SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT AND OTHER FINANCING AGREEMENTS

 

 

THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT AND OTHER FINANCING
AGREEMENTS (this "Amendment"), dated as of October 31, 2002, is entered into
among CONGRESS FINANCIAL CORPORATION (WESTERN), a California corporation
("Lender"), PC MALL, INC., a Delaware corporation formerly known as IdeaMall,
Inc. ("PC Mall"), PC MALL SALES, INC., a California corporation formerly known
as Creative Computers, Inc. ("PC Mall Sales") ECOST.COM, INC., a Delaware
corporation ("ecost"), 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" and together with PC Mall, PC Mall Sales, ecost, eLinux, CCIT
and WF Sub, collectively referred to herein as "Existing Borrowers"), AF
SERVICES, INC., a Delaware corporation ("AF Services"), PC MALL GOV, INC., a
Delaware corporation ("PCMG"), CLUBMAC, INC., a Delaware corporation
("ClubMac"), 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") and together with AF Services, PCMG, ClubMac, Onsale, AV
Acquisition and Acquisition 1, collectively referred to herein as "New
Borrowers").  Existing Borrowers and New Borrowers will collectively be referred
to herein as "Borrowers".

RECITALS

A.Existing Borrowers and Lender have previously entered into that certain Loan
and Security Agreement dated March 7, 2001 as amended (the "Loan Agreement"),
pursuant to which Lender has made certain loans and financial accommodations
available to Existing Borrowers.  Terms used herein without definition shall
have the meanings ascribed to them in the Loan Agreement.

B.                 In connection with the Loan Agreement, PC Mall and Lender
have previously entered into that certain Stock Pledge Agreement dated March 7,
2001 (the "Pledge Agreement"), covering the capital stock of the other Existing
Borrowers.

C.                 PC Mall owns all of the issued and outstanding capital stock
of New Borrowers.

D.                 AF Services was formed to purchase inventory and provide
administrative and fulfillment services for the other Borrowers and to conduct
sales under the tradename "PC Mall Services".

E.                  PCMG was formed to conduct sales to governmental entities
under the name "PC Mall Gov".

F.                  ClubMac will acquire the business purchased by PC Mall from
Pacific Business Systems, Inc. (the "PBS Business").

G.                 Onsale was formed to conduct internet auction sales.

H.                  AV Acquisition, Acquisition 1 and Acquisition 2 were formed
for future acquisitions.

I.                   Borrowers have requested Lender to add New Borrowers as
co-borrowers under the Loan Agreement and to make loans and provide other
financial accommodations to all Borrowers upon the terms and conditions of the
Loan Agreement (as amended hereby), and Lender is willing to accede to such
request upon the terms and conditions set forth below.

J.                   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 will be 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 Lender to make funds available under the Loan Agreement to all
Borrowers based upon all of their Eligible Accounts and Eligible Inventory.  All
advances and credit accommodations made under the Loan Agreement 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.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

1.Amendments.

(a)Addition of New Borrowers.  New Borrowers are hereby added as co-borrowers
under the Loan Agreement with the same force and effect as if New Borrowers had
duly executed and delivered the Loan Agreement as Borrowers thereunder in
addition to the Existing Borrowers.  Without limiting the foregoing:

(i)The definitions of "Borrower" and "Borrowers" in the preamble of the Loan
Agreement are hereby amended to include New Borrowers in addition to the
Existing Borrowers.

(ii)Each of the New Borrowers and each of the Existing Borrowers shall be
jointly and severally liable for all Obligations.

(iii)To secure payment and performance of all Obligations, each of the New
Borrowers hereby grants to Lender a continuing security interest in, a lien
upon, and a right of set off against, and hereby assigns to Lender as security,
all Collateral, whether now owned or hereafter acquired or existing, and
wherever located.

(iv)The Information Certificates of New Borrowers attached hereto as Exhibit A
are hereby included in Exhibit A to the Loan Agreement in addition to the
Information Certificates of the Existing Borrowers.

(v)New Borrowers hereby represent and warrant to Lender the truth and accuracy
of all representations and warranties applicable to Borrowers in the Loan
Agreement (after giving effect to the inclusions of New Borrowers and their
Information Certificates as set forth in clauses (i) and (iv) above).

(vi)New Borrowers hereby agree to perform all of the covenants and agreements
applicable to Borrowers in the Loan Agreement.

(vii)Lender shall have all of the rights, remedies, interests and powers as
against New Borrowers as provided to Lender in relation to Borrowers in the Loan
Agreement.

(b)Indebtedness.  The word "and" at the end of Section 9.9(d) of the Loan
Agreement is hereby deleted, the period at the end of Section 9.9(e) is hereby
replaced with "; and", and a new Section 9.9(f) is hereby added to the Loan
Agreement as follows:

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

(c)Acquisitions.  Section 9.10(d) of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:

"(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 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 Thirty Million
Dollars ($30,000,000);

(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 Lender;

(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 Lender;

(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 Lender of the acquisition of
the subject Target or the making of the subject Subsidiary Investments as soon
as 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)Lender 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 Lender may reasonably
request; and

(x)Lender 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 Lender.  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
Sections 1.19 and 1.20 of the Loan Agreement, the inclusion of such Accounts and
Inventory in Eligible Accounts and Eligible Inventory shall be subject to:

(xi)Lender'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 Lender and by an appraiser reasonably acceptable to
Lender, addressed to Lender, and upon which Lender is expressly permitted to
rely;

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

(xiii)Such additional eligibility criteria, Availability Reserves and percentage
advance rates as Lender 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 States, and in
any event, only those Accounts generated and invoiced from the Untied States and
that Inventory located in the United States may be deemed Eligible Accounts or
Eligible Inventory.

(d)Pledge Agreement.  Recital B of the Pledge Agreement is hereby amended by
adding immediately after the reference to", WF ACQUISITION SUB, INC., a Delaware
corporation" the words "AF SERVICES, INC., a Delaware corporation, PC MALL GOV,
INC., a Delaware corporation, CLUBMAC, INC., a Delaware corporation, ONSALE,
INC., a Delaware corporation, AV ACQUISITION, INC., a Delaware corporation, MALL
ACQUISITION 1, INC., a Delaware corporation formerly known as PCM.com, Inc., and
MALL ACQUISITION 2, INC., a Delaware corporation formerly known as PCMall.com,
Inc."

2.Lender Consents.  Lender hereby consents to:

(a)The formation of New Borrowers as wholly owned subsidiaries of PC Mall, the
transfer by Existing Borrowers of Inventory to AF Services, and the transfer by
PC Mall of the assets related to the PBS Business to ClubMac;

(b)The formation of Mall Acquisition 3, Inc., a Delaware corporation formerly
known as Shipitforyou, Inc., as a wholly owned subsidiary of PC Mall, which
subsidiary was formed for future acquisitions, provided that any acquisition by
it shall be subject to the satisfaction in full of all conditions precedent set
forth in Section 9.10(d) of the Loan Agreement (as amended above); and

(c)The winding up, liquidation or dissolution of Computability (which is defunct
and has no assets) or the merger thereof into another Borrower.

3.Accommodation Fee.  Concurrently with their execution and delivery of this
Amendment to Lender, Borrowers shall pay Lender an accommodation fee in the
amount of Thirty-Seven Thousand Five Hundred Dollars ($37,500).

4.Effectiveness of this Amendment.  Lender must have received the following
items, in form and content acceptable to Lender, before this Amendment is
effective.

(a)This Amendment fully executed in a sufficient number of counterparts for
distribution to all parties.

(b)A Second Amended and Restated Term Promissory Note duly executed and
delivered by Borrowers to replace that certain Amended and Term Promissory Note
of Existing Borrowers in the original principal sum of $583,333.39.

(c)The certificates evidencing all of the issued and outstanding shares of
capital stock of New Borrowers, together with stock powers duly executed and
delivered by PC Mall therefor in blank.

(d)Flooring agreement(s) duly executed and delivered by DFS and such Borrowers
as appropriate.

(e)Amendments duly executed and delivered by DFS, Apple Computer and
Hewlett-Packard Company to their intercreditor/subordination agreements with
Lender to cover such New Borrowers as appropriate.

(f)Such documents as Lender may require to establish that it has a valid,
perfected and first priority security interest in the Collateral.

(g)Such documents as Lender may require with respect to the organization,
existence, good standing, power and authority of New Borrowers.

(h)Evidence of insurance and loss payable endorsements with respect to the
insurance policies of New Borrowers.

(i)Favorable opinion letter of counsel to New Borrowers with respect to the
transactions contemplated hereby.

(j)Consents and Amendments duly executed and delivered by LaSalle Business
Credit, Inc. and Fleet Capital Business Finance Division as Participants.

(k)All other documents and legal matters in connection with the transactions
contemplated by this Amendment shall have been delivered or executed or recorded
and shall be in form and substance satisfactory to Lender.

5.Representations and Warranties.  Each Borrower represents and warrants as
follows:

(a)Authority.  Such Borrower has the requisite corporate power and authority to
execute and deliver this Amendment, and to perform its obligations hereunder and
under the Financing Agreements (as amended or modified hereby) to which it is a
party.  The execution, delivery and performance by such Borrower of this
Amendment have been duly approved by all necessary corporate action and no other
corporate proceedings are necessary to consummate such transactions.

(b)Enforceability.  This Amendment has been duly executed and delivered by such
Borrower.  This Amendment and each Financing Agreement (as amended or modified
hereby) is the legal, valid and binding obligation of such Borrower, enforceable
against such Borrower in accordance with its terms, and is in full force and
effect.

(c)Representations and Warranties.  The representations and warranties contained
in each Financing Agreement (other than any such representations or warranties
that, by their terms, are specifically made as of a date other than the date
hereof) are correct on and as of the date hereof as though made on and as of the
date hereof.

(d)Due Execution.  The execution, delivery and performance of this Amendment are
within the power of such Borrower, have been duly authorized by all necessary
corporate action, have received all necessary governmental approval, if any, and
do not contravene any law or any contractual restrictions binding on such
Borrower.

(e)No Default.  No event has occurred and is continuing that constitutes an
Event of Default.

6.Choice of Law.  The validity of this Amendment, its construction,
interpretation and enforcement, the rights of the parties hereunder, shall be
determined under, governed by, and construed in accordance with the internal
laws of the State of California governing contracts only to be performed in that
State.

7.Counterparts.  This Amendment may be executed in any number of counterparts
and by different parties and separate counterparts, each of which when so
executed and delivered, shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.  Delivery of an
executed counterpart of a signature page to this Amendment by telefacsimile
shall be effective as delivery of a manually executed counterpart of this
Amendment.

8.Reference to and Effect on the Financing Agreements.

(a)Upon and after the effectiveness of this Amendment, each reference in the
Loan Agreement to "this Agreement", "hereunder", "hereof" or words of like
import referring to the Loan Agreement, and each reference in the other
Financing Agreements to "the Loan Agreement", "thereof" or words of like import
referring to the Loan Agreement, shall mean and be a reference to the Loan
Agreement as modified and amended hereby.

(b)Except as specifically provided above, the Loan Agreement and all other
Financing Agreements, are and shall continue to be in full force and effect and
are hereby in all respects ratified and confirmed and shall constitute the
legal, valid, binding and enforceable obligations of Borrowers to Lender.

(c)The execution, delivery and effectiveness of this Amendment shall not operate
as a waiver of any right, power or remedy of Lender under any of the Financing
Agreements, nor constitute a waiver of any provision of any of the Financing
Agreements.

(d)To the extent that any terms and conditions in any of the Financing
Agreements shall contradict or be in conflict with any terms or conditions of
the Loan Agreement or the Pledge Agreement, after giving effect to this
Amendment, such terms and conditions are hereby deemed modified or amended
accordingly to reflect the terms and conditions of the Loan Agreement and the
Pledge Agreement as modified or amended hereby.

9.Ratification.  Each Borrower hereby restates, ratifies and reaffirms each and
every term and condition set forth in the Loan Agreement and the Pledge
Agreement, as amended hereby, and the other Financing Agreements effective as of
the date hereof.

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date
first above written.

LENDER:

BORROWERS:

CONGRESS FINANCIAL
CORPORATION (WESTERN)

PC MALL, INC.

By:/s/ Gary
Cassianni                                                            
Name: Gary Cassianni                                                          
Title: Vice
President                                                              

By:/s/ Ted Sanders                                                        
Name: Ted Sanders                                                      
Title: Chief Financial Officer                                          

 

PC MALL SALES, INC.

 

By: /s/ Rory Zaks                                                          
Name: Rory Zaks                                                          
Title: President                                                              

 

ECOST.COM, INC.

 

By: /s/ Gary Guy                                                          
Name: Gary Guy                                                          
Title: President                                                             

 

ELINUX.COM, INC.

 

By: /s/ Ted Sanders                                                       
Name: Ted Sanders                                                      
Title: Secretary                                                             

 

CCIT, INC.

 

By: /s/ Richard Lepow                                                  
Name: Richard Lepow                                                 
Title: President                                                             

 

WF ACQUISITION SUB, INC.

 

By: /s/ William Neary                                                   
Name: William C. Neary                                              
Title: President                                                             

 

COMPUTABILITY LIMITED

 

By: /s/ Peter Zuiker                                                      
Name: Peter Zuiker                                                     
Title: President                                                            

 

AF SERVICES, INC.

 

By: /s/ Simon Abuyounes                                              
Name: Simon Abuyounes                                             
Title: President                                                             

 

PC MALL GOV, INC.

 

By: /s/ Alan Bechara                                                     
Name: Alan Bechara                                                    
Title: President                                                             

 

CLUBMAC, INC.

 

By: /s/ Mike McNeill                                                    
Name: Mike McNeill                                                   
Title: President                                                             

 

ONSALE, INC.

 

By: /s/ Sam Khulusi                                                      
Name: Sam Khulusi                                                     
Title: President                                                             

 

AV ACQUISITION, INC.

 

By: /s/ Ted Sanders                                                      
Name: Ted Sanders                                                     
Title: President                                                             

 

MALL ACQUISITION 1, INC.

 

By: /s/ Ted Sanders                                                       
Name: Ted Sanders                                                      
Title: President                                                              

 

MALL ACQUISITION 2, INC.

 

By: /s/ Ted Sanders                                                       
Name: Ted Sanders                                                      
Title: President