FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT (the "Agreement"), is made as of the 10th
day of August 2000 by and among PROGRAMMER'S PARADISE, INC., CORSOFT, INC.,
LIFEBOAT DISTRIBUTION, INC. and PROGRAMMER'S PARADISE CATALOGS, INC.
(collectively the "Obligors"), and PNC BANK, NATIONAL ASSOCIATION, a national
banking association (the "Lender").
WITNESSETH:
WHEREAS, the Obligors and the Lender entered into a certain Letter
Agreement dated February 24, 1998 (the "Letter Agreement") providing for the
terms and conditions of a Line of Credit Loan up to the maximum amount of
$7,500,000 (the "Loan") to the Obligors;
WHEREAS, the Obligors executed a Committed Line of Credit Note dated
February 28, 1998 (the "Note") in favor of the Lender for repayment of the Loan
under the terms and conditions set forth in the Letter Agreement, which was
incorporated into the Note;
WHEREAS, the Note provided for interest to accrue on the basis of
either the Lender's Prime Rate or the Euro Rate, as defined therein, at the
Obligors' option, and for all sums outstanding under the Note to be repaid on or
before June 30, 1999 (the "Expiration Date");
WHEREAS, repayment of the Loan was secured by the Obligors' pledge of a
security interest in the personalty of each of the Obligors (the "Collateral"),
as more fully set forth in certain Security Agreements dated December 31, 1997
and executed by each of the Obligors (the "Security Agreements");
WHEREAS, to further secure repayment of the Loan, Programmer's
Paradise, Inc. ("PPI") executed a Pledge Agreement dated December 31, 1997 (the
"Pledge Agreement") pledging to the Lender all or a portion of its stock in the
other Obligors and in other related entities (the "Stock");
WHEREAS, the Obligors and the Lender executed an Amendment No.1 to
Letter Agreement dated June 30, 1999, which modified certain terms of the Loan
including extending the Expiration Date to March 31, 2000 (the "Extended
Expiration Date");
WHEREAS, the Obligors and the Lender executed a Second Amendment to
Loan Documents dated March 31, 2000, which modified certain terms of the Loan,
including extending the Extended Expiration Date to June 30, 2000 (the "Final
Expiration Date");
WHEREAS, the principal balance due under the Loan as of August 1, 2000
is $328,086.56, without defense, offset or counterclaim;
Request for Forbearance:
WHEREAS, the Obligors are in default of their obligations under the
Loan and the documents executed in connection therewith (the "Loan Documents")
as a result of their failure
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to pay all sums due upon the Final Expiration Date, the Obligors' failure to
maintain certain of the financial covenants set forth in the Loan Documents and
PPI's failure to deliver the Stock to the Lender in accordance with the Pledge
Agreement;
WHEREAS, all amounts outstanding under the Loan are now due and
payable;
WHEREAS, the Obligors have requested that the Lender forbear from
pursuing its rights and remedies under the Loan Documents to permit the Obligors
an opportunity to refinance their obligations thereunder; and
WHEREAS, the Lender has agreed to forbear under the terms and
conditions set forth herein.
AGREEMENT
---------
NOW THEREFORE, for and in consideration of the premises (which are
deemed herein contained) and other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties agree as follows:
1. RECITALS INCORPORATED.
---------------------
The Recitals set forth above are true and correct and are hereby
incorporated into this Forbearance Agreement as if set forth at length herein.
2. PRINCIPAL AMOUNTS OUTSTANDING.
-----------------------------
The Obligors and the Lender acknowledge that as of July 31, 2000, the
amount due under the Loan is $328,086.56 (the "Indebtedness"), consisting of
$328,000 in outstanding principal and $86.56 in accrued and unpaid interest. The
Obligors and the Lender hereby represent, warrant and confirm that there are no
set-off rights, claims or causes of action of any nature whatsoever which the
Obligors have or may assert against the Lender with respect to the Loan and Loan
Documents as of the date hereof.
3. FORBEARANCE TERMS.
-----------------
The Obligors have requested and the Lender has agreed to forbear from
pursuing its rights and remedies under the Loan until December 31, 2000 (the
"Forbearance Period") under the following terms and conditions:
(a) Lender agrees to continue to extend funds under the Loan up to the
maximum aggregate principal amount of the lesser of $2,000,000
(the "New Loan Amount")or 60% of the Obligors' Qualified Accounts
Receivable, defined as those accounts receivable which are less
than ninety (90) days past due from date of sale, are due from
domestic and unrelated companies and are approved by Lender;
(b) The Obligors shall make timely payments under the Loan as if there
had been no defaults thereunder, with payments made thereunder to
be applied in accordance with the terms of the Loan Documents as
long as there is no Event of Default, as defined herein, with all
outstanding principal and accrued and unpaid interest due on or
before December 31, 2000;
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(c) The Obligors are no longer permitted to utilize the Loan for
stand-by letters of credit and funds extended under the Loan shall
only be made in the lawful currency of the United States;
(d) The Obligors shall deliver to the Lender borrowing base
certificates, in the form previously delivered to the Lender,
bi-monthly, on or before the 10th and 25th days of each month for
the previous month, beginning in August 2000;
(e) During the Forbearance Period, interest shall accrue under the
Loan at the Lender's Prime Rate plus one percent (1%);
(f) Upon the Obligors' execution of this Agreement, payment by the
Obligors to the Lender, of a fee of 2% of the New Loan Amount, or
$40,000, in immediately available funds;
(g) On or before execution of this Agreement, payment to the Lender in
immediately available funds of all expenses related to this
Agreement, including but not limited to the field audit fees of
$8,795.10 and attorney's fees and costs estimated not to exceed
$3,500;
(h) Within five (5) days of a written request from Lender, payment in
immediately available funds of any additional costs and fees
incurred in connection with this Agreement, including without
limitation, fees for a second field audit, such fees not to exceed
$9,000, to occur prior to October 31, 2000, which reimbursement
obligation shall survive the termination of this Agreement and any
Loan Document;
(i) The Obligors' consolidated net loss, for the six-month period
ending June 30, 2000, shall not exceed $2,000,000 and, for the
nine-month period ending September 30, 2000, shall not exceed
$2,250,000;
(j) In addition to the financial reporting contained in the Loan
Documents, the Obligors shall deliver to the Lender monthly
unaudited financial statements and accounts receivable aging
reports, which shall include current lists of all account debtors,
including the address and contact person for each;
(k) The following financial covenants are hereby waived during the
Forbearance Period: the Current Ratio, Domestic Leverage (Total
Liabilities/Total Net Worth) and Consolidated Total
Liabilities/Total Net Worth;
(l) Within five (5) days of a request from Lender, the Obligors shall
execute UCC-1 Financing Statements to perfect Lender's interests
in any of the collateral pledged as security for repayment of the
Loan;
(m) There shall be no defaults under the Loan Documents other than the
existing defaults set forth in the Recitals above, and no Event of
Default under this Agreement.
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4. NO WAIVER; FORBEARANCE; CUMULATIVE REMEDIES.
-------------------------------------------
The execution of this Forbearance Agreement and the consummation of the
forbearance transaction contemplated in this Forbearance Agreement are not, and
shall not be deemed to constitute, a waiver, except as expressly set forth
herein, or cure of any default arising prior or subsequent to the date of this
Forbearance Agreement, nor shall it constitute a reinstatement of the terms
described in the Loan Documents. The Obligors acknowledge that (i) the events of
default which exist as of the date of execution of this Agreement are material
defaults under the Loan Documents, (ii) they are unable to cure the existing
defaults and have requested that the Lender forbear from exercising their rights
to proceed against them in respect of the defaults. In consideration of the
Obligors entering into and fully performing their obligations under this
Forbearance Agreement, the Lender has agreed to such forbearance. In the event
that an Event of Default occurs and continues hereunder, the Lender shall not be
bound by its agreement to forbear and may immediately exercise its rights and
remedies under the Loan Documents and under applicable law. The Obligors agree
that no delay on the part of Lender in exercising any power or right shall
operate as a waiver of any such power or right or preclude the further exercise
of any other power or right. The remedies herein are cumulative and not
exclusive of any remedies provided by law. Notice to or demand in circumstances
under which the terms of this Agreement do not require such demand or notice
shall not entitle the Obligors to further notice or demand nor constitute a
waiver of the rights of Lender to take any other or further action without
notice or demand.
5. RELEASE OF LENDER.
-----------------
As additional consideration for the forbearance as set forth herein,
Obligors hereby remise, release, waive and forever discharge Lender and its
predecessors, successors and assigns, their parents, subsidiaries, officers,
directors, members, shareholders, agents, employees, representatives, attorneys
and any affiliated companies, their parents, subsidiaries, officers, directors,
shareholders, agents, employees, representatives and attorneys (collectively,
the "Released Parties") from, any and all claims, demands, damages, actions or
causes of action whatsoever, known or unknown, from the beginning of time
through the date of this Forbearance Agreement, related to the Loan Documents or
the administration of any of the above.
6. FORBEARANCE AGREEMENT CONTROLS.
------------------------------
In the event of a conflict betwee n the terms and conditions of this
Forbearance Agreement and the terms and conditions of the Loan Documents, the
terms and conditions of this Forbearance Agreement shall control.
7. INDEMNIFICATION.
---------------
(a) The Obligors hereby indemnify and agree to protect, defend and hold
harmless the Lender, any entity which "controls" the Lender within the meaning
of Section 15 of the Securities Act of 1933, as amended, or is under common
control with the Lender, and any member, officer, director, official, agent,
employee or attorney of the Lender, and their respective heirs, administrators,
executors, successors and assigns (collectively, the "Indemnified Parties"),
from and against any and all losses, damages, expenses or liabilities of any
kind or nature and from any suits, claims or demands, including reasonable
attorneys' fees incurred
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defending such claim, suffered by any of them and caused by, relating to,
arising out of, resulting from, or in any way connected with the Loan Documents,
this Forbearance Agreement or the transactions contemplated therein or herein
including, without limitation: (i) any untrue statement of a material fact
contained in information submitted to Lender by the Obligors or the omission of
any material fact necessary to be stated therein in order to make such statement
not misleading or incomplete; and (ii) the failure of any Obligor to perform any
obligations herein required to be performed by the Obligors, except that the
Obligors shall not be required to indemnify the Lender for its gross negligence
or willful misconduct. In case any action shall be brought against Lender, or
any other Indemnified Party in respect to which indemnity may be sought against
the Obligors, Lender, or such other Indemnified Party shall promptly notify the
Obligors and the Obligors shall assume the defense thereof, and the payment of
all costs and expenses. Lender may select and employ counsel, provided that the
Obligors shall pay all of such counsel's fees, expenses and disbursements and
the Obligors shall indemnify Lender for any loss associated with or resulting
from such representation. The failure of Lender to so notify any Obligor shall
not relieve the Obligors of any liability they may have under the foregoing
indemnification provisions or from any liability which they may otherwise have
to Lender, or any of the other Indemnified Parties, except to the extent such
failure to notify results in unreasonable prejudice to the Obligors. Lender
shall not be liable for any settlement of any such action effected without their
written consent, but if settled with the Obligors' consent, or if there be a
final judgment for the claimant in any such action, the Obligors agree to
indemnify and save harmless Lender from and against any loss or liability by
reason of such settlement or judgment.
(b) The provisions of this Section shall survive the term of this
Agreement and the repayment or other satisfaction of the Loan.
8. NO NOVATION.
-----------
It is the intention of the parties hereto that this Forbearance
Agreement shall not constitute a novation and shall in no way adversely affect
or impair the lien priority of any of the Loan Documents.
9. SURVIVAL PROVISIONS.
-------------------
The covenants, representations and obligations contained in this
Forbearance Agreement shall survive the execution of all transactions
contemplated by this Forbearance Agreement, and this Forbearance Agreement shall
bind and benefit the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and assigns.
10. ENTIRE AGREEMENT.
----------------
(a) This Forbearance Agreement, and any document executed in connection
herewith, contains all of the covenants, representations, warranties and
agreements between the parties with respect to the subject matters contained
herein, and supercedes all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof. The parties
to this Forbearance Agreement acknowledge that all the terms of this Forbearance
Agreement were negotiated at arm's length and after adequate and independent
investigation on their respective parts and that this Forbearance Agreement and
all documents executed in connection therewith were prepared and executed
without duress, undue influence or coercion of any kind exerted by any party
upon the other.
(b) Each party acknowledges and confirms that it has not relied upon
Lender or any officer, director or employee of the Lender, or upon the advice of
any but its own accountants or
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counsel, concerning any aspect of the transactions contemplated by this
Forbearance Agreement including, without limitation, the tax implications
thereof and the representations herein made.
11. FURTHER ASSURANCES.
------------------
The parties hereto agree to execute all such further instruments and
take all such further action that may be reasonably required by any party to
fully effectuate the terms and provisions of this Forbearance Agreement and the
transaction contemplated herein.
12. PARTICIPATIONS.
--------------
Lender expressly retains and reserves its rights to sell and assign its
interests under the Loan Documents and this Forbearance Agreement and fully
disclose its files in connection with the Loan Documents, and/or any collateral
pledged in connection therewith, to potential purchasers of the Lender's
interests under the Loan Documents.
13. NO MODIFICATION OF FORBEARANCE AGREEMENT EXCEPT IN WRITING.
----------------------------------------------------------
The within Forbearance Agreement encompasses all the forbearance terms
between the parties, notwithstanding any verbal communications between the
parties. No further forbearance terms shall be deemed effective, unless in
writing, executed by both parties. The parties hereto acknowledge the provisions
of N.J.S.A. 25:1-5, which precludes enforcement, inter alia, of any oral
promises relating to extensions of credit and agree that its provisions are
fully applicable to this Forbearance Agreement.
14. WAIVER OF JURY TRIAL.
--------------------
THE OBLIGORS AND THE LENDER HEREBY WAIVE ANY RIGHT TO REQUEST A TRIAL
BY JURY IN ANY LITIGATION WITH RESPECT TO ANY ASPECT OF THIS AGREEMENT OR THE
LOAN DOCUMENTS. THE OBLIGORS ACKNOWLEDGE THAT THEY HAVE HAD THE OPPORTUNITY TO
CONSULT WITH INDEPENDENT COUNSEL WITH RESPECT TO THIS WAIVER.
15. GOVERNING LAW.
-------------
This Agreement shall be construed and enforced in accordance with the
laws of New Jersey without regard to principles of conflicts of law.
16. EVENTS OF DEFAULT.
-----------------
The following shall constitute an Event of Default under this
Agreement:
(a) An Event of Default under any of the Loan Documents, including
without limitation the filing of any petition, voluntary or
involuntary, by or against any of the Obligors, except those
defaults set forth in the Recitals to this Agreement; or
(b) The failure of the Obligors to comply with this Agreement.
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The Events of Default defined in this Section 16 are the enumerated
Events of Default for purposes of this Agreement. Except as specifically set
forth in Section 3 of this Agreement, nothing herein shall be construed as
altering, eliminating, curing or modifying any of the express Events of Default
set forth in the Loan Documents, nor shall anything contained herein be deemed a
waiver, cure or modification of any other non-specified defaults which have
occurred or may occur during the Forbearance Period except as to which Lender is
specifically forbearing hereunder.
Upon the occurrence of an Event of Default hereunder, Lender's
agreement to forebear shall immediately terminate and Lender shall be free to
pursue all of its legal and equitable rights and remedies including, but not
limited to, all of its remedies under the Loan Documents, this Forbearance
Agreement and any documents executed in connection herewith.
17. CONSTRUCTION.
------------
The parties hereto agree that the terms and language of this
Forbearance Agreement were the result of negotiations between the parties and,
as a result, there shall be no presumption that any ambiguities in this
Forbearance Agreement shall be resolved against either party. Any controversy
over the construction of this Forbearance Agreement shall be decided neutrally,
in light of its conciliatory purposes, and without regard to events of
authorship or negotiation. All terms and words used in this Forbearance
Agreement, regardless of the number and gender in which used, shall be deemed to
include any other number or gender as the context or use thereof may require. If
more than one person or entity is named as the Obligor, each such person or
entity shall be jointly and severally liable for the representations,
warranties, covenants and obligations of the Loan Documents and this Forbearance
Agreement. The captions contained in this Forbearance Agreement are used for
convenience of reference only and in no way define limit or describe the scope
or intent of this Forbearance Agreement or any particular paragraph or section
hereof or the proper construction hereof.
18. ADMISSIBILITY.
-------------
The terms of this Forbearance Agreement, when executed, shall be fully
admissible in any court of law. The parties hereto waive any objection that may
be interposed under any state or federal rules of evidence as to the
admissibility of this document.
19. NO THIRD PARTY BENEFICIARIES.
----------------------------
It is not the intent of the parties who are signatories to this
Agreement to grant any rights whatsoever to parties who are not signatories to
this Forbearance Agreement and no provision of this Forbearance Agreement should
be construed to grant any rights to any party who is not a signatory herein.
20. ASSIGNMENT.
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This Forbearance Agreement shall be binding upon and inure to the
benefit of Lender, the Obligors and their respective permitted heirs, successors
and assigns. The Obligors shall not assign this Forbearance Agreement without
the prior written consent of the Lender.
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THE OBLIGORS DECLARE THAT EACH HAS RECEIVED, WITHOUT CHARGE, A TRUE COPY OF THIS
AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Forbearance Agreement as of
the date first above written.
ATTEST: PROGRAMMER'S PARADISE, INC.
/s/ Tracy G. Higgins
----------------------------- By: /s/ William H. Sheehy
-----------------------------
Name: William H. Sheehy
Title: V.P. Finance and Secretary
ATTEST: CORSOFT, INC.
/s/ Tracy G. Higgins
----------------------------- By: /s/ William H. Sheehy
-----------------------------
Name: William H. Sheehy
Title: V.P. Finance and Secretary
ATTEST: LIFEBOAT DISTRIBUTION, INC.
/s/ Tracy G. Higgins
----------------------------- By: /s/ William H. Sheehy
-----------------------------
Name: William H. Sheehy
Title: V.P. Finance and Secretary
ATTEST: PROGRAMMER'S PARADISE CATALOGS, INC.
/s/ Tracy G. Higgins
----------------------------- By: /s/ William H. Sheehy
-----------------------------
Name: William H. Sheehy
Title: V.P. Finance and Secretary
ATTEST: PNC BANK, N.A.
/s/ Ralph W. Karken
----------------------------- By: /s/ Donald Irwin
-----------------------------
Name: Donald Irwin
Title: Vice President
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