of
Credit), as the case may be, may prior to receipt of written confirmation act
without liability upon the basis of such telephonic notice, believed by the
Administrative Agent or the Letter of Credit Issuer, as the case may be, in good
faith to be from an Authorized Officer of the Borrower. In each such case, the
Borrower hereby waives the right to dispute the Administrative Agent's or the
Letter of Credit Issuer's record of the terms of such telephonic notice (except
in the case of gross negligence or bad faith).
1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New
York time) on the date specified in each Notice of Borrowing, each Bank with a
Commitment under the respective Facility will make available its pro rata share,
if any, of each Borrowing requested to be made on such date in the manner
provided below. All amounts shall be made available to the Administrative Agent
in U.S. Dollars and in immediately available funds at the Payment Office and the
Administrative Agent promptly will make available to the Borrower by depositing
to its account at the Payment Office (or at such other office or account as the
Borrower shall request and the Administrative Agent shall agree) the aggregate
of the amounts so made available in the type of funds received. Unless the
Administrative Agent shall have been notified by any Bank prior to the date of
Borrowing that such Bank does not intend to make available to the
-2-
<PAGE>
Administrative Agent its portion of the Borrowing or Borrowings to be made on
such date, the Administrative Agent may assume that such Bank has made such
amount available to the Administrative Agent on such date of Borrowing, and the
Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the Administrative Agent by such Bank and the Administrative Agent has made
available same to the Borrower, the Administrative Agent shall be entitled to
recover such corresponding amount from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent shall promptly notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover from such Bank or the
Borrower, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Administrative Agent to the Borrower to the date such corresponding amount is
recovered by the Administrative Agent, at a rate per annum equal to (x) if paid
by such Bank, the overnight Federal Funds Rate or (y) if paid by the Borrower,
the then applicable rate of interest, calculated in accordance with Section
1.08, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Bank from
its obligation to fulfill its commitments hereunder or to prejudice any rights
which the Borrower may have against any Bank as a result of any default by such
Bank hereunder.
1.05 Notes. (a) At the request of any Bank, the Borrower's
obligation to pay the principal of, and interest on, all the Loans made to it by
such Bank shall be evidenced (i) if Term Loans, by a promissory note
substantially in the form of Exhibit B-1 with blanks appropriately completed in
conformity herewith (each, a "Term Note" and, collectively, the "Term Notes"),
and (ii) if Revolving Loans, by a promissory note substantially in the form of
Exhibit B-2 with blanks appropriately completed in conformity herewith (each, a
"Revolving Note" and, collectively, the "Revolving Notes").
(b) A Term Note issued to any Bank that has a Term Loan
Commitment or outstanding Term Loans shall (i) be executed by the Borrower, (ii)
be payable to the order of such Bank or its registered assigns and be dated the
Initial Borrowing Date (or if issued thereafter, the date of issuance), (iii) be
in a stated principal amount equal to the initial Term Loan Commitment of such
Bank and be payable in the principal amount of Term Loans evidenced thereby,
(iv) mature on the Term Loan Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment as provided in Section 4.01, and mandatory repayment as
provided in Section 4.02, and (vii) be entitled to the benefits of this
Agreement and the other Credit Documents.
(c) A Revolving Note issued to any Bank that has a Revolving
Loan Commitment or outstanding Revolving Loans shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank or its registered assigns
and be dated the Initial Borrowing Date (or if issued thereafter, the date of
issuance), (iii) be in a stated principal amount equal to the Revolving Loan
Commitment of such Bank (or if issued after the termination thereof, in an
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amount equal to the outstanding Revolving Loans of such Bank at such time) and
be payable in the principal amount of the Revolving Loans evidenced thereby,
(iv) mature on the Revolving Loan Maturity Date, (v) bear interest as provided
in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment as provided in Section 4.01, and mandatory repayment as
provided in Section 4.02, and (vii) be entitled to the benefits of this
Agreement and the other Credit Documents.
(d) Each Bank will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes (to the extent it has such Notes), endorse on the
reverse side thereof the outstanding principal amount of Loans evidenced
thereby. Failure to make any such notation or any error in such notation shall
not affect the Borrower's obligations in respect of such Loans.
1.06 Conversions. The Borrower shall have the option to
convert on any Business Day occurring on or after the Initial Borrowing Date,
all or a portion at least equal to the applicable Minimum Borrowing Amount of
the outstanding principal amount of the Loans owing by the Borrower pursuant to
a single Facility into a Borrowing or Borrowings of another Type of Loan under
such Facility; provided, that (i) except as otherwise provided in Section
1.10(b), no partial conversion of a Borrowing of Eurodollar Loans shall reduce
the outstanding principal amount of the Eurodollar Loans made pursuant to such
Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii)
unless the Required Banks otherwise agree, Base Rate Loans may only be converted
into Eurodollar Loans if no Default or Event of Default is in existence on the
date of the conversion and (iii) Borrowings of Eurodollar Loans resulting from
this Section 1.06 shall be limited in number as provided in Section 1.02. Each
such conversion shall be effected by the Borrower by giving the Administrative
Agent at the Notice Office, prior to 11:00 A.M. (New York time), at least three
Business Days' (or one Business Day's in the case of a conversion into Base Rate
Loans) prior written notice (or telephonic notice promptly confirmed in writing)
(each, a "Notice of Conversion") specifying the Loans to be so converted, the
Type of Loans to be converted into and, if to be converted into a Borrowing of
Eurodollar Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall give each Bank prompt notice of any such proposed
conversion affecting any of its Loans.
1.07 Pro Rata Borrowings. All Loans comprising a Borrowing
under this Agreement shall be made by the Banks pro rata on the basis of their
Term Loan Commitments or Revolving Loan Commitments, as the case may be. It is
understood that no Bank shall be responsible for any default by any other Bank
of its obligation to make Loans hereunder and that each Bank shall be obligated
to make the Loans to be made by it hereunder, regardless of the failure of any
other Bank to fulfill its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base
Rate Loan shall bear interest from the date of the Borrowing thereof until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall at all times be the
Applicable Margin plus the Base Rate in effect from time to time.
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(b) The unpaid principal amount of each Eurodollar Loan shall
bear interest from the date of the Borrowing thereof until the earlier of (i)
the maturity (whether by acceleration or otherwise) of such Eurodollar Loan and
(ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to
Section 1.06, 1.09 or 1.10(b), as applicable, at a rate per annum which shall at
all times be the Applicable Margin plus the relevant Eurodollar Rate.
(c) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan shall bear interest at a rate per annum
equal to the rate which is 2% in excess of the rate otherwise applicable to Base
Rate Loans of such Facility from time to time; provided that Eurodollar Loans
shall bear interest after maturity (whether by acceleration or otherwise) until
the end of the applicable Interest Period at a rate per annum equal to 2% in
excess of the rate of interest then applicable thereto. Interest which accrues
under this Section 1.08(c) shall be payable on demand.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on each
Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, in arrears on
(x) the date of any conversion into a Base Rate Loan pursuant to Section 1.06,
1.09 or 1.10(b), as applicable (on the amount converted) and (y) the last day of
each Interest Period applicable thereto and, in the case of an Interest Period
in excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period, (iii) in respect of each Term Loan and,
to the extent such prepayment or repayment is accompanied by a permanent
reduction to the Total Revolving Loan Commitment, each Revolving Loan, on the
date of any prepayment or repayment thereof (on the amount prepaid or repaid),
and (iv) in respect of each Loan, at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(f) The Administrative Agent, upon determining the interest
rate for any Borrowing of Eurodollar Loans for any Interest Period, shall
promptly notify the Borrower and the Banks thereof.
1.09 Interest Periods. At the time the Borrower gives a Notice
of Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 11:00 A.M. (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans, it shall have the right to elect by giving the
Administrative Agent written notice (or telephonic notice promptly confirmed in
writing) of the Interest Period applicable to such Borrowing, which Interest
Period shall, at the option of the Borrower, be a one, two, three or six-month
period. Notwithstanding anything to the contrary contained above:
(i) all Eurodollar Loans comprising a Borrowing shall have
the same Interest Period;
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(ii) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date
of any conversion from a Borrowing of Base Rate Loans) and each
Interest Period occurring thereafter in respect of such Borrowing shall
commence on the day on which the next preceding Interest Period
expires;
(iii) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, provided, that if any Interest Period
would otherwise expire on a day which is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business
Day;
(v) no Interest Period for a Borrowing under a Facility may be
elected if it would extend beyond the respective Maturity Date for such
Facility;
(vi) unless the Required Banks otherwise agree, no Interest
Period may be elected at any time when a Default or an Event of Default
is then in existence; and
(vii) no Interest Period with respect to any Borrowing of Term
Loans shall extend beyond any date upon which a mandatory prepayment of
Term Loans is required to be made under Section 4.02(A)(b) if, after
giving effect to the selection of such Interest Period, the aggregate
principal amount of Term Loans maintained as Eurodollar Loans with
Interest Periods ending after such date of mandatory repayment would
exceed the aggregate principal amount of Term Loans permitted to be
outstanding after such mandatory prepayment.
If upon the expiration of any Interest Period, the Borrower has failed to elect,
or is not permitted to elect, a new Interest Period to be applicable to the
respective Borrowing of Eurodollar Loans as provided above, the Borrower shall
be deemed to have elected to convert such Borrowing into a Borrowing of Base
Rate Loans effective as of the expiration date of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that
(x) in the case of clause (i) below, the Administrative Agent or (y) in the case
of clauses (ii) and (iii) below, any Bank, shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period, that, by reason of any changes arising after the date
of this Agreement affecting the interbank Eurodollar market, adequate
and fair means do not exist for ascertaining the applicable interest
rate on the basis provided for in the definition of Eurodollar Rate; or
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(ii) at any time, that such Bank shall incur increased costs
or reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loans (other than any increased cost or
reduction in the amount received or receivable resulting from the
imposition of or a change in the rate of net income taxes or similar
charges) because of (x) any change since the date of this Agreement in
any applicable law, governmental rule, regulation, guideline, order or
request (whether or not having the force of law), or in the
interpretation or administration thereof and including the introduction
of any new law or governmental rule, regulation, guideline, order or
request (such as, for example, but not limited to a change in official
reserve requirements, but, in all events, excluding reserves required
under Regulation D to the extent included in the computation of the
Eurodollar Rate) and/or (y) other circumstances affecting such Bank,
the interbank Eurodollar market or the position of such Bank in such
market; or
(iii) at any time since the date of this Agreement, that the
making or continuance of any Eurodollar Loan has become unlawful by
compliance by such Bank in good faith with any law, governmental rule,
regulation, guideline or order (or would conflict with any such
governmental rule, regulation, guideline or order not having the force
of law but with which such Bank customarily complies even though the
failure to comply therewith would not be unlawful), or has become
impracticable as a result of a contingency occurring after the date of
this Agreement which materially and adversely affects the interbank
Eurodollar market;
then, and in any such event, such Bank (or the Administrative Agent in the case
of clause (i) above) shall (x) on such date and (y) as promptly as practicable
after the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and (except in the case of clause (i)) to
the Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Banks). Thereafter, (x) in
the case of clause (i) above, Eurodollar Loans shall no longer be available
until such time as the Administrative Agent notifies the Borrower and the Banks
that the circumstances giving rise to such notice by the Administrative Agent no
longer exist, and any Notice of Borrowing or Notice of Conversion given by the
Borrower with respect to Eurodollar Loans which have not yet been incurred shall
be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the
Borrower agrees to pay to such Bank, upon written demand therefor (accompanied
by the written notice referred to below), such additional amounts (in the form
of an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the additional
amounts owed to such Bank, showing the basis for the calculation thereof,
submitted to the Borrower by such Bank shall, absent manifest error, be final
and conclusive and binding upon all parties hereto) and (z) in the case of
clause (iii) above, the Borrower shall take one of the actions specified in
Section 1.10(b) as promptly as possible and, in any event, within the time
period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing (whether initially or by conversion), cancel said
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Borrowing by giving the Administrative Agent telephonic notice (confirmed
promptly in writing) thereof on the same date that the Borrower was notified by
a Bank pursuant to Section 1.10(a)(ii) or (iii)), or (ii) if the affected
Eurodollar Loan is then outstanding, upon at least three Business Days' notice
to the Administrative Agent, require the affected Bank to convert each such
Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the
circumstances described in Section 1.10(a)(iii), shall occur no later than the
last day of the Interest Period then applicable to such Eurodollar Loan (or such
earlier date as shall be required by applicable law)); provided, that if more
than one Bank is affected at any time, then all affected Banks must be treated
the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the date
hereof, the adoption or effectiveness of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by the National Association of
Insurance Commissioners ("NAIC") or any governmental authority, central Bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by such Bank or any corporation controlling such Bank with any
request or directive regarding capital adequacy (whether or not having the force
of law) of the NAIC or any such authority, central Bank or comparable agency,
has or would have the effect of reducing the rate of return on such Bank's or
such other corporation's capital or assets as a consequence of such Bank's
Commitments or obligations hereunder to a level below that which such Bank or
such other corporation could have achieved but for such adoption, effectiveness,
change or compliance (taking into consideration such Bank's or such other
corporation's policies with respect to capital adequacy), then from time to
time, upon written demand by such Bank (with a copy to the Administrative
Agent), accompanied by the notice referred to in the last sentence of this
clause (c), the Borrower agrees to pay to such Bank such additional amount or
amounts as will compensate such Bank or such other corporation for such
reduction. Each Bank, upon determining in good faith that any additional amounts
will be payable pursuant to this Section 1.10(c), will give prompt written
notice thereof to the Borrower, which notice shall set forth the basis of the
calculation of such additional amounts, although the failure to give any such
notice shall not release or diminish the Borrower's obligations to pay
additional amounts pursuant to this Section 1.10(c) upon the subsequent receipt
of such notice.
1.11 Compensation. The Borrower agrees to compensate each
Bank, promptly upon its written request (which request shall set forth the basis
for requesting such compensation and shall be made through the Administrative
Agent), for all reasonable losses, expenses and liabilities (including, without
limitation, any loss, expense or liability incurred by reason of the liquidation
or reemployment of deposits or other funds required by such Bank to fund its
Eurodollar Loans but excluding loss of anticipated profit with respect to any
Loans) which such Bank may sustain: (i) if for any reason (other than a default
by such Bank or the Administrative Agent) a Borrowing of Eurodollar Loans does
not occur on a date specified therefor in a Notice of Borrowing or Notice of
Conversion (whether or not withdrawn by the Borrower or deemed withdrawn
pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment
made pursuant to Section 4.02 or as a result of an acceleration of the Loans
pursuant to Section 9) or conversion of any Eurodollar Loans occurs on a date
which is not the last day of an Interest Period applicable thereto; (iii) if any
prepayment of any Eurodollar Loans is not made on any date specified in a notice
of prepayment given by the Borrower; or (iv) as a consequence of (x) any other
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default by the Borrower to repay its Eurodollar Loans when required by the terms
of this Agreement or (y) an election made pursuant to Section 1.10(b).
Calculation of all amounts payable to a Bank under this Section 1.11 shall be
made as though that Bank had actually funded its relevant Eurodollar Loan
through the purchase of a Eurodollar deposit bearing interest at the Eurodollar
Rate in an amount equal to the amount of that Loan, having a maturity comparable
to the relevant Interest Period and through the transfer of such Eurodollar
deposit from an offshore office of that Bank to a domestic office of that Bank
in the United States of America; provided, however, that each Bank may fund each
of its Eurodollar Loans in any manner it sees fit and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this Section
1.11. It is further understood and agreed that if any repayment of Eurodollar
Loans pursuant to Section 4.01 or any conversion of Eurodollar Loans pursuant to
Section 1.06 in either case occurs on a date which is not the last day of an
Interest Period applicable thereto, such repayment or conversion shall be
accompanied by any amounts owing to any Bank pursuant to this Section 1.11.
1.12 Change of Lending Office. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Bank) to designate another lending office for any Loans or Letters of
Credit affected by such event; provided, that such designation is made on such
terms that, in the sole judgment of such Bank, such Bank and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequences of the event giving rise to the operation of any such
Section. Nothing in this Section 1.12 shall affect or postpone any of the
obligations of the Borrower or the right of any Bank provided in Section 1.10,
2.05 or 4.04.
1.13 Replacement of Banks. (x) If any Bank becomes a
Defaulting Bank, (y) upon the occurrence of any event giving rise to the
operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or
Section 4.04 with respect to any Bank which results in such Bank charging to the
Borrower increased costs in excess of those being generally charged by the other
Banks or (z) in the case of a refusal by a Bank to consent to a proposed change,
waiver, discharge or termination with respect to this Agreement which has been
approved by the Required Banks as provided in Section 12.12(b), the Borrower
shall have the right, if no Default or Event of Default then exists, to replace
such Bank (the "Replaced Bank") with one or more other Eligible Transferee or
Transferees, none of whom shall constitute a Defaulting Bank at the time of such
replacement (collectively, the "Replacement Bank") reasonably acceptable to the
Administrative Agent, provided that (i) at the time of any replacement pursuant
to this Section 1.13, the Replacement Bank shall enter into one or more
Assignment and Assumption Agreements pursuant to Section 12.04(b) (and with all
fees payable pursuant to said Section 12.04(b) to be paid by the Replacement
Bank) pursuant to which the Replacement Bank shall acquire all of the
Commitments and outstanding Loans of, and in each case participations in Letters
of Credit by, the Replaced Bank and, in connection therewith, shall pay to (x)
the Replaced Bank in respect thereof an amount equal to the sum of (A) the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Bank, (B) all Unpaid Drawings that have been funded by (and not reimbursed to)
such Replaced Bank, together with all then unpaid interest with respect thereto
at such time and (C) all accrued, but theretofore unpaid, Fees owing
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to the Replaced Bank pursuant to Section 3.01 and (y) the Letter of Credit
Issuer an amount equal to such Replaced Bank's RL Percentage of any Unpaid
Drawing (which at such time remains an Unpaid Drawing) with respect to a Letter
of Credit issued by it to the extent such amount was not theretofore funded by
such Replaced Bank and (ii) all obligations (including, without limitation, all
such amounts, if any, due and owing under Section 1.11, whether resulting from
the replacement of such Replaced Bank pursuant to this Section 1.13 or
otherwise) of the Borrower due and owing to the Replaced Bank (other than those
specifically described in clause (i) above in respect of which the assignment
purchase price has been, or is concurrently being, paid) shall be paid in full
to such Replaced Bank concurrently with such replacement. Upon the execution of
the respective Assignment and Assumption Agreements, the payment of amounts
referred to in clauses (i) and (ii) above, recordation of the assignment on the
Register by the Administrative Agent pursuant to Section 7.13 and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Note or Notes executed by the Borrower, (x) the Replacement Bank
shall become a Bank hereunder and the Replaced Bank shall cease to constitute a
Bank hereunder, except with respect to indemnification provisions under this
Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 11.07
and 12.01), which shall survive as to such Replaced Bank as to the events
occurring prior to the date of replacement and (y) Annex I shall be deemed
modified to reflect the changed Commitments (and/or outstanding Term Loans, as
the case may be) resulting from the assignment from the Replaced Bank to the
Replacement Bank.
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request the Letter of Credit
Issuer at any time and from time to time on or after the Initial Borrowing Date
and prior to the Revolving Loan Maturity Date to issue, for the account of the
Borrower and in support of, on a standby basis, L/C Supportable Indebtedness,
and subject to and upon the terms and conditions herein set forth the Letter of
Credit Issuer agrees to issue from time to time, irrevocable letters of credit
in such form as may be approved by the Letter of Credit Issuer (each such letter
of credit, a "Letter of Credit" and, collectively, the "Letters of Credit").
Notwithstanding the foregoing, the Letter of Credit Issuer shall be under no
obligation to issue any Letter of Credit if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority
or arbitrator shall purport by its terms to enjoin or restrain the
Letter of Credit Issuer from issuing a Letter of Credit or any
requirement of law applicable to the Letter of Credit Issuer or any
request or directive (whether or not having the force of law) from any
governmental authority with jurisdiction over the Letter of Credit
Issuer shall prohibit, or request that the Letter of Credit Issuer
refrain from, the issuance of letters of credit generally or the Letter
of Credit in particular or shall impose upon the Letter of Credit
Issuer with respect to the Letter of Credit any restriction or reserve
or capital requirement (for which the Letter of Credit Issuer is not
otherwise compensated) not in effect on the date hereof, or any
unreimbursed loss, cost or expense which was not applicable, in effect
or known to the Letter of Credit Issuer as of the date hereof and which
the Letter of Credit Issuer in good faith deems material to it; or
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(ii) the Letter of Credit Issuer shall have received notice
prior to the issuance of a Letter of Credit of the type described in
clause (vi) of Section 2.01(b).
(b) Notwithstanding the foregoing, (i) no Letter of Credit
shall be issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (x) $40,000,000 or (y) when added to the aggregate principal
amount of all Revolving Loans, the Total Revolving Loan Commitment at such time;
(ii) each Letter of Credit shall have an expiry date occurring not later than
one year after such Letter of Credit's date of issuance, provided, that any
Letter of Credit may be automatically extendable for periods of up to one year
so long as such Letter of Credit provides that the Letter of Credit Issuer
retains an option, satisfactory to the Letter of Credit Issuer, to terminate
such Letter of Credit within a specified period of time prior to each scheduled
extension date; (iii) no Letter of Credit shall have an expiry date occurring
later than five Business Days next preceding the Revolving Loan Maturity Date;
(iv) each Letter of Credit shall be denominated in U.S. Dollars and payable on a
sight basis; (v) the Stated Amount of each Letter of Credit shall not be less
than $250,000 or such lesser amount as is acceptable to the Letter of Credit
Issuer; and (vi) the Letter of Credit Issuer will not issue any Letter of Credit
after it has received written notice from the Borrower or the Required Banks
stating that a Default or an Event of Default exists until such time as the
Letter of Credit Issuer shall have received a written notice of (i) rescission
of such notice from the party or parties originally delivering the same or (ii)
a waiver of such Default or Event of Default by the Required Banks.
(c) Notwithstanding the foregoing, in the event a Bank Default
exists, the Letter of Credit Issuer shall not be required to issue any Letter of
Credit unless the Letter of Credit Issuer has entered into arrangements
satisfactory to it and the Borrower to eliminate the Letter of Credit Issuer's
risk with respect to the participation in Letters of Credit of the Defaulting
Bank or Banks, including by cash collateralizing such Defaulting Bank's or
Banks' RL Percentage of the Letter of Credit Outstandings.
(d) Annex X hereto contains a description of all letters of
credit issued pursuant to the Existing Credit Facility and outstanding on the
Effective Date. Each such letter of credit, including any extension or renewal
thereof, shall constitute a "Letter of Credit" for all purposes of this
Agreement, issued, for purposes of Section 2.04(a), on the Effective Date.
2.02 Letter of Credit Requests; Notices of Issuance. (a)
Whenever it desires that a Letter of Credit be issued, the Borrower shall give
the Administrative Agent and the Letter of Credit Issuer written notice (or
telephonic notice confirmed in writing) thereof prior to 11:00 A.M. (New York
time) at least five Business Days (or such shorter period as may be acceptable
to the Letter of Credit Issuer) prior to the proposed date of issuance (which
shall be a Business Day) which written notice shall be in the form of Exhibit
A-2 (each such notice, a "Letter of Credit Request"). Each Letter of Credit
Request shall include any other documents as the Letter of Credit Issuer
customarily requires in connection therewith.
(b) Upon its issuance of or amendment to any Letter of Credit,
the Letter of Credit Issuer shall promptly notify the Administrative Agent, each
RL Bank and the Borrower of
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such issuance or amendment, which notice shall include a summary description of
the Letter of Credit actually issued and any amendments thereto.
2.03 Agreement to Repay Letter of Credit Payments. (a) The
Borrower hereby agrees to reimburse the Letter of Credit Issuer, by making
payment directly to the Letter of Credit Issuer in immediately available funds,
for any payment or disbursement made by the Letter of Credit Issuer under any
Letter of Credit issued by it (each such amount so paid or disbursed until
reimbursed, an "Unpaid Drawing") no later than one Business Day following the
date that the Borrower receives notice from the Letter of Credit Issuer of such
payment or disbursement, with interest on the amount so paid or disbursed by the
Letter of Credit Issuer to the extent not reimbursed prior to 1:00 P.M. (New
York time) on the date of such payment or disbursement, from and including the
date paid or disbursed to but not including the date the Letter of Credit Issuer
is reimbursed therefor at a rate per annum which shall be the Applicable Margin
plus the Base Rate as in effect from time to time for Revolving Loans (plus an
additional 2% per annum if not reimbursed by the third Business Day after the
date the Borrower receives notice from the Letter of Credit Issuer of such
payment or disbursement), such interest also to be payable on demand, provided
that the notice referred to above in this clause (a) shall not be required to be
given if a Default or an Event of Default under Section 9.05 shall have occurred
and be continuing, in which case such Unpaid Drawings shall be due and payable
immediately without presentment, demand, protest or notice of any kind (all of
which are hereby waived by each Credit Party) and shall bear interest at a rate
per annum which shall be the Base Rate plus the Applicable Margin for Revolving
Loans (plus an additional 2% on and after the third Business Day following the
respective Drawing).
(b) The Borrower's obligation under this Section 2.03 to
reimburse the Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had against the Letter of
Credit Issuer, the Administrative Agent or any Bank, including, without
limitation, any defense based upon the failure of any drawing under a Letter of
Credit issued by it to substantially conform to the terms of the Letter of
Credit or any non-application or misapplication by the beneficiary of the
proceeds of such drawing; provided, however, that the Borrower shall not be
obligated to reimburse the Letter of Credit Issuer for any wrongful payment made
by the Letter of Credit Issuer under a Letter of Credit issued by it as a result
of acts or omissions constituting willful misconduct or gross negligence on the
part of the Letter of Credit Issuer.
2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of
Credit Issuer shall be deemed to have sold and transferred to each other RL
Bank, and each such RL Bank (each, a "Participant") shall be deemed irrevocably
and unconditionally to have purchased and received from the Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such Participant's RL Percentage, in such Letter of Credit,
each substitute Letter of Credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto (although
Letter of Credit Fees shall be payable directly to the Administrative Agent for
the account of the RL Banks as provided in Section 3.01(b) and the Participants
shall
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<PAGE>
have no right to receive any portion of any Facing Fees) and any security
therefor or guaranty pertaining thereto. Upon any change in the Revolving Loan
Commitments of the RL Banks pursuant to Section 1.13 or 12.04(b) or otherwise,
it is hereby agreed that, with respect to all outstanding Letters of Credit and
Unpaid Drawings, there shall be an automatic adjustment to the participations
pursuant to this Section 2.04 to reflect the new RL Percentages of the assigning
and assignee Banks.
(b) In determining whether to pay under any Letter of Credit,
the Letter of Credit Issuer shall not have any obligation relative to the
Participants other than to determine that any documents required to be delivered
under such Letter of Credit have been delivered and that they appear to
substantially comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by the Letter of Credit Issuer
under or in connection with any Letter of Credit issued by it if taken or
omitted in the absence of gross negligence or willful misconduct, shall not
create for the Letter of Credit Issuer any resulting liability.
(c) In the event that the Letter of Credit Issuer makes any
payment under any Letter of Credit issued by it and the Borrower shall not have
reimbursed such amount in full to the Letter of Credit Issuer pursuant to
Section 2.03(a), the Letter of Credit Issuer shall promptly notify the
Administrative Agent, and the Administrative Agent shall promptly notify each
Participant of such failure, and each Participant shall promptly and
unconditionally pay to the Administrative Agent for the account of the Letter of
Credit Issuer, the amount of such Participant's RL Percentage of such payment in
U.S. Dollars and in same day funds; provided, however, that no Participant shall
be obligated to pay to the Administrative Agent its RL Percentage of such
unreimbursed amount for any wrongful payment made by the Letter of Credit Issuer
under a Letter of Credit issued by it as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of the Letter of
Credit Issuer. If the Administrative Agent so notifies any Participant required
to fund a payment under a Letter of Credit prior to 11:00 A.M. (New York time)
on any Business Day, such Participant shall make available to the Administrative
Agent for the account of the Letter of Credit Issuer such Participant's RL
Percentage of the amount of such payment on such Business Day in same day funds.
If and to the extent such Participant shall not have so made its RL Percentage
of the amount of such payment available to the Administrative Agent for the
account of the Letter of Credit Issuer, such Participant agrees to pay to the
Administrative Agent for the account of the Letter of Credit Issuer, forthwith
on demand such amount, together with interest thereon, for each day from such
date until the date such amount is paid to the Administrative Agent for the
account of the Letter of Credit Issuer at the overnight Federal Funds Rate. The
failure of any Participant to make available to the Administrative Agent for the
account of the Letter of Credit Issuer its RL Percentage of any payment under
any Letter of Credit issued by it shall not relieve any other Participant of its
obligation hereunder to make available to the Administrative Agent for the
account of the Letter of Credit Issuer its RL Percentage of any payment under
any the Letter of Credit on the date required, as specified above, but no
Participant shall be responsible for the failure of any other Participant to
make available to the Administrative Agent for the account of the Letter of
Credit Issuer such other Participant's RL Percentage of any such payment.
(d) Whenever the Letter of Credit Issuer receives a payment of
a reimbursement obligation as to which the Administrative Agent has received for
the account of the Letter
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<PAGE>
of Credit Issuer any payments from the Participants pursuant to clause (c)
above, the Letter of Credit Issuer shall promptly pay to the Administrative
Agent and the Administrative Agent shall promptly pay to each Participant which
has paid its RL Percentage thereof, in U.S. Dollars and in same day funds, an
amount equal to such Participant's RL Percentage of the principal amount thereof
and interest thereon accruing after the purchase of the respective
participations.
(e) The obligations of the Participants to make payments to
the Administrative Agent for the account of the Letter of Credit Issuer with
respect to Letters of Credit issued by it shall be irrevocable and not subject
to counterclaim, set-off or other defense or any other qualification or
exception whatsoever and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower or any of its Subsidiaries may have at any time
against a beneficiary named in a Letter of Credit, any transferee of
the Letter of Credit (or any Person for whom any such transferee may be
acting), the Administrative Agent, the Letter of Credit Issuer, any
Bank, or other Person, whether in connection with this Agreement, any
Letter of Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between the Borrower
or any of its Subsidiaries and the beneficiary named in any such Letter
of Credit);
(iii) any draft, certificate or other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Increased Costs. If after the date hereof, the adoption
or effectiveness of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Letter of
Credit Issuer or any Participant with any request or directive (whether or
not having the force of law) by any such authority, central bank or
comparable agency shall either (i) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against Letters of
Credit issued by the Letter of Credit Issuer or such Participant's
participation therein, or (ii) impose on the Letter of Credit Issuer or any
Participant any other conditions affecting this Agreement, any Letter of
Credit or such Participant's participation therein; and the result of any of
the foregoing is to increase the cost to the Letter of Credit Issuer or such
Participant of issuing, maintaining or participating in the Letter of Credit,
or to reduce the amount of any sum received or receivable by the Letter of
Credit Issuer or such Participant hereunder, then, upon written demand to the
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<PAGE>
Borrower by the Letter of Credit Issuer or such Participant (a copy of which
notice shall be sent by the Letter of Credit Issuer or such Participant to the
Administrative Agent), accompanied by the certificate described in the last
sentence of this Section 2.05, the Borrower shall pay to the Letter of Credit
Issuer or such Participant such additional amount or amounts as will compensate
the Letter of Credit Issuer or such Participant for such increased cost or
reduction. A certificate submitted to the Borrower by the Letter of Credit
Issuer or such Participant, as the case may be (a copy of which certificate
shall be sent by the Letter of Credit Issuer or such Participant to the
Administrative Agent), setting forth the basis for the determination of such
additional amount or amounts necessary to compensate the Letter of Credit Issuer
or such Participant as aforesaid shall be final and conclusive and binding on
the Borrower absent manifest error, although the failure to deliver any such
certificate shall not release or diminish the Borrower's obligations to pay
additional amounts pursuant to this Section 2.05 upon subsequent receipt of such
certificate.
SECTION 3. Fees; Commitments.
3.01 Fees. (a) The Borrower shall pay to the Administrative
Agent for distribution to each Non-Defaulting Bank a commitment fee (the
"Commitment Fee") for the period from the Effective Date to but not including
the date the Total Commitment has been terminated, computed at a rate for each
day equal to the Applicable Margin then in effect with respect to Commitment
Fees on the daily Aggregate Unutilized Commitment of such Bank. Accrued
Commitment Fees shall be due and payable in arrears on each Quarterly Payment
Date and the date upon which the Total Commitment is terminated.
(b) The Borrower shall pay to the Administrative Agent for the
account of each Non-Defaulting Bank that has a Revolving Loan Commitment pro
rata on the basis of their RL Percentages, a fee in respect of each Letter of
Credit (the "Letter of Credit Fee") computed at a rate per annum equal to the
Applicable Margin then in effect with respect to Letters of Credit on the daily
Stated Amount of the Letter of Credit. Accrued Letter of Credit Fees shall be
due and payable quarterly in arrears on each Quarterly Payment Date and upon the
first day after the termination of the Total Revolving Loan Commitment upon
which no Letters of Credit remain outstanding.
(c) The Borrower shall pay to the Letter of Credit Issuer for
its own account a fee in respect of each Letter of Credit issued by such Letter
of Credit Issuer (the "Facing Fee") computed at the rate of 1/10 of 1% per annum
on the daily Stated Amount of such Letter of Credit. Accrued Facing Fees shall
be due and payable quarterly in arrears on each Quarterly Payment Date and upon
the first day after the termination of the Total Revolving Loan Commitment upon
which no Letters of Credit remain outstanding.
(d) The Borrower hereby agrees to pay directly to the Letter
of Credit Issuer upon each issuance of, payment under, and/or amendment of, a
Letter of Credit issued by it such amount as shall at the time of such issuance,
payment or amendment be the administrative charge which such Letter of Credit
Issuer is customarily charging for issuances of, payments under or amendments
of, letters of credit issued by it.
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<PAGE>
(e) The Borrower shall pay to the Administrative Agent, for
its own account, such fees as may be agreed to from time to time between the
Borrower and the Administrative Agent, when and as due.
(f) All computations of Fees shall be made in accordance with
Section 12.07(b).
3.02 Voluntary Termination or Reduction of Total Unutilized
Revolving Loan Commitment. (a) Upon at least two Business Days' prior written
notice (or telephonic notice promptly confirmed in writing) to the
Administrative Agent at the Notice Office (which notice the Administrative Agent
shall promptly transmit to each of the Banks), the Borrower shall have the
right, without premium or penalty, to terminate or partially reduce the Total
Unutilized Revolving Loan Commitment; provided that (x) any such termination or
partial reduction shall apply to proportionately and permanently reduce the
Revolving Loan Commitment of each of the RL Banks and (y) any partial reduction
pursuant to this Section 3.02(a) shall be in the amount of at least $5,000,000
or any multiple of $1,000,000 in excess thereof.
(b) In the event of certain refusals by a Bank to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Banks as provided in
Section 12.12(b), the Borrower shall have the right, upon five Business Days'
prior written notice to the Administrative Agent at the Notice Office (which
notice the Administrative Agent shall promptly transmit to each of the Banks),
to terminate the entire Revolving Loan Commitment of such Bank, so long as all
Loans, together with accrued and unpaid interest, Fees and all other amounts,
due and owing to such Bank are repaid concurrently with the effectiveness of
such termination pursuant to Section 4.01(b) and the Borrower shall pay to the
Administrative Agent at such time an amount in cash and/or Cash Equivalents
equal to such Bank's RL Percentage of the outstanding Letters of Credit (which
cash and/or Cash Equivalents shall be held by the Administrative Agent as
security for the obligations of the Borrower hereunder in respect of the
outstanding Letters of Credit pursuant to a cash collateral agreement to be
entered into in form and substance reasonably satisfactory to the Administrative
Agent, which shall permit certain investments in Cash Equivalents reasonably
satisfactory to the Administrative Agent until the proceeds are applied to the
secured obligations) (at which time Annex I shall be deemed modified to reflect
such changed amounts), and at such time, such Bank shall no longer constitute a
"Bank" for purposes of this Agreement, except with respect to indemnifications
under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05,
4.04, 11.07 and 12.01), which shall survive as to such repaid Bank.
3.03 Mandatory Adjustments of Commitments, etc. (a) The Total
Commitment shall terminate in its entirety on April 9, 1999 unless the Initial
Borrowing Date has occurred on or before such date.
(b) The Total Term Loan Commitment shall terminate in its
entirety on the Initial Borrowing Date, after giving effect to the making of the
Term Loans on such date.
(c) The Total Revolving Loan Commitment shall terminate in its
entirety on the Revolving Loan Maturity Date.
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<PAGE>
(d) Each reduction or adjustment of the Total Term Loan
Commitment or the Total Revolving Loan Commitment pursuant to this Section 3.03
shall apply proportionately to the Term Loan Commitment or the Revolving Loan
Commitment, as the case may be, of each Bank with such a Commitment.
SECTION 4. Payments.
4.01 Voluntary Prepayments. (a) The Borrower shall have the
right to prepay the Loans made to it, in whole or in part, without premium or
penalty, except as otherwise provided in this Agreement, from time to time on
the following terms and conditions: (i) the Borrower shall give the
Administrative Agent at the Notice Office written notice (or telephonic notice
promptly confirmed in writing) of its intent to prepay such Loans pursuant to
this Section 4.01(a), whether such Loans are Term Loans or Revolving Loans, the
amount of such prepayment and (in the case of Eurodollar Loans) the specific
Borrowing(s) pursuant to which such Loans were made, which notice shall be given
by the Borrower prior to 1:00 P.M. (New York time) (x) on the same Business Day
of such prepayment in the case of Base Rate Loans and (y) at least three
Business Days prior to the date of such prepayment in the case of Eurodollar
Loans, which notice shall promptly be transmitted by the Administrative Agent to
each of the Banks; (ii) each prepayment pursuant to this Section 4.01(a) shall
be in an aggregate principal amount of (A) at least $5,000,000 or in any
multiple of $1,000,000 in excess thereof in the case of Eurodollar Loans and (B)
at least $500,000 or any multiple of $100,000 in excess thereof in the case of
Base Rate Loans; provided, that no partial prepayment of Eurodollar Loans made
pursuant to a Borrowing shall reduce the aggregate principal amount of the
Eurodollar Loans outstanding pursuant to such Borrowing to an amount less than
the Minimum Borrowing Amount applicable thereto; (iii) each prepayment pursuant
to this Section 4.01(a) in respect of any Loans made pursuant to a Borrowing
shall be applied pro rata among such Loans; provided, that at the Borrower's
election in connection with any prepayment of Revolving Loans pursuant to this
Section 4.01(a), such prepayment shall not be applied to any Revolving Loans of
a Defaulting Bank at any time when the aggregate amount of Revolving Loans of
any Non-Defaulting Bank exceeds such Non-Defaulting Bank's RL Percentage of all
Revolving Loans then outstanding; (iv) each prepayment of Term Loans pursuant to
this Section 4.01(a) shall be applied to reduce the then remaining Scheduled
Repayments in inverse order of maturity.
(b) In the event of certain refusals by a Bank to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Bank as provided in
Section 12.12(b), the Borrower shall have the right, upon five Business Days'
prior written notice to the Administrative Agent at the Notice Office (which
notice the Administrative Agent shall promptly transmit to each of the Banks) to
repay all Loans, together with accrued and unpaid interest, Fees and all other
amounts due and owing to such Bank in accordance with said Section 12.12(b), so
long as (A) in the case of the repayment of Revolving Loans of any RL Bank
pursuant to this clause (b), the Revolving Loan Commitment of such RL Bank is
terminated concurrently with such repayment pursuant to Section 3.02(b) (at
which time Annex I shall be deemed modified to reflect the changed Revolving
Loan Commitments) and (B) in the case of the repayment of Loans of any Bank, the
consents required by Section 12.12(b) in connection with the repayment pursuant
to this clause (b) shall have been obtained.
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<PAGE>
4.02 Mandatory Prepayments.
(A) Requirements:
(a) If on any date the sum of (i) the aggregate outstanding
principal amount of all Revolving Loans (after giving effect to all other
repayments thereof on such date) plus (ii) the aggregate Letter of Credit
Outstandings on such date exceeds the Total Revolving Loan Commitment as then in
effect, the Borrower shall repay on such date the principal of Revolving Loans
in an aggregate amount equal to such excess. If, after giving effect to the
prepayment of all outstanding Revolving Loans, the aggregate amount of Letter of
Credit Outstandings exceeds the Total Revolving Loan Commitment as then in
effect, the Borrower agrees to pay to the Administrative Agent on such date an
amount in cash and/or Cash Equivalents equal to such excess (up to the aggregate
amount of Letter of Credit Outstandings at such time) and the Administrative
Agent shall hold such payment as security for the obligations of the Borrower
hereunder pursuant to a cash collateral agreement to be entered into in form and
substance reasonably satisfactory to the Administrative Agent and the Borrower
(which shall permit certain investments in Cash Equivalents reasonably
satisfactory to the Administrative Agent until the proceeds are applied to the
secured obligations or released to the Borrower at such time as the aggregate
amount of Letter of Credit Outstandings shall no longer exceed the Total
Revolving Loan Commitment then in effect).
(b) The Borrower shall be required to repay the principal
amount of the Term Loans on each date set forth below in the amount set forth
opposite each such date below (each such repayment, as the same may be reduced
as provided in Section 4.01(a), a "Scheduled Repayment"):
<TABLE>
<CAPTION>
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
June 30, 1999 $ 12,500,000
September 30, 1999 12,500,000
December 31, 1999 12,500,000
March 31, 2000 12,500,000
June 30, 2000 12,500,000
September 30, 2000 12,500,000
December 31, 2000 12,500,000
March 31, 2001 12,500,000
June 30, 2001 12,500,000
September 30, 2001 12,500,000
December 31, 2001 12,500,000
March 31, 2002 12,500,000
June 30, 2002 12,500,000
September 30, 2002 12,500,000
December 31, 2002 12,500,000
Term Loan Maturity Date 12,500,000
</TABLE>
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<PAGE>
(c) Notwithstanding anything to the contrary contained in this
Agreement or in any other Credit Document all then outstanding Loans shall be
repaid in full on the respective Maturity Date for such Loans.
(B) Application:
(a) With respect to each repayment of Loans required by this
Section 4.02, the Borrower may designate the Types of Loans under the respective
facility which are to be repaid and the specific Borrowing(s) under the affected
Facility pursuant to which made; provided, that (i) Eurodollar Loans made
pursuant to a specific Facility may be designated for repayment pursuant to this
Section 4.02 only on the last day of an Interest Period applicable thereto
unless all Eurodollar Loans made pursuant to such Facility with Interest Periods
ending on such date of required prepayment and all Base Rate Loans made pursuant
to such Facility have been paid in full; (ii) if any repayment of Eurodollar
Loans made pursuant to a single Borrowing shall reduce the outstanding Loans
made pursuant to such Borrowing to an amount less than the Minimum Borrowing
Amount, such Borrowing shall be immediately converted into Base Rate Loans; and
(iii) each repayment of any Loans made pursuant to a Borrowing shall be applied
pro rata among such Loans; provided, that no repayment pursuant to Section
4.02(A)(a) shall be applied to any Revolving Loans of a Defaulting Bank at any
time when the aggregate amount of the Revolving Loans of any Non-Defaulting Bank
exceeds such Non-Defaulting Bank's RL Percentage of Revolving Loans then
outstanding. In the absence of a designation by the Borrower as described in the
preceding sentence, the Agent shall, subject to the above, make such designation
in its sole discretion with a view, but no obligation, to minimize breakage
costs owing under Section 1.11.
4.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement and under any
Note shall be made to the Administrative Agent for the ratable account of the
Banks entitled thereto, not later than 11:00 A.M. (New York time) on the date
when due and shall be made in immediately available funds and in U.S. Dollars at
the Payment Office, it being understood that written, telex or facsimile
transmission notice by the Borrower to the Administrative Agent to make a
payment from the funds in the Borrower's account at the Payment Office shall
constitute the making of such payment to the extent of such funds held in such
account. Any payments under this Agreement or under any Note which are made
later than 11:00 A.M. (New York time) shall be deemed to have been made on the
next succeeding Business Day. Whenever any payment to be made hereunder shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable during such extension at the
applicable rate in effect immediately prior to such extension.
4.04 Net Payments. (a) All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Section 4.04(b), all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding, except as provided in the second succeeding sentence, any tax
imposed on or measured by the net income
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<PAGE>
or net profits of a Bank pursuant to the laws of the jurisdiction in which it is
organized or the jurisdiction in which the principal office or applicable
lending office of such Bank is located or any subdivision thereof or therein)
and all interest, penalties or similar liabilities with respect thereto (all
such non-excluded taxes, levies, imposts, duties, fees, assessments or other
charges being referred to collectively as "Taxes"). If any Taxes are so levied
or imposed, the Borrower agrees to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts due
under this Agreement or under any Note, after withholding or deduction for or on
account of any Taxes, will not be less than the amount provided for herein or in
such Note. If any amounts are payable in respect of Taxes pursuant to the
preceding sentence, the Borrower agrees to reimburse each Bank, upon the written
request of such Bank, for taxes imposed on or measured by the net income or net
profits of such Bank pursuant to the laws of the jurisdiction in which the
principal office or applicable lending office of such Bank is located or under
the laws of any political subdivision or taxing authority of any such
jurisdiction in which the principal office or applicable lending office of such
Bank is located and for any withholding of taxes as such Bank shall determine
are payable by, or withheld from, such Bank in respect of such amounts so paid
to or on behalf of such Bank pursuant to the preceding sentence and in respect
of any amounts paid to or on behalf of such Bank pursuant to this sentence. The
Borrower will furnish to the Administrative Agent within 45 days after the date
the payment of any Taxes is due pursuant to applicable law certified copies of
tax receipts evidencing such payment by the Borrower. The Borrower agrees to
indemnify and hold harmless each Bank, and reimburse such Bank upon its written
request, for the amount of any Taxes so levied or imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Administrative Agent on or prior to the Effective Date, or in the case
of a Bank that is an assignee or transferee of an interest under this Agreement
pursuant to Section 1.13 or 12.04 (unless the respective Bank was already a Bank
hereunder immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying to such Bank's entitlement as of such date to a complete exemption
from United States withholding tax with respect to payments to be made under
this Agreement and under any Note, or (ii) if the Bank is not a "Bank" within
the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either
Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a
certificate substantially in the form of Exhibit C (any such certificate, a
"Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original
signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Bank's entitlement as of such date to a complete exemption
from United States withholding tax with respect to payments of interest to be
made under this Agreement and under any Note. In addition, each Bank agrees that
from time to time after the Effective Date, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate in any
material respect, it will deliver to the Borrower and the Administrative Agent
two new accurate and complete original signed copies of Internal Revenue Service
Form 4224 or 1001, or Form W-8 and a Section 4.04(b)(ii) Certificate, as the
case may be, and such other forms as may be required in order to confirm or
establish the entitlement of such Bank to a continued exemption from or
reduction in United States withholding tax with respect to payments under this
Agreement and any Note, or it shall immediately notify the
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Borrower and the Administrative Agent of its inability to deliver any such Form
or Certificate, in which case such form or Certificate shall not be required to
be so delivered by such Bank. Notwithstanding anything to the contrary contained
in Section 4.04(a), but subject to Section 12.04(b) and the immediately
succeeding sentence, (x) the Borrower shall be entitled, to the extent it is
required to do so by law, to deduct or withhold income or similar taxes imposed
by the United States (or any political subdivision or taxing authority thereof
or therein) from interest, fees or other amounts payable hereunder for the
account of any Bank which is not a United States person (as such term is defined
in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the
extent that such Bank has not provided to the Borrower U.S. Internal Revenue
Service Forms that establish a complete exemption from such deduction or
withholding and (y) the Borrower shall not be obligated pursuant to Section
4.04(a) hereof to gross-up payments to be made to a Bank in respect of income or
similar taxes imposed by the United States if (I) such Bank has not provided to
the Borrower the Internal Revenue Service Forms required to be provided to the
Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment,
other than interest, to a Bank described in clause (ii) above, to the extent
that such Forms do not establish a complete exemption from withholding of such
taxes. Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 4.04 and except as set forth in Section
12.04(b), the Borrower agrees to pay additional amounts and to indemnify each
Bank in the manner set forth in Section 4.04(a) (without regard to the identity
of the jurisdiction requiring the deduction or withholding) in respect of any
amounts deducted or withheld by it as described in the immediately preceding
sentence as a result of any changes that are effective after the Effective Date
in any applicable law, treaty, governmental rule, regulation, guideline or
order, or in the interpretation thereof, relating to the deducting or
withholding of Taxes.
SECTION 5. Conditions Precedent. The obligation of each Bank
to make each Loan to the Borrower hereunder, and the obligation of any Letter of
Credit Issuer to issue each Letter of Credit hereunder, is subject, at the time
of each such Credit Event (except as otherwise hereinafter indicated), to the
satisfaction of the following conditions:
5.01 Execution of Agreement; Notes. On or prior to the Initial
Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Administrative Agent for the account of each Bank
which has requested same the appropriate Term Note and Revolving Note, in each
case executed by the Borrower and in the amount, maturity and as otherwise
provided herein.
5.02 No Default; Representations and Warranties. At the time
of each Credit Event and also after giving effect thereto (i) there shall exist
no Default or Event of Default, (ii) all representations and warranties
contained herein and in the other Credit Documents in effect at such time shall
be true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event, unless stated to relate to a specific earlier date, in which case
such representations and warranties shall be true and correct in all material
respects as of such earlier date, and (iii) the Administrative Agent shall have
received a Notice of Borrowing meeting the requirements of Section 1.03(a) or
Letter of Credit Request meeting with the requirements of Section 1.03(b), as
the case may be.
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5.03 Officer's Certificate. On the Initial Borrowing Date, the
Administrative Agent shall have received a certificate dated such date signed by
an Authorized Officer of the Borrower stating that all of the applicable
conditions set forth in Sections 5.02, 5.06, 5.07, 5.08, 5.09 and 5.16 have been
satisfied as of such date.
5.04 Opinions of Counsel. On the Initial Borrowing Date, the
Administrative Agent shall have received an opinion, addressed to the
Administrative Agent and each of the Banks and dated the Initial Borrowing Date,
from McGrath, North, Mullin & Kratz, P.C., counsel to the Credit Parties, which
opinion shall cover such matters incident to the transactions contemplated
herein and in the other Credit Documents as the Administrative Agent may
reasonably request and shall be substantially in the form of Exhibit K.
5.05 Corporate Proceedings; etc. (a) On the Initial Borrowing
Date, the Administrative Agent shall have received from each Credit Party a
certificate, dated the Initial Borrowing Date, signed by a senior officer of or
other appropriate Person in respect of such Credit Party, and attested to by
another officer or other appropriate Person in respect of such Credit Party, in
the form of Exhibit D with appropriate insertions, together with copies of the
Certificate of Incorporation and By-Laws (or equivalent organizational
documents) of such Credit Party and the resolutions of such Credit Party
referred to in such certificate and all of the foregoing (including each such
Certificate of Incorporation and By-Laws (or equivalent organizational
documents)) shall be reasonably satisfactory to the Administrative Agent.
(b) On the Initial Borrowing Date, all corporate, limited
liability company, partnership and legal proceedings and all instruments and
agreements in connection with the transactions contemplated by this Agreement
and the other Credit Documents shall be reasonably satisfactory in form and
substance to the Administrative Agent, and the Administrative Agent shall have
received all information and copies of all certificates, documents and papers,
including good standing certificates, bring-down certificates and any other
records of corporate and limited liability company proceedings and governmental
approvals, if any, which the Administrative Agent reasonably may have requested
in connection therewith, such documents and papers, where appropriate, to be
certified by proper corporate or governmental authorities.
5.06 Adverse Change, etc. On or prior to the Initial Borrowing
Date, nothing shall have occurred since December 26, 1998 (and neither the Banks
nor the Administrative Agent shall have become aware of any facts or conditions
not previously known) which the Required Banks or the Administrative Agent shall
determine (a) has had, or could reasonably be expected to have, a material
adverse effect on the rights or remedies of the Banks or the Administrative
Agent, or on the ability of any Credit Party to perform its obligations to them
hereunder or under any other Credit Document or (b) has had, or could reasonably
be expected to have, a Material Adverse Effect.
5.07 Litigation. On the Initial Borrowing Date, there shall be
no actions, suits or proceedings pending or threatened (a) with respect to this
Agreement or any other Credit Document or (b) which the Administrative Agent or
the Required Banks shall determine could reasonably be expected to (i) have a
Material Adverse Effect or (ii) have a material adverse effect on the rights or
remedies of the Banks or the Agent hereunder or under any other Credit
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Document or on the ability of any Credit Party to perform its respective
obligations to the Banks or the Administrative Agent hereunder or under any
other Credit Document.
5.08 Approvals. On or prior to the Initial Borrowing Date, all
necessary governmental (domestic and foreign) and third party approvals in
connection with the transactions contemplated by the Credit Documents and
otherwise referred to herein or therein shall have been obtained and remain in
effect, and all applicable waiting periods shall have expired without any action
being taken by any competent authority which restrains, prevents or imposes
materially adverse conditions upon the consummation of the transactions
contemplated by the Credit Documents and otherwise referred to herein or
therein. Additionally, there shall not exist any judgment, order, injunction or
other restraint issued or filed or a hearing seeking injunctive relief or other
restraint pending or notified prohibiting or imposing materially adverse
conditions upon the making of Loans.
5.09 Consummation of the Vanstar Merger. (a) Prior to the
Initial Borrowing Date, the Vanstar Merger shall have been consummated pursuant
to the Vanstar Merger Documents and all applicable laws.
(b) On or prior to the Initial Borrowing Date, there shall
have been delivered to the Banks true and correct copies of all Vanstar Merger
Documents.
5.10 Security Documents. (a) On the Initial Borrowing Date,
the Borrower and each Subsidiary Guarantor shall have duly authorized, executed
and delivered a Pledge Agreement in the form of Exhibit E (as modified, amended
or supplemented from time to time in accordance with the terms thereof and
hereof, the "Pledge Agreement") and shall have delivered to the Collateral
Agent, as pledgee thereunder, all of the Certificated Securities referred to
therein, endorsed in blank in the case of promissory notes or accompanied by
executed and undated stock powers in the case of capital stock, and the Pledge
Agreement shall be in full force and effect.
(b) On the Initial Borrowing Date, the Borrower and each
Subsidiary Guarantor shall have duly authorized, executed and delivered a
Security Agreement in the form of Exhibit F (as modified, amended or
supplemented from time to time in accordance with the terms thereof and hereof,
the "Security Agreement"), which Security Agreement shall be in full force and
effect and shall cover all of the Security Agreement Collateral, and together
therewith the Borrower and each Subsidiary Guarantor shall have delivered:
(A) executed copies of Financing Statements (Form UCC-1) or
appropriate local equivalent in appropriate form for filing under the
UCC or appropriate local equivalent of each jurisdiction as may be
necessary to perfect the security interests purported to be created by
the Security Agreement;
(B) certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, each of a recent date listing all
effective financing statements that name the Borrower or any
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of its Domestic Subsidiaries or a division or operating unit of any
such Person, as debtor and that are filed in the jurisdictions referred
to in clause (A) above, together with copies of such financing
statements that name the Borrower or any of its Domestic Subsidiaries
as debtor (none of which shall cover the Collateral except (x) those
with respect to which appropriate termination statements executed by
the secured lender thereunder have been delivered to the Administrative
Agent and (y) to the extent evidencing Permitted Liens);
(C) evidence of the completion of all other recordings and
filings of, or with respect to, the Security Agreement as may be
necessary or, in the opinion of the Collateral Agent, desirable to
perfect the security interests intended to be created by the Security
Agreement; and
(D) evidence that all other actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to perfect the
security interests purported to be created by the Security Agreement
have been taken.
5.11 Subsidiary Guaranty. On the Initial Borrowing Date, each
Subsidiary Guarantor shall have duly authorized, executed and delivered a
Subsidiary Guaranty in the form of Exhibit G (as modified, amended or
supplemented from time to time in accordance with the terms hereof and thereof,
the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force
and effect.
5.12 Existing Indebtedness Agreements; Inventory Finance
Facilities; and Receivable Purchase Facilities. On or prior to the Initial
Borrowing Date, there shall have been delivered to the Banks copies, certified
as true and correct by an appropriate officer of the Borrower, of:
(a) all agreements evidencing or relating to the Existing
Indebtedness (collectively, the "Existing Indebtedness Agreements");
(b) the IBM Inventory Finance Facility and the DFS Inventory
Finance Facility (collectively, the "Inventory Finance Facilities");
and
(c) the Morgan Receivables Purchase Facility and the Nesbitt
Burns Receivables Purchase Facility (collectively, the "Receivables
Purchase Facilities");
all of which Existing Indebtedness Agreements, Inventory Finance Facilities and
Receivables Purchase Facilities shall be in form and substance reasonably
satisfactory to the Administrative Agent (it being understood and agreed that
all such documents in the form delivered to the Administrative Agent before the
Effective Date are satisfactory) and shall be in full force and effect on the
Initial Borrowing Date.
5.13 Solvency Certificate; Environmental Analyses; Insurance
Analyses; Financial Statements. On the Initial Borrowing Date, the
Administrative Agent shall have received:
(a) a solvency certificate from the chief financial officer of
the Borrower in the form of Exhibit J, addressed to the Administrative
Agent and each of the Banks and dated the Initial Borrowing Date and
supporting the conclusions, that the Borrower (on a
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stand-alone basis) and the Borrower and its Subsidiaries (on a
consolidated basis) are not insolvent and will not be rendered
insolvent by the indebtedness incurred in connection herewith, will not
be left with unreasonably small capital with which to engage in their
respective businesses and will not have incurred debts beyond their
ability to pay such debts as they mature and become due;
(b) evidence of insurance complying with the requirements of
Section 7.03 for the business and properties of the Borrower and its
Subsidiaries in scope, form and substance reasonably satisfactory to
the Agent and the Required Banks and naming the Collateral Agent as an
additional insured and/or loss payee, and stating that such insurance
shall not be canceled or revised without 30 days prior written notice
by the insurer to the Collateral Agent; and
(c) true and correct copies of the financial statements
referred to in Section 6.10(b) and such financial statements shall be
in form and substance reasonably satisfactory to the Administrative
Agent and the Required Banks.
5.14 Pro Forma Financial Statements. (a) On or prior to the
Initial Borrowing Date, there shall have been delivered to the Administrative
Agent, an unaudited pro forma consolidated balance sheet of the Borrower and its
Subsidiaries as of December 26, 1998 after giving effect to the Vanstar Merger
and assuming that same was consummated on or prior to December 26, 1998 and
prepared in accordance with GAAP, which pro forma balance sheet shall be
reasonably satisfactory in form and substance to the Administrative Agent and
the Required Banks.
(b) On or prior to the Initial Borrowing Date, there shall
have been delivered to the Administrative Agent unaudited pro forma income and
cash flow statements of the Borrower and its Subsidiaries for the twelve month
period ended December 26, 1998 after giving effect to the Vanstar Merger and
assuming that same was consummated on December 28, 1997, which pro forma
financial statements shall be in form and substance reasonably satisfactory to
the Administrative Agent and the Required Banks.
5.15 Projections. On or prior to the Initial Borrowing Date,
the Banks shall have received financial projections (the "Projections"), which
include the projected results of the Borrower and its Subsidiaries for the seven
fiscal years ended after the Initial Borrowing Date, which Projections shall be
in form and substance reasonably satisfactory to the Administrative Agent and
the Required Banks.
5.16 Existing Indebtedness. (a) On the Initial Borrowing Date
and after giving effect to the Vanstar Merger and the Loans incurred on the
Initial Borrowing Date, neither the Borrower nor any of its Subsidiaries shall
have any Indebtedness outstanding except for Indebtedness permitted under
Section 8.04 or any preferred stock outstanding except the Trust Preferred
Securities. On and as of the Initial Borrowing Date (and after giving effect
thereto), all of the Existing Indebtedness shall remain outstanding without any
default or event of default existing or arising thereunder.
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(b) (i) On the Initial Borrowing Date, the total commitments
in respect of Existing Credit Facility shall have been terminated, and all loans
with respect thereto shall have been repaid in full, together with interest
thereon, all letters of credit issued thereunder shall have been terminated and
all other amounts due and owing pursuant to the Existing Credit Facility shall
have been repaid in full and all guarantees with respect thereto shall have been
terminated (except as to indemnification provisions, which may survive) and be
of no further force or effect.
(ii) On the Initial Borrowing Date, the creditors in respect
of the Existing Credit Facility shall have terminated and released all security
interests and Liens on the assets owned by the Borrower and its Subsidiaries.
The Administrative Agent shall have received such releases of security interests
in and Liens on the assets owned by the Borrower and its Subsidiaries as may
have been requested by the Administrative Agent, which releases shall be in form
and substance reasonably satisfactory to the Administrative Agent. Without
limiting the foregoing, there shall have been delivered (i) proper termination
statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC
of each jurisdiction where a financing statement (Form UCC-1 or the appropriate
equivalent) was filed with respect to the Borrower or any of its Subsidiaries in
connection with the security interests created with respect to the Existing
Credit Facility and the documentation related thereto, (ii) termination or
reassignment of any security interest in, or Lien on, any patents, trademarks,
copyrights, or similar interests of the Borrower or any of its Subsidiaries on
which filings have been made and (iii) all collateral owned by the Borrower or
any of its Subsidiaries in the possession of any of the creditors in respect to
the Existing Credit Facility or any collateral agent or trustee under any
related security document shall have been returned to the Borrower or such
Subsidiary.
5.17 Payment of Fees. On the Initial Borrowing Date, all
costs, fees and expenses, and all other compensation contemplated by this
Agreement, due to the Administrative Agent or the Banks (including, without
limitation, legal fees and expenses) shall have been paid to the extent due.
The acceptance of the benefits of each Credit Event occurring
on the Initial Borrowing Date shall constitute a representation and warranty by
each Credit Party to each of the Banks that all of the conditions specified
above have been satisfied as of the Initial Borrowing Date. The acceptance of
the benefits of each Credit Event occurring subsequent to the Initial Borrowing
Date shall constitute a representation and warranty by each Credit Party to each
of the Banks that the conditions specified in Section 5.02 have been satisfied
as of the date of such Credit Event. All of the certificates, legal opinions and
other documents and papers referred to in this Section 5, unless otherwise
specified, shall be delivered to the Administrative Agent at the Notice Office
for the account of each of the Banks and, except for the Notes, in sufficient
counterparts for each of the Banks and shall be satisfactory in form and
substance to the Administrative Agent and the Required Banks.
SECTION 6. Representations, Warranties and Agreements. In
order to induce the Banks to enter into this Agreement and to make the Loans and
issue and/or participate in the Letters of Credit provided for herein, the
Borrower makes the following representations, warranties and agreements with the
Banks, all of which shall survive the execution and delivery of this Agreement,
the making of the Loans and the issuance of the Letters of Credit (with the
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occurrence of each Credit Event being deemed to constitute a representation and
warranty that the matters specified in this Section 6 are true and correct in
all material respects on and as of the date of each such Credit Event, unless
stated to relate to a specific earlier date in which case all representations
and warranties shall be true and correct in all material respects as of such
earlier date):
6.01 Status. Each of the Borrower and each of its Subsidiaries
(i) is a duly organized and validly existing corporation, limited liability
company or partnership, as the case may be, in good standing (to the extent such
concept is relevant in such jurisdiction) under the laws of the jurisdiction of
its organization, (ii) has the corporate, limited liability company or
partnership power and authority, as the case may be, to own its property and
assets and to transact the business in which it is engaged and presently
proposes to engage and (iii) is duly qualified and is authorized to do business
and is in good standing in all jurisdictions where it is required to be so
qualified and where the failure to be so qualified could not reasonably be
expected to have a Material Adverse Effect.
6.02 Power and Authority. Each Credit Party has the corporate,
limited liability company or partnership power and authority, as the case may
be, to execute, deliver and carry out the terms and provisions of the Credit
Documents to which it is a party and has taken all necessary corporate limited
liability company or partnership action, as the case may be, to authorize the
execution, delivery and performance of the Documents to which it is a party.
Each Credit Party has duly executed and delivered each Credit Document to which
it is a party and each such Credit Document constitutes the legal, valid and
binding obligation of such Credit Party enforceable in accordance with its
terms, except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
6.03 No Violation. Neither the execution, delivery or
performance by any Credit Party of the Credit Documents to which it is a party
nor compliance by any Credit Party with the terms and provisions thereof, nor
the consummation of the transactions contemplated herein or therein, (i) will
contravene any applicable provision of any law, statute, rule or regulation, or
any order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will conflict or be inconsistent with or result in any
breach of, any of the terms, covenants, conditions or provisions of, or
constitute a default under, or (other than pursuant to the Security Documents)
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of the Borrower or any of its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement, credit agreement or any other material agreement or instrument
to which the Borrower or any of its Subsidiaries is a party or by which it or
any of its property or assets are bound or to which it may be subject or (iii)
will violate any provision of the Certificate of Incorporation or By-Laws (or
equivalent organizational documents) of the Borrower or any of its Subsidiaries.
6.04 Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower or any of its Subsidiaries,
threatened, with respect to the Borrower or any of its Subsidiaries (i) that
could reasonably be expected to have a Material Adverse Effect or
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(ii) that could reasonably be expected to have a material adverse effect on the
rights or remedies of the Banks or on the ability of any Credit Party to perform
its respective obligations to the Banks hereunder and under the other Credit
Documents to which it is, or will be, a party. Additionally, there does not
exist any judgment, order or injunction prohibiting, or imposing material
adverse conditions upon the occurrence of, any Credit Event.
6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of
all Term Loans shall be utilized (i) first, to refinance in full the Existing
Credit Facility and (ii) second, for other general corporate purposes.
(b) The proceeds of Revolving Loans shall be utilized for the
general corporate and working capital purposes of the Borrower and its
Subsidiaries, including to refinance the Existing Credit Facility.
(c) Neither the making of any Loan hereunder, nor the use of
the proceeds thereof, nor the occurrence of any other Credit Event, will violate
the provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System and no part of the proceeds of any Loan and no Letter of Credit
will be used to purchase or carry any Margin Stock or to extend credit for the
purpose of purchasing or carrying any Margin Stock.
6.06 Governmental Approvals. Each order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any foreign or domestic governmental or public body or
authority, or any subdivision thereof, required to authorize or required in
connection with (i) the execution, delivery and performance of any Document or
(ii) the legality, validity, binding effect or enforceability of any Credit
Document has been obtained or made.
6.07 Investment Company Act. Neither the Borrower nor any of
its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.08 Public Utility Holding Company Act. Neither the Borrower
nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
6.09 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
the Borrower or any of its Subsidiaries in writing to the Administrative Agent
or any Bank (including, without limitation, all information contained in the
Credit Documents) for purposes of or in connection with this Agreement or any
transaction contemplated herein is, and all other such factual information
(taken as a whole) hereafter furnished by or on behalf of any such Persons in
writing to the Administrative Agent or any Bank will be, true and accurate in
all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any material fact necessary to
make such information (taken as a whole) not misleading at such time in light of
the circumstances under which such information was provided.
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6.10 Financial Condition; Financial Statements. (a) On and as
of the Initial Borrowing Date, on a pro forma basis after giving effect to the
refinancing of the Existing Credit Facility and to all Indebtedness incurred,
and to be incurred (including, without limitation, the Loans), and Liens
created, and to be created, by each Credit Party in connection herewith, with
respect to each of the Borrower and its Subsidiaries (on a consolidated basis)
and of the Borrower (on a stand-alone basis) (x) the sum of the assets, at a
fair valuation, of each of the Borrower and its Subsidiaries (on a consolidated
basis) and of the Borrower (on a stand-alone basis) will exceed its debts, (y)
it has not incurred nor intended to, nor believes that it will, incur debts
beyond its ability to pay such debts as such debts mature and (z) it will have
sufficient capital with which to conduct its business. For purposes of this
Section 6.10, "debt" means any liability on a claim, and "claim" means (i) right
to payment whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.
(b) The consolidated statements of financial condition of the
Borrower and its Subsidiaries at December 26, 1998 and the related statements of
income and cash flows and changes in shareholders' equity of the Borrower and
its Subsidiaries for the fiscal year ended as of said date, copies of which have
heretofore been furnished to each Bank, present fairly in all material respects
the consolidated financial position of Borrower at the date of said statements
and the results for the period covered thereby. All such financial statements
have been prepared in accordance with GAAP consistently applied except to the
extent provided in the notes to said financial statements.
(c) Since December 26, 1998 nothing has occurred that has had
or could reasonably be expected to have a Material Adverse Effect.
(d) Except as reflected in the financial statements (including
the notes thereto) described in Section 6.10(b) and the Indebtedness incurred
under this Agreement, (i) there were as of the Initial Borrowing Date (and after
giving effect to any Loans made on such date), no liabilities or obligations
(excluding current obligations incurred in the ordinary course of business) with
respect to the Borrower or any of its Subsidiaries of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not due), and
(ii) the Borrower does not know of any basis for the assertion against the
Borrower or any of its Subsidiaries of any such liability or obligation which,
in the case of clause (i) or (ii) either individually or in the aggregate, has
had or would be reasonably likely to have, a Material Adverse Effect.
(e) The Projections are based on good faith estimates and
assumptions made by the management of the Borrower as of the date on which such
Projections were prepared, and on the Initial Borrowing Date such management
believed that the Projections were reasonable and attainable, it being
recognized by the Banks, however, that projections as to future events are not
to be viewed as facts and that the actual results during the period or periods
covered by the Projections probably will differ from the projected results and
that the differences may be material. There is no fact known to the Borrower or
any of its Subsidiaries which could
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reasonably be expected to have a Material Adverse Effect, which has not been
disclosed herein or in such other documents, certificates and statements
furnished to the Banks for use in connection with the transactions contemplated
hereby.
6.11 Security Interests. On and after the Initial Borrowing
Date, each of the Security Documents creates (or after the execution and
delivery thereof will create), as security for the Obligations, a valid and
enforceable perfected security interest in and Lien on all of the Collateral
subject thereto, superior to and prior to the rights of all third Persons and
subject to no other Liens (except that the Security Agreement Collateral and the
collateral covered by the Additional Security Documents may be subject to
Permitted Liens relating thereto), in favor of the Collateral Agent. No filings
or recordings are required in order to perfect the security interests created
under any Security Document except for filings or recordings required in
connection with any such Security Document which shall have been made on or
prior to the Initial Borrowing Date (or provision for such filings satisfactory
to the Collateral Agent shall have been made) as contemplated by Section 5.10(b)
or on or prior to the execution and delivery thereof as contemplated by Sections
7.11 and 8.16.
6.12 Compliance with ERISA. (a) Annex VIII sets forth, as of
the Initial Borrowing Date, each Plan (and each related trust, insurance
contract or fund). Each Plan (and each related trust, insurance contract or
fund) is in substantial compliance with its terms and with all applicable laws,
including without limitation ERISA and the Code; each Plan (and each related
trust, if any) which is intended to be qualified under Section 401(a) of the
Code has received a determination letter from the Internal Revenue Service (or
has submitted or is within the remedial amendment period for submitting an
application for a determination letter with the Internal Revenue Service and is
awaiting receipt of a response) to the effect that it meets the requirements of
Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; no
Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA)
is insolvent or in reorganization; no Plan has an Unfunded Current Liability; no
Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an
accumulated or waived funding deficiency within the meaning of such sections of
the Code or ERISA, or has applied for or received a waiver of an accumulated
funding deficiency or an extension of any amortization period, within the
meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all
contributions required to be made with respect to a Plan have been timely made;
neither the Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate
has incurred any material liability (including any indirect, contingent or
secondary liability) to or on account of a Plan pursuant to Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section
401(a)(29), 4971 or 4975 of the Code or reasonably expects to incur any such
liability under any of the foregoing sections with respect to any Plan; no
condition exists which presents a material risk to the Borrower or any
Subsidiary of the Borrower or any ERISA Affiliate of incurring a liability to or
on account of a Plan pursuant to the foregoing provisions of ERISA and the Code;
no proceedings have been instituted to terminate or appoint a trustee to
administer, any Plan subject to Title IV of ERISA; no action, suit, proceeding,
hearing, audit or investigation with respect to the administration, operation or
the investment of assets of any Plan (other than routine claims for benefits) is
pending, threatened or expected; using actuarial assumptions and computation
methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate
liabilities of the Borrower and its Subsidiaries and its ERISA Affiliates to all
Plans which are
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multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of
a complete withdrawal therefrom, as of the close of the most recent fiscal year
of each such Plan ended prior to the date of the most recent Credit Event, would
not exceed [$500,000]; each group health plan (as defined in Section 607(1) of
ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees
or former employees of the Borrower, any Subsidiary of the Borrower, or any
ERISA Affiliate has at all times been operated in compliance with the provisions
of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no
lien imposed under the Code or ERISA on the assets of the Borrower or any
Subsidiary of the Borrower or any ERISA Affiliate exists or is reasonably
expected to arise on account of any Plan; and the Borrower and its Subsidiaries
may cease contributions to or terminate any employee benefit plan maintained by
any of them in accordance with its terms without incurring any material
liability.
(b) Each Foreign Pension Plan has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities. All contributions required to be made with respect to a Foreign
Pension Plan have been timely made. Neither the Borrower nor any of its
Subsidiaries has incurred any material obligation in connection with the
termination of or withdrawal from any Foreign Pension Plan. The present value of
the accrued benefit liabilities (whether or not vested) under each Foreign
Pension Plan, determined as of the end of the most recently ended fiscal year of
the Borrower on the basis of actuarial assumptions, each of which is reasonable,
did not exceed the current value of the assets of such Foreign Pension Plan,
allocable to such benefit liabilities.
6.13 Subsidiaries. On and as of the Initial Borrowing Date,
the Borrower has no Subsidiaries other than those Subsidiaries listed on Annex
IV. Annex IV correctly sets forth, as of the Initial Borrowing Date, the
percentage ownership (direct and indirect) of the Borrower in each class of
capital stock of each of its Subsidiaries and also identifies the direct owner
thereof. All outstanding shares of capital stock of each Subsidiary of the
Borrower have been duly and validly issued, are fully paid and nonassessable and
have been issued free of preemptive rights. No Subsidiary of the Borrower has
outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any right to subscribe for or to purchase, or any options
or warrants for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of or any calls, commitments or claims of any
character relating to, its capital stock or any stock appreciation or similar
rights.
6.14 Intellectual Property. Each of the Borrower and each of
its Subsidiaries owns or holds a valid license to use all the material patents,
trademarks, permits, service marks, trade names, technology, know-how and
formulas or other rights with respect to the foregoing, free from restrictions
that are materially adverse to the use thereof, that are used in the operation
of the business of the Borrower and each of its Subsidiaries as presently
conducted.
6.15 Compliance with Statutes, etc. Each of the Borrower and
each of its Subsidiaries is in compliance with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including compliance with all
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applicable Environmental Laws with respect to any Real Property or governing its
business and the requirements of any permits issued under such Environmental
Laws with respect to any such Real Property or the operations of the Borrower or
any of its Subsidiaries), except where such non-compliance could not reasonably
be expected to, individually or in the aggregate, have a Material Adverse
Effect.
6.16 Environmental Matters. (a) The Borrower and each of its
Subsidiaries have complied with, and on the date of each Credit Event are in
compliance with, all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws. There are no pending or, to the
best knowledge of the Borrower and each of its Subsidiaries, past or threatened
Environmental Claims against the Borrower or any of its Subsidiaries or any Real
Property owned, leased or operated by the Borrower or any of its Subsidiaries.
There are no facts, circumstances, conditions or occurrences regarding the
operations of the Borrower or any of its Subsidiaries on any Real Property
owned, leased or operated by the Borrower or any of its Subsidiaries or, to the
best knowledge of the Borrower, on any property adjoining or in the vicinity of
any such Real Property that could reasonably be expected (i) to form the basis
of an Environmental Claim against the Borrower or any of its Subsidiaries or any
such Real Property or (ii) to cause any such Real Property to be subject to any
restrictions on the ownership, occupancy, use or transferability of such Real
Property by the Borrower or any of its Subsidiaries under any applicable
Environmental Law.
(b) Hazardous Materials have not at any time been generated,
used, treated or stored on, or transported to or from, any Real Property owned,
leased or operated by the Borrower or any of its Subsidiaries where such
generation, use, treatment or storage has violated or could reasonably be
expected to violate any Environmental Law. Hazardous Materials have not at any
time been Released on or from any Real Property owned, leased or operated by the
Borrower or any of its Subsidiaries. There are not now any underground storage
tanks located on any Real Property owned or operated by the Borrower or any of
its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section
6.16, the representations made in this Section 6.16 shall only be untrue if the
aggregate effect of all restrictions, failures, noncompliance, Environmental
Claims, Releases and presence of underground storage tanks, in each case of the
types described above, could reasonably be expected to have a Material Adverse
Effect.
6.17 Properties. All Real Property owned or leased by the
Borrower or any of its Domestic Subsidiaries as of the Initial Borrowing Date
and the nature of the interest therein, is described on Annex III. Each of the
Borrower and each of its Subsidiaries has good and valid title to, or a
leasehold interest in, all material properties owned or leased by it, including
all Real Property reflected in Annex III or in the financial statements referred
to in Section 6.10(b), free and clear of all Liens, other than Permitted Liens.
6.18 Labor Relations. Neither the Borrower nor any of its
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect. There is (i) no unfair labor
practice complaint pending against the Borrower or any of its Subsidiaries or,
to the best knowledge of the Borrower, threatened against any of them,
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before the National Labor Relations Board, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against the Borrower or any of its Subsidiaries or, to the best
knowledge of the Borrower, threatened against any of them, (ii) no strike, labor
dispute, slowdown or stoppage pending against the Borrower or any of its
Subsidiaries or, to the best knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries and (iii) to the best knowledge of the
Borrower, no union representation question existing with respect to the
employees of the Borrower or any of its Subsidiaries and, to the best knowledge
of the Borrower, no union organizing activities are taking place, except (with
respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as is not reasonably likely to have a
Material Adverse Effect.
6.19 Tax Returns and Payments. All Federal, state and other
material returns, statements, forms and reports for taxes (the "Returns")
required to be filed by or with respect to the income, properties or operations
of the Borrower and/or any of its Subsidiaries have been timely filed with the
appropriate taxing authority. The Returns accurately reflect all liability for
taxes of the Borrower and its Subsidiaries, as the case may be, for the periods
covered thereby. The Borrower and each of its Subsidiaries have paid all taxes
payable by them other than taxes which are not yet due and payable, and other
than those contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP. Except as
disclosed in the financial statements referred to in Section 6.10(b), there is
no material action, suit, proceeding, investigation, audit, or claim now pending
or, to the knowledge of the Borrower, threatened by any authority regarding any
taxes relating to the Borrower or any of its Subsidiaries. As of the Initial
Borrowing Date, neither the Borrower nor any of its Subsidiaries has entered
into an agreement or waiver or been requested to enter into an agreement or
waiver extending any statute of limitations relating to the payment or
collection of taxes of the Borrower or any of its Subsidiaries, or is aware of
any circumstances that would cause the taxable years or other taxable periods of
the Borrower or any of its Subsidiaries not to be subject to the normally
applicable statute of limitations. Neither the Borrower nor any of its
Subsidiaries has provided, with respect to themselves or property held by them,
any consent under Section 341 of the Code. Neither the Borrower nor any of its
Subsidiaries has incurred, or will incur, any material tax liability in
connection with the Transaction and the other transactions contemplated hereby.
6.20 Existing Indebtedness. Part A of Annex V sets forth a
true and complete list of all Indebtedness for borrowed money of the Borrower
and its Subsidiaries as of the Initial Borrowing Date and which is to remain
outstanding after giving effect to the incurrence of Loans on such date
(excluding any existing Subordinated Debt and the Loans and the Letters of
Credit, the "Existing Indebtedness"), in each case showing the aggregate
principal amount thereof and the name of the respective borrower and any other
entity which directly or indirectly guaranteed such debt.
6.21 Insurance. The properties of the Borrower and its
Subsidiaries are insured with financially sound and reputable insurance
companies not Affiliates of the Borrower, in such amounts, with such deductibles
and covering such risks as are customarily carried by companies engaged in
similar businesses and owning similar properties in localities where the
Borrower or such Subsidiary operates.
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6.22 Year 2000 Compliance. The Borrower reasonably believes
that no later than September 30, 1999 all computer applications that are
material to its or any of its Subsidiaries' business and operations will be able
to perform properly date-sensitive functions for all dates before and after
January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
6.23 Hewlett-Packard Financing Statements. The UCC filings
("HP UCC Filings") by Hewlett-Packard Company Finance and Remarketing Divisions
("HP") against the Borrower arise from transactions (collectively, the "HP
Transaction") in which the Borrower, as a result of its prior acquisition of
assets of HW Electronics, Inc. ("HW"), is a conduit for specifically identified
equipment and/or inventory (collectively, the "HP-Lockheed Property") leased or
sold by HP to HW which in turn leases or sells to Lockheed Martin Corporation or
an affiliate thereof ("Lockheed"). The HP Lockheed Property is leased or sold
pursuant to various Finance Agreements between HP and HW and an Asset Management
Service Agreement effective as of September 11, 1996 and Purchase Order Nos.
CDXA8500E and CVXAK6000Q, between HW and Lockheed. No other purchase orders are
effective (including, without limitation, Purchase Order Nos. CDXA5510E and
CDXA85200E), whether referred to in the HP UCC Filings or otherwise, and in any
event all preceding purchase orders (other than purchase Order Nos. CDXA8500E
and CVXAK6000Q) involving the HP Transaction have been cancelled and are no
longer in effect. The aggregate amount payable by Lockheed in respect of the HP
Transaction does not exceed $10,000,000 per year and the obligations of Lockheed
thereunder are due and payable on or before March 31, 2002. Except for its
interest in the HP Lockheed Property and the payments by Lockheed in respect
thereof, HP has no Lien on any assets or rights of the Borrower or any
Subsidiary of the Borrower. Annex IX is an accurate description of the HP
Transaction. The information contained in Annex IX is true and correct in all
material respects.
6.24 Assets of Borrower, InaCom Communications, InaCom Finance
Corp., Vanstar, Vanstar Finance Co. and InaCom Funding Corp. The assets of the
Borrower, InaCom Communications, Inc., and Vanstar represent 98% of all assets
of the Borrower and its Subsidiaries (other than asset interests purchased under
the Nesbitt Burns Receivables Purchase Facility and the Morgan Receivables
Purchase Facility and proceeds thereof). InaCom Finance Corp. has no assets
other than non-material assets purchased by it having an aggregate value of less
than $10,000. InaCom Funding Corp. has no assets other than assets purchased by
it under the Morgan Receivables Purchase Facility, or other non-material assets
having an aggregate value of less than $250,000. Vanstar Finance Co. has no
assets other than assets purchased by it under the Nesbitt Burns Receivables
Purchase Facility or other non-material assets having an aggregate value of less
than $250,000.
SECTION 7. Affirmative Covenants. The Borrower hereby
covenants and agrees that on the Effective Date and thereafter for so long as
this Agreement is in effect and until the Commitments have terminated, no
Letters of Credit or Notes are outstanding and the Loans and Unpaid Drawings,
together with interest, Fees and all other Obligations (other than any
indemnities described in Section 12.13 which are not then due and payable)
incurred hereunder, are paid in full:
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7.01 Information Covenants. The Borrower will furnish to the
Administrative Agent (with sufficient copies for each Bank):
(a) Monthly Reports. Within 30 days after the end of each
fiscal month of the Borrower, (i) inventory reports for such fiscal
month for the Inventory Finance Facilities and (ii) receivables reports
for such fiscal month for the Receivables Purchase Facilities, in each
case with respect to clauses (i) and (ii) above in the forms presented
as of the date hereof under such agreements and containing such
information as reasonably requested by the Administrative Agent or the
Required Banks.
(b) Quarterly Financial Statements. As soon as available and
in no event more than 50 days after the close of each of the first
three quarterly accounting periods in each fiscal year of the Borrower,
(i) the unaudited consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarterly accounting period and the
related unaudited consolidated statements of income and retained
earnings and of cash flows for such quarterly accounting period and for
the elapsed portion of the fiscal year ended with the last day of such
quarterly accounting period, in each case setting forth comparative
figures for the related periods in the prior fiscal year, all of which
shall be in reasonable detail and certified by the chief financial
officer or other Authorized Officer of the Borrower that they fairly
present in all material respects the financial condition of the
Borrower and its Subsidiaries as of the dates indicated and the results
of their operations and changes in their cash flows for the periods
indicated, subject to normal year-end audit adjustments and the absence
of footnote disclosure, and (ii) management's discussion and analysis
of the important operational and financial developments during such
quarterly accounting period; it being understood that if the Borrower's
quarterly report filed on Form 10Q with the SEC contains the
information required above, delivery of such 10Q shall be sufficient
for the purposes of satisfying the requirements of this Section
7.01(b).
(c) Annual Financial Statements. As soon as available and in
no event more than 100 days after the close of each fiscal year of the
Borrower, (i) the consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income and retained earnings and of cash
flows for such fiscal year, in each case setting forth comparative
consolidated figures for the preceding fiscal year, and certified by
KPMG Peat Marwick LLP or such other independent certified public
accountants of recognized national standing as shall be reasonably
acceptable to the Administrative Agent, in each case to the effect that
such statements fairly present in all material respects the financial
condition of the Borrower and its Subsidiaries as of the dates
indicated and the results of their operations and cash flows, together
with a certificate of such accounting firm stating that in the course
of its regular audit of the business of the Borrower and its
Subsidiaries, which audit was conducted in accordance with generally
accepted auditing standards, no Default or Event of Default which has
occurred and is continuing has come to their attention insofar as such
Default or Event of Default relates to financial and accounting matters
or, if such a Default or Event of Default has come to their attention a
statement as to the nature thereof and (ii) management's discussion and
analysis of the important operational and financial developments during
such fiscal year; it being understood that (x) the foregoing
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accountant's opinion shall not be qualified or limited because of a
restricted or limited examination by the independent certified public
accountants of any material portion of the Borrower's or any
Subsidiaries' records and (y) if the Borrower's annual report filed on
Form 10K with the SEC contains the information and the report required
above, delivery of such 10K shall be sufficient for purposes of
satisfying the requirements of this Section 7.01(c).
(d) Budgets, etc. Not more than 45 days after the commencement
of each fiscal year of the Borrower, budgets of the Borrower and its
Subsidiaries in reasonable detail for three full fiscal years from and
including the fiscal year in which such budget is delivered, as
customarily prepared by management for its internal use setting forth,
with appropriate discussion, the principal assumptions upon which such
budgets are based. Together with each delivery of financial statements
pursuant to Section 7.01(b) and (c), a comparison of the current year
to date financial results (other than in respect of the balance sheets
included therein) against the budgets required to be submitted pursuant
to this clause (d) shall be presented.
(e) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 7.01(b) and (c), a
certificate of the chief financial officer or other Authorized Officer
of the Borrower to the effect that no Default or Event of Default
exists or, if any Default or Event of Default does exist, specifying
the nature and extent thereof, which certificate shall set forth the
calculations required to establish whether the Borrower and its
Subsidiaries were in compliance with the provisions of Sections 8.09,
through and including 8.13, as at the end of such fiscal quarter or
year, as the case may be.
(f) Notice of Default or Litigation. Promptly, and in any
event within five Business Days after any officer of the Borrower or
any of its Subsidiaries obtains knowledge thereof, notice of (x) the
occurrence of any event which constitutes a Default or an Event of
Default, which notice shall specify the nature thereof, the period of
existence thereof and what action the Borrower proposes to take with
respect thereto and shall state that such notice is a "notice of
default" and (y) the commencement of, or threat of, or any significant
development in, any litigation or governmental proceeding pending
against the Borrower or any of its Subsidiaries which is likely to have
a Material Adverse Effect, or a material adverse effect on the ability
of any Credit Party to perform its respective obligations hereunder or
under any other Credit Document.
(g) Auditors' Reports. Promptly upon receipt thereof, a copy
of any letter or report submitted to the Borrower or any of its
Subsidiaries by its independent accountants with respect to any
material weakness as to internal control noted by such independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Borrower or any of its Subsidiaries.
(h) Environmental Matters. Promptly after obtaining knowledge
of any of the following, written notice of:
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(i) any pending or threatened material Environmental
Claim against the Borrower or any of its Subsidiaries or any
Real Property owned, leased or operated by the Borrower or any
of its Subsidiaries;
(ii) any condition or occurrence on any Real Property
owned, leased or operated by the Borrower or any of its
Subsidiaries that (x) results in material noncompliance by the
Borrower or any of its Subsidiaries with any applicable
Environmental Law or (y) could reasonably be anticipated to
form the basis of a material Environmental Claim against the
Borrower or any of its Subsidiaries or any such Real Property;
(iii) any condition or occurrence on any Real
Property owned, leased or operated by the Borrower or any of
its Subsidiaries that could reasonably be anticipated to cause
such Real Property to be subject to any material restrictions
on the ownership, occupancy, use or transferability by the
Borrower or its Subsidiary, as the case may be, of its
interest in such Real Property under any Environmental Law;
and
(iv) the taking of any material removal or remedial
action in response to the actual or alleged presence of any
Hazardous Material on any Real Property owned, leased or
operated by the Borrower or any of its Subsidiaries where the
Borrower or any of its Subsidiaries is or is reasonably
expected to be responsible for the cost of such action (other
than in the ordinary course of business and in compliance with
applicable law) or where the taking of such action could
reasonably be expected to materially interfere with the
operations of the Borrower or any of its Subsidiaries at such
Real Property.
All such notices shall describe in reasonable detail the
nature of the claim, investigation, condition, occurrence or removal or
remedial action and the Borrower's or such Subsidiary's response
thereto. In addition, the Borrower agrees to provide the Administrative
Agent with copies of all material written communications by the
Borrower or any of its Subsidiaries with any Person, government or
governmental agency relating to any of the matters set forth in clauses
(i)-(iv) above, and such detailed reports relating to any of the
matters set forth in clauses (i)-(iv) above, as may reasonably be
requested by the Administrative Agent or the Required Banks.
(i) Ratings Change. Promptly upon the occurrence of any change
in any S&P Rating or Moody's Rating.
(j) Modification of Inventory or Receivables Facilities.
Promptly upon the occurrence of any proposed amendment, supplement or
modification to any of the IBM Inventory Finance Facility, the DFS
Inventory Finance Facility, the Morgan Receivables Purchase Facility or
the Nesbitt Burns Receivables Purchase Facility.
(k) Receivables/Inventory Audits. (i) No later than 45 days
after the commencement of each fiscal year of the Borrower (beginning
with the fiscal year
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commencing on or about January 1, 2000) and (ii) at such other time or
times during any fiscal year at the request of the Administrative Agent
or the Required Banks (which request may only be made pursuant to this
clause (ii) if an Event of Default has occurred and is continuing), an
audit performed by a firm satisfactory to the Administrative Agent of
the accounts receivable and inventories of the Borrower and its
Subsidiaries, such audit to be conducted at the Borrower's expense (in
an amount not to exceed $10,000 unless an Event of Default has occurred
and is continuing).
(l) Other Information. Promptly upon transmission thereof,
copies of any filings and registrations with, and reports to, the SEC
by the Borrower or any of its Subsidiaries and copies of all financial
statements, proxy statements, notices and reports as the Borrower or
any of its Subsidiaries shall generally send to analysts or the holders
of their capital stock (in each case to the extent not theretofore
delivered to the Banks pursuant to this Agreement) and, with reasonable
promptness, such other information or documents (financial or
otherwise) as the Administrative Agent on its own behalf or on behalf
of any Bank may reasonably request from time to time.
7.02 Books and Records. The Borrower will, and will cause each
of its Subsidiaries to, permit, upon reasonable notice to the chief financial
officer or other Authorized Officer of the Borrower, officers and designated
representatives of the Administrative Agent or any Bank to visit and inspect any
of the properties or assets of the Borrower and any of its Subsidiaries in
whomsoever's possession, and to examine the books of account of the Borrower and
any of its Subsidiaries and discuss the affairs, finances and accounts of the
Borrower and of any of its Subsidiaries with, and be advised as to the same by,
their officers and independent accountants, all at such reasonable times and
intervals and to such reasonable extent as the Administrative Agent or any Bank
may desire.
7.03 Insurance. In addition to insurance requirements set
forth in the Security Documents, the Borrower shall maintain, and shall cause
each of its Subsidiaries to maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other Persons;
including workers' compensation insurance, public liability and property and
casualty insurance which amount shall not be reduced by the Borrower in the
absence of 30 days' prior notice to the Administrative Agent. All such insurance
shall name the Collateral Agent as loss payee/mortgagee with respect to the
Collateral (and subject to the rights of Deutsche Financial Services and IBM
Credit Corporation with respect to the collateral on which there exists a
Permitted Lien under the DFS Inventory Finance Facility and the IBM Inventory
Finance Facility, respectively) and as additional insured, for the benefit of
the Banks, as their interests may appear. Upon request of the Administrative
Agent or any Bank, the Borrower shall furnish the Administrative Agent, with
sufficient copies for each Bank, at reasonable intervals (but not more than once
per calendar year) a certificate of an Authorized Officer of the Borrower (and,
if requested by the Administrative Agent, any insurance broker of the Borrower)
setting forth the nature and extent of all insurance maintained by the Borrower
and its Subsidiaries in accordance with this Section
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or any Security Documents (and which, in the case of a certificate of a broker,
were placed through such broker).
7.04 Payment of Taxes. The Borrower will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which material penalties attach thereto, and all lawful claims for sums that
have become due and payable which, if unpaid, might become a Lien not otherwise
permitted under Section 8.03(a) or charge upon any properties of the Borrower or
any of its Subsidiaries; provided, that neither the Borrower nor any of its
Subsidiaries shall be required to pay any such tax, assessment, charge, levy or
claim which is being contested in good faith and by proper proceedings if it has
maintained adequate reserves with respect thereto in accordance with GAAP.
7.05 Corporate Franchises. The Borrower will do, and will
cause each of its Subsidiaries to do, or cause to be done, all things necessary
to preserve and keep in full force and effect its existence and its material
rights, franchises and authority to do business; provided, however, that any
transaction permitted by Section 8.02 will not constitute a breach of this
Section 7.05.
7.06 Compliance with Statutes, etc. The Borrower will, and
will cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls) other than such non-compliance as could not reasonably be expected to
have a Material Adverse Effect or a material adverse effect on the ability of
any Credit Party to perform its obligations under any Credit Document to which
it is a party.
7.07 Compliance with Environmental Laws. (a) The Borrower will
pay, and will cause each of its Subsidiaries to pay, all costs and expenses
incurred by it in keeping in compliance with all Environmental Laws, and will
keep or cause to be kept all Real Properties at any time owned, leased or
operated by the Borrower or any of its Subsidiaries free and clear of any Liens
imposed pursuant to such Environmental Laws; and (b) neither the Borrower nor
any of its Subsidiaries will generate, use, treat, store, release or dispose of,
or permit the generation, use, treatment, storage, release or disposal of,
Hazardous Materials on any such Real Property, or transport or permit the
transportation of Hazardous Materials to or from any such Real Property, unless
the failure to comply with the requirements specified in clause (a) or (b)
above, either individually or in the aggregate, could not reasonably be expected
to have a Material Adverse
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Effect. If the Borrower or any of its Subsidiaries, or any tenant or occupant of
any Real Property at any time owned, leased or operated by the Borrower or any
of its Subsidiaries, cause or permit any intentional or unintentional act or
omission resulting in the presence or Release of any Hazardous Material (except
in compliance with applicable Environmental Laws), the Borrower agrees to
undertake, and/or to cause any of its Subsidiaries, tenants or occupants to
undertake, at their sole expense, any clean up, removal, remedial or other
action required pursuant to Environmental Laws to remove and clean up any
Hazardous Materials from any Real Property except where the failure to do so
could not be reasonably expected to have a Material Adverse Effect; provided,
that neither the Borrower nor any of its Subsidiaries shall be required to
comply with any such order or directive which is being contested in good faith
and by proper proceedings so long as it has maintained adequate reserves with
respect to such compliance to the extent required in accordance with GAAP.
7.08 ERISA. As soon as possible and, in any event, within ten
days after the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following, the
Borrower will deliver to the Administrative Agent (with sufficient copies for
each of the Banks) a certificate of the chief financial officer of the Borrower
setting forth the full details as to such occurrence and the action, if any,
which the Borrower, such Subsidiary or such ERISA Affiliate is required or
proposes to take, together with any notices required or proposed to be given to
or filed with or by the Borrower, such Subsidiary, such ERISA Affiliate, the
PBGC, a Plan participant or the Plan administrator with respect thereto: that a
Reportable Event has occurred (except to the extent that the Borrower has
previously delivered to the Banks a certificate and notices (if any) concerning
such event pursuant to the next clause hereof); that a contributing sponsor (as
defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA
is subject to the advance reporting requirement of PBGC Regulation Section
4043.61 (without regard to subparagraph (b)(1) thereof), and an event described
in Subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section
4043 is reasonably expected to occur with respect to such Plan within the
following 30 days; that an accumulated funding deficiency, within the meaning of
Section 412 of the Code or Section 302 of ERISA, has been incurred or an
application may be or has been made for a waiver or modification of the minimum
funding standard (including any required installment payments) or an extension
of any amortization period under Section 412 of the Code or Section 303 or 304
of ERISA with respect to a Plan; that any contribution required to be made to a
Plan or Foreign Pension Plan has not been timely made; that a Plan has been or
is reasonably expected to be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that a Plan has an Unfunded Current
Liability; that proceedings are reasonably expected to be or have been
instituted to terminate or appoint a trustee to administer a Plan which is
subject to Title IV of ERISA; that a proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Plan; that the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or could
reasonably be expected to incur any material liability (including any indirect,
contingent or secondary liability) to or on account of the termination of or
withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212
of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980
of the Code or Section 409, 502(i) or 502(l) of ERISA or with respect to a group
health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the
Code) under Section 4980B of the Code; or that the Borrower or any Subsidiary of
the Borrower could reasonably be expected to incur any material liability
pursuant to any employee welfare benefit plan (within the meaning of Section
3(1) of ERISA) that provides benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or any Plan or any
Foreign Pension Plan. The Borrower will deliver to each Bank (i) a complete copy
of the annual report (on Internal Revenue Service Form 5500-series) of each Plan
required to be filed with the Internal Revenue Service and (ii) copies of any
records, documents or other information that must be furnished to the PBGC with
respect to any Plan pursuant to Section 4010 of ERISA. In addition to any
certificates or notices delivered to the Administrative Agent or the Banks
pursuant to the first
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sentence hereof, copies of annual reports and any records, documents or other
information required to be furnished to the PBGC, and any material notices
received by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
with respect to any Plan or Foreign Pension Plan shall be delivered to the
Administrative Agent (with sufficient copies for each of the Banks) no later
than ten days after the date any annual report has been filed with the Internal
Revenue Service or such records, documents and/or information has been furnished
to the PBGC or such notice has been received by the Borrower, the Subsidiary or
the ERISA Affiliate, as applicable.
7.09 Good Repair. The Borrower will, and will cause each of
its Subsidiaries to, ensure that its material properties and equipment used in
its business are kept in good repair, working order and condition, normal wear
and tear and damage by casualty excepted, and that from time to time there are
made in such properties and equipment all needful and proper repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto, to
the extent and in the manner useful or customary for companies in similar
businesses.
7.10 End of Fiscal Years; Fiscal Quarters. The Borrower will,
for financial reporting purposes, cause (i) each of its, and each of its
Domestic Subsidiaries', fiscal years to end on or about December 31 of each year
and (ii) each of its, and each of its Domestic Subsidiaries', fiscal quarters to
end on dates which are consistent with a fiscal year ending on or about December
31.
7.11 Additional Security; Further Assurances. (a) The Borrower
will, and will cause each of its Domestic Subsidiaries to, grant to the
Collateral Agent security interests in such assets and properties of the
Borrower and its Subsidiaries as are not covered by the original Security
Documents, and as may be requested from time to time by the Administrative Agent
or the Required Banks (collectively, the "Additional Security Documents"). All
such security interests and mortgages shall be granted pursuant to documentation
reasonably satisfactory in form and substance to the Administrative Agent and
shall constitute valid and enforceable perfected security interests and
mortgages superior to and prior to the rights of all third Persons and subject
to no other Liens except for Permitted Liens. The Additional Security Documents
or instruments related thereto shall have been duly recorded or filed in such
manner and in such places as are required by law to establish, perfect, preserve
and protect the Liens in favor of the Collateral Agent required to be granted
pursuant to the Additional Security Documents and all taxes, fees and other
charges payable in connection therewith shall have been paid in full.
(b) The Borrower will, and will cause each of its Subsidiaries
to, at the expense of the Borrower, make, execute, endorse, acknowledge, file
and/or deliver to the Collateral Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, surveys,
reports and other assurances or instruments and take such further steps relating
to the collateral covered by any of the Security Documents as the Collateral
Agent may reasonably require. Furthermore, the Borrower shall cause to be
delivered to the Collateral Agent such opinions of counsel and other related
documents as may be reasonably requested by the Administrative Agent to assure
themselves that this Section 7.11 has been complied with.
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(c) The Borrower agrees that each action required above by
this Section 7.11 shall be completed as soon as possible, but in no event later
than 90 days after such action is either requested to be taken by the
Administrative Agent or the Required Banks or required to be taken by the
Borrower and its Subsidiaries pursuant to the terms of this Section 7.11;
provided that in no event shall the Borrower be required to take any action,
other than using its reasonable efforts, to obtain consents from third parties
with respect to its compliance with this Section 7.11.
7.12 Interest Rate Protection. The Borrower shall no later
than 90 days following the Initial Borrowing Date enter into, and thereafter
maintain for at least two years, Interest Rate Protection Agreements
satisfactory to the Administrative Agent fixing a fixed or maximum interest rate
on at least $200,000,000 of the floating rate Indebtedness of the Borrower and
its Subsidiaries (including, without limitation, the Loans).
7.13 Register. The Borrower hereby designates the
Administrative Agent to serve as the Borrower's agent, solely for purposes of
this Section 7.13, to maintain a register (the "Register") on which it will
record the Commitments from time to time of each of the Banks, the Loans made by
each of the Banks and each repayment in respect of the principal amount of the
Loans of each Bank. Failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower's obligations in respect of such
Loans. With respect to any Bank, the transfer of the Commitments of such Bank
and the rights to the principal of, and interest on, any Loan made pursuant to
such Commitments shall not be effective until such transfer is recorded on the
Register maintained by the Administrative Agent with respect to ownership of
such Commitments and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitments and Loans shall remain owing to
the transferor. The registration of assignment or transfer of all or part of any
Commitments and Loans shall be recorded by the Administrative Agent on the
Register only upon the acceptance by the Agent of a properly executed and
delivered Assignment and Assumption Agreement pursuant to Section 12.04(b).
Coincident with the delivery of such an Assignment and Assumption Agreement to
the Administrative Agent for acceptance and registration of assignment or
transfer of all or part of a Loan, or as soon thereafter as practicable, the
assigning or transferor Bank shall surrender the Note evidencing such Loan, and
thereupon one or more new Notes in the same aggregate principal amount shall be
issued to the assigning or transferor Bank and/or the new Bank. The Borrower
agrees to indemnify the Agent from and against any and all losses, claims,
damages and liabilities of whatsoever nature which may be imposed on, asserted
against or incurred by the Administrative Agent in performing its duties under
this Section 7.13, unless such losses, claims, damages and liabilities are
caused by the gross negligence or willful misconduct of the Administrative
Agent.
7.14 Year 2000 Compliance. No later than September 30, 1999,
the Borrower shall (i) complete a review and assessment of all areas within its
and each of its Subsidiaries' business and operations (including those affected
by material suppliers and vendors) that could be adversely affected by the "Year
2000 Problem" (that is, the risk that computer applications used by the Borrower
or any of its Subsidiaries (or its material suppliers and vendors) may be unable
to recognize and perform properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999) and (ii) develop a plan and
complete the implementation of that plan for addressing the Year 2000 Problem.
The Borrower will promptly notify the
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Administrative Agent in the event the Borrower discovers or determines that any
computer application (including those of its material suppliers and vendors)
that is material to its or any of its Subsidiaries' business and operations will
not be Year 2000 Compliant on September 30, 1999, except to the extent that such
failure could not reasonably be expected to have a Material Adverse Effect.
SECTION 8. Negative Covenants. The Borrower hereby covenants
and agrees that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Commitments have terminated, no Letters of
Credit or Notes are outstanding and the Loans and Unpaid Drawings, together with
interest, Fees and all other Obligations (other than any indemnities described
in Section 12.13 which are not then due and payable) incurred hereunder, are
paid in full:
8.01 Changes in Business. The Borrower and its Subsidiaries
will not engage in any business other than the businesses engaged in by the
Borrower and its Subsidiaries as of the Effective Date and activities directly
related thereto, and similar or related businesses. Notwithstanding the
foregoing, neither the Borrower nor any of its Subsidiaries shall conduct a
material portion of its business on a "cash on delivery" basis.
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc.
The Borrower will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets (other than inventory or used, worn-out or surplus equipment in the
ordinary course of business), or enter into any partnerships, joint ventures or
sale-leaseback transactions, or purchase or otherwise acquire (in one or a
series of related transactions) any part of the property or assets (other than
purchases or other acquisitions of inventory, materials and equipment in the
ordinary course of business) of any Person, except that the following shall be
permitted:
(a) so long as no Default or Event of Default then exists or
would result therefrom, the Borrower and its Wholly-Owned Subsidiaries
may acquire (including by way of merger) the assets or the capital
stock of any Person (any such acquisition permitted by this clause (a),
a "Permitted Acquisition"), provided, that (i) such Person (or the
assets so acquired) was, immediately prior to such acquisition, engaged
(or used) primarily in the businesses permitted pursuant to Section
8.01, (ii) if such acquisition is structured as a stock acquisition,
then either (A) the Person so acquired becomes a Wholly-Owned
Subsidiary of the Borrower or (B) such Person is merged with and into
the Borrower (with the Borrower being the surviving corporation of such
merger) or is merged with a Wholly-Owned Subsidiary of the Borrower
(with the surviving corporation of such merger being a Wholly-Owned
Subsidiary of the Borrower), and in any case, all of the provisions of
Section 8.16 have been complied with in respect of such Person, (iii)
any Liens or Indebtedness assumed or issued in connection with such
acquisition are otherwise permitted under Section 8.03 or 8.04, as the
case may be, (iv) the only consideration paid in connection with such
Permitted Acquisition consists of cash, common equity of the Borrower
or Indebtedness permitted to be issued under Section 8.04, (v) if the
aggregate consideration paid in connection with such Permitted
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Acquisition is in excess of $10,000,000, at least three Business Days
prior to the consummation of any Permitted Acquisition, the Borrower
shall deliver to the Administrative Agent a certificate of the
Borrower's chief financial officer certifying (and showing the
calculations therefor in reasonable detail) that the Borrower would
have been in compliance with the financial covenants set forth in
Sections 8.09, 8.10, 8.11, 8.12 and 8.13 for the Test Period then most
recently ended prior to the date of the consummation of such Permitted
Acquisition, in each case with such financial covenants to be
determined on a pro forma basis as if such Permitted Acquisition had
been consummated on the first day of such Test Period, (vi) prior,
effective written consent or approval of such Permitted Acquisition of
the board of directors or equivalent governing body is obtained and
(vii) the aggregate consideration paid in connection with all Permitted
Acquisitions consummated in any fiscal year of the Borrower (including,
without limitation, any earn-out, non-compete or deferred compensation
arrangements and the principal amount of Indebtedness issued or assumed
in connection therewith), shall not exceed the Annual Cash Investment
Limit for such fiscal year;
(b) the Borrower and its Subsidiaries may lease as lessee or
lessor or license as licensee or licensor real or personal property in
the ordinary course of business and otherwise in compliance with this
Agreement, so long as any such lease or license by the Borrower or any
of its Subsidiaries in its capacity as lessor or licensor, as the case
may be, does not prohibit the granting of a Lien by the Borrower or any
of its Subsidiaries pursuant to the Security Agreement in the personal
property covered by such lease or license;
(c) Capital Expenditures by the Borrower and its Subsidiaries
to the extent not in violation of Section 8.23;
(d) the advances, investments and loans permitted pursuant to
Section 8.05;
(e) the following sales of receivables:
(i) the sale by Vanstar Corporation to Vanstar
Finance Co., and the subsequent sale by Vanstar Finance Co. to
Nesbitt Burns Securities, Inc., as agent, of Nesbitt Burns
Receivables pursuant to the Nesbitt Burns Receivables Purchase
Facility, provided that (A) the agent under the Nesbitt Burns
Receivables Purchase Facility shall not have been notified
that, immediately before or after giving effect to such sale,
a Default under Section 9.05 or an Event of Default shall
exist, (B) no purchaser under the Nesbitt Burns Receivables
Purchase Facility shall have any interest in any receivables
created after notice by the Administrative Agent to such
purchaser of such a Default or an Event of Default and (C)
before and after giving effect to such sale (1) the
"Investment" does not exceed 65% of the "Outstanding Balance"
(each term, as defined in the Nesbitt Burns Receivables
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Purchase Facility) of receivables of the Borrower and its
Subsidiaries (excluding intercompany receivables ) and (2) the
"Outstanding Balance" of the portion of "Pool Receivables"
does not exceed 75% of the "Outstanding Balance" (each term,
as defined in the Nesbitt Burns Receivables Purchase Facility)
of receivables of the Borrower and its Subsidiaries (excluding
intercompany receivables); and
(ii) the sale by the Borrower to InaCom Funding
Corp., and the subsequent sale by InaCom Funding Corp. to
Morgan Guaranty Trust Company of New York, as agent, of Morgan
Receivables pursuant to the Morgan Receivables Purchase
Facility, provided that (A) the agent under the Morgan
Receivables Purchase Facility shall not have been notified
that, immediately before or after giving effect to such sale,
a Default under Section 9.05 or an Event of Default shall
exist, (B) no purchaser under the Morgan Receivables Purchase
Facility shall have any interest in any receivables created
after notice by the Administrative Agent to such purchaser of
such a Default or an Event of Default, and (C) before and
after giving effect to such sale (1) the "Aggregate Unpaids"
do not exceed 65% of the "Outstanding Balance" (each term, as
defined in the Morgan Receivables Purchase Facility) of
receivables of the Borrower and its Subsidiaries (excluding
intercompany receivables) and (2) the "Outstanding Balance" of
the portion of the "Purchased Assets" consisting of
"Receivables" does not exceed 75% of the "Outstanding Balance"
(each term, as defined in the IC/IFC Purchase Agreement) of
receivables of the Borrower and its Subsidiaries (excluding
intercompany receivables);
(f) the Borrower and its Subsidiaries may sell or exchange
specific items of equipment, so long as the purpose of each such sale
or exchange is to acquire (and results within 90 days of such sale or
exchange in the acquisition of) replacement items of equipment which
are, in the reasonable business judgment of the Borrower and its
Subsidiaries, the functional equivalent of the item of equipment so
sold or exchanged;
(g) the Borrower and its Subsidiaries may, in the ordinary
course of business, license as licensee or licensor patents,
trademarks, copyrights and know-how to or from third Persons, so long
as any such license by the Borrower or any of its Subsidiaries in its
capacity as licensor is permitted to be assigned pursuant to the
Security Agreement (to the extent that a security interest in such
patents, trademarks, copyrights and know-how is granted thereunder) and
does not otherwise prohibit the granting of a Lien by the Borrower or
any of its Subsidiaries pursuant to the Security Agreement in the
intellectual property covered by such license;
(h) each of the Borrower and its Subsidiaries may dispose of
assets not otherwise permitted hereunder, provided that (i) such
dispositions are made for fair market value, (ii) at the time of any
disposition, no Event of Default shall exist or shall result from each
such disposition, (iii) the aggregate sales price from such disposition
shall be paid in cash, and (iv) the aggregate value of all assets so
sold by the Borrower and its Subsidiaries, together, shall not exceed
in any fiscal year of the Borrower 5.0% of the book value of the
Borrower's and its Subsidiaries' tangible assets measured, together
with all other dispositions in such fiscal year, as of the end of the
most recently ended fiscal quarter for which the reports under Section
7.01(b) or (c) have been delivered;
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(i) any Subsidiary of the Borrower may transfer assets to the
Borrower or to any other Subsidiary of the Borrower so long as the
security interests granted to the Collateral Agent for the benefit of
the Secured Creditors pursuant to the Security Documents in the assets
so transferred shall remain in full force and effect and perfected (to
at least the same extent as in effect immediately prior to such
transfer);
(j) any Subsidiary of the Borrower may merge with and into, or
be dissolved or liquidated into, the Borrower so long as (i) the
Borrower is the surviving corporation of such merger and (ii) the
security interests granted to the Collateral Agent for the benefit of
the Secured Creditors pursuant to the Security Documents in the assets
of such Subsidiary so merged shall remain in full force and effect and
perfected (to at least the same extent as in effect immediately prior
to such merger, dissolution or liquidation);
(k) any Subsidiary of the Borrower may merge with and into, or
be dissolved or liquidated into, any other Subsidiary of the Borrower
so long as (i) the Wholly-Owned Subsidiary is the surviving corporation
of any merger between a Subsidiary and a Wholly-Owned Subsidiary, (ii)
to the extent that a Subsidiary Guarantor is involved in such merger,
the Subsidiary Guarantor is the surviving corporation and (iii) the
security interests granted to the Collateral Agent for the benefit of
the Secured Creditors pursuant to the Security Documents in the assets
of such Subsidiary shall remain in full force and effect and perfected
(to at least the same extent as in effect immediately prior to such
merger, dissolution or liquidation); and
(l) dispositions of equipment by the Borrower or any
Subsidiary of the Borrower to any Subsidiary of the Borrower in the
ordinary course of business pursuant to reasonable business
requirements.
To the extent the Required Banks waive the provisions of this Section 8.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold as permitted by this Section 8.02 (and such Collateral is permitted to be
released from the Liens created by the respective Security Document), such
Collateral in each case shall be sold or otherwise disposed of free and clear of
the Liens created by the Security Documents and the Administrative Agent shall
take such actions (including, without limitation, directing the Collateral Agent
to take such actions) as are appropriate in connection therewith.
8.03 Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets of any kind (real or personal, tangible
or intangible) of the Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to the
Borrower or any of its Subsidiaries) or assign any right to receive income,
except for the following (collectively, the "Permitted Liens"):
(a) inchoate Liens for taxes, assessments or governmental
charges or levies not yet due or Liens for taxes, assessments or
governmental charges or levies being
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contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP;
(b) Liens in respect of property or assets of the Borrower or
any of its Subsidiaries imposed by law which were incurred in the
ordinary course of business and which have not arisen to secure
Indebtedness for borrowed money, such as carriers', warehousemen's and
mechanics' Liens, statutory landlord's Liens, and other similar Liens
arising in the ordinary course of business, and which either (x) do not
in the aggregate materially detract from the value of such property or
assets or materially impair the use thereof in the operation of the
business of the Borrower or any of its Subsidiaries or (y) are being
contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property or
asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement and the
Security Documents;
(d) Liens in existence on the Initial Borrowing Date which are
listed, and the property subject thereto described in Annex VI (other
than liens described in clauses (p) and (q) of this Section 8.03),
including any continuations thereof, or concurrent replacements or
substitutions therefor in respect of such Indebtedness or Indebtedness
incurred to refinance such Indebtedness (which Lien shall not extend to
categories, types, classes or items of collateral not previously
serving as collateral for such Indebtedness or the Indebtedness so
refinanced);
(e) Liens (other than Liens on the Collateral) consisting of
judgment or judicial attachment Liens, provided that the enforcement of
such Liens is effectively stayed and all such Liens in the aggregate at
any time outstanding for the Borrower and its Subsidiaries do not
exceed $5,000,000 (other than Liens in connection with judicial
proceedings the liability under which is fully covered by insurance
issued by an insurance company which has acknowledged coverage);
(f) Liens incurred (other than Liens imposed by ERISA and
other than on the Collateral) or deposits made (x) in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, (y) to
secure the performance of non-delinquent tenders, statutory
obligations, surety and appeal bonds, bids, government contracts,
performance and return-of-money bonds and other similar obligations
incurred in the ordinary course of business (exclusive of obligations
in respect of the payment for borrowed money) and (z) to secure the
performance of leases, to the extent incurred or made in the ordinary
course of business consistent with past practices, provided that all
such Liens (in the case of preceding clauses (y) and (z)) in the
aggregate could not reasonably be expected (even if enforced) to cause
a Material Adverse Effect;
(g) licenses, leases or subleases granted to third Persons not
interfering in any material respect with the business of the Borrower
or any of its Subsidiaries;
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(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances which
(i) in the aggregate are not substantial in amount, (ii) do not
interfere in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries and (iii) do not
materially detract from the value of the property subject thereto;
(i) Liens arising from precautionary UCC financing statements
regarding operating leases permitted by this Agreement;
(j) any interest or title of a licensor, lessor or sublessor
under any license or lease permitted by this Agreement;
(k) Liens arising pursuant to purchase money mortgages or
security interests securing Indebtedness representing the purchase
price (or financing of the purchase price within 20 days after the
respective purchase) of assets (other than inventory) acquired in the
ordinary course of business after the Initial Borrowing Date, provided
that (i) any such Liens attach only to the assets so purchased, (ii)
the Indebtedness secured by any such Lien does not exceed 100% of the
purchase price of the property being purchased at the time of the
incurrence of such Indebtedness and (iii) the Indebtedness secured
thereby is permitted to be incurred pursuant to Section 8.04(f);
(l) Liens on property or assets acquired pursuant to a
Permitted Acquisition, or on property or assets of a Subsidiary of the
Borrower in existence at the time such Subsidiary is acquired pursuant
to a Permitted Acquisition, provided that (i) any Indebtedness that is
secured by such Liens is permitted to exist under Section 8.04(f) and
(ii) such Liens are not incurred in connection with or in contemplation
or anticipation of such Permitted Acquisition and do not attach to any
other asset of the Borrower or any of its Subsidiaries;
(m) Liens in favor of customs and revenue authorities arising
as a matter of law to secure the payment of customs duties in
connection with the importation of goods;
(n) Liens arising pursuant to Capital Leases, provided that
(i) any Indebtedness that is secured by such Liens is permitted to
exist under Section 8.04(f), (ii) such Liens only attach to the assets
subject to such Capital Leases and (iii) such Liens are otherwise
permitted under this Agreement;
(o) Liens arising solely by virtue of any statutory or common
law provision relating to bankers' liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained
with a creditor depository institution; provided that (i) such deposit
account is not a dedicated cash collateral account and is not subject
to restrictions against access by the Borrower or any of its
Subsidiaries in excess of those set forth by regulations promulgated by
the Federal Reserve Board, and (ii) such deposit account is not
intended by the Borrower or any Subsidiary of the Borrower to provide
collateral to the depository institution;
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(p) Liens arising pursuant to the interest of (i) Nesbitt
Burns Securities, Inc., as agent, in Nesbitt Burns Receivables sold,
prior to the occurrence of a Default under Section 9.05 or any Event of
Default, pursuant to the Nesbitt Burns Receivables Purchase Facility
and (ii) Morgan Guaranty Trust Company of New York, as agent, in Morgan
Receivables sold, prior to the occurrence of a Default under Section
9.05 or any Event of Default and the receipt of written notice from the
Administrative Agent to the agent under the Morgan Receivables Purchase
Facility, pursuant to the Morgan Receivables Purchase Facility; and
(q) Liens on inventory financed under the IBM Inventory
Finance Facility (IBM manufactured inventory) or the DFS Inventory
Finance Facility, together, in each case, with price protection
payments, vendor returns, identifiable cash proceeds from inventory
sold for cash and related insurance proceeds.
8.04 Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(b) Existing Indebtedness outstanding on the Initial Borrowing
Date and listed on Part A of Annex V, without giving effect to any
subsequent extension, renewal or refinancing thereof;
(c) Capitalized Lease Obligations permitted pursuant to
Section 8.08;
(d) Indebtedness among the Borrower and its Subsidiaries to
the extent permitted by Section 8.05;
(e) Indebtedness consisting of Subordinated Debt;
(f) Indebtedness secured by Liens permitted to be incurred
pursuant to Sections 8.03(k), 8.03(l) and 8.03(n) not to exceed an
aggregate amount of $25,000,000 outstanding at any time for all such
Sections taken together;
(g) Indebtedness consisting of Contingent Obligations
otherwise permitted pursuant to Section 8.20;
(h) Indebtedness under the IBM Inventory Finance Facility or
the DFS Inventory Finance Facility;
(i) Indebtedness under the (i) Morgan Receivables Purchase
Facility and (ii) Nesbitt Burns Receivables Purchase Facility;
(j) Indebtedness under Interest Rate Protection Agreements
entered into to protect the Borrower against fluctuations in interest
rates in respect of the Obligations and other Indebtedness permitted
hereunder;
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(k) Indebtedness under Other Hedging Agreements providing
protection against fluctuations in currency values in connection with
the Borrower's or any of its Subsidiaries' operations so long as
management of the Borrower or such Subsidiary, as the case may be, has
determined that the entering into of such Other Hedging Agreements are
bona fide hedging activities and not for purposes of speculation;
(l) Indebtedness of the Borrower or a Wholly-Owned Subsidiary
of the Borrower acquired pursuant to a Permitted Acquisition (or
Indebtedness assumed at the time of the acquisition of an asset
securing such Indebtedness), and any refinancing of such Indebtedness
so long as the principal amount thereof is not increased, provided that
(i) such Indebtedness was not incurred in connection with or in
contemplation of such Permitted Acquisition and (ii) such Indebtedness
is repaid in full within 60 days after the consummation of such
Permitted Acquisition; and
(m) Indebtedness consisting of the Trust Preferred Related
Subordinated Debt and any refinancing thereof consummated in accordance
with Section 8.18.
8.05 Advances, Investments and Loans. The Borrower will not,
and will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, or purchase or own a futures contract or otherwise become liable for
the purchase or sale of currency or other commodities at a future date in the
nature of a futures contract, or hold any cash, Cash Equivalents or Foreign Cash
Equivalents, except:
(a) the Borrower and its Subsidiaries may invest in cash and
Cash Equivalents and foreign Subsidiaries may invest in Foreign Cash
Equivalents;
(b) the Borrower and its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course
of business and payable or dischargeable in accordance with customary
trade terms of the Borrower or such Subsidiary;
(c) the Borrower and its Subsidiaries may acquire and own
investments (including debt obligations) received in connection with
the bankruptcy or reorganization of suppliers and customers and in good
faith settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business;
(d) the Borrower may acquire and hold obligations of one or
more officers or other employees of the Borrower or its Subsidiaries in
connection with such officers' or employees' acquisition of shares of
common stock of the Borrower Common Stock so long as no cash is paid by
the Borrower or any of its Subsidiaries in connection with the
acquisition of any such obligations;
(e) deposits made in the ordinary course of business
consistent with past practices to secure the performance of leases
shall be permitted;
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(f) the Borrower and its Subsidiaries may make transfers of
assets to their respective Subsidiaries in accordance with Sections
8.02(i), (j) and (k);
(g) extensions of credit by any Credit Party to any other
Credit Party shall be permitted, provided that any such extensions of
credit are evidenced by a note in the form of an Intercompany Note;
(h) advances, loans and investments in existence on the
Initial Borrowing Date and listed on Annex VII shall be permitted,
without giving effect to any additions thereto or replacements thereof
(except those additions or replacements which are independently
permitted under this Section 8.05);
(i) Permitted Acquisitions shall be permitted in accordance
with Section 8.02(a);
(j) investments made with consideration to the extent
consisting of non-convertible common securities of the Borrower;
(k) Interest Rate Protection Agreements entered into in
compliance with Section 8.04(j) shall be permitted;
(l) Other Hedging Agreements entered into in compliance with
Section 8.04(k) shall be permitted; and
(m) so long as no Default or Event of Default then exists or
would result therefrom, the Borrower and its Subsidiaries may make
additional loans, advances and investments in Joint Ventures or
Minority Investments so long as the aggregate amount of such loans,
advances and investments does not exceed $25,000,000 in any fiscal year
of the Borrower (determined without regard to any write-downs or
write-offs thereof), provided that neither the Borrower nor any of its
Subsidiaries may make or own any investment in Margin Stock.
8.06 Dividends, etc. The Borrower will not, and will not
permit any of its Subsidiaries to, declare or pay any dividends (other than
dividends payable solely in common stock of the Borrower or any such Subsidiary,
as the case may be) or return any capital to, its stockholders or authorize or
make any other distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for consideration, any shares of any class of its capital stock,
now or hereafter outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or set aside any funds
for any of the foregoing purposes, and the Borrower will not permit any of its
Subsidiaries to purchase or otherwise acquire for consideration any shares of
any class of the capital stock of the Borrower or any other Subsidiary, as the
case may be, now or hereafter outstanding (or any options or warrants or stock
appreciation rights issued by such Person with respect to its capital stock)
(all of the foregoing "Dividends"), except that:
(i) the Borrower may purchase, redeem or otherwise acquire
shares of its common stock or warrants or options to acquire any such
shares with the proceeds
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received by the Borrower from the substantially concurrent issue of new
shares of its common stock;
(ii) any Subsidiary of the Borrower may pay Dividends to the
Borrower or any Wholly-Owned Subsidiary of the Borrower;
(iii) the Borrower may declare or pay cash dividends to its
stockholders and purchase, redeem or otherwise acquire shares of its
capital stock or warrants, rights or options to acquire any such shares
for cash solely out of 25% of Net Income of the Borrower and its
Subsidiaries arising after March 27, 1999 and computed on a cumulative
consolidated basis, provided, that, immediately after giving effect to
such proposed action, no Default or Event of Default would exist; and
(iv) Vanstar Financing Trust may declare and pay regularly
accruing cash dividends on the Trust Preferred Securities in accordance
with the terms thereof in an amount not to exceed $9,000,000 in any
fiscal year.
8.07 Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any transaction or series
of transactions with any Affiliate other than in the ordinary course of business
and on terms and conditions substantially as favorable to the Borrower or such
Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time
in a comparable arm's-length transaction with a Person other than an Affiliate.
8.08 Lease Obligations. The Borrower will not, and will not
permit any of its Subsidiaries to, create or suffer to exist any obligations for
the payment of rent for any property under lease to agreement to lease, except
for:
(a) leases of the Borrower and its Subsidiaries in existence
on the Initial Borrowing Date and any renewal, extension or refinancing thereof;
(b) operating leases entered into by the Borrower or any
Subsidiary of the Borrower after the Initial Borrowing Date in the ordinary
course of business; and
(c) Capital Leases other than those permitted under clause (a)
of this Section 8.08, entered into by the Borrower or any of its Subsidiaries
after the Initial Borrowing Date, provided that such Capital Leases are (i) to
finance the acquisition of equipment and (ii) permitted to exist under Section
8.04(f).
8.09 Net Worth. The Borrower shall not permit Net Worth at any
time to be less than the sum of (i) 90% of Net Worth as of March 27, 1999, plus
(ii) 75% of net income, if positive for the period from and after March 27, 1999
to the last day of the then most recently ended fiscal quarter, plus (iii) 100%
of the aggregate Net Issuance Proceeds received by the Borrower from the
issuance or sale of its capital stock (including any preferred stock) from and
after the Initial Borrowing Date, plus (iv) 100% of the principal amount of any
Indebtedness (including, without limitation, any Subordinated Debt and the Trust
Preferred Related Subordinated Debt), which is converted into equity after the
Initial Borrowing Date (in each case
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on and after the date of such conversion); such covenant to be calculated as of
the end of each fiscal quarter.
8.10 Current Ratio. The Borrower shall not permit at any time
its consolidated Current Ratio to be less than 1.00:1.00.
8.11 Leverage Ratios. The Borrower shall not permit (i) the
ratio of (a) the aggregate principal amount of Funded Senior Debt outstanding at
any time of the Borrower and its Subsidiaries to (b) EBITDA for the Test Period
then most recently ended to exceed (A) 2.75:1.00 at any time on or prior to the
last day of the fiscal year ending on or about December 31, 1999 and (B)
1.50:1.00 at any time thereafter; or (ii) the ratio of (a) the aggregate
principal amount of Funded Debt outstanding at any time of the Borrower and its
Subsidiaries to (b) EBITDA for the Test Period then most recently ended to
exceed (A) 3.50:1.00 at any time on or prior to the last day of the fiscal year
ending on or about December 31, 1999 and (B) 2.50:1.00 at any time thereafter.
8.12 EBITDA to Interest Expense Ratio. The Borrower shall not
permit (x) for any Test Period ending on or prior to the last day of the
Borrower's fiscal year ending on or about December 31, 1999 (commencing with the
fiscal quarter ending on or about June 30, 1999) the ratio of EBITDA for such
Test Period to Interest Expense for such Test Period to be less than 2.75:1.00
and (y) for any Test Period ending thereafter the ratio of EBITDA for such Test
Period to Interest Expense for such Test Period to be less than 3.00:1.00.
8.13 Total Tangible Assets to Outstandings. The Borrower shall
not at any time permit the ratio of (A) the book value (determined in accordance
with GAAP) of the Borrower's and its Subsidiaries' tangible assets (determined
on a consolidated basis) which are free of all Liens (other than Liens in favor
of the Collateral Agent under the Security Agreement) to (B) the aggregate of
the Effective Amount of all Loans and the Effective Amount of all Letter of
Credit Outstandings, to be less than 1.50:1.00, such ratio to be calculated as
of the end of each fiscal quarter.
8.14 Limitation on Modifications of Certificate of
Incorporation, By-Laws and Certain Other Agreements; etc. The Borrower will not,
and will not permit any of its Subsidiaries to:
(i) amend, modify or change in any way adverse to the interests
of the Banks, its Certificate of Incorporation (including, without
limitation, by the filing or modification of any certificate of
designation) or By-Laws (or equivalent organizational documents), or
any agreement entered into by it, with respect to its capital stock, or
enter into any new agreement with respect to its capital stock which
would be adverse to the interests of the Banks;
(ii) enter into any amendment, supplement or modification to the
IBM Inventory Finance Facility, the Morgan Receivables Purchase
Facility, the DFS Inventory Finance Facility or the Nesbitt Burns
Receivables Purchase Facility other than amendments, modifications or
supplements which do not involve increases in interest or pricing,
acceleration of amortization, increases in collateralization, or
increases in facility size,
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and in any event the Borrower shall provide the Banks 10 Business Days'
prior written notice (together with a description) of any proposed
amendment, supplement or modification regardless of whether the same
would require the Banks' consent pursuant to this Section 8.14(ii);
(iii) enter into any agreement (excluding this Agreement and any
other Credit Document and, with respect to the Morgan Receivables and
Nesbitt Burns Receivables, the Morgan Receivables Purchase Facility and
the Nesbitt Burns Receivables Purchase Facility, respectively)
prohibiting the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired (other than
assets subject to a Lien permitted under Sections 8.03(k), (l) and
(n)); or
(iv) enter into, or accept obligations under, any agreement (a)
prohibiting (including subjecting to any condition) the ability of the
Borrower or any of its Subsidiaries to amend, supplement or otherwise
modify this Agreement or any other Credit Document or (b) containing
any provision that would contravene any provision of this Agreement or
any other Credit Document.
8.15 Limitation on Certain Restrictions on Subsidiaries. The
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of
the Borrower, (b) make loans or advances to the Borrower or any of the
Borrower's Subsidiaries or (c) transfer any of its properties or assets to the
Borrower or any of the Borrower's Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) this
Agreement, the other Credit Documents and in connection with the Morgan
Receivables, and Nesbitt Burns Receivables, the Morgan Receivables Purchase
Facility and the Nesbitt Burns Receivables Purchase Facility respectively, (iii)
the DFS Inventory Finance Facility and the IBM Inventory Finance Facility, (iv)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of the Borrower or a Subsidiary of the Borrower, (v)
customary provisions restricting assignment of any licensing agreement entered
into by the Borrower or a Subsidiary of the Borrower in the ordinary course of
business, and (vi) customary provisions restricting the transfer of assets
subject to Liens permitted under Sections 8.03(k), (l) and (n).
8.16 Limitation on the Creation of Subsidiaries.
Notwithstanding anything to the contrary contained in this Agreement, the
Borrower will not, and will not permit any of its Subsidiaries to, establish,
create or acquire after the Initial Borrowing Date any Subsidiary; provided that
the Borrower and its Subsidiaries shall be permitted to establish, create or, to
the extent permitted by this Agreement, acquire Subsidiaries so long as (i) at
least three Business Days prior written notice thereof (or such lesser notice as
is acceptable to the Administrative Agent) is given to the Administrative Agent,
(ii) the capital stock or other equity interests of each new Domestic Subsidiary
is pledged pursuant to, and to the extent required by, this Agreement and the
Pledge Agreement and the certificates, if any, representing such stock or other
equity interests, together with stock or other powers duly executed in blank,
are delivered to the
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Collateral Agent, (iii) such new Subsidiary (other than a Foreign Subsidiary)
executes a counterpart of the Subsidiary Guaranty, the Pledge Agreement and the
Security Agreement, and (iv) to the extent requested by the Administrative Agent
or the Required Banks, takes all actions required pursuant to Section 7.11. In
addition, each new Subsidiary that is required to execute any Credit Document
shall execute and deliver, or cause to be executed and delivered, all other
relevant documentation of the type described in Section 5 as such new Subsidiary
would have had to deliver if such new Subsidiary were a Credit Party on the
Initial Borrowing Date.
8.17 Limitation on Assets of Subsidiaries. The Borrower will
not permit the assets of the Borrower, InaCom Communications, Inc. and Vanstar
to be less than 98% of all assets of the Borrower and its Subsidiaries (other
than asset interests purchased under the Nesbitt Burns Receivables Purchase
Facility and proceeds thereof or the Morgan Receivables Purchase Facility and
proceeds thereof). The Borrower will not permit InaCom Finance Corp. to have any
assets other than non-material assets having an aggregate value of less than
$10,000. The Borrower will not permit InaCom Funding Corp. to have any assets
other than non-material assets having an aggregate value of less than $250,000
and asset interests purchased under the Morgan Receivables Purchase Facility or
proceeds thereof. The Borrower will not permit Vanstar Finance Co. to have any
assets other than assets purchased by it under the Nesbitt Burns Receivables
Purchase Facility or other non-material assets having an aggregate value of less
than $250.000.
8.18 Subordinated Debt and Trust Preferred Securities. The
Borrower shall not, and shall not permit any of its Subsidiaries to:
(a) subject to clauses (c) and (d) below, make any payment
(whether of principal, interest or otherwise) on any Subordinated Debt,
Trust Preferred Related Subordinated Debt or Trust Preferred Securities
on any date other than the stated, scheduled date for such payment set
forth in the documents and instruments evidencing such Subordinated
Debt, Trust Preferred Related Subordinated Debt or Trust Preferred
Securities;
(b) make any payment on any Subordinated Debt, Trust Preferred
Related Subordinated Debt or Trust Preferred Securities in
contravention or violation of the subordination provisions thereof;
(c) prepay, redeem, purchase or defease any Subordinated Debt,
or make any deposit for any of the foregoing purposes; provided that
(i) the Borrower may convert Subordinated Debt to non-convertible
equity securities of the Borrower and (ii) the Borrower may prepay,
redeem, purchase or defease Subordinated Debt of the type referred to
in clauses (i) and (ii) of the definition thereof in cash, so long as
such prepayment, redemption, purchase or defeasance (i) is for a price
no greater than 100% of the principal of such Subordinated Debt plus
accrued and unpaid interest related thereto and (ii) occurs no later
than May 28, 1999; or
(d) prepay, redeem, purchase or defease any Trust Preferred
Related Subordinated Debt or Trust Preferred Securities, or make any
deposit for any of the foregoing purposes; provided that (i) the
Borrower may convert Trust Preferred Related
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Subordinated Debt or Trust Preferred Securities to non-convertible
equity securities of the Borrower and (ii) the Borrower may refinance,
prepay, redeem, purchase or defease Trust Preferred Related
Subordinated Debt or Trust Preferred Securities with the proceeds of
any subordinated debt or preferred stock issuance, so long as such
subordinated debt or preferred stock has payment terms and other terms,
and is subordinated in form and substance, satisfactory to the Required
Banks; or
(e) enter into any amendment or modification of any
Subordinated Debt, Trust Preferred Related Subordinated Debt or Trust
Preferred Securities.
8.19 Use of Proceeds. The Borrower will not, and will not
permit any of its Subsidiaries to, use any portion of the Loan proceeds or any
Letter of Credit, directly or indirectly, (i) to purchase or carry Margin Stock,
(ii) to repay or otherwise refinance indebtedness of the Borrower or others
incurred to purchase or carry Margin Stock, (iii) to extend credit for the
purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any
security in any transaction that is subject to Section 13 or 14 of the Exchange
Act.
8.20 Contingent Obligations. The Borrower will not, and will
not permit any of its Subsidiaries to, create, incur, assume or suffer to exist
any Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary
course of business;
(b) Interest Rate Protection Agreements and Other Hedging
Agreements in compliance with Section 8.04;
(c) existing Contingent Obligations as of the Initial
Borrowing Date and listed on Part B of Annex V; and
(d) Contingent Obligations in connection with investments made
pursuant to Section 8.05(m) in an aggregate amount not to exceed $15,000,000
outstanding at any time;
(e) Letters of Credit issued under this Agreement; and
(f) Other Contingent Obligations entered into by the Borrower
in respect of any obligations of its Subsidiaries.
8.21 ERISA. The Borrower will not, and will not permit any of
its ERISA Affiliates to: (i) engage in a prohibited transaction or violation of
the fiduciary responsibility rules with respect to any Plan which could
reasonably be expected to result in liability of the Borrower and its
Subsidiaries in an aggregate amount in excess of $5,000,000 or (ii) engage in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
8.22 Accounting Changes. The Borrower will not, and will not
permit any of its Subsidiaries to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP.
8.23 Capital Expenditures. (a) The Borrower will not and will
not permit any of its Subsidiaries to, make any Capital Expenditures except that
the Borrower and its Subsidiaries
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may make Capital Expenditures (other than in connection with Permitted
Acquisitions) so long as the aggregate amount thereof during any fiscal year
does not exceed $90,000,000.
(b) Notwithstanding the foregoing, in the event that the
amount of Capital Expenditures permitted to be made by the Borrower and its
Subsidiaries pursuant to clause (a) above in any fiscal year (before giving
effect to any increase in such permitted expenditure amount pursuant to this
clause (b)) is greater than the amount of such Capital Expenditures made by the
Borrower and its Subsidiaries during such fiscal year, such excess may be
carried forward and utilized to make Capital Expenditures in succeeding fiscal
years, provided that in no event shall the aggregate amount of Capital
Expenditures made by the Borrower and its Subsidiaries pursuant to clause (a)
above and this clause (b) during any fiscal year exceed 110% of the amount set
forth in clause (a) above for such fiscal year.
(c) In addition to the Capital Expenditures permitted above,
the Borrower and its Subsidiaries may make Permitted Acquisitions in accordance
with Section 8.02(a) in an amount not to exceed the amounts permitted thereby.
SECTION 9. Events of Default. Upon the occurrence of any of
the following specified events (each, an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment
when due of any principal of the Loans or (ii) default, and such default shall
continue unremedied for five or more days, in the payment when due of any Unpaid
Drawing (or any interest thereon), any interest on the Loans or any Fees or any
other amounts owing hereunder or under any other Credit Document; or
9.02 Representations, etc. Any representation, warranty or
statement made or deemed made by the Borrower or any other Credit Party herein
or in any other Credit Document or in any statement or certificate delivered
pursuant hereto or thereto shall prove to be untrue in any material respect on
the date as of which such representation, warranty or statement is made or
deemed made; or
9.03 Covenants. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Sections 7.01(f)(x), 7.10 or 8, or (b) default in the due performance or
observance by it of any term, covenant or agreement (other than those referred
to in Section 9.01, 9.02 or clause (a) of this Section 9.03) contained in this
Agreement and such default shall continue unremedied for a period of at least 30
days after written notice to the defaulting party by the Administrative Agent or
the Required Banks; or
9.04 Default Under Other Agreements. (a) The Borrower or any
of its Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations) beyond the period of grace, if any,
provided in the instrument or agreement under which Indebtedness was created or
(ii) default in the observance or performance of any agreement or condition
relating to any such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or
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holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause any such Indebtedness to become due prior to its stated
maturity; or
(b) any Indebtedness (other than the Obligations) of the
Borrower or any of its Subsidiaries shall be declared to be (or shall become)
due and payable, or shall be required to be prepaid other than by a regularly
scheduled required prepayment or as a mandatory prepayment (unless such required
prepayment or mandatory prepayment results from a default thereunder or an event
of the type that constitutes an Event of Default), prior to the stated maturity
thereof; provided, that it shall not constitute an Event of Default pursuant to
clause (a) or (b) of this Section 9.04 unless the principal amount of any one
issue of such Indebtedness, or the aggregate amount of all such Indebtedness
referred to in clauses (a) and (b) above, equals or exceeds $10,000,000 at any
one time; or
(c) there occurs any termination, liquidation, unwind or
similar event or circumstance under the Morgan Receivables Purchase Facility or
the Nesbitt Burns Receivables Purchase Facility which permits any purchaser of
such receivables to cease to purchase such receivables or as a result of which
any purchaser of such receivables has ceased to purchase such receivables; or
9.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy," as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Borrower or any of its Subsidiaries and the petition is not
controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower or any of its Subsidiaries; or the Borrower or any of its
Subsidiaries commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Borrower or any of its Subsidiaries; or there is
commenced against the Borrower or any of its Subsidiaries any such proceeding
which remains undismissed for a period of 60 days; or the Borrower or any of its
Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or the Borrower or
any of its Subsidiaries suffers any appointment of any custodian or the like for
it or any substantial part of its property to continue undischarged or unstayed
for a period of 60 days; or the Borrower or any of its Subsidiaries makes a
general assignment for the benefit of creditors; or any corporate action is
taken by the Borrower or any of its Subsidiaries for the purpose of effecting
any of the foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof under Section 412 of
the Code or Section 302 of ERISA or a waiver of such standard or extension of
any amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66,
.67 or .68 of PBGC Regulation Section 4043 shall be reasonably
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expected to occur with respect to such Plan within the following thirty (30)
days, any Plan which is subject to Title IV of ERISA shall have had or is likely
to have a trustee appointed to administer such Plan, any Plan which is subject
to Title IV of ERISA is, shall have been or is likely to be terminated or to be
the subject of termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, a contribution required to be made with respect to a
Plan or a Foreign Pension Plan has not been timely made, the Borrower or any
Subsidiary of the Borrower or any ERISA Affiliate has incurred or is likely to
incur any liability to or on account of a Plan under Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section
401(a)(29), 4971, or 4975 of the Code or on account of a group health plan (as
defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under
Section 4980B of the Code, or the Borrower or any Subsidiary of the Borrower has
incurred or is likely to incur liabilities pursuant to one or more employee
welfare benefit plans (as defined in Section 3(1) of ERISA) that provide
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or Plans or Foreign Pension Plans; (b) there shall
result from any such event or events the imposition of a lien, the granting of a
security interest, or a liability or a material risk of incurring a liability;
and (c) which lien, security interest or liability, individually, and/or in the
aggregate, in the reasonable opinion of the Required Banks, has had, or could
reasonably be expected to have, a Material Adverse Effect; or
9.07 Security Documents. Any Security Document shall cease to
be in full force and effect, or shall cease to give the Collateral Agent the
Liens, rights, powers and privileges purported to be created thereby in favor of
the Collateral Agent, or (b) any Credit Party shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any such Security Document and such default
shall continue beyond any cure or grace period specifically applicable thereto
pursuant to the terms of such Security Document; or
9.08 Subsidiary Guaranty. The Subsidiary Guaranty or any
provision thereof shall cease to be in full force and effect, or any Subsidiary
Guarantor or any Person acting by or on behalf of such Subsidiary Guarantor
shall deny or disaffirm such Subsidiary Guarantor's obligations under the
Subsidiary Guaranty or any Subsidiary Guarantor shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to the Subsidiary Guaranty and such default shall
continue beyond any cure or grace period specifically applicable thereto
pursuant to the terms of such Subsidiary Guaranty; or
9.09 Judgments. One or more judgments or decrees shall be
entered against the Borrower or any of its Subsidiaries involving a liability
(not paid or not fully covered by insurance) of $5,000,000 or more individually
or $10,000,000 or more in the aggregate for all such judgments and decrees and
all such judgments or decrees shall not have been vacated, discharged or stayed
or bonded pending appeal within 20 days from the entry thereof; or
9.10 Non-Monetary Judgments. Any non-monetary
non-interlocutory judgment, order or decree is entered against the Borrower or
its Subsidiaries which does or could reasonably be expected to have a Material
Adverse Effect, and there shall be any period of 20 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
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9.11 Invalidity of Subordination Provisions. The subordination
provisions of any Subordinated Debt or any agreement or instrument governing the
terms of any Subordinated Debt is or are for any reason revoked or invalidated,
or otherwise cease to be in full force and effect (other than upon an equity
conversion in accordance with the terms of such agreements or instruments), or
the Borrower or any other Person contests in any manner the validity or
enforceability thereof or denies that it has any further liability or obligation
thereunder, or the Indebtedness hereunder is for any reason subordinated or does
not have the priority contemplated by this Agreement or such subordination
provisions; or
9.12 Ownership. A Change of Control Event shall have occurred;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Banks, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of the
Administrative Agent or any Bank to enforce its claims against any Credit Party,
except as otherwise specifically provided for in this Agreement (provided, that
if an Event of Default specified in Section 9.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Administrative Agent as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
Commitment terminated, whereupon the Commitment of each Bank shall forthwith
terminate immediately and any Commitment Fees shall forthwith become due and
payable without any other notice of any kind; (ii) declare the principal of and
any accrued interest in respect of all Loans and all Obligations owing hereunder
(including Unpaid Drawings) to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower; (iii) enforce, as
Collateral Agent (or direct the Collateral Agent to enforce), any or all of the
Liens and security interests created pursuant to the Security Documents; (iv)
terminate any Letter of Credit which may be terminated in accordance with its
terms; (v) direct the Borrower to pay (and the Borrower hereby agrees upon
receipt of such notice, or upon the occurrence of any Event of Default specified
in Section 9.05, it will pay) to the Collateral Agent at the Payment Office such
additional amounts of cash, to be held as security for the Borrower's
reimbursement obligations in respect of Letters of Credit then outstanding, as
is equal to the aggregate Stated Amount of all Letters of Credit then
outstanding; and (vi) apply any cash collateral held pursuant to Section 4.02 in
satisfaction of the Obligations.
SECTION 10. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Additional Security Documents" shall have the meaning
provided in Section 7.11.
"Administrative Agent" shall mean DBNY as administrative agent
for the Banks hereunder and shall include any successor to the Administrative
Agent appointed pursuant to Section 11.10.
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"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, membership interests, by
contract or otherwise.
"Aggregate Unutilized Commitment" shall mean, with respect to
any Bank at any time, the sum of (i) such Bank's Term Loan Commitment at such
time, if any and (ii) such Bank's Unutilized Revolving Loan Commitment at such
time, if any.
"Agreement" shall mean this Credit Agreement, as the same may
be from time to time modified, amended and/or supplemented.
"Annual Cash Investment Limit" shall mean, in any fiscal year
of the Borrower, the sum of (i) (A) $50,000,000 for the fiscal year ending on or
about December 31, 1999 or (B) $100,000,000 for each fiscal year thereafter plus
(ii) an amount equal to the positive difference, if any, of (A) the Annual Cash
Investment Limit for the immediately preceding fiscal year less (B) the amount
of cash, notes and Indebtedness paid or payable in connection with a Permitted
Acquisition made during the immediately preceding fiscal year pursuant to
Section 8.02(a); provided, that in no event shall the Annual Cash Investment
Limit for any fiscal year in clause (B) above exceed $125,000,000. The Annual
Cash Investment Limit shall be computed exclusive of the non-convertible common
equity of the Borrower received by or on behalf of the seller(s) in such
Permitted Acquisition.
"Applicable Margin" shall mean, with respect to Term Loans,
Revolving Loans, Letter of Credit Fees and Commitment Fees, the applicable
percentage per annum set forth below based on the Pricing Level ("Pricing
Level") then in effect:
Revolving Loans and Term Loans
<TABLE>
<CAPTION>
Eurodollar Base Letter
Rate Rate of Commitment
Pricing Level Loans Loans Credit Fees Fee
<S> <C> <C> <C> <C>
Level I .875% 0.0 .875% .30%
Level II 1.50% 0.0 1.50% .375%
Level III 2.00% 0.0 2.00% .50%
Level IV 2.50% 1.00% 2.50% .50%
Level V 3.00% 1.50% 3.00% .625%
Level VI 3.75% 1.50% 3.75% .875%
</TABLE>
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For purposes of the foregoing table:
"Pricing Level I" shall mean that both the S&P Rating and the
Moody's Rating are BBB- and Baa3, respectively, or higher.
"Pricing Level II" shall mean that both the S&P Rating and the
Moody's Rating are BB+ and Ba1, respectively, or higher, and either the
S&P Rating or the Moody's Rating is lower than BBB- or Baa3,
respectively.
"Pricing Level III" shall mean that both the S&P Rating and
the Moody's Rating are BB and Ba2, respectively, or higher, and either
the S&P Rating or the Moody's Rating is lower than BB+ or Ba1,
respectively.
"Pricing Level IV" shall mean that both the S&P Rating and the
Moody's Rating are BB- and Ba3 respectively, or higher, and either the
S&P Rating or the Moody's Rating is lower than BB or Ba2, respectively.
"Pricing Level V" shall mean that both the S&P Rating and the
Moody's Rating are B+ and B1, respectively, or higher, and either the
S&P Rating or the Moody's Rating is lower than BB- or Ba3,
respectively.
"Pricing Level VI" shall mean that either the S&P Rating or
the Moody's Rating is B or B2, as applicable, or lower, or that no
current S&P Rating or Moody's Rating exists.
"S&P Rating" shall mean the then current rating (if any) by
Standard & Poor's Rating Services Group ("S&P"), a division of The
McGraw Hill Companies, Inc. of the long-term indebtedness of the
Borrower (i.e., the actual or implied corporate rating for long-term
unsecured debt). "Moody's Rating" means the then current rating (if
any) by Moody's Investor Service ("Moody's") of the long-term
indebtedness of the Borrower (Moody's and S&P are collectively referred
to as the "Rating Agencies"). The Applicable Margin will be adjusted
based on the S&P Rating and the Moody's Rating as and when changed. If
either Rating Agency ceases to provide ratings services with respect to
the Borrower, then the rating provided by the remaining Rating Agency
shall be determinative of the appropriate Pricing Level; provided that
if both Rating Agencies cease to provide ratings for the Borrower's
long-term indebtedness, Pricing Level VI shall apply.
"Adjusted Certificate of Deposit Rate" shall mean, on any day,
the sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by
dividing (x) the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market as
published in the most recent Federal Reserve System publication entitled "Select
Interest Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Administrative Agent on the basis of quotations
for such certificates received by it from three
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certificate of deposit dealers in New York of recognized standing or, if such
quotations are unavailable, then on the basis of other sources reasonably
selected by the Administrative Agent, by (y) a percentage equal to 100% minus
the stated maximum rate of all reserve requirements as specified in Regulation D
applicable on such day to a three-month certificate of deposit of a member bank
of the Federal Reserve System in excess of $100,000 (including, without
limitation, any marginal, emergency, supplemental, special or other reserves),
plus (2) the then daily net annual assessment rate as estimated by the
Administrative Agent for determining the current annual assessment payable by
the Administrative Agent to the Federal Deposit Insurance Corporation for
insuring three-month certificates of deposit.
"Assignment and Assumption Agreement" shall mean the
Assignment and Assumption Agreement substantially in the form of Exhibit H
(appropriately completed).
"Authorized Officer" shall mean the Chief Executive Officer,
President, Chief Financial Officer, Treasurer, Controller or Secretary of the
Borrower or any other senior officer of the Borrower designated as such in
writing to the Administrative Agent by the Borrower, in each case to the extent
reasonably acceptable to the Administrative Agent.
"Bank" shall mean each financial institution listed on Annex
I, as well as any person that becomes a "Bank" hereunder pursuant to Section
1.13 or 12.04(b).
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of an RL Bank to make available its portion of any Borrowing or to
fund its portion of any unreimbursed payment under Section 2.04(c) or (ii) an RL
Bank having notified the Administrative Agent and/or the Borrower that it does
not intend to comply with the obligations under Section 1.01(A)(b) or 2.04(c),
in the case of either clause (i) or (ii) above as a result of the appointment of
a receiver or conservator with respect to such Bank at the direction or request
of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in
Section 9.05.
"Base Rate" at any time shall mean the highest of (x) the rate
which is 1/2 of 1% in excess of the Federal Funds Rate, (y) the rate which is 1%
in excess of the Adjusted Certificate of Deposit Rate and (z) the Prime Lending
Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the
rates provided in Section 1.08(a).
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrowing" shall mean the incurrence of one Type of Loan
pursuant to a single Facility by the Borrower from all of the Banks having
Commitments with respect to such Facility on a pro rata basis on a given date
(or resulting from conversions on a given date), having in the case of
Eurodollar Loans the same Interest Period; provided, that Base Rate Loans
incurred pursuant to Section 1.10(b) shall be considered part of any related
Borrowing of Eurodollar Loans.
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"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person,
without duplication, all expenditures by such Person which should be capitalized
in accordance with GAAP, including, without duplication, all such expenditures
with respect to fixed or capital assets (including, without limitation,
expenditures for maintenance and repairs which should be capitalized in
accordance with GAAP), and the amount of all Capitalized Lease Obligations
incurred by such Person.
"Capital Lease," as applied to any Person, shall mean any
lease of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"Capitalized Lease Obligations" shall mean all obligations
under Capital Leases of the Borrower or any of its Subsidiaries in each case
taken at the amount thereof accounted for as liabilities in accordance with
GAAP.
"Cash Equivalents" shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided, that the full faith and credit of
the United States of America is pledged in support thereof) having maturities of
not more than six months from the date of acquisition, (ii) U.S. dollar
denominated time deposits, certificates of deposit and bankers acceptances of
(x) any Bank or (y) any bank whose short-term commercial paper rating from S&P
is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank or bank, an "Approved Bank"), in each case
with maturities of not more than six months from the date of acquisition, (iii)
commercial paper issued by any Approved Bank or by the parent company of any
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, or guaranteed by any industrial company with a long term unsecured debt
rating of at least A or A2, or the equivalent of each thereof, from S&P or
Moody's, as the case may be, and in each case maturing within six months after
the date of acquisition, (iv) marketable direct obligations issued by any state
of the United States of America or any political subdivision of any such state
or any public instrumentality thereof maturing within six months from the date
of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's and (v) investments in
money market funds substantially all the assets of which are comprised of
securities of the types described in clauses (i) through (iv) above.
"Certificated Securities" shall have the meaning provided in
the Pledge Agreement.
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"Change of Control Event" shall mean (i) the acquisition by
any Person, entity or "group," within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act (excluding for this purpose, the Borrower or its
Subsidiaries, or any employee benefit plan of the Borrower or its Subsidiaries
which acquires beneficial ownership of voting securities of the Borrower) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 30% or more of either the then outstanding shares of common
stock or the combined voting power of the Borrower's then outstanding voting
securities entitled to vote generally in the election of directors; or (ii)
individuals who, as of the Initial Borrowing Date, constitute the Board of
Directors (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors, provided that any
Person becoming a director subsequent to the Initial Borrowing Date whose
election, or nomination for election by the Borrower's stockholders, was
approved by a vote of at least a majority of the directors then compromising the
Incumbent Board shall be considered as though such Person were a member of the
Incumbent Board; or (iii) approval by the stockholders of the Borrower of a
reorganization, merger or consolidation, in each case, with respect to which
Persons who were the stockholders of the Borrower immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than 30% of the combined voting power entitled to vote generally in the election
of directors of the reorganized, merged or consolidated Borrower's then
outstanding voting securities; or (iv) a liquidation or dissolution of the
Borrower (other than pursuant to the Bankruptcy Code) or the conveyance,
transfer or leasing of all or substantially all of the assets of the Borrower.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code amendatory
thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in
each of the Security Documents and all cash and Cash Equivalents delivered as
collateral pursuant to Section 4.02 or Section 9 hereof.
"Collateral Agent" shall mean the Administrative Agent acting
as collateral agent for the Secured Creditors pursuant to the Security
Documents.
"Commitment" shall mean, with respect to each Bank, such
Bank's Term Loan Commitment and Revolving Loan Commitment.
"Commitment Fee" shall have the meaning provided in
Section 3.01(a).
"Consolidated Current Assets" shall mean, at any time, the
current assets which are or should be carried on the balance sheet of the
Borrower and its Subsidiaries at such time determined in accordance with GAAP on
a consolidated basis.
"Consolidated Current Liabilities" shall mean, at any time,
the current liabilities which are or should be carried on the balance sheet of
the Borrower and its Subsidiaries determined in accordance with GAAP on a
consolidated basis.
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"Contingent Obligations" shall mean as to any Person, any
direct or indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease, dividend, letter
of credit or other obligation (the "primary obligations") of another Person (the
"primary obligor"), including any obligation of that Person (i) to purchase,
repurchase or otherwise acquire such primary obligations or any security
therefor, (ii) to advance or provide funds for the payment or discharge of any
such primary obligation, or to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (iv)
otherwise to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation"); (b) with
respect any Surety Instrument (other than any Letter of Credit under this
Agreement) issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; (c) to purchase any
materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered or (d) in respect of any Interest Rate Protection
Agreements or Other Hedging Agreements. The amount of any Contingent Obligation
shall, in the case of Guaranty Obligations, be deemed equal to the stated or
determinable amount of the primary obligation in respect of which such Guaranty
Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof, and in the case of other
Contingent Obligations (other than in respect of Interest Rate Protection
Agreements or Other Hedging Agreements) shall be equal to the maximum reasonably
anticipated liability in respect thereof and, in the case of Contingent
Obligations in respect of Interest Rate Protection Agreements or Other Hedging
Agreements, shall be equal to the amount payable if such Agreements were
terminated at such time (giving effect to any legally enforceable netting
agreement relating thereto).
"Convertible Preferred Securities Purchase Agreement" shall
mean the Purchase Agreement, dated September 26, 1996, among Vanstar, Vanstar
Financing Trust and the Initial Purchasers named therein.
"Credit Documents" shall mean this Agreement, the Notes, the
Subsidiary Guaranty and each Security Document.
"Credit Event" shall mean the making of a Loan or the issuance
of a Letter of Credit.
"Credit Party" shall mean the Borrower and each Subsidiary
Guarantor.
"Current Ratio" shall mean, at any time, the ratio of (a) the
Consolidated Current Assets of the Borrower and its Subsidiaries to (b) the
Consolidated Current Liabilities of the Borrower and its Subsidiaries at such
time.
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"DBNY" shall have the meaning provided in the first paragraph
of this Agreement, and any successor corporation thereto by merger,
consolidation or otherwise.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a
Bank Default is in effect.
"DFS Inventory Finance Facility" shall mean the agreement for
wholesale financing dated as of December 24, 1998 between the Borrower and
Deutsche Financial Services Corporation, together with all the documents,
instruments and agreements related thereto, as the same may be amended,
supplemented or modified from time to time.
"Dividends" shall have the meaning provided in Section 8.06.
"Domestic Subsidiary" shall mean each Subsidiary of the
Borrower which is not a Foreign Subsidiary.
"EBITDA" shall mean, with respect to the Borrower and its
Subsidiaries for any applicable period, Net Income for such period, plus, to the
extent deducted in determining Net Income for such period, the aggregate amount
of (i) Interest Expense, (ii) federal, state, local and foreign income taxes,
(iii) depletion, depreciation and amortization of tangible and intangible assets
and (iv) non-recurring charges taken in the fiscal year ending on or about
December 31, 1999 in an amount not greater than $197,000,000 and relating to the
Vanstar Merger.
"Effective Amount" shall mean (i) with respect to any Loans on
any date, the aggregate outstanding principal amount thereof after giving effect
to any Borrowings and prepayments or repayments of Loans occurring on such date
and (ii) with respect to any Letter of Credit Outstandings on any date, the
amount of such Letter of Credit Outstandings on such date after giving effect to
any of Letter of Credit issuances occurring on such date and any other changes
in the aggregate amount of the Letter of Credit Outstandings as of such date,
including as a result of any reimbursements of outstanding unpaid drawings under
any Letters of Credit or any reductions in the maximum amount available for
drawing under Letters of Credit taking effect on such date.
"Effective Date" shall have the meaning provided in
Section 12.10.
"Eligible Transferee" shall mean and include a commercial
bank, investment company, financial institution, any fund that invests in loans
or any other "accredited investor" (as defined in Regulation D of the Securities
Act).
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any violation (or alleged violation) by the Borrower or any of its
Subsidiaries under any Environmental Law (hereafter "Claims") or any permit
issued under any such law, including, without limitation, (a) any and all Claims
by
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governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any federal, state or local
statute, law, rule, regulation, ordinance, code, policy or rule of common law
now or hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment (for purposes of this definition
(collectively, "Laws")), relating to the environment or Hazardous Materials or
health and safety to the extent health and safety issues arise under the
Occupational Safety and Health Act of 1970, as amended, or any such similar
Laws.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder. Section references to ERISA are to ERISA as in effect
at the date of this Agreement and any subsequent provisions of ERISA amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower or any Subsidiary of the
Borrower would be deemed to be a "single employer" (i) within the meaning of
Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the Borrower
or any Subsidiary of the Borrower being or having been a general partner of such
person.
"Eurodollar Loan" shall mean each Loan bearing interest at the
rates provided in Section 1.08(b).
"Eurodollar Rate" shall mean, with respect to each Interest
Period for a Eurodollar Loan, a rate per annum equal to the (i) rate for U.S.
dollar deposits with maturities comparable to such Interest Period which appears
on Telerate Page 3750 as of 11:00 a.m., London time, two (2) Business Days prior
to the commencement of such Interest Period, provided, however, that if such
rate does not appear on Telerate Page 3750, the "Eurodollar Rate" applicable to
a particular Interest Period shall mean a rate per annum equal to the rate at
which U.S. dollar deposits in an amount approximately equal to the principal
amount of such Eurodollar Loan of Deutsche Bank, and with maturities comparable
to the last day of the Interest Period with respect to which such Eurodollar
Rate is applicable, are offered in immediately available funds in the London
interbank market to the London office of Deutsche Bank AG by leading banks in
the Eurodollar market at 11:00 a.m., London time, two (2) Business Days prior to
the commencement of the Interest Period to which such Eurodollar Rate is
applicable, divided by (ii) a percentage equal to 100% minus the then stated
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) applicable to any
member Bank of the Federal Reserve System in respect of Eurocurrency liabilities
as defined in Regulation D (or any successor category of liabilities under
Regulation D).
"Event of Default" shall have the meaning provided in
Section 9.
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"Exchange Act" shall mean the Securities Exchange Act of 1934,
and the regulations promulgated thereunder.
"Existing Credit Facility" shall mean the Credit Agreement,
dated as of April 23, 1998 among the Borrower, DBNY, as Agent, and various
lenders, as amended to and including the Effective Date.
"Existing Indebtedness" shall have the meaning provided in
Section 6.20.
"Existing Indebtedness Agreements" shall have the meaning
provided in Section 5.12(a).
"Facility" shall mean any of the credit facilities established
under this Agreement, i.e., the Term Loan Facility or the Revolving Loan
Facility.
"Facing Fee" shall have the meaning provided in
Section 3.01(c).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to 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 New York, or, 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 the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred
to in, Section 3.01.
"Foreign Cash Equivalents" shall mean certificates of deposit
or bankers acceptances of any Bank organized under the laws of Canada, Japan or
any country that is a member of the European Economic Community whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof, in each case with
maturities of not more than six months from the date of acquisition.
"Foreign Pension Plan" shall mean any plan, fund (including,
without limitation, any superannuation fund) or other similar program
established or maintained outside the United States of America by the Borrower
or any one or more of its Subsidiaries primarily for the benefit of employees of
the Borrower or such Subsidiaries residing outside the United States of America,
which plan, fund or other similar program provides, or results in, retirement
income, a deferral of income in contemplation of retirement or payments to be
made upon termination of employment, and which plan is not subject to ERISA or
the Code.
"Foreign Subsidiary" shall mean each Subsidiary of the
Borrower that is incorporated or organized under the laws of any jurisdiction
other than the United States of America, any State thereof, or any territory
thereof.
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"Funded Debt" of a Person shall mean the sum of (i)
"Indebtedness" of such Person of the types described in clauses (a), (b), (c)
and (f) of the definition thereof, together with all Indebtedness of the type
described in such clauses secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness and (ii) all Trust Preferred Related Subordinated
Debt.
"Funded Senior Debt" of a Person shall mean all Funded Debt of
such Person other than (a) Subordinated Debt, (b) Trust Preferred Related
Subordinated Debt, and (c) Indebtedness in respect of the IBM Inventory Finance
Facility, the DFS Inventory Finance Facility, the Morgan Receivables Purchase
Facility and the Nesbitt Burns Receivables Purchase Facility.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time; it being understood
and agreed that determinations in accordance with GAAP for purposes of Section
8, including defined terms as used therein, are subject (to the extent provided
therein) to Section 12.07(a).
"Guaranty Obligation" shall have the meaning provided in the
definition of Contingent Obligation.
"Hazardous Materials" shall mean (a) any petrochemical or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; and (b) any chemicals, materials or substances defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "restricted hazardous materials," "extremely hazardous
wastes," "restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect.
"HP" shall have the meaning provided in Section 6.25.
"HP-Lockheed Property" shall have the meaning provided in
Section 6.25.
"HP Transaction" shall have the meaning provided in
Section 6.25.
"HP UCC Filings" shall have the meaning provided in
Section 6.25.
"HW" shall have the meaning provided in Section 6.25.
"IBM Inventory Finance Facility" means the Agreement for
Inventory Financing, dated as of April 23, 1998, between the Borrower and IBM
Credit Corporation, together with all documents, instruments and agreements
related thereto, as the same may be amended, supplemented or modified from time
to time.
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"IC/IFC Purchase Agreement" shall mean the Purchase Agreement,
dated as of July 1, 1998, among the Borrower, as the seller, and InaCom Funding
Corp., as the buyer, together with all documents, instruments, and agreements
related thereto, as the same may be amended, supplemented or modified from time
to time.
"InaCom Acquisition" shall mean InaCom Acquisition, Inc., a
Delaware corporation and a Wholly-Owned Subsidiary of the Borrower formed for
the purpose of consummating the Vanstar Merger.
"Indebtedness" of any Person shall mean, without duplication,
(a) all indebtedness for borrowed money; (b) all obligations issued, undertaken
or assumed as the deferred purchase price of property or services (other than
trade payables entered into in the ordinary course of business on ordinary
terms); (c) all non-contingent reimbursement or payment obligations with respect
to Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to the
repossession or sale of such property); (f) all obligations with respect to
capital leases; (g) all indebtedness created or arising under any Interest
Protection Agreement and Other Hedging Agreement; (h) all indebtedness referred
to in clauses (a) through (g) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness; and (i) all Guaranty Obligations in respect of
indebtedness or obligations of others if the kinds referred to in clauses (a)
through (g) above. Indebtedness shall include Morgan Receivables and Nesbitt
Burns Receivables sold pursuant to the Morgan Receivables Purchase Facility and
Nesbitt Burns Receivable Purchase Facility, respectively, to the extent that
indemnification, recourse or repurchase obligations exists under the Morgan
Receivables Purchase Facility or the Nesbitt Burns Receivables Purchase
Facility, as the case may be. For all purposes of this Agreement, the
Indebtedness of any Person shall include all recourse Indebtedness of any
partnership or any joint venture or limited liability company in which such
Person is a general partner or a joint venture or a member.
"Indemnified Person" shall have the meaning provided in
Section 12.01.
"Initial Borrowing Date" shall mean the date upon which the
Term Loans are initially incurred hereunder.
"Intercompany Note" shall mean a promissory note, in the form
of Exhibit I, evidencing intercompany Indebtedness under Section 8.05.
"Interest Expense" shall mean, for any applicable period, the
aggregate consolidated interest expense (both cash and non-cash and determined
without regard to original issues discount) of the Borrower and its Subsidiaries
for such period, as determined in accordance with GAAP, including, to the extent
allocable to interest expense in accordance with
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GAAP, (i) all other fees paid or owed with respect to the issuance or
maintenance of Contingent Obligations (including letters of credit of the
Borrower and its Subsidiaries), (ii) net costs or benefits payable under
Interest Rate Protection Agreements or Other Hedging Agreements of the Borrower
and its Subsidiaries and (iii) the portion of any payments made in respect of
obligations in respect of Capitalized Leases of the Borrower and its
Subsidiaries allocable to interest expense, but excluding interest paid to the
Vanstar Financing Trust the proceeds of which are used by such Person to pay
regularly accruing cash dividends on the Trust Preferred Securities.
"Interest Period," with respect to any Eurodollar Loan, shall
mean the interest period applicable thereto, as determined pursuant to Section
1.09.
"Interest Rate Protection Agreement" shall mean any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedging agreement or other similar agreement or
arrangement.
"Inventory Finance Facilities" shall have the meaning provided
in Section 5.12(b).
"Joint Venture" shall mean a corporation, partnership, limited
liability company, joint venture or other similar legal arrangement (whether
created by contract or conducted through a separate legal entity) now or
hereafter formed by the Borrower or any of its Subsidiaries with another Person
in order to conduct a common venture or enterprise with such Person.
"L/C Supportable Indebtedness" shall mean (i) obligations of
the Borrower or its Subsidiaries incurred in the ordinary course of business
with respect to insurance obligations and workers' compensation, surety bonds
and other similar statutory obligations and (ii) such other obligations (other
than Subordinated Debt) of the Borrower or any of its Subsidiaries as are
reasonably acceptable to the Administrative Agent and the Letter of Credit
Issuer and otherwise permitted to exist pursuant to the terms of this Agreement.
"Leasehold" of any Person shall mean all of the right, title
and interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Letter of Credit Fee" shall have the meaning provided in
Section 3.01(b).
"Letter of Credit Issuer" shall mean DBNY.
"Letter of Credit Outstandings" shall mean, at any time, the
sum of, without duplication, (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in
respect of all Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in
Section 2.02(a).
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"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any similar
recording or notice statute, and any lease having substantially the same effect
as the foregoing).
"Loan" shall mean each and every Loan made by any Bank
hereunder, including Term Loans and Revolving Loans.
"Lockheed" shall have the meaning provided in Section 6.23.
"Margin Stock" shall have the meaning provided in
Regulation U.
"Material Adverse Effect" shall mean a material adverse change
in, or a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Borrower or the Borrower
and its Subsidiaries taken as a whole (b) a material impairment of the ability
of the Borrower or any Subsidiary to perform any obligation under any Credit
Document necessary to avoid any Event of Default; or (c) a material adverse
effect upon (i) the legality, validity, binding effect or enforceability against
the Borrower or any Subsidiary of any Credit Document, or (ii) the perfection or
priority of a Lien granted under any of the Security Documents.
"Maturity Date" with respect to any Facility shall mean either
the Term Loan Maturity Date or the Revolving Loan Maturity Date, as the case may
be.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans,
$500,000 or any multiple of $100,000 in excess thereof and (ii) for Eurodollar
Loans, $5,000,000 or any multiple of $1,000,000 in excess thereof.
"Minority Investment" shall mean any investment of cash, notes
and/or Indebtedness in a Person other than any investment constituting a
Permitted Acquisition or a Joint Venture.
"Moody's" shall have the meaning provided in the definition of
"Applicable Margin."
"Morgan Receivables" shall mean the "Purchased Interest" in
"Receivables" under the Morgan Receivables Purchase Facility, together with the
"Related Security" and "Collections" in connection therewith, as each is defined
in the Morgan Receivables Purchase Facility, as in effect on the Initial
Borrowing Date.
"Morgan Receivables Purchase Facility" shall mean the
Receivables Purchase Agreement, dated as of July 1, 1998, among InaCom Funding
Corp., as seller, InaCom Corp., as servicer, Delaware Funding Corporation, as
buyer, and Morgan Guaranty Trust Company of New York, as administrative agent,
together with all documents, instruments and agreements related thereto
(including the IC/IFC Purchase Agreement), as the same may be amended,
supplemented or modified from time to time.
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"NAIC" shall have the meaning provided in Section 1.10(c).
"Nesbitt Burns Receivables" means the "Purchased Interest" in
"Receivables" under the Nesbitt Burns Receivables Purchase Facility, together
with the "Related Security" and "Collections" in connection therewith as each is
defined in the Nesbitt Burns Receivables Purchase Facility, as in effect on the
Initial Borrowing Date.
"Nesbitt Burns Receivables Purchase Facility" means the
Receivables Purchase Agreement, dated as of December 20, 1996, among Vanstar
Finance Co., as seller, Vanstar Corporation, as servicer, Pooled Accounts
Receivable Capital Corporation, as Purchaser, and Nesbitt Burns Securities,
Inc., as agent, together with all documents, instruments and agreements related
thereto, as the same may be amended, supplemented or modified from time to time.
"Net Income" shall mean, for any applicable period, the
aggregate of all amounts which, in accordance with GAAP, would be included as
net income (or net loss (including any extraordinary losses)) on a consolidated
statement of income of the Borrower and its Subsidiaries for such period;
provided, however, that Net Income shall exclude (i) the effect of any
extraordinary or other non-recurring non-cash gains outside the ordinary course
of business and (ii) any write-up in the value of any asset (to the extent such
write-up exceeds any write-down taken in connection with the same transaction or
event which gave rise to such write-up).
"Net Issuance Proceeds" shall mean, as to any issuance of debt
or equity by any Person, cash proceeds and non-cash proceeds received or
receivable by such Person in connection therewith, net of reasonable
out-of-pocket costs and expenses paid or incurred in connection therewith in
favor of any Person not an Affiliate of such Person, such costs and expenses not
to exceed 5% of the gross proceeds of such issuance.
"Net Worth" shall mean, as of any date of determination, total
consolidated assets of the Borrower as of such date minus total consolidated
liabilities of the Borrower as of such date and minus the carrying value on a
consolidated basis of (a) all amortizing debt issuance carried as an asset, (b)
all reserves carried and not deducted from assets or not reflected as a
liability, and (c) cash held in a sinking or other analogous fund established
for the purpose of redemption, retirement or repayment of any capital stock or
any Indebtedness or Contingent Obligation, if no offsetting liability exists
with respect to such Indebtedness or Contingent Obligation on the balance sheet
of the Borrower.
"Non-Defaulting Bank" shall mean each Bank other than a
Defaulting Bank.
"Note" shall mean each Term Note and each Revolving Note.
"Notice of Borrowing" shall have the meaning provided in
Section 1.03(a).
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Administrative
Agent located at 31 West 52nd Street, New York, New York 10019, Attention: John
Quinn or such other office as the Administrative Agent may designate to the
Borrower and the Banks from time to time.
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"Obligations" shall mean all advances, debts, liabilities,
obligations, covenants and duties arising under any Credit Document owing by the
Borrower to any Bank, the Letter of Credit Issuer, the Administrative Agent, the
Collateral Agent or any Indemnified Person, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising.
"Other Hedging Agreements" shall mean any foreign exchange
contracts, currency swap agreements or other similar agreements or arrangements
designed to protect against fluctuations in currency values.
"Participant" shall have the meaning provided in
Section 2.04(a).
"Payment Office" shall mean the office of the Administrative
Agent located at 31 West 52nd Street, New York, New York 10019 or such other
office as the Administrative Agent may designate to the Borrower and the Banks
from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" shall have the meaning provided in
Section 8.02(a).
"Permitted Liens" shall have the meaning provided in
Section 8.03.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, limited liability company, association, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2)
of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower or a Subsidiary of the Borrower or an
ERISA Affiliate and each such plan for the five year period immediately
following the latest date on which the Borrower or a Subsidiary of the Borrower
or an ERISA Affiliate maintained, contributed to or had an obligation to
contribute to such plan.
"Pledge Agreement" shall have the meaning provided in
Section 5.10(a).
"Prime Lending Rate" shall mean the rate announced by DBNY
from time to time as its prime lending rate for commercial loans within the
United States (but is not intended to be the lowest rate of interest) and
charged by DBNY in connection with extensions of credit to debtors. Any change
in the prime lending rate announced by Deutsche Bank shall take effect at the
opening of business on the day specified in the public announcement of such
change.
"Projections" shall have the meaning provided in Section 5.15.
"Quarterly Payment Date" shall mean June 30, September 30,
December 31 and March 31.
"Real Property" of any Person shall mean all of the right,
title and interest of such Person in and to land, improvements and fixtures,
including Leaseholds.
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"Receivables Purchase Facilities" shall have the meaning
provided in Section 5.12(c).
"Register" shall have the meaning provided in Section 7.13.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
"Release" shall mean any disposing, discharging, injecting,
spilling, pumping, leaking, leaching, dumping, emitting, escaping, emptying,
seeping, placing, pouring and the like, into or upon any land or water or air,
or otherwise entering into the environment.
"Replaced Bank" shall have the meaning provided in
Section 1.13.
"Replacement Bank" shall have the meaning provided in
Section 1.13.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA
other than those events as to which the 30-day notice period is waived under
subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.
"Required Banks" shall mean Non-Defaulting Banks the sum of
whose outstanding Term Loans and Revolving Loan Commitments (or, if after the
Total Revolving Loan Commitment has been terminated, outstanding Revolving Loans
and RL Percentages of Letter of Credit Outstandings) constitute greater than 50%
of the sum of (i) the total outstanding Term Loans of Non-Defaulting Banks and
(ii) the Total Revolving Loan Commitment less the aggregate Revolving Loan
Commitments of Defaulting Banks (or, if after the Total Revolving Loan
Commitment has been terminated, the total outstanding Revolving Loans of
Non-Defaulting Banks and the aggregate RL Percentages of all Non-Defaulting
Banks of the total Letter of Credit Outstandings at such time).
"Returns" shall have the meaning provided in Section 6.19.
"Revolving Loan" shall have the meaning provided in
Section 1.01(A)(b).
"Revolving Loan Commitment" shall mean, with respect to each
Bank, the amount set forth opposite such Bank's name in Annex I directly below
the column entitled "Revolving Loan Commitment," as the same may be reduced from
time to time pursuant to Section 3.02, 3.03 and/or 9 or otherwise modified
pursuant to Section 1.13 and/or 12.04(b).
"Revolving Loan Facility" shall mean the Facility evidenced by
the Total Revolving Loan Commitment.
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"Revolving Loan Maturity Date" shall mean March 31, 2003.
"Revolving Note" shall have the meaning provided in
Section 1.05(a).
"RL Bank" shall mean, at any time, each Bank with a Revolving
Loan Commitment or with outstanding Revolving Loans.
"RL Percentage" shall mean at any time for each RL Bank, the
percentage obtained by dividing such RL Bank's Revolving Loan Commitment by the
Total Revolving Loan Commitment; provided, that if the Total Revolving Loan
Commitment has been terminated, the RL Percentage of each RL Bank shall be
determined by dividing such RL Bank's Revolving Loan Commitment immediately
prior to such termination by the Total Revolving Loan Commitment immediately
prior to such termination.
"S&P" shall have the meaning provided in the definition of
Applicable Margin.
"Scheduled Repayment" shall have the meaning provided in
Section 4.02(A)(b).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning
provided in Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning provided in the
respective Security Documents.
"Security Agreement" shall have the meaning provided in
Section 5.10(b).
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Security Documents" shall mean and include the Security
Agreement, the Pledge Agreement, each Additional Security Document, if any and
each other document or instrument entered into pursuant to Sections 5.10 and
7.11, if any, in each case as and when executed and delivered in accordance with
the terms of this Agreement and as the same may be amended, modified or
supplemented from time to time in accordance with the terms thereof and hereof.
"Stated Amount" of each Letter of Credit shall mean at any
time the maximum amount available to be drawn thereunder (regardless of whether
any conditions for drawing could then be met).
"Subordinated Debt" shall mean (i) the 4.5% convertible
subordinated debentures issued by the Borrower in the original principal amount
of $86,250,000, due November 1, 2004, to the extent governed by the relevant
documents as
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in effect on the Initial Borrowing Date, (ii) the 6.0% convertible subordinated
debentures issued by the Borrower in the original principal amount of
$55,250,000, due June 15, 2006 to the extent governed by the relevant documents
as in effect on the Initial Borrowing Date, and (iii) any other Indebtedness of
the Borrower having payment terms and other terms, and subordinated in form and
substance, satisfactory to the Required Banks.
"Subsidiary" of any Person shall mean and include (i) any
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 by such Person directly
or indirectly through Subsidiaries and (ii) any partnership, association, joint
venture, limited liability company or other entity in which such Person directly
or indirectly through Subsidiaries, has more than a 50% equity interest at the
time.
"Subsidiary Guarantor" shall mean each Subsidiary of the
Borrower (other than a Foreign Subsidiary and other than Vanstar Finance Co.,
Vanstar Financing Trust and InaCom Funding Corp.).
"Subsidiary Guaranty" shall have the meaning provided in
Section 5.11.
"Surety Instruments" shall mean all letters of credit
(including standby and commercial), bankers' acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Telerate Page 3750" shall mean the display designated as
"Page 3750" on the Telerate Service (or other such page as may replace Page 3750
on that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Bankers' Association Interest Settlement Rates for U.S. Dollar
deposits).
"Term Loan" shall have the meaning provided in
Section 1.01(A)(a).
"Term Loan Maturity Date" shall mean March 31, 2003.
"Term Loan Commitment" shall mean, with respect to each Bank,
the amount set forth opposite such Bank's name in Annex I directly below the
column entitled "Term Loan Commitment," as the same may be terminated pursuant
to Section 3.03 and/or 9.
"Term Loan Facility" shall mean the Facility evidenced by the
Total Term Loan Commitment.
"Term Note" shall have the meaning provided in
Section 1.05(a).
"Test Period" shall mean each period of four consecutive
fiscal quarters of the Borrower (or, if shorter, the period beginning on the
first day of the fiscal quarter ending on or about March 31, 1999 and ending on
the last day of the then most recently ended fiscal quarter of the Borrower), in
each case taken as one accounting period; provided that for purposes of
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calculating compliance with Section 8.11(i) for the Test Period ending on or
about June 30, 1999, EBITDA shall be EBITDA as calculated for such Test Period
multiplied by 2.00 and (ii) for the Test Period ending on or about September 30,
1999, EBITDA shall be EBITDA as calculated for such Test Period multiplied by
1.33.
"Total Commitment" shall mean the sum of the Total Term Loan
Commitment and the Total Revolving Loan Commitment.
"Total Revolving Loan Commitment" shall mean the sum of the
Revolving Loan Commitments of each of the RL Banks.
"Total Term Loan Commitment" shall mean the sum of the Term
Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at
any time, (i) the Total Revolving Loan Commitment at such time less (ii) the sum
of the aggregate principal amount of all Revolving Loans outstanding at such
time plus the Letter of Credit Outstandings at such time.
"Trust Preferred Related Subordinated Debt" shall mean the
6-3/4% convertible subordinated debentures issued by Vanstar in the original
principal amount of $180,412,350 due 2016 pursuant to the Indenture between
Vanstar and Wilmington Trust Company, dated as of October 2, 1996.
"Trust Preferred Securities" shall mean the Convertible
Preferred Securities (as defined in the Convertible Preferred Securities
Purchase Agreement) issued and sold by Vanstar Financing Trust.
"Type" shall mean any type of Loan determined with respect to
the interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar
Loan.
"UCC" shall mean the Uniform Commercial Code as in effect from
time to time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan year, determined
in accordance with actuarial assumptions at such time consistent with Statement
of Financial Accounting Standards No. 87, exceeds the fair market value of the
assets allocable thereto.
"Unpaid Drawing" shall have the meaning provided in
Section 2.03(a).
"Unutilized Revolving Loan Commitment" with respect to any
Bank at any time shall mean such Bank's Revolving Loan Commitment at such time
less the sum of (x) the aggregate outstanding principal amount of all Revolving
Loans made by such Bank and (y) such Bank's RL Percentage of the Letter of
Credit Outstandings at such time.
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"U.S. Dollars" and the sign "$" shall each mean freely
transferable lawful money of the United States of America.
"Vanstar" shall mean Vanstar Corporation, a Delaware
corporation.
"Vanstar Merger" shall mean the previous merger of Vanstar
with InaCom Acquisition pursuant to which Vanstar was the surviving corporation
and became a Wholly-Owned Subsidiary of the Borrower, which merger was
consummated substantially as set forth in the Agreement and Plan of Merger,
dated as of October 8, 1998, among the Borrower, InaCom Acquisition and Vanstar.
"Vanstar Merger Documents" shall mean each of the agreements,
documents and instruments entered into in connection with the Vanstar Merger.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i)
any corporation 100% of whose capital stock (other than director's qualifying
shares and/or other nominal amounts of shares required to be held other than by
such Person under applicable law) is at the time owned by such Person and/or one
or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership,
association, joint venture, limited liability company or other entity in which
such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a
100% equity interest at such time.
"Written," "written" or "in writing" shall mean any form of
written communication or a communication by means of telex, facsimile device,
telegraph or cable.
"Year 2000 Compliant" shall have the meaning provided in
Section 6.22.
"Year 2000 Problem" shall have the meaning provided in
Section 7.14.
SECTION 11. The Administrative Agent.
11.01 Appointment. Each Bank irrevocably designates and
appoints DBNY as Administrative Agent of such Bank (for purposes of this Section
11, the term " Administrative Agent" also shall include DBNY in its individual
capacity acting as Collateral Agent) to act as specified herein and in the other
Credit Documents, and each such Bank hereby irrevocably authorizes DBNY as the
Administrative Agent to take such action on its behalf under the provisions of
this Agreement and the other Credit Documents and to exercise such powers and
perform such duties as are expressly delegated to the Administrative Agent by
the terms of this Agreement and the other Credit Documents, together with such
other powers as are reasonably incidental thereto. The Administrative Agent
agrees to act as such upon the express conditions contained in this Section 11.
Notwithstanding any provision to the contrary elsewhere in this Agreement or in
any other Credit Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein or in the other Credit
Documents, or any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Administrative Agent.
The provisions of this Section 11 are solely for the benefit of the
Administrative Agent and the Banks, and neither the Borrower nor any of its
Subsidiaries shall
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have any rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Administrative
Agent shall act solely as agent of the Banks and the Administrative Agent does
not assume and shall not be deemed to have assumed any obligation or
relationship of agency or trust with or for the Borrower or any of its
Subsidiaries.
11.02 Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement or any other Credit Document by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by Section 11.03.
11.03 Exculpatory Provisions. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person in its capacity as Administrative Agent under or in
connection with this Agreement or the other Credit Documents (except for its or
such Person's own gross negligence or willful misconduct as determined by a
court of competent jurisdiction) or (ii) responsible in any manner to any of the
Banks for any recitals, statements, representations or warranties made by the
Borrower, any of its Subsidiaries or any of their respective officers contained
in this Agreement or the other Credit Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Credit Document or for any failure of the Borrower or any of its Subsidiaries or
any of their respective officers to perform its obligations hereunder or
thereunder. The Administrative Agent shall not be under any obligation to any
Bank to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or the other
Credit Documents, or to inspect the properties, books or records of the Borrower
or any of its Subsidiaries. The Administrative Agent shall not be responsible to
any Bank for the effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Agreement or any other Credit Document or
for any representations, warranties, recitals or statements made herein or
therein or made in any written or oral statement or in any financial or other
statements, instruments, reports, certificates or any other documents in
connection herewith or therewith furnished or made by the Administrative Agent
to the Banks or by or on behalf of the Borrower or any of its Subsidiaries to
the Administrative Agent or any Bank or be required to ascertain or inquire as
to the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or of the existence or possible existence of any Default
or Event of Default.
11.04 Reliance by Administrative Agent. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, facsimile, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Borrower or any of its Subsidiaries), independent accountants and other experts
selected by the Administrative Agent. The
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Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Credit Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
or it shall first be indemnified to its satisfaction by the Banks against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
and the other Credit Documents in accordance with a request of the Required
Banks (or all of the Banks, to the extent required by this Agreement), and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Banks.
11.05 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has actually received notice
from a Bank or the Borrower referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a "notice of default." In
the event that the Administrative Agent receives such a notice, the
Administrative Agent shall give prompt notice thereof to the Banks. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Banks;
provided, that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Banks.
11.06 Non-Reliance on Administrative Agent and Other Banks.
Each Bank expressly acknowledges that neither the Administrative Agent nor any
of its respective officers, directors, employees, agents, attorneys-in-fact or
affiliates have made any representations or warranties to it and that no act by
the Administrative Agent hereinafter taken, including any review of the affairs
of the Borrower or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Bank. Each Bank
represents to the Administrative Agent that it has, independently and without
reliance upon the Administrative Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, assets, operations, property, financial
and other condition, prospects and creditworthiness of the Borrower and its
Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Bank also represents that it will, independently and
without reliance upon the Administrative Agent or any other Bank, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement, and to make such investigation as it
deems necessary to inform itself as to the business, assets, operations,
property, financial and other condition, prospects and creditworthiness of the
Borrower and its Subsidiaries. The Administrative Agent shall not have any duty
or responsibility to provide any Bank with any credit or other information
concerning the business, operations, assets, property, financial and other
condition, prospects or creditworthiness of the Borrower or any of its
Subsidiaries which may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
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11.07 Indemnification. The Banks agree to indemnify the
Administrative Agent in its capacity as such ratably according to their
respective "percentages" as used in determining the Required Banks at such time
or, if the Commitments have terminated and all Loans have been repaid in full,
as determined immediately prior to such termination and repayment (with such
"percentages" to be determined as if there are no Defaulting Banks), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Obligations) be imposed on, incurred by or
asserted against the Administrative Agent in its capacity as such in any way
relating to or arising out of this Agreement or any other Credit Document, or
any documents contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted to be taken by the
Administrative Agent under or in connection with any of the foregoing, but only
to the extent that any of the foregoing is not paid by the Borrower or any of
its Subsidiaries; provided, that no Bank shall be liable to the Administrative
Agent for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
to the extent incurred by reason of the gross negligence or willful misconduct
of the Administrative Agent. If any indemnity furnished to the Administrative
Agent for any purpose shall, in the opinion of the Administrative Agent be
insufficient or become impaired (other than as a result of the gross negligence
or willful misconduct of the Administrative Agent), the Administrative Agent may
call for additional indemnity and cease, or not commence, to do the acts
indemnified against until such additional indemnity is furnished. The agreements
in this Section 11.07 shall survive the payment of all Obligations.
11.08 Administrative Agent in its Individual Capacity. The
Administrative Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower and its
Subsidiaries as though the Administrative Agent were not the Administrative
Agent hereunder. With respect to the Loans made by it and all Obligations owing
to it, the Administrative Agent shall have the same rights and powers under this
Agreement as any Bank and may exercise the same as though it were not the
Administrative Agent and the terms "Bank" and "Banks" shall include the
Administrative Agent in its individual capacity. The Administrative Agent and/or
its affiliates may own stock of the Borrower or any Subsidiary of the Borrower
and may accept deposits from, lend money to, and generally engage in any kind of
banking, trust or other business with the Borrower or any Affiliate of the
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Credit Party for services in
connection with this Agreement and otherwise without having to account for the
same to the Banks.
11.09 Holders. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
a written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person or entity who, at the time of making such
request or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee, assignee or
indorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.
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11.10 Resignation of the Administrative Agent; Successor
Administrative Agent. The Administrative Agent may resign as the Administrative
Agent upon 20 days' notice to the Banks and, unless a Default of the type
referred to in Section 9.05 has occurred and is continuing, to the Borrower.
Upon the resignation of the Administrative Agent, the Required Banks shall
appoint from among the Banks a successor Administrative Agent which is a Bank or
a trust company for the Banks subject, to the extent that no payment or
bankruptcy Default, or Event of Default, has occurred and is then continuing, to
prior approval by the Borrower (such approval not to be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall
include such successor agent effective upon its appointment, and the resigning
Administrative Agent's rights, powers and duties as the Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement. If a
successor Administrative Agent shall not have been so appointed within such 20
day period after the date such notice of resignation was given by the
Administrative Agent, the Administrative Agent's resignation shall become
effective and the Banks shall thereafter perform all duties of the
Administrative Agent hereunder and/or under any other Credit Documents until
such time, if any, as the Required Banks appoint a successor Administrative
Agent as provided above. After the resignation of the Administrative Agent
hereunder, the provisions of this Section 11 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement.
11.11 Syndication Agent; Documentation Agent. Nothing in this
Agreement shall impose on the Syndication Agent or the Documentation Agent, in
each case in such capacity, any duties or obligations.
SECTION 12. Miscellaneous.
12.01 Payment of Expenses, etc. The Borrower hereby agrees to:
(i) whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Administrative Agent
(including, without limitation, the reasonable fees and disbursements of White &
Case LLP and local counsel) in connection with the negotiation, preparation,
execution and delivery of the Credit Documents and the documents and instruments
referred to therein and any amendment, waiver or consent relating thereto and in
connection with the Administrative Agent's syndication efforts with respect to
this Agreement; (ii) pay all reasonable out-of-pocket costs and expenses of the
Administrative Agent, the Collateral Agent, the Letter of Credit Issuer and each
of the Banks in connection with the enforcement of the Credit Documents and the
documents and instruments referred to therein and, after an Event of Default
shall have occurred and be continuing, the protection of the rights of the
Administrative Agent and each of the Banks thereunder (including, without
limitation, the reasonable fees and disbursements of counsel (including in-house
counsel) and consultants for the Administrative Agent and for each of the
Banks); (iii) pay and hold each of the Banks harmless from and against any and
all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iv)
indemnify the Administrative Agent, the Collateral Agent, the Letter of Credit
Issuer, and each Bank, its officers, directors, trustees, employees,
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representatives, affiliates and agents (each an "Indemnified Person") from and
hold each of them harmless against any and all losses, liabilities, claims,
damages or expenses incurred by any of them as a result of, or arising out of,
or in any way related to, or by reason of, (a) any investigation, litigation or
other proceeding (whether or not any Indemnified Person is a party thereto and
whether or not any such investigation, litigation or other proceeding is between
or among the Administrative Agent, the Collateral Agent, the Letter of Credit
Issuer, any Bank, any Credit Party or any third Person or otherwise) related to
the entering into and/or performance of this Agreement or any other Credit
Document or the use of the proceeds of any Loans hereunder or the consummation
of any other transactions contemplated in any Credit Document (but excluding any
such losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of such Indemnified
Person), or (b) the actual or alleged presence of Hazardous Materials in the
air, surface water or groundwater or on the surface or subsurface of any Real
Property or any Environmental Claim, in each case, including, without
limitation, the reasonable fees and disbursements of counsel and independent
consultants incurred in connection with any such investigation, litigation or
other proceeding. To the extent that the undertaking to indemnify, pay or hold
harmless any Indemnified Person in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Borrower shall make the
maximum contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
12.02 Right of Setoff, Collateral Matters. (a) In addition to
any rights now or hereafter granted under applicable law or otherwise, and not
by way of limitation of any such rights, upon the occurrence and during the
continuance of an Event of Default, the Administrative Agent and each Bank is
hereby authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or any of its Subsidiaries
or to any other Person, any such notice being hereby expressly waived, to set
off and to appropriate and apply any and all deposits (general or special) and
any other Indebtedness at any time held or owing by the Administrative Agent or
such Bank (including, without limitation, by branches and agencies of the
Administrative Agent or such Bank wherever located) to or for the credit or the
account of the Borrower or any of its Subsidiaries against and on account of the
Obligations of the Borrower or any of its Subsidiaries to the Administrative
Agent or such Bank under this Agreement or under any of the other Credit
Documents, including, without limitation, all interests in Obligations of the
Borrower or any of its Subsidiaries purchased by such Bank pursuant to Section
12.06(b), and all other claims of any nature or description arising out of or
connected with this Agreement or any other Credit Document, irrespective of
whether or not the Administrative Agent or such Bank shall have made any demand
hereunder and although said Obligations shall be contingent or unmatured.
12.03 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party,
at the address specified opposite its signature below or in the other relevant
Credit Documents, as the case may be; if to any Bank, at its address specified
for such Bank on Annex II; and if to the Administrative Agent, at the Notice
Office; or, at such other address as shall be designated by any party in a
written notice to the other parties hereto.
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All such notices and communications shall be mailed, telegraphed, telexed,
telecopied or cabled or sent by overnight courier, and shall be effective when
received.
12.04 Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however, no Credit Party
may assign or transfer any of its rights, obligations or interest hereunder or
under any other Credit Document without the prior written consent of all of the
Banks and, provided further, that no Bank may assign or transfer all or any
portion of its Commitment and/or its outstanding Loans except as provided in
Section 12.04(b) and, provided further, that although any Bank may grant
participations in its rights hereunder in accordance with this Section, such
Bank shall remain a "Bank" for all purposes hereunder and the participant shall
not constitute a "Bank" hereunder and, provided further, that no Bank shall
grant any participation under which the participant shall have rights to approve
any amendment to or waiver of this Agreement or any other Credit Document except
to the extent such amendment or waiver would (i) extend the final scheduled
maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is
not extended beyond the Revolving Loan Maturity Date) in which such participant
is participating, or reduce the rate or extend the time of payment of interest
or Fees thereon (except in connection with a waiver of applicability of any
post-default increase in interest rates) or reduce the principal amount thereof,
or increase the amount of the participant's participation over the amount
thereof then in effect (it being understood that a waiver of any Default or
Event of Default or of a mandatory reduction in the Total Commitment shall not
constitute a change in the terms of such participation, and that an increase in
any Commitment or Loan shall be permitted without the consent of any participant
if the participant's participation is not increased as a result thereof), (ii)
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement or (iii) release all or substantially all of
the Collateral under all of the Security Documents (except as expressly provided
in the Credit Documents) supporting the Loans hereunder in which such
participant is participating. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against such Bank in respect of such
participation to be those set forth in the agreement executed by such Bank in
favor of the participant relating thereto) and all amounts payable by the
Borrower hereunder shall be determined as if such Bank had not sold such
participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank
together with one or more other Banks) may (x) assign all or a portion of its
Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Loans to (i) any other Bank or Banks, (ii) its parent company and/or
any affiliate of such Bank which is at least 50% owned by such Bank or its
parent company or to one or more Banks or (iii) in the case of any Bank that is
a fund that invests in loans, any other fund that invests in loans and is
managed by the same investment advisor of such Bank or by an Affiliate of such
investment advisor or (y) assign all, or if less than all, a portion equal to at
least $5,000,000 in the aggregate for the assigning Bank or assigning Banks, of
such Commitments and outstanding principal amount of Loans hereunder to one or
more Eligible Transferees (treating any fund that invests in loans and any other
fund that invests in loans and is managed by the same investment advisor of such
fund or by an Affiliate of such investment advisor as a single Eligible
Transferee), each of which assignees shall become a party to this Agreement as a
Bank by execution of an Assignment and Assumption Agreement,
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provided that (i) at such time Annex I shall be deemed modified to reflect the
Commitments (and/or outstanding Loans, as the case may be) of such new Bank and
of the existing Banks, (ii) upon surrender of the old Notes, new Notes will be
issued (to the extent requested by the new Bank), at the Borrower's expense, to
such new Bank and to the assigning Bank, such new Notes to be in conformity with
the requirements of Section 1.05 (with appropriate modifications) to the extent
needed to reflect the revised Commitments (and/or outstanding Loans, as the case
may be), (iii) the consent of the Administrative Agent, the Letter of Credit
Issuer (to the extent that such assignment includes an assignment of any
Revolving Loan Commitment) and, so long as no Default or Event of Default
exists, the consent of the Borrower, shall be required in connection with any
such assignment pursuant to clause (y) of this Section 12.04(b) (each of which
consents shall not be unreasonably withheld or delayed) and (iv) the
Administrative Agent shall receive at the time of each such assignment, from the
assigning or assignee Bank, the payment of a non-refundable assignment fee of
$3,500 and, provided further, that such transfer or assignment will not be
effective until recorded by the Administrative Agent on the Register pursuant to
Section 7.13 hereof. To the extent of any assignment pursuant to this Section
12.04(b), the assigning Bank shall be relieved of its obligations hereunder with
respect to its assigned commitments. At the time of each assignment pursuant to
this Section 12.04(b) to a Person which is not already a Bank hereunder and
which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for Federal income tax purposes, the respective
assignee Bank shall provide to the Borrower and the Administrative Agent the
appropriate Internal Revenue Service Forms (and, if applicable a Section
4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an
assignment of all or any portion of a Bank's Commitments and related outstanding
Obligations pursuant to Section 1.13 or this Section 12.04(b) would, at the time
of such assignment, result in increased costs under Section 1.10, 1.11, 2.05 or
4.04 from those being charged by the respective assigning Bank prior to such
assignment, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to pay any other increased costs of
the type described above resulting from changes after the date of the respective
assignment).
(c) Nothing in this Agreement shall prevent or prohibit any
Bank from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank and, with
the consent of the Administrative Agent, any Bank which is a fund may pledge all
or any portion of its Loans and Notes to its trustee in support of its
obligations to the trustee. No pledge pursuant to this clause (c) shall release
the transferor Bank from any of its obligations hereunder.
12.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Administrative Agent or any Bank in exercising any right, power
or privilege hereunder or under any other Credit Document and no course of
dealing between any Credit Party and the Administrative Agent or any Bank shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies which the
Administrative Agent or any Bank would otherwise have. No notice to or demand on
any Credit Party in any case shall entitle any Credit Party to any other or
further notice or demand in similar or other circumstances or constitute a
waiver
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of the rights of the Administrative Agent or the Banks to any other or further
action in any circumstances without notice or demand.
12.06 Payments Pro Rata. (a) The Administrative Agent agrees
that promptly after its receipt of each payment from or on behalf of any Credit
Party in respect of any Obligations of such Credit Party, it shall, except as
otherwise provided in this Agreement, distribute such payment to the Banks
(other than any Bank that has consented in writing to waive its pro rata share
of such payment) pro rata based upon their respective shares, if any, of the
Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligation then owed and due to such Bank bears to the total of
such Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
of the respective Credit Party to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount; provided, that if
all or any portion of such excess amount is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of the preceding Sections 12.06(a) and (b) shall be subject to
the express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.
12.07 Calculations; Computations. (a) The financial statements
to be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Banks); provided, that except as otherwise specifically
provided herein, all computations determining compliance with Section 8,
including definitions used therein, shall utilize accounting principles and
policies in effect at the time of the preparation of, and in conformity with
those used to prepare, the December 26, 1998 financial statements of the
Borrower delivered to the Banks pursuant to Section 6.10(b).
(b) All computations of interest and Fees hereunder shall be
made on the actual number of days elapsed over a year of 360 days or on the
actual number of days elapsed over a year of 365/366 days in the case of Base
Rate Loans based on the Prime Lending Rate.
12.08 Governing Law; Submission to Jurisdiction; Venue. (a)
THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Agreement or any other Credit
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Document may be brought in the courts of the County of New York or of the United
States for the Southern District of New York, and, by execution and delivery of
this Agreement, each Credit Party hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each Credit Party hereby further irrevocably waives any claim
that any such courts lack jurisdiction over such Credit Party, and agrees not to
plead or claim, in any legal action or proceeding with respect to this Agreement
or any other Credit Document brought in any of the aforesaid courts, that any
such court lacks jurisdiction over such Credit Party. Each Credit Party
irrevocably consents to the service of process in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such Credit Party, at its address for notices pursuant to Section
12.03, such service to become effective 30 days after such mailing. Each Credit
Party hereby irrevocably waives any objection to such service of process and
further irrevocably waives and agrees not to plead or claim in any action or
proceeding commenced hereunder or under any other Credit Document that service
of process was in any way invalid or ineffective. Nothing herein shall affect
the right of the Administrative Agent, any Bank or the holder of any Note to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any Credit Party in any other
jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Credit Document brought in the courts referred to in
clause (a) above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
12.09 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A
complete set of counterparts executed by all the parties hereto shall be lodged
with the Borrower and the Administrative Agent.
12.10 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which the Borrower and each of the Banks
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered the same to the Administrative Agent at
the Notice Office or, in the case of the Banks, shall have given to the
Administrative Agent telephonic (confirmed in writing), written, telex or
facsimile notice (actually received) at such office that the same has been
signed and mailed to it. The Administrative Agent will give the Borrower and
each Bank prompt written notice of the occurrence of the Effective Date.
12.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
12.12 Amendment or Waiver; etc. (a) Neither this Agreement nor
any other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or termi-
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nated unless such change, waiver, discharge or termination is in writing signed
by the respective Credit Parties party thereto and the Required Banks, provided
that no such change, waiver, discharge or termination shall, without the consent
of each Bank (other than a Defaulting Bank) (with Obligations being directly
affected in the case of following clause (i)), (i) extend any Scheduled
Repayment, extend the final scheduled maturity of any Loan or Note or extend the
stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date,
or reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal amount thereof ), (ii) discharge any Subsidiary Guarantor,
or release any portion of the Collateral having a book value in excess of
$2,000,000 except as otherwise may be provided in this Agreement or in the
Security Documents or except where the consent of the Required Lenders only is
specifically provided for, (iii) amend, modify or waive any provision of this
Section 12.12, (iv) reduce the percentage specified in the definition of
Required Banks (it being understood that, with the consent of the Required
Banks, additional extensions of credit pursuant to this Agreement may be
included in the determination of the Required Banks on substantially the same
basis as the extensions of Term Loans and Revolving Loan Commitments are
included on the Effective Date) or (v) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement; provided
further, that no such change, waiver, discharge or termination shall (1)
increase the Commitments of any Bank over the amount thereof then in effect
without the consent of such Bank (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory reduction in the Total Commitment shall not constitute an
increase of the Commitment of any Bank, and that an increase in the available
portion of any Commitment of any Bank shall not constitute an increase in the
Commitment of such Bank), (2) without the consent of the Letter of Credit
Issuer, amend, modify or waive any provision of Section 2 or alter its rights or
obligations with respect to Letters of Credit, (3) without the consent of the
Administrative Agent, amend, modify or waive any provision of Section 11 as same
applies to the Administrative Agent or any other provision as same relates to
the rights or obligations of the Administrative Agent, or (4) without the
consent of the Collateral Agent, amend, modify or waive any provision relating
to the rights or obligations of the Collateral Agent.
(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clause (i) through (v), inclusive, of the first proviso to
Section 12.12(a), the consent of the Required Banks is obtained but the consent
of one or more of such other Banks whose consent is required is not obtained,
then the Borrower shall have the right, so long as all non-consenting Banks
whose individual consent is required are treated as described in either clause
(A) or (B) below, to either (A) replace each such non-consenting Bank or Banks
with one or more Replacement Banks pursuant to Section 1.13 so long as at the
time of such replacement, each such Replacement Bank consents to the proposed
change, waiver, discharge or termination or (B) terminate such non-consenting
Bank's Commitments and repay in full its outstanding Loans, in accordance with
Sections 3.02(b) and/or 4.01(b), provided that, unless the Commitments
terminated and Loans repaid pursuant to preceding clause (B) are immediately
replaced in full at such time through the addition of new Banks or the increase
of the Commitments and/or outstanding Loans of existing Banks (who in each case
must specifically consent thereto), then in the case of any action pursuant to
preceding clause (B) the Required Banks (determined before giving effect to the
proposed action) shall specifically consent thereto, provided further, that the
Borrower shall not have the right to
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<PAGE>
replace a Bank solely as a result of the exercise of such Bank's rights (and the
withholding of any required consent by such Bank) pursuant to the second proviso
to Section 12.12(a).
12.13 Survival. All indemnities set forth herein including,
without limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01, shall
survive the execution, delivery and termination of this Agreement and the making
and repayment of the Loans.
12.14 Domicile of Loans. Each Bank may transfer and carry its
Loans at, to or for the account of any branch office, subsidiary or affiliate of
such Bank; provided, that the Borrower shall not be responsible for costs
arising under Section 1.10, 1.11, 2.05 or 4.04 resulting from any such transfer
(other than a transfer pursuant to Section 1.12) to the extent such costs would
not otherwise be applicable to such Bank in the absence of such transfer.
12.15 Confidentiality. (a) Each of the Banks agrees that it
will not disclose without the prior consent of the Borrower (other than to its
employees, auditors, counsel or other professional advisors, to affiliates or to
another Bank if the Bank or such Bank's holding or parent company in its sole
discretion determines that any such party should have access to such
information) any information with respect to the Borrower or any of its
Subsidiaries which is furnished pursuant to this Agreement and is designated by
the Borrower in writing as being confidential; provided, that any Bank may
disclose any such information (a) as has become generally available to the
public or has become available to such Bank on a non-confidential basis, (b) as
may be required or appropriate in any report, statement or testimony submitted
to any municipal, state or Federal regulatory body having or claiming to have
jurisdiction over such Bank or to the Federal Reserve Board, the Federal Deposit
Insurance Corporation, the NAIC or similar organizations (whether in the United
States or elsewhere) or their successors, (c) as may be required or appropriate
in response to any summons or subpoena or in connection with any litigation, (d)
in order to comply with any law, order, regulation or ruling applicable to such
Bank, and (e) to any prospective transferee in connection with any contemplated
transfer of any of the Notes or any interest therein by such Bank; provided,
that such prospective transferee agrees to be bound by the provisions of this
Section 12.15 to the same extent as such Bank.
(b) The Borrower hereby acknowledges and agrees that each Bank
may share with any of its affiliates any information related to the Borrower or
any of its Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of the Borrower and its Subsidiaries,
provided that such Persons shall be subject to the provisions of this Section
12.15 to the same extent as such Bank).
12.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
* * *
-91-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
10810 Farnam Drive INACOM CORP.
Omaha, NE 68154
Attention: Mr. Richard C. Oshlo
Telephone: (402) 758-4380
Telecopy: (402) 758-3509
By: /s/ Richard C. Oshlo
------------------------------------
Name: Richard C. Oshlo
Title: Treasurer & V.P.
DEUTSCHE BANK AG,
NEW YORK BRANCH,
as Administrative Agent
By: /s/ Robert W. Wood
------------------------------------
Name: Robert Wood
Title: Director
By: /s/ John L. Quinn
------------------------------------
Name: John L. Quinn
Title: Assistant Vice President
DEUTSCHE BANK AG,
NEW YORK BRANCH and/or
CAYMAN ISLANDS BRANCH
By: /s/ Robert Wood
------------------------------------
Name: Robert Wood
Title: Director
By: /s/ John L. Quinn
------------------------------------
Name: John L. Quinn
Title: Assistant Vice President
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<PAGE>
IBM CREDIT CORPORATION,
as Documentation Agent
By: /s/ Robert W. Flood
------------------------------------
Name: Robert W. Flood
Title: Region Manager Central
BANQUE NATIONALE DE PARIS,
Individually and as Syndication Agent
By: /s/ Jennifer Y. Cho /s/ Stuart Darby
--------------------------------------------
Name: Jennifer Y. Cho Stuart Darby
Title: Vice President Assistant Vice President
ABN AMRO BANK, N.V.
By: /s/ Lee-Lee Miao /s/ Paul S. Faust
--------------------------------------------
Name: Lee-Lee Miao Paul S. Faust
Title: Vice President Vice President
COMERICA BANK
By: /s/ James B. Haeffner
------------------------------------
Name: James B. Haeffner
Title: First Vice President
CREDIT LYONNAIS CHICAGO BRANCH
By: /s/ Peter B. Kelly
------------------------------------
Name: Peter B. Kelly
Title: Vice President
-93-
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Merrill M. Hales
------------------------------------
Name: Merrill M. Hales
Title: Vice President
MERCANTILE BANK N.A.
By: /s/ Joseph L. Sooter, Jr.
------------------------------------
Name: Joseph L. Sooter, Jr.
Title: Vice President
-94-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Amount and Terms of Credit.............................................................................1
1.01 Commitments.........................................................................................1
1.02 Minimum Borrowing Amounts, etc......................................................................2
1.03 Notice of Borrowing.................................................................................2
1.04 Disbursement of Funds...............................................................................2
1.05 Notes...............................................................................................3
1.06 Conversions.........................................................................................4
1.07 Pro Rata Borrowings.................................................................................4
1.08 Interest............................................................................................4
1.09 Interest Periods....................................................................................5
1.10 Increased Costs, Illegality, etc....................................................................6
1.11 Compensation........................................................................................8
1.12 Change of Lending Office............................................................................9
1.13 Replacement of Banks................................................................................9
SECTION 2. Letters of Credit.....................................................................................10
2.01 Letters of Credit..................................................................................10
2.02 Letter of Credit Requests; Notices of Issuance.....................................................11
2.03 Agreement to Repay Letter of Credit Payments.......................................................11
2.04 Letter of Credit Participations....................................................................12
2.05 Increased Costs....................................................................................14
SECTION 3. Fees; Commitments.....................................................................................15
3.01 Fees...............................................................................................15
3.02 Voluntary Termination or Reduction of Total Unutilized Revolving Loan Commitment...................15
3.03 Mandatory Adjustments of Commitments, etc..........................................................16
SECTION 4. Payments..............................................................................................16
4.01 Voluntary Prepayments..............................................................................16
4.02 Mandatory Prepayments..............................................................................17
4.03 Method and Place of Payment........................................................................19
4.04 Net Payments.......................................................................................19
SECTION 5. Conditions Precedent..................................................................................21
5.01 Execution of Agreement; Notes......................................................................21
5.02 No Default; Representations and Warranties.........................................................21
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
5.03 Officer's Certificate..............................................................................21
5.04 Opinions of Counsel................................................................................21
5.05 Corporate Proceedings; etc.........................................................................21
5.06 Adverse Change, etc................................................................................22
5.07 Litigation.........................................................................................22
5.08 Approvals..........................................................................................22
5.09 Consummation of the Vanstar Merger.................................................................22
5.10 Security Documents.................................................................................23
5.11 Subsidiary Guaranty................................................................................23
5.12 Existing Indebtedness Agreements; Inventory Finance Facilities; and Receivable Purchase
Facilities.......................................................................................24
5.13 Solvency Certificate; Environmental Analyses; Insurance Analyses; Financial Statements.............24
5.14 Pro Forma Financial Statements.....................................................................24
5.15 Projections........................................................................................25
5.16 Existing Indebtedness..............................................................................25
5.17 Payment of Fees....................................................................................26
SECTION 6. Representations, Warranties and Agreements............................................................26
6.01 Status.............................................................................................26
6.02 Power and Authority................................................................................26
6.03 No Violation.......................................................................................27
6.04 Litigation.........................................................................................27
6.05 Use of Proceeds; Margin Regulations................................................................27
6.06 Governmental Approvals.............................................................................27
6.07 Investment Company Act.............................................................................28
6.08 Public Utility Holding Company Act.................................................................28
6.09 True and Complete Disclosure.......................................................................28
6.10 Financial Condition; Financial Statements..........................................................28
6.11 Security Interests.................................................................................29
6.12 Compliance with ERISA..............................................................................29
6.13 Subsidiaries.......................................................................................30
6.14 Intellectual Property..............................................................................31
6.15 Compliance with Statutes, etc......................................................................31
6.16 Environmental Matters..............................................................................31
6.17 Properties.........................................................................................32
6.18 Labor Relations....................................................................................32
6.19 Tax Returns and Payments...........................................................................32
6.20 Existing Indebtedness..............................................................................33
6.21 Insurance..........................................................................................33
6.22 Year 2000 Compliance...............................................................................33
6.23 Hewlett-Packard Financing Statements...............................................................33
6.24 Assets of Borrower, InaCom Communications, InaCom Finance Corp.,
Vanstar, Vanstar Finance Co. and InaCom Funding Corp.............................................33
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
SECTION 7. Affirmative Covenants.................................................................................34
7.01 Information Covenants..............................................................................34
7.02 Books and Records..................................................................................37
7.03 Insurance..........................................................................................37
7.04 Payment of Taxes...................................................................................38
7.05 Corporate Franchises...............................................................................38
7.06 Compliance with Statutes, etc......................................................................38
7.07 Compliance with Environmental Laws.................................................................38
7.08 ERISA..............................................................................................39
7.09 Good Repair........................................................................................40
7.10 End of Fiscal Years; Fiscal Quarters...............................................................40
7.11 Additional Security; Further Assurances............................................................40
7.12 Interest Rate Protection...........................................................................41
7.13 Register...........................................................................................41
7.14 Year 2000 Compliance...............................................................................41
SECTION 8. Negative Covenants....................................................................................42
8.01 Changes in Business................................................................................42
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc.............................................42
8.03 Liens..............................................................................................45
8.04 Indebtedness.......................................................................................48
8.05 Advances, Investments and Loans....................................................................49
8.06 Dividends, etc.....................................................................................50
8.07 Transactions with Affiliates.......................................................................51
8.08 Lease Obligations..................................................................................51
8.09 Net Worth..........................................................................................51
8.10 Current Ratio......................................................................................51
8.11 Leverage Ratios....................................................................................51
8.12 EBITDA to Interest Expense Ratio...................................................................52
8.13 Total Tangible Assets to Outstandings..............................................................52
8.14 Limitation on Modifications of Certificate of Incorporation, By-Laws and Certain Other
Agreements; etc.................................................................................52
8.15 Limitation on Certain Restrictions on Subsidiaries.................................................53
8.16 Limitation on the Creation of Subsidiaries.........................................................53
8.17 Limitation on Assets of Subsidiaries...............................................................53
8.18 Subordinated Debt and Trust Preferred Securities...................................................54
8.19 Use of Proceeds....................................................................................54
8.20 Contingent Obligations.............................................................................55
8.21 ERISA..............................................................................................55
8.22 Accounting Changes.................................................................................55
8.23 Capital Expenditures...............................................................................55
SECTION 9. Events of Default.....................................................................................56
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
9.01 Payments...........................................................................................56
9.02 Representations, etc...............................................................................56
9.03 Covenants..........................................................................................56
9.04 Default Under Other Agreements.....................................................................56
9.05 Bankruptcy, etc....................................................................................57
9.06 ERISA..............................................................................................57
9.07 Security Documents.................................................................................58
9.08 Subsidiary Guaranty................................................................................58
9.09 Judgments..........................................................................................58
9.10 Non-Monetary Judgments.............................................................................58
9.11 Invalidity of Subordination Provisions.............................................................58
9.12 Ownership..........................................................................................58
SECTION 10. Definitions..........................................................................................59
SECTION 11. The Administrative Agent.............................................................................78
11.01 Appointment.......................................................................................79
11.02 Delegation of Duties..............................................................................79
11.03 Exculpatory Provisions............................................................................79
11.04 Reliance by Administrative Agent..................................................................80
11.05 Notice of Default.................................................................................80
11.06 Non-Reliance on Administrative Agent and Other Banks..............................................80
11.07 Indemnification...................................................................................81
11.08 Administrative Agent in its Individual Capacity...................................................81
11.09 Holders...........................................................................................82
11.10 Resignation of the Administrative Agent; Successor Administrative Agent...........................82
11.11 Syndication Agent; Documentation Agent............................................................82
SECTION 12. Miscellaneous........................................................................................82
12.01 Payment of Expenses, etc..........................................................................82
12.02 Right of Setoff, Collateral Matters...............................................................83
12.03 Notices...........................................................................................84
12.04 Benefit of Agreement..............................................................................84
12.05 No Waiver; Remedies Cumulative....................................................................85
12.06 Payments Pro Rata.................................................................................86
12.07 Calculations; Computations........................................................................86
12.08 Governing Law; Submission to Jurisdiction; Venue..................................................87
12.09 Counterparts......................................................................................87
12.10 Effectiveness.....................................................................................87
12.11 Headings Descriptive..............................................................................88
12.12 Amendment or Waiver; etc..........................................................................88
12.13 Survival..........................................................................................89
12.14 Domicile of Loans.................................................................................89
12.15 Confidentiality...................................................................................89
</TABLE>
(iv)
<PAGE>
<TABLE>
<S> <C>
12.16 Waiver of Jury Trial..............................................................................89
</TABLE>
ANNEX I -- List of Banks
ANNEX II -- Bank Addresses
ANNEX III -- Real Properties
ANNEX IV -- Subsidiaries
ANNEX V -- Existing Indebtedness
ANNEX VI -- Existing Liens
ANNEX VII -- Investments
ANNEX VIII -- Plans
ANNEX IX -- HP Transaction
ANNEX X -- Letters of Credit
EXHIBIT A-1 -- Form of Notice of Borrowing
EXHIBIT A-2 -- Form of Letter of Credit Request
EXHIBIT B-1 -- Form of Term Note
EXHIBIT B-2 -- Form of Revolving Note
EXHIBIT C -- Form of Section 4.04(b)(ii) Certificate
EXHIBIT D -- Form of Officers' Certificate
EXHIBIT E -- Form of Pledge Agreement
EXHIBIT F -- Form of Security Agreement
EXHIBIT G -- Form of Subsidiary Guaranty
EXHIBIT H -- Form of Assignment and Assumption Agreement
EXHIBIT I -- Form of Intercompany Note
EXHIBIT J -- Form of Solvency Certificate
EXHIBIT K -- Form of Legal Opinion
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> MAR-27-1999
<CASH> 88,897
<SECURITIES> 0
<RECEIVABLES> 760,086
<ALLOWANCES> 16,067
<INVENTORY> 402,859
<CURRENT-ASSETS> 1,299,931
<PP&E> 273,455
<DEPRECIATION> 116,480
<TOTAL-ASSETS> 1,893,341
<CURRENT-LIABILITIES> 956,335
<BONDS> 316,557
195,063
0
<COMMON> 4,522
<OTHER-SE> 419,831
<TOTAL-LIABILITY-AND-EQUITY> 1,893,341
<SALES> 1,164,016
<TOTAL-REVENUES> 1,366,352
<CGS> 1,127,821
<TOTAL-COSTS> 1,301,361
<OTHER-EXPENSES> 282,331
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,224
<INCOME-PRETAX> (227,564)
<INCOME-TAX> (81,621)
<INCOME-CONTINUING> (148,172)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (148,172)
<EPS-PRIMARY> (3.29)
<EPS-DILUTED> (3.29)
</TABLE>
