EXHIBIT 10.26

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

by and among

 

THE FINANCIAL INSTITUTIONS NAMED HEREIN

 

As Lenders,

 

WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN)

 

as Agent

 

and

 

PC MALL, INC.
PC MALL SALES, INC.
ELINUX.COM, INC.

CCIT, INC.
WF ACQUISITION SUB, INC.
COMPUTABILITY LIMITED
AF SERVICES, LLC
PC MALL GOV, INC.
SIFY, INC.
ONSALE, INC.
AV ACQUISITION, INC.
MALL ACQUISITION 1, INC.
and
MALL ACQUISITION 2, INC.
as Borrowers

 

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

SECTION 1.

 

DEFINITIONS

2

 

 

 

 

SECTION 2.

 

CREDIT FACILITIES

15

 

 

 

 

2.1

 

Revolving Loans

15

 

 

 

 

2.2

 

Letter of Credit Accommodations

17

 

 

 

 

2.3

 

Term Loan

20

 

 

 

 

2.4

 

Commitments

21

 

 

 

 

SECTION 3.

 

INTEREST AND FEES

21

 

 

 

 

3.1

 

Interest

21

 

 

 

 

3.2

 

Line Increase Fee

23

 

 

 

 

3.3

 

Extension Fee

23

 

 

 

 

3.4

 

Syndication Fee

23

 

 

 

 

3.5

 

Loan Servicing Fee

23

 

 

 

 

3.6

 

Unused Line Fee

23

 

 

 

 

3.7

 

Compensation Adjustment

24

 

 

 

 

3.8

 

Changes in Laws and Increased Costs of Loans

25

 

 

 

 

SECTION 4.

 

CONDITIONS PRECEDENT

26

 

 

 

 

4.1

 

Conditions Precedent to Agreement

26

 

 

 

 

4.2

 

Conditions Precedent to All Loans and Letter of Credit Accommodations

27

 

 

 

 

SECTION 5.

 

GRANT OF SECURITY INTEREST

27

 

 

 

 

SECTION 6.

 

COLLECTION AND ADMINISTRATION

28

 

 

 

 

6.1

 

Borrowers’ Loan Account

28

 

 

 

 

6.2

 

Statements

28

 

 

 

 

6.3

 

Collection of Accounts

28

 

 

 

 

6.4

 

Payments

30

 

 

 

 

6.5

 

Taxes

31

 

 

 

 

6.6

 

Authorization to Make Loans

33

 

 

 

 

6.7

 

Use of Proceeds

33

 

 

 

 

6.8

 

Pro Rata Treatment

34

 

i

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

6.9

 

Sharing of Payments, Etc.

34

 

 

 

 

6.10

 

Settlement Procedures

35

 

 

 

 

SECTION 7.

 

COLLATERAL REPORTING AND COVENANTS

37

 

 

 

 

7.1

 

Collateral Reporting

37

 

 

 

 

7.2

 

Accounts Covenants

38

 

 

 

 

7.3

 

Inventory Covenants

40

 

 

 

 

7.4

 

Equipment Covenants

41

 

 

 

 

7.5

 

Power of Attorney

42

 

 

 

 

7.6

 

Right to Cure

43

 

 

 

 

7.7

 

Access to Premises

43

 

 

 

 

SECTION 8.

 

REPRESENTATIONS AND WARRANTIES

44

 

 

 

 

8.1

 

Corporate Existence, Power and Authority; Subsidiaries

44

 

 

 

 

8.2

 

Financial Statements; No Material Adverse Change

44

 

 

 

 

8.3

 

Chief Executive Office; Collateral Locations

44

 

 

 

 

8.4

 

Priority of Liens; Title to Properties

45

 

 

 

 

8.5

 

Tax Returns

45

 

 

 

 

8.6

 

Litigation

45

 

 

 

 

8.7

 

Compliance with Other Agreements and Applicable Laws

45

 

 

 

 

8.8

 

Bank Accounts

46

 

 

 

 

8.9

 

Environmental Compliance

46

 

 

 

 

8.10

 

Employee Benefits

46

 

 

 

 

8.11

 

Year 2000 Compliance

47

 

 

 

 

8.12

 

Accuracy and Completeness of Information

47

 

 

 

 

8.13

 

Survival of Warranties; Cumulative

48

 

 

 

 

SECTION 9.

 

AFFIRMATIVE AND NEGATIVE COVENANTS

48

 

 

 

 

9.1

 

Maintenance of Existence

48

 

 

 

 

9.2

 

New Collateral Locations

48

 

 

 

 

9.3

 

Compliance with Laws, Regulations, Etc.

48

 

 

 

 

9.4

 

Payment of Taxes and Claims

50

 

ii

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

9.5

 

Insurance

50

 

 

 

 

9.6

 

Financial Statements and Other Information

50

 

 

 

 

9.7

 

Sale of Assets, Consolidation, Merger, Dissolution, Etc.

52

 

 

 

 

9.8

 

Encumbrances

52

 

 

 

 

9.9

 

Indebtedness

53

 

 

 

 

9.10

 

Loans, Investments, Guarantees, Etc.

54

 

 

 

 

9.11

 

Dividends and Redemptions

57

 

 

 

 

9.12

 

Transactions with Affiliates

57

 

 

 

 

9.13

 

Additional Accounts

57

 

 

 

 

9.14

 

Compliance with ERISA

57

 

 

 

 

9.15

 

Adjusted Tangible Net Worth

58

 

 

 

 

9.16

 

Costs and Expenses

58

 

 

 

 

9.17

 

Further Assurances

59

 

 

 

 

SECTION 10.

 

EVENTS OF DEFAULT AND REMEDIES

59

 

 

 

 

10.1

 

Events of Default

59

 

 

 

 

10.2

 

Remedies

61

 

 

 

 

SECTION 11.

 

JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

63

 

 

 

 

11.1

 

Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver

63

 

 

 

 

11.2

 

Waiver of Notices

64

 

 

 

 

11.3

 

Amendments and Waivers

64

 

 

 

 

11.4

 

Waiver of Counterclaims

65

 

 

 

 

11.5

 

Indemnification

66

 

 

 

 

SECTION 12.

 

THE AGENT

66

 

 

 

 

12.1

 

Appointment; Powers and Immunities

66

 

 

 

 

12.2

 

Reliance By Agent

66

 

 

 

 

12.3

 

Events of Default

67

 

 

 

 

12.4

 

Wachovia in its Individual Capacity

67

 

 

 

 

12.5

 

Indemnification

68

 

iii

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

12.6

 

Non-Reliance on Agent and Other Lenders

68

 

 

 

 

12.7

 

Failure to Act

68

 

 

 

 

12.8

 

Additional Loans

69

 

 

 

 

12.9

 

Concerning the Collateral and the Related Financing Agreements

69

 

 

 

 

12.10

 

Field Audits; Examination Reports and other Information; Disclaimer by Lenders

69

 

 

 

 

12.11

 

Collateral Matters

70

 

 

 

 

12.12

 

Agency for Perfection

71

 

 

 

 

12.13

 

Failure to Respond Deemed Consent

71

 

 

 

 

SECTION 13.

 

TERM OF AGREEMENT; MISCELLANEOUS

72

 

 

 

 

13.1

 

Term

72

 

 

 

 

13.2

 

Notices

73

 

 

 

 

13.3

 

Partial Invalidity

73

 

 

 

 

13.4

 

Successors

73

 

 

 

 

13.5

 

Assignments and Participations

74

 

 

 

 

13.6

 

Participant’s Security Interest

76

 

 

 

 

13.7

 

Confidentiality

77

 

 

 

 

13.8

 

Entire Agreement

77

 

 

 

 

13.9

 

Publicity

77

 

 

 

 

SECTION 14.

 

JOINT AND SEVERAL LIABILITY; SURETYSHIP WAIVERS

77

 

 

 

 

14.1

 

Independent Obligations; Subrogation

77

 

 

 

 

14.2

 

Authority to Modify Obligations and Security

78

 

 

 

 

14.3

 

Waiver of Defenses

78

 

 

 

 

14.4

 

Exercise of Agent’s and Lenders’ Rights

79

 

 

 

 

14.5

 

Additional Waivers

79

 

 

 

 

14.6

 

Additional Indebtedness

79

 

 

 

 

14.7

 

Subordination

80

 

 

 

 

14.8

 

Revival

80

 

 

 

 

14.9

 

Understanding of Waivers

81

 

iv

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

Exhibit A

 

Form of Assignment and Acceptance Agreement

 

 

 

Exhibit B

 

Information Certificates

 

 

 

Exhibit C

 

Inventory Turn Calculation

 

 

 

Exhibit D

 

Adjusted Tangible Net Worth Calculation

 

 

 

Schedule 8.4

 

Other Liens

 

 

 

Schedule 8.8

 

Accounts

 

 

 

Schedule 8.9

 

Environmental Disclosures

 

 

 

Schedule 9.9

 

Indebtedness

 

v

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

Dated:  As of August 1, 2005

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This Amended and Restated Loan and Security Agreement (this “Agreement”),dated
as of August 1, 2005, is entered into by and among the financial institutions
from time to time parties hereto, whether by execution of an Assignment and
Acceptance Agreement (as defined below) or this Agreement (each a “Lender” and
collectively “Lenders”), WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN), a
California corporation formerly known as Congress Financial Corporation
(Western), as administrative and collateral agent for Lenders (in such capacity
“Agent”), and PC MALL, INC., a Delaware corporation formerly known as Idea
Mall, Inc. (“PC Mall”), PC MALL SALES, INC., a California corporation formerly
known as Creative Computers, Inc. (“PC Mall Sales”),  ELINUX.COM, INC., a
Delaware corporation (“eLinux”), CCIT, INC., a Delaware corporation formerly
known as Creative Computers Integrated Technologies, Inc. (“CCIT”), WF
ACQUISITION SUB, INC., a Delaware corporation (“WF Sub”), COMPUTABILITY LIMITED,
a Delaware corporation (“Computability”), AF SERVICES, LLC, a Delaware limited
liability company, as successor by merger to AF Services, Inc. (“AF Services”),
PC MALL GOV, INC., a Delaware corporation (“PCMG”), SIFY, INC., a Delaware
corporation formerly known as ClubMac, Inc. (“SIFY”), ONSALE, INC., a Delaware
corporation (“Onsale”), AV ACQUISITION, INC., a Delaware corporation (“AV
Acquisition”), MALL ACQUISITION 1, INC., a Delaware corporation formerly known
as PCM.com, Inc. (“Acquisition 1”) and MALL ACQUISITION 2, INC., a Delaware
corporation formerly known as PCMall.com, Inc. (“Acquisition 2”), jointly and
severally as co-borrowers (each a “Borrower” and collectively “Borrowers”).

 

W I T N E S S E T H:

 

WHEREAS, Congress Financial Corporation (Western), now known as Wachovia Capital
Finance Corporation (Western), and Borrowers previously have entered into that
certain Loan and Security Agreement dated March 7, 2001, as amended by that
certain First Amendment to Loan and Security Agreement and Other Financing
Agreements dated as of August 23, 2002, Second Amendment to Loan and Security
Agreement and Other Financing Agreements dated as of October 31, 2002, Third
Amendment to Loan and Security Agreement dated as of March,  2003, Fourth
Amendment to Loan and Security Agreement dated as of May 14, 2004, Fifth
Amendment to Loan and Security Agreement dated as of May 31, 2004, and Sixth
Amendment to Loan and Security Agreement dated as of February 10, 2005 (as
amended, the “Original Loan Agreement”), pursuant to which Congress Financial
Corporation (Western), now known as Wachovia Capital Finance Corporation
(Western), has provided certain loans and other financial accommodations to
Borrowers; and

 

WHEREAS, the parties hereto have agreed to amend and restate in their entirety
the agreements contained in the Original Loan Agreement as amongst themselves;
and

 

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

WHEREAS, as affiliated companies under the common ownership of PC Mall, the
financial success of each Borrower is largely dependant on the financial success
of the other Borrowers.  Although certain of the Borrowers operate separate and
distinct core businesses in designated geographical areas, administrative and
other service functions are performed for all of the Borrowers under the
auspices of AF Services and all of the Borrowers are providing
technology-related goods and services for the ultimate benefit of PC Mall and
its shareholders.  It would be extremely impractical and unfeasible for each
Borrower to report separately its Eligible Accounts and Eligible Inventory and
to receive separately the proceeds of advances based upon such Borrower’s
Eligible Accounts and Eligible Inventory alone.  Borrowers have therefore
requested that Agent and Lenders make funds available to all Borrowers based
upon all of their Eligible Accounts and Eligible Inventory.  All advances and
credit accommodations will thereby benefit all of the Borrowers by providing an
available source of credit for all of the Borrowers, as needed, to fund their
working capital needs; and

 

WHEREAS, each Lender is willing to agree (severally and not jointly) to make
such loans and provide such financial accommodations to Borrowers on a pro rata
basis according to its Commitment (as defined below) on the terms and conditions
set forth herein and Agent is willing to act as administrative and collateral
agent for Lenders on the terms and conditions set forth herein and in the other
Financing Agreements (as defined below); and

 

WHEREAS, each Borrower hereby restates, ratifies and reaffirms each and every
term and condition set forth in the Original Loan Agreement, as amended and
restated hereby, and the other Financing Agreements effective as of the date
hereof;

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

SECTION 1.  DEFINITIONS.

 

All terms used herein which are defined in Article 1 or Article 9 of the
California Uniform Commercial Code shall have the respective meanings given
therein unless otherwise defined in this Agreement.  All references to the
plural herein shall also mean the singular and to the singular shall also mean
the plural.  All references to Agent, Lenders and Borrowers pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns.  The words “hereof”,
“herein”, “hereunder”, “this Agreement” and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.  An
Event of Default shall exist or continue or be continuing until such Event of
Default is waived in accordance with Section 11.3.  Any accounting term used
herein unless otherwise defined in this Agreement shall have the meaning
customarily given to such term in accordance with GAAP.  For purposes of this
Agreement, the following terms shall have the respective meanings given to them
below.

 

2

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

1.1           “Accounts” shall mean all present and future rights of Borrowers
to payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.

 

1.2           “Adjusted Eurodollar Rate” shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to:  (i) one (1) minus (ii) the Reserve Percentage.  For
purposes hereof, “Reserve Percentage” shall mean the reserve percentage,
expressed as a decimal, prescribed by any United States or foreign banking
authority for determining the reserve requirement which is or would be
applicable to deposits of United States dollars in a non-United States or an
international banking office of Reference Bank used to fund a Eurodollar Rate
Loan or any Eurodollar Rate Loan made with the proceeds of such deposit, whether
or not the Reference Bank actually holds or has made any such deposits or
loans.  The Adjusted Eurodollar Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.

 

1.3           “Adjusted Tangible Net Worth” shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its subsidiaries (if any),
the amount equal to:  (a) the difference between:  (i) the aggregate net book
value of all assets of such Person and its subsidiaries, excluding Intangible
Assets, calculating the book value of inventory for this purpose on a
first-in-first-out basis, after deducting from such book values all appropriate
reserves in accordance with GAAP (including all reserves for doubtful
receivables, obsolescence, depreciation and amortization) and (ii) the aggregate
amount of the indebtedness and other liabilities of such Person and its
subsidiaries (including tax and other proper accruals) plus (b) indebtedness of
such Person and its subsidiaries which is subordinated in right of payment to
the full and final payment of all of the Obligations on terms and conditions
acceptable to Agent.

 

1.4           “Apple Computer” shall mean Apple Computer, Inc., a California
corporation.

 

1.5           “Apple Intercreditor Agreement” shall mean that certain
Intercreditor and Release Agreement dated as of March 7, 2001 between Apple
Computer and Congress Financial Corporation (Western), now known as Wachovia
Capital Finance Corporation (Western), as lender under the Original Loan
Agreement, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

 

1.6           “Appraised Liquidation Value” shall mean, with respect to Eligible
Inventory, the appraised value of such Eligible Inventory, expressed as a
percentage of the Value thereof, as determined by Agent as of any date on an
“orderly liquidation” basis, net of all estimated liquidation expenses,
shrinkage and markdowns, pursuant to an appraisal conducted, at Borrowers’
expense, by an independent appraisal firm acceptable to Agent or such value as
otherwise determined by Agent in its sole discretion.

 

1.7           “Assignment and Acceptance” shall mean an Assignment and
Acceptance substantially in the form of Exhibit A attached hereto delivered to
Agent in connection with an

 

3

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

assignment of a Lender’s interest hereunder in accordance with the provisions of
Section 13.5 hereof.

 

1.8           “Availability Reserves” shall mean, as of any date of
determination, such amounts as Agent may from time to time establish and revise
in its commercially reasonable discretion reducing the amount of Revolving Loans
and Letter of Credit Accommodations which would otherwise be available to
Borrowers under the lending formula(s) provided for herein:  (a) to reflect
events, conditions, contingencies or risks which, as determined by Agent in good
faith, do affect either (i) the Collateral or any other property which is
security for the Obligations or its value or (ii) the security interests and
other rights of Agent in the Collateral (including the enforceability,
perfection and priority thereof) or (b) to reflect Agent’s good faith belief
that any collateral report or financial information furnished by or on behalf of
any Borrower or any Obligor to any Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) to reflect any state of
facts which Agent determines in good faith constitutes an Event of Default. 
Without limiting the generality of the foregoing, Agent (i) shall establish on
the date hereof and maintain throughout the term of this Agreement and
throughout any renewal term an Availability Reserve for an amount equal to two
(2) months (or one (1) month in the case of the warehouse in Tennessee) of
Borrowers’ gross rent and other obligations as lessee for each leased premises
of Borrowers which is either a warehouse location or is located in a state where
a landlord may be entitled to a priority lien on Collateral to secure unpaid
rent and with respect to each such property the landlord has not executed a form
of waiver and consent acceptable to Agent, (ii) shall establish on the date
hereof and maintain throughout the term of this Agreement and throughout any
renewal term an Availability Reserve for an amount equal to the greater of the
Value of the Inventory subject to the security interest of Apple Computer (or
any other Persons who hold a security interest prior to Agent in the sale
proceeds of Inventory, unless and until those Persons have released or
subordinated their security interests against Borrowers in a manner satisfactory
to Agent) or the sum of the Borrowers’ payables and accrued payables to Apple
Computer (or such other Persons), provided, that, the Availability Reserve for
the sum of such payables to Apple Computer shall be based upon the amounts
reported from time to time by Apple Computer to Agent pursuant to the Apple
Intercreditor Agreement, as such amounts may be reduced by wire transfers made
by Agent to Apple Computer upon the written instructions of Borrowers, and
(iii) shall establish on the date hereof and maintain throughout the term of
this Agreement and throughout any renewal term Availability Reserves for Letter
of Credit Accommodations as provided in Section 2.2(c) hereof and without
duplication of Section 2.2(c).

 

1.9           “Blocked Account” shall have the meaning set forth in Section 6.3
hereof.

 

1.10         “Business Day” shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York or the State of North Carolina, and a day on
which the Reference Bank, Agent and each Lender are open for the transaction of
business, except that if a determination of a Business Day shall relate to any
Eurodollar Rate Loans, the term Business Day shall also exclude any day on which
banks are closed for dealings in dollar deposits in the London interbank market
or other applicable Eurodollar Rate market.

 

4

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

1.11         “Closing Date” shall mean the date on which all of the conditions
precedent set forth in Section 4 hereof are fully satisfied.

 

1.12         “Code” shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.

 

1.13         “Collateral” shall have the meaning set forth in Section 5 hereof.

 

1.14         “Commitment” shall mean, as to any Lender, the Revolving Loan
Commitment of such Lender, the Term Loan Commitment of such Lender, if any or
the Total Commitment of such Lender, as the context requires.

 

1.15         “Credit Card/Check Processing Agreements” shall mean all agreements
now or hereafter entered into by any Borrower with any Credit Card Issuer or
Credit Card/Check Processor as the same may now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.16         “Credit Card Issuer” shall mean any person who issues or whose
members issue credit cards used by customers of any Borrower to purchase goods,
including, without limitation, MasterCard or VISA bank credit or debit cards or
other bank credit or debit cards, and American Express, Discover, Diners Club,
Carte Blanche, and other non-bank credit or debit cards.

 

1.17         “Credit Card/Check Processor” shall mean any servicing or
processing agent or any factor or financial intermediary who facilities,
services, processes, collects, guarantees or manages the credit authorization,
billing transfer and/or payment from a Credit Card Issuer or on a check and
other procedures with respect to any sales transactions of any Borrower
involving credit card, debit card or check purchases by customers.

 

1.18         “Credit Card/Check Processing Receivables” shall mean all Accounts
consisting of the present and future rights of any Borrower to payment by Credit
Card Issuers or Credit Card/Check Processors for merchandise sold and delivered
to customers of such Borrower who have purchased such goods using a credit card,
debit card or check.

 

1.19         “Defaulting Lender” shall have the meaning set forth in
Section 6.10(d) hereof.

 

1.20         “Eligible Accounts” shall mean Accounts created by Borrowers which
are and continue to be acceptable to Agent based on the criteria set forth
below.  In general, Accounts shall be Eligible Accounts if:

 

(a)           such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrowers in the ordinary course of their business which
transactions are completed in accordance with the terms and provisions contained
in any documents related thereto;

 

(b)           in the case of Credit Card/Check Processing Receivables, such
Accounts are not unpaid more than five (5) days after the date of the original
invoice for them, and in the case of all other Accounts, such Accounts are not
unpaid more than one hundred twenty (120)

 

5

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

days after the date of the original invoice for them and are not unpaid more
than sixty (60) days after the original due date for them;

 

(c)           such Accounts comply with the terms and conditions contained in
Section 7.2(d) of this Agreement, and in the case of Credit Card/Check
Processing Receivables, Agent shall have received a direction letter duly
executed and delivered by the Credit Card Issuer or Credit Card/Check Processor
with respect thereto in form and substance reasonably satisfactory to Agent;

 

(d)           such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent (except for returns made in
the ordinary course of business and in accordance with Borrowers’ present
practices);

 

(e)           the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada, or, at
Agent’s option, if either:  (i) the account debtor has delivered to Borrowers an
irrevocable letter of credit issued or confirmed by a bank satisfactory to Agent
and payable only in the United States of America and in U.S. dollars, sufficient
to cover such Account, in form and substance satisfactory to Agent and, if
required by Agent, the original of such letter of credit has been delivered to
Agent or Agent’s agent and the issuer thereof notified of the assignment of the
proceeds of such letter of credit to Agent, or (ii) such Account is subject to
credit insurance payable to Agent issued by an insurer and on terms and in an
amount acceptable to Agent, or (iii) such Account is otherwise acceptable in all
respects to Agent (subject to such lending formula with respect thereto as Agent
may determine);

 

(f)            such Accounts do not consist of progress billings, bill and hold
invoices or retainage invoices, except as to bill and hold invoices, if Agent
shall have received an agreement in writing from the account debtor, in form and
substance satisfactory to Agent, confirming the unconditional obligation of the
account debtor to take the goods related thereto and pay such invoice;

 

(g)           the account debtor with respect to such Accounts has not asserted
a counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts
(but the portion of the Accounts of such account debtor in excess of the amount
at any time and from time to time owed by any Borrower to such account debtor or
claimed owed by such account debtor may be deemed Eligible Accounts);

 

(h)           there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts (other than the
collectability of such Accounts by Agent by virtue of the Federal Assignment of
Claims Act of 1940, as amended or any similar state or local law, if
applicable), or reduce the amount payable or delay payment thereunder;

 

6

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(i)            such Accounts are subject to the first priority, valid and
perfected security interest of Agent and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;

 

(j)            neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with any Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise; provided that, up to
$5,000,000 of the Accounts of eCost.com, Inc. may, at Agent’s commercially
reasonable discretion and subject to the other eligibility criteria set forth
herein, be deemed Eligible Accounts;

 

(k)           there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor’s financial
condition;

 

(l)            such Accounts of a single account debtor or its affiliates do not
constitute more than fifteen percent (15%) of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);

 

(m)          such Accounts are not owed by an account debtor who has Accounts
unpaid more than one hundred twenty (120) days after the date of the original
invoice for them or more than sixty (60) days after the original due date for
them which constitute more than fifty percent (50%) of the total Accounts of
such account debtor;

 

(n)           such Accounts are not owed by consumers;

 

(o)           such Accounts are not service Accounts (other than for a
manufacturer or other third party warranty contract);

 

(p)           if a bankruptcy petition is filed by or against any Borrower, and
without limiting Lender’s rights and remedies upon such filing, such Accounts
are not generated from the sale of Inventory subject to the security interest of
IBM Credit Corporation;

 

(q)           such Accounts are owed by account debtors deemed creditworthy at
all times by Agent, as determined by Agent in its commercially reasonable
discretion; and

 

(r)            such Accounts owed by the United States of America, any State,
political subdivision, agency or instrumentality thereof, with respect to which
Borrowers have not fully complied with the Federal Assignment of Claims Act of
1940, as amended, or any similar state or local law, if applicable, do not
constitute more than twenty percent (20%) of all otherwise Eligible Accounts
(but the portion of such Accounts not in excess of such percentage may be deemed
Eligible Accounts).

 

Any Accounts which are not Eligible Accounts shall nevertheless be part of the
Collateral.

 

1.21         “Eligible Inventory” shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrowers which
are located at Borrowers’

 

7

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

warehouse location(s) or retail store(s) and which are acceptable to Agent based
on the criteria set forth below.  In general, Eligible Inventory shall not
include (a) raw materials or work-in-process; (b) components which are not part
of finished goods; (c) spare parts for equipment (it being understood that parts
held for sale in their then current condition shall not be deemed spare parts
for these purposes); (d) packaging and shipping materials; (e) supplies and
fixed assets used or consumed in Borrowers’ business; (f) Inventory at premises
other than those owned or controlled by Borrowers, except if Agent shall have
received an agreement in writing from the person in possession of such Inventory
in form and substance satisfactory to Agent acknowledging Agent’s priority
security interest in the Inventory, waiving security interests and claims by
such person against the Inventory and permitting Agent access to, and the right
to remain on, the premises so as to exercise Agent’s rights and remedies and
otherwise deal with the Collateral; (g) Inventory in transit, unless such
Inventory is in transit to one of Borrowers’ retails stores or warehouse
locations under a Letter of Credit Accommodation hereunder, and the bill of
lading covering such Inventory names Agent as consignee and otherwise contains
terms acceptable to Agent, and all originals of such bill of lading are in the
possession of Agent, Reference Bank or another bailee acceptable to Agent;
(h) Inventory subject to a security interest or lien in favor of any person
other than Agent except those permitted in this Agreement; (i) bill and hold
goods; (j) unserviceable or obsolete Inventory; (k) Inventory which is not
subject to the valid and perfected security interest of Agent, for itself and
the ratable benefit of Lenders; (l) returned (except for closed box returns),
damaged and/or defective Inventory; (m) Inventory purchased or sold on
consignment; (n) Inventory located at service centers; (o) software, books,
magazines, manuals, videos and similar Inventory; (p) Inventory purchased under
a Letter of Credit Accommodation that is outstanding as contemplated in
Section 2.2(c)(i) hereof, and (q) Inventory subject to the security interest of
IBM Credit Corporation or Hewlett-Packard Company.  Any Inventory which is not
Eligible Inventory shall nevertheless be part of the Collateral.

 

1.22         “Eligible Transferee” shall mean (a) any affiliate of Lender;
(b) any other commercial bank or other financial institution and (c) any
“accredited investor” (as defined in Regulation D under the Securities Act of
1933) approved by Agent, and except as otherwise provided in Section 13.5
hereof, as to any such other commercial bank or other financial institution or
any such accredited investor, as approved by Borrowers, such approval of
Borrowers not to be unreasonably withheld, conditioned or delayed and such
approval to be deemed given by Borrowers if no objection from Borrowers is
received within ten (10) Business Days after written notice of such proposed
assignment has been provided by Agent; provided, that, neither any Borrower nor
any affiliate of any Borrower shall qualify as an Eligible Transferee.

 

1.23         “Environmental Laws” shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower and any
governmental authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing,

 

8

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials.  The term “Environmental Laws”
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act,
the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.

 

1.24         “Equipment” shall mean all of Borrowers’ now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.

 

1.25         “ERISA” shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.

 

1.26         “ERISA Affiliate” shall mean any person required to be aggregated
with any Borrower or any of its affiliates under Sections 414(b), 414(c),
414(m) or 414(o) of the Code.

 

1.27         “Eurodollar Rate Loans” shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.

 

1.28         “Eurodollar Rate” shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrowers and approved by Agent) on or
about 9:00 a.m.  (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrowers in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrowers.

 

1.29         “Eurodollar Rate Margin” based upon the audited net income of
Borrowers on a consolidated basis during any twelve (12) month fiscal year shall
mean (a) two percent (2.00%) per annum if such audited net income was greater
than Two Million Five Hundred Thousand Dollars ($2,500,000), (b) two and
one-quarter percent (2.25%) per annum if such audited net income was equal to or
less than Two Million Five Hundred Thousand Dollars ($2,500,000) but

 

9

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

not less than One Dollar ($1), and (c) two and one-half percent (2.50%) per
annum if such audited net income was less than One Dollar ($1), as adjusted
pursuant to Section 3.1(d) hereof, provided, that, the Eurodollar Rate Margin
shall not be reduced if an Event of Default has occurred and is continuing as
determined by Lender.  For the purposes of this Section 1.32, the ‘audited net
income’ of Borrowers on a consolidated basis shall mean such net income as
determined in accordance with GAAP based upon the audited financial statements
furnished to Agent in accordance with clause 9.6(a) hereof, without, however,
giving effect to any net income or loss of eCost.com, Inc., a Delaware
corporation, any extraordinary gains or extraordinary losses, any non-cash
write-ups or non-cash write-downs or any options given to Borrowers’ employees
to acquire the capital stock of PC Mall.

 

1.30         “Event of Default” shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.

 

1.31         “Excess Availability” shall mean the amount, as determined by
Agent, calculated at any time, equal to:

 

(a)           the lesser of (i) the amount of the Revolving Loans available to
Borrowers as of such time (based on the applicable advance rates set forth in
Section 2.1(a) hereof), subject to the sublimits and Availability Reserves from
time to time established by Lender hereunder and (ii) the Maximum Credit (less
the then outstanding principal amount of the Term Loan), minus

 

(b)           the amount of all then outstanding and unpaid Obligations (but not
including for this purpose the then outstanding principal amount of the Term
Loan).

 

1.32         “Final Maturity Date” shall mean March 7, 2008.

 

1.33         “Financing Agreements” shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by any
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.

 

1.34         “GAAP” shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.15 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to Agent prior to
the date hereof.

 

1.35         “Hazardous Materials” shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without

 

10

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

limitation, materials which include hazardous constituents), sewage, sludge,
industrial slag, solvents and/or any other similar substances, materials, or
wastes and including any other substances, materials or wastes that are or
become regulated under any Environmental Law (including, without limitation any
that are or become classified as hazardous or toxic under any Environmental
Law).

 

1.36         “Information Certificates” shall mean the Information Certificates
of Borrowers constituting Exhibit B hereto containing material information with
respect to Borrowers, their business and assets provided by or on behalf of
Borrowers to Agent in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.

 

1.37         “Intangible Assets” shall mean as to any Person (a) all loans or
advances to, and other receivables owing from, any officers, employers,
subsidiaries or other affiliates of such Person, (b) all investments of such
Person, (c) all goodwill of such Person, and (d) all other assets of such Person
deemed intangible under GAAP or determined to be intangible by Agent in good
faith.

 

1.38         “Interest Period” shall mean for any Eurodollar Rate Loan, a period
of approximately one (1), two (2), or three (3) months duration as Borrowers may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrowers may
not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.

 

1.39         “Inventory” shall mean all of Borrowers’ now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.

 

1.40         “Inventory Advance Rates” shall mean the advance rates applicable
to Eligible Inventory as determined in accordance with Section 2.1(a)(ii)(A).

 

1.41         “Letter of Credit Accommodations” shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either
(a) issued, opened or provided by Agent or any Lender for the account of any
Borrower or any Obligor or (b) with respect to which Agent on behalf of Lenders
has agreed to indemnify the issuer or guaranteed to the issuer the performance
by any Borrower of its obligations to such issuer.

 

1.42         “Loans” shall mean the Revolving Loans and the Term Loan.

 

1.43         “Maximum Credit” shall mean, with reference to the Revolving Loans,
the Term Loan and the Letter of Credit Accommodations, the amount of One Hundred
Million Dollars ($100,000,000).

 

1.44         Net Amount of Eligible Accounts” shall mean the gross amount of
Eligible Accounts less returns, discounts, claims, credits and allowances of any
nature at any time issued, owing, granted, outstanding, available or claimed
with respect thereto.

 

11

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

1.45         “New Lending Office” shall have the meaning set forth in
Section 6.5(e) hereof.

 

1.46         “Non-U.S. Lender” shall have the meaning set forth in
Section 6.5(e) hereof.

 

1.47         “Obligations” shall mean any and all Revolving Loans, the Term
Loan, the Letter of Credit Accommodations and all other obligations, liabilities
and indebtedness of every kind, nature and description owing by any Borrower to
Agent or any Lender and/or any of their respective affiliates, including
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, whether arising
under this Agreement or otherwise, whether now existing or hereafter arising,
whether arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to any Borrower
under the United States Bankruptcy Code or any similar statute (including,
without limitation, the payment of interest and other amounts which would accrue
and become due but for the commencement of such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by Agent or any Lender.

 

1.48         “Obligor” shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrowers.

 

1.49         “Original Loan Agreement” shall have the meaning set forth in the
recitals hereto.

 

1.50         “Other Taxes” shall mean any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any of the
other Financing Agreements.

 

1.51         “Participant” shall mean any person which at any time participates
with any Lender in respect of the Loans, the Letter of Credit Accommodations or
other Obligations or any portion thereof.

 

1.52         “Payment Account” shall have the meaning set forth in Section 6.3
hereof.

 

1.53         “Person” or “person” shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Internal Revenue Code of
1986, as amended), limited liability company, limited liability partnership,
business trust, unincorporated association, joint stock corporation, trust,
joint venture or other entity or any government or any agency or instrumentality
or political subdivision thereof.

 

1.54         “Prime Rate” shall mean the rate from time to time publicly
announced by Reference Bank, or its successors, from time to time as its prime
rate, whether or not such announced rate is the best rate available at such
bank.

 

1.55         “Prime Rate Loans” shall mean any Loans or portion thereof on which
interest is payable based upon the Prime Rate in accordance with the terms
hereof.

 

12

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

1.56         “Pro Rata Share” shall mean:

 

(a)           with respect to a Revolving Loan Lender’s obligation to make
Revolving Loans and receive payments relative thereto, the fraction (expressed
as a percentage) the numerator of which is such Lender’s Revolving Loan
Commitment and the denominator of which is the aggregate amount of all of the
Revolving Loan Commitments of Revolving Loan Lenders, as adjusted from time to
time in accordance with the provisions of Section 13.5 hereof; provided, that,
if the Revolving Loan Commitments have been terminated, the numerator shall be
the unpaid amount of such Lender’s Revolving Loans and its interest in the
Letter of Credit Accommodations and the denominator shall be the aggregate
amount of all unpaid Revolving Loans and Letter of Credit Accommodations; and

 

(b)           with respect to a Term Loan Lender’s obligation to make Term Loans
and receive payments relative thereto, the fraction (expressed as a percentage)
the numerator of which is such Lender’s Term Loan Commitment and the denominator
of which is the aggregate amount of all of the Term Loan Commitments of Term
Loan Lenders, as adjusted from time to time in accordance with Section 13.5
hereof, provided, that, if the Term Loan Commitments have been terminated, the
numerator shall be the unpaid amount of such Lender’s Term Loans and the
denomination shall be the aggregate amount of all unpaid Term Loans; and

 

(c)           with respect to all other matters (including the indemnification
obligations arising under Section 12.5 hereof), the fraction (expressed as a
percentage) the numerator of which is such Lender’s Total Commitment to make
Loans and the denominator of which is the aggregate amount of all of the Total
Commitments of Lenders.

 

1.57         “PTCE 95-60” shall have the meaning set forth in
Section 13.5(a) hereof.

 

1.58         “Real Estate” shall mean the real estate owned by Creative
Computers and commonly known as 1505 Wilshire Boulevard, Santa Monica,
California.

 

1.59         “Records” shall mean all of Borrowers’ present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrowers with respect to the
foregoing maintained with or by any other person).

 

1.60         “Reference Bank” shall mean Wachovia Bank, National Association,
its successor or such other bank as Agent may from time to time designate.

 

1.61         “Register” shall have the meaning set forth in
Section 13.5(b) hereof.

 

1.62         “Report” and “Reports” shall have the meaning set forth in
Section 12.10(a) hereof.

 

13

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

1.63         “Required Lenders” shall mean, at any time, those Lenders whose Pro
Rata Shares, based on their respective Total Commitments, aggregate sixty-six
and two-thirds (66 2/3%) percent or more of the aggregate of the Total
Commitments of all Lenders, or if the Commitments shall have been terminated,
Lenders to whom at least sixty-six and two-thirds (66 2/3%) percent of the then
outstanding Obligations are owing.

 

1.64         “Revolving Loan Commitment” shall mean, at any time, as to each
Revolving Loan Lender, the principal amount set forth below such Lender’s
signature on the signature pages hereto designated as the Revolving Loan
Commitment or on Schedule 1 to the Assignment and Acceptance pursuant to which
such Lender became a Lender hereunder in accordance with the provisions of
Section 13.5 hereof, as the same may be adjusted from time to time in accordance
with the terms hereof; sometimes being collectively referred to herein as
“Revolving Loan Commitments.”

 

1.65         “Revolving Loan Lenders” shall mean, collectively, those Lenders
making Revolving Loans or providing Letter of Credit Accommodations and their
respective successors and assigns; sometimes being referred to herein
individually as a “Revolving Loan Lender.”

 

1.66         “Revolving Loans” shall mean the loans now or hereafter made by or
on behalf of any Revolving Loan Lender or by Agent for the ratable account of
any Revolving Loan Lender, to or for the benefit of Borrowers on a revolving
basis (involving advances, repayments and readvances) as set forth in
Section 2.1 hereof.

 

1.67         “Settlement Period” shall have the meaning set forth in
Section 6.10(b) hereof.

 

1.68         “Slow Moving Inventory” shall mean Inventory held by Borrowers for
more than one hundred twenty (120) days.

 

1.69         “Special Agent Advances” shall have the meaning set forth in
Section 12.11(a) hereof.

 

1.70         “Taxes” shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of any Lender, such taxes (including income
taxes, franchise taxes or capital taxes) as are imposed on or measured by such
Lender’s net income or capital by any jurisdiction (or any political subdivision
thereof).

 

1.71         “Term Loan Commitment” shall mean, at any time, as to each Term
Loan Lender, the principal amount set forth below such Lender’s signature on the
signature pages hereto designated as the Term Loan Commitment or on Schedule 1
to the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 13.5 hereof, as the same
may be adjusted from time to time in accordance with the terms hereof; sometimes
being collectively referred to herein as “Term Loan Commitments.”

 

1.72         “Term Loan Lenders” shall mean, collectively, those Lenders who
have made the Term Loans, and their respective successors and assigns; sometimes
being referred to herein individually as a “Term Loan Lender.”

 

14

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

1.73         “Term Loans” shall have the meaning set forth in Section 2.3
hereof; sometimes being referred to herein individually as a “Term Loan.”

 

1.74         “Term Notes” shall mean, collectively, those certain Term
Promissory Notes, of even date herewith, issued by Borrowers to each Term Loan
Lender, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

 

1.75         “Total Commitment” shall mean, at any time, as to each Lender, the
principal amount set forth below such Lender’s signature on the signature
pages hereto designated as the Total Commitment or on Schedule 1 to the
Assignment and Acceptance pursuant to which such Lender become a Lender
hereunder in accordance with the provisions of Section 13.5 hereof, as the same
may be adjusted from time to time in accordance with the terms hereof; sometimes
being collectively referred to herein as “Total Commitments.”

 

1.76         “Transferee” shall have the meaning set forth in
Section 6.5(a) hereof.

 

1.77         “UCC” shall mean the Uniform Commercial Code as in effect in the
State of California, and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial Code
as in effect in the State of California on the date hereof shall continue to
have the same meaning notwithstanding any replacement or amendment of such
statute except as Lender may otherwise determine.

 

1.78         “Value” shall mean, as determined by Agent in good faith, with
respect to Inventory, the lower of (a) cost under the first-in-first-out method,
net of vendor discounts or (b) market value.

 

SECTION 2.  CREDIT FACILITIES.

 

2.1           Revolving Loans.

 

(a)           Subject to, and upon the terms and conditions contained herein,
each Revolving Loan Lender severally (and not jointly) agrees to fund its Pro
Rata Share of  Revolving Loans to Borrowers from time to time in amounts
requested by Borrowers up to the amount equal to the sum of:

 

(i)            eighty-five percent (85%) of the Net Amount of Eligible Accounts,
provided, that, such percentage advance rate shall be reduced by one percent
(1%) for each percentage point by which the dilution rate on the Accounts, as
determined by Lender in good faith based on the ratio of (A) the aggregate
amount of reductions in Accounts other than as a result of payments in cash, to
(B) the aggregate amount of total sales, exceeds five percent (5%), and provided
further, that, the total sum available under this Section 2.1(a)(i) based upon
Credit Card/Check Processing Receivables shall not exceed Seven Million Five
Hundred Thousand Dollars ($7,500,000) at any time; plus

 

15

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(ii)           the lesser of:

 

(A)          the sum of (1) sixty percent (60%) of the Value of Eligible
Inventory not consisting of office supplies (held for sale by Borrowers),
refurbished Inventory, Slow Moving Inventory, or the Inventory described in
clause (3) immediately below, not to exceed eighty-five percent (85%) of the
Appraised Liquidation Value of such Eligible Inventory, plus (2) the lesser of
Two Million Dollars ($2,000,000) or forty percent (40%) of the Value of Eligible
Inventory consisting of office supplies (held for sale by Borrowers),
refurbished Inventory or Slow Moving Inventory and not consisting of the
Inventory described in clause (3) immediately below, not to exceed eighty-five
percent (85%) of the Appraised Liquidation Value of such Eligible Inventory,
plus (3) seventy-five percent (75%) of the Value of Eligible Inventory that is
in its original closed box, that has been held by Borrowers no more than one
hundred twenty (120) days, and for which Apple Computer, upon its repossession
thereof, is committed to credit the sum of the purchase prices thereof, net of
certain rebates and other allowances, pursuant to the terms and provisions of
the Apple Intercreditor Agreement, provided, that, the total sum available under
this Section 2.1(a)(ii)(A) based upon Eligible Inventory that is in transit from
Apple Computer to Borrowers shall not exceed Two Million Dollars ($2,000,000) at
any time, unless Borrowers have provided Agent with a current borrowing base
certificate (separately identifying such in-transit Eligible Inventory) and a
current certificate of Borrowers’ payables and accrued payables to Apple
Computer (with such supporting documentation as Agent may reasonably request and
separately identifying the payables owing for Inventory in transit from Apple
Computer to Borrowers), which certificates shall be in form reasonably
satisfactory to Agent, in which case, for a period of five (5) Business Days
after Lender’s receipt and satisfactory review of such certificates, the total
sum available hereunder based upon such in-transit Eligible Inventory shall not
exceed Ten Million Dollars ($10,000,000); or

 

(B)           Forty Million Dollars ($40,000,000), provided, that, such amount
shall be reduced to (1) Thirty Million Dollars ($30,000,000) if the turn of
Borrowers’ Inventory is slower than twenty-five (25) days but not slower than
thirty (30) days, as determined by Agent on a rolling six (6) month basis in
accordance with Exhibit C attached hereto as the product of three hundred sixty
(360) times the quotient of the average total Value of Inventory, divided by the
cost of all Inventory sold, and (2) Twenty Million Dollars ($20,000,000) if such
turn of Borrowers’ Inventory is slower than thirty (30) days, and provided
further, that, if Borrowers do not provide Agent, on or before the tenth (10th)
Business Day of any month, with a certificate (in form satisfactory to Agent)
that such turn of Borrowers’ Inventory was not slower than a specified number of
days during the six (6) months ending on the last day of the immediately
preceding month, then such amount shall be reduced to Twenty Million Dollars
($20,000,000), minus

 

(iii)          the then undrawn amounts of outstanding Letter of Credit
Accommodations, multiplied by the applicable percentages as provided for in
Section 2.2(c)(i) or Section 2.2(c)(ii) hereof; minus

 

(iv)          any Availability Reserves.

 

16

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(b)           Agent may, in its commercially reasonable discretion, from time to
time, upon not less than ten (10) days prior notice to Borrowers reduce the
lending formula(s) with respect to Eligible Inventory to the extent that Agent
determines that:

 

(i)            the number of days of the turnover, or the mix, of such Inventory
for any period has changed in any materially adverse respect; or

 

(ii)           the nature and quality of the Inventory has deteriorated in any
material respect.  In determining whether to reduce the lending formula(s),
Agent may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts, Eligible Inventory or in
establishing Availability Reserves.

 

(c)           Except in Agent’s discretion, with the consent of all Lenders, the
aggregate amount of the Loans, the Letter of Credit Accommodations and other
Obligations outstanding at any time shall not exceed the Maximum Credit.  In the
event that the outstanding amount of any component of the Loans and Letter of
Credit Accommodations, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations and other Obligations, exceeds the amounts
available under the lending formulas set forth in Section 2.1(a) hereof, the
sublimits for Letter of Credit Accommodations set forth in Section 2.2(d) or the
Maximum Credit, as applicable, such event shall not limit, waive or otherwise
affect any rights of Agent or any Lender in that circumstance or on any future
occasions and Borrowers shall, upon demand by Agent, which may be made at any
time or from time to time, immediately repay to Agent, for the ratable benefit
of Lenders, the entire amount of any such excess(es) for which payment is
demanded.

 

(d)           For purposes only of applying the sublimit on Revolving Loans
based on Eligible Inventory pursuant to Section 2.1(a)(ii)(B) Agent may treat
the then undrawn amounts of outstanding Letter of Credit Accommodations for the
purpose of purchasing Eligible Inventory as Revolving Loans to the extent Agent
is in effect basing the issuance of the Letter of Credit Accommodations on the
Value of the Eligible Inventory being purchased with such Letter of Credit
Accommodations.  In determining the actual amounts of such Letter of Credit
Accommodations to be so treated for purposes of the sublimit, the outstanding
Revolving Loans and Availability Reserves shall be attributed first to any
components of the lending formulas in Section 2.1(a) that are not subject to
such sublimit, before being attributed to the components of the lending formulas
subject to such sublimit.

 

2.2           Letter of Credit Accommodations.

 

(a)           Subject to, and upon the terms and conditions contained herein, at
the request of Borrowers, Agent agrees, for the ratable risk of each Revolving
Loan Lender according to its Pro Rata Share, to provide or arrange for Letter of
Credit Accommodations for the account of Borrowers containing terms and
conditions acceptable to Agent and the issuer thereof.  Any payments made by
Agent or any Lender to any issuer thereof and/or related parties in connection
with the Letter of Credit Accommodations shall constitute additional Revolving
Loans to Borrowers pursuant to this Section 2.

 

17

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(b)           In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrowers
shall pay to Agent for the benefit of Revolving Loan Lenders, a letter of credit
fee at a rate equal to one and one-half percent (1.50%) per annum on the daily
outstanding balance of the Letter of Credit Accommodations for the immediately
preceding month (or part thereof), payable in arrears as of the first day of
each succeeding month; provided, however, that so long as no Event of Default
has occurred and is continuing, such letter of credit fee shall not be charged
on any Letter of Credit Accommodations up to an aggregate outstanding sum of
Twenty Million Dollars ($20,000,000) that are issued in favor of any financial
institution providing floor plan financing to Borrowers, and provided, further,
that so long as no Event of Default has occurred and is continuing, such letter
of credit fee on any Letter of Credit Accommodations issued in favor of any such
floor planning financial institutions that exceed Twenty Million Dollars
($20,000,000) in the aggregate outstanding shall be at a rate equal to one
percent (1.0%) per annum.  Notwithstanding the foregoing, such letter of credit
fee shall be increased, at Agent’s option without notice, to three and one-half
percent (3.50%) per annum upon the occurrence and during the continuation of an
Event of Default, and for the period on or after the date of termination or
non-renewal of this Agreement.  Such letter of credit fee shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed and
the obligation of Borrowers to pay such fee shall survive the termination or
non-renewal of this Agreement.

 

(c)           No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrowers (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than:

 

(i)            if the proposed Letter of Credit Accommodation is for the purpose
of purchasing Eligible Inventory, the sum of:

 

(A)          the product of the Value or Appraised Liquidation Value of such
Eligible Inventory multiplied by one minus the Inventory Advance Rate under
Section 2.1(a)(ii)(A) as applicable, plus

 

(B)           freight, taxes, duty and other amounts which Lender estimates must
be paid in connection with such Inventory upon arrival and for delivery to one
of Borrowers’ locations for Eligible Inventory within the United States of
America; and

 

(ii)           if the proposed Letter of Credit Accommodation is for standby
letters of credit guaranteeing the purchase of Eligible Inventory or for any
other purpose, an amount equal to one hundred percent (100%) of the face amount
thereof and all other commitments and obligations made or incurred by Lender
with respect thereto.

 

Effective on the issuance of each Letter of Credit Accommodation, the amount of
Revolving Loans which might otherwise be available to Borrowers shall be reduced
by the applicable amount set forth in this Section 2.2(c).

 

18

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(d)           An Availability Reserve shall be established in the amount set
forth in Section 2.2(c)(i) upon the placement of the order for the purchase of
the subject Inventory.  Effective upon the issuance of each Letter of Credit
Accommodation for a purpose other than the purchase of Inventory, an
Availability Reserve shall be established in the amount set forth in Sections
2.2(c)(ii) or (iii), as applicable.

 

(e)           Except in Agent’s discretion, with the consent of all Lenders, the
amount of all outstanding Letter of Credit Accommodations and all other
commitments and obligations made or incurred by Agent or any Lender in
connection therewith shall not at any time exceed Forty Million Dollars
($40,000,000); provided, that, if the sublimit on Revolving Loans based upon
Eligible Inventory pursuant to Section 2.1(a)(ii)(B) is reduced to a lesser
amount, the amount of all Letter of Credit Accommodations for the purpose of
purchasing Eligible Inventory and all other commitments and obligations made or
incurred by Lenders in connection therewith shall not exceed such lesser
amount.  At any time an Event of Default exists or has occurred and is
continuing, upon Agent’s request, Borrowers will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Agent for the
Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrowers shall not be reduced as provided in
Section 2.2(c) to the extent of such cash collateral.

 

(f)            Each Borrower shall indemnify and hold Agent and Lenders harmless
from and against any and all losses, claims, damages, liabilities, costs and
expenses which Agent or any Lender may suffer or incur in connection with any
Letter of Credit Accommodations and any documents, drafts or acceptances
relating thereto (excluding any of the foregoing to the extent arising from the
gross negligence or willful misconduct of Agent or any Lender), including, but
not limited to, any losses, claims, damages, liabilities, costs and expenses due
to any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation.  Each Borrower assumes all risks with respect to the acts
or omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
such Borrower’s agent.  Each Borrower assumes all risks for, and agree to pay,
all foreign, Federal, State and local taxes, duties and levies relating to any
goods subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder.  Each Borrower hereby releases and holds Agent and each
Lender harmless from and against any acts, waivers, errors, delays or omissions,
whether caused by such Borrower, by any issuer or correspondent or otherwise,
unless caused by the gross negligence or willful misconduct of Agent or such
Lender, with respect to or relating to any Letter of Credit Accommodation.  The
provisions of this Section 2.2(f) shall survive the payment of Obligations and
the termination or non-renewal of this Agreement.

 

(g)           Nothing contained herein shall be deemed or construed to grant
Borrowers any right or authority to pledge the credit of Agent or any Lender in
any manner.  Neither Agent nor any Lender shall have any liability of any kind
with respect to any Letter of Credit Accommodation provided by an issuer other
than Agent or any Lender, unless Agent has duly executed and delivered to such
issuer the application or a guarantee or indemnification in writing with respect
to such Letter of Credit Accommodation.  Each Borrower shall be bound by any
interpretation made in good faith by Agent, or any other issuer or correspondent
under or in

 

19

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

connection with any Letter of Credit Accommodation or any documents, drafts or
acceptances thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of such Borrower.  At any time an Event of
Default exists or has occurred and is continuing, Agent shall have the sole and
exclusive right and authority to, and no Borrower shall, without the prior
written consent of Agent:  (i) approve or resolve any questions of
non-compliance of documents, (ii) give any instructions as to acceptance or
rejection of any documents or goods or (iii) execute any and all applications
for steamship or airway guaranties, indemnities or delivery orders, and  at all
times, (iv) grant any extensions of the maturity of, time of payment for, or
time of presentation of, any drafts, acceptances, or documents, and (v) agree to
any amendments, renewals, extensions, modifications, changes or cancellations of
any of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral.  Agent may take such actions either in its
own name or in any Borrower’s name.

 

(h)           Any rights, remedies, duties or obligations granted or undertaken
by any Borrower to any issuer or correspondent in any application for any Letter
of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by such Borrower to Agent for the ratable
benefit of Lenders.  Any duties or obligations undertaken by Agent or any Lender
to any issuer or correspondent in any application for any Letter of Credit
Accommodation, or any other agreement by Agent or any Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrowers to Agent and Lenders and to apply in
all respects to Borrowers.

 

2.3           Term Loan.

 

(a)           Congress Financial Corporation (Western), now known as Wachovia
Capital Finance Corporation (Western) as lender under the Original Loan
Agreement made a term loan to Borrowers as evidenced by that certain Fourth
Amended and Restated Term Promissory Note dated June 16, 2004 in the original
principal sum of $3,500,000 and with an outstanding principal balance of
$2,916,662.  Subject to the terms and conditions contained herein, each Term
Loan Lender severally (and not jointly) agrees to make a term loan to Borrowers
(each a “Term Loan” and collectively the “Term Loans”) on the Closing Date in an
amount equal to such Term Loan Lender’s Pro Rata Share of such outstanding
principal balance.  The Term Loans shall be (a) evidenced by the Term Notes,
(b) repaid with interest in accordance with this Agreement, the Term Notes and
other Financing Agreements, and (c) secured by all of the Collateral.

 

(b)           Notwithstanding anything to the contrary contained herein, the
Real Estate may be sold or refinanced and Agent shall release its liens against
the Real Estate in connection with the sale or refinance thereof, provided,
that, (i) no Default or Event of Default has occurred and is continuing,
(ii) the net proceeds of the sale or refinance are remitted to Agent for
application first to any principal outstanding on the Term Loans and any accrued
but unpaid interest thereon, and then to any other Obligations, and (iii) upon
the application of such net proceeds that are payable in cash on the closing of
the sale or refinance, any principal outstanding on the Term Loans and any
accrued but unpaid interest thereon would be paid and

 

20

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

satisfied in full and the Excess Availability would not be less than Seven
Million Dollars ($7,000,000).  Upon any refinance of the Real Estate in
accordance with the foregoing, any indebtedness secured solely by the Real
Estate and any lien against the Real Estate securing such indebtedness will be
permitted for the purposes of Sections 9.8 and 9.9 hereof.

 

2.4                                 Commitments.  The aggregate amount of each
Revolving Loan Lender’s Pro Rata Share of the Revolving Loans and Letter of
Credit Accommodations shall not exceed the amount of such Lender’s Revolving
Loan Commitment, as the same may from time to time be amended with the written
acknowledgment of Agent.  The aggregate amount of each Term Loan Lender’s Pro
Rata Share of the Term Loans shall not exceed the amount of such Lender’s Term
Loan Commitment, as the same may from time to time be amended, with the written
acknowledgment of Agent.

 

SECTION 3.  INTEREST AND FEES.

 

3.1                                 Interest.

 

(a)                                  Except as provided in Sections 3.1(b), (c),
(d) and (e) below, Borrowers shall pay to Agent, for the benefit of Lenders,
interest on the outstanding principal amount of the non-contingent Obligations
at the Prime Rate.

 

(b)                                 Borrowers may from time to time request that
Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing
Eurodollar Rate Loans continue for an additional Interest Period.  Such request
from Borrowers shall specify the amount of the Prime Rate Loans which will
constitute Eurodollar Rate Loans (subject to the limits set forth below) and the
Interest Period to be applicable to such Eurodollar Rate Loans.  Subject to the
terms and conditions contained herein, three (3) Business Days after receipt by
Agent of such a request from Borrowers, such Prime Rate Loans shall be converted
to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the
case may be, provided, that, (i) no Event of Default, or event which with notice
or passage of time or both would constitute an Event of Default exists or has
occurred and is continuing, (ii) no party hereto shall have sent any notice of
termination or non-renewal of this Agreement, (iii) Borrowers shall have
complied with such customary procedures as are established by Agent and
specified by Agent to Borrowers from time to time for requests by Borrowers for
Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount of $5,000,000 or an integral multiple of $1,000,000 in
excess thereof, (vi) the maximum amount of the Eurodollar Rate Loans at any time
requested by Borrowers shall not exceed the amount equal to eighty-five percent
(85%) of the lowest principal amount of the Loans which it is anticipated will
be outstanding during the applicable Interest Period, in each case as determined
by Agent (but with no obligation of Lenders to make such Loans) and (vii) each
Revolving Loan Lender shall have determined that the Interest Period or Adjusted
Eurodollar Rate is available to such Lender and can be readily determined as of
the date of the request for such Eurodollar Rate Loan by Borrowers.  Any request
by Borrowers to convert Prime Rate Loans to Eurodollar Rate Loans or to continue
any existing Eurodollar Rate Loans shall be irrevocable.  Notwithstanding
anything to the contrary contained herein, Agent, Revolving Loan Lenders and
Reference Bank shall not be required to purchase United States

 

21

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

Dollar deposits in the London interbank market or other applicable Eurodollar
Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall
be deemed to apply as if Agent, Revolving Loan Lenders and Reference Bank had
purchased such deposits to fund the Eurodollar Rate Loans.

 

(c)                                  Any Eurodollar Rate Loans shall
automatically convert to Prime Rate Loans upon the last day of the applicable
Interest Period, unless Agent has received and approved a request to continue
such Eurodollar Rate Loan at least three (3) Business Days prior to such last
day in accordance with the terms hereof.  Any Eurodollar Rate Loans shall, at
Agent’s option, upon notice by Agent to Borrowers, convert to Prime Rate Loans
in the event that (i) an Event of Default or event which, with the notice or
passage of time, or both, would constitute an Event of Default, shall exist,
(ii) this Agreement shall terminate or not be renewed, or (iii) the aggregate
principal amount of the Prime Rate Loans which have previously been converted to
Eurodollar Rate Loans or existing Eurodollar Rate Loans continued, as the case
may be, at the beginning of an Interest Period shall at any time during such
Interest Period exceed either (A) the aggregate principal amount of the Loans
then outstanding, or (B) the sum of the Revolving Loans then available to
Borrowers under Section 2 hereof.  Borrowers shall pay to Agent, for the benefit
of Lenders, upon demand by Agent (or Agent may, at its option, charge any loan
account of Borrowers) any amounts required to compensate any Revolving Loan
Lender, the Reference Bank or any Participant with any Revolving Loan Lender for
any loss (including loss of anticipated profits), cost or expense incurred by
such person, as a result of the conversion of Eurodollar Rate Loans to Prime
Rate Loans pursuant to any of the foregoing.

 

(d)                                 Except as provided in Section 3.1(e) below,
Borrowers shall pay to Agent, for the benefit of Lenders, interest on the
outstanding principal amount of the Eurodollar Rate Loans at the rate of two and
three-quarters percent (2.75%) per annum in excess of the Adjusted Eurodollar
Rate (based on the Eurodollar Rate applicable for the Interest Period selected
by Borrowers as in effect three (3) Business Days after the date of receipt by
Agent of the request of Borrowers for such Eurodollar Rate Loans in accordance
with the terms hereof, whether such rate is higher or lower than any rate
previously quoted to Borrowers), provided, that, effective on the first day of
the calendar month immediately following Agent’s receipt of the audited
financial statements of Borrowers for any twelve (12) month fiscal year
(commencing with the twelve (12) month fiscal year ending December 31, 2000),
and Agent’s determination that those audited financial statements comply with
the requirements set forth in Section 9.6(a)(ii) hereof, such interest rate
shall be adjusted to such Adjusted Eurodollar Rate plus the applicable
Eurodollar Rate Margin based upon the consolidated net income of Borrowers
during such fiscal year as reflected in those audited financial statements, and
provided further, that, such interest rate shall not be reduced if those audited
financial statements are qualified under GAAP or if an Event of Default is
continuing as determined by Agent, and provided further, that, if the audited
financial statements of Borrowers for any fiscal year are not furnished to Agent
as and when required under Section 9.6(a)(ii) hereof, such interest rate shall
be adjusted to such Adjusted Eurodollar Rate plus the highest Eurodollar Rate
Margin until Agent receives and approves those audited financial statements.

 

22

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(e)                                  Notwithstanding the foregoing, Borrowers
shall pay to Agent, for the benefit of Lenders, interest, at Agent’s option,
without notice, at a rate two (2.0%) percent per annum greater than the
applicable rate(s) chargeable above:

 

(i)                                     on the non-contingent Obligations for
the period from and after the date of termination or non-renewal hereof, or the
date of the occurrence of an Event of Default, and for so long as such Event of
Default is continuing as determined by Agent and until such time as Agent has
received full and final payment of all such Obligations (notwithstanding entry
of any judgment against Borrowers); and

 

(ii)                                  on the Revolving Loans at any time
outstanding in excess of the amounts available to Borrowers under Section 2
(whether or not such excess(es), arise or are made with or without Agent’s
knowledge or consent and whether made before or after an Event of Default).

 

All interest accruing hereunder on and after the occurrence of any of the events
referred to in this Section 3.1(e) shall be payable on demand.

 

(f)                                    Interest shall be payable by Borrowers to
Agent, for the benefit of Lenders, monthly in arrears not later than the first
day of each calendar month and shall be calculated on the basis of a three
hundred sixty (360) day year and actual days elapsed.  The interest rate on
non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or
decrease by an amount equal to each increase or decrease in the Prime Rate
effective on the first day of the month after any change in such Prime Rate is
announced based on the Prime Rate in effect on the last day of the month in
which any such change occurs.

 

3.2                                 Line Increase Fee.  Borrowers shall pay to
Agent, for the benefit of Lenders, as a line increase fee, Sixty-Two Thousand
Five Hundred Dollars ($62,500), which fee shall be fully earned as of and
payable on the date hereof.

 

3.3                                 Extension Fee.  Borrowers shall pay to
Agent, for the benefit of Lenders, as an extension fee, One Hundred Thousand
Dollars ($100,000), which fee shall be fully earned as of and payable on the
date hereof.

 

3.4                                 Syndication Fee.  Borrowers shall pay to
Agent, for its own account, as a syndication fee, Twenty-Five Thousand Dollars
($25,000), which fee shall be fully earned as of and payable on the date hereof.

 

3.5                                 Loan Servicing Fee.  Borrowers shall pay to
Agent, for its own account, a monthly loan servicing fee in an amount equal to
One Thousand Five Hundred Dollars ($1,500), plus out-of-pocket costs and
expenses, in respect of Agent’s services while this Agreement remains in effect
and for so long thereafter as any of the Obligations are outstanding, which fee
shall be payable on a monthly basis, in advance, on the first day of each month.

 

3.6                                 Unused Line Fee.  Borrowers shall pay to
Agent, for the benefit of Lenders, monthly, an unused line fee equal to a rate
equal to one-quarter of one percent (0.25%) per annum calculated upon the
amount, if any, by which the sum of Sixty Million Dollars

 

23

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

($60,000,000) exceeds the average daily principal balance of the outstanding
Loans and Letter of Credit Accommodations during the immediately preceding month
while this Agreement is in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be payable on the first day of each
month in arrears; provided, that, if the outstanding principal balance of the
Loans and Letter of Credit Accommodations exceeds Seventy-Five Million Dollars
($75,000,000) at any time, the foregoing sum of Sixty Million Dollars
($60,000,000) shall then be permanently increased to Eighty Million Dollars
($80,000,000).

 

3.7                                 Compensation Adjustment.

 

(a)                                  If after the date of this Agreement the
introduction of, or any change in, any law or any governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law) having
general application to financial institutions of the same type as Agent or any
Lender or any Participant, or any interpretation thereof, or compliance by Agent
or any Lender or any Participant therewith:

 

(i)                                     subjects Agent or any Lender to any tax,
duty, charge or withholding on or from payments due from Borrowers (excluding
franchise taxes imposed upon, and taxation of the overall net income of, Agent
or any Lender or any Participant), or changes the basis of taxation of payments,
in either case in respect of amounts due it hereunder, or

 

(ii)                                  imposes or increases or deems applicable
any reserve requirement or other reserve, assessment, insurance charge, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by Agent or any Lender or any Participant, or

 

(iii)                               imposes any other condition the result of
which is to increase the cost to Agent or any Lender or any Participant of
making, funding or maintaining the Loans or Letter of Credit Accommodations or
reduces any amount receivable by Agent or any Lender or any Participant in
connection with the Loans or Letter of Credit Accommodations, or requires Agent
or any Lender or any Participant to make payment calculated by references to the
amount of loans held or interest received by it, by an amount deemed material by
Agent or any Lender or any Participant, or

 

(iv)                              imposes or increases any capital requirement
or affects the amount of capital required or expected to be maintained by Agent
or any Lender or any Participant or any corporation controlling Agent or any
Lender or any Participant, and Agent or any Lender or any Participant determines
that such imposition or increase in capital requirements or increase in the
amount of capital expected to be maintained is based upon the existence of this
Agreement or the Loans or Letter of Credit Accommodations hereunder, all of
which may be determined by Agent’s reasonable allocation of the aggregate of its
impositions or increases in capital required or expected to be maintained, and
the result of any of the foregoing is to increase the cost to Agent or any
Lender or any Participant of making, renewing or maintaining the Loans or Letter
of Credit Accommodations, or to reduce the rate of return to Agent or any Lender
or any Participant on the Loans or Letter of Credit Accommodations, then upon
demand by Agent, Borrowers shall pay to Agent, for the benefit of Lenders, and
continue to make periodic

 

24

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

payments to Agent, for the benefit of Lenders, such additional amounts as may be
necessary to compensate any Lender or any Participant for any such additional
cost incurred or reduced rate of return realized.

 

(b)                                 A certificate of Agent or any Lender
claiming entitlement to compensation as set forth above will be conclusive in
the absence of manifest error.  Such certificate will set forth the nature of
the occurrence giving rise to such compensation, the additional amount or
amounts to be paid and the compensation and the method by which such amounts
were determined.  In determining any additional amounts due from Borrowers under
this Section 3.5, Agent and each Lender shall act reasonably and in good faith
and will, to the extent that the increased costs, reductions, or amounts
received or receivable relate to Agent or such Lender’s or a Participant’s loans
or commitments generally and are not specifically attributable to the Loans and
commitments hereunder, use averaging and attribution methods which are
reasonable and equitable and which cover all such loans and commitments by Agent
or such Lender or such Participant, as the case may be, whether or not the loan
documentation for such other loans and commitments permits Agent or such Lender
or such Participant to receive compensation costs of the type described in this
Section 3.5.

 

3.8                                 Changes in Laws and Increased Costs of
Loans.

 

(a)                                  Notwithstanding anything to the contrary
contained herein, all Eurodollar Rate Loans shall, upon notice by Agent to
Borrowers, convert to Prime Rate Loans in the event that (i) any change in
applicable law or regulation having general application to financial
institutions of the same type as Agent, any Lender, Reference Bank or any
Participant, as applicable (or the interpretation or administration thereof)
shall either (A) make it unlawful for Agent, any Lender, Reference Bank or any
Participant to make or maintain Eurodollar Rate Loans or to comply with the
terms hereof in connection with the Eurodollar Rate Loans, or (B) shall result
in the increase in the costs to Agent, any Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans by an amount
deemed by Agent to be material, or (C) reduce the amounts received or receivable
by Agent or such Lender in respect thereof, by an amount deemed by Agent to be
material or (ii) the cost to Agent, any Lender, Reference Bank or any
Participant of making or maintaining any Eurodollar Rate Loans shall otherwise
increase by an amount deemed by Agent to be material.  Upon demand by Agent,
Borrowers shall pay to Agent, for itself or the applicable Lender (or Agent may,
at its option, charge any loan account of Borrowers) any amounts required to
compensate Agent, or the applicable Lender, Reference Bank or any Participant
for any loss (including loss of anticipated profits), cost or expense incurred
by such person as a result of the foregoing, including, without limitation, any
such loss, cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such person to make or maintain the
Eurodollar Rate Loans or any portion thereof.  A certificate setting forth the
basis for the determination of such amount necessary to compensate the Agent or
applicable Lender as aforesaid shall be delivered to Borrowers and shall be
conclusive, absent manifest error.  In determining any additional amounts due
from Borrowers under this Section 3.6, Agent or the applicable Lender shall act
reasonably and in good faith and will, to the extent that the increased costs,
reductions, or amounts received or receivable relate to the Agent’s or
applicable Lender’s or a Participant’s loans or commitments generally and are
not specifically attributable to the Loans and

 

25

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

commitments hereunder, use averaging and attribution methods which are
reasonable and equitable and which cover all such loans and commitments by the
Agent or applicable Lender or such Participant, as the case may be, whether or
not the loan documentation for such other loans and commitments permits the
Agent, Lender or such Participant to receive compensation costs of the type
described in this Section 3.6.

 

(b)                                 If any payments or prepayments in respect of
the Eurodollar Rate Loans are received by Agent or the applicable Lender other
than on the last day of the applicable Interest Period (whether pursuant to
acceleration, upon maturity or otherwise), including any payments pursuant to
the application of collections under Section 6.3 or any other payments made with
the proceeds of Collateral, Borrowers shall pay to Agent, for itself or the
applicable Lender (or Agent may, at its option, charge any loan account of
Borrowers) any amounts required to compensate Agent, or the applicable Lender,
Reference Bank or any Participant for any additional loss (including loss of
anticipated profits), cost or expense incurred by such person as a result of
such prepayment or payment, including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such person to make or maintain such Eurodollar Rate
Loans or any portion thereof.

 

SECTION 4.  CONDITIONS PRECEDENT.

 

4.1                                 Conditions Precedent to Agreement.  Each of
the following is a condition precedent to the effectiveness of this Agreement
and to this Agreement amending and restating the Original Loan Agreement in its
entirety:

 

(a)                                  all requisite corporate or company action
and proceedings in connection with this Agreement and the other Financing
Agreements shall be satisfactory in form and substance to Agent, and Agent shall
have received all information and copies of all documents, including, without
limitation, records of requisite corporate or company action and proceedings
which Agent may have requested in connection therewith, such documents where
requested by Agent or its counsel to be certified by appropriate corporate or
company officers or governmental authorities;

 

(b)                                 no material adverse change shall have
occurred in the assets, business or prospects of Borrowers since the date of
Agent’s latest field examination and no change or event shall have occurred
which would impair the ability of any Borrower or any Obligor to perform its
obligations hereunder or under any of the other Financing Agreements to which it
is a party or of Agent to enforce the Obligations or realize upon the
Collateral;

 

(c)                                  Agent shall have received, in form and
substance reasonably satisfactory to Agent, the Term Notes duly executed and
delivered by Borrowers;

 

(d)                                 Agent shall have received, in form and
substance satisfactory to Agent, such opinion letters of counsel to Borrowers
and Obligors with respect to the Financing Agreements and such other matters as
Agent may reasonably request;

 

(e)                                  Agent shall have received a CLTA 110.5
endorsement to its loan policy of title insurance for its deed of trust against
the Real Estate as amended; and

 

26

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(f)                                    Agent shall have received, in form and
substance satisfactory to Agent, projections of Borrowers through the end of the
current fiscal year.

 

4.2                                 Conditions Precedent to All Loans and Letter
of Credit Accommodations.  Each of the following is an additional condition
precedent to Lenders (or Agent on behalf of Lenders) making Loans and/or
providing Letter of Credit Accommodations to Borrowers, including the initial
Loans and Letter of Credit Accommodations and any future Loans and Letter of
Credit Accommodations:

 

(a)                                  all representations and warranties
contained herein and in the other Financing Agreements shall be true and correct
in all material respects with the same effect as though such representations and
warranties had been made on and as of the date of the making of each such Loan
or providing each such Letter of Credit Accommodation and after giving effect
thereto; and

 

(b)                                 no Event of Default and no event or
condition which, with notice or passage of time or both, would constitute an
Event of Default, shall exist or have occurred and be continuing on and as of
the date of the making of such Loan or providing each such Letter of Credit
Accommodation and after giving effect thereto.

 

SECTION 5.  GRANT OF SECURITY INTEREST.

 

To secure payment and performance of all Obligations, each Borrower hereby
grants to Agent, for itself and the ratable benefit of Lenders, a continuing
security interest in, a lien upon, and a right of set off against, and hereby
assigns to Agent, for itself and the ratable benefit of Lenders, as security,
the following property and interests in property of such Borrower, whether now
owned or hereafter acquired or existing, and wherever located (collectively, the
“Collateral”):

 

5.1                                 all Accounts and other indebtedness owed to
such Borrower;

 

5.2                                 all present and future contract rights,
general intangibles (including, but not limited to, tax and duty refunds,
registered and unregistered patents, trademarks, service marks, copyrights,
trade names, applications for the foregoing, trade secrets, goodwill, processes,
drawings, blueprints, customer lists, mailing lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing and future
leasehold interests in equipment, real estate and fixtures), chattel paper,
documents, instruments, securities, investment property, letters of credit,
proceeds of letters of credit, bankers’ acceptances and guaranties;

 

5.3                                 all present and future monies, securities,
credit balances, deposits, deposit accounts and other property of such Borrower
now or hereafter held or received by or in transit to Agent, any Lender or any
of their respective affiliates or at any other depository or other institution
from or for the account of such Borrower, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all present and future
liens, security interests, rights, remedies, title and interest in, to and in
respect of Accounts and other Collateral, including, without limitation,
(a) rights and remedies under or relating to guaranties, contracts of
suretyship, letters of credit and credit and other insurance related to the
Collateral, (b) rights of stoppage in

 

27

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (c) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Accounts or other Collateral, including, without limitation,
returned, repossessed and reclaimed goods, and (d) deposits by and property of
account debtors or other persons securing the obligations of account debtors;

 

5.4                                 all Inventory;

 

5.5                                 all Equipment;

 

5.6                                 all Records;

 

5.7                                 as to Creative Computers, the Real Estate;
and

 

5.8                                 all products and proceeds of the foregoing,
in any form, including, without limitation, insurance proceeds and any claims
against third parties for loss or damage to or destruction of any or all of the
foregoing.

 

SECTION 6.  COLLECTION AND ADMINISTRATION.

 

6.1                                 Borrowers’ Loan Account.  Agent shall
maintain one or more loan account(s) on its books in which shall be recorded
(a) all Loans, all Letter of Credit Accommodations and all other Obligations and
the Collateral, (b) all payments made by or on behalf of Borrowers and (c) all
other appropriate debits and credits as provided in this Agreement, including,
without limitation, fees, charges, costs, expenses and interest.  All entries in
the loan account(s) shall be made in accordance with Agent’s customary practices
as in effect from time to time.

 

6.2                                 Statements.  Agent shall render to Borrowers
each month a statement setting forth the balance in the Borrowers’ loan
account(s) maintained by Agent for Borrowers pursuant to the provisions of this
Agreement, including principal, interest, fees, costs and expenses.  Each such
statement shall be subject to subsequent adjustment by Agent but shall, absent
manifest errors or omissions, be considered correct and deemed accepted by
Borrowers and conclusively binding upon Borrowers as an account stated except to
the extent that Agent receives a written notice from Borrowers of any specific
exceptions of Borrowers thereto within sixty (60) days after the date such
statement has been mailed by Agent.  Until such time as Agent shall have
rendered to Borrowers a written statement as provided above, the balance in
Borrowers’ loan account(s) shall be presumptive evidence of the amounts due and
owing to Agent and Lenders by Borrowers.

 

6.3                                 Collection of Accounts.

 

(a)                                  Borrowers shall establish and maintain, at
their expense, deposit account arrangements and merchant payment arrangements
with the banks set forth on Schedule 8.8 and after prior written notice to
Agent, such other banks as Borrowers may hereafter select as are acceptable to
Agent.  The banks set forth on Schedule 8.8 constitute all of the banks with
whom any Borrower has deposit account arrangements and merchant payment
arrangements as of the date hereof.

 

28

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(i)                                     Borrowers shall deposit all proceeds
from sales of Inventory in every form (including, without limitation, cash,
checks, credit card sales drafts, credit card sales of charge slip or receipts
and other forms of daily receipts) and all other proceeds of Collateral that are
received at Borrowers’ retail store location(s), on each Business Day into the
deposit accounts of Borrowers used solely for such purpose as set forth on
Schedule 8.8.  Borrowers shall irrevocably authorize and direct in writing, in
form and substance satisfactory to Agent, each of the banks into which proceeds
from sales of Inventory and any and all other proceeds of Collateral are at any
time deposited as provided above to send by wire transfer on a daily basis all
funds deposited in such account, and shall irrevocably authorize and direct in
writing their account debtors, Credit Card Issuers and Credit Card/Check
Processors to directly remit payments on their Accounts, Credit Card Receivables
and all other payments constituting process of Inventory to the Blocked Accounts
described in Section 6.3(a)(ii) below. Notwithstanding the foregoing, so long as
no Event of Default has occurred and is continuing, those of such banks used by
Borrowers’ retail store location in Memphis, Tennessee shall remit the foregoing
proceeds received by them to the Blocked Accounts on a weekly basis, instead of
a daily basis, provided, that, the aggregate sum of such proceeds held by those
banks shall not exceed Fifty Thousand Dollars ($50,000) at any time.  Such
authorizations and directions shall not be rescinded, revoked or modified
without the prior written consent of Agent.

 

(ii)                                  Borrowers shall establish and maintain, at
their expense, a blocked account or lockboxes and related blocked accounts (in
either case, each a “Blocked Account” and collectively the “Blocked Accounts”),
as Agent may specify, with such bank or banks as are acceptable to Agent into
which Borrowers shall promptly deposit and direct their account debtors to
directly remit all payments on Accounts and all payments constituting proceeds
of Inventory or other Collateral in the identical form in which such payments
are made, whether by cash, check or other manner.  Each bank at which a Blocked
Account is established shall enter into an agreement, in form and substance
satisfactory to Agent, providing (unless otherwise agreed to by Agent) that all
items received or deposited in such Blocked Account are the Collateral of Agent
and Lenders, that the depository bank has no lien upon, or right to setoff
against, the Blocked Accounts, the items received for deposit therein, or the
funds from time to time on deposit therein and that the depository bank will
wire, or otherwise transfer, in immediately available funds, on a daily basis,
all funds received or deposited into such Blocked Account to such bank account
of Agent as Agent may from time to time designate for such purpose (the “Payment
Account”).  Borrowers agree that all amounts deposited in the Blocked Accounts
or other funds received and collected by Agent or any Lender, whether as
proceeds of Inventory, the collection of Accounts or other Collateral or
otherwise shall be the Collateral of Agent and Lenders.

 

(b)                                 For purposes of calculating interest on the
Obligations, such payments or other funds received will be applied (conditional
upon final collection) to the Obligations one-half of one (1/2) Business Day
following the date of receipt of immediately available funds by Agent in the
Payment Account (such that Borrowers will pay a charge equal to one-half (1/2)
of the additional interest that would have accrued on the sum of such payments
or other funds if the sum was applied to the Obligations one (1) Business Day
after receipt of immediately available funds by Lenders in the Payment
Account).  For purposes of calculating the amount of the Revolving Loans
available to Borrowers such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Agent in the
Payment Account,

 

29

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

if such payments are received within sufficient time (in accordance with Agent’s
usual and customary practices as in effect from time to time) to credit
Borrowers’ loan account on such day, and if not, then on the next Business Day. 
In the event that at any time or from time to time there are no Revolving Loans
outstanding, Lenders shall be entitled to an administrative charge in an amount
equivalent to the interest Lenders would have received on account of the above
one-half of one (1/2) Business Day clearance had there been Revolving Loans
outstanding.

 

(c)                                  Borrowers and all of their affiliates,
subsidiaries, shareholders, directors, employees or agents shall, acting as
trustee for Agent and Lenders, receive, as the property of Agent and Lenders,
any monies, cash, checks, notes, drafts or any other payment relating to and/or
proceeds of Accounts or from sales of Inventory or other Collateral which come
into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Agent.  In no event shall any such monies, checks, notes, drafts or other
payments be commingled with any Borrower’s own funds.  Borrowers agree to
reimburse Agent and the Lenders on demand for any amounts owed or paid to any
bank at which a Blocked Account is established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Agent’s or any Lender’s payments to or indemnification of such bank or person,
unless such payment or indemnification obligation of Agent or Lender was a
result of Agent’s or such Lender’s gross negligence or willful misconduct.  The
obligation of Borrowers to reimburse Agent and Lenders for such amounts pursuant
to this Section 6.3 shall survive the termination or non-renewal of this
Agreement.

 

6.4                                 Payments.  All Obligations shall be payable
to the Payment Account as provided in Section 6.3 of this Agreement or such
other place as Agent may designate from time to time.  Agent may apply payments
received or collected from Borrowers or for the account of Borrowers (including,
without limitation, the monetary proceeds of collections or of realization upon
any Collateral) to such of the Obligations, whether or not then due, in such
order and manner as Agent determines; provided, that, so long as no Event of
Default has occurred and is continuing, proceeds generated in the ordinary
course of Borrowers’ business on Accounts or Inventory will not be applied to
any principal amount not yet due and payable on the Term Loan or to contingent
Obligations; and provided further, that, if an Event of Default has occurred and
is continuing, proceeds of Collateral shall be applied to those Obligations
owing under or in connection with this Agreement before being applied to any
other Obligations except to the extent that Agent established (prior to the
occurrence of such Event of Default) and is maintaining an Availability Reserve
for such other Obligations.  At Agent’s option, all principal, interest, fees,
costs, expenses and other charges provided for in this Agreement or the other
Financing Agreements may be charged directly to the loan account(s) of
Borrowers.  Borrowers shall make all payments to Agents and the Lenders on the
Obligations free and clear of, and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, withholding, restrictions or conditions of any kind.  If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Agent or any Lender is required to surrender or return
such payment or proceeds to any Person for any reason, then the Obligations
intended to be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by such Person.  Borrowers shall be

 

30

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

liable to pay to Agent and Lenders, and do hereby indemnify and hold Agent and
each Lender harmless for the amount of any payments or proceeds surrendered or
returned.  This Section 6.4 shall remain effective notwithstanding any contrary
action which may be taken by Agent or any Lender in reliance upon such payment
or proceeds.  This Section 6.4 shall survive the payment of the Obligations and
the termination or non-renewal of this Agreement.

 

6.5                                 Taxes.

 

(a)                                  Any and all payments by or on behalf of any
Borrower or any Obligor hereunder and under any other Financing Agreement shall
be made, in accordance with Section 6.4 of this Agreement, free and clear of and
without deduction for any and all Taxes, excluding (i) income taxes imposed on
the net income of any Lender (or any transferee or assignee of such Lender,
including any Participant, any such transferee or assignee being referred to as
a “Transferee”) and (ii) franchise or similar taxes imposed on or determined by
reference to the net income of any Lender (or Transferee), in each case by the
United States of America or by the jurisdiction under the laws of which such
Lender (or Transferee) (A) is organized or any political subdivision thereof or
(B) has its applicable lending office located.  In addition, each Borrower
agrees to pay to the relevant Governmental Authority, in accordance with
applicable law, any Other Taxes.

 

(b)                                 If any Borrower or any Obligor shall be
required by law to deduct or withhold in respect of any Taxes or Other Taxes
from or in respect of any sum payable hereunder to Agent or any Lender, then:

 

(i)                                     the sum payable shall be increased as
necessary so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums payable
under this Section) such Lender (or Agent on behalf of such Lender) receives an
amount equal to the sum it would have received had no such deductions or
withholdings been made;

 

(ii)                                  such Borrower or such Obligor shall make
such deductions and withholdings;

 

(iii)                               such Borrower or such Obligor shall pay the
full amount deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and

 

(iv)                              to the extent not paid to Agent and Lenders
pursuant to clause (i) above, such Borrower or such Obligor shall also pay to
Agent or any Lender, at the time interest is paid, all additional amounts which
Agent or any Lender specifies as necessary to preserve the after-tax yield such
Lender would have received if such Taxes or Other Taxes had not been imposed.

 

(c)                                  Within thirty (30) days after the date of
any payment by any Borrower or any Obligor of Taxes or Other Taxes, such Person
shall furnish to Agent the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment reasonably satisfactory to Agent.

 

31

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(d)                                 Borrowers will indemnify Agent and each
Lender (or Transferee) for the full amount of Taxes and Other Taxes paid by
Agent or such Lender (or Transferee, as the case may be).  If Agent or such
Lender (or Transferee) receives a refund in respect of any Taxes or Other Taxes
for which Lender (or Transferee) has received payment from any Borrower or any
Obligor hereunder, so long as no Default or Event of Default shall exist or have
occurred and be continuing, Agent or such Lender (as the case may be) shall
credit to the loan account of Borrowers the amount of such refund plus any
interest received (but only to the extent of indemnity payments made, or
additional amounts paid, by any Borrower or any Obligor under this Section 6.5
with respect to the Taxes or Other Taxes giving rise to such refund).  If a
Lender (or any Transferee) claims a tax credit in respect of any Taxes for which
it has been indemnified by Borrower or any Obligor pursuant to this Section 6.5,
such Lender will apply the amount of the actual dollar benefit received by such
Lender as a result thereof, as reasonably calculated by Lender and net of all
expenses related thereto, to the Loans.  If Taxes or Other Taxes were not
correctly or legally asserted, Agent or such Lender shall, upon Borrower’s
request and at Borrowers’ expense, provide such documents to Borrower as
Borrower may reasonably request, to enable Borrowers to contest such Taxes or
Other Taxes pursuant to appropriate proceedings then available to Borrowers (so
long as providing such documents shall not, in the good faith determination of
Agent, have a reasonable likelihood of resulting in any liability of Agent or
any Lender).

 

(e)                                  In the event any Transferee is organized
under the laws of a jurisdiction other than the United States, any State thereof
or the District of Columbia (a “Non-U.S. Lender”) such Non-U.S. Lender shall
deliver to Borrowers two (2) copies of either United States Internal Revenue
Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming
exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of
the Code with respect to payments of “portfolio interest”, a Form W-8, or any
subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender
delivers a Form W-8, a certificate representing that such Non-U.S. Lender is not
a bank for purposes of Section 881(c) of the Code, is not a ten (10%) percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of any
Borrower or any Obligor and is not a controlled foreign corporation related to
any Borrower or any Obligor (within the meaning of Section 864(d)(4) of the
Code)), properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from U.S. Federal withholding tax on payments by any Borrower
or any Obligor under this Agreement and the other Financing Agreements.  Such
forms shall be delivered by any Transferee that is a Non-U.S. Lender on or
before the date it becomes a party to this Agreement (or, in the case of a
Transferee that is a Participant, on or before the date such Participant becomes
a Transferee hereunder) and on or before the date, if any, such Non-U.S. Lender
changes its applicable lending office by designating a different lending office
(a “New Lending Office”).  In addition, a Non-U.S. Lender shall upon written
notice from Borrowers promptly deliver such new forms as are required by the
Code or the regulations issued thereunder to claim exemption from, or reduction
in the rate of, U.S. Federal withholding tax upon the obsolescence or invalidity
of any form previously delivered by such Non-U.S. Lender.  Notwithstanding any
other provision of this Section 6.5(e), a Non-U.S. Lender shall not be required
to deliver any form pursuant to this Section 6.5(e) that such Non-U.S. Lender is
not legally able to deliver.

 

32

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(f)                                    Borrowers and Obligors shall not be
required to indemnify any Non-U.S. Lender or to pay any additional amounts to
any Non-U.S. Lender, in respect of United States Federal withholding tax
pursuant to subsections (a) or (d) above to the extent that (i) the obligation
to withhold amounts with respect to United States Federal withholding tax was
applicable on the date such Non-U.S. Lender became a party to this Agreement
(or, in the case of a Transferee that is a Participant, on the date such
Participant became a Transferee hereunder) or, with respect to payments to a New
Lending Office, the date such Non-U.S. Lender designated such New Lending Office
with respect to a Loan; provided, that, this subsection (f) shall not apply
(A) to any Transferee or New Lending Office that becomes a Transferee or New
Lending Office as a result of an assignment, participation, transfer or
designation made at the request of any Borrower or any Obligor and (B) to the
extent the indemnity payment or additional amounts any Transferee, acting
through a New Lending Office, would be entitled to receive (without regard to
this subsection (f)) do not exceed the indemnity payment or additional amounts
that the person making the assignment, participation or transfer to such
Transferee making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of subsection (e) above.

 

6.6                                 Authorization to Make Loans.  Agent and each
Lender is authorized to make the Loans and provide the Letter of Credit
Accommodations based upon telephonic or other instructions received from anyone
purporting to be an officer of a Borrower or other authorized person or, at the
discretion of Agent or any Lender, if such Loans are necessary to satisfy any
Obligations; provided, that, proceeds of Loans shall be remitted by Agent and
the Lenders to accounts designated by Borrowers in writing, which accounts shall
be accounts of Borrowers unless otherwise agreed by Agent.  All requests for
Loans or Letter of Credit Accommodations hereunder shall specify the date on
which the requested advance is to be made or Letter of Credit Accommodations
established (which day shall be a Business Day) and the amount of the requested
Loan.  Requests received at or before 10:30 a.m.  (Los Angeles time) on any
Business Day shall be deemed to have been made as of such Business Day. 
Requests received on any day that is not a Business Day or received after
10:30 a.m.  (Los Angeles time) on any Business Day shall be deemed to have been
made as of the opening of business on the immediately following Business Day. 
Subject to the terms and conditions of this Agreement, Agent and the Lenders
will make the Loans or commence arranging for the Letter of Credit
Accommodations (as requested by Borrowers) on the Business Day the request is
deemed to have been made or such later Business Day as may be specified by
Borrowers.  All Loans and Letter of Credit Accommodations under this Agreement
shall be conclusively presumed to have been made to, and at the request of and
for the benefit of, Borrowers when deposited to the credit of Borrowers or
otherwise disbursed or established in accordance with the instructions of
Borrowers or in accordance with the terms and conditions of this Agreement.

 

6.7                                 Use of Proceeds.  Borrowers shall use the
initial proceeds of the Loans provided by or on behalf of Lenders to Borrowers
hereunder only for costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements executed in connection herewith.  All other Loans made or Letter of
Credit Accommodations provided by or on behalf of Lenders to Borrowers pursuant
to the

 

33

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

provisions hereof shall be used by Borrowers only for general operating, working
capital and other proper corporate purposes of Borrowers not otherwise
prohibited by the terms hereof.  None of the proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security or for
the purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Loans to be considered a “purpose credit” within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
as amended.

 

6.8                                 Pro Rata Treatment..  Except to the extent
otherwise provided in this Agreement:  (a) (i) the making and conversion of
Revolving Loans shall be made among the Revolving Loan Lenders based on their
respective Pro Rate Shares as to the Revolving Credit Loans, and (ii) the making
of Term Loans shall be made among the Term Loan Lenders based on their
respective Pro Rata Shares as to the Term Loans; and (b) each payment on account
of any Obligations to or for the account of one or more of Lenders in respect of
any Obligations due on a particular day shall be allocated among the Lenders
entitled to such payments based on their respective Pro Rata Shares and shall be
distributed accordingly.

 

6.9                                 Sharing of Payments, Etc.

 

(a)                                  Each Borrower agrees that, in addition to
(and without limitation of) any right of setoff, banker’s lien or counterclaim
any Agent or Lender may otherwise have, each Lender shall be entitled, at its
option (but subject, as among Agent and Lenders, to the provisions of
Section 6.8(b) hereof), to offset balances held by it for the account of any
Borrower at any of its offices, in dollars or in any other currency, against any
principal of or interest on any Loans owed to such Lender or any other amount
payable to such Lender hereunder, that is not paid when due (regardless of
whether such balances are then due to Borrower), in which case it shall promptly
notify Borrowers and Agent thereof; provided, that, such Lender’s failure to
give such notice shall not affect the validity thereof.

 

(b)                                 Agent and Lenders agree that no Lender
shall, except upon the prior written consent of Agent, exercise any right of
setoff, banker’s lien or counterclaim such Lender may have with respect to any
property held by such Lender for the account of any Borrower.  If any Lender
(including Agent) shall obtain from any Borrower payment of any principal of or
interest on any Loan owing to it or payment of any other amount under this
Agreement or any other Financing Agreement through the exercise (in accordance
with the terms hereof) of any right of setoff, banker’s lien or counterclaim or
similar right or otherwise (other than from Agent as provided herein), and, as a
result of such payment, such Lender shall have received more than its Pro Rata
Share of the principal of the Loans or more than its share of such other amounts
then due hereunder or thereunder by such Borrower to such Lender than the
percentage thereof received by any other Lender, it shall promptly pay to Agent,
for the benefit of Lenders, the amount of such excess and simultaneously
purchase from such other Lenders a participation in the Loans or such other
amounts, respectively, owing to such other Lenders (or such interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all Lenders shall share
the benefit of such excess payment (net of any expenses that may be incurred by
such Lender in obtaining or preserving

 

34

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

such excess payment) in accordance with their respective Pro Rata Shares or as
otherwise agreed by Lenders.  To such end all Lenders shall make appropriate
adjustments among themselves (by the resale of participation sold or otherwise)
if such payment is rescinded or must otherwise be restored.

 

(c)                                  Each Borrower agrees that any Lender so
purchasing a participation pursuant to subsection (b) above (or direct interest)
may exercise, in a manner consistent with this Section, all rights of setoff,
banker’s lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender were a direct holder of Loans or other amounts (as
the case may be) owing to such Lender in the amount of such participation.

 

(d)                                 Nothing contained herein shall require any
Lender to exercise any such right or shall affect the right of any Lender to
exercise, and retain the benefits of exercising, any such right with respect to
any other Indebtedness or obligation of any Borrower.  If, under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this Section applies, such Lender shall, to the
extent practicable, assign such rights to Agent for the benefit of Lenders and,
in any event, exercise its rights in respect of such secured claim in a manner
consistent with the rights of Lenders entitled under this Section to share in
the benefits of any recovery on such secured claim.

 

6.10                           Settlement Procedures.

 

(a)                                  In order to administer the credit facility
provided hereunder in an efficient manner and to minimize the transfer of funds
between Agent and Lenders, Agent may, subject to the terms of this Section, make
available, on behalf of Lenders, the full amount of the Loans requested or
charged to Borrowers’ loan account(s) or otherwise to be advanced by Lenders
pursuant to the terms hereof, without any requirement of prior notice to Lenders
of the proposed Loans.

 

(b)                                 With respect to all Revolving Loans made by
Agent on behalf of Revolving Loan Lenders as provided in this Section, the
amount of each Revolving Loan Lender’s Pro Rata Share of the outstanding
Revolving Loans shall be computed weekly, and shall be adjusted upward or
downward on the basis of the amount of the outstanding Revolving Loans as of
5:00 p.m. Los Angeles time on the Business Day immediately preceding the date of
each settlement computation; provided, that, Agent retains the absolute right at
any time or from time to time to make the above described adjustments at
intervals more frequent than weekly, but in no event more than twice in any
week.  Agent shall deliver to each of the Revolving Loan Lenders after the end
of each week, or at such lesser period or periods as Agent shall determine, a
summary statement of the amount of outstanding Revolving Loans for such period
(such week or lesser period or periods being hereinafter referred to as a
“Settlement Period”).  If the summary statement is sent by Agent and received by
a Revolving Loan Lender prior to 2:00 p.m. Los Angeles time, then such Revolving
Loan Lender shall make the settlement transfer described in this Section by no
later than 2:00 p.m. Los Angeles time on the next Business Day following the
date of receipt.  If, as of the end of any Settlement Period, the amount of a
Lender’s Pro Rata Share of the outstanding Revolving Loans is more than such
Lender’s Pro Rata Share of the outstanding Revolving Loans as of the end of the
previous Settlement Period, then such Lender

 

35

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

shall forthwith (but in no event later than the time set forth in the preceding
sentence) transfer to Agent by wire transfer in immediately available funds the
amount of the increase.  Alternatively, if the amount of a Lender’s Pro Rata
Share of the outstanding Revolving Loans in any Settlement Period is less than
the amount of such Lender’s Pro Rata Share of the outstanding Revolving Loans
for the previous Settlement Period, Agent shall forthwith transfer to such
Lender by wire transfer in immediately available funds the amount of the
decrease.  The obligation of each of the Revolving Loan Lenders to transfer such
funds and effect such settlement shall be irrevocable and unconditional and
without recourse to or warranty by Agent.  Each of Agent and Revolving Loan
Lenders agrees to mark its books and records at the end of each Settlement
Period to show at all times the dollar amount of its Pro Rate Share of the
outstanding Revolving Loans and Letter of Credit Accommodations.  Each Revolving
Loan Lender shall only be entitled to receive interest on its Pro Rata Share of
the Loans to the extent such Loans have been funded by such Lender.  Because the
Agent on behalf of Revolving Loan Lenders may be advancing and/or may be repaid
Revolving Loans prior to the time when Lenders will actually advance and/or be
repaid such Revolving Loans, interest with respect to Revolving Loans shall be
allocated by Agent in accordance with the amount of Revolving Loans actually
advanced by and repaid to each Revolving Loan Lender and the Agent and shall
accrue from and including the date such Loans are so advanced to but excluding
the date such Loans are either repaid by any Borrower or actually settled with
the applicable Lender as described in this Section.

 

(c)                                  To the extent that Agent has made any such
amounts available and the settlement described above shall not yet have
occurred, upon repayment of any Loans by any Borrower, Agent may apply such
amounts repaid directly to any amounts made available by any Agent pursuant to
this Section.  In lieu of weekly or more frequent settlements, Agent may at any
time require each Lender to provide Agent with immediately available funds
representing its Pro Rata Share of each Loan, prior to Agent’s disbursement of
such Loan to any Borrower.  In such event, all Loans under this Agreement shall
be made by the Lenders simultaneously and proportionately to their Pro Rata
Shares.  No Lender shall be responsible for any default by any other Lender in
the other Lender’s obligation to make a Loan requested hereunder nor shall the
Commitment of any Lender be increased or decreased as a result of the default by
any other Lender in the other Lender’s obligation to make a Loan hereunder.

 

(d)                                 If Agent is not funding a particular Loan to
Borrowers pursuant to this Section on any day, Agent may assume that each Lender
will make available to Agent such Lender’s Pro Rata Share of the Revolving Loan
requested or otherwise made on such day and Agent may, in its discretion, but
shall not be obligated to, cause a corresponding amount to be made available to
Borrowers on such day.  If Agent makes such corresponding amount available to
Borrowers and such corresponding amount is not in fact made available to Agent
by such Lender, Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon for each day from the
date such payment was due until the date such amount is paid to Agent at the
interest rate provided for in Section 3.1 hereof.  During the period in which
such Lender has not paid such corresponding amount to Agent, notwithstanding
anything to the contrary contained in this Agreement or any of the other
Financing Agreements, the amount so advanced by Agent to any Borrower shall, for
all purposes hereof, be a Loan made by Agent for its own account.  Upon any such
failure by a Lender to pay Agent, Agent shall promptly thereafter notify
Borrowers of such failure and Borrowers shall

 

36

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

immediately pay such corresponding amount to Agent for its own account.  A
Lender who fails to pay Agent its Pro Rata Share of any Loans made available by
the Agent on such Lender’s behalf, or any Lender who fails to pay any other
amount owing to Agent, is a “Defaulting Lender”.  Agent shall not be obligated
to transfer to a Defaulting Lender any payments made by or on behalf of any
Borrower or any Obligor to Agent for the Defaulting Lender’s benefit, nor shall
a Defaulting Lender be entitled to the sharing of any payments hereunder. 
Amounts payable to a Defaulting Lender shall instead be paid to or retained by
Agent.  Agent may hold and, in its discretion, re-lend to any Borrower the
amount of all such payments received or retained by it for the account of such
Defaulting Lender.  For purposes of voting or consenting to matters with respect
to this Agreement and the other Financing Agreements and determining Pro Rata
Shares, such Defaulting Lender shall be deemed not to be a Lender and such
Defaulting Lender’s Commitment shall be deemed to be zero (0).  This
Section shall remain effective with respect to a Defaulting Lender until such
default is cured.  The operation of this Section shall not be construed to
increase or otherwise affect the Commitment of any Lender, or relieve or excuse
the performance by any Borrower or any Obligor of their duties and obligations
hereunder.

 

(e)                                  Nothing in this Section or elsewhere in
this Agreement or the other Financing Agreements shall be deemed to require
Agent to advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its Commitment hereunder or to prejudice any rights that
any Borrower may have against any Lender as a result of any default by any
Lender hereunder in fulfilling its Commitment.

 

SECTION 7.  COLLATERAL REPORTING AND COVENANTS.

 

7.1                                 Collateral Reporting.  Borrowers shall
provide Agent with the following documents in a form satisfactory to Agent: 
(a) on a weekly basis, (i) schedules of sales made, credits issued and cash
received, which, after the occurrence of an Event of Default or the filing of a
bankruptcy petition by or against any Borrower, and for so long as such Event of
Default is continuing or such bankruptcy petition has not been dismissed, shall
separately account for sales of Inventory subject to the security interest of
IBM Credit Corporation, (ii) borrowing base certificates, (iii) schedules of
Inventory (net of fixed assets) separately identifying Inventory by vendor,
type, location and age, with perpetual inventory reports, and (iv) schedules of
accounts payable and accrued accounts payable to any vendor holding a security
interest in any property of the Borrowers; (b) on a monthly basis, on or before
the tenth (10th) Business Day of such month for the immediately preceding month
or more frequently as Agent may request, (i) agings of accounts receivable,
(ii) agings of accounts payable, accrued accounts payable, lease payables and
other payables, and (iii) a certificate from an authorized officer of Borrowers
representing that each Borrower has made payment of sales and use taxes during
such month or, at Agent’s request, other evidence of such payment; (c) upon
Agent’s request, (i) copies of customer statements and credit memos, remittance
advices and reports, and copies of deposit slips and bank statements,
(ii) copies of shipping and delivery documents, and (iii) copies of purchase
orders, invoices and delivery documents for Inventory and Equipment acquired by
Borrowers; and (d) such other reports as to the Collateral or other property
which is security for the Obligations as Agent shall request from time to time. 
Borrowers shall provide Agent, as soon as available, but in any event not later
than five (5) days after receipt by Borrowers, with all statements received from
Apple Computer and any other vendor who may hold a security interest

 

37

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

in any Borrowers’ assets, together with such additional information as shall be
sufficient to enable Agent to monitor the accounts payable and accrued accounts
payable to them.  If any of Borrowers’ records or reports of the Collateral or
other property which is security for the Obligations are prepared or maintained
by an accounting service, contractor, shipper or other agent, Borrowers hereby
irrevocably authorize such service, contractor, shipper or agent to deliver such
records, reports, and related documents to Agent and to follow Agent’s
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.

 

7.2                                 Accounts Covenants.

 

(a)                                  Each Borrower shall notify Agent promptly
of the assertion of any claims, offsets, defenses of counterclaims by any
account debtor, or any disputes with any of such persons or any settlement,
adjustment or compromise thereof, in the schedules, certificates and reports
provided pursuant to Section 7.1 hereof.

 

(b)                                 Each Borrower shall notify Agent promptly
of:  (i) any material delay in any Borrower’s performance of any of its
obligations to any account debtor or the assertion of any claims, offsets,
defenses or counterclaims by any account debtor, or any disputes with account
debtors, or any settlement, adjustment or compromise thereof, (ii) all material
adverse information relating to the financial condition of any account debtor
and (iii) any event or circumstance which, to Borrowers’ knowledge would cause
Agent to consider any then existing Accounts as no longer constituting Eligible
Accounts.  No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor, Credit Card Issuer or
Credit Card/Check Processor except in the ordinary course of Borrowers’ business
in accordance with its most recent past practices and policies.  So long as no
Event of Default exists or has occurred and is continuing, Borrowers may settle,
adjust or compromise any claim, offset, counterclaim or dispute with any account
debtor, Credit Card Issuer or Credit Card/Check Processor in the ordinary course
of Borrowers’ business in accordance with their most recent past practices and
policies.  At any time that an Event of Default exists or has occurred and is
continuing, Agent shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with any account
debtor, Credit Card Issuer or Credit Card/Check Processor or grant any credits,
discounts or allowances.  Each Borrower shall notify Agent promptly of (i) any
notice of a material default by any Borrower under any of the Credit Card/Check
Processing Agreements or of any default which might result in the Credit Card
Issuer or Credit Card/Check Processor ceasing to make payments or suspending
payments to Borrowers, (ii) any notice from any Credit Card Issuer or Credit
Card/Check Processor that such person is ceasing or suspending, or will cease or
suspend, any present or future payments due or to become due to Borrowers from
such person, or that such person is terminating or will terminate any of the
Credit Card/Check Processing Agreements, and (iii) the failure of any Borrower
to comply with any material terms of the Credit Card/Check Processing Agreements
or any terms thereof which might result in the Credit Card Issuer or Credit
Card/Check Processor ceasing or suspending payments to Borrowers.

 

(c)                                  Without limiting the obligation of
Borrowers to deliver any other information to Agent, Borrowers shall promptly
report to Agent any return of Inventory by any

 

38

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

account debtor.  At any time that Inventory is returned, reclaimed or
repossessed, the Account (or portion thereof) which arose from the sale of such
returned, reclaimed or repossessed Inventory shall not be deemed an Eligible
Account.  In the event any account debtor returns Inventory when an Event of
Default exists or has occurred and is continuing, Borrowers shall, upon Agent’s
request, (i) hold the returned Inventory in trust for Agent, (ii) segregate all
returned Inventory from all of its other property, (iii) dispose of the returned
Inventory solely according to Agent’s instructions, and (iv) not issue any
credits, discounts or allowances with respect thereto without Agent’s prior
written consent.

 

(d)                                 With respect to each Account and Credit
Card/Check Processing Receivable:  (i) the amounts shown on any invoice
delivered to Agent or schedule thereof delivered to Agent shall be true and
complete, (ii) no payments shall be made thereon except payments delivered to
Agent pursuant to the terms of this Agreement, (iii) no credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted to
any account debtor, Credit Card Issuer or Credit Card/Check Processor except as
reported to Agent in accordance with this Agreement and except for credits,
discounts, allowances or extensions made or given in the ordinary course of
Borrowers’ business in accordance with practices and policies previously
disclosed to Agent, (iv) there shall be no setoffs, deductions, contras,
defenses, counterclaims or disputes existing or asserted with respect thereto
except as reported to Agent in accordance with the terms of this Agreement,
(v) none of the transactions giving rise thereto will violate any applicable
State or Federal Laws or regulations, all documentation relating thereto will be
legally sufficient under such laws and regulations and all such documentation
will be legally enforceable in accordance with its terms.

 

(e)                                  Agent shall have the right at any time or
times, in Agent’s name or in the name of a nominee of Agent, to verify the
validity, amount or any other matter relating to any Account, Credit Card/Check
Processing Receivable or other Collateral, by mail, telephone, facsimile
transmission or otherwise.

 

(f)                                    Borrowers shall deliver or cause to be
delivered to Agent, with appropriate endorsement and assignment, with full
recourse to Borrowers, all chattel paper and instruments which Borrowers now own
or may at any time acquire immediately upon Borrowers’ receipt thereof, except
as Agent may otherwise agree.

 

(g)                                 Agent may, at any time or times that an
Event of Default exists or has occurred, (i) notify any or all account debtors,
Credit Card Issuers or Credit Card/Check Processors that the Accounts and Credit
Card/Check Processing Receivables have been assigned to Agent and that Agent and
the Lenders have a security interest therein and Agent may direct any or all
account debtors, Credit Card Issuers or Credit Card/Check Processors to make
payments of Accounts and Credit Card/Check Processing Receivables directly to
Agent, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Accounts and Credit Card/Check

 

39

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

Processing Receivables or other obligations included in the Collateral and
thereby discharge or release the account debtor, Credit Card Issuer, Credit
Card/Check Processor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts and Credit Card/Check Processing Receivables or
such other obligations, but without any duty to do so, and Agent shall not be
liable for its failure to collect or enforce the payment thereof or for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Agent may deem necessary or desirable for the protection
of its interests.  At any time that an Event of Default exists or has occurred
and is continuing, at Agent’s request, all invoices and statements sent to any
account debtor shall state that the Accounts due from such account debtor and
such other obligations have been assigned to Agent and are payable directly and
only to Agent and Borrowers shall deliver to Agent such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as Agent may require.

 

7.3                                 Inventory Covenants.  With respect to the
Inventory:

 

(a)                                  Borrowers shall at all times maintain
inventory records reasonably satisfactory to Agent, keeping correct and accurate
records itemizing and describing the kind, type, quality and quantity of
Inventory, Borrowers’ cost therefor and daily withdrawals therefrom and
additions thereto;

 

(b)                                 Borrowers shall cause a third party firm
acceptable to Agent to conduct a complete physical count of the Inventory at a
minimum of once every twelve (12) months but at any time as Agent may reasonably
request upon the occurrence and during the continuance of an Event of Default,
and promptly following such physical count such firm shall supply Agent with a
report in the form and with such specificity as may be reasonably satisfactory
to Agent concerning such physical count;

 

(c)                                  Borrowers shall not remove any Inventory
from the locations set forth or permitted herein, without the prior written
consent of Agent, except for sales of Inventory in the ordinary course of
Borrowers’ business and except to move Inventory directly from one location set
forth or permitted herein to another such location;

 

(d)                                 upon Agent’s request, Borrowers shall, at
their expense, no more than three (3) times in any twelve (12) month period as
to desktop appraisals, and no more than one (1) time in any twelve (12) month
period as to full appraisals, but at any time or times as Agent may request upon
the occurrence and during the continuance of an Event of Default, deliver or
cause to be delivered to Agent written reports or appraisals as to the Inventory
in form, scope and methodology acceptable to Agent and addressing such issues as
Agent may require in its commercially reasonable judgment, issued by an
appraiser acceptable to Agent, and addressed to Agent and Lenders or upon which
Agent and Lenders are expressly permitted to rely (with the understanding that
Agent may revise the definition of ‘Eligible Inventory’ hereunder or establish
Availability Reserves as Agent may deem advisable in its sole discretion based
upon the results of such updated appraisals);

 

(e)                                  Borrowers shall produce, use, store and
maintain the Inventory, with all reasonable care and caution and in accordance
with applicable standards of any insurance and in conformity with applicable
laws (including, but not limited to, the requirements of the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and orders related
thereto);

 

40

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(f)            Borrowers assume all responsibility and liability arising from or
relating to the production, use, sale or other disposition of the Inventory;

 

(g)           Borrowers shall not sell Inventory to any customer on approval, or
any other basis which entitles the customer to return or may obligate Borrowers
to repurchase such Inventory (except for returns made in the ordinary course of
Borrowers’ business pursuant to their existing policies and in accordance with
their industry standards);

 

(h)           Borrowers shall keep the Inventory in good and marketable
condition;

 

(i)            Borrowers shall not, without prior written notice to Agent,
acquire or accept any Inventory on consignment or approval; and

 

(j)            upon the occurrence and during the continuance of an Event of
Default, Borrowers shall not return any Inventory to its vendors without the
prior consent of Agent.

 

7.4           Equipment Covenants.  With respect to the Equipment:

 

(a)           upon Agent’s request, Borrowers shall, at their expense, at any
time or times as Agent may request upon the occurrence and during the
continuation of an Event of Default, deliver or cause to be delivered to Agent
written reports or appraisals as to the Equipment in form, scope and methodology
reasonably acceptable to Agent and by an appraiser acceptable to Agent;

 

(b)           Borrowers shall keep the Equipment in good order, repair, running
and marketable condition (ordinary wear and tear excepted);

 

(c)           Borrowers shall use the Equipment with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with all applicable laws;

 

(d)           the Equipment is and shall be used in Borrowers’ business and not
for personal, family, household or farming use;

 

(e)           Borrowers shall not remove any Equipment from the locations set
forth or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of Borrowers or to
move Equipment directly from one such location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of Borrowers in the ordinary course of business;

 

(f)            the Equipment is now and shall remain personal property and
Borrowers shall not permit any of the Equipment to be or become a part of or
affixed to real property; and

 

(g)           Borrowers assume all responsibility and liability arising from the
use of the Equipment.

 

41

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

7.5           Power of Attorney.  Each Borrower hereby irrevocably designates
and appoints Agent (and all persons designated by Agent) as such Borrower’s true
and lawful attorney-in-fact, and authorizes Agent, in such Borrower’s or Agent’s
name, to:

 

(a)           at any time an Event of Default has occurred and is continuing:

 

(i)            demand payment on Accounts, Credit Card/Check Processing
Receivables or other proceeds of Inventory or other Collateral;

 

(ii)           enforce payment of Accounts, Credit Card/Check Processing
Receivables or other Obligations included in the Collateral by legal proceedings
or otherwise;

 

(iii)          exercise all of such Borrower’s rights and remedies to collect
any Account, Credit Card/Check Processing Receivables or other proceeds of
Inventory or other Collateral;

 

(iv)          sell or assign any Account and Credit Card/Check Processing
Receivables upon such terms, for such amount and at such time or times as the
Agent deems advisable;

 

(v)           settle, adjust, compromise, extend or renew any Accounts and
Credit Card/Check Processing Receivables;

 

(vi)          discharge and release any Accounts and Credit Card/Check
Processing Receivables or other Obligations included in the Collateral;

 

(vii)         prepare, file and sign such Borrower’s name on any proof of claim
in bankruptcy or other similar document against an account debtor;

 

(viii)        notify the post office authorities to change the address for
delivery of such Borrower’s mail to an address designated by Agent, and open and
dispose of all mail addressed to such Borrower, provided, that, any such mail
received by Agent that does not constitute checks or other items of payment
shall be forwarded by Agent to such Borrower promptly after receipt by Agent;
and

 

(ix)           do all acts and things which are necessary, in Agent’s
determination, to fulfill Borrowers’ obligations under this Agreement and the
other Financing Agreements; and

 

(b)           at any time, subject to the terms of the agreement(s) relating to
the Blocked Account(s) to:

 

(i)            take control in any manner of any item of payment or proceeds
thereof;

 

(ii)           have access to any lockbox or postal box into which Borrowers’
mail is deposited;

 

42

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(iii)          endorse such Borrower’s name upon any items of payment or
proceeds thereof and deposit the same in the Agent’s account for application to
the Obligations;

 

(iv)          endorse such Borrower’s name upon any chattel paper, document,
instrument, invoice, or similar document or agreement relating to any Accounts
or Credit Card/Check Processing Receivables or any goods pertaining thereto or
any other Collateral;

 

(v)           sign such Borrower’s name on any verification of Accounts or
Credit Card/Check Processing Receivables and notices thereof to account debtors,
Credit Card Issuers or Credit Card/Check Processors; and

 

(vi)          execute in such Borrower’s name and file any UCC financing
statements or amendments thereto as deemed appropriate by Agent to perfect its
security interests in the Collateral.

 

Each Borrower hereby releases Agent and each Lender and each of their respective
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of the gross negligence or willful
misconduct of Agent’s or such Lender’s or their respective officers, employees
or designees as determined pursuant to a final non-appealable order of a court
of competent jurisdiction.

 

7.6           Right to Cure.  After the occurrence and during the continuance of
an Event of Default, Agent may, at its option, (a) cure any default by any
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against any Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Agent’s judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Agent and Lenders with
respect thereto.  Agent and Lenders may add any amounts so expended to the
Obligations and charge Borrowers’ account therefor, such amounts to be repayable
by Borrowers on demand.  Agent and Lenders shall be under no obligation to
effect such cure, payment or bonding and shall not, by doing so, be deemed to
have assumed any obligation or liability of Borrowers.  Any payment made or
other action taken by Agent or any Lender under this Section 7.6 shall be
without prejudice to any right to assert an Event of Default hereunder and to
proceed accordingly.

 

7.7           Access to Premises.  From time to time as requested by Agent, at
the cost and expense of Borrowers, no more than three (3) times in any twelve
(12) month period, but at any time or times as Agent may request upon the
occurrence and during the continuance of an Event of Default, (a) Agent or its
designee shall have complete access to all of Borrowers’ premises during normal
business hours and after two (2) Business Days prior notice to Borrowers, or at
any time and without notice to Borrowers if an Event of Default exists or has
occurred and is continuing, for the purposes of inspecting, verifying and
auditing the Collateral and all of Borrowers’ books and records, including,
without limitation, the Records, and (b) Borrowers shall promptly furnish to
Agent such copies of such books and records or extracts therefrom as Agent may
reasonably request, and (c)Agent may use during normal business hours such of

 

43

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

Borrowers’ personnel, equipment, supplies and premises as may be reasonably
necessary for the foregoing and if an Event of Default exists or has occurred
and is continuing for the collection of Accounts or Credit Card/Check Processing
Receivables and realization of other Collateral..

 

SECTION 8.  REPRESENTATIONS AND WARRANTIES.

 

Each Borrower hereby represents and warrants to Agent and Lenders the following
(which shall survive the execution and delivery of this Agreement), the truth
and accuracy of which are a continuing condition of the making of Loans and the
providing of Letter of Credit Accommodations by Lender to Borrowers:

 

8.1           Corporate Existence, Power and Authority; Subsidiaries.  Each
Borrower is a corporation duly organized and in good standing under the laws of
its state of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and extent
of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on such Borrower’s financial
condition, results of operation or business or the rights of Agent or any Lender
in or to any of the Collateral.  The execution, delivery and performance of this
Agreement, the other Financing Agreements to which any Borrower is a party and
the transactions contemplated hereunder and thereunder are all within such
Borrower’s corporate or company powers, have been duly authorized and are not in
contravention of law or the terms of such Borrower’s certificate of
incorporation or formation, by-laws or operating agreement, or other
organizational documentation, or any indenture, agreement or undertaking to
which such Borrower is a party or by which such Borrower or its property are
bound.  This Agreement and the other Financing Agreements to which any Borrower
is a party constitute legal, valid and binding obligations of such Borrower
enforceable in accordance with their respective terms.  Borrowers do not have
any subsidiaries except as set forth on the Information Certificates.

 

8.2           Financial Statements; No Material Adverse Change.  All financial
statements relating to Borrowers which have been or may hereafter be delivered
by Borrowers to Agent or any Lender have been prepared in accordance with GAAP
and fairly present the financial condition and the results of operations of
Borrowers as at the dates and for the periods set forth therein.  Except as
disclosed in any interim financial statements furnished by Borrowers to Agent or
any Lender prior to the date of this Agreement, there has been no material
adverse change in the assets, liabilities, properties and condition, financial
or otherwise, of Borrowers, since the date of the most recent audited financial
statements furnished by Borrowers to Agent or any Lender prior to the date of
this Agreement.

 

8.3           Chief Executive Office; Collateral Locations.  The chief executive
office of Borrowers and Borrowers’ Records concerning Accounts and Credit
Card/Check Processing Receivables are located only at the address set forth
below and their only other places of business and the only other locations of
Collateral, if any, are the addresses set forth in the Information Certificates,
subject to the right of Borrowers to establish new locations in accordance with
Section 9.2 below.  The Information Certificates or any notices delivered
pursuant to Section 9.2 correctly identify any of such locations which are not
owned by Borrowers and set forth the

 

44

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

owners and/or operators thereof and, to the best of Borrowers’ knowledge, the
holders of any mortgages on such locations.

 

8.4           Priority of Liens; Title to Properties.  The security interests
and liens granted to Agent, for itself and the ratable benefit of Lenders, under
this Agreement and the other Financing Agreements to which any Borrower is a
party constitute valid and perfected first priority liens and security interests
in and upon the Collateral to which such Borrower now has or hereafter acquires
rights, subject only to the liens indicated on Schedule 8.4 hereto and the other
liens permitted under Section 9.8 hereof.  Each Borrower has good and marketable
title to all of its properties and assets subject to no liens, mortgages,
pledges, security interests, encumbrances or charges of any kind, except those
granted to Agent, for itself and the ratable benefit of Lenders, and such others
as are specifically listed on Schedule 8.4 hereto or permitted under Section 9.8
hereof.

 

8.5           Tax Returns.  Each Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Agent and Lenders).  All information in such tax returns, reports and
declarations is complete and accurate in all material respects.  Each Borrower
has paid or caused to be paid prior to delinquency all taxes due and payable or
claimed due and payable in any assessment received by it, except taxes the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower and with respect to which
adequate reserves have been set aside on its books.  Adequate provision has been
made for the payment of all accrued and unpaid Federal, State, county, local,
foreign and other taxes whether or not yet due and payable and whether or not
disputed.

 

8.6           Litigation.  Except as set forth on the Information Certificates,
there is no present investigation by any governmental agency pending, or to the
Borrowers’ actual knowledge threatened, against or affecting any Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the Borrowers’ actual knowledge threatened, against any
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrowers
would result in any material adverse change in the assets or business of
Borrowers or would impair the ability of any Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a party
or of Agent or any Lender to enforce any Obligations or realize upon a material
portion of the Collateral.

 

8.7           Compliance with Other Agreements and Applicable Laws.  Each
Borrower is not in default in any material respect under, or in violation in any
material respect of any of the terms of, any agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound and each Borrower is in compliance in all material respects
with all applicable provisions of laws, rules, regulations, licenses, permits,
approvals and orders of any foreign, Federal, State or local governmental
authority, except with respect to the annual reporting obligations imposed by
Sections 103 and 104 of ERISA and Section 6039D of the Code with respect to the
Plans (as defined in Section 8.10(a) hereof), as to which obligations Borrowers
shall comply promptly.

 

45

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

8.8           Bank Accounts.  All of the deposit accounts, investment accounts
or other accounts in the name of or used by Borrowers maintained at any bank or
other financial institution are set forth on Schedule 8.8 hereto, subject to the
right of Borrowers to establish new accounts in accordance with Section 9.13
below.

 

8.9           Environmental Compliance.

 

(a)           Except as set forth on Schedule 8.9 hereto, each Borrower has not
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off its premises (whether or not
owned by it) in any manner which at any time violates any applicable
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder and the operations of Borrowers comply in all material
respects with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder.

 

(b)           Except as set forth on Schedule 8.9 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrowers’ knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
Borrowers or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which affects any Borrower or its
business, operations or assets or any properties at which such Borrower has
transported, stored or disposed of any Hazardous Materials.

 

(c)           Each Borrower has no material liability (contingent or otherwise)
in connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.

 

(d)           Each Borrower has all licenses, permits, certificates, approvals
or similar authorizations required to be obtained or filed in connection with
the operations of such Borrower under any Environmental Law and all of such
licenses, permits, certificates, approvals or similar authorizations are valid
and in full force and effect.

 

8.10         Employee Benefits.

 

(a)           Except with respect to the Creative Computers 401(k) Plan and
Trust, the Creative Computers Group Welfare Benefit Plan and the Creative
Computers Flexible Benefit Plan (collectively, the “Plans”), each Borrower has
not engaged in any transaction in connection with which such Borrower or any of
its ERISA Affiliates could be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code, including any accumulated funding deficiency described in
Section 8.10(c) hereof and any deficiency with respect to vested accrued
benefits described in Section 8.10(d) hereof.  With respect to the Plans, each
Borrower has not engaged in any transaction in connection with which such
Borrower or any of its ERISA Affiliates could be subject to either a civil
penalty assessed

 

46

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code
and has corrected, or undertaken reasonable efforts to promptly correct, any
such transactions it has identified during the course of routine plan
administration.

 

(b)           No liability to the Pension Benefit Guaranty Corporation has been
or is expected by Borrowers to be incurred with respect to any employee pension
benefit plan of Borrowers or any of their ERISA Affiliates.  There has been no
reportable event (within the meaning of Section 4043(b) of ERISA) or any other
event or condition with respect to any employee pension benefit plan of
Borrowers or any of their ERISA Affiliates which presents a risk of termination
of any such plan by the Pension Benefit Guaranty Corporation.

 

(c)           Full payment has been made of all amounts which Borrowers or any
of their ERISA Affiliates are required under Section 302 of ERISA and
Section 412 of the Code to have paid under the terms of each employee pension
benefit plan as contributions to such plan as of the last day of the most recent
fiscal year of such plan ended prior to the date hereof, and no accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, exists with respect to any employee pension
benefit plan, including any penalty or tax described in Section 8.10(a) hereof
and any deficiency with respect to vested accrued benefits described in
Section 8.10(c) hereof.

 

(d)           The current value of all vested accrued benefits under all
employee pension benefit plans maintained by Borrowers that are subject to Title
IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.10(a) hereof and any accumulated funding deficiency
described in Section 8.10(c) hereof.  The terms “current value” and “accrued
benefit” have the meanings specified in ERISA.

 

(e)           Neither Borrowers nor any of their ERISA Affiliates is or has ever
been obligated to contribute to any “multiemployer plan” (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.

 

8.11         Year 2000 Compliance.  Borrowers and any business in which any
Borrower holds a substantial interest and all customers, suppliers and vendors
that are material to Borrowers’ business are Year 2000 Compliant.  As used
herein, “Year 2000 Compliant” shall mean, in regard to any entity, that all
software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of such entity, are
properly performing date sensitive functions during and after the year 2000. 
Borrowers shall, immediately upon request, provide to Agent and Lenders such
certifications or other evidence of Borrowers’ compliance with the terms hereof
as Agent and Lenders may from time to time require.

 

8.12         Accuracy and Completeness of Information.  All information
furnished by or on behalf of Borrowers in writing to Agent or any Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including, without limitation, all
information on the Information Certificates is true and correct in all material
respects on the date as of which such information is dated or certified and does
not omit

 

47

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

any material fact necessary in order to make such information not misleading. 
No event or circumstance has occurred which has had or could reasonably be
expected to have a material adverse affect on the business or assets of
Borrowers, which has not been fully and accurately disclosed to Agent and
Lenders in writing.

 

8.13         Survival of Warranties; Cumulative.  All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Agent and Lenders on the date of each additional
borrowing or other credit accommodation hereunder and shall be conclusively
presumed to have been relied on by Agent and Lenders regardless of any
investigation made or information possessed by Agent or any Lender.  The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which Borrowers shall now or
hereafter give, or cause to be given, to Agent and Lenders.

 

SECTION 9.  AFFIRMATIVE AND NEGATIVE COVENANTS.

 

9.1           Maintenance of Existence.  Each Borrower shall at all times
preserve, renew and keep in full, force and effect its corporate existence and
rights and franchises with respect thereto and maintain in full force and effect
all permits, licenses, trademarks, trade names, approvals, authorizations,
leases and contracts necessary to carry on the business as presently or proposed
to be conducted.  Each Borrower shall give Agent thirty (30) days prior written
notice of any proposed change in its corporate name, which notice shall set
forth the new name and such Borrower shall deliver to Agent a copy of the
amendment to the Certificate of Incorporation of such Borrower providing for the
name change certified by the Secretary of State of the jurisdiction of
incorporation of such Borrower as soon as it is available.

 

9.2           New Collateral Locations.  Any Borrower may open any new location
within the continental United States provided such Borrower:  (a) gives Agent
ten (10) days prior written notice of the intended opening of any such new
location; and (b) executes and delivers, or causes to be executed and delivered,
to Agent such agreements, documents, and instruments as Agent may deem
reasonably necessary or desirable to protect its interests in the Collateral at
such location, including, without limitation, UCC financing statements and, if
such Borrower leases such new location, provides a favorable landlord waiver or
subordination.

 

9.3           Compliance with Laws, Regulations, Etc.

 

(a)           Each Borrower shall, at all times, comply in all material respects
with all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any Federal, State or
local governmental authority, including, without limitation, the Employee
Retirement Security Act of 1974, as amended, the Occupational Safety and Hazard
Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and
all statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including, without
limitation, all of the Environmental Laws.

 

48

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(b)           Borrowers shall take prompt and appropriate action to respond to
any of Borrowers’ non-compliance (to the extent Borrowers have knowledge thereof
or would have knowledge thereof upon due inquiry) with any of the Environmental
Laws and shall report to Agent on such response.

 

(c)           Borrowers shall give both oral and written notice to Agent
immediately upon Borrowers’ receipt of any notice of, or Borrowers’ otherwise
obtaining knowledge of:

 

(i)            the occurrence of any event involving the release, spill or
discharge, threatened or actual, of any Hazardous Material by any Borrower or
upon any of its premises; or

 

(ii)           any investigation, proceeding, complaint, order, directive,
claims, citation or notice with respect to:

 

(A)          any non-compliance with or violation of any Environmental Law by
any Borrower;

 

(B)           the release, spill or discharge, threatened or actual, of any
Hazardous Material by any Borrower or upon any of its premises;

 

(C)           the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials by any
Borrower or upon any of its premises; or

 

(D)          any other environmental, health or safety matter, which could have
a material adverse effect upon any Borrower or its business, operations or
assets or any properties at which any Borrower transported, stored or disposed
of any Hazardous Materials.

 

(d)           Borrowers shall indemnify and hold harmless Agent, Lenders, and
their respective directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including attorneys’ fees and
legal expenses) directly or indirectly arising out of or attributable to the
use, generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous Material by any
Borrower or upon any of its premises, including, without limitation, the costs
of any required or necessary repair, cleanup or other remedial work with respect
to any property of such Borrower and the preparation and implementation of any
closure, remedial or other required plans.  All representations, warranties,
covenants and indemnifications in this Section 9.3 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.

 

(e)           To the extent any of the provisions of this Section 9.3 as they
pertain to the Real Property are inconsistent with the provisions of the deed of
trust in favor of Agent and Lenders on the Real Property, the provisions of such
deed of trust shall govern.

 

49

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

9.4           Payment of Taxes and Claims.  Each Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower and with respect to which adequate reserves have
been set aside on its books.  Borrowers shall be liable for any tax or penalties
imposed on Agent or any Lender as a result of the financing arrangements
provided for herein and Borrowers agree to indemnify and hold Agent and Lenders
harmless with respect to the foregoing, and to repay to Agent and Lenders on
demand the amount thereof, and until paid by Borrowers such amount shall be
added and deemed part of the Loans, provided, that, nothing contained herein
shall be construed to require Borrowers to pay any income or franchise taxes
attributable to the income of Agent or any Lender from any amounts charged or
paid hereunder to Agent or any Lender.  The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.

 

9.5           Insurance.  Borrowers shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated.  Said policies of insurance shall be satisfactory to Agent as to form,
amount and insurer.  Borrowers shall furnish certificates, policies or
endorsements to Agent as Agent shall require as proof of such insurance, and, if
Borrowers fail to do so, Agent is authorized, but not required, to obtain such
insurance at the expense of Borrowers.  All policies shall provide for at least
thirty (30) days prior written notice to Agent of any cancellation or reduction
of coverage and that Agent may act as attorney for Borrowers in obtaining, and
at any time an Event of Default exists or has occurred and is continuing,
adjusting, settling, amending and canceling such insurance.  Borrowers shall
cause Agent to be named as a loss payee and an additional insured (but without
any liability for any premiums) under such insurance policies and Borrowers
shall obtain non-contributory lender’s loss payable endorsements to all
insurance policies in form and substance satisfactory to Agent.  Such lender’s
loss payable endorsements shall specify that the proceeds of such insurance
shall be payable to Agent, for the ratable benefit of Lenders, as its interests
may appear and further specify that Agent shall be paid regardless of any act or
omission by Borrowers or any of their affiliates.  Subject to the provisions of
the deed of trust executed by Creative Computers in favor of Agent, at its
option, Agent may apply any insurance proceeds received by Agent at any time to
the cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as Agent
may determine or hold such proceeds as cash collateral for the Obligations.

 

9.6           Financial Statements and Other Information.

 

(a)           Borrowers shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of Borrowers and their subsidiaries (if any)
in accordance with GAAP and Borrowers shall furnish or cause to be furnished to
Agent:  (i) on or before the earlier of the forty-fifth (45th) day after the end
of each fiscal month or, for any fiscal month ending on the last day of a fiscal
quarter, the date on which Borrowers file their Form 10Q with the Securities and
Exchange Commission for such fiscal quarter, monthly unaudited internally
prepared

 

50

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

consolidated and consolidating financial statements (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders’ equity) as of the end of and through such fiscal
month, all in reasonable detail, which financial statements shall be prepared
honestly and in good faith (provided that where such fiscal month does not end
on the last day of a fiscal quarter, Agent understands that such financial
statements are based upon information available at the time of preparation of
such financial statements and may therefore not be accurate or complete), and
where such fiscal month ends on the last day of a fiscal quarter, shall fairly
present the financial position and the results of the operations of Borrowers
and their subsidiaries, provided, that, if the average daily Excess Availability
during any fiscal quarter (as determined on the dates on which Agent approves
the weekly borrowing base certificates provided pursuant to clause (a) of
Section 7.1 hereof) is not less than Ten Million Dollars ($10,000,000) and so
long as no Event of Default has occurred and is continuing, then during the
immediately following fiscal quarter, such financial statements may be provided
on a fiscal quarter basis on or before the earlier of the forty-fifth (45th)
day  after the end of such fiscal quarter or the date on which Borrowers file
their Form 10Q with the Securities and Exchange Commission for such fiscal
quarter, and (ii) within ninety (90) days after the end of each fiscal year,
audited consolidated and consolidating financial statements of Borrowers and
their subsidiaries (including in each case balance sheets, statements of income
and loss, statements of cash flow and statements of shareholders’ equity), and
the accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrowers and their
subsidiaries as of the end of and for such fiscal year, together with the
opinion of independent certified public accountants, which accountants shall be
an independent accounting firm selected by Borrowers and reasonably acceptable
to Agent, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
Borrowers and their subsidiaries as of the end of and for the fiscal year then
ended.

 

(b)           Borrowers shall promptly notify Agent in writing of the details of
(i) any loss, damage, investigation, action, suit, proceeding or claim which
involves an amount in excess of Five Hundred Thousand Dollars ($500,000) and
relates to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in any
Borrower’s business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.

 

(c)           Borrowers shall promptly after the sending or filing thereof
furnish or cause to be furnished to Agent copies of all financial reports which
Borrowers send to their stockholders generally and copies of all reports and
registration statements which Borrowers file with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.

 

(d)           Borrowers shall furnish or cause to be furnished to Agent such
budgets, forecasts, projections and other information in respect of the
Collateral and the business of Borrowers, as Agent may, from time to time,
reasonably request.  Agent and Lenders are hereby authorized to deliver a copy
of any financial statement or any other information relating to the business of
Borrowers to any court or other government agency or, subject to Section 13.5

 

51

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

below, to any participant or assignee or prospective participant or assignee. 
Borrowers hereby irrevocably authorize and direct all accountants or auditors to
deliver to Agent, at Borrowers’ expense, copies of the financial statements of
Borrowers and any reports or management letters prepared by such accountants or
auditors on behalf of Borrowers and to disclose to Agent such information as
they may have regarding the business of Borrowers.  Any documents, schedules,
invoices or other papers delivered to Agent may be destroyed or otherwise
disposed of by Agent one (1) year after the same are delivered to Agent, except
as otherwise designated by Borrowers to Agent in writing.

 

9.7           Sale of Assets, Consolidation, Merger, Dissolution, Etc.  Each
Borrower shall not, directly or indirectly, (a) merge into or with or
consolidate with any other Person or permit any other Person to merge into or
with or consolidate with it, provided, that any Borrower may merge into or with
or consolidate with any other Borrower upon not less than twenty (20) days prior
written notice to Agent, or (b) unless otherwise consented to by Agent in
writing, which consent shall not be unreasonably withheld or delayed, sell,
assign, lease, transfer, abandon or otherwise dispose of any capital stock of a
subsidiary or indebtedness to any other Person or any of its assets to any other
Person (except for (i) sales of Inventory in the ordinary course of business,
(ii) the disposition of worn-out or obsolete Equipment or Equipment no longer
used in the business of such Borrower so long as (A) if an Event of Default
exists or has occurred and is continuing, any proceeds are paid to Agent, for
the ratable benefit of Lenders and (B) such sales for all Borrowers do not
involve Equipment having an aggregate fair market value in excess of One Million
Dollars ($1,000,000) for all such Equipment disposed of in any single
transaction or in excess of Two Million Dollars ($2,000,000) for all such
Equipment disposed of in any fiscal year of Borrowers and (iii) a sale of the
Real Estate for a sales price of not less than Two Million Dollars ($2,000,000)
cash, so long as no Event of Default has occurred and is continuing or would
result from such sale, and provided that the sale proceeds are applied first to
pay in full the outstanding principal amount of the Term Loan, together with all
accrued but unpaid interest thereon, and any balance is applied to the
outstanding principal amount of the Revolving Loans), or (c) form or acquire any
subsidiaries (except as provided in Section 9.10(d) below), or (d) wind up,
liquidate or dissolve or (e) agree to do any of the foregoing.  Notwithstanding
the foregoing, the assets or capital stock of ecost may be sold, transferred or
otherwise disposed, provided that the proceeds thereof are remitted to Agent,
for the benefit of Lenders, for application to the Revolving Loans, and so long
as no Event of Default has occurred and is continuing or would result therefrom.

 

9.8           Encumbrances.  Borrowers shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of their assets or properties,
including, without limitation, the Collateral, except:

 

(a)           the liens and security interests of Agent and Lenders;

 

(b)           liens securing the payment of taxes, either not yet delinquent or
the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrowers and with respect to
which adequate reserves have been set aside on their books;

 

52

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(c)           security deposits in the ordinary course of business;

 

(d)           non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of Borrowers’ business to the
extent:

 

(i)            such liens secure indebtedness which is not overdue; or

 

(ii)           such liens secure indebtedness relating to claims or liabilities
which are fully insured and being defended at the sole cost and expense and at
the sole risk of the insurer (subject to applicable deductibles) or being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrowers, in each case prior to the commencement of foreclosure or
other similar proceedings and with respect to which adequate reserves have been
set aside on their books;

 

(e)           zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of real property which do not interfere in any
material respect with the use of such real property or ordinary conduct of the
business of Borrowers as presently conducted thereon or materially impair the
value of the real property which may be subject thereto;

 

(f)            purchase money security interests in Equipment (including capital
leases) and purchase money mortgages on real estate so long as such security
interests and mortgages do not apply to any property of Borrowers other than the
Equipment or real estate so acquired and any additions or accessions thereto,
and the indebtedness secured thereby does not exceed the cost of the Equipment
or real estate so acquired, as the case may be; and

 

(g)           the security interests and liens set forth on Schedule 8.4 hereto.

 

9.9           Indebtedness.  Borrowers shall not incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any obligations
or indebtedness, except:

 

(a)           the Obligations;

 

(b)           trade obligations, operating lease obligations and other
obligations incurred in the ordinary course of the Borrowers’ business and not
for borrowed money, together with normal accruals in the ordinary course of
business not yet due and payable, or with respect to which the Borrowers are
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to Borrowers, and with respect to
which adequate reserves have been set aside on their books;

 

(c)           purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement;

 

(d)           obligations or indebtedness set forth on Schedule 9.9 hereto;
provided, that, (i) Borrowers may only make regularly scheduled payments of
principal and interest in respect of such indebtedness in accordance with the
terms of the agreement or instrument evidencing or giving rise to such
indebtedness as in effect on the date hereof, (ii) Borrowers shall

 

53

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

not, directly or indirectly, (A) amend, modify, alter or change the terms of
such indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof, or (B) except as otherwise permitted under this
Agreement, redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrowers shall furnish to Agent all notices or demands in
connection with such indebtedness either received by Borrowers or on their
behalf, promptly after the receipt thereof, or sent by Borrowers or on their
behalf, concurrently with the sending thereof, as the case may be;

 

(e)           indebtedness of any Borrower to another Borrower;

 

(f)            any obligations or indebtedness of Borrowers on account of the
deferred payment of the Total Consideration (as defined in Section 9.10 hereof)
or any earn-outs or similar contingent payments in connection with the
acquisition of a Target (as defined in Section 9.10 hereof), to the extent
permitted in Section 9.10(d) hereof; and

 

(g)           indebtedness to the Canadian federal government in an aggregate
sum not to exceed Two Million Dollars ($2,000,000) (Canadian) on account of
advances made by the Canadian federal government against rebates payable by it
to Borrowers.

 

9.10         Loans, Investments, Guarantees, Etc.  Borrowers shall not, directly
or indirectly, make any loans or advance money or property to any person, or
invest in (by capital contribution, dividend or otherwise) or purchase or
repurchase the stock or indebtedness or all or a substantial part of the assets
or property of any person, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the indebtedness, performance,
obligations or dividends of any Person or agree to do any of the foregoing,
except:

 

(a)           the endorsement of instruments for collection or deposit in the
ordinary course of business;

 

(b)           investments in:

 

(i)            short-term direct obligations of the United States Government;

 

(ii)           negotiable certificates of deposit issued by any bank
satisfactory to Agent, payable to the order of the Borrowers or to bearer and
delivered to Agent;

 

(iii)          commercial paper rated A1 or P1; provided, that, as to any of the
foregoing, unless waived in writing by Lender, Borrowers shall take such actions
as are deemed necessary by Agent to perfect the security interest of Agent and
Lenders in such investments;

 

(c)           the guarantees set forth in the Information Certificates;

 

(d)           Borrowers may acquire all of the issued and outstanding capital
stock of another Person, or all or substantially all of the assets of another
Person or of a division of another Person (each, a “Target”), and may form a new
wholly-owned subsidiary (a “New

 

54

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

Subsidiary”) and make investments in such New Subsidiary (“Subsidiary
Investments”), subject to the satisfaction in full of all of the following
conditions precedent:

 

(i)            The subject Target or New Subsidiary (as applicable) shall be in
the same or similar type of business as Borrowers;

 

(ii)           The aggregate sum of (A) the purchase price for the subject
Target and any related Targets plus any other consideration payable in
connection with the sale of the Target and any related Targets, excluding any
earn-outs and similar contingent payments, excluding any obligations or
indebtedness of the Target that are assumed (as permitted by Section 9.9 hereof)
and excluding any capital stock of PC Mall (the “Total Consideration”) or the
amount of the subject Subsidiary Investments (as applicable), plus (B) the
aggregate sum of the Total Considerations for all Targets previously acquired by
Borrowers (excluding Pacific Business Systems, Inc. and Wareforce Incorporated)
plus all Subsidiary Investments previously made by Borrowers, shall not exceed
Fifty Million Dollars ($50,000,000) during the terms of the Original Loan
Agreement and this Agreement and Twenty Million Dollars ($20,000,000) during any
fiscal year;

 

(iii)          As of the date of the acquisition of the subject Target and any
related Targets or the making of the subject Subsidiary Investments (as
applicable) and after giving effect thereto, the Excess Availability would not
be less than Ten Million Dollars ($10,000,000);

 

(iv)          The subject Target shall be acquired in accordance with applicable
laws free and clear of any security interest, mortgage, pledge, lien, charge or
other encumbrance except as permitted in Section 9.8 hereof, and free and clear
of any obligations or indebtedness except as permitted in Section 9.9 hereof;

 

(v)           Any portion of the Total Consideration (excluding any earn-outs
and similar contingent payments) that is not payable on the closing of the
acquisition of the subject Target shall, to the extent a Borrower is obligated
to make payment thereof, be subordinated in a manner satisfactory to Agent or,
at Borrowers’ option, Agent may establish an Availability Reserve for such
portion of the Total Consideration;

 

(vi)          The subject Target and the Person acquiring the subject Target or
the subject New Subsidiary (as applicable) shall guaranty the Obligations, and
the assets and capital stock of the subject Target and such Person or the
subject New Subsidiary (as applicable) shall be pledged to Lender, all pursuant
to documents in form and substance satisfactory to Agent;

 

(vii)         No Event of Default, or event that with notice or lapse of time or
both would constitute an Event of Default, shall have occurred and be continuing
or would result from the acquisition of the subject Target or the making of the
subject Subsidiary Investments (as applicable);

 

(viii)        Borrowers shall give prior written notice to Agent of the
acquisition of the subject Target or the making of the subject Subsidiary
Investments as soon as

 

55

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

reasonably practicable, but in no event less than fifteen (15) calendar days
prior to the closing thereof if the Total Consideration for the subject Target
and any related Targets or the amount of the Subsidiary Investments (as
applicable) is greater than Two Million Dollars ($2,000,000);

 

(ix)           Agent shall have received true, correct and complete copies of
the acquisition agreement(s) for the subject Target and all exhibits, schedules,
documents and other agreements relating thereto, together with such financial
and other information concerning the subject Target as Agent may reasonably
request; and

 

(x)            Agent shall have received such further agreements, documents and
instruments, and such further acts shall have been completed, with respect to
the subject Target or New Subsidiary (as applicable), as required by
Section 9.17 hereof.

 

At Borrowers’ request, the subject Target or the Person acquiring the subject
Target or the subject New Subsidiary (as applicable) may be added as a borrower
hereunder, but only at the sole election of Agent.  Regardless of whether the
subject Target or the Person acquiring the subject Target or the subject New
Subsidiary (as applicable) is or becomes a borrower hereunder, and regardless of
whether the Accounts and Inventory of the subject Target or New Subsidiary
qualify under the definition of “Eligible Accounts” and “Eligible Inventory” in
this Agreement, the inclusion of such Accounts and Inventory in Eligible
Accounts and Eligible Inventory shall be subject to:

 

(xi)           Agent’s receipt and approval of full written appraisals as to the
inventory of the subject Target or New Subsidiary in form, scope and methodology
reasonable acceptable to Agent and by an appraiser reasonably acceptable to
Agent, addressed to Agent, and upon which Agent is expressly permitted to rely;

 

(xii)          The completion of a field examination by Agent of the subject
Target or New Subsidiary with results reasonably satisfactory to Agent;

 

(xiii)         Such additional eligibility criteria, Availability Reserves and
percentage advance rates as Agent shall establish in its commercially reasonable
discretion in light of the foregoing appraisals and field examination; and

 

(xiv)        The chief executive office and jurisdiction of organization of the
subject Target or New Subsidiary (as applicable) shall be in the United State or
Canada, and in any event, only those Accounts generated and invoiced from the
United States or Canada and that Inventory located in the United States or
Canada may be deemed Eligible Accounts or Eligible Inventory;

 

(e)           any Borrower may make loans or advances to, or investments in,
another Borrower, and may guaranty, assume, endorse or otherwise become
responsible for the indebtedness or obligations of another Borrower; and

 

(f)            Borrowers may make advances to their employees not to exceed One
Million Dollars ($1,000,000) in the aggregate outstanding at any time.

 

56

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

9.11         Dividends and Redemptions.  Borrowers shall not, directly or
indirectly, declare or pay any dividends on account of any shares of any class
of capital stock of Borrowers now or hereafter outstanding (except to PC Mall),
or set aside or otherwise deposit or invest any sums for such purpose, or
redeem, retire, defease, purchase, repurchase, recapitalize or otherwise acquire
(except from PC Mall) any shares of any class of capital stock (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration
other than common stock or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
shares (except to PC Mall) or agree to do any of the foregoing; provided, that,
PC Mall may repurchase a portion of its capital stock so long as (a) the
aggregate sum of all payments made on account of such repurchases shall not
exceed Ten Million Dollars ($10,000,000) during the term of this Agreement,
(b) the Excess Availability upon giving effect to such repurchases shall not be
less than Five Million Dollars ($5,000,000), and (c) no Event of Default has
occurred and is continuing or would result from such repurchases.

 

9.12         Transactions with Affiliates.  Borrowers shall not enter into any
transaction for the purchase, sale or exchange of property or the rendering of
any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrowers’ business and upon fair and
reasonable terms no less favorable to the Borrowers than Borrowers would obtain
in a comparable arm’s length transaction with an unaffiliated person.

 

9.13         Additional Accounts.  Borrowers shall not, directly or indirectly,
open, establish or maintain any deposit account, investment account, credit card
or check processing account or any other account with any bank or other
financial institution, other than the Blocked Accounts and the accounts set
forth in Schedule 8.8 hereto, except:  (a) as to any new or additional Blocked
Accounts and other such new or additional accounts which contain any Collateral
or proceeds thereof, with the prior written consent of Agent and subject to such
conditions thereto as Agent may establish and (b) as to any accounts used by
Borrowers to make payments of payroll, taxes or other obligations to third
parties, after prior written notice to Agent.

 

9.14         Compliance with ERISA.  Borrowers shall not with respect to any
“employee pension benefit plans” maintained by Borrowers or any of their ERISA
Affiliates:

 

(a)           (i)            terminate any of such employee pension benefit
plans so as to incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA;

 

(ii)           allow or fail to correct promptly after discovery thereof any
prohibited transaction involving any of such employee pension benefit plans or
any trust created thereunder which would subject Borrowers or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA;

 

(iii)          fail to pay to any such employee pension benefit plan any
contribution which they are obligated to pay under Section 302 of ERISA,
Section 412 of the Code or the terms of such plan;

 

(iv)          allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such employee pension benefit plan;

 

57

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(v)           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 Pension Benefit Guaranty Corporation of any such employee pension benefit
plan that is a single employer plan, which termination could result in any
liability to the Pension Benefit Guaranty Corporation; or

 

(vi)          incur any withdrawal liability with respect to any multiemployer
pension plan.

 

(b)           As used in this Section 9.14, the term “employee pension benefit
plans,” “employee benefit plans”, “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
Section 4975 of the Code and ERISA.

 

9.15         Adjusted Tangible Net Worth.  Borrowers on a consolidated basis
shall maintain Adjusted Tangible Net Worth, calculated in accordance with
Exhibit C attached hereto, of not less than Six Million Two Hundred Fifteen
Thousand Dollars ($6,215,000), tested as of the last day of each fiscal quarter
if the Excess Availability is greater than Five Million Dollars ($5,000,000) and
as of the last day of each month if the Excess Availability is equal to or less
than Five Million Dollars ($5,000,000).

 

9.16         Costs and Expenses.  Borrowers shall pay to Agent, for itself and
the ratable benefit of Lenders, on demand all reasonable costs, expenses, filing
fees and taxes paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, administration, collection, liquidation,
enforcement and defense of the Obligations, Agent’s and Lender’s rights in the
Collateral, this Agreement, the other Financing Agreements and all other
documents related hereto or thereto, including any amendments, supplements or
consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to:

 

(a)           all reasonable costs and expenses of filing or recording
(including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable);

 

(b)           all reasonable costs and expenses and fees for title insurance and
other insurance premiums, environmental audits, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees;

 

(c)           reasonable costs and expenses of remitting loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
the Blocked Accounts, together with Agent’s and Lender’s customary charges and
fees with respect thereto;

 

(d)           customary charges, fees or expenses charged by any bank or issuer
in connection with the Letter of Credit Accommodations;

 

(e)           reasonable costs and expenses of preserving and protecting the
Collateral;

 

58

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(f)            reasonable costs and expenses paid or incurred in connection with
obtaining payment of the Obligations, enforcing the security interests and liens
of Agent, for itself and the ratable benefit of Lenders, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements or defending any claims made or
threatened against Agent and/or Lenders arising out of the transactions
contemplated hereby and thereby (including, without limitation, preparations for
and consultations concerning any such matters);

 

(g)           all reasonable out-of-pocket expenses and costs incurred by
Agent’s examiners in the conduct of their periodic field examinations of the
Collateral and Borrowers’ operations, plus a per diem charge at the rate of
Seven Hundred Fifty Dollars ($750) per person per day for such examiners in the
field and office; and

 

(h)           the reasonable fees and disbursements of counsel (including legal
assistants) to Agent, any Lender and any Participant in connection with any of
the foregoing.

 

9.17         Further Assurances.  At the request of Agent or any Lender at any
time and from time to time, Borrowers shall, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements.  Agent may at any time and from time to time request a certificate
from an officer of Borrowers representing on behalf of Borrowers that all
conditions precedent to the making of Loans and providing Letter of Credit
Accommodations contained herein are satisfied.  In the event of such request by
Agent, Agent and Lenders may, at Agent’s option, cease to make any further Loans
or provide any further Letter of Credit Accommodations until Agent has received
such certificate and, in addition, Agent has determined that such conditions are
satisfied.  Where permitted by law, Borrowers hereby authorizes Agent and any
Lender to execute and file one or more UCC financing statements signed only by
Agent and any Lender as deemed appropriate by Agent to perfect Agent’s and
Lender’s security interests in the Collateral.

 

SECTION 10.  EVENTS OF DEFAULT AND REMEDIES.

 

10.1         Events of Default.  The occurrence or existence of any one or more
of the following events are referred to herein individually as an “Event of
Default,” and collectively as “Events of Default”:

 

(a)           (i) Borrowers fail to pay any of the Obligations within two
(2) Business Days after the same become due and payable or (ii) any Borrower or
any Obligor fails to perform any of the covenants contained in this Agreement or
the other Financing Agreements and such failure shall continue for thirty (30)
days; provided, that, such thirty (30) day period shall not apply in the case of
(A) any failure to observe any such covenant which is not capable of being cured
at all or within such thirty (30) day period or which has been the subject of a
prior failure within the preceding four (4) month period or (B) any failure by
Borrowers to pursue a cure diligently and promptly during such thirty (30) day
period or (iii) any Borrower fails to perform

 

59

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

any of the terms, covenants, conditions or provisions contained in this
Agreement or any of the other Financing Agreements other than those described in
Sections 10.1(a)(i) and 10.1(a)(ii) above;

 

(b)           any representation, warranty or statement of fact made by any
Borrower to Agent or any Lender in this Agreement, the other Financing
Agreements or any other agreement, schedule, confirmatory assignment or
otherwise shall when made or deemed made be false or misleading in any material
respect;

 

(c)           any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Agent or any Lender;

 

(d)           any judgment for the payment of money (excluding any such judgment
fully covered by insurance) is rendered against any of Borrowers or Obligors in
excess of Five Hundred Thousand Dollars ($500,000) in any one case or in excess
of One Million Dollars ($1,000,000) in the aggregate and shall remain
undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any material judgment
other than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against any of Borrowers or Obligors or any of their
assets;

 

(e)           any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or any Borrower or any Obligor, which is a
partnership, limited liability company, or corporation, dissolves or suspends or
discontinues doing business;

 

(f)            any Borrowers or any Obligor becomes insolvent (however defined
or evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;

 

(g)           a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within thirty
(30) days after the date of its filing or any Borrower or any Obligor shall file
any answer admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or proceeding or
the relief requested is granted sooner;

 

(h)           a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or any Obligor or for all or any part of its
property;

 

(i)            any default by any Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money or
secured indebtedness owing to any person other than Agent or any Lender, or any
capitalized lease

 

60

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

obligations, contingent indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any person other
than Lender, in excess of One Million Dollars ($1,000,000) in the aggregate,
which default continues for more than the applicable cure period, if any, with
respect thereto, or any default by any Borrower or any Obligor under any
material contract, lease, license or other obligation to any person other than
Agent and Lenders, which default continues for more than the applicable cure
period, if any, with respect thereto, unless (in each case and without limiting
Agent’s rights to establish Availability Reserves for any such defaults) such
defaults are being contested in good faith by appropriate proceedings diligently
pursued;

 

(j)            the acquisition by any Person (other than Frank Khulusi or Sam
Khulusi) of the capital stock of PC Mall if the effect of such acquisition is
that such Person together with any of its affiliates hold, directly or
indirectly, fifty percent (50%) or more of the issued and outstanding capital
stock of PC Mall;

 

(k)           the indictment or threatened indictment of any Borrower or any
Obligor under any criminal statute, or the commencement or threatened
commencement of criminal or civil proceedings against any Borrower or any
Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any of the property of such Borrower
or such Obligor;

 

(l)            there shall be a material adverse change in the business or
assets of Borrowers taken as a whole or any Obligor after the date hereof; or

 

(m)          there shall be an Event of Default as defined in any of the other
Financing Agreements.

 

10.2         Remedies.

 

(a)           At any time an Event of Default exists or has occurred and is
continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the Uniform Commercial Code and
other applicable law, all of which rights and remedies may be exercised without
notice to or consent by any Borrower or any Obligor, except as such notice or
consent is expressly provided for hereunder or required by applicable law.  All
rights, remedies and powers granted to Agent and Lenders hereunder, under any of
the other Financing Agreements, the Uniform Commercial Code or other applicable
law, are cumulative, not exclusive and enforceable, in Agent’s discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrowers of this
Agreement or any of the other Financing Agreements.  Subject to Section 12
hereof, Agent shall, upon the direction of the Required Lenders, at any time or
times an Event of Default has occurred and is continuing, proceed directly
against Borrowers or any Obligor to collect the Obligations without prior
recourse to the Collateral.

 

(b)           Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent may, and upon the direction of
the Required Lenders, shall

 

61

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(i) accelerate the payment of all Obligations and demand immediate payment
thereof to Agent, for the ratable benefit of Lenders (provided, that, upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h),
all Obligations shall automatically become immediately due and payable),
(ii) with or without judicial process or the aid or assistance of others, enter
upon any premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair of
all or any portion of the Collateral, (iii) require Borrowers, at Borrowers’
expense, to assemble and make available to Agent any part or all of the
Collateral at any place and time designated by Agent, (iv) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (v) remove
any or all of the Collateral from any premises on or in which the same may be
located for the purpose of effecting the sale, foreclosure or other disposition
thereof or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker’s board, at any office of Agent or elsewhere) at such prices or
terms as Agent may deem reasonable, for cash, upon credit or for future
delivery, with the Agent or any Lender having the right to purchase the whole or
any part of the Collateral at any such public sale, all of the foregoing being
free from any right or equity of redemption of Borrowers, which right or equity
of redemption is hereby expressly waived and released by Borrowers and/or
(vii) terminate this Agreement.  If any of the Collateral is sold or leased by
Agent upon credit terms or for future delivery, the Obligations shall not be
reduced as a result thereof until payment therefor is finally collected by
Agent, for the ratable benefit of Lenders.  If notice of disposition of
Collateral is required by law, ten (10) days prior notice by Agent to Borrowers
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrowers waives any other notice. 
In the event Agent institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of prejudgment remedy, Borrowers waive the
posting of any bond which might otherwise be required.

 

(c)           Agent may apply the cash proceeds of Collateral actually received
by it from any sale, lease, foreclosure or other disposition of the Collateral
to payment of the Obligations, in whole or in part and in such order as Agent
may elect, whether or not then due.  Borrowers shall remain liable to Agent and
Lenders for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys’ fees and legal expenses.

 

(d)           Without limiting the foregoing, upon the occurrence of an Event of
Default, Agent may, and upon the direction of the Required Lenders, shall,
without notice, (i) cease making Loans or arranging Letter of Credit
Accommodations or reduce the lending formulas or amounts of Loans and Letter of
Credit Accommodations available to Borrowers and/or (ii) terminate any provision
of this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Agent or Lenders to Borrowers.

 

62

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

SECTION 11.  JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW.

 

11.1         Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.

 

(a)           The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of California (without
giving effect to principles of conflicts of law).

 

(b)           Borrowers, Agent and Lenders irrevocably consent and submit to the
non-exclusive jurisdiction of the state courts of the County of Los Angeles,
State of California and of the United States District Court for the Central
District of California and waive any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Agent or any Lender shall have the right to bring
any action or proceeding against Borrowers or their property in the courts of
any other jurisdiction which such Person deems necessary or appropriate in order
to realize on the Collateral or to otherwise enforce its rights against
Borrowers or their property).

 

(c)           Borrowers hereby waive personal service of any and all process
upon them and consent that all such service of process may be made by certified
mail (return receipt requested) directed to their address set forth on the
signature pages hereof and service so made shall be deemed to be completed five
(5) Business Days after the same shall have been so deposited in the U.S. 
mails, or, at Agent’s or any Lender’s option, by service upon Borrowers in any
other manner provided under the rules of any such courts.  Within thirty (30)
days after such service or such other period as provided by applicable law,
Borrowers shall appear in answer to such process, failing which Borrowers shall
be deemed in default and judgment may be entered by Agent or any Lender against
Borrowers for the amount of the claim and other relief requested.

 

(d)           BORROWERS, AGENT AND EACH LENDER HEREBY WAIVE ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  BORROWERS, AGENT
AND EACH LENDER HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS

 

63

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

(e)           Neither Agent nor any Lender shall have any liability to Borrowers
(whether in tort, contract, equity or otherwise) for losses suffered by
Borrowers in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on such Person, that
the losses were the result of acts or omissions constituting gross negligence or
willful misconduct.

 

11.2         Waiver of Notices.  Borrowers hereby expressly waive demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein and except
to the extent such waiver is prohibited by applicable law.  No notice to or
demand on Borrowers which Agent or any Lender may elect to give shall entitle
Borrowers to any other or further notice or demand in the same, similar or other
circumstances.

 

11.3         Amendments and Waivers.

 

(a)           Neither this Agreement nor any provision hereof shall be amended,
modified, waived or discharged orally or by course of conduct, but only by a
written agreement signed as provided in Section 11.3(b) hereof.  Neither Agent
nor any Lender shall, by any act, delay, omission or otherwise be deemed to have
expressly or impliedly waived any of its rights, powers and/or remedies unless
such waiver shall be in writing and signed by an authorized officer of such
Person as provided in Section 11.3(b) hereof.  Any such waiver shall be
enforceable only to the extent specifically set forth therein.  A waiver by
Agent or any Lender of any right, power and/or remedy on any one occasion shall
not be construed as a bar to or waiver of any such right, power and/or remedy
which Agent or any Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.

 

(b)           Neither this Agreement nor any other Financing Agreement nor any
terms hereof or thereof may be changed, waived, discharged or terminated unless
such change, waiver, discharge or termination is in writing signed by Agent and
the Required Lenders, and as to amendments to any of the Financing Agreements,
by Borrowers; except, that, any change, waiver, discharge or termination with
respect to the following shall require the consent of Agent and all Lenders:

 

(i)            the extension of the Final Maturity Date or the due dates for
principal payments on the Term Loans;

 

(ii)           reduction in the interest rate or any fees or the extension of
the time of payment of interest or any fees or reduction in the principal amount
of any Loan or Letter of Credit Accommodations;

 

64

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(iii)          increase in the Commitment of any Lender over the amount thereof
then in effect or provided hereunder (it being understood that a waiver of any
Event of Default shall not constitute a change in the terms of any Commitment of
any Lender);

 

(iv)          the release of any Collateral (except as expressly required by the
Financing Agreements and except as permitted under Section 12.11(b) hereof);

 

(v)           the amendment, modification or waiver of:  (A) the terms of the
following definitions or any provisions relating thereto:  Eligible Accounts,
Eligible Inventory, Excess Availability, Final Maturity Date, Maximum Credit,
Required Lenders or Pro Rata Shares, or (B) any provision of this Section 11.3;

 

(vi)          the consent to the assignment or transfer by any Borrower of any
of its rights and obligations under this Agreement; or

 

(vii)         the increase in the advance rates or the sublimits set forth in
Section 2.1(a) hereof.

 

(c)           Notwithstanding anything to the contrary contained in
Section 11.3(b) above, in the event that Borrowers request that this Agreement
or any other Financing Agreements be amended or otherwise modified in a manner
which would require the unanimous consent of all of the Lenders and such
amendment or other modification is agreed to by the Required Lenders, then, with
the consent of Borrowers and the Required Lenders, Borrowers and the Required
Lenders may amend this Agreement without the consent of the Lender or Lenders
which did not agree to such amendment or other modification (collectively, the
“Minority Lenders”) to provide for (i) the termination of the Commitment of each
of the Minority Lenders, (ii) the addition to this Agreement of one or more
other Lenders, or an increase in the Commitment of one or more of the Required
Lenders, so that the Commitments, after giving effect to such amendment, shall
be in the same aggregate amount as the Commitments immediately before giving
effect to such amendment, (iii) if any Loans are outstanding at the time of such
amendment, the making of such additional Loans by such new Lenders or Required
Lenders, as the case may be, as may be necessary to repay in full the
outstanding Loans of the Minority Lenders immediately before giving effect to
such amendment and (iv) the payment of all interest, fees and other Obligations
payable or accrued in favor of the Minority Lenders and such other modifications
to this Agreement as Borrowers and the Required Lenders may determine to be
appropriate.

 

(d)           The consent of Agent shall be required for any amendment, waiver
or consent affecting the rights or duties of Agent hereunder or under any of the
other Financing Agreements, in addition to the consent of the Lenders otherwise
required by this Section.

 

11.4         Waiver of Counterclaims.  Borrowers waive all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other than
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.

 

65

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

11.5         Indemnification.  Borrowers shall indemnify and hold Agent and each
Lender, and its directors, agents, employees and counsel (each an “Indemnified
Party”), harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses imposed on, incurred by or asserted against any
of them (unless arising from the gross negligence or willful misconduct of any
Indemnified Party) in connection with any litigation, investigation, claim or
proceeding commenced or threatened related to the negotiation, preparation,
execution, delivery, enforcement, performance or administration of this
Agreement, any other Financing Agreements, or any undertaking or proceeding
related to any of the transactions contemplated hereby or any act, omission,
event or transaction related or attendant thereto, including, without
limitation, amounts paid in settlement, court costs, and the fees and expenses
of counsel.  To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section 11.5 may be unenforceable because it violates
any law or public policy, Borrowers shall pay the maximum portion which they are
permitted to pay under applicable law to Agent and Lenders in satisfaction of
indemnified matters under this Section 11.5.  The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.

 

SECTION 12.  THE AGENT

 

12.1         Appointment; Powers and Immunities.  Each Lender hereby irrevocably
designates, appoints and authorizes Wachovia Capital Finance Corporation
(Western) to act as Agent hereunder and under the other Financing Agreements
with such powers as are specifically delegated to Agent by the terms of this
Agreement and of the other Financing Agreements, together with such other powers
as are reasonably incidental thereto.  Agent: (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Financing Agreements, and shall not by reason of this Agreement or any
other Financing Agreement be a trustee or fiduciary for any Lender; (b) shall
not be responsible to Lenders for any recitals, statements, representations or
warranties contained in this Agreement or in any other Financing Agreement, or
in any certificate or other document referred to or provided for in, or received
by any of them under, this Agreement or any other Financing Agreement, or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Financing Agreement or any other document
referred to or provided for herein or therein or for any failure by any Borrower
or any Obligor or any other Person to perform any of its obligations hereunder
or thereunder; and (c) shall not be responsible to Lenders for any action taken
or omitted to be taken by it hereunder or under any other Financing Agreement or
under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction.  Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith.  Agent may
deem and treat the payee of any note as the holder thereof for all purposes
hereof unless and until the assignment thereof pursuant to an agreement (if and
to the extent permitted herein) in form and substance satisfactory to Agent
shall have been delivered to and acknowledged by Agent.

 

12.2         Reliance By Agent.  Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the

 

66

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by Agent.  As to any matters
not expressly provided for by this Agreement or any other Financing Agreement,
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or thereunder in accordance with instructions given by the
Required Lenders or all of Lenders as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all Lenders.

 

12.3         Events of Default.

 

(a)           Agent shall not be deemed to have knowledge or notice of the
occurrence of an Event of Default or other failure of a condition precedent to
the Loans and Letter of Credit Accommodations hereunder, unless and until Agent
has received written notice from a Lender, a Borrower or any Obligor specifying
such Event of Default or any unfulfilled condition precedent, and stating that
such notice is a “Notice of Default or Failure of Condition”.  In the event that
Agent receives such a notice, Agent shall give prompt notice thereof to the
Lenders.  Agent shall (subject to Section 12.7) take such action with respect to
any such Event of Default or failure of condition precedent as shall be directed
by the Required Lenders; provided, that, unless and until Agent shall have
received such directions, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to or by reason of such
Event of Default or failure of condition precedent, as it shall deem advisable
in the best interest of Lenders.  Without limiting the foregoing, and
notwithstanding the existence or occurrence and continuance of an Event of
Default or any other failure to satisfy any of the conditions precedent set
forth in Section 4 of this Agreement to the contrary, Agent may, but shall have
no obligation to, continue to make Loans and issue or cause to be issued Letter
of Credit Accommodations for the ratable account and risk of Lenders from time
to time if Agent believes making such Loans or issuing or causing to be issued
such Letter of Credit Accommodations is in the best interests of Lenders.

 

(b)           Except with the prior written consent of Agent, no Lender may
assert or exercise any enforcement right or remedy in respect of the Loans,
Letter of Credit Accommodations or other Obligations, as against any Borrower or
any Obligor or any of the Collateral or other property of any Borrower or any
Obligor.

 

12.4         Wachovia in its Individual Capacity.  With respect to its
Commitment and the Loans made and Letter of Credit Accommodations issued or
caused to be issued by it (and any successor acting as Agent), so long as
Wachovia Capital Finance Corporation (Western) shall be a Lender hereunder, it
shall have the same rights and powers hereunder as any other Lender and may
exercise the same as though it were not acting as Agent, and the term “Lender”
or “Lenders” shall, unless the context otherwise indicates, include Wachovia
Capital Finance Corporation (Western) in its individual capacity as Lender
hereunder.  Wachovia Capital Finance Corporation (Western) (and any successor
acting as Agent) and its Affiliates may (without having to account therefor to
any Lender) lend money to, make investments in and generally engage in any kind
of business with Borrowers and Obligors (and any of their respective
Subsidiaries or Affiliates) as if it were not acting as Agent, and Wachovia
Capital Finance Corporation (Western) and its Affiliates may accept fees and
other consideration from Borrowers

 

67

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

and Obligors for services in connection with this Agreement or otherwise without
having to account for the same to Lenders.

 

12.5         Indemnification.  Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrowers hereunder and without limiting the Obligations of
Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any
and all claims of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Agent (including by any Lender) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the party to be indemnified as determined by
a final non-appealable judgment of a court of competent jurisdiction.

 

12.6         Non-Reliance on Agent and Other Lenders.  Each Lender agrees that
it has, independently and without reliance on Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of each Borrower and Obligors and has made its own decision
to enter into this Agreement and that it will, independently and without
reliance upon Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement or
any of the other Financing Agreements.  Agent shall not be required to keep
itself informed as to the performance or observance by any Borrower or any
Obligor of any term or provision of this Agreement or any of the other Financing
Agreements or any other document referred to or provided for herein or therein
or to inspect the properties or books of any Borrower or any Obligor.  Agent
will use reasonable efforts to provide Lenders with any information received by
Agent from any Borrower or any Obligor which is required to be provided to
Lenders hereunder and with a copy of any “Notice of Default or Failure of
Condition” received by Agent from any Borrower, any Obligor or any Lender;
provided, that, Agent shall not be liable to any Lender for any failure to do
so, except to the extent that such failure is attributable to Agent’s own gross
negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction.  Except for notices, reports and
other documents expressly required to be furnished to Lenders by Agent
hereunder, Agent shall not have any duty or responsibility to provide any Lender
with any other credit or other information concerning the affairs, financial
condition or business of any Borrower or any Obligor that may come into the
possession of Agent.

 

12.7         Failure to Act.  Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.

 

68

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

12.8         Additional Loans.  Agent shall not make any Revolving Loans or
provide any Letter of Credit Accommodations to any Borrower on behalf of Lenders
intentionally and with actual knowledge that such Loans or Letter of Credit
Accommodations would cause the aggregate amount of the total outstanding Loans
and Letter of Credit Accommodations to Borrowers to exceed the amount set forth
in Section 2.1(a) hereof (the “Borrowing Base”), without the prior consent of
all Lenders, except, that, Agent may make such additional Loans or provide such
additional Letter of Credit Accommodations on behalf of Lenders, intentionally
and with actual knowledge that such Loans or Letter of Credit Accommodations
will cause the total outstanding Loans and Letter of Credit Accommodations to
Borrowers exceed the Borrowing Base as Agent may deem necessary or advisable in
its discretion, provided, that:  (a) the total principal amount of the
additional Loans or additional Letter of Credit Accommodations to any Borrower
which Agent may make or provide after obtaining such actual knowledge that the
aggregate principal amount of the Loans equal or exceed the Borrowing Base shall
not exceed the amount equal to ten (10%) percent of the Borrowing Base at the
time and shall not cause the total principal amount of the Loans and Letter of
Credit Accommodations to exceed the Maximum Credit and (b) without the consent
of all Lenders, Agent shall not make any such additional Loans or Letter of
Credit Accommodations more than ninety (90) days from the date of the first such
additional Loans or Letter of Credit Accommodations.  Each Lender shall be
obligated to pay Agent the amount of its Pro Rata Share of any such additional
Loans or Letter of Credit Accommodations provided that Agent is acting in
accordance with the terms of this Section 12.8.

 

12.9         Concerning the Collateral and the Related Financing Agreements. 
Each Lender authorizes and directs Agent to enter into this Agreement and the
other Financing Agreements relating to the Collateral, for the ratable benefit
of Lenders and Agent.  Each Lender agrees that any action taken by Agent or
Required Lenders in accordance with the terms of this Agreement or the other
Financing Agreements relating to the Collateral, and the exercise by Agent or
Required Lenders of their respective powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto, shall be
binding upon all of the Lenders.

 

12.10       Field Audits; Examination Reports and other Information; Disclaimer
by Lenders.  By signing this Agreement, each Lender:

 

(a)           is deemed to have requested that Agent furnish Lender, promptly
after it becomes available, a copy of each field audit or examination report and
a weekly report with respect to the Borrowing Base prepared by Agent (each field
audit or examination report and weekly report with respect to the Borrowing Base
(as defined in Section 12.8 hereof) being referred to herein as a “Report” and
collectively, the “Reports”);

 

(b)           expressly agrees and acknowledges that Agent (i) does not make any
representation or warranty as to the accuracy of any Report, or (ii) shall not
be liable for any information contained in any Report; provided, that, nothing
contained in this Section 12.10 shall be construed to limit the liability of
Agent under Section 12.1(c) hereof in the event of the gross negligence or
willful misconduct of Agent as determined pursuant to a final non-appealable
order of a court of competent jurisdiction;

 

69

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(c)           expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrowers
and Obligors and will rely significantly upon each Borrower’s books and records,
as well as on representations of each Borrower’s personnel; and

 

(d)           agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 13.7 hereof, and not to
distribute or use any Report in any other manner.

 

12.11       Collateral Matters.

 

(a)           Agent may, at its option, from time to time, at any time on or
after an Event of Default and for so long as the same is continuing or upon any
other failure of a condition precedent to the Loans and Letter of Credit
Accommodations hereunder, make such disbursements and advances (“Special Agent
Advances”) which Agent, in its sole discretion, deems necessary or desirable
either (i) to preserve or protect the Collateral or any portion thereof
(provided that in no event shall Special Agent Advances for such purpose exceed
Five Million Dollars ($5,000,000) in the aggregate outstanding at any time),
provided, that, unless all Lenders otherwise agree in writing, the Special Agent
Advances under this clause (i) shall not cause the aggregate outstanding amount
of the Loans, the Letter of Credit Accommodations and such Special Agent
Advances to exceed the Maximum Credit, and Agent shall make commercially
reasonable arrangements with Borrowers for the repayment in full of such Special
Agent Advances within a reasonable time, or (ii) to pay any other amount
chargeable to any Borrower pursuant to the terms of this Agreement consisting of
costs, fees and expenses and payments to any issuer of Letter of Credit
Accommodations.  Special Agent Advances shall be repayable on demand and be
secured by the Collateral.  Special Agent Advances shall not constitute Loans
but shall otherwise constitute Obligations hereunder.  Agent shall notify each
Lender and Borrowers in writing of each such Special Agent Advance, which notice
shall include a description of the purpose of such Special Agent Advance. 
Without limitation of its obligations pursuant to Section 6.10, each Lender
agrees that it shall make available to Agent, upon Agent’s demand, in
immediately available funds, the amount equal to such Lender’s Pro Rata Share of
each such Special Agent Advance.  If such funds are not made available to Agent
by such Lender, Agent shall be entitled to recover such funds, on demand from
such Lender together with interest thereon, for each day from the date such
payment was due until the date such amount is paid to Agent at the interest rate
then payable by Borrowers in respect of the Revolving Loans as set forth in
Section 3.1 hereof.

 

(b)           Lenders hereby irrevocably authorize Agent, at its option and in
its discretion to release any security interest in, mortgage or lien upon, any
of the Collateral (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations and delivery of cash collateral to the
extent required under Section 13.1 hereof, or (ii) constituting property being
sold or disposed of if Borrowers certify to Agent that the sale or disposition
is made in compliance with the terms hereof, including Section 9.7 hereof (and
Agent may rely conclusively on any such certificate, without further inquiry),
or (iii) constituting property in which any Borrower or any Obligor did not own
an interest at the time the security interest,

 

70

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

mortgage or lien was granted or at any time thereafter, or (iv) having a value
of less than Five Million Dollars ($5,000,000), or (v) if approved, authorized
or ratified in writing by all of Lenders.  Except as provided above, Agent will
not release any security interest in, mortgage or lien upon, any of the
Collateral without the prior written authorization of all of Lenders (and any
Lender may require that the proceeds from any sale or other disposition of the
Collateral to be so released be applied to the Obligations in a manner
satisfactory to such Lender).  Upon request by Agent at any time, Lenders will
promptly confirm in writing Agent’s authority to release particular types or
items of Collateral pursuant to this Section.

 

(c)           Without any manner limiting Agent’s authority to act without any
specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section.  Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent for itself and the benefit of the Lenders upon any Collateral
to the extent set forth above; provided, that, (i) Agent shall not be required
to execute any such document on terms which, in Agent’s opinion, would expose
Agent to liability or create any obligations or entail any consequence other
than the release of such security interest, mortgage or liens without recourse
or warranty and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any security interest, mortgage or lien upon (or
obligations of any Borrower in respect of) the Collateral retained by any
Borrower.

 

(d)           Agent shall have no obligation whatsoever to any Lender or any
other Person to investigate, confirm or assure that the Collateral exists or is
owned by any Borrower or any Obligor or is cared for, protected or insured or
has been encumbered, or that any particular items of Collateral meet the
eligibility criteria applicable in respect of the Loans or Letter of Credit
Accommodations hereunder, or whether any particular reserves are appropriate, or
that the liens and security interests granted to Agent herein or pursuant hereto
or otherwise have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent in this Agreement or in any of the other Financing
Agreements, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, Agent may act in any manner it may
deem appropriate, in its discretion, given Agent’s own interest in the
Collateral as a Lender and that Agent shall have no duty or liability whatsoever
to any other Lender.

 

12.12       Agency for Perfection.  Agent and each Lender hereby appoints each
Lender as agent for the purpose of perfecting the security interests in and
liens upon the Collateral of Agent for itself and the ratable benefit of Lenders
in assets which, in accordance with Article 9 of the UCC can be perfected only
by possession.  Should any Lender obtain possession of any such Collateral, such
Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor
shall deliver such Collateral to Agent or in accordance with Agent’s
instructions.

 

12.13       Failure to Respond Deemed Consent.  In the event any Lender’s
consent is required pursuant to the provisions of this Agreement and such Lender
does not respond to any

 

71

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

request by Agent for such consent within ten (10) days after such request is
made to such Lender, such failure to respond shall be deemed a consent.

 

SECTION 13.  TERM OF AGREEMENT; MISCELLANEOUS.

 

13.1         Term.

 

(a)           This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the Final Maturity Date, unless
sooner terminated pursuant to the terms hereof.  Upon the effective date of
termination of this Agreement and the other Financing Agreements, Borrowers
shall pay to Agent, for the ratable benefit of the Lenders, in full, all
outstanding and unpaid non-contingent Obligations and shall furnish cash
collateral to Agent, (or at Agent’s option, a letter of credit issued for the
account of Borrowers and at Borrowers’ expense, in form and substance
satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as
beneficiary, for the ratable benefit of Lenders) in such amounts as Agent
determines are reasonably necessary to secure (or reimburse) Agent and Lenders
from loss, cost, damage or expense, including attorneys’ fees and legal
expenses, in connection with any contingent Obligations, including issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Agent and Lenders
have not yet received final and indefeasible payment.  Such payments in respect
of the Obligations and cash collateral shall be remitted by wire transfer in
federal funds to such bank account of Agent, as Agent may, in its discretion,
designate in writing to Borrowers for such purpose.  Interest shall be due until
and including the next Business Day, if the amounts so paid by any Borrower to
the bank account designated by Agent are received in such bank account later
than 12:00 noon, Los Angeles time.

 

(b)           No termination of this Agreement or the other Financing Agreements
shall relieve or discharge any Borrower of its respective duties, obligations
and covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, provided, that,
Lender shall terminate its security interests in the Collateral upon the
payments and furnishing of cash collateral by Borrowers to Lender in the full
sums required in Section 13.1(a) above.

 

(c)           If for any reason this Agreement is terminated prior to the Final
Maturity Date, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Agent’s and Lenders’ lost profits as a result thereof,
Borrowers agree to pay to Agent, for itself and the ratable benefit of Lenders,
upon the effective date of such termination, an early termination fee in the
amount set forth below if such termination is effective in the period indicated:

 

 

 

Amount

 

Period

(i)

 

0.25% of the Maximum Credit

 

To and including March 7, 2006

 

 

 

 

 

(ii)

 

0.125% of the Maximum Credit

 

After March 7, 2006 to and including September 7, 2006

 

72

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

 

 

Amount

 

Period

(iii)

 

$

0

 

After September 7, 2006

 

Such early termination fee shall be presumed to be the amount of damages
sustained by Agent and Lenders as a result of such early termination and
Borrowers agree that it is reasonable under the circumstances currently
existing.  Agent and Lenders shall be entitled to such early termination fee
upon the occurrence of any Event of Default described in Sections 10.1(g) and
10.1(h) hereof, even if Agent and Lenders do not exercise their right to
terminate this Agreement, but elect, at their option, to provide financing to
Borrowers or permit the use of cash collateral under the United States
Bankruptcy Code.  The early termination fee provided for in this Section 12.1
shall be deemed included in the Obligations.  The early termination fee shall be
waived if the Obligations are repaid after the first anniversary of this
Agreement, from the proceeds of loans made by Reference Bank or its affiliates,
or from the proceeds of unsecured loans.

 

13.2         Notices.  All notices, requests and demands hereunder shall be in
writing and (a) made to Agent and Lenders at their respective addresses set
forth below and to Borrowers at their chief executive office set forth below, or
to such other address as either party may designate by written notice to the
other in accordance with this provision, and (b) deemed to have been given or
made:  if delivered in person, immediately upon delivery; if by telex, telegram
or facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next Business Day, one (1) Business Day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.

 

13.3         Partial Invalidity.  If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.

 

13.4         Successors.  This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Agent, Lenders, Borrowers and their
respective successors and assigns, except that Borrowers may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Agent and Lenders.   No Lender may assign its rights and obligations under this
Agreement (or any part thereof) without the prior written consent of all Lenders
and Agent, except as permitted under Section 13.5 hereof.  Any purported
assignment by a Lender without such prior express consent or compliance with
Section 13.5 where applicable, shall be void.  The terms and provisions of this
Agreement and the other Financing Agreements are for the purpose of defining the
relative rights and obligations of Borrowers, Obligors, Agent and Lenders with
respect to the transactions contemplated hereby and there shall be no third
party beneficiaries of any of the terms and provisions of this Agreement or any
of the other Financing Agreements

 

73

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

13.5         Assignments and Participations.

 

(a)           Each Lender may (i) assign all or a portion of its rights and
obligations under this Agreement (including, without limitation, a portion of
its Commitment, the Loans owing to it and its rights and obligations as a Lender
with respect to Letters of Credit Accommodations) and the other Financing
Agreements; to its parent company and/or any Affiliate of such Lender which is
at least fifty (50%) percent owned by such Lender or its parent company or to
one or more Lenders or (ii) assign all, or if less than all a portion equal to
at least $5,000,000 in the aggregate for the assigning Lender or assigning
Lenders, of such rights and obligations under this Agreement to one or more
Eligible Transferees, each of which assignees shall become a party to this
Agreement as a Lender by execution of an Assignment and Acceptance; provided,
that, (A) the consent of Agent shall be required in connection with any
assignment to an Eligible Transferee pursuant to clause (ii) above, (B) if such
Eligible Transferee is not a bank, Agent shall receive a representation in
writing by such Eligible Transferee that either (1) no part of its acquisition
of its Loans is made out of assets of any employee benefit plan, or (2)  after
consultation, in good faith, with Borrowers and provision by Borrowers of such
information as may be reasonably requested by such Eligible Transferee, the
acquisition and holding of such Commitments and Loans does not constitute a
non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of
the Code, or (3) such assignment is an “insurance company general account,” as
such term is defined in the Department of Labor Prohibited Transaction
Class Exemption 95.60 (issued July 12, 1995) (“PTCE 95-60”), and, as of the date
of the assignment, there is no “employee benefit plan” with respect to which the
aggregate amount of such general account’s reserves and liabilities for the
contracts held by or on behalf of such “employee benefit plan” and all other
“employee benefit plans” maintained by the same employer (and affiliates thereof
as defined in Section V(a)(1) of PTCE 95-60) or by the same employee
organization (in each case determined in accordance with the provisions of PTCE
95-60) exceeds ten (10%) percent of the total reserves and liabilities of such
general account (as determined under PTCE 95-60) (exclusive of separate account
liabilities) plus surplus as set forth in the National Association of Insurance
Commissioners Annual Statement filed with the state of domicile of such Eligible
Transferee and (C) such transfer or assignment will not be effective until
recorded by the Agent on the Register.  As used in this Section, the term
“employee benefit plan” shall have the meaning assigned to it in Title I of
ERISA and shall also include a “plan” as defined in Section 4975(e)(1) of the
Code.

 

(b)           Agent shall maintain a register of the names and addresses of
Lenders, their Commitments and the principal amount of their Loans (the
“Register”).  Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give effect to
each Assignment and Acceptance.  Upon its receipt of each Assignment and
Acceptance, Agent will give prompt notice thereof to Lenders and deliver to each
of them a copy of the executed Assignment and Acceptance.  The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and Borrowers, Obligors, Agent and Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement.  The Register shall be available for inspection by Borrowers,
Obligors and any Lender at any reasonable time and from time to time upon
reasonable prior notice.

 

74

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

(c)           Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (i) the
assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of Credit Accommodations) of a Lender hereunder and thereunder and
(ii) the assigning Lender shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement.

 

(d)           By execution and delivery of an Assignment and Acceptance, the
assignor and assignee thereunder confirm to and agree with each other and the
other parties hereto as follows:  (i) other than as provided in such Assignment
and Acceptance, the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any of the other
Financing Agreements or the execution, legality, enforceability, genuineness,
sufficiency or value of this Agreement or any of the other Financing Agreements
furnished pursuant hereto, (ii)  the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrowers, Obligors or any of their respective Subsidiaries or the
performance or observance by any Borrower or any Obligor of any of the
Obligations; (iii) such assignee confirms that it has received a copy of this
Agreement and the other Financing Agreements, together with such other documents
and information it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance, (iv) such assignee will,
independently and without reliance upon the assigning Lender, Agent or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Financing Agreements, (v) such
assignee appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Financing
Agreements as are delegated to Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto, and (vi) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement and the other Financing
Agreements are required to be performed by it as a Lender.  Agent and Lenders
may furnish any information concerning Borrowers, Obligors or their respective
Subsidiaries in the possession of Agent or any Lender from time to time to
assignees and Participants.

 

(e)           Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement and the other Financing Agreements (including, without limitation, all
or a portion of its Commitments and the Loans owing to it and its participation
in the Letter of Credit Accommodations, without the consent of Agent or the
other Lenders); provided, that, (i) such Lender’s obligations under this
Agreement (including, without limitation, its Commitment hereunder) and the
other Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrowers, Obligors, Agent and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Agreement and the other Financing Agreements,
(iii)

 

75

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

the Participant shall not have any rights under this Agreement or any of the
other Financing Agreements (the Participant’s rights against such Lender in
respect of such participation to be those set forth in the agreement executed by
such Lender in favor of the Participant relating thereto) and all amounts
payable by any Borrower or any Obligor hereunder shall be determined as if such
Lender had not sold such participation, and (iv) if such Participant is not a
bank, represent that either (A) no part of its acquisition of its participation
is made out of assets of any employee benefit plan, or (B) after consultation,
in good faith, with Borrowers and provision by Borrowers of such information as
may be reasonably requested by the Participant, the acquisition and holding of
such participation does not constitute a non-exempt prohibited transaction under
Section 406 of ERISA and Section 4975 of the Code, or (C) such participation is
an “insurance company general account, “ as such term is defined in the “PTCE
95-60”, and, as of the date of the transfer there is no “employee benefit plan”
with respect to which the aggregate amount of such general account’s reserves
and liabilities for the contracts held by or on behalf of such “employee benefit
plan” and all other “employee benefit plans” maintained by the same employer
(and affiliates thereof as defined in Section V(a)(1) of PTCE 95-60) or by the
same employee organization (in each case determined in accordance with the
provisions of PTCE 95-60) exceeds ten (10%) percent of the total reserves and
liabilities of such general account (as determined under PTCE 95-60) (exclusive
of separate account liabilities) plus surplus as set forth in the National
Association of Insurance Commissioners Annual Statement filed with the state of
domicile of the Participant.

 

(f)            Nothing in this Agreement shall prevent or prohibit any Lender
from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lenders from such Federal Reserve Bank.

 

(g)           Borrowers shall assist Agent or any Lender permitted to sell
assignments or participations under this Section 13.5 in whatever manner
reasonably necessary in order to enable or effect any such assignment or
participation, including (but not limited to) the execution and delivery of any
and all agreements, notes and other documents and instruments as shall be
requested and the delivery of informational materials, appraisals or other
documents for, and the participation of relevant management in meetings and
conference calls with, potential assignees or Participants.  Each Borrower shall
certify the correctness, completeness and accuracy of all descriptions of such
Borrower and its affairs provided, prepared or reviewed by such Borrower that
are contained in any selling materials and all other information provided by it
and included in such materials.

 

13.6         Participant’s Security Interest.  If a Participant shall at any
time participate with any Lender in the Loans, Letter of Credit Accommodations
or other Obligations, Borrowers hereby grant to such Participant and such
Participant shall have and is hereby given, a continuing lien on and security
interest in any money, securities and other property of Borrowers in the custody
or possession of the Participant, including the right of setoff, to the extent
of the Participant’s participation in the Obligations, and such Participant
shall be deemed to have the same right of setoff to the extent of its
participation in the Obligations, as it would have if it were a direct lender.

 

76

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

13.7         Confidentiality.  Each Lender agrees that it will use its
reasonable best efforts not to disclose, without the prior consent of Borrowers,
confidential information with respect to Borrowers, any Obligor or any of their
respective Subsidiaries which is furnished pursuant to this Agreement and which
is specifically designated as confidential in writing by Borrowers; provided,
that, any Lender may disclose any such information (a) to its employees,
auditors or counsel, or to another Lender if the disclosing Lender or such
disclosing Lender’s holding or parent company in its sole discretion determines
that any such party should have access to such information, (b) as has become
generally available to the public without a breach of this Section 13.7, (c) as
may be required or appropriate in any report, statement or testimony submitted
to any Governmental Authority having or claiming to have jurisdiction over such
Lender, (d) as may be required or appropriate in response to any summons or
subpoena or in connection with any litigation, (e) in order to comply with any
statute or regulation, and (f) to any prospective or actual assignee or
Participant in connection with any contemplated transfer or participation of any
of the Commitments or any interest therein by such Lender, provided, that, such
assignee or Participant has agreed in writing to the confidentiality of any such
confidential information in accordance with the terms of this Section 13.7. 
Anything contained herein to the contrary notwithstanding, the obligations of
confidentiality contained herein, as they relate to the transactions
contemplated hereby, shall not apply to the federal tax structure or federal tax
treatment of such transactions, and each party hereto (and any employee,
representative, or agent of any party hereto) may disclose to any and all
Persons, without limitation of any kind, the federal tax structure and federal
tax treatment of such transactions (including all written materials related to
such tax structure and tax treatment).  The preceding sentence is intended to
cause the transactions contemplated hereby to not be treated as having been
offered under conditions of confidentiality for purposes of
Section 1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations
promulgated under Section 6011 of the United States Internal Revenue Code, and
shall be construed in a manner consistent with such purpose.  In addition, each
party hereto acknowledges that it has no proprietary or exclusive rights to the
tax structure of the transactions contemplated hereby or any tax matter or tax
idea related thereto.

 

13.8         Entire Agreement.  This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.

 

13.9         Publicity.  Borrowers consent to Agent publishing a tombstone or
similar advertising material relating to the financing transaction contemplated
by this Agreement.

 

SECTION 14.  JOINT AND SEVERAL LIABILITY; SURETYSHIP WAIVERS

 

14.1         Independent Obligations; Subrogation.  The Obligations of each
Borrower hereunder are joint and several.  To the maximum extent permitted by
law, each Borrower hereby waives any claim, right or remedy which either may now
have or hereafter acquire

 

77

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

against any other Borrower that arises hereunder including, without limitation,
any claim, remedy or right of subrogation, reimbursement, exoneration,
contribution, indemnification, or participation in any claim, right or remedy of
Agent or any Lender against any Borrower or any Collateral which Agent or any
Lender now has or hereafter acquires, whether or not such claim, right or remedy
arises in equity, under contract, by statute, under common law or otherwise
until the Obligations are fully paid and finally discharged.  In addition, each
Borrower hereby waives any right to proceed against the other Borrowers, now or
hereafter, for contribution, indemnity, reimbursement, and any other suretyship
rights and claims, whether direct or indirect, liquidated or contingent, whether
arising under express or implied contract or by operation of law, which any
Borrower may now have or hereafter have as against the other Borrowers with
respect to the Obligations until the Obligations are fully paid and finally
discharged.  Each Borrower also hereby waives any rights of recourse to or with
respect to any asset of the other Borrowers until the Obligations are fully paid
and finally discharged.

 

14.2         Authority to Modify Obligations and Security.  Each Borrower
authorizes Agent and Lenders, without notice or demand and without affecting any
Borrowers’ liability hereunder, from time to time, whether before or after any
notice of termination hereof or before or after any default in respect of the
Obligations, to: (a) renew, extend, accelerate, or otherwise change the time for
payment of, or otherwise change any other term or condition of, any document or
agreement evidencing or relating to any Obligations as such Obligations relate
to the other Borrowers, including, without limitation, to increase or decrease
the rate of interest thereon; (b) accept, substitute, waive, defease, increase,
release, exchange or otherwise alter any Collateral, in whole or in part,
securing the other Borrowers’ Obligations; (c) apply any and all such Collateral
and direct the order or manner of sale thereof as Agent and Lenders, in their
sole discretion, may determine; (d) deal with the other Borrowers as Agent or
any Lender may elect; (e) in Agent’s and Lenders’ sole discretion, settle,
release on terms satisfactory to them, or by operation of law or otherwise,
compound, compromise, collect or otherwise liquidate any of the other Borrowers’
Obligations and/or any of the Collateral in any manner, and bid and purchase any
of the collateral at any sale thereof; (f) apply any and all payments or
recoveries from the other Borrowers as Agent or Lenders, in their sole
discretion, may determine, whether or not such indebtedness relates to the
Obligations; all whether such Obligations are secured or unsecured or guaranteed
or not guaranteed by others; and (g) apply any sums realized from Collateral
furnished by the other Borrowers upon any of its indebtedness or obligations to
Agent or Lenders as they in their sole discretion, may determine, whether or not
such indebtedness relates to the Obligations; all without in any way
diminishing, releasing or discharging the liability of any Borrower hereunder.

 

14.3         Waiver of Defenses.  Upon an Event of Default by any Borrower in
respect of any Obligations, and except as required in Section 726 of the
California Code of Civil Procedure, Agent or any Lender may, at their option and
without notice to any Borrower, proceed directly against any Borrower to collect
and recover the full amount of the liability hereunder, or any portion thereof,
and each Borrower waives any right to require Agent or any Lender to:
(a) proceed against the other Borrowers or any other person whomsoever;
(b) proceed against or exhaust any Collateral given to or held by Agent or any
Lender in connection with the Obligations; (c) give notice of the terms, time
and place of any public or private sale of any of the Collateral except as
otherwise provided herein; or (d) pursue any other remedy in Agent’s or

 

78

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

any Lender’s power whatsoever.  A separate action or actions may be brought and
prosecuted against any Borrower whether or not action is brought against the
other Borrowers and whether the other Borrowers be joined in any such action or
actions; and each Borrower agrees that any payment of any Obligations or other
act which shall toll any statute of limitations applicable thereto shall
similarly operate to toll such statute of limitations applicable to the
liability hereunder.

 

14.4         Exercise of Agent’s and Lenders’ Rights.  Each Borrower hereby
authorizes and empowers Agent and Lenders in their sole discretion, without any
notice or demand to such Borrower whatsoever and without affecting the liability
of such Borrower hereunder, to exercise any right or remedy which Agent or any
Lender may have available to them against the other Borrowers.

 

14.5         Additional Waivers.  Each Borrower waives any defense arising by
reason of any disability or other defense of the other Borrowers or by reason of
the cessation from any cause whatsoever of the liability of the other Borrowers
or by reason of any act or omission of Agent or any Lender or others which
directly or indirectly results in or aids the discharge or release of the other
Borrowers or any Obligations or any Collateral by operation of law or
otherwise.  The Obligations shall be enforceable against each Borrower without
regard to the validity, regularity or enforceability of any of the Obligations
with respect to any of the other Borrowers or any of the documents related
thereto or any collateral security documents securing any of the Obligations. 
No exercise by Agent or any Lender of, and no omission of Agent or any Lender to
exercise, any power or authority recognized herein and no impairment or
suspension of any right or remedy of Agent or any Lender against any Borrower or
any Collateral shall in any way suspend, discharge, release, exonerate or
otherwise affect any of the Obligations or any Collateral furnished by the
Borrowers or give to the Borrowers any right of recourse against Agent or any
Lender.  Each Borrower specifically agrees that the failure of Agent or any
Lender: (a) to perfect any lien on or security interest in any property
heretofore or hereafter given any Borrower to secure payment of the Obligations,
or to record or file any document relating thereto or (b) to file or enforce a
claim against the estate (either in administration, bankruptcy or other
proceeding) of any Borrower shall not in any manner whatsoever terminate,
diminish, exonerate or otherwise affect the liability of any Borrower hereunder.

 

14.6         Additional Indebtedness .  Additional Obligations may be created
from time to time at the request of any Borrower and without further
authorization from or notice to any other Borrower even though the borrowing
Borrower’s financial condition may deteriorate since the date hereof.  Each
Borrower waives the right, if any, to require Agent or any Lender to disclose to
such Borrower any information it may now have or hereafter acquire concerning
the other Borrowers’ character, credit, Collateral, financial condition or other
matters.  Each Borrower has established adequate means to obtain from the other
Borrowers, on a continuing basis, financial and other information pertaining to
such Borrower’s business and affairs, and assumes the responsibility for being
and keeping informed of the financial and other conditions of the other
Borrowers and of all circumstances bearing upon the risk of nonpayment of the
Obligations which diligent inquiry would reveal.  Neither Agent nor any Lender
need inquire into the powers of any Borrower or the authority of any of their
respective officers, directors, partners or agents acting or purporting to act
in their behalf, and any Obligations created in reliance upon the

 

79

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

purported exercise of such power or authority are hereby guaranteed.  All
Obligations of each Borrower to Agent and Lenders heretofore, now or hereafter
created shall be deemed to have been granted at each Borrower’s special
insistence and request and in consideration of and in reliance upon this
Agreement.

 

14.7         Subordination.  Except as otherwise provided in this Section 14.7,
any indebtedness of any Borrower now or hereafter owing to any other Borrower is
hereby subordinated to the Obligations, whether heretofore, now or hereafter
created, and whether before or after notice of termination hereof, and,
following the occurrence and during the continuation of an Event of Default, no
Borrower shall, without the prior consent of Agent, pay in whole or in part any
of such indebtedness nor will any such Borrower accept any payment of or on
account of any such indebtedness at any time while such Borrower remains liable
hereunder.  At the request of Agent, after the occurrence and during the
continuance of an Event of Default, each Borrower shall pay to Agent all or any
part of such subordinated indebtedness and any amount so paid to Agent at its
request shall be applied to payment of the Obligations.  Each payment on the
indebtedness of any Borrower to the other Borrowers received in violation of any
of the provisions hereof shall be deemed to have been received by any other
Borrower as trustee for Agent and Lenders and shall be paid over to Agent
immediately on account of the Obligations, but without otherwise affecting in
any manner any such Borrower’s liability under any of the provisions of this
Agreement.  Each Borrower agrees to file all claims against the other Borrowers
in any bankruptcy or other proceeding in which the filing of claims is required
by law in respect of any indebtedness of the other Borrowers to such Borrower,
and Agent and Lenders shall be entitled to all of any such Borrower’s rights
thereunder.  If for any reason any such Borrower fails to file such claim at
least thirty (30) days prior to the last date on which such claim should be
filed, Agent, as such Borrower’s attorney-in-fact, is hereby authorized to do so
in Borrowers’ name or, in Agent’s discretion, to assign such claim to, and cause
a proof of claim to be filed in the name of, Agent’s nominee.  In all such
cases, whether in administration, bankruptcy or otherwise, the person or persons
authorized to pay such claim shall pay to Agent the full amount payable on the
claim in the proceeding, and to the full extent necessary for that purpose any
such Borrower hereby assigns to Agent, for itself and the ratable benefit of
Lenders, all such Borrower’s rights to any payments or distributions to which
such Borrower otherwise would be entitled.  If the amount so paid is greater
than any such Borrower’s liability hereunder, Agent will pay the excess amount
to the person entitled thereto.

 

14.8         Revival.  If any payments of money or transfers of property made to
Agent or any Lender by any Borrower should for any reason subsequently be
declared to be, or in Agent’s counsel’s good faith opinion be determined to be,
fraudulent (within the meaning of any state or federal law relating to
fraudulent conveyances), preferential or otherwise voidable or recoverable in
whole or in part for any reason (hereinafter collectively called “voidable
transfers”) under the Bankruptcy Code or any other federal or state law and
Agent or any Lender is required to repay or restore, or in Agent’s counsel’s
good faith opinion may be so liable to repay or restore, any such voidable
transfer, or the amount or any portion thereof, then as to any such voidable
transfer or the amount repaid or restored and all reasonable costs and expenses
(including reasonable attorneys’ fees) of Agent or any Lender related thereto,
such Borrower’s liability hereunder shall automatically be revived, reinstated
and restored and shall exist as though such voidable transfer had never been
made to Agent or such Lender.

 

80

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

14.9         Understanding of Waivers .  Each Borrower warrants and agrees that
the waivers set forth in this Section 14 are made with full knowledge of their
significance and consequences.  If any of such waivers are determined to be
contrary to any applicable law or public policy, such waivers shall be effective
only to the maximum extent permitted by law.

 

81

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

 

AGENT

 

BORROWERS:

 

 

 

WACHOVIA CAPITAL FINANCE

 

PC MALL, INC.

CORPORATION (WESTERN)

 

 

 

 

 

 

 

 

By:

/s/ D. B. Laughton

 

By:

/s/ Ted Sanders

Name: D.B. Laughton

 

Name: Ted Sanders

Title: Director

 

Title: CFO

 

 

 

 

 

 

Address:

251 South Lake Avenue, Suite 900

Pasadena, CA 91101

Attn: Portfolio Manager

 

PC MALL SALES, INC.

 

 

 

 

 

By:

/s/ Rory Zaks

 

 

 

Name: Rory Zaks

LENDER

 

 

Title: President

 

 

 

 

 

 

WACHOVIA CAPITAL FINANCE

 

ELINUX.COM, INC.

CORPORATION (WESTERN)

 

 

 

 

 

 

 

By:

/s/ Dan DeVries

By:

/s/ D. B. Laughton

 

Name: Dan DeVries

Name: D.B. Laughton

 

Title: President

Title: Director

 

 

 

CCIT, INC.

Address:

251 South Lake Avenue, Suite 900

 

 

 

Pasadena, CA 91101

 

 

 

Attn: Portfolio Manager

 

By:

/s/ Rich Hoffman

 

 

 

Name: Rich Hoffman

 

 

 

Title: Secretary

Revolving Loan Commitment: $50,000,000

 

 

 

 

 

Term Loan Commitment: $1,520,381.50

 

WF ACQUISITION SUB, INC.

 

 

 

 

 

 

 

 

By:

/s/ Bill Neary

 

 

Name: Bill Neary

 

 

Title: President

 

82

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

LENDER

 

 

 

 

 

BANK OF AMERICA, NA

 

 

 

 

COMPUTABILITY LIMITED

By:

/s/ Jang S. Kim

 

 

Name: Jang S. Kim

 

 

Title: VP

 

By:

/s/ Kris Rogers

 

 

Name: Kris Rogers

 

 

Title: President

Address:

335 Madison Ave.

 

 

 

NY, NY 10017

 

 

 

 

AF SERVICES, LLC

 

 

 

Revolving Loan Commitment: $25,000,000

 

 

 

 

By:

/s/ Simon Abuyounes

Term Loan Commitment: $760,415.75

 

Name: Simon Abuyounes

 

 

Title: President

 

 

 

LENDER

 

 

 

 

PC MALL GOV, INC.

LASALLE BUSINESS CREDIT, LLC

 

 

 

 

 

By:

/s/ Scott R. Busch

 

By:

/s/ Alan Bechara

Name: Scott R. Busch

 

Name: Alan Bechara

Title: EVP

 

Title: President

 

 

 

 

 

 

 

 

Address:

135 S. LaSalle St.

 

SIFY, INC.

 

Suite 425

 

 

 

Chicago, IL 60603

 

 

 

 

 

 

By:

/s/ Chris Parker

 

 

 

Name: Chris Parker

Revolving Loan Commitment: $25,000,000

 

Title: President

 

 

 

Term Loan Commitment: $760,415.75

 

 

 

 

 

ONSALE, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Sam Khulusi

 

 

 

Name: Sam Khulusi

 

 

 

Title: President

 

83

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

 

 

 

AV ACQUISITION, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Ted Sanders

 

 

 

Name: Ted Sanders

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

 

MALL ACQUISITION 1, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Ted Sanders

 

 

 

Name: Ted Sanders

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

 

MALL ACQUISITION 2, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Ted Sanders

 

 

 

Name: Ted Sanders

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

Address:

2555 West 190th Street

 

 

 

 

Torrance, California 90504

 

 

 

 

Attn: Chief Financial Officer

 

84

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

EXHIBIT A

 

Form of

 

ASSIGNMENT AND ACCEPTANCE AGREEMENT

 

This ASSIGNMENT AND ACCEPTANCE (this “Assignment and Acceptance”) dated as of
                          ,              is made by and between
                                                     (the “Assignor”) on the one
hand and                                          (the “Assignee”) on the other
hand.

 

W I T N E S S E T H:

 

WHEREAS, PC MALL, INC., PC MALL SALES, INC., ELINUX.COM, INC., CCIT, INC., WF
ACQUISITION SUB, INC., COMPUTABILITY LIMITED, AF SERVICES, LLC, PC MALL GOV,
INC., SIFY, INC., ONSALE, INC., AV ACQUISITION, INC., MALL ACQUISITION 1, INC.,
and MALL ACQUISITION 2, INC. (collectively, “Borrower”), the financial
institutions from time to time party to the Loan Agreement (as hereinafter
defined) as lenders (each a “Lender” and collectively, the “Lenders”), and
Wachovia Capital Finance Corporation (Western), as administrative and collateral
agent for the Lenders (in such capacity, “Agent”) have entered into that certain
Amended and Restated Loan and Security Agreement, dated as of August 1, 2005 (as
the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, the “Loan Agreement”), pursuant to
which the Lenders have and may continue to make loans and provide other
financial accommodations to Borrower.  Capitalized terms not otherwise defined
herein shall have the respective meanings ascribed thereto in the Loan
Agreement.

 

WHEREAS, as provided under the Loan Agreement, Assignor committed to making
Loans (the “Committed Loans”) to Borrower in an aggregate amount not to exceed
$                             (the “Commitment”);

 

WHEREAS, Assignor wishes to assign to Assignee [part of] the rights and
obligations of Assignor under the Loan Agreement in respect of its Commitment in
an amount equal to $                             (the “Assigned Commitment
Amount”) on the terms and subject to the conditions set forth herein and
Assignee wishes to accept assignment of such rights and to assume such
obligations from Assignor on such terms and subject to such conditions;

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:

 

1.                                       Assignment and Acceptance.

 

(a)                                  Subject to the terms and conditions of this
Assignment and Acceptance, (i) Assignor hereby sells, transfers and assigns to
Assignee, and (ii) Assignee hereby purchases, assumes and undertakes from
Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) an interest in (A) the Commitment
and

 

A-1

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

each of the Committed Loans of Assignor and (B) all related rights, benefits,
obligations, liabilities and indemnities of Assignor under and in connection
with the Loan Agreement and the other agreements, documents and instruments
referred to therein or at any time executed and/or delivered in connection
therewith or related thereto (all of the foregoing, together with the Loan
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the “Financing Agreements”), so that after giving effect
thereto, the Commitment of Assignee and the Commitment of Assignor shall be as
set forth in clauses (c) and (d) below and the Pro Rata Share (as defined in the
Loan Agreement) of Assignee shall be                percent (    %).

 

(b)                                 With effect on and after the Effective Date
(as defined in Section 5 hereof), Assignee shall be a party to the Loan
Agreement and succeed to all of the rights and be obligated to perform all of
the obligations of a Lender under the Loan Agreement, including the requirements
concerning confidentiality and the payment of indemnification, with a Commitment
in an amount equal to the Assigned Commitment Amount.  Assignee agrees that it
will perform in accordance with their terms all of the obligations which by the
terms of the Loan Agreement are required to be performed by it as a Lender.  It
is the intent of the parties hereto that the Commitment of Assignor shall, as of
the Effective Date, be reduced by an amount equal to the Assigned Commitment
Amount and Assignor shall relinquish its rights and be released from its
obligations under the Loan Agreement to the extent such obligations have been
assumed by Assignee; provided, that, Assignor shall not relinquish their rights
under the Loan Agreement to the extent such rights relate to the time prior to
the Effective Date.

 

(c)                                  After giving effect to the assignment and
assumption set forth herein, on the Effective Date Assignee’s Commitment will be
$                          .

 

(d)                                 After giving effect to the assignment and
assumption set forth herein, on the Effective Date Assignor’s Commitment will be
$                            .

 

2.                                       Payments.  As consideration for the
sale, assignment and transfer contemplated in Section 1 hereof, Assignee shall
pay to Agent, for the benefit of Assignor, on the Effective Date in immediately
available funds an amount equal to $                        , representing
Assignee’s Pro Rata Share of the principal amount of all Committed Loans.

 

3.                                       Reallocation of Payments.  Any
interest, fees and other payments accrued to the Effective Date with respect to
the Commitment, Committed Loans and outstanding Letter of Credit Accommodations
shall be for the account of Assignor.  Except as Assignor or Assignee may
otherwise agree in writing (with or without the consent of Borrower) any
interest, fees and other payments accrued on and after the Effective Date with
respect to the Assigned Commitment Amount shall be for the account of Assignee. 
Each of Assignor and Assignee agrees that it will hold in trust for the other
parties any interest, fees and other amounts which it may receive to which the
other party is entitled pursuant to the preceding sentence and pay to the other
party any such amounts which it may receive promptly upon receipt.

 

4.                                       Independent Credit Decision.  Assignee
(a) acknowledges that it has received a copy of the Loan Agreement and the
Schedules and Exhibits thereto, together with copies of the

 

A-2

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

most recent financial statements of Borrower, and such other documents and
information as it has deemed appropriate to make its own credit and legal
analysis and decision to enter into this Assignment and Acceptance and
(b) agrees that it will, independently and without reliance upon Assignor, Agent
or any Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit and legal decisions in
taking or not taking action under the Loan Agreement.

 

5.                                       Effective Date; Notices.

 

(a)                                  As between Assignor and Assignee, the
effective date for this Assignment and Acceptance shall be
                              ,            (the “Effective Date”); provided,
that, the following conditions precedent have been satisfied on or before the
Effective Date:

 

(i)                                     this Assignment and Acceptance shall be
executed and delivered by Assignor and Assignee;

 

(ii)                                  the consent of Agent as required for an
effective assignment of the Assigned Commitment Amount by Assignor to Assignee
shall have been duly obtained and shall be in full force and effect as of the
Effective Date;

 

(iii)                               written notice of such assignment, together
with payment instructions, addresses and related information with respect to
Assignee, shall have been given to Borrower and Agent; and

 

(iv)                              Assignee shall pay to Assignor all amounts due
to Assignor under this Assignment and Acceptance.

 

(b)                                 Promptly following the execution of this
Assignment and Acceptance, Assignor shall deliver to Borrower and Agent for
acknowledgment by Agent, a Notice of Assignment in the form attached hereto as
Schedule 1.

 

6.                                       Agent.

 

(a)                                  Assignee hereby appoints and authorizes
Wachovia Capital Finance Corporation (Western) in its capacity as Agent to take
such action as agent on its behalf to exercise such powers under the Loan
Agreement as are delegated to Agent.

 

(b)                                 [Assignee shall assume no duties or
obligations held by Assignor in its capacity as Agent under the Loan Agreement.]

 

7.                                       Withholding Tax.  Assignee
(a) represents and warrants to Assignor, Agent and Borrower that under
applicable law and treaties no tax will be required to be withheld by Assignee,
Agent or Borrower with respect to any payments to be made to Assignee hereunder
or under any of the Financing Agreements, (b) agrees to furnish (if it is
organized under the laws of any jurisdiction other than the United States or any
State thereof) to Agent and Borrower prior to the time that Agent or Borrower
are required to make any payment of principal, interest or fees hereunder,
duplicate executed originals of either U.S. Internal Revenue Service Form 4224
or

 

A-3

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

U.S. Internal Revenue Service Form 1001 (wherein Assignee claims entitlement to
the benefits of a tax treaty that provides for a complete exemption from U.S.
federal income withholding tax on all payments hereunder) and agrees to provide
new Forms 4224 or 1001 upon the expiration of any previously delivered form or
comparable statements in accordance with applicable U.S. law and regulations and
amendments thereto, duly executed and completed by Assignee, and (c) agrees to
comply with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.

 

8.                                       Representations and Warranties.

 

(a)                                  Assignor represents and warrants that
(i) it is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any security interest,
lien, encumbrance or other adverse claim, (ii) it is duly organized and existing
and it has the full power and authority to take, and has taken, all action
necessary to execute and deliver this Assignment and Acceptance and any other
documents required or permitted to be executed or delivered by it in connection
with this Assignment and Acceptance and to fulfill its obligations hereunder,
(iii) no notices to, or consents, authorizations or approvals of, any Person are
required (other than any already given or obtained) for its due execution,
delivery and performance of this Assignment and Acceptance, and apart from any
agreements or undertakings or filings required by the Loan Agreement, no further
action by, or notice to, or filing with, any Person is required of it for such
execution, delivery or performance, and (iv) this Assignment and Acceptance has
been duly executed and delivered by it and constitutes the legal, valid and
binding obligation of Assignor, enforceable against Assignor in accordance with
the terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to or
affecting creditors’ rights and to general equitable principles.

 

(b)                                 Assignor makes no representation or warranty
and does not assume any responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Agreement
or any of the other Financing Agreements or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Agreement or any
other instrument or document furnished pursuant thereto.  Assignor makes no
representation or warranty in connection with, nor does it assume any
responsibility with respect to, the solvency, financial condition, asset
valuation or realization, or statements of Borrower, any Obligor or any of their
respective Affiliates, or the performance or observance by Borrower, any Obligor
or any other Person, of any of its respective obligations under the Loan
Agreement or any other instrument or document furnished in connection therewith.

 

(c)                                  Assignee represents and warrants that
(i) it is duly organized and existing and it has full power and authority to
take, and has taken, all action necessary to execute and deliver this Assignment
and Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder, (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Loan Agreement, no further action by, or notice to, or
filing with, any

 

A-4

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

Person is required of it for such execution, delivery or performance; and
(iii) this Assignment and Acceptance has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of Assignee, enforceable
against Assignee in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors’ rights to
general equitable principles.

 

9.                                       Further Assurances.  Assignor and
Assignee each hereby agree to execute and deliver such other instruments, and
take such other action, as any party hereto may reasonably request in connection
with the transactions contemplated by this Assignment and Acceptance, including
the delivery of any notices or other documents or instruments to any party to
the Loan Agreement, which may be required in connection with the assignment and
assumption contemplated hereby.

 

10.                                 Miscellaneous

 

(a)                                  Any amendment or waiver of any provision of
this Assignment and Acceptance must be in writing and signed by the parties
hereto, except as otherwise provided herein.  No failure or delay by either
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof and any waiver of any breach of the provisions of this
Assignment and Acceptance shall be without prejudice to any rights with respect
to any other for further breach thereof.

 

(b)                                 All payments made hereunder shall be made
without any set-off or counterclaim.

 

(c)                                  Assignor and Assignee shall each pay its
own costs and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Assignment and Acceptance.

 

(d)                                 This Assignment and Acceptance may be
executed in any number of counterparts and all of such counterparts taken
together shall be deemed to constitute one and the same instrument.

 

(e)                                  THIS ASSIGNMENT AND ACCEPTANCE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
CALIFORNIA.  Each party hereto irrevocably submits to the non-exclusive
jurisdiction of any State or Federal court sitting in Los Angeles County,
California over any suit, action or proceeding arising out of or relating to
this Assignment and Acceptance and irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such California
State or Federal court.  Each party to this Assignment and Acceptance hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or proceeding.

 

(f)                                    EACH PARTY HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR

 

A-5

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF
THE OTHER FINANCING AGREEMENTS OR ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).

 

IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment and
Acceptance to be executed and delivered by their duly authorized officers as of
the date first above written.

 

 

 

 

,

 

a

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

,

 

a

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

A-6

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

SCHEDULE 1

to Assignment and Acceptance

 

Form of

 

NOTICE OF ASSIGNMENT AND ACCEPTANCE

 

,

 

Wachovia Capital Finance Corporation (Western)
251 South Lake Avenue, Suite 900
Pasadena, California 91101
Attn:

 

                                                        
                                                        
Attn:

 

Re:

 

Ladies and Gentlemen:

 

Reference is hereby made to (a) that certain Amended and Restated Loan and
Security Agreement, dated as of August 1, 2005 (as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, the “Loan Agreement”) by and among PC MALL, INC., PC MALL SALES, INC.,
ELINUX.COM, INC., CCIT, INC., WF ACQUISITION SUB, INC., COMPUTABILITY LIMITED,
AF SERVICES, LLC, PC MALL GOV, INC., SIFY, INC., ONSALE, INC., AV ACQUISITION,
INC., MALL ACQUISITION 1, INC., and MALL ACQUISITION 2, INC. (collectively,
“Borrower”), the financial institutions from time to time party to the Loan
Agreement as lenders (each a “Lender” and collectively, the “Lenders”) and
Wachovia Capital Finance Corporation (Western), as administrative and collateral
agent for the Lenders (in such capacity, “Agent”) pursuant to which the Lenders
have and may continue to make loans and provide other financial accommodations
to Borrower, and (b) the other agreements, documents and instruments referred to
in the Loan Agreement or at any time executed and/or delivered in connection
therewith or related thereto (all of the foregoing, together with the Loan
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the “Financing Agreements”).  Capitalized terms not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Loan Agreement.

 

11.                                 We hereby give you notice of, and request
Agent’s consent to, the assignment by
                                                         (the “Assignor”) to
                                                       (the “Assignee”) such
that after giving effect to the assignment, Assignee shall have an interest
equal to                  percent (    %) of the total Commitments pursuant to
the Assignment and

 

A-7

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

Acceptance Agreement attached hereto (the “Assignment and Acceptance”).  We
understand that Assignor’s Commitment shall be reduced by
$                          .

 

12.                                 Assignee agrees that, upon receiving the
consent of Agent to such assignment, Assignee will be bound by the terms of the
Loan Agreement as fully and to the same extent as if the Assignee were the
Lender originally holding such interest under the Loan Agreement.

 

13.                                 The following administrative details apply
to Assignee:

 

(a)                                  Notice address:

 

Assignee:

Address:

 

Attention:

Telephone:

Telecopier:

 

(b)                                 Payment instructions:

 

Account No.:

At:

ABA No.:

For Credit To:

Reference:

 

14.                                 You are entitled to rely upon the
representations, warranties and covenants of each party to the Assignment and
Acceptance as contained therein.

 

A-8

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

IN WITNESS WHEREOF, Assignor and Assignee have each caused this Notice of
Assignment and Acceptance to be executed by its duly authorized officials,
officers or agents as of the date first above mentioned.

 

 

 

Very truly yours,

 

 

 

 

 

 

 

 

 

 

a

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

a

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

ACKNOWLEDGED AND CONSENTED TO:

 

WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN),

a California corporation,

as Agent

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

ACKNOWLEDGED:

 

 

 

 

 

 

 

 

 

 

a

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

A-9

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

EXHIBIT B

 

INFORMATION CERTIFICATE
OF

 

 

Dated:

 

 

Wachovia
251 South Lake Avenue, Suite 900
Pasadena, California 91101

 

In order to assist you in the continuing evaluation of the financing you are
considering of                                              (the “Corporation”)
and to expedite the preparation of any documentation which may be required and
to induce you to provide such financing to the Corporation, we represent and
warrant-to you the following information about the Corporation, its
organizational structure and other matters of interest to you:

 

1.                                       The full and exact name of the
Corporation as set forth in its Certificate of Incorporation is:

 

 

2.                                       The Corporation uses and owns the
following trade name(s) in the operation of its business (e.g. billing,
advertising, etc.; note: do not include names ‘which are product names only):

 

 

In the event any trade name appears on an invoice, a sample copy of such invoice
is annexed.

 

3.                                       The date of incorporation of the
Corporation was                             , under the laws of the State of
                        , and the Corporation is in good standing under those
laws. The Corporation has never been involved in a bankruptcy or reorganization
except: (explain)

 

 

4.                                       The Corporation is duly qualified and
authorized to transact business as a foreign corporation in the following states
and is in good standing in such states:

 

 

B-1

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

5.                                       Since the date of incorporation, the
corporate name of the Corporation has been changed as follows:

 

Date

 

Prior Name

 

 

 

 

 

 

 

 

 

 

6.                                       Since the date of incorporation, the
Corporation has made or entered into the following mergers or acquisitions:

 

 

7.                                       The chief executive office of the
Corporation is located at:

 

 

 

 

 

 

 

 

 

Street Address

 

City

 

State

 

County

 

 

8.                                       The books and records of the
Corporation pertaining to accounts, contract rights, inventory, etc. are located
at (if other than the chief executive office referred to in Section 7 above):

 

 

 

 

 

 

 

 

 

Street Address

 

City

 

State

 

County

 

 

9.                                       The Corporation has other places of
business and/or maintains inventory or other assets at the following addresses
(indicate whether locations are owned, leased or operated by third parties and
if leased or operated by third parties, their name and address):

 

 

 

 

 

 

 

 

Street Address

 

City

 

State

 

Lessor/Operator

 

 

 

 

 

 

 

 

Street Address

 

City

 

State

 

Lessor/Operator

 

10.                                 The premises listed below owned by the
Corporation are subject to mortgages as follows (state name and address of
mortgagee and approximate principal balance of mortgage):

 

Location

 

Mortgagee

 

Principal Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B-2

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

11.                                 The places of business or other locations of
any assets used by the Corporation during the last four (4) months other than
those listed above are as follows:

 

None

Street Address

 

City

 

State

 

 

 

Street Address

 

City

 

State

 

 

 

Street Address

 

City

 

State

 

 

12.                                 The Corporation is affiliated with, or has
ownership in, the following corporations (including subsidiaries):

 

NAME

 

CHIEF
EXECUTIVE
OFFICE

 

JURISDICATION
OF
INCORPORATION

 

OWNERSHIP
PERCENTAGE OR
RELATIONSHIP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13.                                 The Federal Employer Identification Number
of the Corporation is as follows:

 

 

14.                                 There is no provision in the Certificate of
Incorporation or By-laws of the Corporation, or in the laws of the State of its
incorporation, requiring any vote or consent of shareholders to borrow or to
authorize the mortgage or pledge of or creation of a security interest in any
assets of the Corporation or any subsidiary. Such power is vested exclusively in
its Board of Directors.

 

15.                                 The officers of the Corporation and their
respective titles are as follows:

 

Title

 

Name

 

 

 

 

 

 

 

 

 

 

The following will have signatory powers as to all your of transactions with the
Corporation:

 

 

B-3

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

16.                                 With respect to the officers noted above,
such officers are affiliated with or have ownership in the following
corporations (indicate name and address of affiliated companies, type of
operations, ownership percentage or other relationship):

 

 

17.                                 The members of the Board of Directors of the
Corporation are:

 

 

18.                                 The name of the stockholders of the
Corporation and their stock holdings are as follows (if stock is widely held
indicate only stockholders owning 10% or more of the voting stock):

 

Name

 

No. of Shares

 

Ownership
Percentage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19.                                 There are no judgments or material
litigation pending by or against the Corporation, its subsidiaries and/or
affiliates or any of its officers/principals, except as follows:

 

 

20.                                 At the present time, there are no delinquent
taxes due (including, but not limited to, all payroll taxes, personal property
taxes, real estate taxes or income taxes) except as follows:

 

B-4

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

21.                                 The Corporation’s assets are owned and held
free and clear of any security interests, liens or attachments. except as
follows:,

 

Lienholder

 

Assets

 

Amount of
Debt Secured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22.                                 The Corporation guarantees the various
commercial obligations of its subsidiaries.

 

23.                                 The Corporation does not own or license any
trademarks, patents, copyrights or other intellectual property, except as
follows (indicate type of intellectual property and whether owned or licensed,
registration number, date of registration, and, if licensed, the name and
address of the licensor):

.

 

24.                                 The Corporation and its affiliates do not
have any deposit or investment accounts with any bank, savings and loan or other
financial institution, except as follows for the purposes and of the types
indicated:

 

Institution

 

Account Number

 

Branch Address

 

Type

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25.                                 The Corporation’s fiscal year ends:

 

26.                                 With regard to any pension or profit sharing
plan, except as disclosed to Congress:

 

(a)                    A determination as to qualification has been issued.

(b)                   Funding is on a current basis and in compliance with
established requirements.

 

B-5

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

27.                                 Certified Public Accountants for the
Corporation is the firm of:

 

Name

Address

Partner Handling Relationship

Were statements uncertified for any fiscal year?

 

28.                                 Prompt written notice will be given you of
any change or amendment with respect to any of the foregoing. Until such notice
is received by you, you shall be entitled to rely upon the foregoing in all
respects.

 

 

Very truly yours,

 

 

 

 

CORPORATE SEAL TO BE

AFFIXED HEREINBELOW

 

 

 

 

By:   

 

 

 

 

 

Title:   

 

 

B-6

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

EXHIBIT C

 

Inventory Turn Calculation

 

pro

Company Name:

 

IdeaMall, Inc.

 

 

 

Exam Type

 

Survey

 

Curr Exam

 

09/22/00

 

Workpaper Name:

 

Inventory Turnover

Currency

US

 

Rounded To:

 

$ 1,000

 

US $ Equal

 

1.00

 

Sources:

 

 

 

Name

 

Position

 

Phone and/ or
Extension

 

Notes/ Comments

Contacts:

 

 

 

 

 

 

 

 

Primary

 

Ted Sanders

 

CFO

 

310-354-5600

 

 

Secondary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

 

Position

 

Phone and/ or
Extension

 

Region Office

Preparer:

 

 

 

 

 

 

 

 

Primary

 

 

 

 

 

 

 

 

Secondary

 

 

 

 

 

 

 

 

 

Inventory Component Descriptions From Inventory Components Workpaper

 

Inventory Components

 

Current

 

Last FYE

 

Prior FYE

 

Comments/
Conclusions:

 

Period Ending (Date)

 

11/30/00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Raw Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WIP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finished Goods

 

39,315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Inventory

 

$

39,315

 

 

 

$

—

 

 

 

$

—

 

 

 

 

 

 

 

Average Inventory

 

$

33,905

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

751,114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COGS

 

671,230

 

89

%

 

 

0

%

 

 

0

%

 

 

 

 

Gross Profit

 

$

79,884

 

11

%

$

—

 

0

%

$

—

 

0

%

 

 

28.50

%

Drop Ship Adjust %

 

29

%

 

 

 

 

 

 

 

 

 

 

drop

 

191313

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

thru June

 

 

 

Turnover Period Days

 

334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Turnover (Days/ Times Per Year)

 

17

 

22

 

—

 

#DIV/0!

 

—

 

#DIV/0!

 

 

 

 

 

T/O Adj for Drop Ships

 

23.60

 

15

 

—

 

#DIV/0!

 

—

 

#DIV/0!

 

 

 

 

 

 

C-1

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

EXHIBIT D

 

Adjusted Tangible Net Worth Calculation

 

Total Stockholders Equity

 

$

37,576,000

 

 

 

 

 

 

Less Intangibles:

 

 

 

Goodwill

 

11,446,000

 

Leasehold Improvements

 

2,339,000

 

Prepaids

 

2,791,000

 

Deferred Taxes

 

5,785,000

 

 

 

 

 

Tangible Net Worth @ 9/30/2000

 

15,215,000

 

 

The date and dollar amounts set forth above are for illustrative purposes only.

 

D-1

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

SCHEDULE 8.4

Other Liens

 

Lienholder

 

Assets

 

Amount of
Debt Secured

 

 

 

 

 

 

 

Wachovia

 

All assets

 

[***]

 

IBM

 

Inventory

 

[***]

 

Apple

 

Inventory/AR

 

[***]

 

HP/Compaq

 

Inventory

 

[***]

 

Lexmark

 

Inventory

 

[***]

 

Panasonic

 

Inventory

 

[***]

 

Phillips

 

Inventory

 

[***]

 

Sharp

 

Inventory

 

[***]

 

 

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

SCHEDULE 8.8

Accounts

 

PC Mall, Inc.:

 

Institution

 

Account
Number

 

Branch Address

 

Type

Bank of America

 

[***]
[***]

 

150 Long Beach
Blvd.
Third Floor
Long Beach, CA
90852

 

[***]
[***]

 

PC Mall Sales, Inc.:

 

Institution

 

Account
Number

 

Branch Address

 

Type

Bank of America

 

[***]
[***]
[***]
[***]
[***]

 

150 Long Beach
Blvd.
Third Floor
Long Beach, CA
90852

 

[***]
[***]
[***]
[***]
[***]

 

CCIT, Inc.:

 

Institution

 

Account
Number

 

Branch Address

 

Type

Bank of America

 

[***]
[***]

 

150 Long Beach
Blvd.
Third Floor
Long Beach, CA
90852

 

[***]
[***]

 

WF Acquisition Sub, Inc.:

 

Institution

 

Account
Number

 

Branch Address

 

Type

Bank of America

 

[***]
[***]

 

150 Long Beach
Blvd.
Third Floor
Long Beach, CA
90852

 

[***]
[***]

 

 

 

 

 

 

 

Union Bank
Harbor
Gateway

 

[***]

 

P.O. Box 513840
Los Angeles, CA
90051-3840

 

 

 

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

AF Services, LLC:

 

Institution

 

Account
Number

 

Branch Address

 

Type

Bank of America

 

[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]

 

150 Long Beach
Blvd.
Third Floor
Long Beach, CA
90852

 

[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]

 

PC Mall Gov, Inc.:

 

Institution

 

Account
Number

 

Branch Address

 

Type

Bank of America

 

[***]
[***]

 

150 Long Beach
Blvd.
Third Floor
Long Beach, CA
90852

 

[***]
[***]

 

Onsale, Inc:

 

Institution

 

Account
Number

 

Branch Address

 

Type

Bank of America

 

[***]
[***]

 

150 Long Beach
Blvd.
Third Floor
Long Beach, CA
90852

 

[***]
[***]

 

SIFY, Inc.:

 

Institution

 

Account
Number

 

Branch Address

 

Type

Bank of America

 

[***]
[***]

 

150 Long Beach
Blvd.
Third Floor
Long Beach, CA
90852

 

[***]
[***]

 

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

SCHEDULE 8.9

Environmental Disclosures

 

None

 

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

SCHEDULE 9.9

Indebtedness

 

Lienholder

 

Assets

 

Amount of
Debt Secured

 

 

 

 

 

Wachovia

 

All assets

 

[***]

IBM

 

Inventory

 

[***]

Apple

 

Inventory/AR

 

[***]

HP/Compaq

 

Inventory

 

[***]

Lexmark

 

Inventory

 

[***]

Panasonic

 

Inventory

 

[***]

Phillips

 

Inventory

 

[***]

Sharp

 

Inventory

 

[***]

 

LEASES:

 

PC Mall, Inc.:

 

4725 E. Shelby Drive, Memphis, TN 38118 - Leased
Street Address             City                State
Lessor/Operator: PDC Properties, Inc., 8395 Jackson Road, Suite F, Sacramento,
CA 95826

 

Suite 100 North Arlington Heights, Illinois- Leased
Street Address             City                State
Lessor/Operator: NAAOC, LLC 1156A West Shore Drive, Arlington Heights, Il 60004

 

7355 E. Orchard Road, Suite C-300, Englewood, CO 80111 - Leased
Street Address             City                State
Lessor/Operator: DJW Properties, LLC, c/o Custom Management Group, 2280 South
Xanadu Way, Suite 107, Aurora, CO 80014

 

N92 W14612 Anthony Ave., Menomonee Fall, WI 53051 - Leased
Street Address             City                State
Lessor/Operator: Wangard Partners, Inc., 1200 N. Mayfair Road, Suite 150,
Milwaukee, WI 53226

 

Suite 210, 14160 Newbrook Drive, Chantilly, Virginia - Leased
Street Address             City                State
Lessor/Operator: Automotive Parts Remanufacturers Association, 4215 Lafayette
Center Drive, Suite 3, Chantilly, VA 20151-1243

 

Suite 300, 4995 Murphy Canyon Road, San Diego, CA 92123-Leased
Street Address             City                State
Lessor/Operator: Spectrum Huntington Center, LLC, 4320 La Jolla Village Drive,
San Diego, CA 92122

 

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

317 Brick Boulevard, Suite 100, Brick, New Jersey 08723 -Leased
Street Address             City                State
Lessor/Operator: W &F Developers, Inc.-Winding River, One Woodbridge Center,
6th Floor, Woodbridge, New Jersey, 07095

 

1100 University Street, 2nd Floor, Montreal, QE, Canada- Leased
Street Address             City                State
Lessor/Operator: CANAPREV, 935 de la Gaichetiere Street West, 8th Floor,
Montreal, QE, Canada H3B 2M9

 

19 Morgan Avenue, Irvine, CA 92618-Leased
Street Address             City                State
Lessor/Operator: Michael G. McNeill and Juliana Sun, 30 Landport, Newport Beach,
CA 92660

 

829 West Burbank Boulevard, Burbank, Suite 200, CA- Leased
Street Address             City                State
Lessor/Operator: C & P Properties #1, 101 S. First Street. # 400, Burbank, CA
91502

 

5601 W. Slauson Ave. Suite 186, Culver City, CA 90230-Leased
Street Address             City                State
Lessor/Operator: Buckingham Heights Business Park, 5731 W. Slauson Ave.,
Suite 222, Culver City, CA 90230

 

AF Services, LLC:

 

4725 E. Shelby Drive, Memphis, TN 38118 - Leased
Street Address             City                State
Lessor/Operator: PDC Properties, Inc., 8395 Jackson Road, Suite F, Sacramento,
CA 95826

 

PC Mall Sales, Inc.:

 

N92 W14612 Anthony Ave., Menomonee Fall, WI 53051 - Leased
Street Address             City                State
Lessor/Operator: Wangard Partners, Inc., 1200 N. Mayfair Road, Suite 150,
Milwaukee, WI 53226

 

19 Morgan Avenue, Irvine, CA 92618-Leased
Street Address             City                State
Lessor/Operator: Michael G. McNeill and Juliana Sun, 30 Landport, Newport Beach,
CA 92660

 

CCIT, Inc.:

 

6767 S. Spruce Street, #125, Englewood, CO 80112 - Leased
Street Address             City                State
Lessor/Operator: Toric Properties, LLC c/o Panorama Property Management, 6767 S.
Spruce Street, #105, Englewood, CO 80112

 

317 Brick Boulevard, Suite 100, Brick, New Jersey 08723 -Leased
Street Address             City                State

 

--------------------------------------------------------------------------------

 

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

Lessor/Operator: W &F Developers, Inc.-Winding River, One Woodbridge Center,
6th Floor, Woodbridge, New Jersey, 07095

 

Computability Limited:

 

N92 W14612 Anthony Ave., Menomonee Falls WI 53051 - Leased
Street Address             City                State
Lessor/Operator: Wangard Partners, Inc., 1200 N. Mayfair Road, Suite 150,
Milwaukee, WI 53226

 

WF Acquisition Sub, Inc.:

 

19 Morgan Avenue, Irvine, CA 92618-Leased
Street Address             City                State
Lessor/Operator: Michael G. McNeill and Juliana Sun, 30 Landport, Newport Beach,
CA 92660

 

Suite 300, 4995 Murphy Canyon Road, San Diego, CA 92123-Leased
Street Address             City                State
Lessor/Operator: Spectrum Huntington Center, LLC, 4320 La Jolla Village Drive,
Suite 220, San Diego, CA 62122

 

829 West Burbank Boulevard, Burbank, Suite 200, CA- Leased
Street Address             City                State
Lessor/Operator: C & P Properties #1, 101 S. First Street. # 400, Burbank, CA
91502

 

5601 W. Slauson Ave. Suite 186, Culver City, CA 90230-Leased
Street Address             City                State
Lessor/Operator: Buckingham Heights Business Park, 5731 W. Slauson Ave.,
Suite 222, Culver City, CA 90230

 

SIFY, Inc.:

 

19 Morgan Avenue, Irvine, CA 92618-Leased
Street Address             City                State
Lessor/Operator: Michael G. McNeill and Juliana Sun, 30 Landport, Newport Beach,
CA 92660

 

--------------------------------------------------------------------------------