FORM 10-Q/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
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Commission File Number 000-28275
PFSWEB, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 75-2837058
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(State of Incorporation) (I.R.S. Employer I.D. No.)
500 NORTH CENTRAL EXPRESSWAY, PLANO, TEXAS 75074
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 881-2900
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 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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At November 3, 2001 there were 18,057,109 shares of registrant's common stock
outstanding.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
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3.1* Amended and Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
10.1** Inventory and Working Capital Financing Agreement by
and among Business Supplies Distributors Holdings,
LLC, BSD Acquisition Corp., Priority Fulfillment
Services, Inc., PFSweb, Inc., Inventory Financing
Partners, LLC and IBM Credit Corporation
10.2** Collateralized Guaranty by and between Priority
Fulfillment Services, Inc. and IBM Credit
Corporation
10.3** Guaranty to IBM Credit Corporation by PFSweb., Inc.
10.4** Notes Payable Subordination Agreement by and between
Priority Fulfillment Services, Inc., BSD Acquisition
Corp., and IBM Credit Corporation
10.5** Stock Purchase Agreement by and among Daisytek,
Incorporated, BSD Acquisition Corp., Priority
Fulfillment Services, Inc., PFSweb, Inc. and
Priority Fulfillment Services Europe B.V.
10.6** Operating Agreement of Business Supplies
Distributors Holdings, LLC
10.7** IBM Global Financing Platinum Plan Agreement (with
Invoice Discounting) by and among Supplies
Distributors S.A., Business Supplies Distributors
Europe B.V., PFSweb B.V., and IBM Belgium Financial
Services S.A.
10.8** Collateralized Guaranty between Priority Fulfillment
Services, Inc. and IBM Belgium Financial Services
S.A.
10.9** Guaranty to IBM Belgium Financial Services S.A. by
PFSweb, Inc.
10.10** Subordinated Demand Note by and among BSD Acquisition
Corp. and Priority Fulfillment Service, Inc.
--------------------
* Incorporated by reference from PFSweb, Inc. Registration Statement on
Form S-1 (Commission File No. 333-87657).
** Filed herewith
b) Reports on Form 8-K:
Form 8-K filed on July 13, 2001 reporting Item 8, Change in
Fiscal Year, that on June 28, 2001 PFSweb, Inc. (the
"Company") changed its fiscal year from March 31 to
December 31.
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 by the
undersigned thereunto duly authorized.
Date: November 16, 2001
PFSweb, Inc.
By: /s/ Thomas J. Madden
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Thomas J. Madden
Chief Financial Officer,
Chief Accounting Officer,
Executive Vice President
\
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
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3.1* Amended and Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
10.1** Inventory and Working Capital Financing Agreement by and
among Business Supplies Distributors Holdings, LLC, BSD
Acquisition Corp., Priority Fulfillment Services, Inc.,
PFSweb, Inc., Inventory Financing Partners, LLC and IBM
Credit Corporation
10.2** Collateralized Guaranty by and between Priority Fulfillment
Services, Inc. and IBM Credit Corporation
10.3** Guaranty to IBM Credit Corporation by PFSweb., Inc.
10.4** Notes Payable Subordination Agreement by and between
Priority Fulfillment Services, Inc., BSD Acquisition Corp.
and IBM Credit Corporation
10.5** Stock Purchase Agreement by and among Daisytek,
Incorporated, BSD Acquisition Corp., Priority Fulfillment
Services, Inc., PFSweb, Inc. and Priority Fulfillment
Services Europe B.V.
10.6** Operating Agreement of Business Supplies Distributors
Holdings, LLC
10.7** IBM Global Financing Platinum Plan Agreement (with Invoice
Discounting) by and among Supplies Distributors, S.A.,
Business Supplies Distributors Europe B.V., PFSweb B.V., and
IBM Belgium Financial Services S.A.
10.8** Collateralized Guaranty between Priority Fulfillment
Services, Inc. and IBM Belgium Financial Services S.A.
10.9** Guaranty to IBM Belgium Financial Services S.A. by PFSweb,
Inc.
10.10** Subordinated Demand Note by and among BSD Acquisition Corp.
and Priority Fulfillment Service, Inc.
----------------------
* Incorporated by reference from PFSweb, Inc. Registration Statement on
Form S-1 (Commission File No. 333-87657).
** Filed herewith
BUSINESS SUPPLIES DISTRIBUTORS HOLDINGS, LLC
BSD ACQUISITION CORP.
PRIORITY FULFILLMENT SERVICES, INC.
PFSWEB, INC.
INVENTORY FINANCING PARTNERS, LLC
INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT
TABLE OF CONTENTS
Section 1. DEFINITIONS; ATTACHMENTS ...................................................................... 1
1.1. Special Definitions ................................................................................. 1
1.2. Other Defined Terms ................................................................................. 11
1.3. Attachments ......................................................................................... 11
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES ..................................................... 11
2.1. Credit Line ......................................................................................... 11
2.2. Product Advances .................................................................................... 11
2.3. A/R Advances ........................................................................................ 12
2.4. Finance and Other Charges ........................................................................... 13
2.5. Borrower Account Statements ......................................................................... 14
2.6. Shortfall ........................................................................................... 14
2.7. Application of Payments ............................................................................. 14
2.8. Prepayment and Reborrowing By Borrower .............................................................. 14
Section 3. CREDIT LINE ADDITIONAL PROVISIONS ............................................................. 14
3.1. Ineligible Accounts ................................................................................. 14
3.2. Reimbursement for Charges ........................................................................... 18
3.3. Lockbox and Special Account ......................................................................... 18
3.4. Collections ......................................................................................... 18
3.5. Application of Remittances and Credits .............................................................. 19
3.6. Power of Attorney ................................................................................... 19
3.7. Concentration Accounts .............................................................................. 20
Section 4. SECURITY -- COLLATERAL ........................................................................ 20
4.1. Grant ............................................................................................... 20
4.2. Further Assurances .................................................................................. 21
Section 5. CONDITIONS PRECEDENT .......................................................................... 22
5.1. Conditions Precedent to the Effectiveness of this Agreement ......................................... 22
5.2. Conditions Precedent to Each Advance ................................................................ 24
Section 6. REPRESENTATIONS AND WARRANTIES ................................................................ 25
6.1. Organization and Qualifications ..................................................................... 25
6.2. Rights in Collateral; Priority of
Liens ............................................................. 25
6.3. No Conflicts ........................................................................................ 25
6.4. Enforceability ...................................................................................... 25
6.5. Locations of Offices, Records and Inventory ......................................................... 25
6.6. Fictitious Business Names ........................................................................... 26
i
6.7. Organization ......................................................................................... 26
6.8. No Judgments or Litigation ........................................................................... 26
6.9. No Defaults .......................................................................................... 26
6.10. Labor Matters ....................................................................................... 26
6.11. Compliance with Law ................................................................................. 26
6.12. ERISA ............................................................................................... 26
6.13. Compliance with Environmental Laws .................................................................. 27
6.14. Intellectual Property ............................................................................... 27
6.15. Licenses and Permits ................................................................................ 27
6.16. Investment Company .................................................................................. 27
6.17. Taxes and Tax Returns ............................................................................... 28
6.18. Status of Accounts .................................................................................. 28
6.19. Affiliate/Subsidiary Transactions ................................................................... 28
6.20. Accuracy and Completeness of Information ............................................................ 28
6.21. Recording Taxes ..................................................................................... 29
6.22. Indebtedness ........................................................................................ 29
6.23. Not Consumer Transaction ............................................................................ 29
6.24. Limitations on Lockboxes and Special Accounts ....................................................... 29
Section 7. AFFIRMATIVE COVENANTS ......................................................................... 29
7.1. Financial and Other Information ...................................................................... 29
7.2. Location of Borrower and Collateral .................................................................. 31
7.3. Changes in Loan Parties .............................................................................. 32
7.4. Legal Entity Existence ............................................................................... 32
7.5. ERISA ................................................................................................ 32
7.6. Environmental Matters ................................................................................ 32
7.7. Collateral Books and Records/Collateral Audit ........................................................ 32
7.8. Insurance; Casualty Loss ............................................................................. 33
7.9. Taxes ................................................................................................ 34
7.10. Compliance With Laws ................................................................................ 34
7.11. Fiscal Year ......................................................................................... 34
7.12. Intellectual Property ............................................................................... 34
7.13. Maintenance of Property ............................................................................. 34
7.14. Collateral .......................................................................................... 34
7.15 Additional Collateral, Etc. ......................................................................... 35
7.16. Subsidiaries ........................................................................................ 35
7.17. Financial Covenants; Additional Covenants ........................................................... 36
7.18. Transaction Documents ............................................................................... 36
Section 8. NEGATIVE COVENANTS ............................................................................. 36
8.1. Liens ................................................................................................ 36
8.2. Disposition of Assets ................................................................................ 36
8.3. Transaction Documents ................................................................................ 36
8.4. Changes in Borrower and Guarantor .................................................................... 36
8.5. Guaranties ........................................................................................... 36
8.6. Restricted Payments .................................................................................. 37
ii
8.7. Investments .......................................................................................... 37
8.8. Affiliate/Subsidiary Transactions .................................................................... 37
8.9. ERISA ................................................................................................ 37
8.10. Additional Negative Pledges ......................................................................... 38
8.11. Storage of Collateral ............................................................................... 38
8.12. Use of Proceeds ..................................................................................... 38
8.13. Accounts ............................................................................................ 38
8.14. Indebtedness ........................................................................................ 38
8.15. Loans ............................................................................................... 38
8.16. Lockboxes and Special Accounts ...................................................................... 38
8.17. Title to Collateral ................................................................................. 38
Section 9. DEFAULT ........................................................................................ 38
9.1. Event of Default ..................................................................................... 38
9.2. Acceleration ......................................................................................... 40
9.3. Remedies ............................................................................................. 40
9.4. Waiver ............................................................................................... 41
Section 10. MISCELLANEOUS ................................................................................. 42
10.1. Term; Termination ................................................................................... 42
10.2. Indemnification ..................................................................................... 42
10.3. Additional Obligations .............................................................................. 42
10.4. Limitation of Liability ............................................................................. 42
10.5. Alteration/Waiver ................................................................................... 43
10.6. Severability ........................................................................................ 43
10.7. One Loan ............................................................................................ 43
10.8. Additional Collateral ............................................................................... 43
10.9. No Merger or Novations .............................................................................. 43
10.10. Paragraph Titles ................................................................................... 44
10.11. Binding Effect; Assignment ......................................................................... 44
10.12. Obligations ........................................................................................ 44
10.13. Notices; E-Business Acknowledgment ................................................................. 44
10.14. Counterparts ....................................................................................... 45
10.15. Attachment A Modifications ......................................................................... 46
10.16. Submission and Consent to Jurisdiction and Choice of Law ........................................... 46
10.17. Jury Trial Waiver .................................................................................. 46
iii
INVENTORY AND WORKING CAPITAL
FINANCING AGREEMENT
This INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT (as amended,
supplemented or otherwise modified from time to time, this "Agreement") is
hereby made this ____ day of September, 2001, by and among IBM CREDIT
CORPORATION, a Delaware corporation with a place of business at 4000 Executive
Parkway, Third Floor, San Ramon, CA 94583 ("IBM Credit"), BUSINESS SUPPLIES
DISTRIBUTORS HOLDINGS, LLC, a limited liability company duly organized under the
laws of the state of Delaware, with its principal place of business at 500 North
Central Expressway, Plano, TX 75074 ("Holdings"), INVENTORY FINANCING PARTNERS,
LLC, a limited liability company duly organized under the laws of the state of
Delaware, with its principal place of business at 500 North Central Expressway,
Plano, TX 75074 ("IFP"), BSD ACQUISITION CORP., a corporation duly organized
under the laws of the state of Delaware, with its principal place of business at
500 North Central Expressway, Plano, TX 75074 ("Borrower"), PRIORITY FULFILLMENT
SERVICES, INC., a corporation duly organized under the laws of the state of
Delaware, with its principal place of business at 500 North Central Expressway,
Plano, TX 75074 ("PFS") and PFSWEB, INC., a corporation duly organized under the
laws of the state of Delaware, with its principal place of business at 500 North
Central Expressway, Plano, TX 75074 ("PFSweb") (Borrower, Holdings, IFP, PFS,
PFSweb, and any other entity that executes any Other Document, including without
limitation all Guarantors, are each individually referred to as a "Loan Party"
and collectively referred to as "Loan Parties").
WITNESSETH
WHEREAS, in the course of Borrower's operations, Borrower intends to
purchase from Persons approved in writing by IBM Credit for the purposes of this
Agreement (the "Authorized Suppliers") computer hardware and software products,
including printer supplies, media supplies, print head bands and other
printing-related products, manufactured or distributed by or bearing any
trademark or trade name of such Authorized Suppliers (the "Products") (as of the
date hereof the Authorized Suppliers are as set forth on Attachment E hereto);
WHEREAS, pursuant to an IBM Transaction Management Services Agreement
dated as of August 14, 2001 between Borrower and PFS ("PFS Agreement") and the
Master Distributor Agreement dated August 14, 2001 by and among International
Business Machines Corporation ("IBM"), PFS, and Borrower, ("IBM Agreement"), PFS
provides various transaction management services to Borrower including, but not
limited to, distribution of Products to Borrower's customers, preparation and
delivery of invoices for the sale of Products to Borrower's customers, and
performance of certain accounting functions related thereto including the
collection of accounts receivable;
WHEREAS, Borrower has requested that IBM Credit finance its purchase of
Products from such Authorized Suppliers its working capital requirements, and
IBM Credit is willing to provide such financing to Borrower subject to the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
SECTION 1. DEFINITIONS; ATTACHMENTS
1.1. SPECIAL DEFINITIONS. The following terms shall have the following
respective meanings in this Agreement (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
Page 1 of 47
"A/R Advance": any loan or advance of funds made by IBM Credit to or on behalf
of Borrower pursuant to Section 2.3 of this Agreement, including, as the context
may require, a WCO Advance and a PRO Advance.
"A/R Advance Date": the Business Day on which IBM Credit makes an A/R Advance
under this Agreement.
"A/R Advance Term": for each A/R Advance, a period of one hundred eighty (180)
days commencing on the A/R Advance Date for such A/R Advance.
"A/R Finance Charges": as defined on Attachment A.
"Account Debtor": shall mean any Person required to make payment to Borrower or
to PFS, on account of Borrower, for the purchase of Product or any other Person
who has a debt obligation owing to Borrower.
"Accounts": as defined in the U.C.C and all now existing and/or hereafter
created or arising accounts receivable of Borrower arising from the sale of
Product, including any interest, finance charges and other amounts payable with
respect thereto. The foregoing shall not include the Acquired Accounts.
"Acquired Accounts": the BSD Accounts that the Borrower acquired from BSD as the
result of the merger described in the Merger Documents immediately following the
closing under the Daisytek Stock Purchase Agreement.
"Advance": any loan or other extension of credit by (or committed to be made by)
IBM Credit to or on behalf of Borrower pursuant to this Agreement including,
without limitation, (i) Product Advances and (ii) A/R Advances.
"Affiliate": with respect to any Person, any other Person (the "Affiliate")
meeting one of the following: (i) at least 10% of the Affiliate's equity is
owned, directly or indirectly, by such Person; (ii) at least 10% of such
Person's equity is owned, directly or indirectly, by the Affiliate; or (iii) at
least 10% of such Person's equity and at least 10% of the Affiliate's equity is
owned, directly or indirectly, by the same Person or Persons. All of Loan
Parties' officers, directors, joint venturers, and partners shall also be deemed
to be Affiliates of such Loan Party for purposes of this Agreement.
"Agreement": as defined in the caption.
"Auditors": a nationally recognized firm of independent certified public
accountants selected by Borrower, Holdings or PFSweb (as applicable) and
satisfactory to IBM Credit.
"Authorized Officer": shall mean the chief executive officer, president, or vice
president or such other officer or authorized member of any Loan Party who is
authorized to execute on such Loan Party's behalf any certification and
documents or give notices and other communications in connection with this
Agreement and the transactions contemplated hereunder.
"Authorized Suppliers": as defined in the recitals of this Agreement.
"Available Credit": at any time, (1) the Maximum Advance Amount less (2) the
Outstanding Advances at such time.
"Average Daily Balance": for each Advance for a given period of time, the sum of
the unpaid principal of such Advance as of each day during such period of time,
divided by the number of days in such period of time.
"Bank": as defined in Section 3.3.
"Borrower": as defined in the caption.
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"Borrower Stock Pledge Agreement": the Stock Pledge Agreement dated the date
hereof (or such other date as IBM Credit may agree) between Borrower and IBM
Credit.
"Borrowing Base": as defined in Attachment A.
"Business Day": any day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are generally closed or on which IBM
Credit is closed.
"BSD": means Business Supplies Distributors, Inc.
"BSD Account Debtors": any Person required to make payment in respect to the
Acquired Accounts.
"BSD Accounts": the Accounts (as defined in the UCC) of Business Supplies
Distributors, Inc.
"BSD Companies": means BSD, Business Supplies Distributors Europe B.V. and BSD
(Canada) Inc.
"BSD Europe": means Supplies Distributors, S.A.
"Closing Date": the date on which the conditions precedent to the effectiveness
of this Agreement set forth in Section 5.1 hereof are satisfied or waived in
writing by IBM Credit.
"Code": the Internal Revenue Code of 1986, as amended or any successor statute.
"Collateral": as defined in Section 4.1.
"Collateral Management Report": a report to be delivered by Borrower to IBM
Credit from time to time, as provided herein, signed by the chief executive
officer or chief financial officer of Borrower or other Authorized
Officer,substantially in the form and detail of Attachment F hereto, detailing
and certifying, among other items: a summary of Borrower's inventory on hand
financed by IBM Credit and Borrower's Eligible Accounts and Eligible Acquired
Accounts, the amounts and aging of all of Borrower's Accounts, Borrower's
Acquired Accounts, Borrower's inventory on hand financed by IBM Credit by
quantity, type, model, Authorized Supplier's invoice price to Borrower and the
total of the line item values for all inventory listed on the report, the
amounts and aging of Borrower's accounts payable as of a specified date, all of
Borrower's IBM Credit borrowing activity during a specified period and the total
amount of Borrower's Borrowing Base as well as Borrower's Outstanding A/R
Advances, Outstanding Product Advances, Available Credit and any Shortfall
Amount as of a specified date.
"Commercial Tort Claim": a claim arising in tort with respect to which (a) the
claimant is an organization or (b) the claimant is an individual and the claim
(i) arose in the course of the claimant's business or profession and (ii) does
not include damages arising out of personal injury to or the death of the
individual.
"Common Due Date": (1) the fifth day of a calendar month if the Product
Financing Period or A/R Advance Term, whichever is applicable, expires on the
first through tenth of such calendar month; (2) the fifteenth day of a calendar
month if the Product Financing Period or A/R Advance Term, whichever is
applicable, expires on the eleventh through twentieth of such calendar month;
and (3) the twenty-fifth day of a calendar month if the Product Financing Period
or A/R Advance Term, whichever is applicable, expires on the twenty-first
through the last day of such calendar month.
"Compliance Certificate": a certificate substantially in the form of Attachment
C.
"Concentration Accounts": an Eligible Account or Eligible Acquired Account that,
individually, or when aggregated with all other outstanding Accounts and
Acquired Accounts of the same account debtor and such account debtor's
Affiliates, constitute more than five percent (5%) of the net outstanding
balance of all
Page 3 of 47
Eligible Accounts and Eligible Acquired Accounts of the Borrower then
outstanding for all Account Debtors and BSD Account Debtors.
"Concentration Account Debtor": at any time, any Account Debtor or BSD Account
Debtor obligated to Borrower with respect to, or on account of, a Concentration
Account.
"Copyrights": (i) all copyrights arising under the laws of the United States,
any other country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished (including, without
limitation, those listed in Attachment B), all registrations and recordings
thereof, and all applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the United States
Copyright Office, and (ii) the right to obtain all renewals thereof.
"Credit Line": as defined in Section 2.1.
"Daisytek": shall mean Daisytek, Inc.
"Daisytek Stock Purchase Agreement": shall mean the Stock Purchase Agreement
dated September 25, 2001 among Daisytek, the Borrower, and PFS.
"Default": either (1) an Event of Default or (2) any event or condition which,
but for the requirement that notice be given or time lapse or both, would be an
Event of Default.
"Delinquency Fee Rate": as defined on Attachment A.
"Deposit Account": a demand, time, savings, passbook, or similar account
maintained with a bank.
"Domestic Subsidiary": a Subsidiary of any Loan Party that is incorporated in
the United States or in the District of Columbia.
"Eligible Accounts": as defined in Section 3.1(A).
"Eligible Acquired Accounts": as defined in Section 3.1(B).
"Environmental Laws": all statutes, laws, judicial decisions, regulations,
ordinances, and other governmental restrictions relating to pollution, the
protection of the environment, occupational health and safety, or to emissions,
discharges or release of pollutants, contaminants, hazardous substances or
wastes into the environment.
"Environmental Liability": any claim, demand, obligation, cause of action,
allegation, order, violation, injury, judgment, penalty or fine, cost or
expense, resulting from the violation or alleged violation of any Environmental
Laws or the imposition of any Lien pursuant to any Environmental Laws.
"Equity Interests": with respect to any Person, means (a) all shares, interests,
participations, rights or other equivalents (however designated, whether voting
or non-voting) of or interests in corporate or capital stock, including, without
limitation, shares of preferred or preference stock of such Person, (b) all
partnership interests (whether general or limited) of such Person, (c) all
membership interests or limited liability company interests in such Person, (d)
all other equity or ownership interests in such Person of any other type and (e)
all warrants, rights or options to purchase any of the foregoing.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended, or any
successor statutes.
"Event of Default": as defined in Section 9.1.
Page 4 of 47
"Financial Statements": the consolidated and consolidating balance sheets
(including, without limitation, securities such as stocks and investment bonds),
statements of operations, statements of cash flows and statements of changes in
shareholder's equity for the period specified, prepared in accordance with GAAP
and consistent with prior practices.
"Floor Plan Lender": any Person who now or hereinafter provides inventory
financing to Borrower, provided that such Person executes an Intercreditor
Agreement (as defined in Section 5.1 of this Agreement) or a subordination
agreement with IBM Credit each in form and substance satisfactory to IBM Credit.
"Free Financing Period": for each Product Advance, the period, if any, in which
IBM Credit does not charge Borrower a financing charge. IBM Credit shall
calculate the Borrower's Free Financing Period utilizing a methodology that is
consistent with the methodologies used for similarly situated customers of IBM
Credit. The Borrower understands that IBM Credit may not offer, may change or
may cease to offer a Free Financing Period for the Borrower's purchases of
Products.
"Free Financing Period Exclusion Fee": as defined in Attachment A.
"GAAP": generally accepted accounting principles in the United States as in
effect from time to time.
"General Intangibles": all "general intangibles" as such term is defined in the
U.C.C and, in any event, including, without limitation, with respect to the
Borrower, (a) all tax refunds, claims for tax refunds, and tax credits, (b) all
permits, licenses, approvals, authorizations, consents, variances and
certifications of any Governmental Authority, (c) all claims, tort claims and
causes of action, (d) all property, casualty, liability, and other insurance of
any kind or character, and all insurance claims and insurance refund claims, (e)
all payment intangibles, (f) all lists, books, records, recorded knowledge,
ledgers, files (whether in printed form or stored electronically), designs,
blueprints, data, specifications, engineering reports, manuals, computer
records, computer programs and computer software (including source codes), (g)
all Internet domain names and web sites and related licenses and agreements, and
(h) all contracts, agreements, instruments and indentures in any form, and
portions thereof, to which Borrower is a party or under which Borrower has any
right, title or interest or to which Borrower or any property of Borrower is
subject, as the same may from time to time be amended, supplemented or otherwise
modified, including, without limitation, (i) all rights of Borrower to receive
moneys due and to become due to it thereunder or in connection therewith, (ii)
all rights of Borrower to damages arising thereunder and (iii) all rights of
Borrower to perform and to exercise all remedies thereunder.
"Governmental Authority": any nation or government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled (through stock or capital
ownership or otherwise) by any of the foregoing.
"Guarantor": means Holdings, PFSweb, PFS and any other party that delivers a
guaranty in favor of IBM Credit.
"Hazardous Substances": all substances, wastes or materials, to the extent
subject to regulation as "hazardous substances" or "hazardous waste" under any
Environmental Laws.
"Holdings": as defined in the caption and a direct subsidiary of PFS and IFP.
"Holdings Stock Pledge Agreement": as defined in Section 5.1(R).
"IBM Credit": as defined in the caption.
"Indebtedness": with respect to any Person, (1) all obligations of such Person
for borrowed money or for the deferred purchase price of property or services
(other than trade liabilities incurred in the ordinary course of
Page 5 of 47
business and payable in accordance with customary practices) or which is
evidenced by a note, bond, debenture or similar instrument, (2) all obligations
of such Person under capital leases (including obligations under any leases such
Person may enter into, now or in the future, with IBM Credit), (3) all
obligations of such Person in respect of letters of credit, banker's acceptances
or similar obligations issued or created for the account of such Person, (4)
liabilities arising under any interest rate protection, future, option swap, cap
or hedge agreement or arrangement under which such Person is a party or
beneficiary, (5) all obligations under guaranties by such Person and (6) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof.
"Intellectual Property": as defined in Section 6.14.
"IFP": as defined in the caption and the owner of Fifty-one Percent (51%) of
Holdings.
"Investment": with respect to any Person (the "Investor"), (1) any investment by
the Investor in any other Person, whether by means of share purchase, capital
contribution, purchase or other acquisition of a partnership or joint venture
interest, loan, time deposit, demand deposit or otherwise, and (2) any guaranty
by the Investor of any Indebtedness or other obligation of any other Person.
"Investment Property": the collective reference to (i) all "investment property"
as such term is defined in the U.C.C. and (ii) whether or not constituting
"investment property" as so defined, all Pledged Interests.
"Letter of Credit Right": any right to payment or performance under a letter of
credit, whether or not the beneficiary has demanded or is at the time entitled
to demand payment or performance.
"LIBOR": as of the date of determination, the thirty-day average of the
one-month London Interbank Offered Rate as published by Bloomberg, L.P.
("Bloomberg") or any successor financial services for the previous calendar
month or, in the event such average is no longer published by Bloomberg or any
successor financial services, such other thirty (30) day average as IBM Credit
may use for determining "LIBOR" in its reasonable discretion. LIBOR is based on
a 360-day calendar year.
"Lien(s)": any lien, claim, charge, pledge, security interest, deed of trust,
mortgage, other encumbrance or other arrangement having the practical effect of
the foregoing, including the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement.
"Loan Parties": as defined in the caption.
"Lockbox": as defined in Section 3.3.
"Material Adverse Effect": a material adverse effect (1) on the business,
operations, results of operations, assets, or financial condition of any Loan
Party, (2) on the aggregate value of the Collateral or the collateral granted to
IBM Credit by any other Loan Party under the Other Documents ("Other
Collateral") or the aggregate amount which IBM Credit would be likely to receive
(after giving consideration to reasonably likely delays in payment and
reasonable costs of enforcement) in the liquidation of such Collateral or Other
Collateral to recover the Obligations in full, or (3) on the rights and remedies
of IBM Credit under this Agreement or any Other Documents.
"Maximum Advance Amount": at any time, the lesser of (1) the Credit Line and (2)
the Borrowing Base at such time.
"Merger Documents": shall mean the (i) Agreement and Plan of Merger and
Reorganization among Borrower and BSD dated September 25, 2001 and (ii) the
Certificate of Merger of BSD with and into Borrower dated September 25, 2001;
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"Obligations": all covenants, agreements, warranties, duties, representations,
loans, advances, interest (including interest accruing on or after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding),
fees, reasonable expenses, indemnities, liabilities and Indebtedness of any kind
and nature whatsoever now or hereafter arising, owing, due or payable from any
Loan Party to IBM Credit.
"Open Approvals": Product Advances committed to be made by IBM Credit under this
Agreement for which (1) Products have not been delivered by Authorized Supplier
to Borrower or (2) Products have been delivered to Borrower but for which IBM
Credit has not received the invoice associated with such Products from
Authorized Supplier.
"Other Charges": as set forth in Attachment A.
"Other Documents": all security agreements, mortgages, leases, instruments,
documents, guarantees, schedules of assignment, contracts and similar agreements
executed by any Loan Party and delivered to IBM Credit, pursuant to this
Agreement, including, without limitation, the collateralized guaranty executed
by Holdings in favor of IBM Credit, the collateralized guaranty executed by PFS
in favor of IBM Credit, the corporate guaranty executed by PFSweb in favor of
IBM Credit, the notes payable subordination agreement between IBM Credit and
PFS, the Holdings Stock Pledge Agreement, the Borrower Stock Pledge Agreement
and all amendments, supplements and other modifications to the foregoing from
time to time.
"Outstanding Advances": at any time of determination, the sum of (1) the unpaid
principal amount of all Outstanding A/R Advances and Outstanding Product
Advances made by IBM Credit under this Agreement, and (2) any finance charge,
fee, expense or other amount related to Advances charged to Borrower's account
with IBM Credit.
"Outstanding A/R Advances": at any time of determination, the sum of (1) the
unpaid principal amount of all A/R Advances made by IBM Credit under this
Agreement; and (2) any finance charge, fee, expense or other amount related to
A/R Advances charged to Borrower's account with IBM Credit.
"Outstanding Product Advances": at any time of determination, the sum of (1) the
unpaid principal amount of all Product Advances made (including Open Approvals
issued) by IBM Credit under this Agreement; and (2) any finance charge, fee,
expense or other amount related to Product Advances charged to Borrower's
account with IBM Credit.
"Patents": (i) all letters patent including, without limitation, all utility
patents, design patents, industrial designs and utility model registrations of
the United States or any other country, or any political subdivision thereof and
all reissues and extensions thereof, including, without limitation, those listed
on Attachment B, (ii) all applications for letters patent of the United States
or any other country and all divisions, continuations and continuations-in-part
thereof, including, without limitation, those listed on Attachment B, and (iii)
all rights to obtain any reissues, reexaminations, or extensions of the
foregoing.
"PBGC": as defined in Section 6.12.
"Permitted Indebtedness": shall mean any of the following:
(1) Indebtedness to IBM Credit;
(2) Indebtedness of BSD Europe to IBM Nederland Financieringen B.V. ("INF") and
the guaranty thereof by Holdings in a principal amount not to exceed the lesser
of (a) 17,000,000 Euros and (b) the amount of the credit line between BSD Europe
and INF;
(3) Indebtedness described in Section VIII of Attachment B;
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(4) Indebtedness to any Floor Plan Lender;
(5) Purchase Money Indebtedness;
(6) guaranties in favor of IBM Credit;
(7) other Indebtedness consented to by IBM Credit in writing prior to incurring
such Indebtedness; and
(8) unsecured Indebtedness in respect of any interest rate protection, future,
option, swap, cap or hedge agreement or arrangement under which any Loan Party
is a party or beneficiary.
"Permitted Liens": shall mean any of the following:
(1) Liens which are the subject of an Intercreditor Agreement, in effect from
time to time between IBM Credit and any other secured creditor;
(2) Purchase Money Security Interests;
(3) Liens described in Section II of Attachment B;
(4) Liens of warehousemen, mechanics, materialmen, workers, repairmen, common
carriers, landlords and other similar Liens arising by operation of law or
otherwise, not waived in connection herewith, for amounts that are not yet due
and payable or being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted if an adequate reserve or other appropriate
provisions shall have been made therefor as required to be in conformity with
GAAP and an adverse determination in such proceedings could not reasonably be
expected to have a Material Adverse Effect;
(5) attachment or judgment Liens individually or in the aggregate not in excess
of $250,000 (exclusive of (A) any amounts that are duly bonded to the
satisfaction of IBM Credit or (B) any amount fully covered by insurance as to
which the insurance company has acknowledged its obligation to pay such judgment
in full);
(6) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount and which do not materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of Borrower;
(7) extensions and renewals of the foregoing Permitted Liens; provided that (A)
the aggregate amount of such extended or renewed Liens do not exceed the
original principal amount of the Indebtedness which it secures, (B) such Liens
do not extend to any property other than property already previously subject to
the Lien and (C) such extended or renewed Liens are on terms and conditions no
more restrictive than the terms and conditions of the Liens being extended or
renewed;
(8) Liens arising from deposits or pledges to secure bids, tenders, contracts,
leases, surety and appeal bonds and other obligations of like nature arising in
the ordinary course of the Borrower's business;
(9) Liens for taxes, assessments or governmental charges not delinquent or being
contested, in good faith, by appropriate proceedings promptly instituted and
diligently conducted if an adequate reserve or other appropriate provisions
shall have been made therefor as required in order to be in conformity with GAAP
and an adverse determination in such proceedings could not reasonably be
expected to have a Material Adverse Effect;
(10) Liens arising out of deposits in connection with workers' compensation,
unemployment insurance or other social security or similar legislation;
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(11) Liens arising pursuant to this Agreement; and
(12) other Liens in favor of any Affiliate of IBM Credit or otherwise consented
to by IBM Credit in writing prior to incurring such Lien.
"Person": any individual, association, firm, corporation, partnership, trust,
unincorporated organization or other entity whatsoever.
"PFS": as defined in the caption and a wholly-owned subsidiary of PFSweb.
"PFS Agreement": as defined in the Recitals of this Agreement.
"PFSweb": as defined in the caption.
"Plans": as defined in Section 6.12.
"Pledged Interests": all Equity Interests of or in any Person that may be issued
or granted to, or held or owned by , Borrower, including, without limitation,
the Equity Interests described on Attachment B hereto, and all certificates
representing such Equity Interests.
"Policies": all policies of insurance required to be maintained by Borrower
under this Agreement or any of the Other Documents.
"Prime Rate": as of the date of determination, the average of the rates of
interest announced by Citibank, N.A., Chase Manhattan Bank and Bank of America
National Trust & Savings Association (or any other bank which IBM Credit uses in
its normal course of business of determining Prime Rate) as their prime or base
rate, as of the last Business Day of the calendar month immediately preceding
the date of determination, whether or not such announced rates are the actual
rates charged by such banking institutions to their most creditworthy borrowers.
"PRO Advance": an A/R Advance, with a PRO Advance Term, made by IBM Credit to
itself on behalf of Borrower to repay all or a portion of a Product Advance that
is due and payable.
"PRO Advance Term": for each PRO Advance, a period, in increments of ten days as
specified by Borrower in the Request for A/R Advance with respect to such PRO
Advance, but in no event in excess of thirty days, commencing on the A/R Advance
Date for such PRO Advance.
"Proceeds": all "proceeds" as such term is defined in the UCC and, in any event,
shall include, without limitation, all dividends, distributions and payments on,
from or with respect to Investment Property.
"Products": as defined in the recitals of this Agreement.
"Product Advance": any advance of funds made or committed to be made by IBM
Credit for the account of Borrower to an Authorized Supplier in respect of an
invoice delivered or to be delivered by such Authorized Supplier to IBM Credit
describing Products purchased by Borrower, including without limitation Open
Approvals.
"Product Financing Charge": as defined on Attachment A.
"Product Financing Period": for each Product Advance, a period of days equal to
that set forth in Attachment A from time to time, commencing on the invoice date
of such Product Advance.
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"Purchase Money Indebtedness": any Indebtedness (including capital leases)
incurred to finance the acquisition of assets (other than assets manufactured or
distributed by or bearing any trademark or trade name of any Authorized
Supplier) to be used in the Borrower's business not to exceed the lesser of (1)
the purchase price or acquisition cost of such asset and (2) the fair market
value of such asset.
"Purchase Money Security Interest": any security interest securing Purchase
Money Indebtedness, which security interest applies solely to the particular
asset acquired with the Purchase Money Indebtedness.
"Request for A/R Advance": as defined in Section 2.3.
"Requirement of Law": as to any Person, the articles of incorporation and
by-laws of such Person, and any law, treaty, rule or regulation or determination
of an arbitrator or a court or other governmental authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"Sales Agreements": shall mean collectively (i) the Agreement dated as of August
20, 2001 between IBM and the Borrower for Sales Force Services and (ii) the
Sales Force Agreement dated as of August 20, 2001 between the Borrower and
Global Marketing Services.
"Shortfall Amount": as defined in Section 2.6.
"Shortfall Transaction Fee": as defined in Attachment A.
"Special Account": as defined in Section 3.3.
"Subsidiary": with respect to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Supplier Credits": as defined in Section 2.2.
"Supporting Obligation": any Letter of Credit Right or secondary obligation that
supports the payment or performance of an Account, chattel paper, a document, a
General Intangible, an instrument, Investment Property, or any other Collateral.
"Termination Date": shall mean One Hundred Twenty (120) days from the date of
this Agreement or such other date as IBM Credit and Loan Parties may agree to in
writing from time to time.
"Trademarks": (i) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, service marks, logos, words, terms,
names, symbols and devices and all combinations thereof, and all other source or
business identifiers, and all goodwill of the business connected with the use
thereof as symbolized thereby, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, including, without
limitation those listed on Attachment B, and (ii) the right to obtain all
renewals and extensions thereof.
"Transaction Documents": shall mean collectively the IBM Agreement, the PFS
Agreement and the Sales Agreements.
"Voting Stock": securities, the holders of which are ordinarily, in the absence
of contingencies, entitled to elect the corporate directors (or persons
performing similar functions).
"WCO Advance": an A/R Advance, with a WCO Advance Term.
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"WCO Advance Term": for each WCO Advance, a period of one hundred eighty (180)
days commencing on the A/R Advance Date for such WCO Advance.
1.2. OTHER DEFINED TERMS. Terms not otherwise defined in this Agreement which
are defined in the Uniform Commercial Code as in effect in the State of New York
on the date of this Agreement (the "U.C.C.") shall have the meanings assigned to
them therein.
1.3. ATTACHMENTS. All attachments, exhibits, schedules and other addenda hereto,
including, without limitation, Attachment A and Attachment B, are specifically
incorporated herein and made a part of this Agreement.
SECTION 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES
2.1. CREDIT LINE. Subject to the terms and conditions set forth in this
Agreement, on and after the Closing Date to but not including the date that is
the earlier of (x) the date on which this Agreement is terminated pursuant to
Section 10 and (y) the date on which IBM Credit terminates the Credit Line
pursuant to Section 9, IBM Credit agrees to extend to the Borrower a credit line
("Credit Line") in the amount set forth in Attachment A pursuant to which IBM
Credit will make to the Borrower, from time to time, Advances in an aggregate
amount at any one time outstanding not to exceed the Maximum Advance Amount.
Notwithstanding any other term or provision of this Agreement, IBM Credit may,
at any time and from time to time, in its sole discretion (x) temporarily
increase the amount of the Credit Line above the amount set forth in Attachment
A and decrease the amount of the Credit Line back to the amount of the Credit
Line set forth in Attachment A, in each case upon written notice to the Borrower
and (y) make Advances pursuant to this Agreement upon the request of Borrower in
an aggregate amount at any one time outstanding in excess of the Credit Line.
2.2. PRODUCT ADVANCES. (A) Subject to the terms and conditions of this
Agreement, IBM Credit shall make Product Advances in connection with Borrower's
purchase of Products from Authorized Suppliers upon at least a two-day prior
written notice from Authorized Suppliers. Borrower hereby authorizes and directs
IBM Credit to pay the proceeds of Product Advances directly to the applicable
Authorized Supplier in respect of invoices delivered to IBM Credit for such
Products by such Authorized Supplier and acknowledges that (i) any delivery to
IBM Credit of an invoice by an Authorized Supplier shall be deemed as a request
for a Product Advance by Borrower, and (ii) each such Product Advance
constitutes a loan by IBM Credit to Borrower pursuant to this Agreement as if
the Borrower received the proceeds of the Product Advance directly from IBM
Credit. IBM Credit may, upon written notice to Borrower, cease to include a
supplier as an Authorized Supplier.
(B) No finance charge shall accrue on any Product Advance during the
Free Financing Period, if any, applicable to such Product Advance. Each Product
Advance shall be due and payable on the Common Due Date for such Product
Advance. Borrower may at its option, repay each Product Advance by requesting
IBM Credit to apply all or any part of the principal amount of an A/R Advance to
the Outstanding Product Advances. Borrower's request for such application shall
be made in accordance with Section 2. When so requested and subject to the terms
and conditions of this Agreement, IBM Credit shall apply the amount so requested
to the amounts due in respect of the Outstanding Product Advances. Nothing
contained herein shall relieve Borrower of its obligation to repay Product
Advances when due. Each Product Advance shall accrue a finance charge on the
Average Daily Balance thereof from and including the first (1st) day following
the end of the Free Financing Period, if any, for such Product Advance, or if no
such Free Financing Period shall be in effect, from and including the date of
invoice for such Product Advance, in each case, to and including the date such
Product Advance shall become due and payable in accordance with the terms of
this Agreement, at a per annum rate equal to the lesser of (a) the finance
charge set forth in Attachment A to this Agreement as the "Product Financing
Charge" and (b) the highest rate from time to time permitted by applicable law.
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In addition, for any Product Advance with respect to which a Free Financing
Period shall not be in effect, Borrower shall pay a Free Financing Period
Exclusion Fee. Such fee shall be due and payable on the Common Due Date for such
Product Advance. If it is determined that amounts received from Borrower were in
excess of the highest rate permitted by law, then the amount representing such
excess shall be considered reductions to principal of Advances.
(C) Borrower acknowledges that IBM Credit does not warrant the
Products. Borrower shall be obligated to pay IBM Credit in full even if the
Products are defective or fail to conform to the warranties extended by the
Authorized Supplier. The Obligations of Borrower shall not be affected by any
dispute Borrower may have with any manufacturer, distributor or Authorized
Supplier. Borrower will not assert any claim or defense which it may have
against any manufacturer, distributor or Authorized Supplier against IBM Credit.
(D) Borrower hereby authorizes IBM Credit to collect directly from any
Authorized Supplier any credits, rebates, bonuses or discounts owed by such
Authorized Supplier to Borrower ("Supplier Credits"). Any Supplier Credits
received by IBM Credit may be applied by IBM Credit to the Outstanding Advances.
Any Supplier Credits collected by IBM Credit shall in no way reduce Borrower's
debt to IBM Credit in respect of the Outstanding Advances until such Supplier
Credits are applied by IBM Credit; provided, however, that in the event any such
Supplier Credits must be returned or disgorged or are otherwise unavailable for
application, then Borrower's Obligations will be reinstated as of the date that
IBM Credit actually returns or repays such Supplier Credits. Upon the Borrower's
request, and provided there is no Event of Default or dispute with respect to
such Supplier Credits, IBM Credit shall remit the Supplier Credits directly to
Borrower within five (5) Business Days of IBM Credit's receipt of such Supplier
Credits.
(E) IBM Credit may apply any payments and Supplier Credits received by
IBM Credit to reduce finance charges first and then to principal amounts of
Advances owed by Borrower. IBM Credit may apply principal payments to the oldest
(earliest) invoices (and related Product Advances) first, but, in any case, all
principal payments will be applied in respect of the Outstanding Product
Advances made for Products which have been sold, lost, stolen, destroyed,
damaged or otherwise disposed of prior to any other application thereof.
(F) Borrower will indemnify and hold IBM Credit harmless from and
against any claims or demands asserted by any Person relating to or arising from
the Products for any reason whatsoever, including, without limitation, the
condition of the Products, any misrepresentation made about the Products by any
representative of Borrower, or any act or failure to act by Borrower except to
the extent such claims or demands are directly attributable to IBM Credit's
gross negligence or willful misconduct. Nothing contained in the foregoing shall
impair any rights or claims which the Borrower may have against any
manufacturer, distributor or Authorized Supplier.
2.3. A/R ADVANCES. (A) Whenever Borrower shall desire IBM Credit to provide an
A/R Advance, Borrower shall deliver to IBM Credit written notice of Borrower's
request for such an Advance ("Request for A/R Advance"). For any requested A/R
Advance pursuant to which monies will be disbursed to Borrower or any Person
other than IBM Credit, a Request for A/R Advance shall be delivered to IBM
Credit on or prior to 1:00 p.m. (eastern time) one Business Day prior to the
requested A/R Advance Date. The Request for A/R Advance shall specify (i) the
requested A/R Advance Date; (ii) the amount of the requested A/R Advance; (iii)
whether such A/R Advance is a WCO Advance or a PRO Advance; (iv) if applicable,
the PRO Advance Term for such A/R Advance; (v) for each PRO Advance, the month,
day and year of the Common Due Date, as set forth in Borrower's applicable
billing statement from IBM Credit, for the Product Advance to which the PRO
Advance is to be applied; and (vi) if applicable, the amount of the requested
A/R Advance that should be applied to the Outstanding Product Advances (provided
that all PRO Advances shall be applied to Outstanding Product Advances).
Borrower may deliver a Request for A/R Advance via facsimile. Any Request for
A/R Advance delivered to IBM Credit shall be irrevocable. Notwithstanding any
other provision of this Agreement, Borrower shall not (i) request more than one
PRO
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Advance in respect of any Product Advance; and (ii) request a PRO Advance for
any Common Due Date on which Borrower will take a discount offered by IBM Credit
for invoice amounts paid in full within fifteen days of the invoice date under
IBM Credit's High Turnover Option ("HTO") Program.
(B) Subject to the terms and conditions of this Agreement, on the A/R
Advance Date specified in a Request for A/R Advance, IBM Credit shall make the
principal amount of each A/R Advance available to the Borrower in immediately
available funds to an account maintained by Borrower. If IBM Credit is making an
A/R Advance hereunder on a day on which Borrower is to repay all or any part of
an Outstanding Advance (or any other amount owing hereunder), IBM Credit shall
apply the proceeds of the A/R Advance to such repayment and only an amount equal
to the difference, if any, between the amount of the A/R Advance and the amount
being repaid shall be made available to Borrower as provided in the immediately
preceding sentence. With respect to the WCO Advances made by IBM Credit on the
Closing Date, the Borrower hereby authorizes and directs IBM Credit to pay the
proceeds of such WCO Advance directly to IBM ("IBM Payment"). Such WCO Advance
constitutes a loan by IBM Credit to Borrower pursuant to this Agreement as if
the Borrower receives the proceeds of such WCO Advance directly from IBM Credit.
(C) Each A/R Advance shall accrue a finance charge on the Average Daily
Balance thereof, from and including the date of each A/R Advance to and
including the date such A/R Advance is due and payable in accordance with the
terms of this Agreement, at a per annum rate equal to the lesser of (a) the
finance charge set forth in Attachment A to this Agreement under the caption
"A/R Finance Charge" for such type of A/R Advance, and (b) the highest rate from
time to time permitted by applicable law. If it is determined that amounts
received from the Borrower were in excess of such highest rate, then the amount
representing such excess shall be considered reductions to principal of
Advances.
(D) Unless otherwise due and payable at an earlier date, the unpaid
principal amount of each A/R Advance shall be due and payable on the applicable
Common Due Date. Unless otherwise notified by Borrower in writing prior to the
day the principal amount of any WCO Advance becomes due and payable, the
Borrower shall be deemed to have provided IBM Credit with a Request for WCO
Advance requesting a WCO Advance on the day such principal amount is due and
payable in an amount equal to the unpaid principal amount of the WCO Advance so
due. Subject to the terms and conditions of this Agreement, the principal amount
of such WCO Advance shall automatically renew for an additional WCO Advance
Term.
2.4. FINANCE AND OTHER CHARGES. (A) Finance charges for an Advance for a
calendar month shall be equal to (i) one twelfth (1/12) of the applicable
Product Financing Charge or A/R Finance Charge multiplied by (ii) the Average
Daily Balance of such Advance for the period when such finance charge accrues
during such calendar month multiplied by (iii) the actual number of days during
such calendar month when such finance charge accrues divided by (iv) thirty
(30).
Late charges pursuant to subsection (D) of this Section 2.4 for an Advance for a
calendar month shall be equal to (i) one twelfth (1/12) of the Delinquency Fee
Rate multiplied by (ii) the Average Daily Balance of such Advance for the period
when such Advance is past due during such calendar month multiplied by (iii) the
actual number of days during such calendar month when such Advance is past due
divided by (iv) thirty (30).
(B) The Borrower hereby agrees to pay to IBM Credit the charges set
forth as "Other Charges" in Attachment A. The Borrower also agrees to pay IBM
Credit additional charges for any returned items of payment received by IBM
Credit. The Borrower hereby acknowledges that any such charges are not interest
but that such charges, if unpaid, will constitute part of the Outstanding
Advances.
(C) The finance charges and Other Charges owed under this Agreement,
and any charges hereafter agreed to in writing by the parties, are payable
monthly on receipt of IBM Credit's bill or statement therefor or IBM Credit may,
in its sole discretion, add unpaid finance charges and Other Charges to the
Borrower's Outstanding Advances.
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(D) If any amount owed under this Agreement, including, without
limitation, any Advance, is not paid when due (whether at maturity, by
acceleration or otherwise), the unpaid amount thereof will bear a late charge
from and including the day after such Advance was due and payable to and
including the date IBM Credit receives payment thereof, at a per annum rate
equal to the lesser of (a) the amount set forth in Attachment A to this
Agreement as the "Delinquency Fee Rate" and (b) the highest rate from time to
time permitted by applicable law. In addition, if any Shortfall Amount shall not
be paid when due pursuant to Section 2.6 hereof, Borrower shall pay IBM Credit a
Shortfall Transaction Fee. If it is determined that amounts received from
Borrower were in excess of such highest rate, then the amount representing such
excess shall be considered reductions to principal of Advances.
2.5. BORROWER ACCOUNT STATEMENTS. IBM Credit will send statements of each
transaction hereunder as well as monthly billing statements to Borrower with
respect to Advances and other charges due on Borrower's account with IBM Credit.
Each statement of transaction and monthly billing statement shall be deemed,
absent manifest error, to be correct and shall constitute an account stated with
respect to each transaction or amount described therein unless within seven (7)
Business Days after such statement of transaction or billing statement is
received by Borrower, Borrower provides IBM Credit written notice objecting that
such amount or transaction is incorrectly described therein and specifying the
error(s), if any, contained therein. IBM Credit may at any time adjust such
statements of transaction or billing statements to comply with applicable law
and this Agreement.
2.6. SHORTFALL. If, on any date, the Outstanding Advances shall exceed the
Maximum Advance Amount (such excess, the "Shortfall Amount"), then the Borrower
shall on such date prepay the Outstanding Advances in an amount equal to such
Shortfall Amount. If Borrower does not pay the Shortfall Amount on such date,
PFSweb agrees unconditionally and irrevocably to pay the Shortfall Amount upon
written demand by IBM Credit.
2.7. APPLICATION OF PAYMENTS. Borrower hereby agrees that all checks and other
instruments delivered to IBM Credit on account of Borrower's Obligations shall
constitute conditional payment until such items are actually collected by IBM
Credit. Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by IBM Credit on account of the
Borrower's Obligations. Borrower agrees that IBM Credit shall have the
continuing exclusive right to apply and reapply any and all such payments to
Borrower's Obligations in such manner as IBM Credit may deem advisable
notwithstanding any entry by IBM Credit upon any of its books and records.
2.8. PREPAYMENT AND REBORROWING BY BORROWER. (A) Borrower may at any time
prepay, without notice or penalty, in whole or in part amounts owed under this
Agreement. IBM Credit may apply payments made to it (whether by the Borrower or
otherwise) to pay finance charges and other amounts owing under this Agreement
first and then to the principal amount owed by the Borrower.
(B) Subject to the terms and conditions of this Agreement, any amount
prepaid or repaid to IBM Credit in respect to the Outstanding Advances may be
reborrowed by Borrower in accordance with the provisions of this Agreement.
SECTION 3. CREDIT LINE ADDITIONAL PROVISIONS
3.1. (A) INELIGIBLE ACCOUNTS. IBM Credit and Borrower agree that IBM Credit
shall have the sole right to determine eligibility of Accounts from an Account
Debtor for purposes of determining the Borrowing Base; provided that IBM Credit
shall exercise such discretion in good faith and, provided further, however,
without limiting such right, the following Accounts will be deemed to be
ineligible for purposes of determining the Borrowing Base:
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(1) Accounts created from the sale of goods and/or performance of
services on non-standard terms or that allow for payment to be made more than
thirty (30) days from the date of such sale or performance of services;
(2) Accounts unpaid more than ninety (90) days from date of invoice;
(3) Accounts payable by an Account Debtor if fifty percent (50%) or
more of the aggregate outstanding balance of all such Accounts and Acquired
Accounts payable by the same account debtor remain unpaid for more than ninety
(90) days from the date of invoice;
(4) Accounts payable by an Account Debtor that is an Affiliate of any
Loan Party, or an officer, employee, agent, guarantor, stockholder of Loan Party
or an Affiliate of any Loan Party, or is related to or has common shareholders,
officers or directors with any Loan Party;
(5) Accounts arising from consignment sales;
(6) Except for state, local and United States government institutions
and public educational institutions, Accounts with respect to which the payment
by the Account debtor is or may be conditional;
(7) Except for state, local and United States government institutions
and public educational institutions, Accounts with respect to which:
(i) the Account debtor is not a commercial entity, or
(ii) the Account debtor is not a resident of the United
States;
(8) Accounts payable by any Account Debtor to which any Loan Party is
or shall become liable for goods sold or services rendered by such Account
Debtor to any Loan Party , except for Accounts payable by IBM provided that IBM
Credit has received evidence satisfactory to it that IBM has waived in writing
its right to setoff such amounts owed to Borrower with any amount Borrower may
owe to IBM;
(9) Accounts arising from the sale or lease of goods purchased for a
personal, family or household purpose;
(10) Accounts arising from the sale or other disposition of goods that
have been used for demonstration purposes or loaned or leased by the Borrower to
another party;
(11) Accounts which are progress payment accounts or contra accounts;
(12) Accounts upon which IBM Credit does not have a valid, perfected,
first priority security interest;
(13) Accounts payable by an Account Debtor that any Loan Party knows is
subject to proceedings under United States Bankruptcy Law or other law for the
relief of debtors;
(14) Accounts that are not payable in US dollars;
(15) Accounts payable by any Account Debtor that is a remarketer of
computer hardware and software products and whose purchases of such products
from Borrower have been financed by another person, other than IBM Credit, who
pays the proceeds of such financing directly to Borrower on behalf of such
debtor ("Third Party Financer") unless (i) such Third Party Financer does not
have a separate financing relationship with Borrower or (ii) such Third Party
Financer has a separate financing relationship with Borrower and has waived its
right to set off its obligations to Borrower;
Page 15 of 47
(16) Accounts arising from the sale or lease of goods which are billed
to any Account Debtor but have not yet been shipped by Borrower or PFS;
(17) Accounts with respect to which Borrower or PFS has permitted or
agreed to any extension, compromise or settlement, or made any change or
modification of any kind or nature, including, but not limited to, any change or
modification to the terms relating thereto, unless agreed to in writing by IBM
Credit;
(18) Accounts that do not arise from undisputed bona fide transactions
completed in accordance with the terms and conditions contained in the invoices,
purchase orders and contracts relating thereto;
(19) Accounts that are discounted for the full payment term specified
in Borrower's terms and conditions with its Account Debtors, or for any longer
period of time;
(20) Accounts on cash on delivery (C.O.D.) terms;
(21) Accounts arising from maintenance or service contracts that are
billed in advance of full performance of service;
(22) Accounts arising from bartered transactions;
(23) Accounts arising from price protection payments, incentive
payments, rebates, discounts, credits, and refunds from a supplier, except for
Accounts arising from incentive payments, rebates invoiced on a monthly basis,
discounts, credits, and refunds in each case owed by IBM to Borrower provided
that (i) Borrower obtains (and provides to IBM Credit along with the monthly
Collateral Management Report required under Section 7.1(O)) from IBM written
confirmation (a) acknowledging the obligation of IBM to pay such amount, (b)
stating the date the amount is due to be paid and (c) IBM waiving its right to
setoff such amounts owed to Borrower with any amount Borrower may owe to IBM;
(ii) such Accounts do not remain unpaid for more than sixty (60) days from the
date the obligation of IBM occurred; and (iii) such Accounts are deposited
directly into the Lockbox; and,
(24) Any and all other Accounts that IBM Credit deems, in its sole and
absolute discretion, to be ineligible.
In the event IBM Credit determines in its sole discretion to deem certain
Accounts to be ineligible pursuant to the introductory paragraph or paragraph
(24) above, IBM Credit will provide written notification to Borrower of its
determination of ineligibility of such Accounts and such ineligibility shall be
applied to such Accounts arising from invoices dated one Business Day after the
date of such notification.
The aggregate of all Accounts that are not ineligible Accounts shall hereinafter
be referred to as "Eligible Accounts".
(B) INELIGIBLE ACQUIRED ACCOUNTS. IBM Credit and Borrower agree that
IBM Credit shall have the sole right to determine eligibility of Acquired
Accounts from a BSD Account Debtor for purposes of determining the Borrowing
Base; provided that IBM Credit shall exercise such discretion in good faith and,
provided further, however, without limiting such right, the following Acquired
Accounts will be deemed to be ineligible for purposes of determining the
Borrowing Base:
(1) Acquired Accounts created from the sale of goods and/or performance
of services on non-standard terms or that allow for payment to be made more than
thirty (30) days from the date of such sale or performance of services;
(2) Acquired Accounts unpaid more than ninety (90) days from date of
invoice;
Page 16 of 47
(3) Acquired Accounts payable by a BSD Account Debtor if fifty percent
(50%) or more of the aggregate outstanding balance of all such Acquired Accounts
and Accounts payable by such same account debtor remain unpaid for more than
ninety (90) days from the date of invoice;
(4) Acquired Accounts payable by a BSD Account Debtor that is an
Affiliate of any Loan Party or BSD, or an officer, employee, agent, guarantor,
stockholder of Loan Party or an Affiliate of any Loan Party or BSD, or is
related to or has common shareholders, officers or directors with any Loan
Party;
(5) Acquired Accounts arising from consignment sales;
(6) Except for state, local and United States government institutions
and public educational institutions, Acquired Accounts with respect to which the
payment by the BSD Account Debtor is or may be conditional;
(7) Except for state, local and United States government institutions
and public educational institutions, Accounts with respect to which:
(i) the BSD Account Debtor is not a commercial entity, or
(ii) the BSD Account Debtor is not a resident of the United
States;
(8) Acquired Accounts payable by any BSD Account Debtor to which any
Loan Party or BSD is or shall become liable for goods sold or services rendered
by such BSD Account Debtor to any Loan Party or BSD, except for BSD Acquired
Accounts payable by IBM provided that IBM Credit has received evidence
satisfactory to it that IBM has waived in writing its right to setoff such
amounts owed to Borrower or BSD with any amount Borrower or BSD may owe to IBM;
(9) Acquired Accounts arising from the sale or lease of goods purchased
for a personal, family or household purpose;
(10) Acquired Accounts arising from the sale or other disposition of
goods that have been used for demonstration purposes or loaned or leased by the
Borrower or BSD to another party;
(11) Acquired Accounts which are progress payment accounts or contra
accounts;
(12) Acquired Accounts upon which IBM Credit does not have a valid,
perfected, first priority security interest;
(13) Acquired Accounts payable by an BSD Account Debtor that any Loan
Party knows is subject to proceedings under United States Bankruptcy Law or
other law for the relief of debtors;
(14) Acquired Accounts that are not payable in US dollars;
(15) Acquired Accounts payable by any BSD Account Debtor that is a
remarketer of computer hardware and software products and whose purchases of
such products from Borrower or BSD have been financed by another person, other
than IBM Credit, who pays the proceeds of such financing directly to Borrower or
BSD on behalf of such debtor ("Third Party Financer") unless (i) such Third
Party Financer does not have a separate financing relationship with Borrower or
BSD or (ii) such Third Party Financer has a separate financing relationship with
Borrower and has waived its right to set off its obligations to Borrower or BSD;
(16) Acquired Accounts arising from the sale or lease of goods which
are billed to any BSD Account Debtor but have not yet been shipped by Borrower
or PFS or BSD;
Page 17 of 47
(17) Acquired Accounts with respect to which Borrower or PFS or BSD has
permitted or agreed to any extension, compromise or settlement, or made any
change or modification of any kind or nature, including, but not limited to, any
change or modification to the terms relating thereto, unless agreed to in
writing by IBM Credit;
(18) Acquired Accounts that do not arise from undisputed bona fide
transactions completed in accordance with the terms and conditions contained in
the invoices, purchase orders and contracts relating thereto;
(19) Acquired Accounts that are discounted for the full payment term
specified in Borrower's or BSD's terms and conditions with its BSD Account
Debtors, or for any longer period of time;
(20) Acquired Accounts on cash on delivery (C.O.D.) terms;
(21) Acquired Accounts arising from maintenance or service contracts
that are billed in advance of full performance of service;
(22) Acquired Accounts arising from bartered transactions;
(23) Acquired Accounts arising from incentive payments, rebates,
discounts, credits, and refunds from a supplier, and
(24) Any and all other Acquired Accounts that IBM Credit deems, in its
sole and absolute discretion, to be ineligible.
The aggregate of all Acquired Accounts that are not ineligible Acquired Accounts
shall hereinafter be referred to as "Eligible Acquired Accounts".
Notwithstanding anything herein to the contrary, Eligible Acquired Accounts
shall not include any accounts receivable acquired by the Borrower after the
Second Conversion Date.
3.2. REIMBURSEMENT FOR CHARGES. Borrower agrees to pay for all costs and
expenses of Borrower's bank in respect to collection of checks and other items
of payment, all fees relating to the use and maintenance of the Lockbox and the
Special Account and with respect to remittances of proceeds of the Advances
hereunder.
3.3. LOCKBOX AND SPECIAL ACCOUNT. Borrower shall establish and maintain
lockbox(es) (each, a "Lockbox") at the address(es) set forth in Attachment A
with the financial institution(s) listed in Attachment A (each, a "Bank")
pursuant to an agreement between the Borrower and each Bank in form and
substance satisfactory to IBM Credit. Borrower shall also establish and maintain
a deposit account which shall contain only proceeds of Borrower's Accounts and
the Acquired Accounts ("Special Account") with each Bank. Borrower shall enter
into and maintain a blocked account agreement with each Bank for the benefit of
IBM Credit in form and substance satisfactory to IBM Credit pursuant to which,
among other things, such Bank shall agree that disbursements from the Special
Account shall be made only as IBM Credit shall direct.
3.4. COLLECTIONS. Each of PFS and the Borrower shall instruct all Account
Debtors and the BSD Account Debtors to remit payments directly to a Lockbox. In
addition, each of PFS and the Borrower shall have such instruction printed in
conspicuous type on all invoices relating to such Accounts and Acquired
Accounts. Borrower shall instruct such Bank to deposit all remittances to such
Bank's Lockbox into its Special Account. Each of Borrower and PFS further agrees
that it shall not deposit or permit any deposits of funds other than remittances
paid in respect of the Accounts and the Acquired Accounts into the Special
Account(s) or permit any commingling of funds with such remittances in any
Lockbox or Special Account.
Page 18 of 47
Without limiting the Borrower's foregoing obligations, if, at any time, PFS or
the Borrower receives a remittance directly from an Account Debtor or BSD
Account Debtor in payment of an Account or Acquired Account, then PFS or the
Borrower (as applicable) shall make entries on its books and records in a manner
that shall reasonably identify such remittances and shall keep a separate
account on its record books of all remittances so received and deposit the same
into a Special Account. Until so deposited into the Special Account, PFS or the
Borrower (as applicable) shall keep all remittances received in respect of such
Accounts and Acquired Accounts separate and apart from PFS's or the Borrower's
(as applicable) other property so that they are capable of identification as the
proceeds of Accounts and Acquired Accounts in which IBM Credit has a security
interest.
3.5. APPLICATION OF REMITTANCES AND CREDITS. PFS and Borrower shall apply all
remittances against the aggregate of Borrower's outstanding Accounts and
Acquired Accounts no later than the end of the next Business Day on which such
remittances are deposited into the Special Account. Each of PFS and Borrower
agrees to apply each remittance against its respective Account or Acquired
Account no later than three (3) Business Days from the date such remittance is
deposited into the Special Account. If, however, Borrower or PFS is unable to
identify the manner in which a remittance should be applied within three (3)
Business Days, Borrower shall clearly identify such unapplied amount on the
Collateral Management Report. In addition, PFS and Borrower shall promptly apply
any credits owing in respect to any Account or Acquired Account when due.
3.6. AUTHORIZATION TO FILE; POWER OF ATTORNEY. The Borrower authorizes IBM
Credit to file with any filing office such financing statements, amendments,
addenda and other records showing IBM Credit as secured party, and Borrower as
debtor and identifying IBM Credit's security interest in the Collateral that IBM
Credit deems necessary to perfect and maintain perfected the security interest
of IBM Credit in the Collateral. Each of the Borrower and PFS (as applicable)
hereby irrevocably appoints IBM Credit, with full power of substitution, as its
true and lawful attorney-in-fact with full power, in good faith and in
compliance with commercially reasonable standards, in the discretion of IBM
Credit, to:
(A) sign the name of Borrower on any document or instrument that IBM
Credit shall deem necessary or appropriate to perfect and maintain perfected the
security interest in the Collateral contemplated under this Agreement and the
Other Documents;
(B) subject to any agreement between IBM Credit and such Bank, direct
the Bank maintaining any Lockbox or Special Account to pay the funds on deposit
to IBM Credit for application to the Obligations; upon the occurrence and during
the continuance of an Event of Default as defined in Section 9.1 hereof:
(C) endorse the name of Borrower or PFS upon any of the items of
payment of proceeds of collateral and deposit the same in the Special Account
for application to the Obligations;
(D) demand payment, enforce payment and otherwise exercise all of
Borrower's or PFS's rights and remedies with respect to the collection of any
Accounts or Acquired Account;
(E) settle, adjust, compromise, extend or renew any Accounts or
Acquired Account;
(F) settle, adjust or compromise any legal proceedings brought to
collect any Accounts or Acquired Account;
(G) sell or assign any Accounts or Acquired Account upon such terms,
for such amounts and at such time or times as IBM Credit may deem advisable;
(H) discharge and release any Accounts or Acquired Account;
Page 19 of 47
(I) prepare, file and sign any such Loan Party's name on any Proof of
Claim in Bankruptcy or similar document against any Account Debtor or BSD
Account Debtor;
(J) prepare, file and sign any such Loan Party's name on any notice of
lien, claim of mechanic's lien, assignment or satisfaction of lien or mechanic's
lien, or similar document in connection with any Accounts or Acquired Account;
(K) endorse the name of Borrower or PFS upon any chattel paper,
document, instrument, invoice, freight bill, bill of lading or similar document
or agreement relating to any Account or Acquired Account or goods pertaining
thereto;
(L) endorse the name of Borrower or PFS upon any of the items of
payment of proceeds and deposit the same in the account of IBM Credit for
application to the Obligation;
(M) sign the name of Borrower or PFS to requests for verification of
Accounts or Acquired Account and notices thereof to Account Debtors or BSD
Account Debtors;
(N) sign the name of Borrower or PFS on any document or instrument that
IBM Credit shall deem necessary or appropriate to enforce any and all remedies
it may have under this Agreement, at law or otherwise;
(O) make, settle and adjust claims under the Policies with respect to
the Collateral and endorse any Loan Party's name on any check, draft, instrument
or other item of payment of the proceeds of the Policies with respect to the
Collateral; and
(P) take control in any manner of any term of payment or proceeds and
for such purpose to notify the postal authorities to change the address for
delivery of mail addressed to any such Loan Party to such address as IBM Credit
may designate.
The power of attorney granted by this Section is for value and coupled with an
interest and is irrevocable so long as this Agreement is in effect or any
Obligations remain outstanding. Nothing done by IBM Credit pursuant to such
power of attorney will reduce any Loan Party's Obligations other than Borrower's
payment Obligations to the extent IBM Credit has received monies.
3.7. CONCENTRATION ACCOUNTS. Without limiting IBM Credit's other rights, IBM
Credit reserves the right to, from time to time in its sole discretion,
exercised in good faith, modify the percentage of the amount of Borrower's
Concentration Accounts permitted to be used in calculating Borrower's Borrowing
Base ("Advance Rate") or eliminate Concentration Accounts in calculating
Borrower's Borrowing Base. In the event IBM Credit determines in its sole
discretion to modify the Advance Rate pertaining to a particular Concentration
Account, or eliminate Concentration Accounts in calculating Borrower's Borrowing
Base, IBM Credit will provide written notification to Borrower of the modified
Advance Rate (or such elimination) to be applied to Accounts and Acquired
Accounts arising from invoices dated one Business Day after the date of such
notification.
SECTION 4. SECURITY -- COLLATERAL
4.1. GRANT. To secure Borrower's full and punctual payment and performance of
the Obligations (including obligations under any leases Borrower may enter into,
now or in the future, with IBM Credit) when due (whether at the stated maturity,
by acceleration or otherwise), Borrower hereby grants IBM Credit a security
interest in all of Borrower's right, title and interest in and to the following
property, whether now owned or hereafter acquired or existing and wherever
located:
(A) all goods, including, all inventory and equipment, and all parts
thereof, attachments, accessories and accessions thereto, products thereof and
documents therefor;
Page 20 of 47
(B) all accounts, contract rights (including without limitation, the
PFS Agreement, the IBM Agreement and the other Transaction Documents), chattel
paper, instruments, negotiable documents, promissory notes, obligations of any
kind owing to Borrower, whether or not arising out of or in connection with the
sale or lease of goods or the rendering of services and all books, invoices,
documents and other records in any form evidencing or relating to any of the
foregoing;
(C) all General Intangibles;
(D) all Deposit Accounts;
(E) all Commercial Tort Claims;
(F) all Intellectual Property;
(G) all Investment Property;
(H) all Letter of Credit Rights;
(I) all Supporting Obligations;
(J) all other obligations of any kind owing to Borrower, whether or not
arising out of or in connection with the sale or lease of goods or the rendering
of services;
(K) all rights now or hereafter existing in and to all mortgages,
security agreements, leases, the PFS Agreement, the IBM Agreement, the other
Transaction Documents or other contracts securing or otherwise relating to any
of the foregoing; and
(L) all substitutions and replacements for all of the foregoing, and
all products or proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
All of the above assets shall be collectively defined herein as the
"Collateral". Borrower covenants and agrees with IBM Credit that: (a) the
security constituted to by this Agreement is in addition to any other security
from time to time held by IBM Credit and (b) the security hereby created is a
continuing security interest and will cover and secure the payment of all
Obligations both present and future of Borrower to IBM Credit and (c) any
transfer of assets between any Loan Party is subject to IBM Credit's continuing
security interest in the Collateral of the transferor as well as IBM Credit's
continuing security interest in the Collateral of the transferee.
PFS consents to the Borrower assigning all of its right, title, and interest in
and to the PFS Agreement, the IBM Agreement, and the other Transaction Documents
as Collateral to secure the payment of all Obligations of Borrower to IBM
Credit.
4.2. FURTHER ASSURANCES. Borrower and PFS shall, from time to time upon the
request of IBM Credit, execute and deliver to IBM Credit, or cause to be
executed and delivered, at such time or times as IBM Credit may request such
other and further documents, certificates and instruments that IBM Credit may
deem necessary to perfect and maintain perfected IBM Credit's security interests
in the Collateral and the Other Collateral and in order to fully consummate all
of the transactions contemplated under this Agreement and the Other Documents.
PFS and Borrower shall make appropriate entries on its books and records
disclosing IBM Credit's security interests in the Collateral.
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SECTION 5. CONDITIONS PRECEDENT
5.1. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT. The
effectiveness of this Agreement is subject to the receipt by IBM Credit of, or
waiver in writing by IBM Credit of compliance with, the following conditions
precedent:
(A) this Agreement executed and delivered by each Loan Party and IBM
Credit;
(B) a favorable opinion of counsel for Loan Parties in substantially
the form of Attachment H;
(C) a certificate of the secretary or an assistant secretary of each
Loan Party, substantially in the form and substance of Attachment I hereto,
certifying that, among other items, (i) each Loan Party is duly organized under
the laws of the State of its organization or incorporation and has its principal
place of business as stated therein, (ii) each Loan Party is registered to
conduct business in specified states and localities, (iii) true and complete
copies of the articles of incorporation, or corresponding organizational
documents, as applicable, and by-laws of each Loan Party are delivered
therewith, together with all amendments and addenda thereto as in effect on the
date thereof, (iv) the resolution as stated in the certificate is a true,
accurate and compared copy of the resolution adopted by each Loan Party's Board
of Directors or, if a Loan Party is a limited liability company, by such Loan
Party's authorized members, authorizing the execution, delivery and performance
of this Agreement and each Other Document executed and delivered in connection
herewith, and (v) the names and true signatures of the officers of each Loan
Party authorized to sign this Agreement and the Other Documents;
(D) certificates dated as of a recent date from the Secretary of State
or other appropriate authority evidencing the good standing of each Loan Party
in the jurisdiction of its organization and in each other jurisdiction where the
ownership or lease of its property or the conduct of its business requires it to
qualify to do business;
(E) a certified copy of the fully executed Daisytek Stock Purchase
Agreement by and among Daisytek, PFS, and Borrower in form and substance
satisfactory to IBM Credit in its sole discretion;
(F) the Borrower shall have acquired all of the stock of the BSD
Companies and BSD shall have merged into the Borrower with the Borrower being
the surviving entity;
(G) a certified copy of the Merger Documents in form and substance
satisfactory to IBM Credit in its sole discretion;
(H) an opinion of counsel in form and substance satisfactory to IBM
Credit and from counsel satisfactory to it which opinion shall include, without
limitation, an opinion hat (i) the Daisytek Stock Purchase Agreement and related
documents are legal, valid, binding and enforceable obligations of the parties
thereto, (ii) the Acquired Accounts are free of all liens, security interests
and encumbrances and (iii) IBM Credit has a first perfected priority security
interest in such Acquired Accounts;
(I) the consolidated Financial Statements of Borrower and BSD as of
Closing Date in form and substance satisfactory to IBM Credit in its sole
discretion;
(J) evidence satisfactory to IBM Credit that Loan Parties have paid any
amounts necessary to IBM so that once the IBM Payment is made, pursuant to
Section 2.3(B) upon the Closing Date, all accounts receivable owed to IBM by
Daisytek and BSD ("IBM Liability") shall be indefeasibly paid in full;
(K) fully executed Supplement to Master Distributor Agreements in form
and substance satisfactory to IBM Credit in its sole discretion and evidence
that all payments required thereunder have been indefeasibly paid in full;
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(L) copies of all approvals and consents from any Person, in each case
in form and substance satisfactory to IBM Credit, which are required to enable
each Loan Party to authorize, or required in connection with, (a) the execution,
delivery or performance of this Agreement and each of the Other Documents, and
(b) the legality, validity, binding effect or enforceability of this Agreement
and each of the Other Documents;
(M) IBM Credit shall have received evidence satisfactory to it that (i)
PFS shall have made or caused to be made an equity contribution to the Borrower
in immediately available funds in an amount equal to Seven Hundred Fifty
Thousand Dollars ($750,000), (ii) IFP shall have made or caused to be made an
equity contribution to the Borrower in immediately available funds in an amount
equal to Two Hundred Fifty Thousand Dollars ($250,000) and (iii) PFS shall have
made or caused to be made a loan to the Borrower in immediately available funds
in an amount equal to Six Million Dollars ($6,000,000) and such loan shall be
subordinated to the Obligations pursuant to the notes payable subordination
agreement referred to in (G) below;
(N) notes payable subordination executed by PFS in favor of IBM Credit
in form and substance satisfactory to IBM Credit in its sole discretion;
(O) Subordinated Demand Note executed by Borrower and endorsed payable
to IBM Credit;
(P) collateralized guaranty executed by each of Holdings and PFS in
favor of IBM Credit in form and substance satisfactory to IBM Credit in its sole
discretion;
(Q) corporate guaranty executed by PFSweb in favor of IBM Credit in
form and substance satisfactory to IBM Credit in its sole discretion;
(R) the pledge by Holdings of one hundred percent (100%) of the stock
of its Domestic Subsidiaries and sixty-five percent (65%) of the stock of each
of its Subsidiaries incorporated outside the USA (the "Holdings Stock Pledge
Agreement") along with undated stock powers and stock certificates with respect
to the shares of stock pledged in form and substance satisfactory to IBM Credit
in its sole discretion;
(S) Borrower Stock Pledge Agreement executed by Borrower in form and
substance satisfactory to IBM Credit in its sole discretion pursuant to which
Borrower shall pledge the stock in BSD (Canada), Inc. and Supplies Distributors
of Canada, Inc.;
(T) documentation satisfactory to IBM Credit in its sole discretion
evidencing Borrower's right, title and interest to accounts receivable
represented by invoices under the name of PFS;
(U) fully-executed Transaction Documents, satisfactory to IBM Credit in
its sole discretion;
(V) evidence that Borrower is a wholly-owned Subsidiary of Holdings;
(W) delivery of a copy of the PFS Agreement which agreement shall be in
form and substance satisfactory to IBM Credit in its sole discretion;
(X) acknowledgment executed by PFS pursuant to Section 9-313(C) of the
U.C.C. which acknowledgment shall be in form and substance satisfactory to IBM
Credit in its sole discretion;
(Y) a lockbox agreement executed by Borrower and each Bank, in form and
substance satisfactory to IBM Credit;
(Z) a blocked account agreement executed by Borrower and each Bank in
form and substance satisfactory to IBM Credit;
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(AA) IBM's consent to the Borrower assigning all of its right, title,
and interest in and to the IBM Agreement as Collateral to secure the payment of
all Obligations of Borrower to IBM Credit;
(BB) the Notice of Assignment as defined in Section 9.3(A)(ii) executed
by PFS in form and substance satisfactory to IBM Credit in its sole discretion;
(CC) absence of any material adverse change in any Loan Party's or any
Guarantor's condition (financial or otherwise), its operations, assets, income
and/or prospects;
(DD) UCC-1 financing statements for each jurisdiction reasonably
requested by IBM Credit executed by each of Holdings, PFS and the Borrower as
necessary to perfect the security interests contemplated by Section 4.1 of this
Agreement and contemplated under the collateralized guaranties;
(EE) control or other agreements for all other deposit accounts,
letter-of-credit rights, electronic chattel paper, inventory in the possession
of third parties;
(FF) all securities and commodities accounts containing investment
property described in Attachment B;
(GG) the statements, certificates, documents, instruments, financing
statements, agreements and information set forth in Attachment A and Attachment
B;
(HH) a certified copy of the organization chart of Loan Parties;
(II) IBM Credit shall have received evidence satisfactory to it that
Supplies Distributors is a registered D.B.A. name of the Borrower; and
(JJ) all such other statements, certificates, documents, instruments,
financing statements, agreements and other information with respect to the
matters contemplated by this Agreement as IBM Credit shall have reasonably
requested.
5.2. CONDITIONS PRECEDENT TO EACH ADVANCE. No Advance will be required to be
made or renewed by IBM Credit under this Agreement unless, on and as of the date
of such Advance, the following statements shall be true to the satisfaction of
IBM Credit:
(A) The representations and warranties contained in this Agreement or
in any Other Document are true and correct in all material respects on and as of
the date of such Advance as though made on and as of such date (except for any
representations or warranties which are made as of any specified date which
shall be true and correct in all material respects as of such specified date);
(B) No event has occurred and is continuing or after giving effect to
such Advance or the application of the proceeds thereof would result in or would
constitute a Default;
(C) No event has occurred and is continuing which could reasonably be
expected to have a Material Adverse Effect; and
(D) Both before and after giving effect to the making of such Advance,
no Shortfall Amount exists.
Except as Borrower has otherwise disclosed to IBM Credit in writing prior to
each request, each request (or deemed request pursuant to Section 2.2(A) or
2.3(D)) for an Advance hereunder and the receipt (or deemed receipt) by the
Borrower of the proceeds of any Advance hereunder shall be deemed to be a
representation and warranty by Borrower and each Loan Party that, as of and on
the date of such Advance, the statements
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set forth in (A) through (D) above are true statements. No such disclosures by
Borrower to IBM Credit shall in any manner be deemed to satisfy the conditions
precedent to each Advance that are set forth in this Section 5.2.
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce IBM Credit to enter into this Agreement, each Loan Party as to itself
and its Subsidiaries represents and warrants to IBM Credit as follows:
6.1. ORGANIZATION AND QUALIFICATIONS. The first paragraph of this Agreement
states the exact name of the Borrower, PFS, Holdings and each other Guarantor
who executes a collateralized guaranty as set forth in its charter or other
organizational record. In addition, Borrower's, PFS's and Holding's (and each
other Guarantor who executes a collateralized guaranty) organizational
identification number assigned by its State of organization is as set forth in
Attachment B. Each Loan Party and each of their Subsidiaries (i) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has the power and authority to own its
properties and assets and to transact the businesses in which it presently is
engaged and (iii) is duly qualified and is authorized to do business and is in
good standing in each jurisdiction where it presently is engaged in business and
is required to be so qualified. PFSweb directly owns one hundred percent (100%)
of the capital stock of PFS. Each of PFS and IFP directly owns Forty-nine
Percent (49%) and Fifty-one Percent (51%), respectively, of the membership
interest of Holdings and Holdings directly owns One Hundred Percent (100%) of
the capital stock of Borrower.
6.2. RIGHTS IN COLLATERAL; PRIORITY OF LIENS. Each of the Borrower and
Guarantors (other than PFSweb) owns the property granted by it respectively as
Collateral and Other Collateral to IBM Credit, free and clear of any and all
Liens in favor of third parties except for the Liens otherwise permitted
pursuant to Section 8.1. The Liens granted by each such Loan Party pursuant to
this Agreement, the Guaranties and the Other Documents in the Collateral and
Other Collateral constitute the valid and enforceable first, prior and perfected
Liens on the Collateral and Other Collateral, except to the extent any Liens
that are prior to IBM Credit's Liens are (i) the subject of an Intercreditor
Agreement or (ii) Purchase Money Security Interests in product of a brand that
is not financed by IBM Credit.
6.3. NO CONFLICTS. The execution, delivery and performance by each Loan Party of
this Agreement and each of the Other Documents (i) are within its power under
its organizational documents; (ii) are duly authorized by all necessary
corporate or limited liability company actions; (iii) are not in contravention
in any respect of any Requirement of Law or any indenture, contract, lease,
agreement, instrument or other commitment to which it is a party or by which it
or any of its properties are bound; (iv) do not require the consent,
registration or approval of any Governmental Authority or any other Person
(except such as have been duly obtained, made or given, and are in full force
and effect); and (v) will not, except as contemplated herein, result in the
imposition of any Liens upon any of its properties.
6.4. ENFORCEABILITY. This Agreement and all of the other documents executed and
delivered by the each Loan Party in connection herewith are the legal, valid and
binding obligations of each Loan Party, and are enforceable in accordance with
their terms, except as such enforceability may be limited by the effect of any
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting creditors' rights generally or the general
equitable principles relating thereto. In addition, the accounts payable arising
from the sale of product from IBM to Borrower are legal, valid, binding
obligations of Borrower.
6.5. LOCATIONS OF OFFICES, RECORDS AND INVENTORY. The addresses of the principal
place of business and chief executive office of each Loan Party (other than IFP)
is as set forth on Attachment B or on any written notice provided by any Loan
Party to IBM Credit pursuant to Section 7.7(C) of this Agreement. The books and
records of each Loan Party (other than IFP), and all of its chattel paper (other
than the chattel paper delivered to IBM Credit pursuant to Section 7.14(E)) and
records of Accounts and Acquired Accounts,
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are maintained exclusively at the locations set forth on Attachment B or on any
written notice provided by any Loan Party to IBM Credit pursuant to Section
7.7(C) of this Agreement .
There is no jurisdiction in which the Borrower or any Guarantor (other than
PFSweb) has any assets, equipment or inventory (except for vehicles and
inventory in transit for processing) other than those jurisdictions identified
on Attachment B or on any notice provided by any Loan Party to IBM Credit
pursuant to Section 7.7(C) of this Agreement. Attachment B, as amended from time
to time by any notice provided by any Loan Party to IBM Credit in accordance
with Section 7.7(C) of this Agreement, also contains a complete list of the
legal names and addresses of each warehouse at which Borrower's inventory is
stored. None of the receipts received by any Loan Party in respect of the
Collateral from any warehouseman states that the goods covered thereby are to be
delivered to bearer or to the order of a named person or to a named person and
such named person's assigns. PFS maintains the inventory and equipment included
within the Collateral segregated from other property of PFS and from property of
other clients of PFS and clearly identified as property of Borrower. PFS has not
issued any warehouse receipts or other documents covering the Collateral.
6.6. FICTITIOUS BUSINESS NAMES. Neither the Borrower nor any Guarantor (other
than PFSweb) has used any company or fictitious name during the five (5) years
preceding the date of this Agreement, other than those listed on Attachment B.
Supplies Distributors is a registered D.B.A. of the Borrower.
6.7. ORGANIZATION. If any Borrower or Guarantor or any of their Subsidiaries is
a corporation, all of the outstanding capital stock of such Loan Party or any of
its Subsidiaries has been validly issued, is fully paid and nonassessable.
6.8. NO JUDGMENTS OR LITIGATION. Except as set forth on Attachment B, no
judgments, orders, writs or decrees are outstanding against the Borrower or any
Guarantor nor is there now pending or, to the best of such Loan Party's
knowledge after due inquiry, threatened, any litigation, contested claim,
investigation, arbitration, or governmental proceeding by or against any such
Loan Party.
6.9. NO DEFAULTS. None of the Borrower or any Guarantor is in default under any
term of any indenture, contract, lease, agreement, instrument or other
commitment to which it is a party or by which it, or any of its properties are
bound, which default could reasonably be expected to have a Material Adverse
Effect. None of the Borrower or any Guarantor has any knowledge of any dispute
regarding any such indenture, contract, lease, agreement, instrument or other
commitment. No Default or Event of Default has occurred and is continuing.
6.10. LABOR MATTERS. Except as set forth on any notice provided by the Borrower
or any Guarantor to IBM Credit pursuant to Section 7.1(L) of this Agreement, no
such Loan Party is a party to any labor dispute. There are no strikes or
walkouts or labor controversies pending or threatened against the Borrower or
any Guarantor which could reasonably be expected to have a Material Adverse
Effect.
6.11. COMPLIANCE WITH LAW. No Loan Party has violated or failed to comply with
any Requirement of Law or any requirement of any self regulatory organization,
which violation or failure could reasonably be expected to have a Material
Adverse Effect.
6.12. ERISA. Each "employee benefit plan", "employee pension benefit plan",
"defined benefit plan", or "multi-employer benefit plan", which the Borrower or
any Guarantor has established, maintained, or to which it is required to
contribute (collectively, the "Plans") is in compliance with all applicable
provisions of ERISA and the Code and the rules and regulations thereunder as
well as the Plan's terms and conditions. There have been no "prohibited
transactions" and no "reportable event" has occurred within the last 60 months
with respect to any Plan. None of the Borrower or any Guarantor is a party to
any "multi-employer benefit plan".
As used in this Agreement the terms "employee benefit plan", "employee pension
benefit plan", "defined benefit plan", and "multi-employer benefit plan" have
the respective meanings assigned to them in Section 3
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of ERISA and any applicable rules and regulations thereunder. None of the
Borrower or any Guarantor has incurred any "accumulated funding deficiency"
within the meaning of ERISA or incurred any liability to the Pension Benefit
Guaranty Corporation (the "PBGC") in connection with a Plan (other than for
premiums due in the ordinary course).
6.13. COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as otherwise disclosed in
Attachment B:
(A) Each of the Borrower and Guarantors has obtained all government
approvals required with respect to the operation of their businesses under any
Environmental Law.
(B) (i) None of the Borrower or Guarantors has generated, transported
or disposed of any Hazardous Substances; (ii) None of the Borrower or Guarantors
is currently generating, transporting or disposing of any Hazardous Substances;
(iii) None of the Borrower or Guarantors has any knowledge that (a) any of its
real property (whether owned, leased, or otherwise directly or indirectly
controlled) has been used for the disposal of or has been contaminated by any
Hazardous Substances, or (b) any of its business operations have contaminated
lands or waters of others with any Hazardous Substances; (iv) None of the
Borrower or any Guarantor and its respective assets are subject to any
Environmental Liability and, to the best of their knowledge, any threatened
Environmental Liability; (v) None of the Borrower or any Guarantor has received
any notice of or otherwise learned of any governmental investigation evaluating
whether any remedial action is necessary to respond to a release or threatened
release of any Hazardous Substances for which they may be liable; (vi) None of
the Borrower or any Guarantor is in violation of any Environmental Law; (vii)
there are no proceedings or investigations pending against any such Loan Party
with respect to any violation or alleged violation of any Environmental Law;
provided however, that the parties acknowledge that any generation,
transportation, use, storage and disposal of certain such Hazardous Substances
in any such Loan Party's or its Subsidiaries' business shall be excluded from
representations (i) and (ii) above, provided, further, that each such Loan Party
is at all times generating, transporting, utilizing, storing and disposing such
Hazardous Substances in accordance with all applicable Environmental Laws and in
a manner designed to minimize the risk of any spill, contamination, release or
discharge of Hazardous Substances other than as authorized by Environmental
Laws.
6.14. INTELLECTUAL PROPERTY. Each of the Borrower and each Guarantor (other than
PFSweb) possesses such assets, licenses, Patents, patent applications,
Copyrights, service marks, Trademarks, trade names and trade secrets and all
rights, priorities and privileges and other property relating thereto or arising
therefrom ("Intellectual Property") as are necessary or advisable to continue to
conduct its present and proposed business activities. No material claim has been
asserted and is pending by any Person challenging or questioning the use of any
Intellectual Property or the validity or effectiveness of any Intellectual
Property, nor does Borrower or any such Guarantor know of any valid basis for
any such claim. All Intellectual Property is valid, subsisting, unexpired and
enforceable, and the use of Intellectual Property by Borrower and each Guarantor
(other than PFSweb) and each of their Subsidiaries does not infringe on the
rights of any Person in any material respect.
6.15. LICENSES AND PERMITS. Each Loan Party has obtained and holds in full force
and effect all franchises, licenses, leases, permits, certificates,
authorizations, qualifications, easements, rights of way and other rights and
approvals which are necessary for the operation of its businesses as presently
conducted, except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect. None of the Borrower or any Guarantor is in
violation of the terms of any such franchise, license, lease, permit,
certificate, authorization, qualification, easement, right of way, right or
approval.
6.16. INVESTMENT COMPANY. No Loan Party is (i) an investment company or a
company controlled by an investment company within the meaning of the Investment
Company Act of 1940, as amended, (ii) a holding company or a subsidiary of a
holding company, or an Affiliate of a holding company or of a subsidiary of a
holding company, within the meaning of the Public Utility Holdings Company Act
of 1935, as amended, or (iii) subject to any other law which purports to
regulate or restrict its ability to borrow money or
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to consummate the transactions contemplated by this Agreement or the Other
Documents or to perform its obligations hereunder or thereunder.
6.17. TAXES AND TAX RETURNS. Each Loan Party has timely filed all federal,
state, and local tax returns and other reports which it is required by law to
file, and has either duly paid all taxes, fees and other governmental charges
indicated to be due on the basis of such reports and returns or pursuant to any
assessment received by each Loan Party, or made provision for the payment
thereof in accordance with GAAP. The charges and reserves on the books of each
Loan Party in respect of taxes or other governmental charges are in accordance
with GAAP. No tax liens have been filed against any Loan Party or any of its
property.
6.18. STATUS OF ACCOUNTS AND ACQUIRED ACCOUNTS. (A) Each Account is based on an
actual and bona fide sale and delivery of goods or rendition of services to
customers, made by Borrower, in the ordinary course of its business; the goods
and inventory being sold by Borrower and the Accounts created thereby are its
exclusive property and are not and shall not be subject to any Lien, consignment
arrangement, encumbrance, security interest or financing statement whatsoever
(other than Permitted Liens). In respect of each Eligible Account, the
Borrower's customers have accepted goods or services and owe and are obligated
to pay the full amounts stated in the invoices according to their terms. There
are no proceedings or actions known to Borrower or any Guarantor which are
pending or threatened against any Material Account Debtor (as defined in Section
7.14(B) of this Agreement) of any of the Accounts or Acquired Accounts which
could reasonably be expected to result in a Material Adverse Effect.
(B) Each Acquired Account is based on an actual and bona fide sale and
delivery of goods or rendition of services to customers, made by BSD, in the
ordinary course of its business; the goods and the Acquired Accounts created
thereby are Borrower's exclusive property. Borrower is the sole, legal and
beneficial owner and has good title to the Acquired Accounts. The Acquired
Accounts are not and shall not be subject to any Lien, consignment arrangement,
encumbrance, security interest or financing statement whatsoever (other than
Permitted Liens). In respect of each Eligible Acquired Account, the BSD Account
Debtors (i) have accepted goods or services and owe and are obligated to pay the
full amounts stated in the invoices according to their terms and (ii) have no
right of set-off.
(C) PFS acknowledges that it does not have title to any of the
Collateral, including inventory and Products owned by Borrower or the Accounts
arising therefrom or to the Acquired Accounts, or any lien on the Collateral
(including the Products and the Accounts arising from the sale of Products or to
the Acquired Accounts) and has not pledged, encumbered or granted any security
interest in the Collateral (including the Products and the Accounts arising from
the sale of Products). PFS acknowledges and agrees that in performing its
services under the PFS Agreement and IBM Agreement, PFS has not acquired title
to any of the Products acquired by Borrower or to the Accounts or Acquired
Accounts or revenue arising from the resale thereof or to the Acquired Accounts.
6.19. AFFILIATE/SUBSIDIARY TRANSACTIONS. No Loan Party is a party to or bound by
any agreement or arrangement (whether oral or written) to which any Affiliate or
Subsidiary of such Loan Party is a party except (i) in the ordinary course of
and pursuant to the reasonable requirements of such Loan Party's business and
(ii) upon fair and reasonable terms no less favorable to such Loan Party than it
could obtain in a comparable arm's-length transaction with an unaffiliated
Person. Except as disclosed to IBM Credit by Borrower in writing from time to
time after the Closing Date, Attachment B sets forth with respect to each
Subsidiary of Borrower and Holdings (i) its name; (ii) if a registered
organization, the State of its formation; (iii) if a non-registered
organization, the State of its principal place of business and chief executive
offices; (iv) if a proprietorship, proprietor's principal place of residence;
and as to each Subsidiary the percentage of ownership by Borrower or Holdings,
as appropriate.
6.20. ACCURACY AND COMPLETENESS OF INFORMATION. All factual information
furnished by or on behalf of any Loan Party to IBM Credit or the Auditors for
purposes of or in connection with this Agreement or any
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Other Document, or any transaction contemplated hereby or thereby is or will be
true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information not misleading at such time.
6.21. RECORDING TAXES. All recording taxes, recording fees, filing fees and
other charges payable in connection with the filing and recording of this
Agreement have either been paid in full by Loan Parties or arrangements for the
payment of such amounts by Loan Parties have been made to the satisfaction of
IBM Credit.
6.22. INDEBTEDNESS. Neither Borrower nor Holdings (i) has any Indebtedness,
other than Permitted Indebtedness; and (ii) has guaranteed the obligations of
any other Person (except for Permitted Indebtedness or as permitted by Section
8.5).
6.23. NOT CONSUMER TRANSACTION. None of the Advances are consumer-goods
transactions or consumer transactions and none of the Collateral constitutes
consumer goods (as defined in the UCC).
6.24. LIMITATIONS ON LOCKBOXES AND SPECIAL ACCOUNTS. Borrower has no Lockbox,
Special Account or other deposit accounts with any banks except as provided in
Attachment B of this Agreement.
SECTION 7. AFFIRMATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations:
7.1. FINANCIAL AND OTHER INFORMATION.
(A) Borrower and Holdings shall deliver as soon as available and in any
event within ninety (90) days after the end of each fiscal year of Holdings (i)
audited Financial Statements of Holdings (provided that, to the extent not
otherwise audited by the Auditors, the consolidating Financial Statements may be
unaudited) as of the close of the fiscal year and for the fiscal year, together
with a comparison to the Financial Statements for the prior year, in each case
accompanied by (a) either an opinion of the Auditors without a "going concern"
or like qualification or exception, or qualification arising out of the scope of
the audit or, if so qualified, an opinion which shall be in scope and substance
reasonably satisfactory to IBM Credit, (b) such Auditors' "Management Letter" to
Holdings, if any, (c) a written statement signed by the Auditors stating that in
the course of the regular audit of the business of Holdings and its consolidated
Subsidiaries, which audit was conducted by the Auditors in accordance with
generally accepted auditing standards, nothing has come to the attention of the
Auditors that has caused them to believe that Holdings has failed to comply with
the financial covenants set forth in Attachment A insofar as they relate to
accounting matters , it being understood that such audit was not directed
primarily toward obtaining knowledge of such non-compliance and such Auditors
shall have no liability, directly or indirectly, to anyone for failure to obtain
such knowledge; and (ii) a Compliance Certificate along with a schedule, in
substantially the form of Attachment C-1 hereto, of the calculations used in
determining, as of the end of such fiscal year, whether Holdings and Borrower
are in compliance with the financial covenants set forth in Attachment A;
(B) PFSweb shall deliver as soon as available and in any event within
ninety (90) days after the end of each fiscal year of PFSweb (i) the Form 10-K
Annual Report filed with the Securities and Exchange Commission for that fiscal
year just ended and (ii) a Compliance Certificate along with a schedule, in
substantially the form of Attachment C-2 hereto, of the calculations used in
determining, as of the end of such fiscal year, whether PFSweb is in compliance
with the financial covenants set forth in Attachment A (in the event PFSweb is
no longer a public company, PFSweb shall be required to deliver Financial
Statements and such other documentation as required by Holdings and Borrower in
(A) above);
(C) Borrower and Holdings shall deliver as soon as available and in any
event within forty-five (45) days after the end of each fiscal quarter of
Holdings (i) consolidating Financial Statements of Holdings and Borrower as of
the end of such period and for the fiscal year to date, together with a
comparison to the
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Financial Statements for the same periods in the prior year, all in reasonable
detail and duly certified (subject to normal year-end audit adjustments and
except for the absence of footnotes) by the chief executive officer, chief
financial officer, or Controller of Holdings and Borrower as having been
prepared in accordance with GAAP (except for the absence of all required
footnotes); and (ii) a Compliance Certificate along with a schedule, in
substantially the form of Attachment C-1 hereto, of the calculations used in
determining, as of the end of such fiscal quarter, whether each of Holdings and
Borrower are in compliance with the financial covenants set forth in Attachment
A;
(D) PFSweb shall deliver as soon as available and in any event within
forty-five (45) days after the end of each fiscal quarter of PFSweb (i) the Form
10-Q Quarterly Report filed with the Securities and Exchange Commission for that
quarter just ended and (ii) a Compliance Certificate along with a schedule, in
substantially the form of Attachment C-2 hereto, of the calculations used in
determining, as of the end of such fiscal quarter, whether PFSweb is in
compliance with the financial covenants set forth in Attachment A (in the event
PFSweb is no longer a public company, PFSweb shall be required to deliver
Financial Statements and such other documentation as required by Holdings and
Borrower in (C) above);
(E) Holdings, Borrower and PFSweb (as applicable) shall deliver as soon
as available and in any event within twenty five (25) days after the end of each
fiscal month of Holdings, Borrower and PFSweb (i) consolidating Financial
Statements of Holdings and consolidated Financial Statements of PFSweb as of the
end of such period and for the fiscal year to date, together with a comparison
to the Financial Statements for the same periods in the prior year, all in
reasonable detail and duly certified (subject to normal year-end audit
adjustments and except for the absence of footnotes) by the chief executive
officer or chief financial officer of such Loan Party as having been prepared in
accordance with GAAP; and (ii) a Compliance Certificate along with a schedule,
in substantially the form of Attachment C-1 and C-2 hereto, of the calculations
used in determining, as of the end of such fiscal month, whether Holdings, the
Borrower and PFSweb are in compliance with the financial covenants set forth in
Attachment A;
(F) Holdings shall deliver as soon as available and in any event within
sixty (60) days after the end of each fiscal year of Holdings (i) projected
Financial Statements, broken down by quarter, for the current and following
fiscal year; and (ii) if composed, a narrative discussion relating to such
projected Financial Statements;
(G) Holdings shall deliver if requested by IBM Credit, as soon as
available and in any event within thirty (30) days after the end of each fiscal
quarter of Holdings, revised projected Financial Statements, broken down by
quarter, for (i) the current fiscal year from the beginning of such fiscal
quarter to the fiscal year end and (ii) the following fiscal year;
(H) Each Loan Party shall deliver as soon as available and in any event
within forty-five (45) days after the end of each fiscal quarter of each Loan
Party quarterly compliance certificates of such Loan Party and all of its
affiliates evidencing compliance under any credit agreements to which they are a
party;
(I) Each Loan Party shall deliver promptly after any Loan Party obtains
knowledge of (i) the occurrence of a Default or Event of Default, or (ii) the
existence of any condition or event which would result in any such Loan Party's
failure to satisfy the conditions precedent to Advances set forth in Section 5,
a certificate of the chief executive officer or chief financial officer or other
Authorized Officer of such Loan Party specifying the nature thereof and such
Loan Party's proposed response thereto, each in reasonable detail;
(J) Each Loan Party shall deliver promptly after any such Loan Party
obtains knowledge of (i) any proceeding(s) being instituted or threatened to be
instituted by or against the Borrower or any Guarantor in any federal, state,
local or foreign court or before any commission or other regulatory body
(federal, state, local or foreign), or (ii) any actual or prospective change,
development or event which, in any such case, has had or could reasonably be
expected to have a Material Adverse Effect, a certificate of the chief executive
officer or chief financial officer or other Authorized Officer of such Loan
Party specifying the nature thereof and such Loan Party's proposed response
thereto, each in reasonable detail;
Page 30 of 47
(K) Each Loan Party shall deliver promptly after any such Loan Party
obtains knowledge that (i) any order, judgment or decree in excess of $1,000,000
shall have been entered against the Borrower or any Guarantor or any of its
properties or assets, or (ii) it has received any notification of a material
violation of any Requirement of Law from any Governmental Authority, a
certificate of the chief executive officer or chief financial officer or other
Authorized Officer of such Loan Party specifying the nature thereof and such
Loan Party's proposed response thereto, each in reasonable detail;
(L) Each Loan Party shall deliver promptly after any such Loan Party
learns of any material labor dispute to which the Borrower or any Guarantor may
become a party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which any such Loan
Party is a party or by which it is bound, a certificate of the chief executive
officer or chief financial officer or other Authorized Officer of such Loan
Party specifying the nature thereof and such Loan Party's proposed response
thereto, each in reasonable detail;
(M) Each Loan Party shall deliver within five (5) Business Days after
request by IBM Credit, any written certificates, schedules and reports together
with all supporting documents as IBM Credit may reasonably request relating to
the Collateral or the Borrower or any Guarantor or any Guarantor's business
affairs and financial condition;
(N) Borrower shall deliver prior to 5:00 p.m. (Pacific Standard Time)
on Tuesday of each week (or if such Tuesday is not a Business Day, the first
Business Day following such Tuesday), or as otherwise agreed in writing, a
Collateral Management Report as of the immediately preceding Friday (or if such
Friday is not a Business Day, as of the last Business Day of such preceding
week);
(O) Borrower shall deliver by the tenth (10th) Business Day of each
month, or as otherwise agreed in writing, a Collateral Management Report as of a
date no earlier than the last day of the immediately preceding month;
(P) Borrower shall deliver along with the Financial Statements set
forth in Section 7.1(A), (B), (C), (D) and (E), the name, address and phone
number of each of its Account Debtors' and BSD's Account Debtors' primary
contacts for each Account and Acquired Account on the Accounts (and Acquired
Accounts, if any) aging report contained in its most recent Collateral
Management Report; and
(Q) PFSweb shall deliver within five (5) days after the same are sent,
copies of all Financial Statements and reports which PFSweb sends to its
stockholders, and within five (5) days after the same are filed, copies of all
Financial Statements and reports which PFSweb may make to, or file with, the
Securities and Exchange Commission or any successor or analogous governmental
authority.
Each certificate, schedule and report provided by any Loan Party to IBM Credit
shall be signed by an Authorized Officer of such Loan Party, and which signature
shall be deemed a representation and warranty that the information contained in
such certificate, schedule or report is true and accurate in all material
respects on the date as of which such certificate, schedule or report is made
and does not omit to state a material fact necessary in order to make the
statements contained therein not misleading at such time. Each Financial
Statement delivered pursuant to this Section 7.1 shall be prepared in accordance
with GAAP (except as otherwise permitted hereunder) applied consistently
throughout the periods reflected therein and with prior periods. Holdings shall
cause the audited Financial Statements and accompanying documents set forth in
Section 7.1(A)(i) to be delivered directly by the Auditors to IBM Credit only
via first class mail or overnight delivery.
7.2. LOCATION OF BORROWER AND COLLATERAL. If it is a registered organization,
the organizational document creating Borrower, Holdings and each other Guarantor
has been filed in the appropriate office of the State referred to in the first
paragraph of this Agreement. The inventory, equipment and other tangible
Collateral or other Collateral shall be kept or sold at the addresses as set
forth on Attachment B or on any
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notice provided by any Loan Party to IBM Credit in accordance with Section
7.7(C). Such locations shall be certified quarterly to IBM Credit substantially
in the form of Attachment G.
7.3. CHANGES IN LOAN PARTIES. Each Loan Party shall provide thirty (30) days
prior written notice to IBM Credit of any change in such Loan Party's name,
chief executive office and principal place of business, organization, form of
ownership or structure; provided, however, that such Loan Party's compliance
with this covenant shall not relieve it of any of its other obligations or any
other provisions under this Agreement or any Other Document limiting actions of
the type described in this Section.
7.4. LEGAL ENTITY EXISTENCE. Each Loan Party shall (A) maintain its legal entity
existence, maintain in full force and effect all licenses, bonds, franchises,
leases and qualifications to do business, and all contracts and other rights
necessary to the profitable conduct of its business, (B) continue in, and limit
its operations to, the same general lines of business as presently conducted by
it unless otherwise permitted in writing by IBM Credit and (C) comply with all
Requirements of Law, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
7.5. ERISA. Each of the Borrower and Guarantors shall promptly notify IBM Credit
in writing after it learns of the occurrence of any event which would constitute
a "reportable event" under ERISA or any regulations thereunder with respect to
any Plan, or that the PBGC has instituted or will institute proceedings to
terminate any Plan. Notwithstanding the foregoing, none of the Borrower or any
Guarantor shall have any obligation to notify IBM Credit as to any "reportable
event" as to which the 30-day notice requirement of Section 4043(b) has been
waived by the PBGC, until such time as such Loan Party is required to notify the
PBGC of such reportable event.
Such notification shall include a certificate of the chief financial officer of
such Loan Party setting forth details as to such "reportable event" and the
action which such Loan Party proposes to take with respect thereto, together
with a copy of any notice of such "reportable event" which may be required to be
filed with the PBGC, or any notice delivered by the PBGC evidencing its intent
to institute such proceedings. Upon request of IBM Credit, each of the Borrower
and Guarantors shall furnish, or cause the plan administrator to furnish, to IBM
Credit the most recently filed annual report for each Plan.
7.6. ENVIRONMENTAL MATTERS. (A) Each of the Borrower and Guarantors and any
other Person under such Loan Party's control (including, without limitation,
agents and Affiliates under such control) shall (i) comply with all
Environmental Laws in all material respects, and (ii) undertake to use
commercially reasonable efforts to prevent any unlawful release of any Hazardous
Substance by such Loan Party or such Person into, upon, over or under any
property now or hereinafter owned, leased or otherwise controlled (directly or
indirectly) by such Loan Party.
(B) Each of the Borrower and Guarantors shall notify IBM Credit,
promptly upon its obtaining knowledge of (i) any non-routine proceeding or
investigation by any Governmental Authority with respect to the presence of any
Hazardous Substances on or in any property now or hereinafter owned, leased or
otherwise controlled (directly or indirectly) by such Loan Party, (ii) all
claims made or threatened by any Person or Governmental Authority against such
Loan Party or any of such Loan Party's assets relating to any loss or injury
resulting from any Hazardous Substance, (iii) such Loan Party's discovery of
evidence of unlawful disposal of or environmental contamination by any Hazardous
Substance on any property now or hereinafter owned, leased or otherwise
controlled (directly or indirectly) by such Loan Party, and (iv) any occurrence
or condition which could constitute a violation of any Environmental Law.
7.7. COLLATERAL BOOKS AND RECORDS/COLLATERAL AUDIT. (A) Each of the Borrower and
Guarantors (other than PFSweb) agrees to maintain its books and records,
pertaining to the Collateral and Other Collateral in such detail, form and scope
as is consistent with good business practice, and agrees that such books and
records will reflect IBM Credit's interest in the Accounts and Acquired Accounts
and accounts of the Guarantors (other than PFSweb). PFS further agrees that the
books and records pertaining to the
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Collateral shall be kept separately from PFS's other books and records and PFS
agrees to note on the books and records pertaining to the Collateral that such
books and records are the property of Borrower.
(B) Each of the Borrower and Guarantors (other than PFSweb) agrees that
IBM Credit or its agents may enter upon the premises of any such Loan Party at
any time and from time to time, during normal business hours and upon reasonable
notice under the circumstances, and at any time at all on and after the
occurrence and during the continuance of an Event of Default for the purposes of
(i) inspecting the Collateral and Other Collateral, (ii) inspecting and/or
copying (at Borrower's or Guarantor's expense) any and all records pertaining
thereto, (iii) discussing the affairs, finances and business of each such Loan
Party with any officers, employees and directors of such Loan Party or with the
Auditors and (iv) verifying Eligible Accounts, Eligible Acquired Accounts and
other Collateral. Upon reasonable prior notice, each such Loan Party also agrees
to provide IBM Credit with such reasonable information and documentation that
IBM Credit deems necessary to conduct the foregoing activities, including,
without limitation, reasonably requested samplings of purchase orders, invoices
and evidences of delivery or other performance.
Upon the occurrence and during the continuance of an Event of Default which has
not been waived by IBM Credit in writing, IBM Credit may conduct any of the
foregoing activities in any manner that IBM Credit deems reasonably necessary.
(C) Borrower and each Guarantor shall give IBM Credit thirty (30) days
prior written notice of any change in the location of any Collateral or Other
Collateral, the location of its books and records or in the location of its
chief executive office or place of business from the locations specified in
Attachment B, and will execute in advance of such change and cause to be filed
and/or delivered to IBM Credit any financing statements, landlord or other lien
waivers, or other documents reasonably required by IBM Credit, all in form and
substance reasonably satisfactory to IBM Credit.
(D) Borrower and PFS, on behalf of the Borrower and each Guarantor
(other than PFSweb), agrees to advise IBM Credit promptly, in reasonably
sufficient detail, of any event or substantial change in the Collateral or Other
Collateral which could reasonably be expected to have a Material Adverse Effect
on the Collateral or on the security interests granted to IBM Credit therein.
7.8. INSURANCE; CASUALTY LOSS. (A) Each Loan Party agrees to maintain with
financially sound and reputable insurance companies: (i) insurance on its
properties, (ii) public liability insurance against claims for personal injury
or death as a result of the use of any products sold by it and (iii) insurance
coverage against other business risks, in each case, in at least such amounts
and against at least such risks as are usually and prudently insured against in
the same general geographical area by companies of established repute engaged in
the same or a similar business. Each Loan Party will furnish to IBM Credit, upon
its written request, the insurance certificates with respect to such insurance.
In addition, all Policies so maintained are to name IBM Credit as an additional
insured as its interest may appear.
(B) Without limiting the generality of the foregoing, Borrower shall
keep and maintain, at its sole expense, the Collateral insured for an amount not
less than the amount set forth on Attachment A from time to time opposite the
caption "Collateral Insurance Amount" against all loss or damage under an "all
risk" Policy with companies mutually acceptable to IBM Credit and Borrower, with
a lender's loss payable endorsement or mortgagee clause in form and substance
reasonably satisfactory to IBM Credit designating that any loss payable
thereunder with respect to such Collateral shall be payable to IBM Credit. Upon
receipt of proceeds by IBM Credit the same shall be deposited in the Lockbox or,
if an Event of Default then exists and is continuing, applied on account of the
Borrower's Outstanding Product Advances first, then to the Outstanding A/R
Advances. Borrower agrees to instruct each insurer to give IBM Credit, by
endorsement upon the Policy issued by it or by independent instruments furnished
to IBM Credit, at least ten (10) days written notice before any Policy shall be
altered or cancelled and that no act or default of any Loan Party or any other
person shall affect the right of IBM Credit to recover under the Policies.
Borrower hereby agrees to direct all insurers under the Policies to pay all
proceeds with respect to the Collateral directly to IBM Credit to be applied as
set forth herein.
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If any Borrower fails to pay any cost, charges or premiums, or if Borrower fails
to insure the Collateral, IBM Credit may pay such costs, charges or premiums.
Any amounts paid by IBM Credit hereunder shall be considered an additional debt
owed by Borrower to IBM Credit and are due and payable immediately upon receipt
of an invoice by IBM Credit.
7.9. TAXES. Each of the Borrower and Guarantors agrees to pay, when due, all
taxes lawfully levied or assessed against such Loan Party or any of the
Collateral before any penalty or interest accrues thereon unless such taxes are
being contested, in good faith, by appropriate proceedings promptly instituted
and diligently conducted and an adequate reserve or other appropriate provisions
have been made therefor as required in order to be in conformity with GAAP and
an adverse determination in such proceedings could not reasonably be expected to
have a Material Adverse Effect.
7.10. COMPLIANCE WITH LAWS. Each Loan Party agrees to comply with all
Requirements of Law applicable to the Collateral or any part thereof, or to the
operation of its business.
7.11. FISCAL YEAR. Each of Holdings, Borrower and PFSweb agrees to maintain its
fiscal year as a year ending December 31 unless either Holdings, Borrower or
PFSweb provides IBM Credit at least thirty (30) days prior written notice of any
change thereof.
7.12. INTELLECTUAL PROPERTY. Each of the Borrower and Guarantors shall do and
cause to be done all things necessary to preserve and keep in full force and
effect all registrations of Intellectual Property which the failure to do or
cause to be done could reasonably be expected to have a Material Adverse Effect.
7.13. MAINTENANCE OF PROPERTY. Each Loan Party shall maintain all of its
material properties (business and otherwise) in good condition and repair
(ordinary wear and tear excepted) and pay and discharge all costs of repair and
maintenance thereof and all rental and mortgage payments and related charges
pertaining thereto and not commit or permit any waste with respect to any of its
material properties. PFS, on behalf of Borrower, shall maintain all of
Borrower's material properties in PFS's possession (business and otherwise) in
good condition in accordance with good business practice.
7.14. COLLATERAL. To the extent applicable to it, each Loan Party will:
(A) from time to time upon request of IBM Credit, provide IBM Credit
with access to copies of all invoices, delivery evidences and other such
documents relating to each Account and Acquired Account;
(B) promptly upon any Loan Party obtaining knowledge thereof, furnish
to and inform IBM Credit of all material adverse information relating to the
financial condition of any Account Debtor or BSD Account Debtors whose
outstanding obligations to Borrower constitute five percent (5%) or more of the
Accounts and Acquired Accounts (in the aggregate) at such time (a "Material
Account Debtor");
(C) promptly upon any Loan Party learning thereof, notify IBM Credit in
writing of any event which would cause any obligation of a Material Account
Debtor to become an Ineligible Account or Ineligible Acquired Accounts;
(D) keep all goods rejected or returned by any Account Debtor or BSD
Account Debtor and all goods repossessed or stopped in transit by PFS (or
Borrower, if applicable) from any Account Debtor or BSD Account Debtor
segregated from other property of Borrower or PFS, holding the same in trust for
IBM Credit until Borrower applies a credit against such Account Debtor's or BSD
Account Debtor's outstanding obligations to Borrower or Borrower sells such
goods in the ordinary course of business, whichever occurs earlier;
(E) stamp or otherwise mark chattel paper and instruments now owned or
hereafter acquired by the Borrower or any Guarantor in conspicuous type to show
that the same are subject to IBM Credit's
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security interest and immediately thereafter deliver or cause such chattel paper
and instruments to be delivered to IBM Credit or any agent designated by IBM
Credit with appropriate endorsements and assignments to vest title and
possession in IBM Credit;
(F) use commercially reasonable efforts to collect all Accounts and
Acquired Accounts owed;
(G) promptly notify IBM Credit of any loss, theft or destruction of or
damage to any of the Collateral or Other Collateral in an amount in excess of
Two Million Five Hundred Thousand Dollars ($2,500,000). Each Borrower and each
Guarantor shall diligently file and prosecute its claim for any award or payment
in connection with any such loss, theft, destruction of or damage to Collateral.
Each such Loan Party shall, upon demand of IBM Credit, make, execute and deliver
any assignments and other instruments sufficient for the purpose of assigning
any such award or payment to IBM Credit, free of any encumbrances of any kind
whatsoever;
(H) consistent with reasonable commercial practice, observe and perform
all matters and things necessary or expedient to be observed or performed under
or by virtue of any lease, license, concession or franchise forming part of the
Collateral and Other Collateral in order to preserve, protect and maintain all
the rights of IBM Credit thereunder;
(I) promptly notify IBM Credit if Borrower is a beneficiary under a
letter of credit now or hereafter issued in favor of Borrower;
(J) consistent with reasonable commercial practice, maintain, use and
operate the Collateral and Other Collateral and carry on and conduct its
business in a proper and efficient manner so as to preserve and protect the
Collateral and Other Collateral and the earnings, incomes, rents, issues and
profits thereof; and
(J) at any time and from time to time, upon the request of IBM Credit,
and at the sole expense of Loan Parties, each Loan Party will promptly and duly
execute and deliver such further instruments and documents and take such further
action as IBM Credit may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the security interests granted herein and the
payment of any and all recording taxes and filing fees in connection therewith.
7.15. ADDITIONAL COLLATERAL, ETC. If Borrower shall at any time hold or acquire
a Commercial Tort Claim, then Borrower shall immediately notify IBM Credit in
writing signed by Borrower of the details thereof and grant to IBM Credit in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
satisfactory to IBM Credit.
7.16. SUBSIDIARIES. IBM Credit may require that any Domestic Subsidiaries of any
Loan Party, except for direct Subsidiaries of PFS other than Holdings ("Excluded
Subsidiaries"), become parties to this Agreement or any other agreement executed
in connection with this Agreement as guarantors or sureties. Each Loan Party
will comply, and cause all Subsidiaries, other than Excluded Subsidiaries, of
such Loan Party to comply with Sections 7 and 8 of this Agreement, as if such
sections applied directly to such Subsidiaries. Each of Borrower and Holdings
hereby agrees that, promptly after it acquires any Subsidiary after the Closing
Date, it shall execute a supplement to the Holdings Stock Pledge Agreement or
Borrower Stock Pledge Agreement (as applicable) for the purpose of pledging to
IBM Credit (i) all shares of stock of the Subsidiary owned by Holdings or
Borrower (as applicable), if the new Subsidiary is a Domestic Subsidiary or (ii)
all shares of stock of the new Subsidiary owned by Holdings or Borrower (as
applicable), up to sixty-five percent (65%) of the total outstanding shares of
stock of the Subsidiary, if the new Subsidiary is not a Domestic Subsidiary. For
the purpose of this Section 7.16, each of Borrower and Holdings agrees to notify
the IBM Credit 10 days before it acquires a new Subsidiary.
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7.17. FINANCIAL COVENANTS; ADDITIONAL COVENANTS. Each of Borrower, Holdings and
PFSweb acknowledges and agrees that such party shall maintain the financial
covenants and other covenants set forth in the attachments, exhibits and other
addenda incorporated in this Agreement.
7.18. TRANSACTION DOCUMENTS. PFS and Borrower agree to comply with the terms of
the PFS Agreement, the IBM Agreement, and the other Transaction Documents in
accordance with the terms set forth therein.
SECTION 8. NEGATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations hereunder:
8.1. LIENS. Neither Borrower nor any Guarantor (other than PFSweb) will,
directly or indirectly mortgage, assign, pledge, transfer, create, incur,
assume, permit to exist or otherwise permit any Lien or judgment to exist on any
of its property, assets, revenues or goods, whether real, personal or mixed,
whether now owned or hereafter acquired, except for Permitted Liens and Liens
created under collateralized guaranties. PFS shall not pledge, encumber or grant
a security interest in the Collateral (including the Products and the Accounts
arising from the sale thereof and the Acquired Accounts) or acquire title or any
security interest to any of the Collateral (including the Products and the
Accounts arising from the sale thereof and the Acquired Accounts). In performing
its services under the PFS Agreement and IBM Agreement, PFS agrees that it shall
not acquire title to any of the Products acquired by the Borrower or the
Accounts or revenue arising from the resale thereof or the Acquired Accounts.
8.2. DISPOSITION OF ASSETS. Neither Borrower nor any Guarantor will, directly or
indirectly, sell, lease, assign, transfer or otherwise dispose of any assets
other than (i) sales of inventory in the ordinary course of business and short
term rental of inventory as demonstrations in amounts not material to it, and
(ii) voluntary dispositions of individual assets and obsolete or worn out
property in the ordinary course of business, provided, that the aggregate book
value of all such assets and property so sold or disposed of under this section
8.2 (ii) in any fiscal year shall not exceed 5% of the consolidated assets of
such Loan Party as of the beginning of such fiscal year.
8.3 TRANSACTION DOCUMENTS. No Loan Party will (i) modify, amend or agree to any
amendment, waiver, supplement or modification of any of the Transaction
Documents, the results of which could reasonably be expected to have a Material
Adverse Effect or (ii) cancel or terminate or agree to cancel or terminate any
of the Transaction Documents without the prior written consent of IBM Credit
which will not be unreasonably withheld provided that such cancellation or
termination could not reasonably be expected to have a Material Adverse Effect.
8.4. CHANGES IN BORROWER AND GUARANTOR. (A) Neither the Borrower nor any
Guarantor will change its name, location (as defined in Article 9 of the UCC),
State of organization, chief executive office, or principal place of business
without thirty (30) days prior written notice to IBM Credit; (B) Neither the
Borrower nor any Guarantor will, without the prior written consent of IBM
Credit, change its organization, form of ownership or structure; (C) no Loan
Party will, without the prior written consent of IBM Credit, directly or
indirectly, merge, consolidate, liquidate, dissolve or enter into or engage in
any operation or activity materially different from that presently being
conducted by such Loan Party.
8.5. GUARANTIES. Neither the Borrower nor Holdings will, directly or indirectly,
assume, guaranty, endorse, or otherwise become liable upon the obligations of
any other Person, except (i) by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business, (ii) by the giving of indemnities in connection with the sale of
inventory or other asset dispositions permitted hereunder, (iii) for guaranties
in favor of IBM Credit, and (iv) the guaranty referred to in
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paragraph 2 of the definition of Permitted Indebtedness and (v) for obligations
which, if incurred directly by any such Loan Party, would be permitted hereunder
as Permitted Indebtedness.
8.6. RESTRICTED PAYMENTS. Borrower will not, directly or indirectly make any of
the following payments ("Restricted Payments") if after giving effect to such
payment, the aggregate amount of all such Restricted Payments exceeds Six
Hundred Thousand Dollars ($600,000) during any fiscal year: (i) declare or pay
any dividend (other than dividends payable solely in common stock of Borrower)
on, or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of any class of capital stock of Borrower or
any warrants, options or rights to purchase any such capital stock or Equity
Interests, whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of Borrower; or (ii) make any optional payment or prepayment
on or redemption (including, without limitation, by making payments to a sinking
or analogous fund) or repurchase of any Indebtedness (other than the
Obligations)).
8.7. INVESTMENTS. Neither the Borrower nor Holdings will, directly or
indirectly, make, maintain or acquire any Investment in any Person (other than a
Loan Party or any wholly-owned Subsidiary thereof) other than:
(A) interest bearing deposit accounts (including certificates of
deposit) which are insured by the Federal Deposit Insurance Corporation ("FDIC")
or a similar federal insurance program;
(B) direct obligations of the government of the United States of
America or any agency or instrumentality thereof or obligations guaranteed as to
principal and interest by the United States of America or any agency thereof;
(C) stock or obligations issued to any Loan Party in settlement of
claims against others by reason of an event of bankruptcy or a composition or
the readjustment of debt or a reorganization of any debtor of any Loan Party;
and
(D) commercial paper of any company organized under the laws of any
State of the United States or any bank organized or licensed to conduct a
banking business under the laws of the United States or any State thereof having
the short-term highest rating then given by Moody's Investor's Services, Inc. or
Standard & Poor's Corporation.
8.8. AFFILIATE/SUBSIDIARY TRANSACTIONS. No Loan Party will, directly or
indirectly, enter into any transaction with any Affiliate or Subsidiary,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service to any Affiliate or Subsidiary of any Loan Party except
in the ordinary course of business and pursuant to the reasonable requirements
of such Loan Party's business upon fair and reasonable terms no less favorable
to such Loan Party than could be obtained in a comparable arm's-length
transaction with an unaffiliated Person.
8.9. ERISA. None of the Borrower or any Guarantor will (A) terminate any Plan so
as to incur a material liability to the PBGC, (B) permit any "prohibited
transaction" involving any Plan (other than a "multi-employer benefit plan")
which would subject such Loan Party to a material tax or penalty on "prohibited
transactions" under the Code or ERISA, (C) fail to pay to any Plan any
contribution which they are obligated to pay under the terms of such Plan, if
such failure would result in a material "accumulated funding deficiency",
whether or not waived, (D) allow or suffer to exist any occurrence of a
"reportable event" or any other event or condition, which presents a material
risk of termination by the PBGC of any Plan (other than a "multi-employer
benefit plan"), or (E) fail to notify IBM Credit as required in Section 7.5. As
used in this Agreement, the terms "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
the Code and ERISA. For purposes of this Section 8.9, the terms "material
liability", "tax", "penalty", "accumulated funding deficiency" and "risk of
termination" shall mean a liability, tax, penalty,
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accumulated funding deficiency or risk of termination which could reasonably be
expected to have a Material Adverse Effect.
8.10. ADDITIONAL NEGATIVE PLEDGES. No Loan Party will, directly or indirectly,
create or otherwise cause or permit to exist or become effective any contractual
obligation which may restrict or inhibit IBM Credit's rights or ability to sell
or otherwise dispose of the Collateral or Other Collateral or any part thereof
after the occurrence and during the continuance of an Event of Default.
8.11. STORAGE OF COLLATERAL. (A) Collateral shall not be stored with a bailee,
warehouseman or similar party without the prior written consent of IBM Credit
unless any Loan Party will, concurrently with the delivery of such Collateral to
such party, cause such party to (i) enter into an agreement acknowledging that
such party holds possession of Collateral (other than certificated securities
and goods covered by a document) for the benefit of IBM Credit, or (ii) issue
and deliver to IBM Credit warehouse receipts in the name of IBM Credit
evidencing the storage of such Collateral.
(B) PFS shall not permit any of its (or its customers') inventory
(other than Borrower) to be commingled with the Collateral.
8.12. USE OF PROCEEDS. Borrower shall not use any portion of the proceeds of any
Advances other than to acquire Products from Authorized Suppliers and for its
general working capital requirements. Borrower shall not use any portion of the
proceeds of any Advances made on the Closing Date other than to satisfy the IBM
Liabilities in accordance with an agreement in form and substance satisfactory
to IBM Credit in its sole discretion.
8.13. ACCOUNTS AND ACQUIRED ACCOUNTS. No Loan Party shall permit or agree to any
extension, compromise or settlement or make any change or modification of any
kind or nature with respect to any Account or Acquired Account, including any of
the terms relating thereto, which would affect IBM Credit's ability to collect
payment on any Account or Acquired Account in whole or in part, except for such
extensions, compromises or settlements made by any Loan Party in the ordinary
course of its business, provided, however, that the aggregate amount of such
extensions, compromises or settlements does not exceed five percent (5%) (in the
aggregate) of Borrower's Accounts and Acquired Accounts at such time.
8.14. INDEBTEDNESS. Neither the Borrower nor Holdings will create, incur, assume
or permit to exist any Indebtedness, except for Permitted Indebtedness.
8.15. LOANS. No Loan Party will make any loans, advances, contributions or
payments of money or goods to any Subsidiary, Affiliate or parent company or to
any officer, director or stockholder of such Loan Party or of any such company
(except for compensation for personal services actually rendered), except for
transactions which comply with the terms of this Agreement.
8.16. LOCKBOXES AND SPECIAL ACCOUNTS. Borrower shall not have or maintain any
Lockbox, Special Account or other deposit account with any bank except as
provided in Attachment B of this Agreement.
8.17. TITLE TO COLLATERAL. PFS disclaims and waives any right to assert any
lien, pledge or claim of title to the Collateral.
SECTION 9. DEFAULT
9.1. EVENT OF DEFAULT. Any one or more of the following events shall constitute
an Event of Default under this Agreement and the Other Documents:
(A) The failure to make timely payment of the Obligations or any part
thereof when due and payable;
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(B) Any Loan Party fails to comply with the financial covenants set
forth on Attachment A, Section 7.4(A), Section 7.4(B) or Section 8 hereof;
(C) Any Loan Party or any of their Affiliates fail to comply with or
observe any term, covenant or agreement contained in this Agreement, any Other
Documents (not covered by (A) or (B) above) to which it is a party, if such
failure shall remain unremedied for five (5) days after the earlier of (i) such
Loan Party obtains actual knowledge thereof and (ii) written notice thereof
shall have been given to such Loan Party by IBM Credit;
(D) Any representation, warranty, statement, report or certificate made
or delivered by or on behalf of any Loan Party or any of its officers, employees
or agents or by or on behalf of any Guarantor to IBM Credit was false in any
material respect at the time when made or deemed made;
(E) The occurrence of any event or circumstance which could reasonably
be expected to have a Material Adverse Effect;
(F) The Borrower or any Guarantor shall generally not pay its debts as
such debts become due, become or otherwise declare itself insolvent, file a
voluntary petition for bankruptcy protection, have filed against it any
involuntary bankruptcy petition, cease to do business as a going concern, make
any assignment for the benefit of creditors, or a custodian, receiver, trustee,
liquidator, administrator or person with similar powers shall be appointed for
any such Loan Party or any Guarantor or any of its respective properties or have
any of its respective properties seized or attached, or take any action to
authorize, or for the purpose of effectuating, the foregoing, provided, however,
that any such Loan Party or any Guarantor shall have a period of forty-five (45)
days within which to discharge any involuntary petition for bankruptcy or
similar proceeding;
(G) The use of any funds borrowed from IBM Credit under this Agreement
for any purpose other than as provided in this Agreement;
(H) The entry of any judgment against the Borrower or any Guarantor in
an amount in excess of $5,000,000 and such judgment is not satisfied, dismissed,
stayed or superseded by bond within thirty (30) days after the day of entry
thereof (and in the event of a stay or supersedeas bond, such judgment is not
discharged within thirty (30) days after termination of any such stay or bond)
or such judgment is not fully covered by insurance as to which the insurance
company has acknowledged its obligation to pay such judgment in full;
(I) The dissolution or liquidation of any Loan Party, or any Guarantor,
or any Loan Party or any Guarantor or its directors or stockholders shall take
any action to dissolve or liquidate any Loan Party or any Guarantor;
(J) Any "going concern" or like qualification or exception, or
qualification arising out of the scope of an audit by an Auditor of its opinion
relative to any Financial Statement delivered to IBM Credit under this
Agreement;
(K) The issuance of a warrant of distress for any rent or taxes with
respect to any premises occupied by any Loan Party in or upon which the
Collateral, or any part thereof, may at any time be situated and such warrant
shall continue for a period of ten (10) Business Days from the date such warrant
is issued and shall not be rescinded, revoked or otherwise terminated within
such ten (10) day period;
(L) Any Loan Party or any Guarantor suspends business;
(M) The occurrence of any event or condition that permits the holder of
any Indebtedness of any Loan Party, Guarantor, or any Loan Party's Subsidiary in
a principal amount in excess of $100,000 arising
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in one or more related or unrelated transactions to accelerate the maturity
thereof or the failure of any Loan Party to pay when due any such Indebtedness;
(N) Any guaranty of any or all of Borrower's Obligations executed by
any Guarantor in favor of IBM Credit, shall at any time for any reason cease to
be in full force and effect or shall be declared to be null and void by a court
of competent jurisdiction or the validity or enforceability thereof shall be
contested or denied by any such Guarantor, or any such Guarantor shall deny that
it has any further liability or obligation thereunder or any such Guarantor
shall fail to comply with or observe any of the terms, provisions or conditions
contained in any such guaranty;
(O) Any Loan Party is in default under the material terms of any of the
Other Documents after the expiration of any applicable cure periods;
(P) There shall occur a "reportable event" with respect to any Plan, or
any Plan shall be subject to termination proceedings (whether voluntary or
involuntary) and there shall result from such "reportable event" or termination
proceedings a liability of any Loan Party to the PBGC which in the reasonable
opinion of IBM Credit will have a Material Adverse Effect;
(Q) Any "person" (as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) acquires a beneficial interest in 50% or more
of the Voting Stock of any Loan Party;
(R) (a) PFSweb ceases to directly own One Hundred Percent (100%) of the
capital stock of PFS, and (b) PFS and IFP cease to directly own One Hundred
Percent (100%) of the interest in members of Holdings or (b) Holdings ceases to
directly own One Hundred Percent (100%) of the capital stock of Borrower;
(S) IBM ceases to be an Authorized Supplier.
(T) The PFS Agreement or any other Transaction Document expires or is
terminated.
9.2. ACCELERATION. Upon the occurrence and during the continuance of an Event of
Default which has not been waived in writing by IBM Credit, IBM Credit may, in
its sole discretion, take any or all of the following actions, without prejudice
to any other rights it may have at law or under this Agreement to enforce its
claims against any Loan Party: (a) declare all Obligations to be immediately due
and payable (except with respect to any Event of Default set forth in Section
9.1(F) hereof, in which case all Obligations shall automatically become
immediately due and payable without the necessity of any notice or other demand)
without presentment, demand, protest or any other action or obligation of IBM
Credit; and (b) immediately terminate the Credit Line hereunder.
9.3. REMEDIES. (A) Upon the occurrence and during the continuance of any Event
of Default which has not been waived in writing by IBM Credit, IBM Credit may
exercise all rights and remedies of a secured party under the U.C.C. Without
limiting the generality of the foregoing, IBM Credit may: (i) remove from any
premises where same may be located any and all documents, instruments, files and
records (including the copying of any computer records), and any receptacles or
cabinets containing same, relating to the Accounts or the Acquired Account, or
IBM Credit may use (at the expense of Loan Parties) such of the supplies or
space of such Loan Party at such Loan Party's place of business or otherwise, as
may be necessary to properly administer and control the Accounts and Acquired
Accounts or the handling of collections and realizations thereon; (ii) send a
notice of assignment that has been executed by PFS ("Notice of Assignment") to
notify all Account Debtors and BSD Account Debtors that PFS has no right, title
or interest in or to the Accounts and the Acquired Accounts and that the
Borrower has assigned its right, title and interest in and to the Accounts and
the Acquired Accounts to IBM Credit; (iii) bring suit, in the name of any Loan
Party or IBM Credit and generally shall have all other rights respecting said
Accounts and the Acquired Accounts, including without limitation the right to
accelerate or extend the time of payment, settle, compromise, release in whole
or in part any amounts owing on any Accounts or the Acquired
Page 40 of 47
Accounts and issue credits in the name of any Loan Party or IBM Credit; (iv)
sell, assign and deliver the Accounts and the Acquired Accounts and any
returned, reclaimed or repossessed merchandise, with or without advertisement,
at public or private sale, for cash, on credit or otherwise, at IBM Credit's
sole option and discretion, and IBM Credit may bid or become a purchaser at any
such sale; and (v) foreclose the security interests created pursuant to this
Agreement by any available judicial procedure, or to take possession of any or
all of the Collateral without judicial process and to enter any premises where
any Collateral may be located for the purpose of taking possession of or
removing the same.
(B) Upon the occurrence and during the continuance of any Event of
Default which has not been waived in writing by IBM Credit, IBM Credit shall
have the right to sell, lease, or otherwise dispose of all or any part of the
Collateral, whether in its then condition or after further preparation or
processing, in the name of any Loan Party or IBM Credit, or in the name of such
other party as IBM Credit may designate, either at public or private sale or at
any broker's board, in lots or in bulk, for cash or for credit, with or without
warranties or representations, and upon such other terms and conditions as IBM
Credit in its sole discretion may deem advisable, and IBM Credit shall have the
right to purchase at any such sale.
If IBM Credit, in its sole discretion determines that any of the Collateral
requires rebuilding, repairing, maintenance or preparation, IBM Credit shall
have the right, at its option, to do such of the aforesaid as it deems necessary
for the purpose of putting such Collateral in such saleable form as IBM Credit
shall deem appropriate. The Borrower hereby agrees that any disposition by IBM
Credit of any Collateral pursuant to and in accordance with the terms of a
repurchase agreement between IBM Credit and the manufacturer or any supplier
(including any Authorized Supplier) of such Collateral constitutes a
commercially reasonable sale. Each Loan Party agrees, at the request of IBM
Credit, to assemble the Collateral or Other Collateral and to make it available
to IBM Credit at places which IBM Credit shall select, whether at the premises
of any Loan Party or elsewhere, and to make available to IBM Credit the premises
and facilities of any Loan Party for the purpose of IBM Credit's taking
possession of, removing or putting such Collateral or Other Collateral in
saleable form. If notice of intended disposition of any Collateral is required
by law, it is agreed that ten (10) Business Days notice shall constitute
reasonable notification.
(C) Unless expressly prohibited by the licensor thereof, if any, IBM
Credit is hereby granted, upon the occurrence and during the continuance of any
Event of Default which has not been waived in writing by IBM Credit, an
irrevocable, non-exclusive license to use, assign, license or sublicense all
computer software programs, data bases, processes and materials used by any Loan
Party in its businesses or in connection with any of the Collateral.
(D) The net cash proceeds resulting from IBM Credit's exercise of any
of the foregoing rights (after deducting all charges, costs and expenses,
including reasonable attorneys' fees) shall be applied by IBM Credit to the
payment of any Loan Party's Obligations, whether due or to become due, in such
order as IBM Credit may in it sole discretion elect. Each Loan Party shall
remain liable to IBM Credit for any deficiencies, and IBM Credit in turn agrees
to remit to each Loan Party or its successors or assigns, any surplus resulting
therefrom.
(E) The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of any
other rights, all of which shall be cumulative.
9.4. WAIVER. If IBM Credit seeks to take possession of any of the Collateral by
any court process, each Loan Party hereby irrevocably waives to the extent
permitted by applicable law any bonds, surety and security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession and any demand for possession of the Collateral prior to the
commencement of any suit or action to recover possession thereof. In addition,
each Loan Party waives to the extent permitted by applicable law all rights of
set-off it may have against IBM Credit. Each Loan Party further waives to the
extent permitted by applicable law presentment, demand and protest, and notices
of non-payment, non-performance, any right of contribution, dishonor, and any
other demands, and notices required by law.
Page 41 of 47
SECTION 10. MISCELLANEOUS
10.1. TERM; TERMINATION. (A) This Agreement shall remain in force until the
earlier of (i) the Termination Date, (ii) the date specified in a written notice
by Borrower that it intends to terminate this Agreement which date shall be no
less than ninety (90) days following the receipt by IBM Credit of such written
notice, and (iii) termination by IBM Credit after the occurrence and during the
continuance of an Event of Default. Upon the date that this Agreement is
terminated, all of Obligations shall be immediately due and payable in their
entirety, even if they are not yet due under their terms.
(B) Until the indefeasible payment in full of all of each Loan Party's
Obligations, no termination of this Agreement or any of the Other Documents
shall in any way affect or impair (i) each Loan Party's Obligations to IBM
Credit including, without limitation, any transaction or event occurring prior
to and after such termination, or (ii) IBM Credit's rights hereunder, including,
without limitation IBM Credit's security interest in the Collateral. On and
after a Termination Date IBM Credit may, but shall not be obligated to, upon the
request of Borrower, continue to provide Advances hereunder.
10.2. INDEMNIFICATION. Each of the Borrower and the Guarantors hereby jointly
and severally agrees to indemnify and hold harmless IBM Credit and each of its
officers, directors, agents and assigns (collectively, the "Indemnified
Persons") against all losses, claims, damages, liabilities or other expenses
(including reasonable attorneys' fees and court costs now or hereinafter arising
from the enforcement of this Agreement, the "Losses") to which any of them may
become subject insofar as such Losses arise out of or are based upon any event,
circumstance or condition (a) occurring or existing on or before the date of
this Agreement relating to any financing arrangements IBM Credit may from time
to time have with (i) each Loan Party, (ii) any Person that shall be acquired by
any Loan Party or (iii) any Person that any Loan Party may acquire all or
substantially all of the assets of, or (b) directly or indirectly, relating to
the execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby or thereby or to any of the Collateral or
to any act or omission of any Loan Party in connection therewith.
Notwithstanding the foregoing, none of the Borrower or any of the Guarantors
shall be obligated to indemnify IBM Credit for any Losses incurred by IBM Credit
which are a result of IBM Credit's gross negligence or willful misconduct. The
indemnity provided herein shall survive the termination of this Agreement.
10.3. ADDITIONAL OBLIGATIONS. IBM Credit, without waiving or releasing any
Obligation or Default of any Loan Party, may perform any Obligations of the any
Loan Party that any Loan Party shall fail or refuse to perform and IBM Credit
may, at any time or times hereafter, but shall be under no obligation to do so,
pay, acquire or accept any assignment of any security interest, lien,
encumbrance or claim against the Collateral asserted by any person. All sums
paid by IBM Credit in performing in satisfaction or on account of the foregoing
and any expenses, including reasonable attorney's fees, court costs, and other
charges relating thereto, shall be a part of the Obligations, payable on demand
and secured by the Collateral.
10.4. LIMITATION OF LIABILITY. NEITHER IBM CREDIT NOR ANY OTHER INDEMNIFIED
PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES SUFFERED BY ANY LOAN PARTY IN CONNECTION WITH THIS
AGREEMENT, ANY OTHER AGREEMENT, ANY DELAY, OMISSION OR ERROR IN THE ELECTRONIC
TRANSMISSION OR RECEIPT OF ANY E-DOCUMENT, OR ANY CLAIMS IN ANY MANNER RELATED
THERETO. NOR SHALL IBM CREDIT OR ANY OTHER INDEMNIFIED PERSON HAVE ANY LIABILITY
TO ANY LOAN PARTY OR ANY OTHER PERSON FOR ANY ACTION TAKEN OR OMITTED TO BE
TAKEN BY IT OR THEM HEREUNDER, EXCEPT FOR ITS OR THEIR OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. IN THE EVENT BORROWER REQUESTS IBM CREDIT TO EFFECT A
WITHDRAWAL OR DEBIT OF FUNDS FROM AN ACCOUNT OF BORROWER, THEN IN NO EVENT SHALL
IBM CREDIT BE LIABLE FOR ANY AMOUNT IN EXCESS OF ANY AMOUNT INCORRECTLY DEBITED,
EXCEPT IN THE EVENT OF IBM CREDIT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. NO
PARTY SHALL BE LIABLE FOR ANY FAILURE TO PERFORM ITS OBLIGATIONS IN CONNECTION
WITH ANY E-DOCUMENT, WHERE SUCH FAILURE RESULTS FROM ANY ACT OF GOD OR OTHER
CAUSE BEYOND SUCH PARTY'S REASONABLE CONTROL (INCLUDING, WITHOUT LIMITATION, ANY
MECHANICAL, ELECTRONIC OR COMMUNICATIONS FAILURE) WHICH PREVENTS SUCH PARTY FROM
TRANSMITTING OR RECEIVING E-DOCUMENTS.
Page 42 of 47
10.5. ALTERATION/WAIVER. This Agreement and the Other Documents may not be
altered or amended except by an agreement in writing signed by each Loan Party
signatory to such agreement and by IBM Credit. No delay or omission of IBM
Credit to exercise any right or remedy hereunder, whether before or after the
occurrence of any Event of Default, shall impair any such right or remedy or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
In the event that IBM Credit at any time or from time to time dispenses with any
one or more of the requirements specified in this Agreement or any of the Other
Documents, such dispensation may be revoked by IBM Credit at any time and shall
not be deemed to constitute a waiver of any such requirement subsequent thereto.
IBM Credit's failure at any time or times to require strict compliance and
performance by each Loan Party of any undertakings, agreements, covenants,
warranties and representations of this Agreement or any Other Document shall not
waive, affect or diminish any right of IBM Credit thereafter to demand strict
compliance and performance thereof. Any waiver by IBM Credit of any Default by
any Loan Party under this Agreement or any of the Other Documents shall not
waive or affect any other Default by any Loan Party under this Agreement or any
of the Other Documents, whether such Default is prior or subsequent to such
other Default and whether of the same or a different type. None of the
undertakings, agreements, warranties, covenants, and representations of any Loan
Party contained in this Agreement or the Other Documents and no Default by any
Loan Party shall be deemed waived by IBM Credit unless such waiver is in writing
signed by an authorized representative of IBM Credit.
10.6. SEVERABILITY. If any provision of this Agreement or the Other Documents or
the application thereof to any Person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the Other Documents and the
application of such provision to other Persons or circumstances will not be
affected thereby, the provisions of this Agreement and the Other Documents being
severable in any such instance.
10.7. ONE LOAN. All Advances heretofore, now or at any time or times hereafter
made by IBM Credit to the Borrower under this Agreement or the Other Documents
shall constitute one loan secured by IBM Credit's security interests in the
Collateral and by all other security interests, liens and encumbrances
heretofore, now or from time to time hereafter granted by any Loan Party to IBM
Credit or any assignor of IBM Credit.
10.8. ADDITIONAL COLLATERAL. All monies, reserves and proceeds received or
collected by IBM Credit with respect to Accounts and Acquired Account and other
property of any Loan Party in possession of IBM Credit at any time or times
hereafter are hereby pledged by such Loan Party to IBM Credit as security for
the payment of each Borrower's Obligations and shall be applied promptly by IBM
Credit on account of Borrower's Obligations; provided, however, IBM Credit may
release to the Borrower such portions of such monies, reserves and proceeds as
IBM Credit may from time to time determine, in its sole discretion.
10.9. NO MERGER OR NOVATIONS. (A) Notwithstanding anything contained in any
document to the contrary, it is understood and agreed by each any Loan Party and
IBM Credit that the claims of IBM Credit arising hereunder and existing as of
the date hereof constitute continuing claims arising out of the Obligations of
each Loan Party under any Other Document. Each Loan Party acknowledges and
agrees that such Obligations outstanding as of the date hereof have not been
satisfied or discharged and that this Agreement is not intended to effect a
novation of any Loan Party's Obligations under any Other Document.
(B) Neither the obtaining of any judgment nor the exercise of any power
of seizure or sale shall operate to extinguish the Obligations of any Loan Party
to IBM Credit secured by this Agreement and shall not operate as a merger of any
covenant in this Agreement, and the acceptance of any payment or alternate
security shall not constitute or create a novation and the obtaining of a
judgment or judgments under a covenant herein contained shall not operate as a
merger of that covenant or affect IBM Credit's rights under this Agreement.
Page 43 of 47
10.10. PARAGRAPH TITLES. The Section titles used in this Agreement and the Other
Documents are for convenience only and do not define or limit the contents of
any Section.
10.11. BINDING EFFECT; ASSIGNMENT. This Agreement and the Other Documents shall
be binding upon and inure to the benefit of IBM Credit and the each Loan Party
and their respective successors and assigns; provided, that no Loan Party shall
have the right to assign this Agreement or any of the Other Documents without
the prior written consent of IBM Credit.
10.12. OBLIGATIONS. Subject to Section 10.5 above, the Obligations and any terms
and provisions herein may be modified or amended only by a document signed by
IBM Credit and the other parties hereto.
10.13. NOTICES; E-BUSINESS ACKNOWLEDGMENT. (A) Except as otherwise expressly
provided in this Agreement, any notice required or desired to be served, given
or delivered hereunder shall be in writing, and shall be deemed to have been
validly served, given or delivered (i) upon receipt if deposited in the United
States mails, first class mail, with proper postage prepaid, (ii) upon receipt
of confirmation or answerback if sent by telecopy, or other similar facsimile
transmission, (iii) one Business Day after deposit with a reputable overnight
courier with all charges prepaid, or (iv) when delivered, if hand-delivered by
messenger, all of which shall be properly addressed to the party to be notified
and sent to the address or number indicated as follows:
(i) If to IBM Credit at: (ii) If to Borrower at:
IBM Credit Corporation BSD Acquisition Corp.
4000 Executive Parkway, Third Floor 500 North Central Expressway
San Ramon, CA 94583 Plano, TX 75074
Attention: Region Manager, West Attention: Mr. Joe Farrell
Facsimile: (925) 277-5675 President
Facsimile: (888) 330-5504
(iii) If to Holdings at: (iv) If to PFS:
Business Supplies Distributors Holdings, LLC Priority Fulfillment Services, Inc.
500 North Central Expressway 500 North Central Expressway
Plano, TX 75075 Plano, TX 75074
Attention: Mr. Joe Farrell, Manager Attention: Mr. Thomas J. Madden
Facsimile: (888) 330-5504 Executive Vice President,
Chief Financial Officer
Facsimile: (888) 330-5504
(v) If to IFP at: (vi) If to PFSweb at:
Inventory Financing Partners, LLC PFSweb, Inc.
500 North Central Expressway 500 North Central Expressway
Plano, TX 75074 Plano, TX 75074
Attention: Mr. Joe Farrell, Manager Attention: Mr. Thomas J. Madden
Facsimile: (888)330-5504 Executive Vice President,
Chief Financial Officer
Facsimile: (888) 330-5504
or to such other address or number as each party designates to the other in the
manner prescribed herein.
(B) (i) Each party may electronically transmit to or receive from the
other party certain documents set forth in Attachment J ("E-Documents") via the
Internet or electronic data interchange ("EDI"). Any transmission of data which
is not an E-Document shall have no force or effect between the parties. EDI
Page 44 of 47
transmissions may be sent directly or through any third party service provider
("Provider") with which either party may contract. Each party shall be liable
for the acts or omissions of its Provider while handling E-Documents for such
party, provided, that if both parties use the same Provider, the originating
party shall be liable for the acts or omissions of such Provider as to such
E-Document. Some information to be made available to each Loan Party will be
specific to such Loan Party and will require such Borrower's or Loan Parties'
registration with IBM Credit before access is provided. After IBM Credit has
approved the registration submitted by such Loan Party, IBM Credit shall provide
an ID and password(s) to an individual designated by such Loan Party
("Recipient"). Each Loan Party accepts responsibility for the designated
individual's distribution of the ID and password(s) within its organization and
each Loan Party will take reasonable measures to ensure that passwords are not
shared or disclosed to unauthorized individuals. Each Loan Party will conduct an
annual review of all IDs and passwords to ensure they are accurate and properly
authorized. IBM CREDIT MAY CHANGE OR DISCONTINUE USE OF AN ID OR PASSWORD AT ITS
DISCRETION AT ANY TIME. E-Documents shall not be deemed to have been properly
received, and no E-Document shall give rise to any obligation, until accessible
to the receiving party at such party's receipt computer at the address specified
herein. Upon proper receipt of an E-Document, the receiving party shall promptly
transmit a functional acknowledgment in return. A functional acknowledgment
shall constitute conclusive evidence that an E-Document has been properly
received. If any transmitted E-Document is received in an unintelligible or
garbled form, the receiving party shall promptly notify the originating party in
a reasonable manner. In the absence of such a notice, the originating party's
records of the contents of such E-Document shall control.
(ii) Each party shall use those security procedures which are reasonably
sufficient to ensure that all transmissions of E-Documents are authorized and to
protect its business records and data from improper access. Any E-Document
received pursuant to this Section 10.13 shall have the same effect as if the
contents of the E-Document had been sent in paper rather than electronic form.
The conduct of the parties pursuant to this Section 10.13 shall, for all legal
purposes, evidence a course of dealing and a course of performance accepted by
the parties. The parties agree not to contest the validity or enforceability of
E-Documents under the provisions of any applicable law relating to whether
certain agreements are to be in writing or signed by the party to be bound
thereby. The parties agree, as to any E-Document accompanied by any Loan Party's
ID, that IBM Credit can reasonably rely on the fact that such E-Document is
properly authorized by such Loan Party. E-Documents, if introduced as evidence
on paper in any judicial, arbitration, mediation or administrative proceedings,
will be admissible as between the parties to the same extent and under the same
conditions as other business records originated and maintained in documentary
form. Neither party shall contest the admissibility of copies of E-Documents
under either the business records exception to the hearsay rule or the best
evidence rule on the basis that the E-Documents were not originated or
maintained in documentary form.
RECIPIENT INFORMATION for Internet transmissions:
Name of Borrower's, Holdings' and IFP's Designated Central Contact Authorized to
Receive IDs and Passwords:
Joe Farrell
E-MAIL ADDRESS: jfarrell@pfsweb.com
PHONE NUMBER:
-------------------------------------------------------------------
Name of PFS's and PFSweb's Designated Central Contact Authorized to Receive IDs
and Passwords:
Thomas J. Madden
E-MAIL ADDRESS: tmadden@pfsweb.com
PHONE NUMBER:
-------------------------------------------------------------------
10.14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto were upon the same instrument.
Page 45 of 47
10.15. ATTACHMENT A MODIFICATIONS. IBM Credit may modify the Product Financing
Period set forth in Attachment A from time to time if on at least two occasions
during any three-month period a Shortfall Amount has become due and payable and
may modify the Collateral Insurance Amount set forth in Attachment A from time
to time, in each case, by providing each Loan Party with a new Attachment A. Any
such new Attachment A shall be effective as of the date specified in the new
Attachment A.
10.16. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW. TO INDUCE IBM
CREDIT TO ACCEPT THIS AGREEMENT AND THE OTHER DOCUMENTS, EACH OF LOAN PARTY
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT AND ANY OTHER DOCUMENT, OR FOR THE RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND ANY FEDERAL DISTRICT
COURT IN NEW YORK.
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREINAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME.
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY
BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS
SET FORTH IN SECTION 10.12 OR AT SUCH OTHER ADDRESS OF WHICH IBM CREDIT SHALL
HAVE BEEN NOTIFIED PURSUANT THERETO;
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE
IN ANY OTHER JURISDICTION.
(E) AGREES THAT THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS (WITHOUT GIVING EFFECT TO CONFLICT OF
LAW PROVISIONS) OF THE STATE OF NEW YORK.
10.17. JURY TRIAL WAIVER. EACH OF IBM CREDIT AND EACH LOAN PARTY HEREBY
IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
(INCLUDING ANY COUNTERCLAIM) OF ANY TYPE IN WHICH IBM CREDIT AND ANY LOAN PARTY
ARE PARTIES AS TO ALL MATTERS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
AGREEMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED IN CONNECTION
HEREWITH.
IN WITNESS WHEREOF, each Loan Party has read this entire Agreement, and
has caused its authorized representatives to execute this Agreement and has
caused its corporate seal, if any, to be affixed hereto as of the date first
written above.
IBM CREDIT CORPORATION BSD ACQUISITION CORP.
By: By:
--------------------------------- ---------------------------------
Print Name: Print Name:
------------------------- -------------------------
Title: Title:
------------------------------ ------------------------------
BUSINESS SUPPLIES DISTRIBUTORS PRIORITY FULFILLMENT SERVICES, INC.
HOLDINGS, LLC
Page 46 of 47
By: as Managing Member
---------------
By: By:
--------------------------------- ---------------------------------
Print Name: Print Name:
------------------------- -------------------------
Title: Title:
------------------------------ ------------------------------
INVENTORY FINANCING PARTNERS, LLC PFSWEB, INC.
By: as Managing Member
---------------
By: By:
--------------------------------- ---------------------------------
Print Name: Print Name:
------------------------- -------------------------
Title: Title:
------------------------------ ------------------------------
Page 47 of 47
EXHIBIT 10.2
IBM CREDIT CORPORATION
COLLATERALIZED GUARANTY
In consideration of credit and financing accommodations granted or to
be granted by IBM Credit Corporation with an office located at 4000 Executive
Parkway, 3rd Floor, San Ramon, CA 94583 ("IBM Credit") to BSD Acquisition Corp.
("Borrower"), which is in the best interest of Priority Fulfillment Services,
Inc. ("Guarantor"), and for other good and valuable consideration received,
Guarantor jointly and severally guaranties to IBM Credit, from property held
separately, jointly or in community, the prompt and unconditional performance
and payment by Borrower of any and all obligations, liabilities, contracts,
mortgages, notes, trust receipts, secured transactions, inventory financing and
security agreements, and commercial paper on which Borrower is in any manner
obligated, heretofore, now, or hereafter owned, contracted or acquired by IBM
Credit ("Liabilities"), whether the Liabilities are individual, joint, several,
primary, secondary, direct, contingent or otherwise. Guarantor also agrees to
indemnify IBM Credit and hold IBM Credit harmless against any losses it may
sustain and expenses it may incur, suffer or be liable for as a result of or in
any
way arising out of, following, or consequential to any transactions with or
for the benefit of Borrower. Capitalized terms used herein without definition
shall have the meaning described thereto in the Inventory and Working Capital
Financing Agreement dated September ____, 2001 among Borrower, Guarantor,
Business Supplies Distributors Holdings, LLC, Inventory Financing Partners, LLC,
and PFSweb, Inc. (as amended, modified and supplemented from time to time, the
"Financing Agreement").
If Borrower fails to pay or perform any Liabilities to IBM Credit when due, all
Liabilities to IBM Credit shall then be deemed to have become immediately due
and payable, and Guarantor shall then pay upon demand the full amount of all
sums owed to IBM Credit by Borrower, together with all expenses, including
reasonable attorney's fees.
The liability of Guarantor is direct and unconditional and shall not be affected
by any extension, renewal or other change in the terms of payment of any
security agreement or any other agreement between IBM Credit and Borrower, or
any change in the manner, place or terms of payment or performance thereof, or
the release, settlement or compromise of or with any party liable for the
payment or performance thereof, or the waiver of any default or event of default
under any financing agreement between IBM Credit and Borrower, or the release or
non-perfection of any security thereunder, any change in Borrower's financial
condition, or the interruption of business relations between IBM Credit and
Borrower. This Guaranty is and shall be deemed to be a continuing guaranty and
shall remain in full force and effect until the indefeasible payment in full of
the Liabilities and any other amounts payable under this Guaranty and the
cessation of all obligations of IBM Credit to extend credit to Borrower.
Guarantor acknowledges that its obligations hereunder are in addition to and
independent of any agreement or transaction between IBM Credit and Borrower or
any other person creating or reserving any lien, encumbrance or security
interest in any property of Borrower or any other person as security for any
obligation of Borrower. IBM Credit need not exhaust its rights or recourse
against Borrower or any other person or any security IBM Credit may have at any
time before being entitled to payment from Guarantor.
To secure payment of all of Guarantor's current and future debts and obligations
to IBM Credit, whether under this Guaranty or any other agreement between IBM
Credit and Guarantor and to secure the Liabilities, whether direct or
contingent, Guarantor does assign, pledge and give to IBM Credit a security
interest in all of Guarantor's personal property, whether now owned or hereafter
acquired or existing and wherever located, including the following: (a) all
inventory and equipment manufactured or sold by or bearing the trademark or
tradename of International Business Machines Corporation ("IBM") or any other
Authorized Supplier and all parts thereof, attachments, additions, accessories
and accessions thereto, all substitutions, repossessions, exchanges,
replacements and returns thereof, all price protection credits, rebates,
discounts and incentive payments relating to the foregoing, products and
proceeds thereof and documents therefor ("IBM Credit Inventory"); (b) all
accounts, chattel paper, instruments, negotiable documents, promissory notes,
general
Page 1 of 6
intangibles (including contract rights, software and licenses), deposit
accounts, commercial tort claims, intellectual property, investment property,
pledged notes, letter of credit rights, supporting obligations, obligations of
any kind owing to Guarantor, whether or not arising out of or in connection with
the sale or lease of goods or the rendering of services and all books, invoices,
documents and other records in any form evidencing or relating to any of the
foregoing; (c) all substitutions and replacements for all of the foregoing; and
(d) all products or proceeds of all of the foregoing (all of the above assets
are defined pursuant to the provisions of Article 9 of the Uniform Commercial
Code as in effect in the State of New York and are hereinafter referred to as
the "Collateral"). Collateral shall not include inventory and equipment of the
Guarantor that is not IBM Credit Inventory (as defined above). This security
interest is also granted to secure Guarantor's debts to all of IBM Credit's
affiliates.
In connection with any working capital financing Guarantor receives from another
financial institution or commercial lender ("Lender"), Guarantor may request
that IBM Credit subordinate its interest in the Collateral (excluding the IBM
Credit Inventory) and IBM Credit will not unreasonably withhold its consent
provided that:
(1) No default or event of default exists;
(2) IBM Credit and Lender shall have entered into a subordination
agreement in form and substance satisfactory to IBM Credit in all
respects in its sole discretion;
(3) IBM Credit shall be satisfied that the IBM Credit Inventory shall
be segregated from the other property of Guarantor and its customers
and IBM Credit shall have a first perfected priority security interest
in the IBM Credit Inventory; and
(4) The books and records maintained on behalf of the Borrower shall be
kept separately from Guarantor's other books and records and Guarantor
shall have conspicuously noted on the Borrower's books and records that
such books and records are the property of Borrower.
IBM Credit shall have the right, but not the obligation, from time to time, as
IBM Credit in its sole discretion may determine, and all without any advance
notice to Guarantor, to: (a) examine the Collateral; (b) appraise it as
security; (c) verify its condition and nonuse; (d) verify that all Collateral
has been properly accounted for and this Agreement complied with, and (e)
assess, examine, check and make copies of any and all of Guarantor's books,
records and files.
If Guarantor does not comply with any of the terms of this Agreement or the
Financing Agreement, or Guarantor fails to fulfill any obligation to IBM Credit
or any of IBM Credit's affiliates under any other agreement between IBM Credit
and Guarantor or between Guarantor and any of IBM Credit's affiliates, or
Guarantor becomes insolvent or ceases to do business as a going concern, or a
bankruptcy, insolvency proceeding, arrangement or reorganization is filed by or
against Guarantor, or any of Guarantor's property is attached or seized, or a
receiver is appointed for Guarantor, or Guarantor commits any act which impairs
the prospect of full performance or satisfaction of Guarantor's obligations to
IBM Credit, or Guarantor shall lose any franchise, permission, license or right
to conduct its business, or Guarantor misrepresents its financial condition or
organizational structure, or whenever IBM Credit deems the debt or Collateral to
be insecure:
a) IBM Credit may call all or any part of the amount Guarantor or
Borrower owes IBM Credit or IBM Credit's affiliates due and payable
immediately, if permitted by applicable law, together with court costs
and all costs and expenses of IBM Credit's repossession and collection
activity, including, but not limited to reasonable attorney's fees.
b) Guarantor will hold and keep the Collateral in trust, in good order
and repair, for IBM Credit's benefit and shall not exhibit or sell it.
Page 2 of 6
c) Upon IBM Credit's demand, Guarantor will immediately deliver the
Collateral to IBM Credit, in good order and repair, at a place
reasonably convenient to IBM Credit, together with all related
documents; or IBM Credit may, in IBM Credit's sole discretion and
without demand, take immediate possession of the Collateral, together
with all related documents.
d) Guarantor waives and releases: (i) any and all claims and causes of
action which Guarantor may now or ever have against IBM Credit as a
result of any possession, repossession, collection or sale by IBM
Credit of any of the Collateral, notwithstanding the effect of such
possession, repossession, collection or sale upon Guarantor's business;
(ii) all rights of redemption from any such sale; and (iii) the benefit
of all valuation, appraisal and exemption laws. If IBM Credit seeks to
take possession of any of the Collateral by replevin or other court
process, Guarantor irrevocably waives any notice, bonds, surety and
security relating thereto required by any statute, court rule or
otherwise as an incident to such possession and any demand for
possession of the Collateral prior to the commencement of any suit or
action to recover possession thereof.
e) Guarantor appoints IBM Credit or any person IBM Credit may delegate
as its duly authorized Attorney-in-Fact (without notifying Guarantor)
to do, in IBM Credit's sole discretion, any of the following: (i) sell,
assign, transfer, negotiate or pledge any and all accounts, chattel
paper, or contract rights; (ii) endorse Guarantor's name on any and all
notes, checks, drafts, or other forms of exchange received as payment
on any accounts, chattel paper and contract rights, for deposit in IBM
Credit's account; (iii) grant any extension, rebate or renewal on any
and all accounts, chattel paper or contract rights, or enter into any
settlement thereof; (iv) demand, collect and receive any and all
amounts due on accounts, chattel paper and contract rights; and (v)
exercise any and all rights Guarantor has in the Collateral.
f) In the event Guarantor brings any action or asserts any claim
against IBM Credit which arises out of this Agreement, any other
agreement or any of Guarantor's and IBM Credit's business dealings, in
which Guarantor does not prevail, Guarantor agrees to pay IBM Credit
all court costs and all costs and expenses of IBM Credit's defense of
such action of claim including, but not limited to, reasonable
attorney's fees.
IBM Credit may also declare a default under this Agreement and exercise any and
all rights and remedies available herein, if, in IBM Credit's sole discretion,
IBM Credit determines that the Collateral has decreased in value, and Guarantor
has been unable to either: (a) provide IBM Credit with additional Collateral in
a form and substance satisfactory to IBM Credit; or (b) pay the Shortfall Amount
as defined in the Financing Agreement.
IBM Credit has and will always possess all the rights and remedies of a secured
party under law, and IBM Credit's rights and remedies are and will always be
cumulative. Guarantor acknowledges and agrees that the Collateral is the subject
of widely distributed standard price quotations and is customarily sold in a
recognized market. Guarantor agrees that a private sale by IBM Credit of any of
the Collateral to a dealer in those types of Collateral is a commercially
reasonable sale. Further, Guarantor agrees that IBM Credit's delivery of any of
the Collateral to a distributor or manufacturer, with a request that it
repurchase Collateral, as provided in any repurchase agreement with IBM Credit,
is a commercially reasonable disposition or sale.
Guarantor promises that (a) the Collateral is and shall remain free from all
claims and liens except IBM Credit's; (b) Guarantor shall defend the Collateral
against all other claims and demands; and (c) Guarantor will notify IBM Credit
before it signs, or authorizes the signing of any financing statement regardless
of its coverage. Guarantor authorizes IBM Credit to file with any filing office
such financing statements, amendments, addenda and other records showing IBM
Credit as secured party and Guarantor as the debtor and identifying IBM Credit's
security interest in the Collateral that IBM Credit deems necessary to perfect
Page 3 of 6
and maintain IBM Credit's security interest in the Collateral. Guarantor will
execute any and all documents IBM Credit may request to confirm or perfect IBM
Credit's title or security interest in the Collateral.
Guarantor represents and covenants that the first paragraph of this Guaranty
states the exact name of Guarantor as set forth in its charter or other
organizational record. Guarantor represents that it is duly organized under the
laws of the State of Delaware and the organization document creating Guarantor
has been filed in the appropriate office of such State. In addition, Guarantor's
organizational identification number assigned by its State of organization is as
follows: ______________________. Guarantor's principal place of business is
located at 500 North Central Expressway, Plano, TX 75074 and Guarantor
represents that its business is conducted as a CORPORATION. Guarantor will not
change its name, location (as defined in Article 9 of the U.C.C.) or State of
organization. Guarantor shall provide IBM Credit at least thirty (30) days prior
written notice of any change in its form of ownership, management, and of any
change in its principal place of business, or any additions or discontinuances
of other business locations. The Collateral shall be kept at Guarantor's
principal place of business and at the following addresses:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
until all sums owed IBM Credit are paid in full. Guarantor will immediately
notify IBM Credit if the Collateral is kept at any other address. This paragraph
is for IBM Credit's informational purposes only, and is not in any way or manner
intended to limit the extent of IBM Credit's security interest in the
Collateral. Guarantor and its predecessors have done and do business only under
the following names: Priority Fulfillment Services, Inc. and PFSweb, Inc.
Guarantor will pay all taxes, license fees, assessments and charges on the
Collateral when due. Guarantor will be responsible for any loss of Collateral
for any reason whatsoever. Guarantor will keep the Collateral insured for its
full insurable value against loss or damage by fire, wind, theft and for
combined additional coverage, including vandalism and malicious mischief, and
for other risks as IBM Credit may require. Guarantor will obtain insurance under
such terms and in amounts as IBM Credit may specify, from time to time, in
companies acceptable to IBM Credit, with a loss-payee or mortgagee clause
payable to IBM Credit to the extent of any loss to the Collateral and containing
a waiver of all defenses against Guarantor that is acceptable to IBM Credit.
Guarantor further agrees to provide IBM Credit with written evidence of the
required insurance coverage and loss-payee or mortgagee clause. Guarantor
assigns to IBM Credit all sums not in excess of the unpaid debt owed IBM Credit,
and directs any insurance company to make payment directly to IBM Credit to be
applied to the unpaid debt owed IBM Credit. Guarantor further grants IBM Credit
an irrevocable power of attorney to endorse any draft and sign and file all of
the necessary papers, forms and documents to initiate and settle any and all
claims with respect to the Collateral. If Guarantor fails to pay any of the
above-referenced costs, charges or any insurance premiums, or if it fails to
insure the Collateral, IBM Credit may pay such costs, charges or any insurance
premiums, and the amounts paid shall be considered an additional debt owed by
Guarantor to IBM Credit. Guarantor will promptly notify IBM Credit of any loss,
theft or destruction of or damage to any of the Collateral.
Guarantor will not rent, lease, lend, demonstrate, pledge, create a security
interest in, transfer or secrete any of the Collateral, or use the Collateral
for any purpose other than exhibition, without IBM Credit's prior written
consent.
This Guaranty is assignable, shall be construed liberally in IBM Credit's favor,
and shall inure to the benefit of and bind IBM Credit's and Guarantor's
respective successors, personal representatives and assigns, and also benefit
any of IBM Credit's existing or future affiliates that may extend credit to
Borrower.
If Borrower hereafter is incorporated, acquired by a corporation, dissolved, or
otherwise undergoes any change in its management, ownership, identity, or
organizational structure, this Guaranty shall continue to extend to any
Liabilities of the Borrower or such resulting corporation, dissolved
corporation, or new or changed legal entity, or identity to IBM Credit.
Page 4 of 6
Guarantor waives: notice of the acceptance of this Guaranty, and of presentment,
demand and protest; notices of nonpayment, nonperformance and dishonor; notices
of amount of indebtedness of Borrower outstanding at any time; notices of the
number and amount of advances made by IBM Credit to Borrower in reliance on this
Guaranty; notice of the financial condition of Borrower or any other guarantor
or any change therein; notice of the release of collateral for the Liabilities,
of any other guaranty, pledge or suretyship agreement or any collateral
therefor; notices of any legal proceedings or other efforts to collect against
Borrower; notice of any recoupment, setoff, administrative freeze on Borrower's
credit or assets; notice and any opportunity for a hearing as to any prejudgment
remedies; and any other demands and notices required by law. Guarantor further
waives all rights to assert against IBM Credit any right of recoupment, setoff,
and all claims, defenses, and counterclaims against IBM Credit or Borrower,
including any defense based on the lack of good faith. To the extent permitted
by law, Guarantor also waives any and all rights in and notices or demands
relating to any Collateral now or hereafter securing any of the Liabilities. All
waivers by Guarantor herein shall survive any termination or revocation of this
Guaranty.
Guarantor authorizes IBM Credit to sell at public or private sale or otherwise
realize upon the Collateral now or hereafter securing any of the Liabilities, in
such manner and upon such terms and conditions as IBM Credit deems best, all
without advertisement or notice to Borrower, Guarantor, or any third parties.
Guarantor further authorizes IBM Credit to deal with the proceeds of such
Collateral as provided in IBM Credit's agreement with Borrower, without
prejudice to IBM Credit's claim for any deficiency and free from any right or
redemption on the part of Borrower, Guarantor or any third parties, which right
or redemption is hereby waived together with every formality prescribed by
custom or by law in relation to any such sale or other realization.
Guarantor further agrees that all of its right, title and interest in, to and
under any loans, notes, debts and all other liabilities and obligations
whatsoever owed by Borrower to Guarantor, whether heretofore or hereafter
created or incurred and for whatever amount, and all security therefor, shall be
now and hereafter at all times fully subordinated to all Liabilities. Guarantor
will not ask, demand or sue for, or take or receive payment of, all or any part
of such loans, notes, debts or any other liabilities or obligations whatsoever
or any security therefor, until and unless all of the Liabilities are paid,
performed and fully satisfied except as expressly permitted by the Financing
Agreement and provided no default or event of default exists. In addition, until
such time that the Liabilities are indefeasibly paid in full, Guarantor
irrevocably waives, for the benefit of IBM Credit, any and all rights which it
presently has, or may hereafter have, whether by virtue of any payment or
payments hereunder or otherwise, to be subrogated to the rights of IBM Credit
against the Borrower with respect to any such indebtedness of the Borrower to
IBM Credit.
Guarantor has made an independent investigation of the financial condition of
Borrower and gives this Guaranty based on that investigation and not upon any
representations made by IBM Credit. Guarantor acknowledges that it has access to
current and future Borrower financial information which will enable Guarantor to
continuously remain informed of Borrower's financial condition. Guarantor also
consents to and agrees that the obligations under this Guaranty shall not be
affected by IBM Credit's subsequent increases or decreases in the credit line
that IBM Credit may grant to Borrower; substitutions, exchanges or releases of
all or any part of the Collateral now or hereafter securing any of the
Liabilities; sales or other dispositions of any or all of the Collateral now or
hereafter securing any of the Liabilities without demands, advertisement or
notice of the time or place of the sales or other dispositions; realizing on the
Collateral to the extent IBM Credit, in IBM Credit's sole discretion, deems
proper; or purchases of all or any part of the Collateral for IBM Credit's own
account.
This Guaranty and any and all obligations, liabilities, terms and provisions
herein shall survive any and all bankruptcy or insolvency proceedings, actions
and/or claims brought by or against Borrower, whether such proceedings, actions
and/or claims are federal and/or state.
This Guaranty is submitted by Guarantor to IBM Credit (for IBM Credit's
acceptance or rejection thereof) at IBM Credit's above specified office; as an
offer by Guarantor to guaranty the credit and financial accommodations provided
by IBM Credit to Borrower. If accepted, this Guaranty shall be deemed to have
Page 5 of 6
been made at IBM Credit's above-specified This Guaranty and all obligations
pursuant thereto, shall office. be governed and controlled as to interpretation,
enforcement, validity, construction, effect and, in all other respects by the
laws of the State of New York without giving effect to the principles of
conflicts of laws. Guarantor, to induce IBM Credit to accept this Guaranty,
agrees that all actions or proceedings arising directly or indirectly in
connection with, out of, related to or from this Guaranty may be litigated, at
IBM Credit's sole discretion and election, in courts within the State of New
Guarantor consents and York. submits to the jurisdiction of any local, state or
federal court located within that state. Guarantor waives any right to transfer
or change the venue of any litigation brought against Guarantor by IBM Credit in
accordance with this paragraph.
Any delay by IBM Credit, or IBM Credit's successors, affiliates or assigns in
exercising any or all rights granted IBM Credit under this Guaranty shall not
operate as a waiver of those rights. Furthermore, any failure by IBM Credit,
IBM Credit's successors, affiliates or assigns, to exercise any or all rights
granted IBM Credit under this Guaranty shall not operate as a waiver of IBM
Credit's right to exercise any or all of them later.
This document contains the full agreement of the parties concerning the guaranty
of Borrower's Liabilities and can be varied only by a document signed by all of
the parties hereto.
THE PARTIES AGREE THAT ANY ACTION, SUIT OR PROCEEDING, RELATING DIRECTLY OR
INDIRECTLY TO THIS GUARANTY, OR THE RELATIONSHIP BETWEEN IBM CREDIT AND
GUARANTOR, WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE WITHOUT
A JURY. THUS, THE PARTIES HEREBY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH
ACTION, SUIT OR PROCEEDING.
WITNESS PRIORITY FULFILLMENT SERVICES, INC.
GUARANTOR
--------------------------------- By:
---------------------------------
Print Name: Print Name:
---------------------- -------------------------
Title:
------------------------------
Date:
(SEAL) -------------------------------
Guarantor's Address:
--------------------------
-----------------, ---- -------
ATTEST:
---------------------------------
Secretary
Print Name:
---------------------
IBM CREDIT CORPORATION
By:
---------------------------------
Print Name:
-------------------------
Title:
------------------------------
Page 6 of 6
EXHIBIT 10.3
IBM CREDIT CORPORATION
GUARANTY
(BY CORPORATION)
In consideration of credit and financing accommodations granted or to
be granted by IBM Credit Corporation with an office located at 4000 Executive
Parkway, Third Floor, San Ramon, CA 94583 ("IBM Credit") to BSD Acquisition
Corp. ("Customer") under a financing agreement between IBM Credit and Customer,
which is in the best interest of PFSweb, Inc. ("Guarantor"), and for other good
and valuable consideration received, Guarantor guaranties to IBM Credit the
prompt and unconditional performance and payment by Customer of any and all
obligations, liabilities, contracts, mortgages, notes, trust receipts, secured
transactions, inventory financing and security agreements, and commercial paper
on which Customer is in any manner obligated, heretofore, now, or hereafter
owned, contracted or acquired by IBM Credit ("Liabilities"), whether the
Liabilities are individual, joint, several, primary, secondary, direct,
contingent or otherwise. Guarantor also agrees to indemnify IBM Credit and hold
IBM Credit harmless against any losses IBM Credit may sustain and expenses it
may incur, suffer or be liable for as a result of or in any way arising out of,
following, or
consequential to any transactions with or for the benefit of
Customer.
If Customer fails to pay or perform any Liabilities to IBM Credit when
due, all Liabilities to IBM Credit shall then be deemed to have become
immediately due and payable, and Guarantor shall then pay upon demand the full
amount of all sums owed to IBM Credit by Customer, together with all expenses,
including reasonable attorney's fees.
The liability of Guarantor is direct and unconditional and shall not be
affected by any extension, renewal or other change in the terms of payment of
any security agreement or any other agreement between IBM Credit and Customer,
or any change in the manner, place or terms of payment or performance thereof,
or the release, settlement or compromise of or with any party liable for the
payment or performance thereof, the release or non-perfection of any security
thereunder, any change in Customer's financial condition, or the interruption of
business relations between IBM Credit and Customer. This Guaranty is and shall
be deemed to be a continuing guaranty and shall remain in full force and effect
until the indefeasible payment in full of the Liabilities and any other amounts
payable under this Guaranty and the cessation of all obligations of IBM Credit
to extend credit to Customer. Guarantor acknowledges that its obligations
hereunder are in addition to and independent of any agreement or transaction
between IBM Credit and Customer or any other person creating or reserving any
lien, encumbrance or security interest in any property of Customer or any other
person as security for any obligation of Customer. IBM Credit need not exhaust
its rights or recourse against Customer or any other person or any security it
may have at any time before being entitled to payment from Guarantor.
This Guaranty is assignable, shall be construed liberally in IBM
Credit's favor, and shall inure to the benefit of and bind IBM Credit's and
Guarantor's respective successors, personal representatives and assigns, and
also benefit any of IBM Credit's existing or future affiliates that may extend
credit to Customer.
If Customer hereafter is incorporated, acquired by a corporation,
dissolved, or otherwise undergoes any change in its management, ownership,
identity or organizational structure, this Guaranty shall continue to extend to
any Liabilities of the Customer or such resulting corporation, dissolved
corporation, or new or changed legal entity or identity to IBM Credit.
Guarantor waives: notice of the acceptance of this Guaranty, and of
presentment, demand and protest; notices of nonpayment, nonperformance, any
right of contribution from other guarantors, and dishonor; notices of amount of
indebtedness of Customer outstanding at any time; notices of the number and
amount of advances made by IBM Credit to Customer in reliance on this Guaranty;
notices of any legal proceedings against Customer; notice and hearing as to any
prejudgment remedies; and any other demands and notices required by law.
Guarantor further waives all rights of set-off and all counterclaims against IBM
Credit or Customer.
Page 1 of 4
Guarantor also waives any and all rights in and notices or demands relating to
any collateral now or hereafter securing any of the Liabilities, including, but
not limited to, all rights, notices or demands relating, whether directly or
indirectly, to the sale or other disposition of any or all of such collateral or
the manner of such sale or other disposition. All waivers by Guarantor herein
shall survive any termination or revocation of this Guaranty. Guarantor
authorizes IBM Credit to sell at public or private sale or otherwise realize
upon the collateral now or hereafter securing any of the Liabilities, in such
manner and upon such terms and conditions as IBM Credit deems best, all without
advertisement or notice to Customer, Guarantor, or any third parties. Guarantor
further authorizes IBM Credit to deal with the proceeds of such collateral as
provided in IBM Credit's agreement with Customer, without prejudice to IBM
Credit's claim for any deficiency and free from any right or redemption on the
part of Customer, Guarantor or any third parties, which right or redemption is
hereby waived together with every formality prescribed by custom or by law in
relation to any such sale or other realization.
Guarantor further agrees that all of its right, title and interest in,
to and under any loans, notes, debts and all other liabilities and obligations
whatsoever owed by Customer to Guarantor, whether heretofore or hereafter
created or incurred and for whatever amount, and all security therefor, shall be
now and hereafter at all times fully subordinated to all Liabilities. Guarantor
will not ask, demand or sue for, or take or receive payment of, all or any part
of such loans, notes, debts or any other liabilities or obligations whatsoever
or any security therefor, until and unless all of the Liabilities are paid,
performed and fully satisfied.
Until such time the Liabilities are indefeasibly paid in full, the
Guarantor hereby irrevocably waives for the benefit of IBM Credit, any and all
rights which it presently has, or may hereafter have, whether by virtue of any
payment or payments hereunder or otherwise, to be subrogated to the rights of
IBM Credit against the Customer with respect to any such indebtedness of the
Customer to IBM Credit.
Guarantor has made an independent investigation of the financial
condition of Customer and gives this Guaranty based on that investigation and
not upon any representations made by IBM Credit. Guarantor acknowledges that it
has access to current and future Customer financial information which will
enable Guarantor to continuously remain informed of Customer's financial
condition. Guarantor also consents to and agrees that the obligations under this
Guaranty shall not be affected by IBM Credit's: subsequent increases or
decreases in the credit line that IBM Credit may grant to Customer;
substitutions, exchanges or releases of all or any part of the collateral now or
hereafter securing any of the Liabilities; sales or other dispositions of any or
all of the collateral now or hereafter securing any of the Liabilities without
demands, advertisement or notice of the time or place of the sales or other
dispositions; realizing on the collateral to the extent IBM Credit, in its sole
discretion, deems proper; or purchases of all or any part of the collateral for
IBM Credit's own account.
This Guaranty and any and all obligations, liabilities, terms and
provisions herein shall survive any and all bankruptcy or insolvency
proceedings, actions and/or claims brought by or against Customer, whether such
proceedings, actions and/or claims are federal and/or state.
This Guaranty is submitted by Guarantor to IBM Credit (for IBM Credit's
acceptance or rejection thereof) at IBM Credit's above specified office; as an
offer by Guarantor to guaranty the credit and financial accommodations provided
by IBM Credit to Customer. If accepted, this Guaranty shall be deemed to have
been made at IBM Credit's above specified office. This Guaranty and all
obligations pursuant thereto, shall be governed and controlled as to
interpretation, enforcement, validity, construction, effect and in all other
respects by the laws of the State of New York without giving effect to the
principles of conflicts of laws. Guarantor, to induce IBM Credit to accept this
Guaranty, agrees that all actions or proceedings arising directly or indirectly
in connection with, out of, related to or from this Guaranty may be litigated,
at IBM Credit's sole discretion and election, in courts within the State of New
York. Guarantor consents and submits to the jurisdiction of any local, state or
federal court located within that state. Guarantor waives any right to transfer
or change the venue of any litigation brought against Guarantor by IBM Credit in
accordance with this paragraph.
Any delay by IBM Credit, or its successors, affiliates or assigns in
exercising any or all rights granted IBM Credit under this Guaranty shall not
operate as a waiver of those rights. Furthermore, any failure by IBM
Page 2 of 4
Credit, its successors, affiliates or assigns, to exercise any or all rights
granted IBM Credit under this Guaranty shall not operate as a waiver of IBM
Credit's right to exercise any or all of them later.
This document contains the full agreement of the parties concerning the
guaranty of Customer's Liabilities and can be varied only by a document signed
by all the parties hereto.
THE PARTIES AGREE THAT ANY ACTION, SUIT OR PROCEEDING RELATING DIRECTLY
OR INDIRECTLY TO THIS GUARANTY OR THE RELATIONSHIP BETWEEN IBM CREDIT AND
GUARANTOR, WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE WITHOUT
A JURY. THUS, THE PARTIES HEREBY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH
ACTION, SUIT OR PROCEEDING.
WITNESS: PFSWEB, INC.
------------------------------
(Print Name ) By:
----------------- --------------------------------
Name:
----------------------------
Title:
(SEAL) ---------------------------
Date: September ____, 2001
Guarantor's Address:
----------------------------------
----------------------------------
ATTEST:
--------------------------------------
(Secretary)
(Print Name)
-------------------------
Page 3 of 4
SECRETARY'S CERTIFICATE
I hereby certify that I am the Secretary of the following named
corporation and that execution of the above Guaranty was ratified, approved and
confirmed by the Shareholders at a meeting, if necessary, and pursuant to a
resolution of the Board of Directors of the corporation at a meeting of the
Board of Directors duly called, and which is currently in effect, which
resolution was duly presented, seconded and adopted and reads as follows:
"BE IT RESOLVED that any officer of this corporation is hereby
authorized to execute a guaranty of the obligations of BSD Acquisition Corp.
("Customer") to IBM Credit Corporation on behalf of the corporation, which
instrument may contain such terms as the above named persons may see fit
including, but not limited to a waiver of notice of acceptance of this guaranty;
presentment; demand; protest; notices of nonpayment, nonperformance, dishonor,
the amount of indebtedness of Customer outstanding at any time, any legal
proceedings against Customer, and any other demands and notices required by law;
any right of contribution from other guarantors; and all set-offs and
counterclaims."
IN WITNESS WHEREOF and as Secretary of the named corporation I have
hereunto set my hand and affixed the corporate seal on this ______ day of
September , 2001.
PFSWEB, INC.
(SEAL) ------------------------
(Secretary)
Page 4 of 4
EXHIBIT 10.4
IBM CREDIT CORPORATION
NOTES PAYABLE SUBORDINATION AGREEMENT
IBM CREDIT CORPORATION
4000 Executive Parkway, Third Floor
San Ramon, CA 94583
Ladies and/or Gentlemen:
BSD Acquisition Corp., with its principal place of business at 500
North Central Expressway, Plano, TX 75074 ("BSD"), may become indebted to
Priority Fulfillment Services, Inc. ("PFS"). PFS represents that no part of said
indebtedness has been assigned to or subordinated in favor of any other person,
firm or corporation and that PFS does not hold any security therefor.
Capitalized terms used herein without definition shall have the meaning ascribed
thereto in the Financing Agreement referred to below.
To induce IBM Credit to enter into a financing agreement with BSD (as
amended, modified, and supplemented from time to time, the "Financing
Agreement") and in consideration of any loans, advances, payments, extensions or
credit (including the extension or renewal, in whole or in part, of any
antecedent or other debt), benefits or financial accommodations heretofore or
hereafter made, granted or extended by IBM Credit or which IBM Credit has or
will become obligated to make, grant or extend to or for the account of BSD
whether under the Financing
Agreement or otherwise, and in consideration of any
obligations heretofore or hereafter incurred by BSD to IBM Credit, whether under
the Financing Agreement or otherwise, PFS agrees to make the payment of the
indebtedness referred to in the first paragraph hereof and any and all other
present or future indebtedness of BSD to PFS together with any and all interest
accrued thereon (collectively the "Secondary Obligations") subject and
subordinate to the prior indefeasible payment in full of any and all debts,
obligations and liabilities of BSD to IBM Credit, whether absolute or
contingent, due or to become due, now existing or hereafter arising and whether
direct or acquired by IBM Credit by transfer, assignment or otherwise
(collectively the "Primary Obligations") and that BSD shall make no payments to
PFS until the Primary Obligations have been indefeasibly paid in full as
acknowledged in writing by IBM Credit. Notwithstanding the foregoing, BSD may
make payments in respect of the Secondary Obligations provided that no Default
or Event of Default exists immediately prior to the payment of the Secondary
Obligations and that no Default or Event of Default will occur after any payment
in respect of the Secondary Obligations. Except as provided above, PFS agrees
not to ask, demand, sue for, take or receive payment or security for all or any
part of the Secondary Obligations until and unless all of the Primary
Obligations shall have been fully paid and discharged.
Upon any distribution of any assets of BSD whether by reason of sale,
reorganization, liquidation, dissolution, arrangement, bankruptcy, receivership,
assignment for the benefit of creditors, foreclosure or otherwise, IBM Credit
shall be entitled to receive payment in full of the Primary Obligations prior to
the payment of any part of the Secondary Obligations. To enable IBM Credit to
enforce its rights hereunder in any such proceeding or upon the happening of any
such event, IBM Credit or any person whom IBM Credit may from time to time
designate is hereby irrevocably appointed attorney-in-fact for PFS with full
power to act in the place and stead of PFS including the right to make, present,
file and vote proofs of claim against BSD on account of all or any part of said
Secondary Obligations as IBM Credit may deem advisable and to receive and
collect any and all payments made thereon and to apply the same on account of
the Primary Obligations. PFS will execute and deliver to such instruments as IBM
Credit may require to enforce each of the Secondary Obligations, to effectuate
said power of attorney and to effect collection of any and all dividends or
other payments which may be made at any time on account thereof.
While this instrument remains in effect, PFS will not assign to or
subordinate in favor of any other person, firm or corporation any right, claim
or interest in or to the Secondary Obligations or commence or join with any
other creditor in commencing any bankruptcy, reorganization or insolvency
proceeding against
Page 1 of 3
BSD. IBM Credit may at any time, in its discretion, renew or extend the time of
payment of all or any portion of the Primary Obligations or waive or release any
collateral which may be held therefor and IBM Credit may enter into such
agreements with BSD as IBM Credit may deem desirable without notice to or
further assent from PFS and without adversely affecting IBM Credit's rights
hereunder in any manner whatsoever.
In furtherance of the foregoing and as collateral security for
the payment and discharge in full of any and all of the Primary Obligations, PFS
hereby transfers and assigns to IBM Credit the Secondary Obligations and all
collateral security therefor to which PFS now is or may at any time be entitled
and all rights under all guarantees thereof and agrees to deliver to IBM Credit
endorsed in blank all notes or other instruments now or hereafter evidencing
said Secondary Obligations. IBM Credit may file one or more financing statements
concerning any security interest hereby created without the signature of PFS
appearing thereon.
The within instrument is and shall be deemed to be a continuing
subordination and shall be and remain in full force and effect until all Primary
Obligations have been performed and paid in full and IBM Credit's commitment, if
any, under the Financing Agreement has been terminated.
Dated .
------------
PRIORITY FULFILLMENT SERVICES, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
500 North Central Expressway
Plano, TX 75074
To: IBM Credit Corporation
BSD hereby acknowledge notice of the within and foregoing
subordination and agree to be bound by all the terms, provisions and conditions
thereof. BSD further agrees not to repay all or any part of the Secondary
Obligations, or to issue any note or other instrument evidencing the same or to
grant any collateral security therefor without IBM Credit's prior written
consent.
BSD ACQUISITION CORP.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
ACCEPTED:
IBM CREDIT CORPORATION
By:
-------------------------
Name:
-----------------------
Title:
----------------------
Page 2 of 3
ACKNOWLEDGMENT OF SUBORDINATION
---------------------- )
) SS
---------------------- )
On the ____ day of September, 2001, appeared before me
______________________ to me known to be the individual described in and who
executed the foregoing instrument, and who acknowledged to me that the same was
executed as his or her free and voluntary act for the uses and purposes therein
set forth.
------------------------------
(Notary Public)
My Commission Expires:
,
------------- -----
Page 3 of 3
EXHIBIT 10.5
================================================================================
DAISYTEK, INCORPORATED
BSD ACQUISITION CORP.
PRIORITY FULFILLMENT SERVICES, INC.
PFSWEB, INC.
PRIORITY FULFILLMENT SERVICES EUROPE B.V.
STOCK PURCHASE AGREEMENT
SEPTEMBER 25, 2001
================================================================================
TABLE OF CONTENTS
Section 1 DEFINITIONS..........................................................................................1
Section 2 THE STOCK PURCHASE...................................................................................6
2.1 The Stock Purchase...................................................................................6
2.2 Closing..............................................................................................6
2.3 Purchase Price.......................................................................................6
2.4 Surrender of Certificates; Payment and Delivery of Stock Purchase Consideration......................7
Section 3 REPRESENTATIONS AND WARRANTIES OF DAISYTEK...........................................................7
3.1 Organization and Qualification.......................................................................7
3.2 Power; Authority.....................................................................................7
3.3 Brokers and Finders' Fees............................................................................8
3.4 Consents.............................................................................................8
3.5 Capitalization.......................................................................................8
3.6 Validity of Securities...............................................................................8
3.7 Material Contracts...................................................................................8
3.8 Employees............................................................................................9
3.9 Taxes................................................................................................9
Section 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PFS.................................................10
4.1 Organization and Qualification......................................................................10
4.2 Power; Authority....................................................................................10
4.3 Brokers and Finders' Fees...........................................................................10
4.4 Consents............................................................................................10
4.5 Investment Intent...................................................................................10
4.6 Knowledge and Experience............................................................................11
4.7 No Obligations Incurred.............................................................................11
4.8 Taxes...............................................................................................11
Section 5 ADDITIONAL AGREEMENTS...............................................................................11
5.1 PFS Mexico and PFS Australia........................................................................11
5.2 Future Sales........................................................................................12
5.3 Access to Records...................................................................................12
5.4 Taxes...............................................................................................13
Section 6 CONDITIONS TO THE STOCK PURCHASE....................................................................13
6.1 Conditions to Obligations of Each Party to Effect the Stock Purchase................................13
6.2 Additional Conditions
to the Obligations of Daisytek................................................13
6.3 Additional Conditions to the Obligations of Purchaser...............................................14
Section 7 MISCELLANEOUS.......................................................................................16
7.1 Amendment and Waiver................................................................................16
7.2 Indemnification.....................................................................................16
7.3 Facsimile Signature.................................................................................17
7.4 Severability........................................................................................17
7.5 Successors and Assigns..............................................................................17
7.6 Notices.............................................................................................18
7.7 Governing Law.......................................................................................19
7.8 Counterparts........................................................................................19
7.9 Headings............................................................................................19
7.10 Construction and Representation.....................................................................19
7.11 Rights of the Parties...............................................................................19
7.12 Arbitration.........................................................................................19
7.13 Covenant of Further Assurances......................................................................20
i
TABLE OF EXHIBITS
EXHIBIT A Capitalization
ii
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT dated as of September 25, 2001 (this
"AGREEMENT"), is entered into by and among Daisytek, Incorporated, a Delaware
corporation ("DAISYTEK"), PFSweb, Inc., a Delaware corporation ("PFSWEB"),
Priority Fulfillment Services, Inc., a Delaware corporation and wholly owned
subsidiary of PFSweb ("PFS"), BSD Acquisition Corp., a Delaware corporation and
an indirect minority owned subsidiary of PFS ("PURCHASER"), and Priority
Fulfillment Services Europe B.V., a Netherlands corporation ("PFS EUROPE").
Capitalized terms used in this Agreement and not otherwise defined are defined
in Section 1 of this Agreement.
RECITALS
WHEREAS, Daisytek beneficially owns and holds of record 100% of the
issued and outstanding capital stock of (a) Business Supplies Distributors,
Inc., a Delaware corporation ("BSD"), (b) Business Supplies Distributors Europe
B.V., a Netherlands corporation ("BSD EUROPE"), and (c) BSD (Canada) Inc., an
Ontario corporation ("BSD CANADA" and together with BSD and BSD Europe, the "BSD
COMPANIES");
WHEREAS, the board of directors of Purchaser and Daisytek,
respectively, believe it to be in the best interest of Purchaser and Daisytek
that Purchaser and Daisytek enter into this Agreement pursuant to which, among
other things, Purchaser will acquire all the outstanding capital stock of each
of the BSD Companies (the "STOCK PURCHASE"), and in furtherance thereof, the
board of directors of Purchaser and Daisytek has each approved the Stock
Purchase and this Agreement;
WHEREAS, pursuant to this Agreement, among other things, Purchaser will
purchase from Daisytek and Daisytek will sell to Purchaser the BSD Stock (as
hereinafter defined) in return for cash;
NOW, THEREFORE, for and in consideration of the mutual representations,
warranties and agreements hereinafter set forth and other good and valuable
consideration, and upon the terms and subject to the conditions hereinafter set
forth, the parties do hereby agree as follows.
Section 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"AAA" is defined in Section 7.12 of this Agreement.
"AFFILIATES" means, with respect to any person, any entity controlling,
controlled by or under common control with such designated person. For the
purposes of this definition, "CONTROL" shall have the meaning specified as of
the date of this Agreement for that word in Rule 405 promulgated by the
Securities and Exchange Commission (and any successor commission or agency
having similar powers) under the Securities Act. For Daisytek, "Affiliate" shall
specifically include ISA (as defined below) even if it is not otherwise included
in the above definition except for Section 7.2(f) where ISA shall not be
included in such definition.
"AGREEMENT" is defined in the opening paragraph of this Agreement.
1
"BANK ONE RELEASE" means the release from Bank One in which Bank One
releases its lien on certain shares of BSD Stock.
"BSD" is defined in the recitals of this Agreement.
"BSD CANADA" is defined in the recitals of this Agreement.
"BSD CANADA COMMON STOCK" is defined in Section 2.3 of this Agreement.
"BSD COMMON STOCK" is defined in Section 2.3 of this Agreement.
"BSD COMPANIES" is defined in the recitals of this Agreement.
"BSD EUROPE" is defined in the recitals of this Agreement.
"BSD EUROPE STOCK" is defined in Section 2.3 of this Agreement.
"BSD STOCK" is defined in Section 2.3 of this Agreement.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in The City of
New York.
"CASH CONSIDERATION" is defined in Section 2.3 of this Agreement.
"CHARTER" means the certificate of incorporation or other incorporation
document as of the date hereof.
"CLOSING" is defined in Section 2.2 of this Agreement.
"CLOSING DATE" is defined in Section 2.2 of this Agreement.
"CODE" is defined in Section 3.9 of this Agreement.
"CONSENTS" is defined in Section 6.1 of this Agreement.
"CONSIDERATION" is defined in Section 2.3 of this Agreement.
"DAISYTEK" is defined in the opening paragraph of this Agreement.
"DAISYTEK'S BANK ACCOUNT" means the account or accounts to be
designated by Daisytek before the Closing.
"DISCLOSURE SCHEDULE" shall collectively refer to all schedules
attached hereto in response to the representations, warranties and disclosures
made in Section 3 of this Agreement. Disclosure on any schedule hereto or
subsection thereof constitutes disclosure pursuant to any and all other sections
of this Agreement and on all other applicable schedules and subsections thereof
to the extent such disclosure is sufficient on its face to indicate it is
applicable to such other schedules and subsections thereof.
2
"IBM" means International Business Machines Corporation, International
Sales and Services B.V. and their Affiliates.
"IBM AGREEMENT" is defined in Section 6.2 of this Agreement.
"IBM GUARANTIES" means the (a) Continuing Contract of Parent Guaranty
of Payment by Daisytek International Corporation on behalf of BSD and BSD Europe
dated as of October 1, 1999 in favor of International Business Machines
Corporation and International Sales and Services B.V., (b) Continuing Contract
of Parent Guaranty of Payment by Daisytek International Corporation on behalf of
BSD dated as of July 13, 1999 in favor of International Business Machines
Corporation, (c) Continuing Contract of Parent Guaranty of Payment by Daisytek
International Corporation on behalf of BSD Europe dated as of July 13, 1999 in
favor of International Business Machines Corporation, and (d) any other
guaranties by Daisytek International Corporation or any of its Affiliates on
behalf of any of the BSD Companies in favor of International Business Machines
Corporation and International Sales and Services B.V. or any of their
Affiliates.
"IBM RELEASE" is defined in Section 6.2 of this Agreement.
"INDEMNITEE" is defined in Section 7.2 of this Agreement.
"INDEMNITOR" is defined in Section 7.2 of this Agreement.
"INTERCOMPANY AMOUNT" is defined in Section 2.3 of this Agreement.
"ISA" means ISA International, PLC and its subsidiaries.
"KNOWLEDGE" means, with respect to any fact, circumstance, event or
other matter in question, the actual knowledge of such fact, circumstance, event
or other matter after reasonable inquiry of (a) an individual, if used in
reference to an individual, or (b) any officer or director of such party, if
used in reference to a Person that is not an individual.
"LOSSES" is defined in Section 7.2 of this Agreement.
"MATERIAL ADVERSE EFFECT" means any circumstance, change in, or effect
on, the business or assets of any of the BSD Companies that individually, or in
the aggregate with any other circumstances, changes in, or effects on, the
business or assets of any of the BSD Companies, taken as a whole would
materially adversely affect the ability of Purchaser to operate or conduct the
business substantially in the manner in which it is currently operated or
conducted by the BSD Companies.
"MASTER DISTRIBUTOR AGREEMENTS" means each of the following:
(a) Master Distributor Agreement (#BSD-OEM001) dated October
1, 1999 between IBM Japan, Ltd. and Business Supplies Distributors,
Inc., as amended;
3
(b) Master Distributor Agreement dated July 28, 1999 by and
among International Business Machines Corporation, Priority Fulfillment
Services Europe B.V. and Business Supplies Distributors Europe B.V., as
amended;
(c) Master Distributor Agreement dated December 1, 1998
between International Sales and Services B.V. and Priority Fulfillment
Services Europe B.V., as amended by Amendment Number 1 thereto dated
October 1, 1999, Amendment Number 2 thereto dated June 1, 2000 and
Amendment Number 3 thereto dated December 1, 2000 by and among
International Sales and Services B.V., Priority Fulfillment Services
Europe B.V. and Business Supplies Distributors Europe B.V;
(d) Master Distributor Agreement dated October 1, 1999 by and
among International Business Machines Corporation, Priority Fulfillment
Services, Inc. and Business Supplies Distributors, Inc., as amended;
(e) Master Distributor Agreement (#OEM8331) dated December 17,
1998 between International Sales and Services B.V. and Priority
Fulfillment Services Europe B.V., as amended by Amendment Number 1 to
Master Distributor Agreement (#OEM8331) dated October 1, 1999 by and
among International Sales and Services B.V., Priority Fulfillment
Services Europe B.V. and Business Supplies Distributors Europe B.V.;
(f) Master Distributor Agreement #OEM10242 dated July 16, 1999
by and among International Business Machines Corporation and Daisytek,
Inc. as assigned by Assignment of Agreement (#OEM10242) dated August
17, 1999 by and among International Business Machines Corporation,
Daisytek, Inc. and Business Supplies Distributors, Inc.; and
(g) any other master distributor agreement entered into by or
on behalf of any of the BSD Companies prior to or as of the date hereof
and not listed above.
"PARENT" means Daisytek International Corporation, a Delaware
corporation and sole stockholder of Daisytek.
"PERSON" means any individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, entity or
group.
"PFS" is defined in the opening paragraph of this Agreement.
"PFS AUSTRALIA" is defined in Section 5.1 of this Agreement.
"PFS EUROPE" is defined in the opening paragraph of this Agreement.
"PFS MEXICO" is defined in Section 5.1 of this Agreement.
"PFSWEB" is defined in the opening paragraph of this Agreement.
"PFSWEB GROUP" means PFSweb, Purchaser, PFS, PFS Europe and their
Affiliates.
4
"PURCHASE RIGHTS" means the rights granted by the PFS Group to each of
Daisytek (or at the election of Daisytek or one of its Affiliates) and ISA to
purchase IBM products from the PFS Group (subject to product availability) by
allowing Daisytek and ISA to place a total of four orders for IBM products as
follows: (a) each of Daisytek (or at the election of Daisytek or one of its
Affiliates) and ISA may place an order for IBM product on any business day in
the month of October 2001 (one in the United States and one in Europe) and a
second order for IBM product on any business day in the month of January 2002
(one in the United States and one in Europe); (b) each order placed under (a)
above is subject to a three percent (3%) discount off of then currently
published prices provided that Daisytek (or at the election of Daisytek or one
of its Affiliates) and ISA remit payment for such order in cash upon
confirmation of order and confirmation of prompt delivery and subject to such
cash payment not being due for back ordered products until such products are
available; (c) all orders placed by Daisytek (or at the election of Daisytek or
one of its Affiliates) will be shipped by the PFS Group to up to two (2)
separate locations for each order within the United States as designated by
Daisytek (or at the election of Daisytek or one of its Affiliates); and (d) each
order placed by ISA will be shipped by the PFS Group to one location for each
order in Europe to be designated by ISA.
"PURCHASER" is defined in the opening paragraph of this Agreement.
"PURCHASER'S BANK ACCOUNT" means the account or accounts to be
designated by Purchaser before the Closing.
"REQUISITE REGULATORY APPROVALS" is defined in Section 6.1 of this
Agreement.
"SALES FORCE SERVICES AGREEMENTS" means (a) Sales Force Services
Agreement by and among Business Supplies Distributors, Inc., Priority
Fulfillment Services, Inc. and Global Marketing Services, Inc. dated as of
October 1, 1999; (b) Agreement between International Business Machines
Corporation and Business Supplies Distributors, Inc. for Sales Force Services
effective as of October 1, 1999; (c) Agreement between International Business
Machines Corporation and Business Supplies Distributors, Inc. for Sales Force
Services effective as of July 1, 2000; and (d) any other agreement for sales
force services or similar services entered into by or on behalf of any of the
BSD Companies prior to or as of the date hereof and not listed above.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STANDARD EXCEPTIONS" is defined in Section 3.2 of this Agreement.
"STOCK PURCHASE" is defined in the recitals of this Agreement.
"TAX RETURNS" is defined in Section 3.9 of this Agreement.
"TAXES" means any and all taxes, fees, levies, duties, tariffs, and
other charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any government or taxing authority, domestic or foreign, including, without
limitation: taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation, or net
5
worth; taxes or other charges in the nature of excise, withholding, ad valorem,
stamp, transfer, value added, or gains taxes; and license, registration and
documentation fees.
"TRANSITION SERVICES AGREEMENT" means that certain Transition Services
Agreement dated as of May 25, 2001 by and between PFSweb and Parent.
Section 2. THE STOCK PURCHASE.
2.1. The Stock Purchase. At the Closing Date and subject to and upon
the terms and conditions of this Agreement and the applicable laws of Texas,
Purchaser will purchase from Daisytek, and Daisytek agrees to sell to Purchaser,
all of the shares of BSD Stock for the consideration set forth below in Section
2.3.
2.2. Closing. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in Section 6 hereof, the parties will cause
the Stock Purchase to be consummated (the "CLOSING") at 10:00 a.m. Central Time
at the offices of Munsch Hardt Kopf & Harr, P.C. 1445 Ross Avenue, 4000 Fountain
Place, Dallas, Texas 75202, on any mutually agreed upon date (the "CLOSING
DATE"); provided that if all such conditions are not met or waived prior to
September 30, 2001 (unless extended) this Agreement shall terminate.
2.3. Purchase Price.
(a) In consideration of an aggregate cash purchase price of
Nine Hundred Twenty Three Thousand Dollars ($923,000) (the "CASH
CONSIDERATION") and the Purchase Rights (together with the Cash
Consideration, the "CONSIDERATION"), Daisytek will transfer to
Purchaser (i) 100% of the shares of common stock of BSD set forth on
Exhibit A for an aggregate number of shares equal to 100 shares of
common stock, $.01 par value per share (the "BSD COMMON STOCK"), (ii)
100% of the shares of common stock of BSD Europe set forth on Exhibit A
for an aggregate number of shares equal to 40 shares of capital stock,
NLG (Dutch guilders) 1,000 par value per share (the "BSD EUROPE
STOCK"), and (iii) 100% of the shares of common stock of BSD Canada set
forth on Exhibit A for an aggregate number of shares equal to 1,000,010
shares of common stock, no par value per share (the "BSD CANADA COMMON
STOCK" and together with the BSD Common Stock and the BSD Europe Stock,
the "BSD STOCK").
(b) In addition to the Consideration to be paid in Section
2.3(a) above, on the Closing Date, Purchaser and Daisytek shall settle
all intercompany balances between Parent, Daisytek and its wholly owned
subsidiaries, on the one hand, and each of the BSD Companies, on the
other hand, by payment from Daisytek to the BSD Companies (as directed
by Purchaser) of an aggregate amount of Five Million Two Hundred Six
Thousand Three Hundred Thirteen Dollars and Sixty Seven Cents
($5,206,313.67) with Five Million One Hundred Sixty Six Thousand Seven
Hundred Seventy One Dollars and Forty Seven Cents ($5,166,771.47) paid
at Closing (the "INTERCOMPANY AMOUNT") and Thirty Nine Thousand Five
Hundred Forty Two Dollars and Twenty Cents ($39,542.20) to be paid
within five (5) business days thereafter. Upon payment of such amounts,
any and all amounts owed to or from any of the BSD Companies to or from
Parent, Daisytek
6
or any of its wholly owned subsidiaries as of the Closing Date shall be
deemed paid in full.
2.4. Surrender of Certificates; Payment and Delivery of Stock Purchase
Consideration. At the Closing, (i) Daisytek will deliver to Purchaser the
various certificates, instruments, and documents referred to in Section 6.3
below, (ii) Purchaser will deliver to Daisytek the various certificates,
instruments, and documents referred to in Section 6.2 below, (iii) Daisytek will
deliver to Purchaser stock certificates (except for BSD Europe whose shares are
not certificated) evidencing the BSD Stock duly endorsed in blank or accompanied
by stock powers duly executed in blank, in proper form for transfer, (iv)
Purchaser will deliver to Daisytek the Cash Consideration by wire transfer of
immediately available funds in the lawful money of the United States of America
to Daisytek's Bank Account, (v) Daisytek will deliver to the BSD Companies (as
directed by Purchaser) the Intercompany Amount by wire transfer of immediately
available funds in the lawful money of the United States of America to
Purchaser's Bank Account, (vi) Daisytek shall deliver to Purchaser the Bank One
Release, and (vii) IBM shall execute and deliver the IBM Agreement.
Section 3. REPRESENTATIONS AND WARRANTIES OF DAISYTEK. Daisytek hereby
represents and warrants to Purchaser as of the date hereof and as of the Closing
Date, except as set forth on the Disclosure Schedule, that:
3.1. Organization and Qualification. Each of the BSD Companies is a
corporation validly existing and in good standing under the laws of the
jurisdiction of its incorporation with the requisite legal and corporate power
to own its property and to carry on its business as presently conducted. Each of
the BSD Companies is qualified and authorized to transact business and is in
good standing as a foreign corporation in the jurisdictions set forth on the
Disclosure Schedule. Daisytek has delivered a true, complete and correct copy of
the Charter, bylaws and minute book (if any) for each of the BSD Companies, each
as amended to date, to counsel for Purchaser.
3.2. Power; Authority. Daisytek has all requisite legal power and
authority to enter into this Agreement and to carry out and perform its
obligations under the terms hereof. All corporate action on the part of Daisytek
and its directors and stockholders necessary for the authorization, execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, and for the authorization, sale and delivery of the BSD
Stock has been taken. This Agreement is the legal, valid and binding obligation
of Daisytek, enforceable in accordance with its terms, except (a) as limited by
bankruptcy, insolvency or other laws affecting the enforcement of creditors'
rights generally, and (b) that the availability of equitable relief is subject
to the discretion of the court before which any proceeding therefor may be
brought (together with (a), the "STANDARD EXCEPTIONS"). The execution and
delivery of this Agreement by Daisytek does not conflict with or result in any
violation of or default under any contract or other agreement applicable to
Daisytek or any of the BSD Companies (except for any contracts or agreements
created by Daisytek before October 25, 2000 or by or through any member of the
PFSweb Group at anytime), and does not require any consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority, whether
foreign or domestic, or instrumentality or other Person (except as may be
created by or through any member of the PFSweb Group).
7
3.3. Brokers and Finders' Fees. Daisytek has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement,
the Stock Purchase or any transaction contemplated hereby.
3.4. Consents. All proceedings and all consents necessary to sell and
transfer the BSD Stock and to authorize, execute and deliver this Agreement have
been taken and obtained by Daisytek (except as for any consents created by or
through any member of the PFSweb Group).
3.5. Capitalization. Except as created by Daisytek before October 25,
2000 or by or through any member of the PFSweb Group at anytime:
(a) BSD. The authorized capital stock of BSD consists of 100
shares of common stock, $.01 par value per share of which only 100
shares are issued and outstanding, which are held of record by Daisytek
as set forth on Exhibit A.
(b) BSD Europe. The authorized capital stock of BSD Europe
consists of 200 shares of capital stock, NLG (Dutch guilders) 1,000 par
value per share of which only 40 shares are issued and outstanding,
which are held of record by Daisytek as set forth on Exhibit A.
(c) BSD Canada. The authorized capital stock of BSD Canada
consists of an unlimited number of shares of common stock, no par value
per share of which only 1,000,010 shares are issued and outstanding,
which are held of record by Daisytek as set forth on Exhibit A.
(d) There are no issued or outstanding shares of capital stock
or equity interests of any kind or any issued or outstanding
subscriptions, options, warrants, rights, calls, contracts,
commitments, understandings or agreements to purchase or otherwise
acquire or relating to the issuance of any shares or other securities
of any of the BSD Companies (except for the BSD Stock being transferred
hereunder), including, without limitation, any rights of conversion or
exchange under any outstanding securities or other instruments, other
than this Agreement.
(e) None of the BSD Companies owns any capital shares or other
proprietary interests, directly or indirectly, in any Person.
3.6. Validity of Securities. Except for liens, charges, claims or
encumbrances created by Daisytek before October 25, 2000 or by or through any
member of the PFSweb Group, imposed by this Agreement or restrictions generally
imposed by applicable securities laws, the BSD Stock, when issued, sold and
delivered in accordance with the terms of this Agreement against payment
therefor, will be free and clear of all liens, charges, claims, preemptive
rights and encumbrances, including, but not limited to, the lien of Bank One
that will be released at Closing.
3.7. Material Contracts. Except (a) for the Master Distributor
Agreements and the Sales Force Services Agreements, (b) as set forth on the
Disclosure Schedule, or (c) as created by Daisytek prior to October 25, 2000 or
with or by or through any member of the PFSweb Group
8
at anytime, none of the BSD Companies is a party to any contract or agreement
(i) providing for payments by or to any of them in an aggregate amount of
$25,000 or more in the ordinary course of business, consistent with past
practice, or otherwise or (ii) that is not terminable without premium or penalty
upon not more than thirty (30) days notice.
3.8. Employees. Except for Persons that may be or have been hired by
any member of the PFSweb Group to be an employee of any BSD Company, none of the
BSD Companies has any employees. After October 25, 2000, none of the BSD
Companies has established or maintained any employee benefit plan.
3.9. Taxes. Except as created by or through any member of the PFSweb
Group and assuming that all information relevant to this Section 3.9 that was
provided by any member of the PFSweb Group to Parent, Daisytek or any of their
Affiliates is true, correct and complete in all material respects:
(a) (i) BSD and BSD Canada have filed all material returns and
reports in respect of Taxes ("TAX RETURNS") that they were required to
file for tax periods ending after March 9, 2000, and to Daisytek's
Knowledge, all such Tax Returns are true, correct and complete in all
material respects, and (ii) to Daisytek's Knowledge, BSD and BSD Canada
have filed all Tax Returns that they were required to file for tax
periods ending on or prior to March 9, 2000, and to Daisytek's
Knowledge, all such Tax Returns are true, correct and complete in all
material respects.
(b) (i) BSD and BSD Canada have paid all Taxes shown on Tax
Returns filed for tax periods ending after March 9, 2000, and (ii) to
Daisytek's Knowledge, BSD and BSD Canada have paid all Taxes shown on
Tax Returns filed for tax periods ending on or prior to March 9, 2000.
(c) (i) Neither BSD nor BSD Canada received formal or informal
notice after March 9, 2000 of any adjustment relating to Tax Returns
and, to Daisytek's Knowledge, no basis exists for any such adjustment,
and (ii) to Daisytek's Knowledge, neither BSD nor BSD Canada received
formal or informal notice on or prior to March 9, 2000 of any
adjustment relating to Tax Returns.
(d) To Daisytek's Knowledge, no action or proceeding for the
collection or assessment of Taxes is pending or threatened against BSD
or BSD Canada or any corporation that was included in the filing of a
tax return with any BSD Company on a consolidated or combined basis.
(e) (i) Neither BSD nor BSD Canada filed a consent under
Section 341(f) of the Internal Revenue Code of 1986, as amended (the
"CODE") after March 9, 2000, and (ii) to Daisytek's Knowledge, neither
BSD nor BSD Canada filed a consent under Code Section 341(f) on or
prior to March 9, 2000.
(f) (i) After March 9, 2000, neither BSD nor BSD Canada waived
any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency, and
(ii) to Daisytek's Knowledge before March 9, 2000, neither
9
BSD nor BSD Canada waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(g) No power of attorney that is currently in force has been
granted by BSD or BSD Canada with respect to any matter relating to
Taxes.
(h) To Daisytek's Knowledge, there are no Tax liens on any
assets of BSD or BSD Canada, except for liens for Taxes not yet due and
payable.
Section 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PFS.
Purchaser and PFS hereby represent and warrant to Daisytek as of the date hereof
and as of the Closing Date that:
4.1. Organization and Qualification. Purchaser is a corporation validly
existing and in good standing under the laws of the State of Delaware with the
requisite legal and corporate power to own its property and to carry on its
business as presently conducted and proposed to be conducted by it. Purchaser is
qualified and authorized to transact business and is in good standing as a
foreign corporation in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business, properties, prospects or
financial condition.
4.2. Power; Authority. Purchaser and PFS have all requisite legal power
and authority to enter into this Agreement and to carry out and perform their
obligations under the terms hereof. All corporate action on the part of each of
Purchaser and PFS and their directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and for the authorization and payment of
the Consideration for the BSD Stock has been taken. This Agreement is the legal,
valid and binding obligation of each of Purchaser and PFS, enforceable in
accordance with its terms, except as limited by the Standard Exceptions. The
execution and delivery of this Agreement by Purchaser and PFS do not conflict
with or result in any violation of or default under any contract or other
agreement applicable to Purchaser and PFS, and do not require any consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality or other Person.
4.3. Brokers and Finders' Fees. Purchaser has not incurred, and will
not incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement,
the Stock Purchase or any transaction contemplated hereby.
4.4. Consents. All proceedings and all consents necessary to purchase
the BSD Stock and to authorize, execute and deliver this Agreement have been
taken and obtained by Purchaser.
4.5. Investment Intent. Purchaser acknowledges that the BSD Stock has
not been registered under the Securities Act and that the BSD Stock may not be
resold absent such registration or unless an exemption is available. Purchaser
is acquiring the BSD Stock for its own account, for investment purposes only and
not with a view toward distribution thereof. Purchaser qualifies as an
"accredited investor" as such term is defined in Rule 501(a) promulgated
pursuant to the Securities Act.
10
4.6. Knowledge and Experience. Purchaser has such knowledge and
experience in financial, tax and business matters, and in particular,
investments in securities, so as to enable it to utilize the information made
available to it to evaluate the merits and risks of an investment in the BSD
Stock and in the BSD Companies and to make an informed investment decision with
respect thereto. Purchaser is not relying on Daisytek or any of the BSD
Companies or any of their employees or agents with respect to the legal, tax,
economic and related considerations of an investment in the BSD Stock, and
Purchaser has relied on the advice of, or has consulted with, only its own
advisors. Purchaser has significant prior investment experience and has a
sufficient net worth to sustain a loss of its entire investment in the BSD
Companies in the event such a loss should occur.
4.7. No Obligations Incurred. No member of the PFSweb Group at anytime
has obligated Parent, Daisytek or their Affiliates under the terms of any
contract, agreement or arrangement (whether written or oral) with IBM or its
Affiliates that is not being released by the IBM Release.
4.8. Taxes.
(a) BSD Europe has filed all Tax Returns that it was required
to file, and to the Knowledge of the PFSweb Group, all such Tax Returns
are true, correct and complete in all material respects.
(b) BSD Europe has paid all Taxes shown on the Tax Returns.
(c) BSD Europe has not received formal or informal notice of
any adjustment relating to Tax Returns and, to the Knowledge of the
PFSweb Group, no basis exists for any such adjustment.
(d) To the Knowledge of the PFSweb Group, no action or
proceeding for the collection or assessment of Taxes is pending or
threatened against BSD Europe.
(e) BSD Europe has not filed a consent under Code Section
341(f).
(f) BSD Europe has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(g) No power of attorney that is currently in force has been
granted by BSD Europe with respect to any matter relating to Taxes.
(h) To the Knowledge of the PFSweb Group, there are no Tax
liens on any assets of BSD Europe, except for liens for Taxes not yet
due and payable.
Section 5. ADDITIONAL AGREEMENTS. Each of the parties hereto agrees
that the following provisions of this Section 5 shall survive Closing and hereby
agree as follows:
5.1. PFS Mexico and PFS Australia. Each of the parties hereto
acknowledges and agrees that notwithstanding the obligation of Parent as set
forth in Section 7.2 of the Asset Purchase Agreement by and among PFSweb, PFS,
Daisytek and Parent dated as of May 25, 2001
11
or as set forth in any other agreement, Priority Fulfillment Services de Mexico,
S.A. de C.V. ("PFS MEXICO") and Priority Fulfillment Services Australia PTY.
LTD. ("PFS AUSTRALIA"), each a wholly-owned subsidiary of Daisytek, shall be
allowed to continue, among other things, to purchase IBM products from IBM
and/or IBM's master distributors and return IBM products to IBM and/or its
master distributors upon terms that are at least as favorable as are available
to other wholesale distributors of IBM products in such countries, respectively.
Daisytek agrees to change the names of PFS Mexico and PFS Australia as soon as
reasonably practicable following the Closing to names not containing the words
"Priority Fulfillment Services" or "PFS."
5.2. Future Sales and Returns of IBM Products. In its capacity as a
master distributor of IBM products, the PFSweb Group will allow Daisytek and its
Affiliates to continue, among other things, to purchase and return IBM products
from IBM and/or IBM's master distributors on terms that are at least as
favorable as are available to other wholesalers of IBM products. In addition,
the PFSweb Group will:
(a) Pass through to resellers, including Daisytek and its
Affiliates, marketing programs specified by IBM and administer such
programs according to IBM's guidelines;
(b) Administer and disburse funds or offerings passed through
to resellers, including Daisytek and its Affiliates, in a proportional
and equitable manner;
(c) Treat resellers, including Daisytek and its Affiliates,
equitably and fairly and not discriminate among them with regard to
marketing programs and product allocation; and
(d) Ensure that resellers, including Daisytek and its
Affiliates, are satisfied with the master distributor's product
marketing activities, including product explanation and ongoing
support.
This Section 3 is in addition to, and does not preclude or supersede,
any rights of Daisytek or any of its Affiliates under any other agreement or
arrangement in which Daisytek or its Affiliates is or becomes a wholesale
distributor of IBM products.
5.3. Access to Records. Each party hereto will cooperate fully with
each other party hereto and their Affiliates, counsel, accountants and other
agents as such party shall designate in connection with their compliance with
any litigation, controversy, regulatory or financial reporting matters,
including, but not limited to audits and preparation of tax returns, insofar as
it relates to the BSD Companies and/or the business conducted by any of them
prior to the Closing. In addition, each party hereto will make available their
personnel and provide access to the books and records of each of the BSD
Companies, to the extent in its possession, upon request of any other party
hereto or their Affiliates in the event that such information is required by
such party or their Affiliates in connection with their compliance with any
litigation, controversy, regulatory or financial reporting matters, including,
but not limited to audits and preparation of tax returns, insofar as it relates
to the BSD Companies and/or the business conducted by any of them prior to the
Closing.
12
5.4. Taxes. Daisytek will timely file all United States and Canada Tax
Returns and timely pay all Taxes payable thereunder for BSD and BSD Canada for
the year ended March 31, 2001 and for the period from that date through the
Closing Date. Purchaser will timely file all Tax Returns and timely pay all
Taxes thereunder for BSD Europe for the year ended March 31, 2001 and for the
period from that date through the Closing Date.
Section 6. CONDITIONS TO THE STOCK PURCHASE.
6.1. Conditions to Obligations of Each Party to Effect the Stock
Purchase. The respective obligations of each party to this Agreement to effect
the Stock Purchase shall be subject to the satisfaction at or prior to the
Closing Date of the following conditions:
(a) Legality. No federal, state or foreign statute, rule,
regulation, executive order, decree or injunction shall have been
enacted, entered, promulgated or enforced by any court or governmental
authority which is in effect and has the effect of making the Stock
Purchase illegal or otherwise prohibiting the consummation of the Stock
Purchase.
(b) Regulatory Matters. All authorizations, consents, orders
or approvals of, or declarations or filings with, and all expirations
of waiting periods imposed by, any governmental body, agency or
official ("CONSENTS") which are necessary for the consummation of the
transactions contemplated hereby, other than immaterial Consents the
failure to obtain which would have no Material Adverse Effect, shall
have been filed, have occurred or have been obtained (all such permits,
approvals, filings and consents and the lapse of all such waiting
periods being referred to as the "REQUISITE REGULATORY APPROVALS") and
all such Requisite Regulatory Approvals shall be in full force and
effect.
6.2. Additional Conditions to the Obligations of Daisytek. The
obligations of Daisytek to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Daisytek:
(a) Delivery of Consideration. Purchaser shall deliver, or
cause to be delivered, to Daisytek the Cash Consideration by wire
transfer of immediately available funds in the lawful money of the
United States of America to Daisytek's Bank Account.
(b) Release of IBM Guaranties. Each of the IBM Guaranties
shall be terminated and released pursuant to a release by IBM (the "IBM
RELEASE") to the satisfaction of Daisytek, including, but not limited
to, the release of any and all of Parent's, Daisytek's or their
Affiliates' obligations under the Sales Force Services Agreements.
(c) Representations, Warranties and Covenants. The
representations and warranties of Purchaser and PFS in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date as though such representations and warranties were made on
and as of such time and Purchaser shall have performed and complied in
all material respects with all covenants, obligations and conditions of
this Agreement required to be performed and complied with by it as of
the Closing Date.
13
(d) Certificate of Purchaser. At the Closing, Daisytek shall
have been provided with:
(i) a certificate executed on behalf of Purchaser and
PFS by their respective Chief Executive Officer or Chief
Financial Officer, certifying (1) all representations and
warranties made by Purchaser and PFS under this Agreement are
true and correct in all material respects, and (2) all
covenants, obligations and conditions of this Agreement to be
performed by Purchaser and PFS on or before Closing have been
so performed in all material respects; and
(ii) a certificate of the Secretary of Purchaser as
to the resolutions duly adopted by the board of directors of
Purchaser authorizing the execution, delivery and performance
of this Agreement and the transactions contemplated hereby,
which resolutions must be in full force and effect as of the
Closing.
(e) No Material Adverse Changes. There shall not have occurred
any event, fact or condition that has had or reasonably would be
expected to have a Material Adverse Effect on Purchaser.
(f) Satisfactory Form of Legal and Tax Matters. The form,
scope and substance of all legal and tax matters contemplated hereby
and all closing documents and other papers delivered hereunder shall be
reasonably acceptable to Daisytek's counsel and accountants.
(g) Future Sales of IBM Products. IBM shall execute and
deliver to Parent and Daisytek an agreement (the "IBM AGREEMENT") in a
form to the satisfaction of Parent and Daisytek in which, among other
things, IBM agrees to cause its master distributors to treat resellers,
including Daisytek and its Affiliates, equitably and fairly.
(h) Supplement to Transition Services Agreement. PFS shall
deliver to Daisytek a supplement to the Transition Services Agreement
in a form to the satisfaction of Daisytek.
6.3. Additional Conditions to the Obligations of Purchaser. The
obligations of Purchaser to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Purchaser:
(a) Delivery of Stock Certificates. Daisytek shall deliver, or
cause to be delivered, to Purchaser the stock certificates (except for
BSD Europe whose shares are not certificated) evidencing the BSD Stock
duly endorsed in blank or accompanied by stock powers duly executed in
blank, in proper form for transfer.
(b) Delivery of Intercompany Amount. Daisytek shall deliver,
or cause to be delivered, to Purchaser the Intercompany Amount by wire
transfer of immediately available funds in the lawful money of the
United States of America to Purchaser's Bank Account.
14
(c) Representations, Warranties and Covenants. The
representations and warranties of Daisytek in this Agreement shall be
true and correct in all material respects on and as of the Closing Date
as though such representations and warranties were made on and as of
such time, and Daisytek shall have performed and complied in all
material respects with all covenants, obligations and conditions of
this Agreement required to be performed and complied with by it as of
the Closing Date.
(d) Certificate of Daisytek. At the Closing, Purchaser shall
have been provided with:
(i) a certificate executed on behalf of Daisytek by
its Chief Executive Officer or Chief Financial Officer,
certifying (1) all representations and warranties made by
Daisytek under this Agreement are true and correct in all
material respects, and (2) all covenants, obligations and
conditions of this Agreement to be performed by Daisytek on or
before Closing have been so performed in all material
respects; and
(ii) a certificate of the Secretary of Daisytek as to
the resolutions duly adopted by the board of directors of
Daisytek authorizing the execution, delivery and performance
of this Agreement and the transactions contemplated hereby,
which resolutions must be in full force and effect as of the
Closing.
(e) Third Party Consents. Daisytek and each of the BSD
Companies shall have obtained the consents listed on the Disclosure
Schedule, as well as the consent or approval of each other Person whose
consent or approval shall be required under any agreement or instrument
in order to permit the consummation of the transactions contemplated
hereby except those which the failure to obtain would not, individually
or in the aggregate, have a Material Adverse Effect.
(f) Satisfactory Form of Legal, Tax and Accounting Matters.
The form, scope and substance of all legal, tax and accounting matters
contemplated hereby and all closing documents and other papers
delivered hereunder shall be reasonably acceptable to Purchaser's
counsel and accountants.
(g) No Material Adverse Changes. There shall not have occurred
any event, fact or condition that has had or reasonably would be
expected to have a Material Adverse Effect.
(h) Resignation of Board of Directors and Officers of the BSD
Companies. Daisytek shall use commercially reasonable efforts to cause
the board of directors of each of the BSD Companies and the officers of
each of the BSD Companies to submit their resignations.
(i) Delivery of Bank One Release. Daisytek shall deliver to
Purchaser the Bank One Release.
(j) Delivery of Corporate Records of BSD Companies. Daisytek
shall have delivered to Purchaser's counsel (i) the minute books (if
any) of each of the BSD
15
Companies containing records of all proceedings, consents, actions and
meetings of the board of directors, committees of the board of
directors (if any) and stockholders of each of the BSD Companies, and
(ii) the stock ledger, journal and other records reflecting all stock
issuances and transfers with respect to the capital stock of each of
the BSD Companies.
(k) Transfer of Accounts. Except for Persons employed by any
member of the PFSweb Group, Daisytek shall cause all Persons having
signatory authority over or with respect to all accounts, lock boxes,
safe deposit boxes and powers of attorney of any of the BSD Companies
to relinquish and transfer such authority to the Purchaser or as
Purchaser shall direct.
Section 7. MISCELLANEOUS.
7.1. Amendment and Waiver.
(a) Any term, agreement or condition contained in this
Agreement may be amended with, and only with, the consent of Daisytek,
Purchaser and PFS.
(b) This Agreement shall not be altered, amended or
supplemented except by written agreement in accordance with Section
7.1(a) above. Any waiver of any term, agreement or condition contained
in this Agreement shall not be deemed a waiver of any other term,
agreement or condition, and any waiver of any default in any such term,
agreement or condition shall not be deemed a waiver of any later
default thereof or of any default of any other term, agreement or
condition.
7.2. Indemnification. From and after the Closing, each party hereto (in
such capacity, an "INDEMNITOR") shall, subject to the limitations hereof,
reimburse, indemnify and hold harmless each other party (in such capacity, an
"INDEMNITEE") and their respective officers, directors, employees, agents,
representatives, and successors and assigns from and against and in respect of
each of the following:
(a) any and all damages, losses, deficiencies, liabilities,
claims, demands, charges, costs and expenses of every nature and
character whatsoever, including, without limitation, reasonable
attorneys' fees and costs (collectively, the "LOSSES") that result
from, relate to or arise out of:
(i) any misrepresentation or breach of warranty of
the Indemnitor in this Agreement or any of the Disclosure
Schedules provided hereunder; and
(ii) the failure of the Indemnitor to perform any
agreement or covenant on its part required to be performed on
or after the Closing Date; and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs
and other expenses incident to any of the foregoing or to the
successful enforcement of this Section.
16
(c) The sum of all Losses incurred by the Indemnitee in the
aggregate must exceed $10,000 before such party shall be entitled to
indemnification hereunder; provided, however, once such Losses exceed
$10,000, such party shall be entitled to indemnification for all Losses
provided further that the total liability of Indemnitor for such Losses
shall not exceed an amount equal to $250,000.
(d) All of the representations and warranties of the parties
contained herein shall expire ninety (90) days after the Closing Date,
except for the representations and warranties contained in Section 3.5,
which shall survive indefinitely and Sections 3.9 and 4.8, which shall
survive until the applicable statute of limitations has expired.
Accordingly, no Indemnitor shall have any liability or indemnification
obligations hereunder in respect of claims asserted against it ninety
(90) days after the Closing Date, except for liabilities or
indemnification obligations for claims related to a breach of the
representations and warranties contained in Sections 3.5, 3.9, and 4.8.
(e) In addition to the indemnification obligations set forth
above, each member of the PFSweb Group hereby jointly and severally
agrees to reimburse, indemnify and hold harmless Parent, Daisytek and
their Affiliates, from and against any Losses arising from any third
party claim arising from any action or inaction taken by any member of
the PFSweb Group or the BSD Companies under any of the Master
Distributor Agreements, the Sales Force Services Agreements, and the
IBM Guaranties. The parties hereto agree that any and all Losses to be
indemnified under this Section 7.2(e) shall not be subject to the
limitations set forth in Section 7.2(c) above.
(f) As between the parties hereto and their Affiliates and
except as expressly set forth herein with respect to third party
claims, each party hereto hereby releases each other party hereto and
its respective Affiliates from any Losses as a result of the existence,
performance, failure to perform or termination of any of the Master
Distributor Agreements, the Sales Force Services Agreements, and the
IBM Guaranties.
7.3. Facsimile Signature. This Agreement shall be deemed duly executed
by Daisytek upon the delivery of its executed signature page by facsimile
transmission to counsel for Purchaser. This Agreement shall be deemed duly
executed by Purchaser, PFS, PFSweb, and PFS Europe upon the delivery of their
executed signature pages by facsimile transmission to counsel for Daisytek.
7.4. Severability. The invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity, legality or
enforceability of the remainder hereof in such jurisdiction or the validity,
legality or enforceability hereof, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
7.5. Successors and Assigns. All representations, warranties, and
agreements of the parties contained in this Agreement or made in writing in
connection herewith, shall, except as otherwise provided herein, be binding upon
and inure to the benefit of the parties hereto and their respective successors,
heirs, devisees, legal representatives and permitted assigns.
17
7.6. Notices. All notices of communication required or permitted
hereunder shall be in writing and may be given by (a) depositing the same in
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, (b) delivering the same
in person to an officer or agent of such party, (c) sending by a nationally
recognized overnight delivery service or (d) telecopying the same with
electronic confirmation of receipt.
If to Daisytek or BSD Companies:
c/o Daisytek, Incorporated
1025 Central Expressway South, Suite 200
Allen, Texas 75013
Attention: Mr. John D. Kearney, Sr.
Telecopy No.: 972-424-4604
with a copy to:
Munsch Hardt Kopf & Harr, P.C.
4000 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202-2790
Attention: A. Michael Hainsfurther, Esq.
Telecopy No.: 214-855-7584
If to Purchaser or PFS:
c/o Priority Fulfillment Services, Inc.
500 North Central Expressway
Plano, Texas 75074
Attention: Mark Layton
Telecopy No.: 972-881-0145
18
with a copy to:
Andrews & Kurth, L.L.P.
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attention: Patrick C. Sargent, Esq.
Telecopy No.: 214-659-4401
and a copy to:
Wolff & Samson, P.A.
5 Becker Farm Road
Roseland, New Jersey 07068
Attention: Morris Bienenfeld, Esq.
Telecopy No.: 973-740-1407
or at such other address or counsel as any party hereto shall specify pursuant
to this Section 7.6 from time to time.
7.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas applicable to agreements
between Texas residents entered into and to be performed entirely within Collin
County, Texas.
7.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same Agreement.
7.9. Headings. The headings used herein are solely for the convenience
of the parties and shall not serve to modify or interpret the text of the
Sections at the beginning of which they appear.
7.10. Construction and Representation. The parties understand and
acknowledge that they have each been represented by counsel in connection with
the preparation, execution and delivery of this Agreement. This Agreement shall
not be construed against any party for having drafted it.
7.11. Rights of the Parties. Except as otherwise expressly provided in
Section 7.5, nothing expressed or implied in this Agreement is intended or will
be construed to confer upon or give any person or entity other than the parties
hereto any rights or remedies under or by reason of this Agreement or any
transaction contemplated hereby.
7.12. Arbitration. In the event of a claimed breach of this Agreement
by any of the parties hereto, except for a dispute where the remedy sought is
specific performance or another form of extraordinary equitable relief, such
dispute shall be submitted to binding arbitration in Collin County, Texas in
accordance with the terms of this Section 7.12. The party who is alleging that a
dispute exists shall send a notice of such dispute to all other parties to this
Agreement, setting forth in detail the dispute, the parties involved and the
position of such party
19
with respect to the dispute. If agreement as to the matters detailed in the
preceding sentence is not reached within twenty (20) business days after receipt
of the notice, then, within ten (10) business days thereafter, the parties shall
mutually select an arbitrator who is experienced in commercial arbitration. If
the parties are unable to agree upon the selection of the arbitrator, the
arbitrator shall be selected by the American Arbitration Association (the
"AAA"). Any disputes as to the rules for conducting the arbitration shall be
resolved by reference to the AAA rules for commercial arbitration by the
arbitrator. The arbitrator shall schedule a hearing on the disputed issues
within forty (40) business days after his or her appointment, and the arbitrator
shall render his or her decision after the hearing, in writing, as expeditiously
as possible, and shall deliver copies of such decision to the parties. A default
judgment may be entered against any party who fails to appear at the arbitration
hearing. Such decision and determination shall be final and unappealable and may
be filed as a judgment of record in any jurisdiction designated by the
successful party. The parties to this Agreement agree that this paragraph has
been included to rapidly and inexpensively resolve any disputes among them with
respect to the matters described above, and that this paragraph shall be grounds
for dismissal of any court action commenced by any party with respect to a
dispute arising out of such matters.
7.13. Covenant of Further Assurances. The parties hereto covenant and
agree to execute and deliver any and all additional writings, instruments and
other documents and take such further actions as shall be reasonably required or
requested to effectuate the terms and conditions of this Agreement.
[THE NEXT PAGE IS THE SIGNATURE PAGE.]
20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day first above written.
DAISYTEK: DAISYTEK, INCORPORATED,
a Delaware corporation
By:
----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
PURCHASER: BSD ACQUISITION CORP.,
a Delaware corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
PFS: PRIORITY FULFILLMENT SERVICES, INC.,
a Delaware corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
PFSWEB: PFSWEB, INC.,
a Delaware corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
PFS EUROPE: PRIORITY FULFILLMENT SERVICES EUROPE B.V.,
a Netherlands corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
21
EXHIBIT A
CAPITALIZATION
BSD:
Certificate Number Number of Shares
001 100
BSD EUROPE:
The Deed of Incorporation for BSD Europe provides that no certificates
for shares shall be issued. The ownership of the shares is registered in the
shareholders register, which reflects Daisytek as the owner of 40 shares of
capital stock of which 26 shares have been pledged to Bank One as security
pursuant to the Credit Agreement dated as of December 18, 2000 by and among
Daisytek, Incorporated, Daisytek International Corporation, Bank One, N.A., and
Bank One, Texas, N.A.
BSD CANADA:
Certificate Number Number of Shares
------------------ ----------------
C-001 10
C-002 1,000,000
------------------
1,000,010
DISCLOSURE SCHEDULE
Schedule 3.1
BSD is qualified and authorized to transact business in the State of Texas and
is in good standing in the State of Texas.
EXHIBIT 10.6
OPERATING AGREEMENT
OF
BUSINESS SUPPLIES DISTRIBUTORS HOLDINGS, LLC
THIS OPERATING AGREEMENT is made as of the 2nd day of July,
2001 by and between PRIORITY FULFILLMENT SERVICES, INC., a Delaware corporation
("PFS"), and INVENTORY FINANCING PARTNERS, LLC, a Delaware limited liability
company ("IFP"). PFS and IFP are individually and collectively referred to
herein as a "Member" and "Members," respectively.
WITNESSETH:
WHEREAS, the Members have authorized the formation of BUSINESS
SUPPLIES DISTRIBUTORS HOLDINGS, LLC (the "Company") as a limited liability
company pursuant to the provisions of the Delaware Limited Liability Company Act
(the "Act"); and
WHEREAS, the Members wish to set forth herein the terms and
provisions governing the operations and management of the Company.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and premises contained herein, and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE 1. Formation; Term.
(a) Pursuant to Chapter 18, Title 6 of the Act, the Members
have authorized and caused to be filed in the Office of the Delaware Secretary
of State a Certificate of Formation (the "Certificate") thereby establishing the
Company
as a Delaware limited liability company. A true and correct copy of the
Certificate is attached hereto as Exhibit A. The Company shall file an amendment
to the Certificate if, and to the extent, required by the Act to reflect the
provisions set forth herein.
(b) The Company shall be operated and shall conduct its
business in accordance with the Act, except to the extent modified by the terms
of this Agreement.
(c) Unless (i) the Company is sooner dissolved in accordance
with Article 14 of this Agreement or the provisions of the Act or (ii) the term
is extended pursuant to Article 14 of this Agreement, the term of existence of
the Company shall expire on December 31, 2050 (the "Term").
ARTICLE 2. Name; Principal Office; Registered Office and
Agent.
(a) The business and affairs of the Company shall be conducted
under the name of BUSINESS SUPPLIES DISTRIBUTORS HOLDINGS, LLC.
(b) The address of the Company's initial registered office in
the State of Delaware shall be 1013 Centre Road, Wilmington, Delaware, and the
registered agent at such office shall be Corporation Service Company. The
Company shall maintain its principal office in such location as the Manager (as
hereinafter defined) shall determine to be necessary and appropriate for the
proper conduct of the business of the Company.
(c) The following documents shall be maintained at the
principal office of the Company:
(i) a current list of the full name and last known
business address of each Member set forth in alphabetical order and the date on
which each person or entity became a Member;
(ii) information regarding the amount of cash and a
description and statement of the agreed value of any other property contributed
by each Member;
(iii) a copy of the Certificate and all amendments
thereto;
(iv) a copy of this Agreement and all amendments hereto;
(v) copies of the Company's Federal and state income tax
returns and annual financial statements; and
(vi) Minutes of every annual meeting, special meeting and
court-ordered meeting and all written consents obtained from Members for actions
taken by Members without a meeting.
(d) Such documents shall be available for inspection and
copying by any Member or its authorized representatives during ordinary business
hours upon reasonable notice from, and at the expense of, such Member.
(e) The foregoing shall not restrict the power and authority
of the Manager to change the name, registered office, registered agent or
principal office of the Company from time to time.
ARTICLE 3. Limited Purpose; Operations; Title to Company
Property.
(a) The sole purpose of the Company shall be to purchase, sell
and distribute IBM products, and to engage in any and all businesses, activities
and enterprises related or incidental thereto, including without limitation, to
purchase, own, operate, manage, lease, sublease, possess, occupy, finance,
borrow, mortgage, pledge, encumber, sell, transfer, assign, grant options with
respect to, construct, expand, renovate, repair, maintain and otherwise deal
with and in respect of real or personal property, or any kind or description,
and otherwise engage in all such activities as are necessary, incidental or
appropriate in connection with the proper and lawful operation of the foregoing;
provided, however, in pursuing the foregoing, the Company shall not take any
action or step, or omit or fail to take any action or step, which shall
constitute a breach, violation or default under any law, rule, regulation,
ordinance, order, decree, license, permit, franchise, authorization, contract,
note, bond, indenture, instrument or agreement to which the Company or any of
its property may be subject or bound. For the avoidance of doubt, the Company
shall be the parent corporation of BSD Acquisition Corp., a Delaware
corporation, which shall conduct the foregoing activities.
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(b) The Company shall conduct its business and operations in
accordance with the following provisions and shall:
(i) maintain books and records and bank accounts separate
from those of any other person;
(ii) maintain its bank accounts and all its other assets
separate from those of any other person or entity;
(iii) hold regular Company meetings, as appropriate, to
conduct the business of the Company and observe all other limited liability
company formalities;
(iv) hold itself out to creditors and the public as a
legal entity separate and distinct from any other entity;
(v) prepare separate tax returns and financial statements;
(vi) conduct business in its own name and use separate
stationery, invoices and checks;
(vii) not commingle its assets or funds with those of any
other person;
(viii) not assume, guarantee or pay the debts or
obligations of any other person;
(ix) pay its own liabilities and expenses only out of its
own funds;
(x) pay salaries of its own employees from its own funds;
(xi) correct any known misunderstanding regarding its
separate identity;
(xii) not identify itself as a division of any other
person or entity; and
(xiii) maintain adequate capital in light of its
contemplated business operations.
(c) All property owned by the Company shall be owned by the
Company as an entity and, to the extent permitted by applicable law, no Member
shall have any ownership interest in any Company property in its individual name
or right, and each Member's interest in the Company shall be personal property
for all purposes.
ARTICLE 4. Members.
(a) As of the date hereof, the Members are PFS and IFP. Except
as provided in this Agreement, no other person, corporation, partnership,
limited liability company or other entity shall become a Member of the Company.
The Members shall have the rights, duties and
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obligations granted to and imposed upon them under the Act, except as and to the
extent modified by the terms of this Agreement.
(b) No Member may resign from the Company prior to the
dissolution and winding up of the Company's business and affairs. If a Member
attempts to resign in violation of the provisions of this Article 4(b), such act
shall, as to the Company and the other Members, be void and of no force and
effect, nor shall such attempted resignation entitle any Member to receive the
fair value of its interest in the Company prior to the dissolution and winding
up of the Company's business and affairs.
(c) Subject to the terms set forth herein, the interests of
the Members in the Company (each an "LLC Interest") are as follows: IFP - 51%;
and PFS - 49%.
(d) Except where specifically indicated otherwise, an LLC
Interest shall be deemed to refer to and include both an Economic Interest (as
hereinafter defined) and a Voting Interest (as hereinafter defined). As used
herein, the term "Economic Interest" means the economic rights and interests
associated with a Member's LLC Interest, including the economic rights and
interests described in the Act and in this Agreement. As used herein, the term
"Voting Interest" means all rights, interests and responsibilities, other than
the Economic Interest, associated with a Member's LLC Interest, including,
without limitation, the right to receive notice of, attend Members' meetings
regarding, and to vote on or consent to matters for which the approval or
consent of the Members is required or permitted hereunder. The Voting Interest
(rather than the Economic Interest) associated with a Member's LLC Interest
shall be counted for purposes of determining the presence of a quorum at
meetings of Members, whether Members holding the requisite percentage of LLC
Interests have voted in favor of any matter presented to the Members for their
approval and whether Members holding the requisite percentage of LLC Interests
have consented to any action taken without a meeting (collectively, the "Voting
Purposes").
ARTICLE 5. Capital Contributions; Capital Accounts.
(a) The Members agree to contribute to the capital of the
Company the cash and other property set forth on Exhibit B attached hereto and
incorporated herein (hereinafter, each Member's "Capital Contribution").
(b) Except as otherwise set forth herein, no Member shall,
solely by reason of being a Member, have any obligation to make any additional
capital contribution or loan to the Company or guaranty any indebtedness or
obligation of the Company.
(c) Contributions of capital to the Company by the Members
shall not bear interest.
(d) No Member shall have the right to withdraw or reduce its
capital contribution to the Company or receive the return of such capital
contribution, except as otherwise provided in this Agreement.
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(e) A separate capital account (each a "Capital Account")
shall be maintained for each Member in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv) of the Internal Revenue Code (the "Code"). Consistent
therewith, each Member's Capital Account shall be credited with (i) the amount
of cash and the fair market value of any other property (net of liabilities to
which the contributed property is subject) or services contributed by such
Member and (ii) the amount of any net profit or items thereof, allocated to that
Member pursuant to Article 7 hereof. Each Member's Capital Account shall be
charged with (iii) the amount of cash and the fair market value of any other
property (net of liabilities assumed by such Member and liabilities to which
such property is subject) paid or distributed to such Member, and (iv) the
Member's share of losses or items thereof, allocated to that Member pursuant to
Article 7 hereof. The Capital Accounts shall be adjusted by any other
adjustments required by Treasury Regulation Section 1.704-1(b)(2)(iv).
(f) The maintenance of the Capital Accounts shall in all cases
be as required by the Code, and the regulations thereunder (the "Regulations"),
and any inconsistencies between the terms of this Agreement and the Code and the
Regulations shall be resolved in favor of the Code and the Regulations. In the
event that there shall be any change to the provisions of the Code or any
Regulations and the application of such change under this Agreement shall result
in material economic harm to any Member, the Members shall use reasonable good
faith efforts to negotiate amendments to this Agreement to compensate such
Member for such harm; provided, however, that such amendments shall not
materially affect a Member's rights to distributions hereunder.
ARTICLE 6. Distributions.
(a) Subject to the restrictions, if any, of any loan
agreement, credit agreement, note, bond or other instrument or agreement to
which the Company is or may be subject or bound at any time, for each fiscal
year of the Company (or portion thereof on a pro rated basis), all Cash Flow (as
defined in Article 6(d) hereof) shall be distributed to the Members in the
following order of priority: first, to IFP until it has received a one-time
amount equal to its Capital Contribution; second, to IFP until it has received
an amount equal to a 35% cumulative annual return on its Capital Contribution;
third, to PFS until it has received a one-time amount equal to its Capital
Contribution; fourth, to PFS until it has received an amount equal to a 35%
cumulative annual return on its Capital Contribution; and fifth, to the Members,
pro rata, in accordance with their respective Capital Accounts. Notwithstanding
the foregoing, no distribution shall be made if, after giving effect thereto,
the net worth of the Company shall be less than the aggregate initial Capital
Contributions of the Members.
(b) The aforesaid distributions set forth in the preceding
paragraph shall be determined, annually, in accordance with the Company's annual
financial statements, and payment thereof shall be made within 30 days following
the completion of such financial statements, but, in any event, not later than
April 1 following each fiscal year.
(c) For purposes of this Agreement, "Cash Flow" means for each
fiscal year of the Company, gross revenues of the Company from operations, minus
all operating expenses, as determined, on an accrual basis, in accordance with
generally accepted accounting principles consistently applied, except that the
following rules shall apply:
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(i) Capital contributions and loans to the Company shall
not be included in Cash Flow;
(ii) Depreciation of any kind shall not be a deduction
from Cash Flow;
(iii) Reserves that the Manager may reasonably establish
from time to time shall be a deduction from Cash Flow, such reserves to include,
without limitation, (A) working capital reserves to reflect the difference
between accounts payable and accounts receivable and (B) reserves deemed
necessary or appropriate by the Manager to fund the Company's operations,
satisfy liabilities, repay indebtedness, capital expenditures, acquisitions or
other transactions;
(iv) Capital expenditures shall be a deduction from Cash
Flow to the extent such capital expenditures are in excess of reserves
previously established for such expenditures and are not paid with proceeds from
insurance;
(v) Insurance proceeds received on account of rental or
business interruption shall be included in Cash Flow;
(vi) Amounts released from reserves for distribution shall
be an increase in Cash Flow; and
(vii) Amortization of any indebtedness of the Company or
any part thereof, shall be a deduction from Cash Flow.
(d) No Member who is entitled to a distribution pursuant to
this Agreement shall be entitled to demand and receive such distribution in any
form other than cash.
(e) No Member having a negative balance in its Capital Account
shall be required to contribute funds to the Company in order to restore its
Capital Account to zero.
(f) Notwithstanding the foregoing, not later than April 1 of
each year, the Company shall make distributions (the "Tax Distributions") to
each Member in an amount equal to the estimated federal and state income tax
liability arising from such Member's membership interest in the Company during
the immediately prior year (based upon a tax rate reflecting the highest
applicable federal and state rates for such Member for such year).
ARTICLE 7. Allocation of Profits and Losses.
(a) All Profits as determined in accordance with Section 7(d)
herein shall be allocated among the Members as follows:
(i) First, Profits shall be allocated to all of the
Members in the amount of and in proportion to the excess, if any, of (A) the
aggregate distributions which have been paid, or are payable, to such Member as
of the last day of the current year; less (B) the aggregate amount of Profits
previously allocated to such Member pursuant to this Section 7(a)(i) for all
prior years; and
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(ii) Second, all remaining Profits shall be allocated to
all of the Members in proportion to their respective LLC Interests.
(b) All Losses as determined in accordance with Section 7(d)
hereof shall be allocated among the Members in proportion to their respective
Capital Accounts.
(c) Notwithstanding Articles 7(a) and (b) hereof:
(i) Profits and Losses shall be specifically allocated
(the "Regulatory Allocations") if and to the extent necessary to comply with the
Regulations under Code Section 704(b) (the "704(b) Regulations"), all as
determined by the Tax Matters Partner (as defined in Section 8(e) below).
(ii) If Regulatory Allocations have been made, then
subsequent allocations of Profits and Losses (the "Curative Allocations") shall
be made, so that the net result of all allocations of Profits and Losses
pursuant to Sections 7(a) and (b) and this Sections 7(c) in the aggregate shall,
as quickly as possible and to the extent possible without violating the
constraints prescribed by the 704(b) Regulations, be the same as if no
allocations had been made pursuant to this Article 7(c), all as determined by
the Tax Matter Partner.
(iii) In furtherance of this Section 7(c), all items of
Losses attributable to a liability of the Company shall be specifically
allocated to the Member that bears the economic risk of loss for such liability
and such Member shall be allocated items of Profits to the extent that there is
a net decrease in the minimum gain attributable to such portion of such
liability, all in accordance with the 704(b) Regulations as determined by the
Tax Matters Partner.
(d) "Profits" and "Losses" shall mean, for each fiscal year,
an amount equal to the Company's taxable income or loss for such year,
determined in accordance with Code Section 703(a), provided that all items of
income, gain, loss or deduction required to be separately stated pursuant to
Code Section 703(a)(1) shall be included in taxable income and loss, except
that:
(i) any income that is exempt from federal income tax
shall be added to such taxable income or loss;
(ii) any expenditure of the Company described in Code
Section 705(a)(2)(B) or treated as such pursuant to the 704(b) Regulations shall
be subtracted from taxable income or loss;
(iii) income, gain, losses and deductions, as determined
for federal income tax purposes, with respect to any property contributed to the
capital of the Company or owned by the Company if and when the Members' Capital
Accounts are revalued in accordance with the 704(b) Regulations shall be
determined with respect to such asset's fair market value in accordance with the
704(b) Regulations (the "Gross Asset Value") as determined by the Tax Matters
Partner;
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(iv) in the event that any of the Company's assets is
adjusted to reflect its Gross Asset Value in accordance with the 704(b)
Regulations, the amount of such adjustment shall be taken into account as gain
or loss from the disposition of such asset for purposes of computing Profits or
Losses; and
(v) to the extent an adjustment to the adjusted tax basis
of any of the Company's assets pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to the 704(b) Regulations to be taken into account
in determining Capital Accounts as a result of a distribution other than in
liquidation of a Member's LLC Interest, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for purposes of
computing Profits or Losses.
(e) Income, gain, losses and deductions, as determined for
federal income tax purposes, shall be allocated in accordance with the
allocation of the corresponding items of Profits and Losses except that income,
gain, losses and deductions as determined for federal income tax purposes with
respect to any property with a Gross Asset Value that differs from its adjusted
basis for federal income tax purposes shall be allocated so as to reconcile the
difference between such adjusted basis and such Gross Asset Value, in any manner
permitted under Code Section 704(c) and the Regulations thereunder as determined
by the Tax Matters Partner. Tax credits shall be allocated to the Members in
proportion to their respective LLC Interests. Allocations pursuant to this
Section 7(e) are solely for purposes of federal, state and local taxes and shall
not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Profits, Losses, or distributions pursuant to any
provision of this Agreement.
(f) In the event that any Member's LLC Interest changes during
the year, then allocations of Profit and Losses shall be made in any manner
permitted under Code Section 706 and the Regulations thereunder as determined by
the Tax Matters Partner to take into account such varying interests.
ARTICLE 8. Management.
(a) The management and control of the business and affairs of
the Company shall be vested in its manager (the "Manager"). The sole Manager
shall be an individual who shall not then be a current officer, director or
employee of PFS or any subsidiary thereof. The initial Manager shall be Joe
Farrell. The Manager shall prepare, and submit to the Members for approval, an
annual budget (as the same may be modified or revised from time to time, the
"Budget") setting forth projected revenue and expenses of the Company and its
subsidiaries for each upcoming fiscal year, together with such additional
information as any Member may reasonably request. The Manager shall have the
complete power and authority to manage and control the operations of the Company
and is authorized to take any and all actions and steps, and execute and deliver
on behalf of the Company, any and all documents, instruments and agreements, as
the Manager may deem necessary or appropriate from time to time; provided,
however, without the prior approval of the Members, the Manager shall not incur
any liability or obligation on behalf of the Company or any subsidiary thereof
or take any other action binding upon the Company or any subsidiary thereof in
an amount which exceeds the corresponding amount therefor set forth in the
applicable approved
8
Budget by more than 15%. Subject to the prior written consent of the Members,
the Manager may appoint one or more officers or representatives of the Company
and may authorize such officers or representatives to act on behalf of, and to
enter into contracts, understandings and agreements in the name of, the Company.
(b) The Manager is hereby designated to serve as and exercise
all rights, powers and duties as "Tax Matters Partner," as such term is defined
and used in Section 6231(a)(7) of the Code and the Regulations. In its capacity
as Tax Matters Partner, the Manager shall cause the preparation and filing of
all Company tax returns and shall, on behalf of the Company, make such tax
elections as he shall determine to be in the best interests of the Members. The
Tax Matters Partner may consent to extensions relating to such returns and
revoke such tax elections as it believes may be in the best interests of the
Members. In addition, the Tax Matters Partner shall file all other tax forms,
documents or other writings with respect to the business and operations of the
Company as shall be required by any governmental agency or authority having
jurisdiction to require such forms, documents or other writings. The Tax Matters
Partner shall provide the Members with prompt notice of any communications
received from the Internal Revenue Service, together with copies of such
communications.
(c) The Manager shall be entitled to reasonable compensation
and benefits as shall be mutually agreed, from time to time, by the Manager and
the Members. The Manager and any officers or representatives of the Company
appointed by the Manager shall perform their respective duties hereunder in good
faith, in a manner they reasonably believe to be in the best interests of the
Company and with such care as an ordinarily prudent person in a like position
would use under similar circumstances. The Manager and such officers and
representatives (in performing their obligations hereunder) shall be fully
protected, and shall not be liable to the Company or to any Member, for acts
performed or omitted by them or their agents or representatives for and on
behalf of the Company in furtherance of its interests, including, without
limitation, acts or omissions made in good faith based upon the records of the
Company or the opinions of professionals employed by the Company.
(d) Upon not less than 30 days' prior written notice to all
Members, the Members, or any of them, shall have the right to remove the Manager
for Cause. As used herein "Cause" shall mean (i) the willful failure of the
Manager to substantially perform his duties to the Company and its subsidiaries
(after reasonable prior notice); (ii) misappropriation by the Manager of funds
or property of the Company or any attempt by the Manager to secure any personal
profit related to the business of the Company and not fairly disclosed to and
approved by all of the Members; (iii) fraud, dishonesty, disloyalty, gross
negligence or willful misconduct on the part of the Manager in the performance
of his duties for the Company and its subsidiaries; (iv) the Manager's engaging
in activities which are prohibited by state and/or federal laws prohibiting
discrimination based on age, sex, race, religion or national origin or engaging
in conduct constituting sexual harassment; or (v) a felony conviction of the
Manager.
(e) In the event of the death, disability or voluntary
resignation or retirement of the Manager or in the event the Manager is removed
for Cause, the Members shall appoint a new Manager, provided, however, such new
Manager shall not be a then current officer, director or employee of PFS.
9
(f) Except as otherwise set forth herein, any action to be
taken by the Members, or any approval or consent required hereunder, shall be
deemed taken, granted or given hereunder (i) without any requirement of notice
or meeting, upon the unanimous action, approval or consent of the Members or
(ii) upon the affirmative vote of Members holding a majority of the outstanding
LLC Interests at a meeting of Members duly called by any Member upon not less
than 30 days prior written notice (specifying the action to be taken or approval
or consent to be granted or given) to all Members.
ARTICLE 9. Activities of Members. The Members may have and
engage in any other activities, business, enterprises or investments without any
liability to the Company arising therefrom, except that IFP covenants and agrees
that for so long as it is a Member herein and for a two year period thereafter,
IFP will not (i) directly or indirectly, own (except for minor holdings in
publicly listed or traded companies), manage, operate, join, control or
otherwise participate in, whether as a partner, director, shareholder or
otherwise, any business competitive with the business of the Company, PFS or any
of their respective subsidiaries; (ii) attempt in any manner to persuade any of
the suppliers or customers of the Company, PFS or any of their respective
subsidiaries to cease doing business or reduce the amount of business which any
of such suppliers or customers has done or may contemplate doing with the
Company, PFS or any of their respective subsidiaries; and (iii) whether directly
or indirectly, and whether on its own behalf or as a consultant, advisor, agent,
representative, shareholder, partner, independent contractor or in any capacity
on behalf of any sole proprietorship, corporation, partnership, joint venture,
person or other entity, employ any person who at any time during such period is
or was an employee of the Company, PFS or any of their subsidiaries. IFP
acknowledges that (i) the restrictive covenants set forth herein are necessary
in order to protect and maintain the legitimate business interests of the
Company and PFS and it is reasonable that the restrictive covenants set forth
above are not limited by any specific geographic area; (ii) the remedy at law
for any breach of this covenant by it will be inadequate and that, accordingly,
the Company and PFS shall, in addition to all other available remedies
(including without limitation seeking damages and an accounting for lost
profits), be entitled to injunctive relief; (iii) if any of the covenants
contained in this Section, or any part hereof, is hereinafter construed to be
invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to the
invalid portions; (iv) if any of the covenants contained in this Section, or any
part hereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the court making such determination shall
have the power to reduce the duration and/or geographic area of such provision
and, in its reduced form, said provision shall then be enforceable; and (v) in
the event that the courts of any one or more of any state having jurisdiction
shall hold the above covenants wholly unenforceable by reason of the breadth of
scope or otherwise, it is the intention of the parties hereto that such
determination not bar or in any way affect the right of the Company or PFS to
the relief provided above in the courts of any other states within the
geographical scope of such covenants, as to breaches of such covenants in such
other respective jurisdictions, the above covenants as they relate to each state
being, for this purpose, severable into diverse and independent covenants.
ARTICLE 10. Limitation of Liability. Except as otherwise
provided by the Act, the debts, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, shall be solely the debts,
obligations and liabilities of the Company; and no Member, Manager,
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employee, agent or representative of the Company shall be obligated personally
for any such debt, obligation or liability of the Company, or for any debt,
obligation or liability of any other Member, Manager, employee, agent or
representative of the Company, by reason of being a Member, or acting as a
Manager, employee, agent or representative of the Company.
ARTICLE 11. Transfer of Interests in the Company.
(a) Except as otherwise provided in this Article 11, a Member
may not sell, assign, transfer, make gifts of or otherwise dispose of, or
pledge, hypothecate or otherwise encumber, its LLC Interest or any part thereof
in any manner whatsoever (such events being hereinafter sometimes collectively
referred to as a "Transfer"), without the prior written consent of all of the
Members (which consent shall not be unreasonably withheld), and any act in
violation hereof shall be null and void as against the Company and the other
Members.
(b) If an Insolvency Event (as herein defined) should occur
with respect to a Member, or if a Member is subject to a court order which
provides for the transfer of such Member's interest in the Company, the trustee
in bankruptcy or other person succeeding to such Member's interest in the
Company shall succeed only to such Member's economic rights and interests as
described in the Act and in this Agreement and shall not be admitted as a Member
of the Company or have the right to exercise any Voting Interests or consent
rights of such Member unless (i) the other Members grant their unanimous written
approval, which may be withheld in their sole and absolute discretion and (ii)
such successor agrees in writing to be bound by and comply with all of the
terms, provisions and conditions of this Agreement. As used herein, an
"Insolvency Event" shall mean any of the events set forth in Section 18-304 of
the Act with respect to a person or the occurrence of any of the events set
forth (and upon the dates specified) in such Section with respect to a person.
ARTICLE 12. Additional Members.
(a) Any person or entity may become a Member of the Company
upon (i) the written consent of all of the then Members and (ii) such person or
entity agreeing in writing to be bound by and comply with all of the terms,
provisions and conditions of this Agreement applicable to Members.
(b) A new Member may be entitled to any retroactive allocation
of losses, income or expense deductions incurred by the Company as the Manager
shall determine. The Manager may, in its sole discretion, at the time a new
Member is admitted, close the Company's books (as though the Company's tax year
had ended) or make pro rata allocations of losses, income and expense deductions
to a new Member for that portion of the Company's tax year in which a new Member
was admitted in accordance with the provisions of Section 706(d) of the Code and
the Regulations promulgated thereunder.
(c) Each Member agrees to execute and deliver such amendments
to, and modifications of, this Agreement as the Manager may deem necessary or
appropriate in connection with or in respect of the admission of any additional
Member as herein provided.
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ARTICLE 13. Additional Capital. In the event the Members shall
unanimously determine in good faith that, in addition to the Capital
Contributions of the Members hereunder, further funds are required for the
proper operations of the Company (including without limitation, any funds needed
for working capital, any operating deficit or the purchase, lease, acquisition,
expansion or construction of additional Company property), such additional
capital shall be obtained from the Members in proportion to their LLC Interests
or in such other proportion, and upon such terms and conditions, as they shall
otherwise agree.
ARTICLE 14. Property Sale Events; Dissolution and Liquidation.
(a) As used herein, a "Property Sale" shall mean (i) the
merger or consolidation of any entity owned by the Company with or into any
other entity (other than a transaction in which the Company continues to own a
controlling interest in the surviving entity of such transaction), (ii) the sale
or transfer by the Company of all or substantially all of its assets and
properties to an unrelated third party in a bona fide transaction or (iii) the
sale or transfer by the Company of all or substantially all of its interest in
any entity owned by it to an unrelated third party in a bona fide transaction.
(b) All of the terms and provisions of any and each Property
Sale, including the consideration thereof and all matters relating thereto
(including the form, terms and provisions of all Property Sale documents,
agreements and instruments (the "Property Sale Documents")), shall be made by
the Manager, subject to the unanimous prior written consent of the Members
(which shall not be unreasonably withheld). Each Member agrees to execute and
deliver any and all Property Sale Documents, and, to the extent required
thereunder, to be jointly and severally liable with the other Members
thereunder, as shall be requested by the Manager, provided that such request
shall be made of all Members and provided further, however, that,
notwithstanding the terms of any Property Sale Document (or the failure of any
Member to execute and deliver the same), as among the Members, any liability or
obligation arising under or in respect of such Property Sale Document shall be
allocated among the Members in the proportion of their respective LLC Interests.
(c) All amounts paid or payable to the Company in connection
with any Property Sale (the "Sale Proceeds") shall be applied and allocated as
follows:
(i) first, to the payment of all costs and expenses
incurred by the Company in connection with the Property Sale;
(ii) second, to the payment of all indebtedness and
liabilities of the Company (including the establishment of such reserves as the
Manager shall deem necessary or appropriate in respect of any anticipated or
contingent liabilities arising from or relating to the Property Sale);
(iii) third, to the Members in proportion to their
respective Capital Accounts; and
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(iv) fourth, the remaining balance shall be paid to the
Members in proportion to their respective LLC Interests.
(d) In the event the Sale Proceeds shall be payable over time
or shall be payable in securities, notes or property other than cash ("Non-cash
Proceeds"), then, to the extent practicable, the provisions of the preceding
paragraph (c) above shall apply to such Non-cash Proceeds, as and when received,
with the same force and effect as if paid in cash as of the effective date of
the Property Sale.
(e) The Company shall be dissolved and its assets liquidated
upon the earliest of (i) as promptly as practicable following the effective date
of a Property Sale, if following such Property Sale, the Company has no material
assets other than the Non-cash Proceeds arising therefrom, (ii) December 31,
2050, unless Members holding a majority of the LLC Interests held by the Members
agree in writing, within one year prior to the expiration of the Term, to extend
the Term; (iii) the unanimous determination of the Members to dissolve and
liquidate the Company and terminate this Agreement; or (iv) the entry of a court
order or judgment of dissolution.
(f) In the event of a dissolution of the Company for any
reason, the Manager shall immediately commence to wind up the Company's affairs
and shall liquidate the assets of the Company as promptly as possible, but in an
orderly and businesslike manner.
(g) In the event of any liquidation and dissolution of the
Company, after all indebtedness, liabilities and obligations of the Company,
including all expenses of liquidation (and including the establishment of such
reserves as the Manager shall deem necessary or appropriate in respect of any
anticipated or contingent liabilities of the Company), shall have been paid or
provided for, and all items of profit, loss, income, gain, loss, deduction and
credit shall have been allocated in accordance with Article 7 hereof, any
proceeds from the liquidation shall be applied and distributed in the order of
priority set forth in paragraph (c) above.
ARTICLE 15. Books, Records and Reports. The Manager shall
select the accountants for the Company. The Company shall keep proper and
complete books of account in accordance with generally accepted accounting
principles, consistently applied, at all times during its continuance, which
books and records shall be maintained at the principal office of the Company and
shall be available for inspection and copying upon reasonable notice. Except as
otherwise provided herein, the Tax Matters Partner shall select the cash or
accrual basis of accounting, as required by the Code, and shall make such
decisions as required and as are necessary with respect to capitalization or
expensing of items and the method of depreciation for both the books of account
and for Federal income tax purposes. The Company shall provide to the Members an
annual financial report, a copy of the Company tax return for each year by April
1st of the following calendar year and Form K-l or such other form necessary for
filing with the Members' income tax returns. The financial reports shall include
a copy of the balance sheet, the statement covering the profits and losses of
the Company, and with respect to the annual report, a statement showing the
distribution made to such Member pursuant to Article 6 hereof and the amounts
allocated to such Member pursuant to Article 7 hereof during or in respect of
such year and the amount thereof reportable for state and Federal income tax
purposes. Accountant's fees incurred by the Company
13
for accounting services necessary to comply with the terms of this Article are
deemed to be a Company expense, payable out of Cash Flow.
ARTICLE 16. Fiscal Year. The fiscal year and the federal
income tax year of the Company shall end on December 31 of each year.
ARTICLE 17. Modifications; Waivers. No amendment or
modification of this Agreement shall be valid or effective unless in writing and
signed by the Members holding not less than 66-2/3% of the LLC Interests held by
the Members; provided that no modification or waiver of any breach or condition
of this Agreement shall be effective against any party unless in writing and
signed by the party or parties sought to be charged therewith. A waiver in one
instance shall not be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
ARTICLE 18. Notices and Addresses. All notices or other
communications given or made under this Agreement shall be in writing and shall
be (a) personally delivered, (b) sent by certified mail, return receipt
requested, postage prepaid or by reputable overnight courier providing a receipt
against delivery or (c) sent by telecopy or facsimile transmission, provided
that a copy thereof is concurrently delivered or sent in accordance with clause
(a) or (b) above. Such notices or other communications shall be delivered or
sent to the Members at their respective addresses set forth in the Company's
records or such other address as any Member may specify in a notice to the other
Members, and to the Company at its principal office specified in Article 2 of
this Agreement. All notices shall be effective upon receipt.
ARTICLE 19. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware.
ARTICLE 20. Gender. As used herein, each of the masculine,
feminine or neuter genders shall include the other genders, the singular shall
include the plural and the plural shall include the singular, whenever
appropriate to the context.
ARTICLE 21. Captions. Article titles or captions contained in
this Agreement are inserted only as a matter of convenience and as reference and
in no way define, limit, extend or describe the scope of this Agreement or the
intent of any of the provisions hereof.
ARTICLE 22. Counterparts. This Agreement may be executed in
one or more counterparts and each of such counterparts shall, for all purposes,
be deemed to be an original, but all of the counterparts shall constitute one
and the same instrument, and this Agreement shall be deemed effective on the
date it is executed by the parties hereto.
ARTICLE 23. Covenant to Sign Documents. Each Member shall
execute, with acknowledgment or affidavit if required, all documents and
writings reasonably necessary or expedient in order to effectuate the terms and
provisions hereof and the achievement of its purpose and as otherwise
contemplated herein.
14
ARTICLE 24. No Waiver. The failure of a Member to insist on
the strict performance of any covenant or duty required by this Agreement, or to
pursue any remedy under the Agreement, shall not constitute a waiver of the
breach or the remedy.
ARTICLE 25. Successors and Assigns. Subject to the
restrictions on transferability contained in this Agreement, this Agreement and
all of its provisions shall be binding on and inure to the benefit of the
successors and assigns of the Members.
ARTICLE 26. Entire Agreement. This Agreement constitutes the
entire understanding of the parties, and supersedes all prior or contemporaneous
agreements among them, with respect to the subject matter hereof.
ARTICLE 27. Right of Partition. Each of the Members, for
itself, its successors and assigns, hereby waives any and all rights of
partition it may have under any and all applicable laws.
ARTICLE 28. Power of Attorney. Each Member hereby appoints the
Manager as its true and lawful representative and attorney-in-fact in his name,
place and stead to make, execute, sign and file any amendments to the
Certificate now or hereafter required by law and any amendments necessary to
reflect the admission of one or more new Members or any other amendment or
modification hereof provided for herein and such instruments, documents and
certificates which, from time to time, may be required by the laws of the United
States of America, the State of Delaware or any other state in which the Company
shall determine to do business, or any political subdivision or agency thereof,
to execute, implement and continue the valid and subsisting existence of the
Company. Such power of attorney is coupled with an interest and shall continue
in full force and effect notwithstanding the subsequent death or incapacity of
such party.
ARTICLE 29. Counsel. Each Member acknowledges that it has
reviewed, or has had the opportunity to review, this Agreement with its own
separate and independent counsel, and each Member has participated in the
negotiation and drafting of this Agreement. Each Member further acknowledges
that counsel to the Company may also serve as counsel to any or all of the
Members, and counsel to any or all of the Members may also serve as counsel to
the Company, in each case, in any related or unrelated matter and any and all
conflicts of interest arising therefrom are hereby waived.
15
IN WITNESS WHEREOF, the undersigned have hereunto executed
this Agreement as of the day and year first aforesaid.
PRIORITY FULFILLMENT SERVICES, INC.
By:
------------------------------------
Name:
Title:
INVENTORY FINANCING PARTNERS, LLC
By:
------------------------------------
Name:
Title:
16
EXHIBIT A
CERTIFICATE OF FORMATION
OF
BUSINESS SUPPLIES DISTRIBUTORS HOLDINGS, LLC
The undersigned, an authorized natural person, in order to form a
limited liability company pursuant to the provisions and subject to the
requirements of the State of Delaware (particularly Chapter 18, Title 6 of the
Delaware Code and the acts amendatory thereof and supplemental thereto, and
known, identified and referred to as the "Delaware Limited Liability Company
Act"), does hereby certify:
FIRST: The name of the limited liability company is BUSINESS SUPPLIES
DISTRIBUTORS HOLDINGS, LLC.
SECOND: The address of the limited liability company's initial
registered office and the name of the limited liability company's initial
registered agent as required to be maintained by Section 18-104 of the Delaware
Limited Liability Company Act are Corporation Service Company, 1013 Centre Road,
Wilmington, Delaware 19805.
IN WITNESS WHEREOF, the undersigned has set his hand this 2nd day of
July, 2001.
/s/ Morris Bienenfeld
-----------------------------------
Morris Bienenfeld
Authorized Representative
17
EXHIBIT B
CAPITAL CONTRIBUTIONS
Name Capital Contribution
---- --------------------
Priority Fulfillment Services, Inc. $750,000
Inventory Financing Partners LLC $250,000
18
EXHIBIT 10.7
IBM GLOBAL FINANCING
-------------------------------------
PLATINUM PLAN AGREEMENT (WITH INVOICE
DISCOUNTING)
-------------------------------------
IBM BELGIUM FINANCIAL SERVICES S.A.
and
SUPPLIES DISTRIBUTORS S.A.
BUSINESS SUPPLIES DISTRIBUTORS EUROPE B.V.
PFSWEB B.V.
--------------------------------------------------------------------------------
CONTENTS
1. DEFINITIONS............................................................. 1
2. CREDIT LIMIT............................................................ 7
3. SUPPLIER PURCHASE FACILITY.............................................. 7
4. RECEIVABLES, ACQUIRED RECEIVABLES AND VAT RECEIVABLES DISCOUNTING
FACILITY................................................................ 8
5. PREPAYMENTS.............................................................11
6. RECEIVABLES AND RECEIVABLES RIGHTS......................................11
7. CREDIT CHARGES AND PAYMENTS.............................................13
8. REPRESENTATIONS, WARRANTIES AND COVENANTS...............................15
9. DEFAULTS AND REMEDIES...................................................19
10. TERMINATION.............................................................20
11. GENERAL.................................................................20
------------------------------------------------------------------------------
IBM GLOBAL FINANCING
PLATINUM PLAN AGREEMENT (WITH RECEIVABLES DISCOUNTING)
THIS AGREEMENT is made on the date specified against the signature of IBM GF
below among Suppliers Distributors S.A. with a registered number of RC Liege
208795 with an address of Rue Louis Bleriot 5, B-4460 Grace-Hollogne, Belgium
("SDSA"), and Business Supplies Distributors Europe BV a Netherlands company
registered in Maastricht with a with a Belgian trade registration number of HR
Maastricht 14062763 with an address of Markt 28, 6211 CJ Maastricht, The
Netherlands ("BSDE") (SDSA and BSDE collectively, "YOU"), PFS Web B.V a
Netherlands company registered
IN Maastricht under the number 17109541 with a
Belgian trade registration number of R.C. Liege 204162 ("PFS Web B.V.") (SDSA,
BSDE and PFS Web B.V. collectively, the "Loan Parties) and IBM Belgium Financial
Services N.V. with a registered number of R.C. Brussels451.673 with an address
of Square Victoria Regina 1,BE-1210 Brussels VAT BE 424300467 ("IBM GF" or
"US").
WHEREAS we agree to provide you with a Credit Limit in respect of our purchase
of Supplier Invoices and/or Receivables, Acquired Receivables and VAT
Receivables under the terms and conditions of this Agreement.
AGREEMENT
1. DEFINITIONS
1.1 In this Agreement the following terms shall (unless the
context otherwise requires) have the following meanings:-
"ACQUIRED RECEIVABLES": means the BSDE Receivables that you
acquired from BSDE in connection with the Daisytek Stock
Purchase Agreement.
"ADDITIONAL COLLATERAL": means that as specified in the
Schedule, it being understood that Additional Collateral is
not used when calculating the Shortfall Amount, if any, as
described in Clause 7.4;
"AFFILIATE": means with respect to any Person, any other
Person (the "Affiliate") meeting one of the following: (i) at
least 10% of the Affiliate's equity is owned, directly or
indirectly, by such Person; (ii) at least 10% of such Person's
equity is owned, directly or indirectly, by the Affiliate; or
(iii) at least 10% of such Person's equity and at least 10% of
the Affiliate's equity is owned, directly or indirectly, by
the same Person or Persons. All your officers, directors,
joint venturers, and partners shall also be deemed to be
Affiliates for purposes of this Agreement. All of Loan
Parties' officers, directors, joint venturers, and partners
shall also be deemed to be Affiliates of such Loan Party for
purposes of this Agreement.
"AGREEMENT": means this Agreement and all its Schedules and
any supplements to this Agreement as the same may be amended,
supplemented or modified from time to time;
"APPROVED CURRENCY" means any currency other than euro agreed
from time to time by you and us to be an approved currency for
the purposes of this Agreement;
"AUDITORS": means a nationally recognised firm of independent
accountants acceptable to us;
"AUTHORISED OFFICER": means those individuals occupying the
positions listed in Attachment A to this Agreement and who are
authorised by you to provide the instructions, authorisations,
agreements, etc. as specified in such Attachment A;
--------------------------------------------------------------------------------
"AUTHORISED SUPPLIER": means any supplier, for the purposes of
this Agreement, from whom we have agreed to purchase the
Supplier Invoices generated by their sales of Products to you;
"AVAILABLE CREDIT": means from time to time the Credit Limit
less the aggregate of:
(i) the principal amount of Supplier Obligations due and
outstanding by you to us; and
(ii) the aggregate amount of Prepayments made to you by us
on account of the purchase price of Receivables,
Acquired Receivables, and VAT Receivables which are
outstanding; and
(iii) any other sum due and payable by you to us under the
terms of this Agreement, including interest due and
payable and outstanding Credit Charges;
"BASE RATE": means the rate so referred to in the Schedule;
"BSD": means Business Supplies Distributors, Inc.
"BSD A": means BSD Acquisition Corp., Inc., a corporation duly
organized under the laws of the state of Delaware, with its
principal place of business at 500 North Central Expressway,
Plano, TX 75074;
"BSD COMPANIES": means BSD, BSDE. and BSD (Canada) Inc.;
"BSDE" means as defined in the caption;
"BSDE DEBTORS": means any Debtor required to make payment in
respect to the Acquired Receivables;
"BSDE RECEIVABLES": means the any payment obligation (present,
future or contingent) of a Debtor pursuant to a sales contract
with BSDE (including the future right to recover sums due
following the determination, assessment or agreement of the
amount of such obligation), including any applicable value
added taxes, duties, charges and interest (whether arising by
contract or by law) together with its Receivables Rights;
"BSDE SUPPLIER INVOICES" means undisputed Supplier Invoices
which were issued to BSDE prior to the Merger and which we
will pay the applicable Authorised Supplier on your behalf;
"BUSINESS DAY": means (a) in relation to any payment or to a
rate fixing, any day (other than a Saturday or Sunday) which
is a TARGET DAY; (b) in relation to any other matter (e.g.
notices) any day (other than a Saturday or Sunday) on which
banks are open in Brussels;
"CLOSING DATE": MEANS 25 SEPTEMBER 2001;
"COLLATERAL" means the aggregate value minus ?500,000, in our
assessment, of outstanding Receivables, Acquired Receivables
and VAT Receivables we have purchased from you together with
any Receivables Rights and any other assets, including
stock-in-trade which are charged to us by way of a Lien and
which is not subject to retention of title by any party other
than us.
"COMMENCEMENT DATE": means the commencement date of this
Agreement as specified in the Schedule;
"CONCENTRATION RECEIVABLE": means an Eligible Receivable that,
individually, or when aggregated with all other outstanding
Accounts of the same Debtor and such Debtor's Affiliates,
constitute more than five percent (5%) of the net outstanding
balance of all your Eligible Receivables then outstanding for
all your Debtors.
"CONCENTRATION DEBTOR": means at any time, any Debtor
obligated to you with respect to, or on account of, a
Concentration Receivable.
--------------------------------------------------------------------------------
2
"CREDIT CHARGES": means our charges to you (as set out in the
Schedule) for purchasing Supplier Invoices from an Authorised
Supplier as set out in Section 3 of this Agreement and
purchasing Receivables, Acquired Receivables and VAT
Receivables from you pursuant to Section 4 of this Agreement;
"CREDIT LIMIT": means the sum specified in the Schedule which
is subject to change by us;
"DAISYTEK": means Daisytek, Inc.
"DAISYTEK STOCK PURCHASE AGREEMENT": means the Stock Purchase
Agreement dated September 26, 2001 among Daisytek, BSD A, and
PFS.
"DEBTOR": means a customer of yours pursuant to a Sales
Contract who is indebted to you in respect of a Receivable or
who is indebted to you in respect of an Acquired Receivable;
"DEFAULT RATE" means the percentage as detailed as such in the
Schedule;
"DISCOUNT CHARGE" means the charge to be calculated as
described in Clause 5.3 at a rate specified in the Schedule or
such other percentage as we may from time to time agree;
"DUE DATE" means the date that payment is due to us which is,
unless otherwise agreed by us in writing (1) for Supplier
Obligations, the last day of the No Charge Period or the
Extended Credit Period as applicable (2) for Credit Charges,
the date as specified on the billing statement (3) for
Shortfall Amounts, as specified in Clause 7.4 and (4) for
Discount Charges, the date specified on the billing statement
if there is insufficient Available Credit at the time such
Discount Charges are normally credited by us against your
account;
"ELIGIBLE RECEIVABLE": means a Receivable or an Acquired
Receivable or a VAT Receivable which is not (or does not
become) an Ineligible Receivable;
"EVENT OF DEFAULT": means any of the events set out in Clause
9.1 of this Agreement;
"EXTENDED CREDIT CHARGE" means the charge (if any) as
specified in the Schedule incurred for outstanding Supplier
Obligations during an Extended Credit Period or such other
charge as we may from time to time agree;
"EXTENDED CREDIT PERIOD" means (if agreed by us) the period
specified in the Schedule following immediately after the No
Charge Period and extending the time for payment by you of
Supplier Obligations;
"FINANCIAL STATEMENTS": means your balance sheets, statements
of account including profit and loss accounts, and statements
of cash flows prepared in accordance with generally accepted
accounting principles;
"GAAP" means the generally accepted accounting principles in
the United States as in effect from time to time
"GUARANTOR": means Holdings, PFS and BSD A and any other party
that delivers a guaranty in favour of us;
"HOLDINGS": means Business Supplies Distributors Holdings,
LLC, a limited liability company duly organized under the laws
of the state of Delaware, with its principal place of business
at 500 North Central Expressway, Plano, TX 75074
"IBM": means International Business Machines Corporation;
"IBM CREDIT": means IBM Credit Corporation, a Delaware
corporation with a place of business at 4000 Executive
Parkway, Third Floor, San Ramon, CA 94583;
"IBM SINGAPORE": means IBM Singapore, Global Procurement
Services Group - Singapore Trading Center
--------------------------------------------------------------------------------
3
"IFP" means Inventory Financing partners, LLC, a US limited
liability corporation;
"INELIGIBLE RECEIVABLE": means any of the following: (i) any
Receivable or Acquired Receivable or VAT Receivable which
remains unpaid for more than 120 days after the date of the
relevant Sales Invoice; (ii) all Receivables or Acquired
Receivables or VAT Receivables of an individual Debtor where
50% or more of the relevant Debtor's aggregate outstanding
balance remains unpaid for more than 120 days after the date
of their respective Sales Invoices; (iii) any Receivable or
Acquired Receivable where the Debtor is an affiliate of yours
by means of common shareholders or officers, or where the
Debtor is an officer, employee, agent, or shareholder of your
company or Acquired Receivables payable by a BSDE Debtor that
is an Affiliate of any Loan Party or BSDE, or an officer,
employee, agent, guarantor, stockholder of Loan Party or an
Affiliate of any Loan Party or BSDE, or is related to or has
common shareholders, officers or directors with any Loan
Party; (iv) any Receivable or Acquired Receivable arising from
a consignment sale; (v) any Receivable or Acquired Receivable
where the Debtor or BSDE Debtor is not a commercial entity, or
is not resident in the countries of Austria, Belgium, Denmark,
Finland, France, Germany, Italy, the Netherlands, Norway,
Portugal, Republic of Ireland, Spain, Sweden, Switzerland and
the United Kingdom, or where the Debtor or BSDE Debtor is
subject to legal proceedings, or any steps under Insolvency
law or bankruptcy law or other law for the relief of debtors;
(vi) any Receivable or Acquired Receivable which arises from
incentive payments, rebates, discounts, credits and refunds
from a Supplier; (vii) any Receivable, Acquired Receivable or
VAT Receivable in respect of which there is a breach of any
undertaking or warranty given to us , or any other obligation
of yours relating to it; (viii) any Receivable or Acquired
Receivable or VAT Receivable expressed in a currency other
than the EURO or another currency approved by us; (ix) any
Receivable or Acquired Receivable in respect of the sale of
Products that have not yet been delivered by you, or in
respect of services invoiced by you in advance of your full
performance of such services; (x) those receivables listed in
the Schedule as Ineligible Receivables; and (xi) any other
Receivable or Acquired Receivable or VAT Receivable which we
deem, in our discretion, to be ineligible except that, In the
event we determine in our sole discretion to deem certain
Receivables, Acquired Receivables or VAT Receivables to be
ineligible pursuant to (xi) above, we will provide written
notification to you of our determination of ineligibility of
such Receivables, Acquired Receivables or VAT Receivables and
such ineligibility shall be applied to such Receivables,
Acquired Receivables or VAT Receivables arising from invoices
dated one Business Day after the date of such notification.;
"INSOLVENCY": in relation to a company means the convening of
a meeting to pass a resolution for voluntary winding up by
reason of insolvency, or the making of a winding up order, or
the issue of an application for the appointment of an
administrator, or the appointment of a receiver (whether in or
out of court) or an administrative receiver of any of the
assets or income of the company; or entry by that company into
a voluntary arrangement, or any informal arrangement generally
for the benefit of creditors or that company consulting with
creditors generally; or any material part of income or assets
being subject to seizure, distress or lien; or enforcement of
security rights; or compounding with creditors; or ceasing to
carry on business (and "INSOLVENT" shall be construed
accordingly);
"IWCF": means that certain Inventory and Working Capital
Financing Agreement among IBM Credit Corporation and Holdings,
IFP, BSD A, PFS and PFSweb
"LIEN(S)": means any mortgage, pledge, lien, charge,
assignment by way of security, hypothecation, security
interest and floating charge or any other security agreement
or arrangement relating to existing or future assets
(including, without limitation, the deposit of monies or
property with a person with the primary intention of affording
such person a right of set-off or lien) but excluding any lien
arising out of rights of consolidation, combination, netting
or set-off over any current and/or deposit accounts with a
bank or financial institution, where it is necessary to agree
to
--------------------------------------------------------------------------------
4
those rights in connection with the opening or operation of
any bank accounts or in connection with a treasury management
arrangement operated by you, in each case, in the ordinary
course of your business or risk management provided the
existence of such lien has been notified to us;
"LOAN PARTIES": means as defined in the caption.
"MATERIAL ADVERSE EFFECT": means a significant adverse effect
on (1) any Loan Party, or your parent company's or any of its
subsidiaries' or any guarantor's business operations, results
of operations, assets, or financial condition; or (2) the
value of the Collateral or (3) our rights and remedies under
this Agreement or the Security Documents or any Liens in our
favour;
"MERGER" means the event documented in, and achieved as a
result of the execution of, the Merger Documents;
"MERGER DOCUMENTS": means the (i) Agreement and Plan of Merger
and Reorganization among BSD A and BSD dated September 26,
2001 and (ii) the Certificate of Merger of BSD with and into
BSD A dated September 26, 2001;
"NO CHARGE PERIOD": means the period, if any, so described in
the Schedule, during which we will not charge you Credit
Charges in relation to each Supplier Obligation, which period
shall commence on the date of the Supplier Invoice
corresponding to each such Supplier Obligation;
"NOTIFICATION": means your confirmation to us, in such way and
with such evidence as we specify, of all Receivables and VAT
Receivables which have come into existence after the
Commencement Date, but which have not previously been Notified
to us;
"NOTIFY"/"NOTIFIED"/"NOTIFYING": means inclusion of a
Receivable, Acquired Receivable or VAT Receivable or a credit
in an Offer or Notification delivered to us;
"OFFER": means an unconditional offer to sell a Receivable,
Acquired Receivable or VAT Receivable to us with full title
guarantee to be made in such way and with such evidence of the
performance of the Sales Contract as we may specify, and where
more than one Receivable, Acquired Receivable or VAT
Receivable is at the same time subject to an Offer it shall be
treated as an independent offer to sell us each Receivable,
Acquired Receivable or VAT Receivable so offered which may be
accepted or rejected by us entirely at our discretion;
"PERSON": means any individual, association, firm,
corporation, partnership, trust, unincorporated organization
or other entity whatsoever.
"PFS": means Priority Fulfillment Services, Inc., a US
corporation;
"PFSWEB": means PFSweb, Inc., a corporation duly organized
under the laws of the state of Delaware, with its principal
place of business at 500 North Central Expressway, Plano, TX
75074
"PFS WEB B.V." means as defined in the caption;
"PREPAYMENT": means any payment by us to you or made available
to you under this Agreement on account of the purchase price
of a Receivable, Acquired Receivable and/or VAT Receivable;
"PREPAYMENT PERCENTAGE": means the amount specified as such in
the Schedule or such other percentage as we may from time to
time agree;
"PRODUCT RIGHTS" includes in relation to the Products supplied
to you by an Authorised Supplier any of the following:
(i) all the Authorised Supplier's rights as unpaid vendor
and all other rights of the Authorised Supplier under
or in relation to the relevant Supplier Invoice
(whether such rights arise from or are created by
statute, common law, contract or otherwise
howsoever);
--------------------------------------------------------------------------------
5
(ii) documentary evidence of the Supplier Invoice or its
performance or of any disputes arising;
(iii) documents of title, warehouse keepers receipts, bills
of lading, shipping documents, airway bills or
similar documents;
(iv) the benefit of all insurances;
(v) all remittances, instruments, securities, bonds,
guarantees and indemnities and accounting records;
"PRODUCTS": as the context permits means either: (i) hardware
and software and associated products and services agreed by us
and acquired by you from an Authorised Supplier; or (ii)
hardware and software and associated products and services
supplied by you to Debtors;
"PURCHASE PRICE": means the amount payable by us to you in
respect of the purchase of a Receivable or an Acquired
Receivable being the Sales Invoice Price in relation to such
Receivable or Acquired Receivable, or in the case of a VAT
Receivable, the amount stated in your invoice to the Country
of the Netherlands, less the Credit Charges and any other sums
due to us in respect of the purchase of such Receivable,
Acquired Receivable or VAT Receivable;
"RECEIVABLE": means any payment obligation (present, future or
contingent) of a Debtor pursuant to a Sales Contract
(including the future right to recover sums due following the
determination, assessment or agreement of the amount of such
obligation), including any applicable value added taxes,
duties, charges and interest (whether arising by contract or
by law) together with its Receivables Rights;
"RECEIVABLES RIGHTS": includes in relation to any Receivable
and any Acquired Receivable, any of your following rights (i)
all your rights by law or under the Sales Contract as an
unpaid vendor including reservation of title rights; (ii)
documentary evidence of the Sales Contract, or its
performance, or of any disputes arising; (iii) documents of
title, warehouse keepers receipts, bills of lading, shipping
documents, airway bills or similar documents; (iv) the benefit
of all insurances; (v) all remittances, instruments,
securities, bonds, guarantees and indemnities and accounting
records; any assets (other than Receivables and Acquired
Receivables purchased by us pursuant to the terms of this
Agreement) and any guarantee(s) which constitute security in
respect of your obligations to us with respect to the purchase
of Receivables, Acquired Receivables and VAT Receivables by us
pursuant to this Agreement as set out in the Schedule);
"REPURCHASE": means the repurchase by you of a Receivable, an
Acquired Receivable or a VAT Receivable at its Repurchase
Price;
"REPURCHASE PRICE": means a sum equivalent to the Purchase
Price of a Receivable, Acquired Receivable or VAT Receivable
plus all sums (if any) then outstanding and due to us in
respect of any relevant Credit Charges relating to that
Receivable, Acquired Receivable or VAT Receivable;
"SALES CONTRACT": means a contract under which you sell
Products to Debtors;
"SALES INVOICE": means a valid invoice issued by you to a
Debtor under a Sales Contract;
"SALES INVOICE PRICE": means the amount payable by the
relevant Debtor as evidenced by a Sales Invoice in respect of
the supply of Products (including Value Added Tax) less all
and any credit notes, discounts and other deductions to which
the relevant Debtor is entitled and of which he avails
himself;
"SCHEDULE": means the Schedule to this Agreement as amended
from time to time by written agreement between the parties;
"SDSA" means as defined in the caption;
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"SHORTFALL AMOUNT": means the amount set out in Clause 7.4;
"SHORTFALL FEE" means the fee calculated as detailed in the
Schedule;
"SUBSIDIARY" means an entity of which a person has direct or
indirect control or owns directly or indirectly more than 50%
of the share capital or similar right of ownership and
"control" for this purpose means the power to direct the
management and the policies of the entity whether through the
ownership of share capital, contract or otherwise;
"SUPPLIER INVOICE": means a valid invoice issued by an
Authorised Supplier in respect of your acquisition of Products
from such Authorised Supplier;
"SUPPLIER OBLIGATIONS": means the amount owing by you in
respect of a Supplier Invoice that we have purchased from an
Authorised Supplier and a BSDE Supplier Invoice (including the
future right to recover sums due following the determination,
assessment or agreement of the amount of such obligation),
including any applicable value added taxes, duties, charges
and interest (whether arising by contract or by law).
"VAT" means value added tax levied by the appropriate
authorities in a country;
"VAT RECEIVABLES" means a payment obligation of the Country of
the Netherlands or Belgium pursuant to an invoice raised to
the respective country for valid reimbursement of VAT paid by
BSDE or SDSA to the Country of the Netherlands or Belgium (1)
for products purchased from IBM or one of its subsidiaries and
which products were sold by BSDE to customers outside the
Country of the Netherlands or (2) by SDSA to customers outside
the Belgium, (3) for products sold by BSDE to SDSA and (4) for
products supplied by IBM Singapore to SDSA, subject to the
limitation specified in the Schedule;
1.2 INTERPRETATION
In this Agreement:
1.2.1 "YOU" and "US" shall where the context admits,
include our respective personal representatives,
successors in title or permitted assigns (whether
immediate or derivative);
1.2.2 any reference herein to any document, including to
this Agreement includes such document as amended,
novated, supplemented, substituted, extended,
assigned or replaced from time to time and includes
any document which is supplemental hereto or thereto;
1.2.3 where a word or phrase has to be considered in
relation to a jurisdiction outside Belgium and there
is no exact equivalent or such work or phrase then it
shall have the meaning of the closest equivalent in
such jurisdiction; and
1.2.4 "INDEBTEDNESS" includes any obligation (whether
incurred as principal guarantor or surety) for the
payment or repayment of money, whether present or
future, actual or contingent.
The headings in this Agreement are inserted for convenience
only and shall not affect its construction or interpretation.
2. CREDIT LIMIT
2.1 We will establish a Credit Limit for you up to the amount
specified in the Schedule which we may, at our discretion,
purchase Supplier Invoices from Authorised Suppliers and/or
Receivables, Acquired Receivables and VAT Receivables from
you.
3. SUPPLIER PURCHASE FACILITY
3.1 SETTLEMENT OF SUPPLIER INVOICES
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7
3.1.1 By entering into this Agreement you agree that you
will pay us, and not the Authorised Supplier, in
order to settle (i) Supplier Invoices which we have
purchased and (ii) BSDE Supplier Invoices.
3.1.2 We may, in our discretion and upon written notice to
you, cease to include a supplier as an Authorised
Supplier for the purposes of this Agreement. Any such
cessation will not affect our purchase of Supplier
Invoices then in existence or our obligation to pay
BSDE Supplier Invoices.
3.1.3 You authorise us to collect directly from any
Authorised Supplier any monies due for credits,
rebates, bonuses or discounts owed by such Authorised
Supplier to you. Once received we shall either (in
our discretion) apply such monies against amounts you
owe us or credit the relevant amount to your ledger
account with us and pay such monies into the bank
account referred to in Clause 6.7.1.
3.1.4 You shall pay us for a Supplier Obligation no later
than the Due Date. You agree to pay us the full
amount of such Supplier Obligation.
3.1.5 If an Extended Credit Period is provided (as
specified in the Schedule) payment of the relevant
Supplier Obligation may be deferred for such further
period as is specified in the Schedule after the end
of the No Charge Period but such Supplier Obligation
shall bear interest at the rate specified in the
Schedule during such period.
3.1.6 If you do not pay the Supplier Obligations before the
last day of the No Charge Period (or, if clause 3.1.5
applies, at the end of the Extended Credit Period),
such sum shall bear interest at the Default Rate from
the expiry of the No Charge Period (unless the
Extended Credit Period is applicable) until actual
receipt of such payment by us in cleared funds.
3.2 TITLE TO PRODUCTS
3.2.1 You hereby acknowledge that by virtue of our purchase
from the relevant Authorised Supplier of the Supplier
Invoices or, as applicable, our agreement to pay the
BSDE Supplier Invoices on your behalf, all Product
Rights, including any reservation of title rights,
belong to us until all amounts owing to us in
connection with payment of the relevant Supplier
Obligations and any outstanding Credit Charges are
paid in full by you.
3.2.2 You will not cause or permit any Debtor or other
third party to encumber our Product Rights in any
way. You agree to take such action as may be required
to implement this provision, including your
acknowledgement of, and agreement to the insertion of
written notice in Sales Invoices or, as applicable,
separate notices to BSDE Debtors, to the intent that
IBM GF is the owner of the relevant Product Rights.
4. RECEIVABLES, ACQUIRED RECEIVABLES AND VAT RECEIVABLES DISCOUNTING
FACILITY
Under the terms of this Agreement, we may from time to time purchase
Receivables, Acquired Receivables and VAT Receivables from you.
4.1 PURCHASE AND PAYMENT OF RECEIVABLES, ACQUIRED RECEIVABLES AND
VAT RECEIVABLES
4.1.1 As soon as possible on or after the Commencement Date
and upon the terms and conditions of this Agreement
you will deliver an Offer to sell to us with full
title guarantee each and all Receivables, Acquired
Receivables and VAT Receivables (together with all
Receivable Rights in existence as at the Commencement
Date). We will only accept each such Offer by
crediting to your ledger account with us the Purchase
Price of all such Receivables, Acquired Receivables
and VAT Receivables upon such date. Upon doing so,
our ownership of the Receivables, Acquired
Receivables and VAT Receivables that we have accepted
shall be complete.
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4.1.2 You hereby agree to transfer ownership to us of all
Receivables and VAT Receivables (together with all
Receivables Rights) created after the Commencement
Date until this Agreement ends, or we give you notice
under Clause 4.1.12 that no more Receivables and/or
VAT Receivables will be accepted from a date
designated by us. Such Receivables and VAT
Receivables shall vest in us the moment the
Receivables are created and transfer of ownership of
any such Receivables and VAT Receivables to us shall
take place automatically and with immediate effect.
On that day our receipt of the relevant Notifications
and our ownership of such Receivables and VAT
Receivables shall then be complete. We will credit to
your ledger account with us the Purchase Price of all
such Receivables and VAT Receivables upon such date.
4.1.3 You will pay any duties or similar charges including
any Stamp Duty arising in connection with this
Agreement and the transfer of the Receivables,
Acquired Receivables and VAT Receivables to us.
4.1.4 After the Commencement Date, you will notify us in
the manner agreed with us, and at the frequency
stated in the Schedule of the invoice value of
Receivables and Acquired Receivables, less any
rebates or deductions or other credits given by you,
or to which a Debtor may be entitled. You will
provide on request copies of the relevant Sales
Contracts, Sales Invoices, credit notes, delivery
notes, and other evidence of the fulfilment of the
Sales Contracts as we may reasonably require and PFS
Web B.V. will provide similar information in relation
to VAT Receivables. There will be either be a service
fee for each Notification subject to a minimum
service fee payable in accordance with Clause 7.2.1,
or a monthly service fee, as set out in the Schedule
which you agree to pay to us. The Loan Parties will
promptly when required by us complete any forms of
assignment, documents or other instruments necessary
to ensure the transfer of full ownership of the
Receivables, Acquired Receivables and VAT Receivables
to us or to enable us to collect the Receivables,
Acquired Receivables and VAT Receivables.
4.1.5 If, for any reason, the sale or transfer of
Receivables, Acquired Receivables and/or VAT
Receivables, pursuant to the above provisions of this
Agreement, does not vest ownership of the
Receivables, Acquired Receivables and/or VAT
Receivables in us, the Loan Parties will hold any
such Receivables, Acquired Receivables and/or VAT
Receivables and any monies collected by them in
respect of such Receivables, Acquired Receivables
and/or VAT Receivables in trust for us, and pay any
such monies to us.
4.1.6 We may use the monies we receive from or on behalf of
Debtors in respect of each Receivable, Acquired
Receivable and VAT Receivable to satisfy any monies
then owing to us by you. We will transfer any
remaining amount to your designated bank account
(provided there is no Event of Default) at the
frequency agreed with you subject to the banking
charge specified in the Schedule.
4.1.7 As the absolute owner we have the sole and unfettered
right to enforce payment of and collect any
Receivable, Acquired Receivable and VAT Receivable
purchased by us under this Agreement. However until
further notice from us the Loan Parties will act
diligently and promptly as our undisclosed agent in
administering the accounts of customers and in
collecting and enforcing payment of Receivables,
Acquired Receivables and VAT Receivables at the Loan
Parties expense. However if (a) we consider that your
continued collection of any Receivables, Acquired
Receivables and VAT Receivables would be prejudicial
to us, and that such collection would
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9
be better conducted by us or a third party, rather
than by the Loan Parties; or (b) an Event of Default
has occurred; or (c) this Agreement has terminated
for whatever reason; or (d) there has occurred (in
our reasonable opinion) a Material Adverse Effect, we
reserve the right to, or designate a third party to,
collect payment directly including issuing demands or
legal proceedings either in our own name or in your
name if required. The Loan Parties agree to
co-operate in such collection or proceedings,
including the provision of witnesses or the
production of documents. We can defend or compromise
such legal proceedings in such manner and on such
terms as we may see fit and the Loan Parties will be
bound by the result. Any reasonable expenses incurred
by us in such proceedings, including the payment of
legal and other professional fees, costs and
expenses, will be paid by you, or charged to you by
debiting the relevant accounts. Whilst the Loan
Parties may ask us to cease collection activities
against any Debtor and we will do so upon receiving
payment of the relevant Receivables, Acquired
Receivables and VAT Receivables or upon such terms as
we shall agree with the applicable Loan Party we have
the right to refuse or to accept such Loan Party's
request.
4.1.8 The Loan Parties agree that without our prior written
consent they will not sell, pledge or grant any Lien
over any Receivables, Acquired Receivables and VAT
Receivables to any third party, or agree to do so, or
enter into any other arrangement which might
adversely affect our interest in any Receivables,
Acquired Receivables and VAT Receivables.
4.1.9 After the you Notify a Receivable, Acquired
Receivable and VAT Receivable to us you agree (save
where Clause 4.1.10 applies) not to cancel or vary
any relevant Sales Contract, Sales Invoice or VAT
invoice or its relevant payment terms or settlement
discounts without our prior written consent except
where the change is due to a manifest error in your
invoice, in which case you will notify us of the
resulting change in the Receivable but our written
consent will not be required.
4.1.10 You undertake that if Products are returned to you
and you provide a credit in any form which has the
effect of reducing the amount of the relevant
Receivable or Acquired Receivable, you will promptly
notify us.
4.1.11 For each Notified Receivable, Acquired Receivable and
VAT Receivable the you represent and warrant to us
that: (a) all particulars notified to us are correct
and complete; (b) the Receivable, Acquired Receivable
and VAT Receivable has not been previously Notified
to us; (c) any covenants or undertakings given to us
relating to such Receivable, Acquired Receivable and
VAT Receivable will be complied with; (d) the Sales
Invoice to the Debtor has been issued within seven
days of the delivery of the Products; (e) each
Receivable or Acquired Receivable relates to an
actual and bona fide sale and delivery of Products to
the Debtor, is fully enforceable and is free from any
other charge, pledge, or Lien in favour of a third
party; (f) each VAT Receivable is fully enforceable
and is free from any other charge, pledge, or Lien in
favour of a third party; and (g) such Receivable,
Acquired Receivable and VAT Receivable will be paid
without any claim for set off, counterclaims,
retention or abatement.
4.1.12 The sale or transfer of Receivables and VAT
Receivables will continue until we notify You in
writing that we will accept no more Receivables
and/or VAT Receivables for purchase or until the
termination of this Agreement whichever is the
sooner.
4.2 CREDIT AND COLLECTION POLICY
The Loan Parties will comply in all material respects with the
Loan Parties' credit and collection practices agreed with us
in regard to each Receivable, Acquired Receivable, VAT
Receivable, any Receivables Rights and the related Sales
Contracts and VAT invoice.
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5. PREPAYMENTS
5.1 We may, following your written or electronic request, make a
Prepayment available to you in a bank account maintained by
you, subject to any banking charge as set out in the Schedule,
in the amount you select up to the Available Credit. We will
endeavour to effect such Prepayment on the day you make such
request provided we receive such request before 10.00 am on
any Business Day.
5.2 If we make a Prepayment on a day upon which any settlement of
a Supplier Obligation or Credit Charge is due or overdue for
payment, or you owe us any monies for the Repurchase Price of
Receivables, Acquired Receivables and/or VAT Receivables then
we may apply the proceeds of the Prepayment to such payment in
or towards the discharge of the monies so due to us and only
an amount equal to the difference, if any, between the amount
of the Prepayment and the amount being paid or so discharged
shall be made available to you.
5.3 A Discount Charge will accrue from day to day during this
Agreement and be calculated on the outstanding daily balance
of all Prepayments.
5.4 You may at any time pay us for Supplier Obligations and any
outstanding Credit Charges, by requesting us to apply all or
part of any Prepayment for that purpose. Prepayments may not
be used for the repayment of principal owing to us pursuant to
any agreement between yourself as borrower and ourselves as
lender unless expressly agreed by us in writing. In addition
to payment for Supplier Obligations, Prepayments shall only be
used for working capital purposes
6. RECEIVABLES AND RECEIVABLES RIGHTS
6.1 You will provide us with your Receivables Rights and take any
necessary steps to make such Receivables Rights effective and
enforceable. If a Lien is to be provided to us in relation to
any Receivable, Acquired Receivable, VAT Receivable and/or
Receivable Right not effectively purchased hereunder it shall
be a valid first priority interest.
6.2 The Loan Parties agree:-
6.2.1 to promptly execute and deliver such further
instruments and documents, and to take such further
action including any filing or payment of
registration fees at the Loan Parties' expense as we
may reasonably request for the purpose of preserving
or protecting all our rights and interests in the
Receivables, Acquired Receivables and VAT Receivables
(and the Receivables Rights) and our ownership of the
former and our rights in the latter;
6.2.2 report to us with the reports and accounts referred
to in the Schedule at the intervals specified therein
and to provide us with such other reports as may be
agreed; and
6.2.3 to advise us promptly, in reasonably sufficient
detail, of any substantial change relating to the
value, quantity or quality of the Receivables,
Acquired Receivables and VAT Receivables and the
Receivables Rights, including any movement in
location of the Receivables, Acquired Receivables and
VAT Receivables and the Receivables Rights, or any
event which could reasonably be expected to have a
significant adverse effect on the value, quantity or
quality of the Receivables, Acquired Receivables and
VAT Receivables and the Receivables Rights; and
6.2.4 promptly advise us of any loss, destruction of or
damage to the Receivables, Acquired Receivables and
VAT Receivables or the Receivables Rights and to pay
us such amount (if any) as will reduce the Credit
Limit as specified by us in our absolute discretion,
or provide such additional Collateral as we may
require; and
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6.2.5 to maintain books and records relating to the
Collateral in such detail, form and scope as is
consistent with good business practice and ensure,
where applicable, such books and records will reflect
our ownership of the Receivables, Acquired
Receivables and VAT Receivables and our interest in
the Receivables Rights.
6.3 NOTICE OF TRANSFER OF OWNERSHIP OF RECEIVABLES
If required by us, for each Receivable, Acquired Receivable
and VAT Receivable, the Loan Parties will give written notice
to the Debtor concerned that we are the owner of the
Receivable, Acquired Receivable or VAT Receivable, as
applicable, and that payment of Receivables, Acquired
Receivables and VAT Receivables, as applicable, must be made
to us directly. The wording of the notice and the manner in
which it is given will be as directed or approved by us. We
may give such written notice to the Debtor directly.
6.4 RECEIVABLES RIGHTS
6.4.1 The Loan Parties hereby acknowledge that all
Receivables Rights belong to us until all amounts
owing to us in connection with such Receivable,
Acquired Receivable or VAT Receivable and any
outstanding Credit Charges are paid in full.
6.4.2 You will not cause and you will use your best
endeavours not to permit any Debtor or other third
party to acquire title in any Products the subject of
Receivables or Acquired Receivables or to encumber
such title in any way before you have delivered the
relevant Products and payment in full of the relevant
Receivable or Acquired Receivable has been made by
such Debtor. You agree to take such action as may be
required to implement this provision, including the
insertion of appropriate clauses in Sales Contracts.
6.5 REPURCHASE
6.5.1 We may require you to buy back any Receivable,
Acquired Receivable or VAT Receivable and pay us the
Repurchase Price of such Receivable, Acquired
Receivable or VAT Receivable as follows in any of the
following situations: (i) if such Receivable,
Acquired Receivable or VAT Receivable is or becomes
an Ineligible Receivable; (ii) if it is the subject
of a dispute; (iii) if payment is withheld for any
reason including a dispute under the Sales Contract
or, if applicable, VAT invoice or any claim to
set-off or counterclaim; (iv) if it is payable by an
Insolvent Debtor; (v) at any time on or after any
Event of Default; or (vi) at any time after
termination of this Agreement. We will either debit
your account with the Repurchase Price if the account
is sufficiently in credit, or if not then we will
require the applicable Loan Party to make a cash
payment of the Repurchase Price in which case such
Loan Party will promptly make such payment to us. On
receipt of payment in full of the Repurchase Price of
each Receivable, Acquired Receivable or VAT
Receivable which we require a Loan Party buy back
together with all other sums due from it to us, we
will upon request assign or transfer that Receivable,
Acquired Receivable or VAT Receivable to you and it
will pay the reasonable costs incurred by us
including any duly documented and properly incurred
legal costs or other professional expenses, stamp
duties, VAT, and similar charges. Any amounts such
Loan Party collects before we receive payment in full
will be held in trust for us and promptly delivered
to us and set against the amounts owed to us and any
amounts we collect after payment in full to us will
be credited to your account.
6.5.2 You will not cancel any notices of assignment given
to Debtors owing Receivables, Acquired Receivables
and VAT Receivables which we have
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required you to buy back or attempt to collect such
Receivables, Acquired Receivables and VAT Receivables
for your own account until you have paid us, in
cleared funds, the Repurchase Price and all other
amounts due to us in respect of it.
6.6 CREDITS AND CLAIMS
6.6.1 If any query or claim shall arise concerning or
affecting a Receivable, Acquired Receivable or VAT
Receivable or concerning a credit or set-off by the
Debtor against the Sales Invoice amount or, if
applicable, VAT invoice, including any late delivery
or return of Products or allegation of inadequate
performance of the Sales Contract(s), the applicable
Loan Party will, after complying with Clause 4.1.10,
(i) immediately give full details in the form we
require; (ii) use all reasonable efforts to resolve
the query or claim; and (iii) notify us of any
resulting credit note or other settlement.
6.6.2 If the query or claim affects the value to us of the
Receivable, Acquired Receivable or VAT Receivable it
may be treated by us as being an Ineligible
Receivable.
6.7 BANK ACCOUNT
6.7.1 We will tell you the form of assignment to be
included on the Sales Invoice, the separate notice
for Acquired Receivables and the VAT Receivable. You
will instruct relevant Debtors to pay the amounts of
the Sales Invoices or, if applicable, the VAT invoice
to a bank account in our name or to a bank account
controlled by us and the Loan Parties must do nothing
to prevent payment to us.
6.7.2 If payments are to be made to a bank account in your
name but controlled by us you will enter into
agreements satisfactory to us, enabling the bank
account to be administered so that we have control
over all withdrawals from the bank account. Any
payments collected by the Loan Parties in relation to
Receivables, Acquired Receivables and VAT Receivables
shall be held in trust for us and promptly deposited
in the bank account without being mixed with the Loan
Parties' own funds or negotiated except in our
favour. You will pay all costs and expenses of
setting up and operating bank accounts for this
purpose, including all charges relating to the
collection or attempted collection of cheques or
other instruments of payment.
7. CREDIT CHARGES AND PAYMENTS
7.1 INFORMATION ABOUT YOUR ACCOUNT
We will provide you with information concerning Supplier
Obligations and Prepayments, including amounts due to us and
on request the then amount of the Available Credit. Such
information shall be treated as being correct and binding upon
you in the absence of manifest error provided that such
manifest error is notified to us within a period of 15 days
from the date of the provision of such information to you. We
will keep such accounts as may be required to show the amounts
due to us and the amounts received from you and/or your
Debtors. In any proceedings or disputes a certificate issued
by our Company Secretary, or by one of our Directors or
authorised officers as to the correctness of any financial
statement or any amounts due to us shall be prima facie
evidence of the same.
7.2 CREDIT CHARGES
7.2.1 The Credit Charges payable by you are set out in the
Schedule. They are set out exclusive of VAT and any
other taxes and duties which (if applicable) will be
additionally payable by you. You will receive an
invoice or relevant statement for all Credit Charges
including any applicable VAT stamp or other duties
and will either be debited to your account on a
monthly basis or paid to us on demand. Any minimum
amounts payable by you will be debited to your
account periodically as set out in the Schedule. Some
Credit Charges will fluctuate up or down depending on
changes to the Base Rate as described in Clause
7.2.3.
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7.2.2 If we purchase a Supplier Invoice that does not
include a "No Charge Period", any Supplier
Obligations thereunder will be subject to a set up
fee as specified in the Schedule (or as agreed with
you) and Credit Charges will be levied on you from
and including the date of issue of the relevant
Supplier Invoice. You agree to pay such Credit
Charges or set up fee on their due date together with
payment of the relevant Supplier Obligations.
7.2.3 Where a Credit Charge is related to Base Rate and the
outside reference rate upon which Base Rate is based
at any time changes then, on the first business day
of the next following calendar month, the Base Rate
will be changed to the outside reference rate
existing on the last business day of the previous
calendar month. However, if the outside reference
rate changes by 25 basis points or more at any time
then the Base Rate will be changed by the same amount
on the day of such change or the next following
business day. When the applicable Base Rate is
determined by reference to another published rate and
that rate ceases to be published for any reason, we
will use another appropriate rate as the reference
rate so that you and we remain in an equivalent
financial position.
7.3 PAYMENT
7.3.1 The Loan parties agree to pay, or cause you to pay,
all sums due to us arising from the settlement of
Supplier Obligations and the Repurchase Price of
Receivables, Acquired Receivables and VAT Receivables
and all Credit Charges owed to us and applicable VAT,
stamp or other duties by direct debit, wire transfer,
or such other method of payment that we agree, in
full, without any set off whatsoever. Payment shall
be deemed to be made when such payment is received in
cleared funds in the designated bank account in our
name or controlled by us. The Loan Parties may at any
time prepay, without notice or penalty, in whole or
in part, amounts owed to us under this Agreement. We
may apply payments made to us (whether by you or
otherwise) firstly to pay any Credit Charges owing
under this Agreement and then the amount owing in
respect of each Supplier Obligation, and or the
Repurchase of Receivables, Acquired Receivables and
VAT Receivables. Late payment will be subject to a
late payment charge on the sums unpaid at the Default
Rate from the date following the Due Date until and
including the date payment is received by us in
cleared funds in our account
7.3.2 Your obligations to pay sums due in respect of
Supplier Obligations to us or any Repurchase Price of
Receivables, Acquired Receivables and VAT Receivables
will not be affected by any dispute you may have with
any Authorised Supplier, including defective,
insufficient, late or partly delivered Products. You
waive all rights of set-off or counterclaim against
your liability to pay Supplier Obligations. However,
this does not affect any claim or right or remedy you
may have against the Authorised Supplier. You will
not assert against us any claim or defence you may
have against the Authorised Supplier or any third
party. We have no obligation to you under the
Supplier Invoice. The Loan Parties will indemnify and
hold us harmless against any claims or liabilities
arising from the Products in any way whatsoever.
7.3.3 When Products are returned by you to an Authorised
Supplier it will not affect the amounts due to us
unless and until we receive the amount of a credit
note from the applicable Authorised Supplier relative
to the returned Products and which we shall promptly
upon receipt apply it to your account. Such credit
note amount will be deducted from the amounts due by
you to us.
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7.4 SHORTFALL AMOUNT
If, on any day, the aggregate of the amounts outstanding from
the Loan Parties to us in respect of Supplier Obligations and
the outstanding and unpaid Prepayments we have made in respect
of Receivables, Acquired Receivables and VAT Receivables by
the relevant Debtor exceed the lesser of either the value of
the Collateral or the Credit Limit, then, unless otherwise
agreed, the Loan Parties will pay such "SHORTFALL AMOUNTS" on
the day this becomes known to you either by our advising you
or from your own enquiries. Until this is done, we shall be
under no obligation to purchase Supplier Invoices from
Authorised Suppliers or Receivables or VAT Receivables from
you (whether or not previously agreed) and you will pay a late
payment charge at the Default Rate set out in the Schedule on
the shortfall amounts accruing from day to day. In addition we
may charge the Shortfall Fee if the Shortfall Amounts are not
paid when due.
7.5 POWER OF ATTORNEY
As security for your obligation hereunder the Loan Parties
grant us, our directors and officers an irrevocable power of
attorney:-
(i) to endorse or negotiate cheques, or bankers drafts
and negotiable instruments;
(ii) to initiate and settle any claims (including the
conduct of legal proceedings); and
(iii) to sign or execute any deeds, papers, forms or
documents and file the same as may be necessary to
perfect or preserve any of our rights or to secure
performance of your obligations to us or any Debtor
with respect to the Collateral and ownership of the
Receivables, Acquired Receivables and VAT
Receivables.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 REPRESENTATIONS AND WARRANTIES
By signing the Agreement and (in relation to Clauses 3 and 4)
before each Supplier Invoice or Receivable, Acquired
Receivable or VAT Receivable is purchased or Prepayment is
made you represent and warrant (or are deemed to represent and
warrant) to us as follows:
8.1.1 VALIDITY
Each of the Loan Parties, your parent company, and
each of its subsidiaries is duly organised, is
validly existing and has the full power, authority
and legal right, including compliance with any
governmental and other consents, licenses and
authorisations, to conduct its business and to enter
into this Agreement. This Agreement and any Liens or
other documents provided in relation to the
Receivables, Acquired Receivables and VAT Receivables
and the Receivables Rights and the Products and the
Product Rights are legal, valid and binding
obligations upon you and do not contravene any other
agreement or obligation.
8.1.2 ACTIONS, PROCEEDINGS
No significant or material judgements, orders, writs
or decrees are outstanding against any Loan Party nor
is there pending nor, to the best of the Loan
Parties' knowledge after due inquiry, threatened, any
material litigation, contested claim, investigation,
arbitration, or taxation or governmental proceeding
by or against a Loan Party, nor is any Loan Party in
default of, nor engaged in, any significant or
material dispute under any agreement or document. If
any dispute does arise such Loan Party undertakes to
inform us and promptly resolve it.
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8.1.3 INFORMATION
Each Loan Party has disclosed to us every fact or
matter known or which should reasonably have been
known to it that might influence us whether or not to
enter into this Agreement, or purchase any Supplier
Invoice or Receivable, Acquired Receivable or VAT
Receivable or make any Prepayment, or to accept any
Product Rights and/or Receivables Rights, or to
accept any guarantee or indemnity, and that all
information furnished by each Loan Party or on its
behalf to us or by its Auditors in connection with
this Agreement and the Products and Product Rights,
Receivables, Acquired Receivables and VAT Receivables
and the Receivables Rights is true and accurate in
all material respects and is neither misleading nor
incomplete by the omission of any material fact and
has not changed since being provided to us.
8.2 COVENANTS AND UNDERTAKINGS
Until termination of this Agreement and the complete payment
and satisfaction of all obligations under this Agreement, each
Loan Party agrees as follows:
8.2.1 MERGER, CONSOLIDATION AND SALES
(a) If any Loan Party plans to merge or
consolidate with any other entity, or engage
in any operation or activity materially
different from that presently being
conducted by it, or otherwise intend to
dispose of any substantial part of its
business, or the Receivables, Acquired
Receivables and VAT Receivables or the
Receivables Rights or the Products or the
Product Rights or engage in a significant
corporate restructuring in ownership, then
such Loan Party will:
(i) disclose these facts to us as early
as possible (and if subject to a
confidentiality undertaking in
relation to these matters, will use
best endeavours to obtain the
consent of the counterparty
thereto), and
(ii) reach agreement with us concerning
all remaining payment obligations
under this Agreement or, failing
such agreement, and if so required
by us, immediately discharge such
payment obligations (whether or not
accrued due and payable). For this
purpose all Supplier Obligations
shall forthwith become payable and
all Receivables, Acquired
Receivables and VAT Receivables
shall be treated as Ineligible
Receivables to be re-purchased by
such Loan Party. No Loan Party will
be required to make such disclosure
if, and for so long as, to do so
would be a breach of applicable
laws or regulatory requirements.
Any disclosure under this
sub-clause shall be treated in
confidence by us.
8.2.2 FINANCIAL STATEMENTS AND OTHER INFORMATION
SDSA will give us a copy of its audited Financial
Statements and management accounts prepared in
accordance with generally accepted accounting
principles, whether audited or not, as provided in
the Schedule. SDSA and BSDE will also provide such
other information as we may reasonably request
concerning Sales Contracts and their completion. Each
Loan Party will promptly advise us if any material
action or proceeding is outstanding or pending
against or if, to the best of its knowledge after due
enquiry, any such action or proceeding becomes
threatened.
8.2.3 AUTHORISATION
We can rely upon the signature or the act or
communication from Authorised Officers and Directors
in accordance with Attachment A to this Agreement.
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8.2.4 INSPECTION
Each of the Loan Parties will allow us or our agents
to enter upon its premises during normal business
hours on reasonable notice, and at any time during
the continuance of an Event of Default, for the
purposes of inspecting, taking copies of and/or
verifying the Supplier Invoices and any Product
Rights, the Receivables, Acquired Receivables and VAT
Receivables, any Receivables Rights, Financial
Statements, and its financial status; each Loan Party
will agree to provide us with such information and
documentation that we consider reasonably necessary
to conduct the foregoing activities, including
samplings of purchase orders, invoices and evidences
of delivery or other performance, and that we may
contact such Loan Party's customers directly or
through our agents to verify Receivables, Acquired
Receivables and VAT Receivables.
8.2.5 INSURANCE
8.2.5.1 Each Loan Party will maintain, or cause to
be maintained, with financially sound and
reputable insurance companies, insurance on
its respective properties and assets
(without being required to effect credit
insurance on the Receivables, Acquired
Receivables and VAT Receivables unless such
obligation is specified in the Schedule) to
their full insurable value; you will be
required to maintain insurance against
claims for personal injury or death as a
result of the use of any Products sold by
you; each Loan Party will be required to
maintain insurance coverage against other
business risks; each Loan Party will give us
at least ten days written notice before any
policy is altered or cancelled.
8.2.5.2 Each Loan Party will instruct each insurer
to endorse and to assign the benefit of each
insurance policy covering its properties and
assets in respect of Supplier's Invoices or
Receivables, Acquired Receivables and VAT
Receivables which have been purchased by us
hereunder so that (a) payment of proceeds
with respect to claims thereon will be made
directly to us and (b) no act or default of
such Loan Party or any other person shall
affect our right to recover under the
policies.
8.2.5.3 If such Loan Party fails to pay any costs,
charges or premiums, or if it fails to
insure its properties and assets, we may pay
such costs, charges or premiums on such Loan
Party's behalf. Any such amounts paid by us
shall be considered as an additional debt
owed by such Loan Party's due and payable by
it or you immediately upon receipt of our
invoice.
8.2.6 RIGHT OF SET-OFF
At all times we can set-off amounts due from you to
us (including those prospectively due where they are
likely to become payable) and whether due under this
or any other agreement with us or otherwise due
against whatever we owe you. Where the amount due by
you cannot immediately be ascertained we may make a
reasonable estimate of the amounts concerned.
8.2.7 FINANCIAL COVENANTS
You agree to comply with the Financial Covenants, if
any, set out in the relevant supplements or the
Schedule. You also agree that you will not, without
our consent, make any of the following payments
("Restricted Payments") if you and Holdings are not
in compliance with the Financial Covenants contained
in this Agreement and after giving effect to such
payment, the aggregate amount of such Restricted
Payments under this Agreement and the IWCF does not
cause you or Holdings to violate such Financial
Covenants or exceed Six Hundred Thousand Dollars
($600,00),
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17
without duplication, during any fiscal year (i)
declare or pay any dividend; (ii) issue any warrants,
options or rights to purchase any capital stock;
(iii) make any payment to an Affiliate other than in
the course of normal trading business and interest on
intercompany debt; or (iv) make any other
distribution, whether in cash, shares or property.
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18
9. DEFAULTS AND REMEDIES
9.1 DEFAULTS
Any one of the following events shall constitute an "EVENT OF
DEFAULT" under the this Agreement:
9.1.1 A Loan Party's failure to make payment to us when due
of any amount, including without limitation Credit
Charges or the Shortfall Amount or part thereof,
under this Agreement or its failure to comply with
any other provision of this Agreement including its
failure to meet the dates by which information or
reports are due under this Agreement;
9.1.2 Any representation, warranty, statement, report or
certificate made or delivered by a Loan Party or on
its behalf is false in any material respect at the
time when made or deemed made;
9.1.3 The occurrence of any event or circumstance,
including adverse comment in Auditors' reports for
any Loan Party, which, in our opinion, could
reasonably be expected by us to have a Material
Adverse Effect;
9.1.4 A Loan Party, your parent company, any subsidiary of
a Loan Party or your parent company, or any of your
guarantors becomes subject to Insolvency, or to a
change of control due to change in shareholders
unless previously agreed to by us in writing;
9.1.5 The use of any Prepayments or the incurring of any
Supplier Obligations for any purpose other than your
normal business operations or as permitted by this
Agreement unless disclosed to us and agreed in
writing before the Prepayment or Supplier Obligation
is made;
9.1.6 Any default by any Loan Party in complying with any
judgement or any demand under a guarantee or
indemnity;
9.1.7 Any breach by any Loan Party, your parent company or
any of your guarantors of any other agreement with us
or with any other lender, including IBM Credit
Corporation, or credit providers or suppliers
(including Authorised Suppliers); or
9.1.8 Any other actions materially adversely affecting our
ownership of Receivables, Acquired Receivables or VAT
Receivables or of Supplier Obligations or reducing
our rights relating to Receivables Rights and/or
Product Rights.
9.1.9 Any failure by Holdings to meet the financial
covenant specified for it in the Schedule.
9.1.10 The dissolution or liquidation of any Loan Party,
your parent company, any of any Loan Party's or your
parent's subsidiaries or any of your guarantors or
the directors or stockholders of such entities taking
action to dissolve or liquidate any such entity.
9.1.11 Any Loan Party, your parent company or any guarantor
suspends business.
9.1.12 a) PFSweb ceases to directly own one hundred percent
(100%) of the capital stock of PFS, and (b) PFS and
IFP cease to directly own One Hundred Percent (100%)
of the interest in members of Holdings or (b)
Holdings ceases to directly own One Hundred Percent
(100%) of the capital stock of BSD A;
9.1.13 BSD A ceases to maintain the extent of its current
ownership of you.
9.2 REMEDIES
9.2.1 In addition to any rights or remedies available at
law or under this Agreement, on or at any time after
an Event of Default that we have not
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19
waived in writing, we may do any or all of the
following: (a) immediately terminate this Agreement;
(b) immediately reduce the Credit Limit to nil (c)
require you forthwith to buy back from us all
outstanding Receivables, Acquired Receivables and VAT
Receivables but so that no such Receivable, Acquired
Receivable or VAT Receivable shall revest in you
until the Repurchase Price of all such Receivables,
Acquired Receivables and VAT Receivables has been
paid to us together with all other sums then due to
us; (d) declare all payments of Supplier Obligations
and the Repurchase Price of Receivables, Acquired
Receivables and VAT Receivables together with any
Credit Charges to be immediately due and payable; and
(e) to take any action we deem necessary to take
possession of, realise or sell in a commercially
reasonable manner any Receivables, Acquired
Receivables, VAT Receivables or Receivables Rights,
and/or Products and/or Product Rights and/or assets
purchased with money provided by us.
9.2.2 Except as otherwise required by law or provided in
any Lien which encumbers the relevant assets, all
amounts obtained from any actions above will be
applied promptly to reduce or settle the amounts due
from you under this Agreement or any other deed or
agreement between any of and all of the Loan Parties
and IBM GF after deducting all charges, costs and
expenses including reasonable legal costs,
disbursements and other fees incurred in the
collection of such amounts, and any excess amounts
will, to the extent permitted by law and subject to
the rights of any person having priority, be paid to
you.
9.2.3 With respect to any Event of Default which we waive
we reserve the right to make a default charge as
compensation for such waiver.
10. TERMINATION
10.1 This Agreement will remain in force until the earlier of (i)
120 days from the date of this Agreement or such other date as
the Loan Parties and we may agree to in writing from time to
time and (ii) upon not less than 60 days written notice by any
party to the other. However following the occurrence of an
Event of Default that we have not waived in writing we may by
notice with immediate effect terminate this Agreement. Upon
any termination of this Agreement we shall have all the rights
and remedies set out in Clause 9.2 until the complete
discharge of all the Loan Parties' obligations to us. Any such
termination shall not affect any right we have in relation to
the Receivables, Acquired Receivables and VAT Receivables or
the Receivables Rights and the Supplier Obligations and the
Product Rights.
10.2 Following the termination of this Agreement and the discharge
of all the Loan Parties' obligations to us and subject to the
exercise of any rights under this Agreement then any amounts
we hold for you will be paid to you after deduction of all or
any sums then owed to us under this or any other agreement
between any of and all of the Loan Parties and IBM GF.
10.3 Notwithstanding the termination of this Agreement, the
provision of Clauses which should by their nature survive
termination (including without limitation payment obligations
and rights to Receivables, Acquired Receivables and VAT
Receivables and the Supplier Obligations and the Product
Rights and/or Receivables Rights) shall so survive and shall
remain in full force and effect until such time as all rights
and liabilities between the parties have been satisfied.
11. GENERAL
11.1 ASSIGNMENT
We may assign the benefit of this Agreement in whole or in
part. The Loan Parties consent to us novating to any other
person all or any of our obligations, rights, benefits and
remedies under this Agreement. Following such novation this
Agreement (or the novated part) shall bind and enure to the
benefit of our successors and assigns. The Loan Parties may
not assign or change their rights and benefits under this
Agreement or sub-contract any of their obligations without our
prior written consent.
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11.2 LIMITATION OF LIABILITY
No party shall have any liability to any other party with
respect to any special, indirect or consequential damages
suffered in connection with this Agreement.
11.3 GUARANTEE AND INDEMNIFICATION.
Each of BSDE, SDSA and the Guarantors irrevocably and
unconditionally, jointly and severally:
11.3.1 guarantees to each of BSDE and SDSA the due and
punctual observance and performance of all the terms,
conditions and covenants on the part of each of them
contained in this Agreement and agrees to pay from
time to time on demand any and every sum or sums of
money which each of BSDE and SDSA is at any time
liable to pay to us under or pursuant to the
Agreement and which has become due and payable but
has not been paid at the time such demand is made;
and
11.3.2 agrees to indemnify and hold harmless IBM GF and each
of its officers, directors, agents and assigns
(collectively, the "Indemnified Persons") against all
losses, claims, damages, liabilities or other
expenses (including reasonable attorneys' fees and
court costs now or hereinafter arising from the
enforcement of this Agreement, the "Losses") to which
any of them may become subject insofar as such Losses
arise out of or are based upon any event,
circumstance or condition (a) occurring or existing
on or before the date of this Agreement relating to
any financing arrangements IBM GF may from time to
time have with (i) each Loan Party, (ii) any Person
that shall be acquired by any Loan Party or (iii) any
Person that any Loan Party may acquire all or
substantially all of the assets of, or (b) directly
or indirectly, relating to the execution, delivery or
performance of this Agreement or the consummation of
the transactions contemplated hereby or thereby or to
any of the Collateral or to any act or omission of
any Loan Party in connection therewith.
Notwithstanding the foregoing, none of the Borrower
or any of the Guarantors shall be obligated to
indemnify IBM GF for any Losses incurred by IBM GF
which are a result of IBM GF's gross negligence or
wilful misconduct. The indemnity provided herein
shall survive the termination of this Agreement.
11.4 WAIVER
No delay or omission of ours to exercise any right or remedy
whether before or after the occurrence of any Event of
Default, shall impair any such right or remedy or shall
operate as a waiver thereof.
11.5 CHANGE OF TERMS
11.4.1 We may change the terms and conditions of this
Agreement upon sixty days written notice to you, but
no such change shall apply to purchases of Supplier
Invoices or Receivables, Acquired Receivables and VAT
Receivables made before the effective date of such
change of terms.
11.4.2 We reserve the right to serve sixty days written
notice on you designating some or all Receivables,
Acquired Receivables or VAT Receivables as Ineligible
Receivables and on the expiry of such notice you will
promptly buy back the relevant Ineligible Receivables
together with payment of any Credit Charges that
apply.
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11.4.3 In the case mentioned in paragraph 11.4.1 the Loan
Parties shall be entitled to terminate this Agreement
effective on the effective date of the change of
terms by written notice delivered to us within thirty
days of receipt of our notice of change of terms.
11.6 CURRENCY INDEMNITY
11.6.1 Unless otherwise agreed by us where a Receivable,
Acquired Receivable or VAT Receivable is payable
otherwise than in EURO in Belgium, the charges for
both the collection and/or in the case of
Receivables, Acquired Receivables and VAT Receivables
not denominated in EURO, conversion into EURO or into
such other currency as we shall from time to time
determine, shall be deducted in calculating the
Purchase Price and such price shall be computed by
reference to the spot rate of exchange ruling in
London the date of collection but at IBM GF's
discretion, we may provisionally apply the rate
ruling on the date we receive Notification of such
Receivable, Acquired Receivable or VAT Receivable
making such adjustments as shall thereafter be
necessary
11.6.2 We hereby agree prior to the occurrence of an event
referred to in Clause 11.6.1 that we will not convert
any monies received hereunder in a currency other
than EURO into any other currency without your prior
agreement.
11.6.3 If at any time more than one currency or currency
unit are recognised by the central bank of Belgium,
or having jurisdiction in any country as the lawful
currency of that country.
11.6.3.1 for so long as the currency or currency unit
in which the provisions of and obligations
under this Agreement are expressed (the
"EXPRESS CURRENCY") shall remain so
recognised, those provisions and obligations
shall remain denominated and paid or
satisfied in that currency or currency unit;
11.6.3.2 if the express currency ceases to be so
recognised, any reference in this Agreement
to that currency or currency unit shall be
translated into and become payable in the
currency or currency unit of that country
designated by us; and
11.6.3.3 any translation from one currency or
currency unit to another shall be at the
official rate of exchange recognised by the
central bank for the conversion of that
currency or currency unit into the other,
rounded up or down by us in the manner
officially prescribed in relation to such
official rate or, if to the extent not so
recognised or prescribed, in such manner as
we may reasonably determine.
11.6.3.4 If any change in any currency of a country
occurs, this Agreement will be amended to
the extent we after consultation with the
Loan Parties, specify to be necessary in the
light of the change in currency and to put
the parties hereto as far as possible in the
same position as they would have been but
for such change in currency.
11.7 VAT
11.7.1 All charges specified in this Agreement are quoted
exclusive of VAT
11.7.2 The Loan Parties shall comply with any directions
which we may give to them in relation to the relief
or refund on behalf of us of VAT included in any
Receivable or Acquired Receivable purchased by us
pursuant to this Agreement where such relief or
refund may be available to us in respect of the
Insolvency of the Debtor.
11.8 ELECTRONIC COMMUNICATIONS
Any party may communicate with any other party, other than
notices referred to in Clause 11.9, by electronic means and
such communication is acceptable as a signed
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22
writing. An identification code (called a "USER ID") contained
in an electronic document is sufficient to verify the sender's
identity and the document's authenticity.
11.9 NOTICES
Any notice required or desired to be given under this
Agreement shall be in writing and shall be delivered by
facsimile transmission or registered mail, postage prepaid,
and addressed to the address of the respective party to this
Agreement listed in the Schedule or following the expiry of a
period of 30 Business Days from the delivery of written notice
to the other party, such other address or facsimile number
notified by that party to the other in accordance with this
clause:
11.10 PARTIAL INVALIDITY
If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable under any applicable statute
or rule of law, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected.
11.11 COMPLETE AGREEMENT
This Agreement including the Schedule embodies the entire
agreement between the Loan Parties and us with respect to the
subject matter hereof, and any prior written or oral
statements relating thereto are not to be considered part of
this Agreement.
11.12 MISCELLANEOUS
11.12.1 IBM GF's rights and benefits under this Agreement
shall not be affected by the granting of any time or
indulgence to any Loan Party or to any surety or
guarantor of your obligations to us hereunder or to
any Debtor or by any failure to exercise or delay in
exercising any right or option against such person.
11.12.2 We shall be entitled to rely on any act done and on
any document signed and on any oral or written
communication (including any such communication sent
by facsimile) by any reason purportedly doing or
signing or communicating on behalf of you
notwithstanding any defect in or absence of any
authority in such person except as provided for in
Clause 8.2.3.
11.12.3 Without prejudice to the provisions of Clause 11.5
and except as otherwise provided in this Agreement no
variation of this Agreement shall be binding upon the
parties unless it is evidenced in writing and signed
by or on behalf of IBM GF by an authorised signatory
of IBM GF and on behalf of each Loan Party by a
director or the secretary or officer thereof.
11.13 APPLICABLE LAW AND JURISDICTION
This Agreement shall be construed in accordance with and
governed by the laws of Belgium. The parties hereby submit to
the jurisdiction of the Belgian courts.
BY SIGNING BELOW BOTH PARTIES ACCEPT THE TERMS OF THE AGREEMENT
SIGNED ON BEHALF OF SIGNED ON BEHALF OF
SUPPLIERS DISTRIBUTORS S.A. IBM BELGIUM FINANCIAL SERVICES S.A.
Signed: Signed:
------------------------------ ------------------------------
By Name: By Name:
----------------------------- -----------------------------
Title: Title:
------------------------------- -------------------------------
Signature: Signature:
--------------------------- ---------------------------
Date: Date:
-------------------------------- --------------------------------
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23
BUSINESS SUPPLIES DISTRIBUTORS PFS WEB B.V.
EUROPE BV
Signed: Signed:
------------------------------ ------------------------------
By Name: By Name:
----------------------------- -----------------------------
Title: Title:
------------------------------- -------------------------------
Signature: Signature:
--------------------------- ---------------------------
Date: Date:
-------------------------------- --------------------------------
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24
EXHIBIT 10.8
IBM CREDIT CORPORATION
COLLATERALIZED GUARANTY
In consideration of credit and financing accommodations granted or to
be granted by IBM Belgium Financial Services S.A. a registered number of R.C.,
Brussels 451.673 with an address of Square Victoria Regina 1,BE-1210 Brussels
VAT BE 424300467 ("IBM GF") to Business Supplies Distributors Europe B.V. and
Supplies Distributors S.A. (collectively the "Borrower"), which is in the best
interest of Priority Fulfillment Services, Inc. ("Guarantor"), and for other
good and valuable consideration received, Guarantor jointly and severally
guaranties to IBM GF and to IBM Credit Corporation as agent to IBM GF ("IBM
Credit"), from property held separately, jointly or in community, the prompt and
unconditional performance and payment by Borrower of any and all obligations,
liabilities, contracts, mortgages, notes, trust receipts, secured transactions,
inventory financing and security agreements, and commercial paper on which
Borrower is in any manner obligated, heretofore, now, or hereafter owned,
contracted or acquired by IBM GF ("Liabilities"), whether the Liabilities are
individual, joint, several, primary, secondary, direct, contingent or otherwise.
Guarantor
also agrees to indemnify IBM GF and IBM Credit and hold IBM GF and IBM
Credit harmless against any losses it may sustain and expenses it may incur,
suffer or be liable for as a result of or in any way arising out of, following,
or consequential to any transactions with or for the benefit of Borrower.
Capitalized terms used herein without definition shall have the meaning
described thereto in the IBM Global Financing Platinum Plan (with Invoice
Discounting) between IBM GF and the Borrower (as amended, modified and
supplemented from time to time, the "Financing Agreement").
If Borrower fails to pay or perform any Liabilities to IBM GF when due, all
Liabilities to IBM GF shall then be deemed to have become immediately due and
payable, and Guarantor shall then pay upon demand the full amount of all sums
owed to IBM GF by Borrower, together with all expenses, including reasonable
attorney's fees.
The liability of Guarantor is direct and unconditional and shall not be affected
by any extension, renewal or other change in the terms of payment of any
security agreement or any other agreement between IBM GF and/or IBM Credit and
Borrower, or any change in the manner, place or terms of payment or performance
thereof, or the release, settlement or compromise of or with any party liable
for the payment or performance thereof, or the waiver of any default or event of
default under any financing agreement between IBM GF and/or IBM Credit and
Borrower, or the release or non-perfection of any security thereunder, any
change in Borrower's financial condition, or the interruption of business
relations between IBM GF and Borrower. This Guaranty is and shall be deemed to
be a continuing guaranty and shall remain in full force and effect until the
indefeasible payment in full of the Liabilities and any other amounts payable
under this Guaranty and the cessation of all obligations of IBM GF to extend
credit to Borrower. Guarantor acknowledges that its obligations hereunder are in
addition to and independent of any agreement or transaction between IBM GF
and/or IBM Credit and Borrower or any other person creating or reserving any
lien, encumbrance or security interest in any property of Borrower or any other
person as security for any obligation of Borrower. IBM GF and IBM Credit need
not exhaust its rights or recourse against Borrower or any other person or any
security IBM GF and IBM Credit may have at any time before being entitled to
payment from Guarantor.
To secure payment of all of Guarantor's current and future debts and obligations
to IBMGF, and to secure the Liabilities, whether under this Guaranty or any
other agreement between IBM GF and/or IBM Credit and Guarantor, whether direct
or contingent, Guarantor does assign, pledge and give to IBM GF a security
interest in all of Guarantor's personal property, whether now owned or hereafter
acquired or existing and wherever located, including the following: (a) all
inventory and equipment manufactured or sold by or bearing the trademark or
tradename of International Business Machines Corporation ("IBM") or any other
Authorized Supplier and all parts thereof, attachments, additions, accessories
and accessions thereto, all substitutions, repossessions, exchanges,
replacements and returns thereof, all price protection credits, rebates,
discounts and incentive payments relating to the foregoing, products thereof
Page 1 of 7
and documents therefor ("IBM Credit Inventory"); (b) all accounts, chattel
paper, instruments, negotiable documents, promissory notes, general intangibles
(including contract rights, software and licenses), deposit accounts, commercial
tort claims, intellectual property, investment property, pledged notes, letter
of credit rights, supporting obligations, obligations of any kind owing to
Guarantor, whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services and all books, invoices, documents and
other records in any form evidencing or relating to any of the foregoing; (c)
all substitutions and replacements for all of the foregoing; and (d) all
products or proceeds of all of the foregoing (all of the above assets are
defined pursuant to the provisions of Article 9 of the Uniform Commercial Code
as in effect in the State of New York and are hereinafter referred to as the
"Collateral"). Collateral shall not include inventory and equipment of the
Guarantor that is not IBM Credit Inventory (as defined above). This security
interest is also granted to secure Guarantor's debts to all of IBM GF's
affiliates.
In connection with any working capital financing Guarantor receives from another
financial institution or commercial lender ("Lender"), Guarantor may request
that IBM GF and IBM Credit subordinate its interest in the Collateral (excluding
the IBM Credit Inventory) and IBM GF and IBM Credit will not unreasonably
withhold its consent provided that:
(1) No default or event of default exists;
(2) IBM GF, IBM Credit and Lender shall have entered into a
subordination agreement in form and substance satisfactory to IBM GF
and IBM Credit in all respects in its sole discretion;
(3) IBM Credit shall be satisfied that the IBM Credit Inventory shall
be segregated from the other property of Guarantor and its customers
and IBM GF and IBM Credit shall have a first perfected priority
security interest in the IBM Credit Inventory; and
(4) The books and records maintained on behalf of the Borrower shall be
kept separately from Guarantor's other books and records and Guarantor
shall have conspicuously noted on the Borrower's books and records that
such books and records are the property of Borrower.
IBM GF and IBM Credit shall have the right, but not the obligation, from time to
time, as IBM GF and/or IBM Credit in their sole discretion may determine, and
all without any advance notice to Guarantor, to: (a) examine the Collateral; (b)
appraise it as security; (c) verify its condition and nonuse; (d) verify that
all Collateral has been properly accounted for and this Agreement complied with,
and (e) assess, examine, check and make copies of any and all of Guarantor's
books, records and files.
If Guarantor does not comply with any of the terms of this Agreement, or
Guarantor fails to fulfill any obligation to IBM GF and/or IBM Credit or any of
IBM GF's and/or IBM Credit's affiliates under any other agreement between IBM GF
or IBM Credit and Guarantor or between Guarantor and any of IBM GF's or IBM
Credit's affiliates, or Guarantor becomes insolvent or ceases to do business as
a going concern, or a bankruptcy, insolvency proceeding, arrangement or
reorganization is filed by or against Guarantor, or any of Guarantor's property
is attached or seized, or a receiver is appointed for Guarantor, or Guarantor
commits any act which impairs the prospect of full performance or satisfaction
of Guarantor's obligations to IBM GF and/or IBM Credit, or Guarantor shall lose
any franchise, permission, license or right to conduct its business, or
Guarantor misrepresents its financial condition or organizational structure, or
whenever IBM GF deems the debt or Collateral to be insecure:
a) IBM GF or IBM Credit may call all or any part of the amount
Guarantor or Borrower owes IBM GF or IBM GF's affiliates due and
payable immediately, if permitted by applicable law, together with
court costs and all costs and expenses of IBM GF and IBM Credit's
repossession and collection activity, including, but not limited to
reasonable attorney's fees.
Page 2 of 7
b) Guarantor will hold and keep the Collateral in trust, in good order
and repair, for IBM GF and IBM Credit's benefit and shall not exhibit
or sell it.
c) Upon IBM GF and/or IBM Credit's demand, Guarantor will immediately
deliver the Collateral to IBM GF and/or IBM Credit, in good order and
repair, at a place reasonably convenient to IBM GF and IBM Credit,
together with all related documents; or IBM GF and/or IBM Credit may,
in their sole discretion and without demand, take immediate possession
of the Collateral, together with all related documents.
d) Guarantor waives and releases: (i) any and all claims and causes of
action which Guarantor may now or ever have against IBM GF and IBM
Credit as a result of any possession, repossession, collection or sale
by IBM GF and/or IBM Credit of any of the Collateral, notwithstanding
the effect of such possession, repossession, collection or sale upon
Guarantor's business; (ii) all rights of redemption from any such sale;
and (iii) the benefit of all valuation, appraisal and exemption laws.
If IBM GF or IBM Credit seeks to take possession of any of the
Collateral by replevin or other court process, Guarantor irrevocably
waives any notice, bonds, surety and security relating thereto required
by any statute, court rule or otherwise as an incident to such
possession and any demand for possession of the Collateral prior to the
commencement of any suit or action to recover possession thereof.
e) Guarantor appoints IBM GF and IBM Credit or any person IBM GF and/or
IBM Credit may delegate as its duly authorized Attorney-in-Fact
(without notifying Guarantor) to do, in IBM GF's and IBM Credit's sole
discretion, any of the following: (i) sell, assign, transfer, negotiate
or pledge any and all accounts, chattel paper, or contract rights; (ii)
endorse Guarantor's name on any and all notes, checks, drafts, or other
forms of exchange received as payment on any accounts, chattel paper
and contract rights, for deposit in IBM GF's and/or IBM Credit's
account; (iii) grant any extension, rebate or renewal on any and all
accounts, chattel paper or contract rights, or enter into any
settlement thereof; (iv) demand, collect and receive any and all
amounts due on accounts, chattel paper and contract rights; and (v)
exercise any and all rights Guarantor has in the Collateral.
f) In the event Guarantor brings any action or asserts any claim
against IBM GF and/or IBM Credit which arises out of this Agreement,
any other agreement or any of Guarantor's and IBM GF and/or IBM
Credit's business dealings, in which Guarantor does not prevail,
Guarantor agrees to pay IBM GF and IBM Credit all court costs and all
costs and expenses of IBM GF's and IBM Credit's defense of such action
of claim including, but not limited to, reasonable attorney's fees.
IBM GF and/or IBM Credit may also declare a default under this Agreement and
exercise any and all rights and remedies available herein, if, in IBM GF's
and/or IBM Credit's sole discretion, IBM GF or IBM Credit determines that the
Collateral has decreased in value, and Guarantor has been unable to either: (a)
provide IBM GF with additional Collateral in a form and substance satisfactory
to IBMGF; or (b) pay the Shortfall Amount as defined in the Financing Agreement.
IBM GF and IBM Credit have and will always possess all the rights and remedies
of a secured party under law, and IBM GF's and IBM Credit's rights and remedies
are and will always be cumulative. Guarantor acknowledges and agrees that the
Collateral is the subject of widely distributed standard price quotations and is
customarily sold in a recognized market. Guarantor agrees that a private sale by
IBM GF or IBM Credit of any of the Collateral to a dealer in those types of
Collateral is a commercially reasonable sale. Further, Guarantor agrees that IBM
GF's and/or IBM Credit's delivery of any of the Collateral to a distributor or
manufacturer, with a request that it repurchase Collateral, as provided in any
repurchase agreement with IBMGF, is a commercially reasonable disposition or
sale.
Page 3 of 7
Guarantor promises that (a) the Collateral is and shall remain free from all
claims and liens except IBM GF's and IBM Credit's; (b) Guarantor shall defend
the Collateral against all other claims and demands; and (c) Guarantor will
notify IBM Credit before it signs, or authorizes the signing of any financing
statement regardless of its coverage. Guarantor authorizes IBM Credit to file
with any filing office such financing statements, amendments, addenda and other
records showing IBM GF and IBM Credit as secured party and Guarantor as the
debtor and identifying IBM GF's and IBM Credit's security interest in the
Collateral that IBM GF and IBM Credit deems necessary to perfect and maintain
IBM GF's and IBM Credit's security interest in the Collateral. Guarantor will
execute any and all documents IBM GF and/or IBM Credit may request to confirm or
perfect IBM GF's and IBM Credit's title or security interest in the Collateral.
Guarantor represents and covenants that the first paragraph of this Guaranty
states the exact name of Guarantor as set forth in its charter or other
organizational record. Guarantor represents that it is duly organized under the
laws of the State of Delaware and the organization document creating Guarantor
has been filed in the appropriate office of such State. In addition, Guarantor's
organizational identification number assigned by its State of organization is as
follows: 2606094. Guarantor's principal place of business is located at 500
North Central Expressway, Plano, TX 75074 and Guarantor represents that its
business is conducted as a CORPORATION. Guarantor will not change its name,
location (as defined in Article 9 of the U.C.C.) or State of organization.
Guarantor shall provide IBM GF and IBM Credit at least thirty (30) days prior
written notice of any change in its form of ownership, management, and of any
change in its principal place of business, or any additions or discontinuances
of other business locations. The Collateral shall be kept at Guarantor's
principal place of business and at the following addresses:
PFS
4550 Quality Drive
Memphis, TN 38118
PFS
4638 Shelby Drive
Memphis, TN 38118
American Eagle Systems
30 Corporate Drive
Holtsville, New York 11742
until all sums owed IBM GF and IBM Credit are paid in full. Guarantor will
immediately notify IBM GF and IBM Credit if the Collateral is kept at any other
address. This paragraph is for IBM GF's and IBM Credit's informational purposes
only, and is not in any way or manner intended to limit the extent of IBM GF's
and/or IBM Credit's security interest in the Collateral. Guarantor and its
predecessors have done and do business only under the following names: priority
Fulfillment Services, Inc.; PFSweb, Inc..
Guarantor will pay all taxes, license fees, assessments and charges on the
Collateral when due. Guarantor will be responsible for any loss of Collateral
for any reason whatsoever. Guarantor will keep the Collateral insured for its
full insurable value against loss or damage by fire, wind, theft and for
combined additional coverage, including vandalism and malicious mischief, and
for other risks as IBM GF and/or IBM Credit may require. Guarantor will obtain
insurance under such terms and in amounts as IBM GF and/or IBM Credit may
specify, from time to time, in companies acceptable to IBM GF and/or IBM Credit,
with a loss-payee or mortgagee clause payable to IBM GF and IBM Credit to the
extent of any loss to the Collateral and containing a waiver of all defenses
against Guarantor that is acceptable to IBM GF and IBM Credit. Guarantor further
agrees to provide IBM GF and/or IBM Credit with written evidence of the required
insurance coverage and loss-payee or mortgagee clause. Guarantor assigns to IBM
GF and IBM Credit all sums not in excess of the unpaid debt owed IBM GF and IBM
Credit, and directs any insurance company to make payment directly to IBM Credit
to be applied to the unpaid debt owed IBM GF and/or IBM Credit. Guarantor
further grants IBM Credit an irrevocable power of attorney to endorse any draft
and sign and file all of the necessary papers, forms and documents to initiate
and
Page 4 of 7
settle any and all claims with respect to the Collateral. If Guarantor fails to
pay any of the above-referenced costs, charges or any insurance premiums, or if
it fails to insure the Collateral, IBM GF and/or IBM Credit may pay such costs,
charges or any insurance premiums, and the amounts paid shall be considered an
additional debt owed by Guarantor to IBM GF and/or IBM Credit. Guarantor will
promptly notify IBM Credit of any loss, theft or destruction of or damage to any
of the Collateral.
Guarantor will not rent, lease, lend, demonstrate, pledge, create a security
interest in, transfer or secrete any of the Collateral, or use the Collateral
for any purpose other than exhibition, without IBM Credit's prior written
consent.
This Guaranty is assignable, shall be construed liberally in IBM GF's and IBM
Credit's favor, and shall inure to the benefit of and bind IBM GF's, IBM
Credit's and Guarantor's respective successors, personal representatives and
assigns, and also benefit any of IBM GF and IBM Credit's existing or future
affiliates that may extend credit to Borrower.
If Borrower hereafter is incorporated, acquired by a corporation, dissolved, or
otherwise undergoes any change in its management, ownership, identity, or
organizational structure, this Guaranty shall continue to extend to any
Liabilities of the Borrower or such resulting corporation, dissolved
corporation, or new or changed legal entity, or identity to IBM GF and IBM
Credit.
Guarantor waives: notice of the acceptance of this Guaranty, and of presentment,
demand and protest; notices of nonpayment, nonperformance and dishonor; notices
of amount of indebtedness of Borrower outstanding at any time; notices of the
number and amount of advances made by IBM GF to Borrower in reliance on this
Guaranty; notice of the financial condition of Borrower or any other guarantor
or any change therein; notice of the release of collateral for the Liabilities,
of any other guaranty, pledge or suretyship agreement or any collateral
therefor; notices of any legal proceedings or other efforts to collect against
Borrower; notice of any recoupment, setoff, administrative freeze on Borrower's
credit or assets; notice and any opportunity for a hearing as to any prejudgment
remedies; and any other demands and notices required by law. Guarantor further
waives all rights to assert against IBM GF and/or IBM Credit any right of
recoupment, setoff, and all claims, defenses, and counterclaims against IBM GF,
IBM Credit or Borrower, including any defense based on the lack of good faith.
To the extent permitted by law, Guarantor also waives any and all rights in and
notices or demands relating to any Collateral now or hereafter securing any of
the Liabilities. All waivers by Guarantor herein shall survive any termination
or revocation of this Guaranty.
Guarantor authorizes IBM Credit to sell at public or private sale or otherwise
realize upon the Collateral now or hereafter securing any of the Liabilities, in
such manner and upon such terms and conditions as IBM GF and/or IBM Credit deems
best, all without advertisement or notice to Borrower, Guarantor, or any third
parties. Guarantor further authorizes IBM GF and IBM Credit to deal with the
proceeds of such Collateral as provided in IBM GF's agreement with Borrower,
without prejudice to IBM GF's claim for any deficiency and free from any right
or redemption on the part of Borrower, Guarantor or any third parties, which
right or redemption is hereby waived together with every formality prescribed by
custom or by law in relation to any such sale or other realization.
Guarantor further agrees that all of its right, title and interest in, to and
under any loans, notes, debts and all other liabilities and obligations
whatsoever owed by Borrower to Guarantor, whether heretofore or hereafter
created or incurred and for whatever amount, and all security therefor, shall be
now and hereafter at all times fully subordinated to all Liabilities. Guarantor
will not ask, demand or sue for, or take or receive payment of, all or any part
of such loans, notes, debts or any other liabilities or obligations whatsoever
or any security therefor, until and unless all of the Liabilities are paid,
performed and fully satisfied except as expressly permitted by the Financing
Agreement and provided no default or event of default exists. In addition, until
such time that the Liabilities are indefeasibly paid in full, Guarantor
irrevocably waives, for the benefit of IBM GF and IBM Credit, any and all rights
which it presently has, or may hereafter have, whether by virtue of any payment
or payments hereunder or otherwise, to be subrogated to the rights of IBM GF and
IBM Credit against the Borrower with respect to any such indebtedness of the
Borrower to IBMGF.
Page 5 of 7
Guarantor has made an independent investigation of the financial condition of
Borrower and gives this Guaranty based on that investigation and not upon any
representations made by IBM GF and/or IBM Credit. Guarantor acknowledges that it
has access to current and future Borrower financial information which will
enable Guarantor to continuously remain informed of Borrower's financial
condition. Guarantor also consents to and agrees that the obligations under this
Guaranty shall not be affected by IBM GF's subsequent increases or decreases in
the credit line that IBM GF may grant to Borrower; substitutions, exchanges or
releases of all or any part of the Collateral now or hereafter securing any of
the Liabilities; sales or other dispositions of any or all of the Collateral now
or hereafter securing any of the Liabilities without demands, advertisement or
notice of the time or place of the sales or other dispositions; realizing on the
Collateral to the extent IBM Credit, in IBM Credit's sole discretion, deems
proper; or purchases of all or any part of the Collateral for IBM GF's and/or
IBM Credit's own account.
This Guaranty and any and all obligations, liabilities, terms and provisions
herein shall survive any and all bankruptcy or insolvency proceedings, actions
and/or claims brought by or against Borrower, whether such proceedings, actions
and/or claims are federal and/or state.
This Guaranty is submitted by Guarantor to IBM GF(for IBM GF's acceptance or
rejection thereof) at IBM GF's above specified office; as an offer by Guarantor
to guaranty the credit and financial accommodations provided by IBM GF to
Borrower. If accepted, this Guaranty shall be deemed to have been made at IBM
GF's above-specified office. This Guaranty and all obligations pursuant thereto,
shall be governed and controlled as to interpretation, enforcement, validity,
construction, effect and, in all other respects by the laws of the State of New
York without giving effect to the principles of conflicts of laws. Guarantor, to
induce IBM GF to accept this Guaranty, agrees that all actions or proceedings
arising directly or indirectly in connection with, out of, related to or from
this Guaranty may be litigated, at IBM GF's and/or IBM Credit's sole discretion
and election, in courts within the State of New York. Guarantor consents and
submits to the jurisdiction of any local, state or federal court located within
that state. Guarantor waives any right to transfer or change the venue of any
litigation brought against Guarantor by IBM GF and/or IBM Credit in accordance
with this paragraph.
Any delay by IBM GF and/or IBM Credit, or IBM GF's and/or IBM Credit's
successors, affiliates or assigns in exercising any or all rights granted IBM GF
and/or IBM Credit under this Guaranty shall not operate as a waiver of those
rights. Furthermore, any failure by IBM GF and/or IBM Credit, IBM GF's and/or
IBM Credit's successors, affiliates or assigns, to exercise any or all rights
granted IBM GF and IBM Credit under this Guaranty shall not operate as a waiver
of IBM GF's and/or IBM Credit's right to exercise any or all of them later.
This document contains the full agreement of the parties concerning the guaranty
of Borrower's Liabilities and can be varied only by a document signed by all of
the parties hereto.
Page 6 of 7
THE PARTIES AGREE THAT ANY ACTION, SUIT OR PROCEEDING, RELATING DIRECTLY OR
INDIRECTLY TO THIS GUARANTY, OR THE RELATIONSHIP BETWEEN IBM CREDIT AND
GUARANTOR, WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE WITHOUT
A JURY. THUS, THE PARTIES HEREBY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH
ACTION, SUIT OR PROCEEDING.
WITNESS PRIORITY FULFILLMENT SERVICES, INC.
GUARANTOR
By:
-------------------------------------- -------------------------------------
Print Name: Print Name:
-------------------------- -----------------------------
Title:
----------------------------------
Date:
(SEAL) ----------------------------------
Guarantor's Address:
------------------------
-----------, ---- ------
ATTEST:
--------------------------------------
Secretary
Print Name:
---------------------------
IBM BELGIUM FINANCIAL SERVICES S.A.
By:
-------------------------------------
Print Name:
-----------------------------
Title:
----------------------------------
Page 7 of 7
EXHIBIT 10.9
IBM BELGIUM FINANCIAL SERVICES S.A.
GUARANTY
(BY CORPORATION)
In consideration of credit and financing accommodations granted or to
be granted by IBM Belgium Financial Services S.A. with a registered number of
R.C. Brussels451.673 with an address of Square Victoria Regina 1,BE-1210
Brussels VAT BE 424300467 ("IBM GF") to Business Supplies Distributors Europe
B.V. and Supplies Distributors S.A. (collectively the "Customer") under a
financing agreement between IBM GF and Customer, which is in the best interest
of PFSweb, Inc. ("Guarantor"), and for other good and valuable consideration
received, Guarantor guaranties to IBM GF and IBM Credit Corporation as agent for
IBM GF ("IBM Credit") the prompt and unconditional performance and payment by
Customer of any and all obligations, liabilities, contracts, mortgages, notes,
trust receipts, secured transactions, inventory financing and security
agreements, and commercial paper on which Customer is in any manner obligated,
heretofore, now, or hereafter owned, contracted or acquired by IBM GF
("Liabilities"), whether the Liabilities are individual, joint, several,
primary, secondary, direct, contingent or otherwise. Guarantor also agrees to
indemnify IBM GF and
IBM Credit and hold IBM GF and IBM Credit harmless against
any losses IBM GF and/or IBM Credit may sustain and expenses they may incur,
suffer or be liable for as a result of or in any way arising out of, following,
or consequential to any transactions with or for the benefit of Customer.
If Customer fails to pay or perform any Liabilities to IBM GF when due,
all Liabilities to IBM GF shall then be deemed to have become immediately due
and payable, and Guarantor shall then pay upon demand the full amount of all
sums owed to IBM GF by Customer, together with all expenses, including
reasonable attorney's fees.
The liability of Guarantor is direct and unconditional and shall not be
affected by any extension, renewal or other change in the terms of payment of
any security agreement or any other agreement between IBM GF and/or IBM Credit
and Customer, or any change in the manner, place or terms of payment or
performance thereof, or the release, settlement or compromise of or with any
party liable for the payment or performance thereof, the release or
non-perfection of any security thereunder, any change in Customer's financial
condition, or the interruption of business relations between IBM GF and
Customer. This Guaranty is and shall be deemed to be a continuing guaranty and
shall remain in full force and effect until the indefeasible payment in full of
the Liabilities and any other amounts payable under this Guaranty and the
cessation of all obligations of IBM GF to extend credit to Customer. Guarantor
acknowledges that its obligations hereunder are in addition to and independent
of any agreement or transaction between IBM GF and/or IBM Credit and Customer or
any other person creating or reserving any lien, encumbrance or security
interest in any property of Customer or any other person as security for any
obligation of Customer. IBM GF and/or IBM Credit need not exhaust their rights
or recourse against Customer or any other person or any security they may have
at any time before being entitled to payment from Guarantor.
This Guaranty is assignable, shall be construed liberally in IBM GF's
and IbM Credit's favor, and shall inure to the benefit of and bind IBM GF's, IBM
Credit's and Guarantor's respective successors, personal representatives and
assigns, and also benefit any of IBM GF's and IBM Credit's existing or future
affiliates that may extend credit to Customer.
If Customer hereafter is incorporated, acquired by a corporation,
dissolved, or otherwise undergoes any change in its management, ownership,
identity or organizational structure, this Guaranty shall continue to extend to
any Liabilities of the Customer or such resulting corporation, dissolved
corporation, or new or changed legal entity or identity to IBM GF.
Guarantor waives: notice of the acceptance of this Guaranty, and of
presentment, demand and protest; notices of nonpayment, nonperformance, any
right of contribution from other guarantors, and dishonor; notices of amount of
indebtedness of Customer outstanding at any time; notices of the number and
amount of advances made by IBM GF to Customer in reliance on this Guaranty;
notices of any legal
Page 1 of 4
proceedings against Customer; notice and hearing as to any prejudgment remedies;
and any other demands and notices required by law. Guarantor further waives all
rights of set-off and all counterclaims against IBM GF and IBM Credit or
Customer. Guarantor also waives any and all rights in and notices or demands
relating to any collateral now or hereafter securing any of the Liabilities,
including, but not limited to, all rights, notices or demands relating, whether
directly or indirectly, to the sale or other disposition of any or all of such
collateral or the manner of such sale or other disposition. All waivers by
Guarantor herein shall survive any termination or revocation of this Guaranty.
Guarantor authorizes IBM GF and IBM Credit to sell at public or private sale or
otherwise realize upon the collateral now or hereafter securing any of the
Liabilities, in such manner and upon such terms and conditions as IBM GF and or
IBM Credit deems best, all without advertisement or notice to Customer,
Guarantor, or any third parties. Guarantor further authorizes IBM GF and IBM
Credit to deal with the proceeds of such collateral as provided in IBM GF's
agreement with Customer, without prejudice to IBM GF's and/or IBM Credit's claim
for any deficiency and free from any right or redemption on the part of
Customer, Guarantor or any third parties, which right or redemption is hereby
waived together with every formality prescribed by custom or by law in relation
to any such sale or other realization.
Guarantor further agrees that all of its right, title and interest in,
to and under any loans, notes, debts and all other liabilities and obligations
whatsoever owed by Customer to Guarantor, whether heretofore or hereafter
created or incurred and for whatever amount, and all security therefor, shall be
now and hereafter at all times fully subordinated to all Liabilities. Guarantor
will not ask, demand or sue for, or take or receive payment of, all or any part
of such loans, notes, debts or any other liabilities or obligations whatsoever
or any security therefor, until and unless all of the Liabilities are paid,
performed and fully satisfied.
Until such time the Liabilities are indefeasibly paid in full, the
Guarantor hereby irrevocably waives for the benefit of IBM GF and IBM Credit,
any and all rights which it presently has, or may hereafter have, whether by
virtue of any payment or payments hereunder or otherwise, to be subrogated to
the rights of IBM GF and IBM Credit against the Customer with respect to any
such indebtedness of the Customer to IBM GF.
Guarantor has made an independent investigation of the financial
condition of Customer and gives this Guaranty based on that investigation and
not upon any representations made by IBM GF and/or IBM Credit. Guarantor
acknowledges that it has access to current and future Customer financial
information which will enable Guarantor to continuously remain informed of
Customer's financial condition. Guarantor also consents to and agrees that the
obligations under this Guaranty shall not be affected by IBM GF's: subsequent
increases or decreases in the credit line that IBM GF may grant to Customer;
substitutions, exchanges or releases of all or any part of the collateral now or
hereafter securing any of the Liabilities; sales or other dispositions of any or
all of the collateral now or hereafter securing any of the Liabilities without
demands, advertisement or notice of the time or place of the sales or other
dispositions; realizing on the collateral to the extent IBM GF and/or IBM
Credit, in their sole discretion, deem proper; or purchases of all or any part
of the collateral for IBM GF's and/or IBM Credit's own account.
This Guaranty and any and all obligations, liabilities, terms and
provisions herein shall survive any and all bankruptcy or insolvency
proceedings, actions and/or claims brought by or against Customer, whether such
proceedings, actions and/or claims are federal and/or state.
This Guaranty is submitted by Guarantor to IBM GF (for IBM GF's
acceptance or rejection thereof) at IBM GF's above specified office; as an offer
by Guarantor to guaranty the credit and financial accommodations provided by IBM
GF to Customer. If accepted, this Guaranty shall be deemed to have been made at
IBM GF's above specified office. This Guaranty and all obligations pursuant
thereto, shall be governed and controlled as to interpretation, enforcement,
validity, construction, effect and in all other respects by the laws of the
State of New York without giving effect to the principles of conflicts of laws.
Guarantor, to induce IBM GF to accept this Guaranty, agrees that all actions or
proceedings arising directly or indirectly in connection with, out of, related
to or from this Guaranty may be litigated, at IBM GF's and/or IBM Credit's sole
discretion and election, in courts within the State of New York. Guarantor
consents and submits to the jurisdiction of any local, state or federal court
located within that state. Guarantor waives any
Page 2 of 4
right to transfer or change the venue of any litigation brought against
Guarantor by IBM GF or IBM Credit in accordance with this paragraph.
Any delay by IBM GF or IBM Credit, or their successors, affiliates or
assigns in exercising any or all rights granted IBM GF and IBM Credit under this
Guaranty shall not operate as a waiver of those rights. Furthermore, any failure
by IBM GF or IBM Credit, their successors, affiliates or assigns, to exercise
any or all rights granted IBM GF and/or IBM Credit under this Guaranty shall not
operate as a waiver of IBM GF's and/or IBM Credit's right to exercise any or all
of them later.
This document contains the full agreement of the parties concerning the
guaranty of Customer's Liabilities and can be varied only by a document signed
by all the parties hereto.
THE PARTIES AGREE THAT ANY ACTION, SUIT OR PROCEEDING RELATING DIRECTLY
OR INDIRECTLY TO THIS GUARANTY OR THE RELATIONSHIP BETWEEN IBM GF, IBM CREDIT
AND GUARANTOR, WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
WITHOUT A JURY. THUS, THE PARTIES HEREBY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY
SUCH ACTION, SUIT OR PROCEEDING.
WITNESS: PFSWEB, INC.
---------------------------------------
(Print Name ) By:
--------------------------- ---------------------------------
Name:
-------------------------------
Title:
(SEAL) ------------------------------
Date: September 27, 2001
Guarantor's Address:
-------------------------------------
-------------------------------------
ATTEST:
-------------------------------------
(Secretary)
(Print Name )
-------------------------
Page 3 of 4
SECRETARY'S CERTIFICATE
I hereby certify that I am the Secretary of the following named
corporation and that execution of the above Guaranty was ratified, approved and
confirmed by the Shareholders at a meeting, if necessary, and pursuant to a
resolution of the Board of Directors of the corporation at a meeting of the
Board of Directors duly called, and which is currently in effect, which
resolution was duly presented, seconded and adopted and reads as follows:
"BE IT RESOLVED that any officer of this corporation is hereby
authorized to execute a guaranty of the obligations of BSD Acquisition Corp.
("Customer") to IBM GF Corporation on behalf of the corporation, which
instrument may contain such terms as the above named persons may see fit
including, but not limited to a waiver of notice of acceptance of this guaranty;
presentment; demand; protest; notices of nonpayment, nonperformance, dishonor,
the amount of indebtedness of Customer outstanding at any time, any legal
proceedings against Customer, and any other demands and notices required by law;
any right of contribution from other guarantors; and all set-offs and
counterclaims."
IN WITNESS WHEREOF and as Secretary of the named corporation I have
hereunto set my hand and affixed the corporate seal on this 27th day of
September, 2001.
PFSWEB, INC.
(SEAL) ---------------------------------
(Secretary)
Page 4 of 4
EXHIBIT 10.10
SUBORDINATED DEMAND NOTE
$6,000,000 September , 2001
FOR VALUE RECEIVED, BSD ACQUISITION CORP., a Delaware corporation
("Borrower"), promises to pay to the order of PRIORITY FULFILLMENT SERVICES,
INC., a Delaware corporation (the "Lender"), on DEMAND (the "Maturity Date") the
principal amount set forth above, or so much thereof, or such other amount, as
shall, from time to time, be advanced by or on behalf of the Lender to, or for
the benefit of, the Borrower, and shall be outstanding, together with interest
thereon as herein provided. All sums hereunder are payable on demand to Lender
at its principal offices in lawful currency of the United States of America and
in immediately available funds. All payments and prepayments made hereunder
shall be made without setoff, counterclaim or deduction of any kind.
The unpaid principal balance hereof shall accrue interest, commencing
on the date hereof and continuing until paid in full, as herein provided, at a
fluctuating rate per annum equal to the Lender's cost of funds for the
corresponding period as determined by the Lender; provided, however, that, for
so long as this Note shall be outstanding, as of the last day of each fiscal
year of the Borrower, all accrued and unpaid
interest for such fiscal year shall
be capitalized and added to the principal balance of this Note and thereafter
interest shall accrue on such increased principal balance. Notwithstanding the
foregoing, however, the interest payable hereunder shall not exceed the highest
lawful rate permitted under the provisions of applicable law (the "Highest
Lawful Rate").
THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY IS SUBORDINATED TO IBM
CREDIT CORPORATION IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THAT CERTAIN
NOTES PAYABLE SUBORDINATION AGREEMENT BY AND AMONG IBM CREDIT CORPORATION,
LENDER AND BORROWER.
Borrower, and each surety, endorser, guarantor and other party now or
hereafter liable for the payment of any sums of money payable on this Note,
hereby severally (a) waive demand, presentment for payment, notice of
nonpayment, protest, notice of protest, notice of intent to accelerate, notice
of acceleration and all other notices, filing of suit and diligence in
collecting this Note or enforcing any other security with respect to same, (b)
agree to any substitution, subordination, exchange or release of any such
security or the release of any parties primarily or secondarily liable hereon,
(c) agree that Lender shall not be required first to institute suit or exhaust
its remedies hereon against Borrower, or others liable or to become liable
hereon or to enforce its rights against them or any security with respect to
same, (d) consent to any and all renewals, extensions, indulgences, releases or
changes, regardless of the number of such renewals, extensions, indulgences,
releases or changes, without notice thereof, and (e) agree to the application of
any deposit balance with Lender as payment or part payment hereon or as an
offset hereto. No waiver by Lender of any of its rights or remedies hereunder or
under any other document evidencing or securing this Note or otherwise shall be
considered a waiver of any other subsequent right or remedy of Lender; no delay
or omission in the exercise or endorsement by Lender of any rights or remedies
shall ever be construed as a waiver of the same or any other right or remedy of
Lender; and no exercise or enforcement of any such right or remedy shall ever be
held to exhaust any right or remedy of Lender.
Failure to pay this Note or any installment of principal or payment of
interest when due shall constitute an Event of Default and shall entitle the
Lender to accelerate the principal amount hereof and all interest then accrued,
which shall at once become due and payable, and to exercise all other rights and
remedies available at law or in equity.
If this Note is not paid at maturity and is placed in the hands of an
attorney for collection, or if it is collected through a bankruptcy or any other
court, then Lender shall be entitled to reasonable attorneys' fees and other
costs of collection.
Borrower acknowledges and agrees that it is the intention of Borrower
and Lender to conform strictly to the usury laws in force that apply to this
Note. Accordingly, this Note is hereby limited so that in no contingency,
whether by reason of acceleration of the maturity of the Note or otherwise,
shall the interest (and all other sums that are deemed to be interest)
contracted for, charged or received by Lender with respect to this Note exceed
the Highest Lawful Rate. If, from any circumstance whatsoever, interest under
this Note would otherwise be payable in excess of the Highest Lawful Rate, and
if from any circumstance Lender shall ever receive anything of value deemed
interest by applicable Law in excess of the Highest Lawful Rate, then Lender's
receipt of such excess interest shall be deemed a mistake and
NOTE - Page 1
the same shall, so long as no Event of Default shall be continuing, at the
option of Borrower, either be repaid to Borrower or credited to the unpaid
principal; provided, however, that if an Event of Default shall have occurred
and be continuing, and Lender shall receive excess interest during such period,
then Lender shall have the option of either crediting such excess amount to
principal or refunding such excess amount for Borrower. If the Note is prepaid
or the maturity of the Note is accelerated by reason of an election of Lender
following an Event of Default, then unearned interest, if any, shall be
cancelled and, if theretofore paid, shall either be refunded to Borrower or
credited on the Note, as Lender elects. All interest paid or agreed to be paid
to Lender shall, to the extent allowed by applicable law, be amortized,
prorated, allocated, and spread throughout the full period until payment in full
of the principal (including the period of any renewal or extension) so that the
interest for such full period shall not exceed the Highest Lawful Rate.
THIS NOTE SHALL BE DEEMED AN INSTRUMENT MADE UNDER THE LAWS OF THE
STATE OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF
AMERICA. PURSUANT TO SECTION 346.004 OF THE TEXAS FINANCE CODE, CHAPTER 346 OF
THE TEXAS FINANCE CODE SHALL NOT APPLY TO THIS NOTE, OR ANY ADVANCE OR LOAN
EVIDENCED BY THIS NOTE.
THE OBLIGATIONS OF BORROWER HEREUNDER ARE PERFORMABLE IN COLLIN COUNTY,
TEXAS. ANY SUIT, ACTION OR PROCEEDING AGAINST BORROWER WITH RESPECT TO THIS NOTE
OR ANY OTHER LOAN DOCUMENT, OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT
THEREOF, MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, COUNTY OF COLLIN,
OR IN THE UNITED STATES COURTS LOCATED IN DALLAS, TEXAS AND BORROWER HEREBY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF ANY
SUCH SUIT, ACTION OR PROCEEDING. BORROWER HEREBY IRREVOCABLY CONSENTS TO SERVICE
OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN SAID COURT BY THE MAILING
THEREOF BY AGENT BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER
AT THE ADDRESS FOR NOTICES AS PROVIDED IN THE AGREEMENT. BORROWER HEREBY
IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS NOTE OR ANY OTHER LOAN DOCUMENT BROUGHT IN THE COURTS LOCATED IN THE STATE
OF TEXAS, COUNTY OF COLLIN, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
BORROWER WAIVES ANY AND ALL RIGHTS THAT IT MAY HAVE TO A TRIAL BY JURY
ON ANY CLAIM, COUNTERCLAIM OR OTHER ACTION, OF ANY NATURE WHATSOEVER, RELATING
TO OR ARISING OUT OF THIS NOTE, ANY OF THE OTHER LOAN DOCUMENTS OR THE
OBLIGATIONS. BORROWER ACKNOWLEDGES THAT THE FOREGOING JURY TRIAL WAIVER IS A
MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THE AGREEMENT AND THAT LENDER IS
RELYING ON SUCH WAIVER IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS
AND REPRESENTS TO LENDER THAT BORROWER HAS REVIEWED THE FOREGOING JURY TRIAL
WAIVER WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH SUCH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THE FOREGOING JURY TRIAL WAIVER MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL BY THE COURT.
BORROWER HEREBY WAIVES ALL OF ITS RIGHTS UNDER THE TEXAS DECEPTIVE
TRADE PRACTICES-CONSUMER PROTECTION ACT (TEX. BUS. & COM. CODE SECTION 17.01
ET SEQ.), A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS, AND
REPRESENTS AND WARRANTS TO LENDER THAT BORROWER (A) HAS KNOWLEDGE AND EXPERIENCE
IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE BORROWER TO EVALUATE THE MERITS
AND RISKS OF THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT AND THIS NOTE, (B)
IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDER, AND
(C) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH SUCH TRANSACTIONS.
NOTE - Page 2
THIS NOTE REPRESENTS THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND
SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF. THIS NOTE REPRESENTS THE FINAL AGREEMENT
AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL
AGREEMENTS BETWEEN THE PARTIES.
BSD ACQUISITION CORP.
a Delaware corporation
By:
-------------------------------------------
Name: Joe Farrell
Title: President
Pay to the order of IBM Credit Corporation:
Priority Fulfillment Services, Inc.
By:
-------------------------------------------
Name: Tom Madden
Title: Chief Financial Officer
NOTE - Page 3