**EXHIBIT 10.26**

** **

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

 

**AMENDED ANDRESTATED LOAN AND SECURITY AGREEMENT**

** **

by and among

 

**THE FINANCIALINSTITUTIONS NAMED HEREIN**

** **

**As Lenders,**

** **

**WACHOVIA CAPITALFINANCE CORPORATION (WESTERN)**

** **

as Agent

 

and

 

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

**CCIT, INC.WF ACQUISITION SUB, INC.COMPUTABILITY LIMITEDAF SERVICES, LLCPC MALL GOV, INC.SIFY, INC.ONSALE, INC.AV ACQUISITION, INC.MALL ACQUISITION 1, INC.**andMALL ACQUISITION 2, INC.asBorrowers

 

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*** CERTAIN INFORMATIONIN 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       |

 

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*** CERTAIN INFORMATIONIN 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       |

 

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*** CERTAIN INFORMATIONIN 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       |

 

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**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       |

 

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*** CERTAIN INFORMATIONIN 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                                      |

 

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Dated:  As of August 1,2005

 

AMENDED ANDRESTATED LOAN AND SECURITY AGREEMENT

 

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

 

W I T N E S S E T H:

 

WHEREAS, Congress Financial Corporation (Western), nowknown as Wachovia Capital Finance Corporation (Western), and****Borrowers previously have entered into that certain Loanand Security Agreement dated March 7, 2001, as amended by that certainFirst Amendment to Loan and Security Agreement and Other Financing Agreementsdated as of August 23, 2002, Second Amendment to Loan and SecurityAgreement 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 SecurityAgreement dated as of May 14, 2004, Fifth Amendment to Loan and SecurityAgreement dated as of May 31, 2004, and Sixth Amendment to Loan andSecurity Agreement dated as of February 10, 2005 (as amended, the “OriginalLoan Agreement”), pursuant to which Congress Financial Corporation(Western), now known as Wachovia Capital Finance Corporation (Western), hasprovided certain loans and other financial accommodations to Borrowers; and

 

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

 

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*** CERTAIN INFORMATIONIN 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 commonownership of PC Mall, the financial success of each Borrower is largelydependant on the financial success of the other Borrowers.  Although certain of the Borrowers operateseparate and distinct core businesses in designated geographical areas,administrative and other service functions are performed for all of theBorrowers under the auspices of AF Services and all of the Borrowers areproviding technology-related goods and services for the ultimate benefit of PCMall and its shareholders.  It would beextremely impractical and unfeasible for each Borrower to report separately itsEligible Accounts and Eligible Inventory and to receive separately the proceedsof advances based upon such Borrower’s Eligible Accounts and Eligible Inventoryalone.  Borrowers have thereforerequested that Agent and Lenders make funds available to all Borrowers basedupon all of their Eligible Accounts and Eligible Inventory.  All advances and credit accommodations willthereby benefit all of the Borrowers by providing an available source of creditfor all of the Borrowers, as needed, to fund their working capital needs; and

 

WHEREAS, each Lender is willing to agree (severallyand not jointly) to make such loans and provide such financial accommodationsto 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 asadministrative and collateral agent for Lenders on the terms and conditions setforth herein and in the other Financing Agreements (as defined below); and

 

WHEREAS, each Borrower hereby restates, ratifies andreaffirms each and every term and condition set forth in the Original LoanAgreement, as amended and restated hereby, and the other Financing Agreementseffective as of the date hereof;

 

NOW, THEREFORE, in consideration of the mutualconditions and agreements set forth herein, and for other good and valuableconsideration, 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 1or Article 9 of the California Uniform Commercial Code shall have therespective meanings given therein unless otherwise defined in thisAgreement.  All references to the pluralherein shall also mean the singular and to the singular shall also mean theplural.  All references to Agent, Lendersand Borrowers pursuant to the definitions set forth in the recitals hereto, orto any other person herein, shall include their respective successors andassigns.  The words “hereof”, “herein”, “hereunder”,“this Agreement” and words of similar import when used in this Agreement shallrefer to this Agreement as a whole and not any particular provision of thisAgreement 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 continueor be continuing until such Event of Default is waived in accordance with Section 11.3.  Any accounting term used herein unlessotherwise defined in this Agreement shall have the meaning customarily given tosuch term in accordance with GAAP.  Forpurposes of this Agreement, the following terms shall have the respectivemeanings given to them below.

 

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

 

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

 

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

 

1.4           “Apple Computer” shall mean AppleComputer, 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 knownas Wachovia Capital Finance Corporation (Western), as lender under the OriginalLoan Agreement, as the same now exists or may hereafter be amended, modified,supplemented, extended, renewed, restated or replaced.

 

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

 

1.7           “Assignment and Acceptance” shallmean an Assignment and Acceptance substantially in the form of Exhibit Aattached hereto delivered to Agent in connection with an 

 

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

 

1.8           “Availability Reserves” shallmean, as of any date of determination, such amounts as Agent may from time totime establish and revise in its commercially reasonable discretion reducingthe amount of Revolving Loans and Letter of Credit Accommodations which wouldotherwise be available to Borrowers under the lending formula(s) providedfor 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 issecurity for the Obligations or its value or (ii) the security interestsand other rights of Agent in the Collateral (including the enforceability,perfection and priority thereof) or (b) to reflect Agent’s good faithbelief that any collateral report or financial information furnished by or on behalfof 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 anystate of facts which Agent determines in good faith constitutes an Event ofDefault.  Without limiting the generalityof the foregoing, Agent (i) shall establish on the date hereof andmaintain throughout the term of this Agreement and throughout any renewal terman Availability Reserve for an amount equal to two (2) months (or one (1) monthin the case of the warehouse in Tennessee) of Borrowers’ gross rent and otherobligations as lessee for each leased premises of Borrowers which is either awarehouse location or is located in a state where a landlord may be entitled toa priority lien on Collateral to secure unpaid rent and with respect to eachsuch property the landlord has not executed a form of waiver and consentacceptable to Agent, (ii) shall establish on the date hereof and maintainthroughout the term of this Agreement and throughout any renewal term anAvailability Reserve for an amount equal to the greater of the Value of theInventory subject to the security interest of Apple Computer (or any otherPersons who hold a security interest prior to Agent in the sale proceeds ofInventory, unless and until those Persons have released or subordinated theirsecurity interests against Borrowers in a manner satisfactory to Agent) or thesum of the Borrowers’ payables and accrued payables to Apple Computer (or suchother Persons), provided, that, the Availability Reserve for thesum of such payables to Apple Computer shall be based upon the amounts reportedfrom time to time by Apple Computer to Agent pursuant to the AppleIntercreditor Agreement, as such amounts may be reduced by wire transfers madeby Agent to Apple Computer upon the written instructions of Borrowers, and (iii) shallestablish on the date hereof and maintain throughout the term of this Agreementand throughout any renewal term Availability Reserves for Letter of CreditAccommodations as provided in Section 2.2(c) hereof and withoutduplication of Section 2.2(c).

 

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

 

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

 

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1.11         “Closing Date” shall mean the dateon which all of the conditions precedent set forth in Section 4 hereof arefully satisfied.

 

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

 

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

 

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

 

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

 

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

 

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

 

1.18         “Credit Card/Check ProcessingReceivables” shall mean all Accounts consisting of the present and futurerights of any Borrower to payment by Credit Card Issuers or Credit Card/CheckProcessors for merchandise sold and delivered to customers of such Borrower whohave purchased such goods using a credit card, debit card or check.

 

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

 

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

 

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

 

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

 

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

 

(c)           such Accounts comply with the terms andconditions contained in Section 7.2(d) of this Agreement, and in thecase of Credit Card/Check Processing Receivables, Agent shall have received adirection letter duly executed and delivered by the Credit Card Issuer orCredit Card/Check Processor with respect thereto in form and substance reasonablysatisfactory to Agent;

 

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

 

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

 

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

 

(g)           the account debtor with respect to suchAccounts 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 setoffagainst such Accounts (but the portion of the Accounts of such account debtorin excess of the amount at any time and from time to time owed by any Borrowerto such account debtor or claimed owed by such account debtor may be deemedEligible Accounts);

 

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

 

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

 

(j)            neither the account debtor nor anyofficer or employee of the account debtor with respect to such Accounts is anofficer, employee or agent of or affiliated with any Borrower directly orindirectly by virtue of family membership, ownership, control, management orotherwise; 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 othereligibility criteria set forth herein, be deemed Eligible Accounts;

 

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

 

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

 

(m)          such Accounts are not owed by an accountdebtor who has Accounts unpaid more than one hundred twenty (120) days afterthe date of the original invoice for them or more than sixty (60) days afterthe 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 oragainst any Borrower, and without limiting Lender’s rights and remedies uponsuch filing, such Accounts are not generated from the sale of Inventory subjectto the security interest of IBM Credit Corporation;

 

(q)           such Accounts are owed by account debtorsdeemed creditworthy at all times by Agent, as determined by Agent in itscommercially reasonable discretion; and

 

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

 

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

 

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

 

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warehouse location(s) or retail store(s) andwhich are acceptable to Agent based on the criteria set forth below.  In general, Eligible Inventory shall notinclude (a) raw materials or work-in-process; (b) components whichare not part of finished goods; (c) spare parts for equipment (it beingunderstood that parts held for sale in their then current condition shall notbe deemed spare parts for these purposes); (d) packaging and shippingmaterials; (e) supplies and fixed assets used or consumed in Borrowers’business; (f) Inventory at premises other than those owned or controlledby Borrowers, except if Agent shall have received an agreement in writing fromthe person in possession of such Inventory in form and substance satisfactoryto Agent acknowledging Agent’s priority security interest in the Inventory,waiving security interests and claims by such person against the Inventory andpermitting Agent access to, and the right to remain on, the premises so as toexercise Agent’s rights and remedies and otherwise deal with the Collateral; (g) Inventoryin transit, unless such Inventory is in transit to one of Borrowers’ retailsstores or warehouse locations under a Letter of Credit Accommodation hereunder,and the bill of lading covering such Inventory names Agent as consignee andotherwise contains terms acceptable to Agent, and all originals of such bill oflading are in the possession of Agent, Reference Bank or another baileeacceptable to Agent; (h) Inventory subject to a security interest or lienin favor of any person other than Agent except those permitted in thisAgreement; (i) bill and hold goods; (j) unserviceable or obsoleteInventory; (k) Inventory which is not subject to the valid and perfectedsecurity interest of Agent, for itself and the ratable benefit of Lenders; (l) returned(except for closed box returns), damaged and/or defective Inventory; (m) Inventorypurchased or sold on consignment; (n) Inventory located at servicecenters; (o) software, books, magazines, manuals, videos and similarInventory; (p) Inventory purchased under a Letter of Credit Accommodationthat is outstanding as contemplated in Section 2.2(c)(i) hereof, and (q) Inventorysubject to the security interest of IBM Credit Corporation or Hewlett-PackardCompany.  Any Inventory which is notEligible Inventory shall nevertheless be part of the Collateral.

 

1.22         “Eligible Transferee” shall mean (a) anyaffiliate of Lender; (b) any other commercial bank or other financialinstitution and (c) any “accredited investor” (as defined in Regulation Dunder the Securities Act of 1933) approved by Agent, and except as otherwiseprovided in Section 13.5 hereof, as to any such other commercial bank orother financial institution or any such accredited investor, as approved byBorrowers, such approval of Borrowers not to be unreasonably withheld,conditioned or delayed and such approval to be deemed given by Borrowers if noobjection from Borrowers is received within ten (10) Business Days afterwritten notice of such proposed assignment has been provided by Agent; provided,that, neither any Borrower nor any affiliate of any Borrower shallqualify as an Eligible Transferee.

 

1.23         “Environmental Laws” shall meanall 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 agreementsbetween any Borrower and any governmental authority, (a) relating topollution 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 orany other natural resource), or to human health or safety, (b) relating tothe exposure to, or the use, storage, recycling, treatment, generation,manufacture, processing, 

 

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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) theFederal Comprehensive Environmental Response, Compensation and Liability Act of1980, the Federal Superfund Amendments and Reauthorization Act, the FederalWater Pollution Control Act of 1972, the Federal Clean Water Act, the FederalClean Air Act, the Federal Resource Conservation and Recovery Act of 1976(including the Hazardous and Solid Waste Amendments thereto), the Federal SolidWaste Disposal and the Federal Toxic Substances Control Act, the FederalInsecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking WaterAct of 1974, (ii) applicable state counterparts to such laws, and (iii) anycommon law or equitable doctrine that may impose liability or obligations forinjuries or damages due to, or threatened as a result of, the presence of orexposure to any Hazardous Materials.

 

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

 

1.25         “ERISA” shall mean the UnitedStates Employee Retirement Income Security Act of 1974, as the same now existsor may hereafter from time to time be amended, modified, recodified orsupplemented, together with all rules, regulations and interpretationsthereunder or related thereto.

 

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

 

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

 

1.28         “Eurodollar Rate” shall mean withrespect to the Interest Period for a Eurodollar Rate Loan, the interest rateper 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 dollarsin the London interbank market (or other Eurodollar Rate market selected byBorrowers and approved by Agent) on or about 9:00 a.m.  (New York time) two (2) Business Daysprior to the commencement of such Interest Period in amounts substantiallyequal to the principal amount of the Eurodollar Rate Loans requested by andavailable to Borrowers in accordance with this Agreement, with a maturity ofcomparable duration to the Interest Period selected by Borrowers.

 

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

 

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not less than One Dollar ($1), and (c) two andone-half percent (2.50%) per annum if such audited net income was less than OneDollar ($1), as adjusted pursuant to Section 3.1(d) hereof, provided,that, the Eurodollar Rate Margin shall not be reduced if an Event ofDefault 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 suchnet income as determined in accordance with GAAP based upon the auditedfinancial 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, anynon-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 theoccurrence or existence of any event or condition described in Section 10.1hereof.

 

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

 

(a)           the lesser of (i) the amount of theRevolving Loans available to Borrowers as of such time (based on the applicableadvance rates set forth in Section 2.1(a) hereof), subject to thesublimits and Availability Reserves from time to time established by Lenderhereunder and (ii) the Maximum Credit (less the then outstanding principalamount of the Term Loan), minus

 

(b)           the amount of all then outstanding andunpaid Obligations (but not including for this purpose the then outstandingprincipal 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 andother agreements, documents and instruments now or at any time hereafterexecuted and/or delivered by any Borrower or any Obligor in connection withthis Agreement, as the same now exist or may hereafter be amended, modified,supplemented, extended, renewed, restated or replaced.

 

1.34         “GAAP” shall mean generallyaccepted accounting principles in the United States of America as in effectfrom time to time as set forth in the opinions and pronouncements of theAccounting Principles Board and the American Institute of Certified PublicAccountants and the statements and pronouncements of the Financial AccountingStandards Boards which are applicable to the circumstances as of the date ofdetermination consistently applied, except that, for purposes of Section 9.15hereof, GAAP shall be determined on the basis of such principles in effect onthe date hereof and consistent with those used in the preparation of theaudited financial statements delivered to Agent prior to the date hereof.

 

1.35         “Hazardous Materials” shall meanany hazardous, toxic or dangerous substances, materials and wastes, including,without limitation, hydrocarbons (including naturally occurring or man-madepetroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehydeinsulation, radioactive materials, biological substances, polychlorinatedbiphenyls, pesticides, herbicides and any other kind and/or type of pollutantsor contaminants (including, without

 

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limitation, materials which include hazardousconstituents), sewage, sludge, industrial slag, solvents and/or any othersimilar 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 hazardousor toxic under any Environmental Law).

 

1.36         “Information Certificates” shallmean the Information Certificates of Borrowers constituting Exhibit Bhereto containing material information with respect to Borrowers, theirbusiness and assets provided by or on behalf of Borrowers to Agent inconnection with the preparation of this Agreement and the other FinancingAgreements and the financing arrangements provided for herein.

 

1.37         “Intangible Assets” shall mean asto any Person (a) all loans or advances to, and other receivables owingfrom, 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 ordetermined to be intangible by Agent in good faith.

 

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

 

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

 

1.40         “Inventory Advance Rates” shallmean the advance rates applicable to Eligible Inventory as determined inaccordance with Section 2.1(a)(ii)(A).

 

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

 

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

 

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

 

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

 

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1.45         “New LendingOffice” 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 andall Revolving Loans, the Term Loan, the Letter of Credit Accommodations and allother obligations, liabilities and indebtedness of every kind, nature anddescription owing by any Borrower to Agent or any Lender and/or any of theirrespective affiliates, including principal, interest, charges, fees, costs andexpenses, however evidenced, whether as principal, surety, endorser, guarantoror otherwise, whether arising under this Agreement or otherwise, whether nowexisting or hereafter arising, whether arising before, during or after theinitial or any renewal term of this Agreement or after the commencement of anycase with respect to any Borrower under the United States Bankruptcy Code orany similar statute (including, without limitation, the payment of interest andother amounts which would accrue and become due but for the commencement ofsuch case), whether direct or indirect, absolute or contingent, joint orseveral, 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 theObligations or who is the owner of any property which is security for theObligations, other than Borrowers.

 

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

 

1.50         “Other Taxes” shallmean any present or future stamp or documentary taxes or any other excise orproperty taxes, charges or similar levies which arise from any payment madehereunder or from the execution, delivery or registration of, or otherwise withrespect to, this Agreement or any of the other Financing Agreements.

 

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

 

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

 

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

 

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

 

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

 

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1.56         “Pro Rata Share” shall mean:

 

(a)           with respect to a Revolving Loan Lender’sobligation to make Revolving Loans and receive payments relative thereto, thefraction (expressed as a percentage) the numerator of which is such Lender’sRevolving Loan Commitment and the denominator of which is the aggregate amountof all of the Revolving Loan Commitments of Revolving Loan Lenders, as adjustedfrom time to time in accordance with the provisions of Section 13.5hereof; provided, that, if the Revolving Loan Commitments havebeen terminated, the numerator shall be the unpaid amount of such Lender’sRevolving Loans and its interest in the Letter of Credit Accommodations and thedenominator shall be the aggregate amount of all unpaid Revolving Loans andLetter of Credit Accommodations; and

 

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

 

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

 

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

 

1.58         “Real Estate” shall mean the realestate owned by Creative Computers and commonly known as 1505 WilshireBoulevard, Santa Monica, California.

 

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

 

1.60         “Reference Bank” shall meanWachovia Bank, National Association, its successor or such other bank as Agentmay from time to time designate.

 

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

 

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

 

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1.63         **“**Required Lenders” shall mean, at any time, those Lenderswhose Pro Rata Shares, based on their respective Total Commitments, aggregatesixty-six and two-thirds (66 2/3%) percent or more of the aggregate of theTotal 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 thenoutstanding Obligations are owing.

 

1.64         “Revolving Loan Commitment” shallmean, at any time, as to each Revolving Loan Lender, the principal amount setforth below such Lender’s signature on the signature pages heretodesignated as the Revolving Loan Commitment or on Schedule 1 to the Assignmentand Acceptance pursuant to which such Lender became a Lender hereunder inaccordance with the provisions of Section 13.5****hereof,as the same may be adjusted from time to time in accordance with the termshereof; sometimes being collectively referred to herein as “Revolving LoanCommitments.”

 

1.65         “Revolving Loan Lenders” shallmean, collectively, those Lenders making Revolving Loans or providing Letter ofCredit Accommodations and their respective successors and assigns; sometimesbeing referred to herein individually as a “Revolving Loan Lender.”

 

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

 

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

 

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

 

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

 

1.70         “Taxes” shall meanany and all present or future taxes, levies, imposts, deductions, charges orwithholdings, and all liabilities with respect thereto, excluding, in the caseof any Lender, such taxes (including income taxes, franchise taxes or capitaltaxes) as are imposed on or measured by such Lender’s net income or capital byany 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 belowsuch Lender’s signature on the signature pages hereto designated as theTerm Loan Commitment or on Schedule 1 to the Assignment and Acceptance pursuantto which such Lender became a Lender hereunder in accordance with theprovisions of Section 13.5****hereof, as thesame 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 respectivesuccessors and assigns; sometimes being referred to herein individually as a “TermLoan Lender.”

 

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1.73         “Term Loans” shall have themeaning set forth in Section 2.3 hereof; sometimes being referred toherein 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 mayhereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.75         “Total Commitment” shall mean, atany time, as to each Lender, the principal amount set forth below such Lender’ssignature on the signature pages hereto designated as the Total Commitmentor on Schedule 1 to the Assignment and Acceptance pursuant to which such Lenderbecome a Lender hereunder in accordance with the provisions of Section 13.5hereof, as the same may be adjusted from time to time in accordance with theterms 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 UniformCommercial Code as in effect in the State of California, and any successorstatute, as in effect from time to time (except that terms used herein whichare defined in the Uniform Commercial Code as in effect in the State ofCalifornia on the date hereof shall continue to have the same meaningnotwithstanding any replacement or amendment of such statute except as Lendermay otherwise determine.

 

1.78         “Value” shall mean, as determinedby Agent in good faith, with respect to Inventory, the lower of (a) costunder the first-in-first-out method, net of vendor discounts or (b) marketvalue.

 

SECTION 2. CREDIT FACILITIES.

 

2.1           Revolving Loans.

 

(a)           Subject to, and upon the terms andconditions contained herein, each Revolving Loan Lender severally (and notjointly) agrees to fund its Pro Rata Share of Revolving Loans to Borrowers from time to time in amounts requested byBorrowers up to the amount equal to the sum of:

 

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

 

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(ii)           the lesser of:

 

(A)          the sum of (1) sixty percent (60%)of the Value of Eligible Inventory not consisting of office supplies (held forsale by Borrowers), refurbished Inventory, Slow Moving Inventory, or theInventory described in clause (3) immediately below, not to exceedeighty-five percent (85%) of the Appraised Liquidation Value of such EligibleInventory, plus (2) the lesser of Two Million Dollars ($2,000,000)or forty percent (40%) of the Value of Eligible Inventory consisting of officesupplies (held for sale by Borrowers), refurbished Inventory or Slow MovingInventory and not consisting of the Inventory described in clause (3) immediatelybelow, not to exceed eighty-five percent (85%) of the Appraised LiquidationValue 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, andfor which Apple Computer, upon its repossession thereof, is committed to creditthe 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) basedupon Eligible Inventory that is in transit from Apple Computer to Borrowersshall not exceed Two Million Dollars ($2,000,000) at any time, unlessBorrowers have provided Agent with a current borrowing base certificate(separately identifying such in-transit Eligible Inventory) and a currentcertificate of Borrowers’ payables and accrued payables to Apple Computer (withsuch supporting documentation as Agent may reasonably request and separatelyidentifying the payables owing for Inventory in transit from Apple Computer toBorrowers), which certificates shall be in form reasonably satisfactory to Agent,in which case, for a period of five (5) Business Days after Lender’sreceipt and satisfactory review of such certificates, the total sum availablehereunder based upon such in-transit Eligible Inventory shall not exceed TenMillion 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 arolling six (6) month basis in accordance with Exhibit Cattached hereto as the product of three hundred sixty (360) times the quotientof the average total Value of Inventory, divided by the cost of all Inventorysold, and (2) Twenty Million Dollars ($20,000,000) if such turn ofBorrowers’ Inventory is slower than thirty (30) days, and providedfurther,that, if Borrowers do not provide Agent, on or before the tenth (10th) Business Day of any month, with a certificate (inform satisfactory to Agent) that such turn of Borrowers’ Inventory was notslower than a specified number of days during the six (6) months ending onthe last day of the immediately preceding month, then such amount shall bereduced to Twenty Million Dollars ($20,000,000), minus

 

(iii)          thethen undrawn amounts of outstanding Letter of Credit Accommodations, multipliedby the applicable percentages as provided for in Section 2.2(c)(i) orSection 2.2(c)(ii) hereof; minus

 

(iv)          any Availability Reserves.

 

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(b)           Agent may, in its commercially reasonablediscretion, from time to time, upon not less than ten (10) days priornotice to Borrowers reduce the lending formula(s) with respect to EligibleInventory to the extent that Agent determines that:

 

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

 

(ii)           the nature and quality of the Inventoryhas deteriorated in any material respect. In determining whether to reduce the lending formula(s), Agent mayconsider events, conditions, contingencies or risks which are also consideredin determining Eligible Accounts, Eligible Inventory or in establishingAvailability Reserves.

 

(c)           Except in Agent’s discretion, with theconsent of all Lenders, the aggregate amount of the Loans, the Letter of CreditAccommodations and other Obligations outstanding at any time shall not exceedthe Maximum Credit.  In the event thatthe outstanding amount of any component of the Loans and Letter of Credit Accommodations,or the aggregate amount of the outstanding Loans and Letter of CreditAccommodations and other Obligations, exceeds the amounts available under thelending formulas set forth in Section 2.1(a) hereof, the sublimitsfor Letter of Credit Accommodations set forth in Section 2.2(d) or theMaximum Credit, as applicable, such event shall not limit, waive or otherwiseaffect any rights of Agent or any Lender in that circumstance or on any futureoccasions and Borrowers shall, upon demand by Agent, which may be made at anytime or from time to time, immediately repay to Agent, for the ratable benefitof Lenders, the entire amount of any such excess(es)****forwhich payment is demanded.

 

(d)           For purposes only of applying thesublimit on Revolving Loans based on Eligible Inventory pursuant to Section 2.1(a)(ii)(B) Agentmay treat the then undrawn amounts of outstanding Letter of CreditAccommodations for the purpose of purchasing Eligible Inventory as RevolvingLoans to the extent Agent is in effect basing the issuance of the Letter ofCredit Accommodations on the Value of the Eligible Inventory being purchasedwith such Letter of Credit Accommodations. In determining the actual amounts of such Letter of CreditAccommodations to be so treated for purposes of the sublimit, the outstandingRevolving Loans and Availability Reserves shall be attributed first to anycomponents of the lending formulas in Section 2.1(a) that are notsubject to such sublimit, before being attributed to the components of thelending formulas subject to such sublimit.

 

2.2           Letter of Credit Accommodations.

 

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

 

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(b)           In addition to any charges, fees orexpenses charged by any bank or issuer in connection with the Letter of CreditAccommodations, Borrowers shall pay to Agent for the benefit of Revolving LoanLenders, 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 CreditAccommodations for the immediately preceding month (or part thereof), payable inarrears 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 letterof credit fee shall not be charged on any Letter of Credit Accommodations up toan aggregate outstanding sum of Twenty Million Dollars ($20,000,000) that areissued in favor of any financial institution providing floor plan financing toBorrowers, and provided, further, that so long as no Event ofDefault has occurred and is continuing, such letter of credit fee on any Letterof Credit Accommodations issued in favor of any such floor planning financialinstitutions that exceed Twenty Million Dollars ($20,000,000) in the aggregateoutstanding shall be at a rate equal to one percent (1.0%) per annum.  Notwithstanding the foregoing, such letter ofcredit fee shall be increased, at Agent’s option without notice, to three andone-half percent (3.50%) per annum upon the occurrence and during thecontinuation of an Event of Default, and for the period on or after the date oftermination or non-renewal of this Agreement. Such letter of credit fee shall be calculated on the basis of a threehundred sixty (360) day year and actual days elapsed and the obligation ofBorrowers to pay such fee shall survive the termination or non-renewal of thisAgreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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(d)           An Availability Reserve shall beestablished in the amount set forth in Section 2.2(c)(i) upon theplacement of the order for the purchase of the subject Inventory.  Effective upon the issuance of each Letter ofCredit Accommodation for a purpose other than the purchase of Inventory, anAvailability Reserve shall be established in the amount set forth in Sections2.2(c)(ii) or (iii), as applicable.

 

(e)           Except in Agent’s discretion, with theconsent of all Lenders, the amount of all outstanding Letter of CreditAccommodations and all other commitments and obligations made or incurred byAgent or any Lender in connection therewith shall not at any time exceed FortyMillion Dollars ($40,000,000); provided, that, if the sublimit onRevolving Loans based upon Eligible Inventory pursuant to Section 2.1(a)(ii)(B) isreduced to a lesser amount, the amount of all Letter of Credit Accommodationsfor the purpose of purchasing Eligible Inventory and all other commitments andobligations made or incurred by Lenders in connection therewith shall notexceed such lesser amount.  At any timean Event of Default exists or has occurred and is continuing, upon Agent’srequest, Borrowers will either furnish cash collateral to secure thereimbursement obligations to the issuer in connection with any Letter of CreditAccommodations or furnish cash collateral to Agent for the Letter of CreditAccommodations, and in either case, the Revolving Loans otherwise available toBorrowers shall not be reduced as provided in Section 2.2(c) to theextent of such cash collateral.

 

(f)            Each Borrower shall indemnify and holdAgent and Lenders harmless from and against any and all losses, claims, damages,liabilities, costs and expenses which Agent or any Lender may suffer or incurin connection with any Letter of Credit Accommodations and any documents,drafts or acceptances relating thereto (excluding any of the foregoing to theextent arising from the gross negligence or willful misconduct of Agent or anyLender), including, but not limited to, any losses, claims, damages,liabilities, costs and expenses due to any action taken by any issuer orcorrespondent with respect to any Letter of Credit Accommodation.  Each Borrower assumes all risks with respectto the acts or omissions of the drawer under or beneficiary of any Letter ofCredit Accommodation and for such purposes the drawer or beneficiary shall be deemedsuch Borrower’s agent.  Each Borrowerassumes all risks for, and agree to pay, all foreign, Federal, State and localtaxes, duties and levies relating to any goods subject to any Letter of CreditAccommodations or any documents, drafts or acceptances thereunder.  Each Borrower hereby releases and holds Agentand each Lender harmless from and against any acts, waivers, errors, delays oromissions, whether caused by such Borrower, by any issuer or correspondent orotherwise, unless caused by the gross negligence or willful misconduct of Agentor such Lender, with respect to or relating to any Letter of CreditAccommodation.  The provisions of this Section 2.2(f) shallsurvive the payment of Obligations and the termination or non-renewal of thisAgreement.

 

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

 

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connection with any Letter of Credit Accommodation orany documents, drafts or acceptances thereunder, notwithstanding that suchinterpretation may be inconsistent with any instructions of such Borrower.  At any time an Event of Default exists or hasoccurred and is continuing, Agent shall have the sole and exclusive right andauthority to, and no Borrower shall, without the prior written consent of Agent:  (i) approve or resolve any questions ofnon-compliance of documents, (ii) give any instructions as to acceptanceor rejection of any documents or goods or (iii) execute any and allapplications for steamship or airway guaranties, indemnities or deliveryorders, and  at all times, (iv) grantany extensions of the maturity of, time of payment for, or time of presentationof, any drafts, acceptances, or documents, and (v) agree to anyamendments, renewals, extensions, modifications, changes or cancellations ofany of the terms or conditions of any of the applications, Letter of CreditAccommodations, or documents, drafts or acceptances thereunder or any lettersof credit included in the Collateral. Agent may take such actions either in its own name or in any Borrower’sname.

 

(h)           Any rights, remedies, duties orobligations granted or undertaken by any Borrower to any issuer orcorrespondent in any application for any Letter of Credit Accommodation, or anyother agreement in favor of any issuer or correspondent relating to any Letterof Credit Accommodation, shall be deemed to have been granted or undertaken bysuch Borrower to Agent for the ratable benefit of Lenders.  Any duties or obligations undertaken by Agentor any Lender to any issuer or correspondent in any application for any Letterof Credit Accommodation, or any other agreement by Agent or any Lender in favorof any issuer or correspondent relating to any Letter of Credit Accommodation,shall be deemed to have been undertaken by Borrowers to Agent and Lenders andto 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 theOriginal Loan Agreement made a term loan to Borrowers as evidenced by thatcertain Fourth Amended and Restated Term Promissory Note dated June 16,2004 in the original principal sum of $3,500,000 and with an outstandingprincipal balance of $2,916,662.  Subjectto 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 amountequal to such Term Loan Lender’s Pro Rata Share of such outstanding principalbalance.  The Term Loans shall be (a) evidencedby the Term Notes, (b) repaid with interest in accordance with thisAgreement, the Term Notes and other Financing Agreements, and (c) securedby all of the Collateral.

 

(b)           Notwithstanding anything to the contrarycontained herein, the Real Estate may be sold or refinanced and Agent shallrelease its liens against the Real Estate in connection with the sale orrefinance thereof, provided, that, (i) no Default or Eventof Default has occurred and is continuing, (ii) the net proceeds of thesale or refinance are remitted to Agent for application first to any principaloutstanding on the Term Loans and any accrued but unpaid interest thereon, andthen to any other Obligations, and (iii) upon the application of such netproceeds that are payable in cash on the closing of the sale or refinance, anyprincipal outstanding on the Term Loans and any accrued but unpaid interestthereon would be paid and

 

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satisfied in full and the Excess Availability wouldnot be less than Seven Million Dollars ($7,000,000).  Upon any refinance of the Real Estate inaccordance with the foregoing, any indebtedness secured solely by the RealEstate and any lien against the Real Estate securing such indebtedness will bepermitted 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 ofthe Revolving Loans and Letter of Credit Accommodations shall not exceed theamount of such Lender’s Revolving Loan Commitment, as the same may from time totime be amended with the written acknowledgment of Agent.  The aggregate amount of each Term Loan Lender’sPro Rata Share of the Term Loans shall not exceed the amount of such Lender’sTerm Loan Commitment, as the same may from time to time be amended, with thewritten 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 benefitof Lenders, interest on the outstanding principal amount of the non-contingentObligations at the Prime Rate.

 

(b)                                 Borrowers may from time to time requestthat Prime Rate Loans be converted to Eurodollar Rate Loans or that anyexisting Eurodollar Rate Loans continue for an additional Interest Period.  Such request from Borrowers shall specify theamount of the Prime Rate Loans which will constitute Eurodollar Rate Loans(subject to the limits set forth below) and the Interest Period to beapplicable to such Eurodollar Rate Loans. Subject to the terms and conditions contained herein, three (3) BusinessDays after receipt by Agent of such a request from Borrowers, such Prime RateLoans shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loansshall continue, as the case may be, provided, that, (i) noEvent of Default, or event which with notice or passage of time or both wouldconstitute an Event of Default exists or has occurred and is continuing, (ii) noparty hereto shall have sent any notice of termination or non-renewal of thisAgreement, (iii) Borrowers shall have complied with such customaryprocedures as are established by Agent and specified by Agent to Borrowers fromtime to time for requests by Borrowers for Eurodollar Rate Loans, (iv) nomore than four (4) Interest Periods may be in effect at any one time, (v) theaggregate 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) themaximum amount of the Eurodollar Rate Loans at any time requested by Borrowersshall not exceed the amount equal to eighty-five percent (85%) of the lowestprincipal amount of the Loans which it is anticipated will be outstandingduring the applicable Interest Period, in each case as determined by Agent (butwith no obligation of Lenders to make such Loans) and (vii) each RevolvingLoan Lender shall have determined that the Interest Period or AdjustedEurodollar Rate is available to such Lender and can be readily determined as ofthe date of the request for such Eurodollar Rate Loan by Borrowers.  Any request by Borrowers to convert PrimeRate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar RateLoans shall be irrevocable. Notwithstanding anything to the contrary contained herein, Agent,Revolving Loan Lenders and Reference Bank shall not be required to purchaseUnited States 

 

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Dollar deposits in the London interbank market orother applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, butthe provisions hereof shall be deemed to apply as if Agent, Revolving LoanLenders and Reference Bank had purchased such deposits to fund the EurodollarRate Loans.

 

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

 

(d)                                 Except as provided in Section 3.1(e) below,Borrowers shall pay to Agent, for the benefit of Lenders, interest on the outstandingprincipal amount of the Eurodollar Rate Loans at the rate of two andthree-quarters percent (2.75%) per annum in excess of the Adjusted EurodollarRate (based on the Eurodollar Rate applicable for the Interest Period selectedby Borrowers as in effect three (3) Business Days after the date ofreceipt by Agent of the request of Borrowers for such Eurodollar Rate Loans inaccordance with the terms hereof, whether such rate is higher or lower than anyrate previously quoted to Borrowers), provided, that, effectiveon the first day of the calendar month immediately following Agent’s receipt ofthe audited financial statements of Borrowers for any twelve (12) month fiscalyear (commencing with the twelve (12) month fiscal year ending December 31,2000), and Agent’s determination that those audited financial statements complywith the requirements set forth in Section 9.6(a)(ii) hereof, suchinterest rate shall be adjusted to such Adjusted Eurodollar Rate plus theapplicable Eurodollar Rate Margin based upon the consolidated net income ofBorrowers during such fiscal year as reflected in those audited financialstatements, and provided further, that, such interest rate shallnot be reduced if those audited financial statements are qualified under GAAPor if an Event of Default is continuing as determined by Agent, and providedfurther, that, if the audited financial statements of Borrowers forany 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 thehighest Eurodollar Rate Margin until Agent receives and approves those auditedfinancial statements.

 

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(e)                                  Notwithstanding the foregoing, Borrowersshall 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 theapplicable rate(s) chargeable above:

 

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

 

(ii)                                  on the Revolving Loans at any timeoutstanding 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’sknowledge or consent and whether made before or after an Event of Default).

 

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

 

(f)                                    Interest shall be payable by Borrowers toAgent, for the benefit of Lenders, monthly in arrears not later than the firstday of each calendar month and shall be calculated on the basis of a threehundred sixty (360) day year and actual days elapsed.  The interest rate on non-contingentObligations (other than Eurodollar Rate Loans) shall increase or decrease by anamount equal to each increase or decrease in the Prime Rate effective on thefirst day of the month after any change in such Prime Rate is announced basedon the Prime Rate in effect on the last day of the month in which any suchchange occurs.

 

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

 

3.3                                 Extension Fee.  Borrowers shall pay to Agent, for the benefitof Lenders, as an extension fee, One Hundred Thousand Dollars ($100,000), whichfee 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 ofand payable on the date hereof.

 

3.5                                 Loan Servicing Fee.** **Borrowers shall pay to Agent, forits own account, a monthly loan servicing fee in an amount equal to OneThousand 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 forso long thereafter as any of the Obligations are outstanding, which fee shallbe 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 ofLenders, monthly, an unused line fee equal to a rate equal to one-quarter ofone percent (0.25%) per annum calculated upon the amount, if any, by which thesum of Sixty Million Dollars 

 

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

 

3.7                                 Compensation Adjustment.

 

(a)                                  If after the date of this Agreement theintroduction of, or any change in, any law or any governmental rule,regulation, policy, guideline or directive (whether or not having the force oflaw) having general application to financial institutions of the same type asAgent or any Lender or any Participant, or any interpretation thereof, orcompliance 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 (excludingfranchise taxes imposed upon, and taxation of the overall net income of, Agentor any Lender or any Participant), or changes the basis of taxation ofpayments, in either case in respect of amounts due it hereunder, or

 

(ii)                                  imposes or increases or deems applicableany reserve requirement or other reserve, assessment, insurance charge, specialdeposit or similar requirement against assets of, deposits with or for theaccount of, or credit extended by Agent or any Lender or any Participant, or

 

(iii)                               imposes any other condition the result of which is toincrease the cost to Agent or any Lender or any Participant of making, fundingor maintaining the Loans or Letter of Credit Accommodations or reduces anyamount receivable by Agent or any Lender or any Participant in connection withthe Loans or Letter of Credit Accommodations, or requires Agent or any Lenderor any Participant to make payment calculated by references to the amount ofloans held or interest received by it, by an amount deemed material by Agent orany Lender or any Participant, or

 

(iv)                              imposes or increases any capitalrequirement or affects the amount of capital required or expected to bemaintained by Agent or any Lender or any Participant or any corporationcontrolling Agent or any Lender or any Participant, and Agent or any Lender orany Participant determines that such imposition or increase in capitalrequirements or increase in the amount of capital expected to be maintained isbased upon the existence of this Agreement or the Loans or Letter of CreditAccommodations hereunder, all of which may be determined by Agent’s reasonableallocation of the aggregate of its impositions or increases in capital requiredor expected to be maintained, and the result of any of the foregoing is toincrease the cost to Agent or any Lender or any Participant of making, renewingor maintaining the Loans or Letter of Credit Accommodations, or to reduce therate of return to Agent or any Lender or any Participant on the Loans or Letterof Credit Accommodations, then upon demand by Agent, Borrowers shall pay toAgent, for the benefit of Lenders, and continue to make periodic 

 

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

 

(b)                                 A certificate of Agent or any Lenderclaiming entitlement to compensation as set forth above will be conclusive inthe absence of manifest error.  Suchcertificate will set forth the nature of the occurrence giving rise to suchcompensation, the additional amount or amounts to be paid and the compensationand the method by which such amounts were determined.  In determining any additional amounts duefrom Borrowers under this Section 3.5, Agent and each Lender shall actreasonably 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’sor a Participant’s loans or commitments generally and are not specificallyattributable to the Loans and commitments hereunder, use averaging andattribution methods which are reasonable and equitable and which cover all suchloans and commitments by Agent or such Lender or such Participant, as the casemay be, whether or not the loan documentation for such other loans and commitmentspermits Agent or such Lender or such Participant to receive compensation costsof the type described in this Section 3.5.

 

3.8                                 Changes in Laws and Increased Costs ofLoans.

 

(a)                                  Notwithstanding anything to the contrarycontained herein, all Eurodollar Rate Loans shall, upon notice by Agent toBorrowers, convert to Prime Rate Loans in the event that (i) any change inapplicable law or regulation having general application to financialinstitutions of the same type as Agent, any Lender, Reference Bank or anyParticipant, as applicable (or the interpretation or administration thereof)shall either (A) make it unlawful for Agent, any Lender, Reference Bank orany Participant to make or maintain Eurodollar Rate Loans or to comply with theterms hereof in connection with the Eurodollar Rate Loans, or (B) shallresult in the increase in the costs to Agent, any Lender, Reference Bank or anyparticipant of making or maintaining any Eurodollar Rate Loans by an amountdeemed by Agent to be material, or (C) reduce the amounts received orreceivable by Agent or such Lender in respect thereof, by an amount deemed byAgent to be material or (ii) the cost to Agent, any Lender, Reference Bankor any Participant of making or maintaining any Eurodollar Rate Loans shallotherwise increase by an amount deemed by Agent to be material.  Upon demand by Agent, Borrowers shall pay toAgent, for itself or the applicable Lender (or Agent may, at its option, chargeany loan account of Borrowers) any amounts required to compensate Agent, or theapplicable Lender, Reference Bank or any Participant for any loss (includingloss of anticipated profits), cost or expense incurred by such person as aresult of the foregoing, including, without limitation, any such loss, cost orexpense incurred by reason of the liquidation or reemployment of deposits orother funds acquired by such person to make or maintain the Eurodollar RateLoans or any portion thereof.  Acertificate setting forth the basis for the determination of such amount necessaryto compensate the Agent or applicable Lender as aforesaid shall be delivered toBorrowers and shall be conclusive, absent manifest error.  In determining any additional amounts duefrom Borrowers under this Section 3.6, Agent or the applicable Lender shallact reasonably and in good faith and will, to the extent that the increasedcosts, reductions, or amounts received or receivable relate to the Agent’s orapplicable Lender’s or a Participant’s loans or commitments generally and arenot specifically attributable to the Loans and 

 

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

 

(b)                                 If any payments or prepayments in respectof the Eurodollar Rate Loans are received by Agent or the applicable Lenderother than on the last day of the applicable Interest Period (whether pursuantto acceleration, upon maturity or otherwise), including any payments pursuantto the application of collections under Section 6.3 or any other paymentsmade with the proceeds of Collateral, Borrowers shall pay to Agent, for itselfor the applicable Lender (or Agent may, at its option, charge any loan accountof Borrowers) any amounts required to compensate Agent, or the applicableLender, Reference Bank or any Participant for any additional loss (includingloss of anticipated profits), cost or expense incurred by such person as aresult of such prepayment or payment, including, without limitation, any loss,cost or expense incurred by reason of the liquidation or reemployment ofdeposits or other funds acquired by such person to make or maintain suchEurodollar 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 ofthis Agreement and to this Agreement amending and restating the Original LoanAgreement in its entirety:

 

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

 

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

 

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

 

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

 

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

 

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

 

4.2                                 Conditions Precedent to All Loans andLetter of Credit Accommodations.  Each of thefollowing is an additional condition precedent to Lenders (or Agent on behalfof Lenders) making Loans and/or providing Letter of Credit Accommodations toBorrowers, including the initial Loans and Letter of Credit Accommodations andany future Loans and Letter of Credit Accommodations:

 

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

 

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

 

SECTION 5. GRANT OF SECURITY INTEREST.

 

To secure payment and performance of all Obligations, each Borrowerhereby grants to Agent, for itself and the ratable benefit of Lenders, acontinuing 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, assecurity, 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 owedto 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 existingand future leasehold interests in equipment, real estate and fixtures), chattelpaper, documents, instruments, securities, investment property, letters ofcredit, 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 ofsuch Borrower now or hereafter held or received by or in transit to Agent, anyLender or any of their respective affiliates or at any other depository orother institution from or for the account of such Borrower, whether forsafekeeping, pledge, custody, transmission, collection or otherwise, and allpresent and future liens, security interests, rights, remedies, title andinterest in, to and in respect of Accounts and other Collateral, including,without limitation, (a) rights and remedies under or relating toguaranties, contracts of suretyship, letters of credit and credit and otherinsurance related to the Collateral, (b) rights of stoppage in 

 

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

 

5.4                                 all Inventory;

 

5.5                                 all Equipment;

 

5.6                                 all Records;

 

5.7                                 as to Creative Computers, the RealEstate; and

 

5.8                                 all products and proceeds of theforegoing, in any form, including, without limitation, insurance proceeds andany claims against third parties for loss or damage to or destruction of any orall 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 inwhich shall be recorded (a) all Loans, all Letter of Credit Accommodationsand all other Obligations and the Collateral, (b) all payments made by oron behalf of Borrowers and (c) all other appropriate debits and credits asprovided in this Agreement, including, without limitation, fees, charges,costs, expenses and interest.  Allentries in the loan account(s) shall be made in accordance with Agent’scustomary practices as in effect from time to time.

 

6.2                                 Statements.  Agent shallrender to Borrowers each month a statement setting forth the balance in theBorrowers’ loan account(s) maintained by Agent for Borrowers pursuant tothe provisions of this Agreement, including principal, interest, fees, costsand expenses.  Each such statement shallbe subject to subsequent adjustment by Agent but shall, absent manifest errorsor omissions, be considered correct and deemed accepted by Borrowers andconclusively binding upon Borrowers as an account stated except to the extentthat Agent receives a written notice from Borrowers of any specific exceptionsof Borrowers thereto within sixty (60) days after the date such statement hasbeen mailed by Agent.  Until such time asAgent shall have rendered to Borrowers a written statement as provided above,the balance in Borrowers’ loan account(s) shall be presumptive evidence ofthe 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 paymentarrangements with the banks set forth on Schedule 8.8 and after priorwritten notice to Agent, such other banks as Borrowers may hereafter select asare acceptable to Agent.  The banks setforth on Schedule 8.8 constitute all of the banks with whom any Borrowerhas deposit account arrangements and merchant payment arrangements as of thedate hereof.

 

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(i)                                     Borrowers shall deposit all proceeds fromsales of Inventory in every form (including, without limitation, cash, checks,credit card sales drafts, credit card sales of charge slip or receipts andother forms of daily receipts) and all other proceeds of Collateral that arereceived at Borrowers’ retail store location(s), on each Business Day into thedeposit accounts of Borrowers used solely for such purpose as set forth on Schedule8.8.  Borrowers shall irrevocablyauthorize 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 allother proceeds of Collateral are at any time deposited as provided above tosend by wire transfer on a daily basis all funds deposited in such account, andshall irrevocably authorize and direct in writing their account debtors, CreditCard Issuers and Credit Card/Check Processors to directly remit payments ontheir Accounts, Credit Card Receivables and all other payments constitutingprocess of Inventory to the Blocked Accounts described in Section 6.3(a)(ii) below.****Notwithstanding the foregoing, so long as no Event ofDefault has occurred and is continuing, those of such banks used by Borrowers’retail store location in Memphis, Tennessee shall remit the foregoing proceedsreceived by them to the Blocked Accounts on a weekly basis, instead of a dailybasis, provided, that, the aggregate sum of such proceeds held bythose banks shall not exceed Fifty Thousand Dollars ($50,000) at any time.  Such authorizations and directions shall notbe 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 “BlockedAccounts”), as Agent may specify, with such bank or banks as are acceptableto Agent into which Borrowers shall promptly deposit and direct their accountdebtors to directly remit all payments on Accounts and all payments constitutingproceeds of Inventory or other Collateral in the identical form in which suchpayments are made, whether by cash, check or other manner.  Each bank at which a Blocked Account isestablished shall enter into an agreement, in form and substance satisfactoryto Agent, providing (unless otherwise agreed to by Agent) that all itemsreceived or deposited in such Blocked Account are the Collateral of Agent andLenders, 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 fromtime to time on deposit therein and that the depository bank will wire, orotherwise transfer, in immediately available funds, on a daily basis, all fundsreceived or deposited into such Blocked Account to such bank account of Agentas Agent may from time to time designate for such purpose (the “PaymentAccount”).  Borrowers agree that allamounts deposited in the Blocked Accounts or other funds received and collectedby Agent or any Lender, whether as proceeds of Inventory, the collection ofAccounts or other Collateral or otherwise shall be the Collateral of Agent andLenders.

 

(b)                                 For purposes of calculating interest onthe Obligations, such payments or other funds received will be applied (conditionalupon final collection) to the Obligations one-half of one (1/2) Business Dayfollowing the date of receipt of immediately available funds by Agent in thePayment 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 paymentsor other funds if the sum was applied to the Obligations one (1) BusinessDay after receipt of immediately available funds by Lenders in the PaymentAccount).  For purposes of calculatingthe amount of the Revolving Loans available to Borrowers such payments will beapplied (conditional upon final collection) to the Obligations on the BusinessDay of receipt by Agent in the Payment Account,

 

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if such payments are received within sufficient time(in accordance with Agent’s usual and customary practices as in effect fromtime to time) to credit Borrowers’ loan account on such day, and if not, thenon the next Business Day.  In the eventthat 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 equivalentto the interest Lenders would have received on account of the above one-half ofone (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 astrustee 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/orproceeds of Accounts or from sales of Inventory or other Collateral which comeinto their possession or under their control and immediately upon receiptthereof, shall deposit or cause the same to be deposited in the BlockedAccounts, or remit the same or cause the same to be remitted, in kind, toAgent.  In no event shall any suchmonies, checks, notes, drafts or other payments be commingled with any Borrower’sown funds.  Borrowers agree to reimburseAgent and the Lenders on demand for any amounts owed or paid to any bank atwhich a Blocked Account is established or any other bank or person involved inthe transfer of funds to or from the Blocked Accounts arising out of Agent’s orany Lender’s payments to or indemnification of such bank or person, unless suchpayment or indemnification obligation of Agent or Lender was a result of Agent’sor such Lender’s gross negligence or willful misconduct.  The obligation of Borrowers to reimburseAgent and Lenders for such amounts pursuant to this Section 6.3 shall survivethe termination or non-renewal of this Agreement.

 

6.4                                 Payments.  AllObligations shall be payable to the Payment Account as provided in Section 6.3of this Agreement or such other place as Agent may designate from time totime.  Agent may apply payments receivedor collected from Borrowers or for the account of Borrowers (including, withoutlimitation, the monetary proceeds of collections or of realization upon anyCollateral) to such of the Obligations, whether or not then due, in such orderand manner as Agent determines; provided, that, so long as noEvent of Default has occurred and is continuing, proceeds generated in theordinary course of Borrowers’ business on Accounts or Inventory will not beapplied to any principal amount not yet due and payable on the Term Loan or tocontingent Obligations; and provided further, that, if an Eventof Default has occurred and is continuing, proceeds of Collateral shall beapplied to those Obligations owing under or in connection with this Agreementbefore being applied to any other Obligations except to the extent that Agentestablished (prior to the occurrence of such Event of Default) and ismaintaining 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 theother Financing Agreements may be charged directly to the loan account(s) ofBorrowers.  Borrowers shall make allpayments to Agents and the Lenders on the Obligations free and clear of, andwithout 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, orproceeds of Collateral applied to the payment of, any of the Obligations, Agentor any Lender is required to surrender or return such payment or proceeds toany Person for any reason, then the Obligations intended to be satisfied bysuch payment or proceeds shall be reinstated and continue and this Agreementshall continue in full force and effect as if such payment or proceeds had notbeen received by such Person.  Borrowersshall be

 

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

 

6.5                                 Taxes.

 

(a)                                  Any and allpayments by or on behalf of any Borrower or any Obligor hereunder and under anyother Financing Agreement shall be made, in accordance with Section 6.4 ofthis 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 anytransferee or assignee of such Lender, including any Participant, any suchtransferee or assignee being referred to as a “Transferee”) and (ii) franchiseor similar taxes imposed on or determined by reference to the net income of anyLender (or Transferee), in each case by the United States of America or by thejurisdiction under the laws of which such Lender (or Transferee) (A) isorganized or any political subdivision thereof or (B) has its applicablelending office located.  In addition,each Borrower agrees to pay to the relevant Governmental Authority, in accordancewith applicable law, any Other Taxes.

 

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

 

(i)                                     the sum payableshall be increased as necessary so that after making all required deductionsand withholdings (including deductions and withholdings applicable toadditional sums payable under this Section) such Lender (or Agent on behalf ofsuch Lender) receives an amount equal to the sum it would have received had nosuch deductions or withholdings been made;

 

(ii)                                  such Borroweror such Obligor shall make such deductions and withholdings;

 

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

 

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

 

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

 

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(d)                                 Borrowers willindemnify Agent and each Lender (or Transferee) for the full amount of Taxesand Other Taxes paid by Agent or such Lender (or Transferee, as the case maybe).  If Agent or such Lender (orTransferee) receives a refund in respect of any Taxes or Other Taxes for whichLender (or Transferee) has received payment from any Borrower or any Obligorhereunder, so long as no Default or Event of Default shall exist or haveoccurred and be continuing, Agent or such Lender (as the case may be) shallcredit to the loan account of Borrowers the amount of such refund plus anyinterest received (but only to the extent of indemnity payments made, oradditional amounts paid, by any Borrower or any Obligor under this Section 6.5with respect to the Taxes or Other Taxes giving rise to such refund).  If a Lender (or any Transferee) claims a taxcredit in respect of any Taxes for which it has been indemnified by Borrower orany Obligor pursuant to this Section 6.5, such Lender will apply theamount of the actual dollar benefit received by such Lender as a resultthereof, as reasonably calculated by Lender and net of all expenses relatedthereto, to the Loans.  If Taxes or OtherTaxes were not correctly or legally asserted, Agent or such Lender shall, uponBorrower’s request and at Borrowers’ expense, provide such documents toBorrower as Borrower may reasonably request, to enable Borrowers to contestsuch Taxes or Other Taxes pursuant to appropriate proceedings then available toBorrowers (so long as providing such documents shall not, in the good faithdetermination of Agent, have a reasonable likelihood of resulting in anyliability of Agent or any Lender).

 

(e)                                  In the eventany Transferee is organized under the laws of a jurisdiction other than theUnited 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) copiesof 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. Federalwithholding tax under Section 871(h) or 881(c) of the Code withrespect to payments of “portfolio interest”, a Form W-8, or any subsequentversions thereof or successors thereto (and, if such Non-U.S. Lender delivers aForm W-8, a certificate representing that such Non-U.S. Lender is not abank 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) ofthe Code) of any Borrower or any Obligor and is not a controlled foreigncorporation related to any Borrower or any Obligor (within the meaning of Section 864(d)(4) ofthe Code)), properly completed and duly executed by such Non-U.S. Lenderclaiming complete exemption from U.S. Federal withholding tax on payments byany Borrower or any Obligor under this Agreement and the other FinancingAgreements.  Such forms shall bedelivered by any Transferee that is a Non-U.S. Lender on or before the date itbecomes a party to this Agreement (or, in the case of a Transferee that is aParticipant, on or before the date such Participant becomes a Transfereehereunder) and on or before the date, if any, such Non-U.S. Lender changes itsapplicable lending office by designating a different lending office (a “NewLending Office”).  In addition, aNon-U.S. Lender shall upon written notice from Borrowers promptly deliver suchnew forms as are required by the Code or the regulations issued thereunder toclaim exemption from, or reduction in the rate of, U.S. Federal withholding taxupon the obsolescence or invalidity of any form previously delivered by suchNon-U.S. Lender.  Notwithstanding anyother provision of this Section 6.5(e), a Non-U.S. Lender shall not berequired to deliver any form pursuant to this Section 6.5(e) thatsuch Non-U.S. Lender is not legally able to deliver.

 

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(f)                                    Borrowers andObligors shall not be required to indemnify any Non-U.S. Lender or to pay anyadditional amounts to any Non-U.S. Lender, in respect of United States Federalwithholding tax pursuant to subsections (a) or (d) above to theextent that (i) the obligation to withhold amounts with respect to UnitedStates Federal withholding tax was applicable on the date such Non-U.S. Lenderbecame a party to this Agreement (or, in the case of a Transferee that is aParticipant, 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. Lenderdesignated such New Lending Office with respect to a Loan; provided, that,this subsection (f) shall not apply (A) to any Transferee or NewLending Office that becomes a Transferee or New Lending Office as a result ofan assignment, participation, transfer or designation made at the request ofany Borrower or any Obligor and (B) to the extent the indemnity payment oradditional amounts any Transferee, acting through a New Lending Office, wouldbe entitled to receive (without regard to this subsection (f)) do not exceedthe indemnity payment or additional amounts that the person making theassignment, participation or transfer to such Transferee making the designationof such New Lending Office, would have been entitled to receive in the absenceof such assignment, participation, transfer or designation or (ii) theobligation to pay such additional amounts would not have arisen but for afailure 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 theLetter of Credit Accommodations based upon telephonic or other instructionsreceived from anyone purporting to be an officer of a Borrower or otherauthorized person or, at the discretion of Agent or any Lender, if such Loansare necessary to satisfy any Obligations; provided, that,proceeds of Loans shall be remitted by Agent and the Lenders to accountsdesignated by Borrowers in writing, which accounts shall be accounts ofBorrowers unless otherwise agreed by Agent. All requests for Loans or Letter of Credit Accommodations hereundershall specify the date on which the requested advance is to be made or Letterof Credit Accommodations established (which day shall be a Business Day) andthe amount of the requested Loan. Requests received at or before 10:30 a.m.  (Los Angeles time) on any Business Day shallbe deemed to have been made as of such Business Day.  Requests received on any day that is not aBusiness Day or received after 10:30 a.m. (Los Angeles time) on any Business Day shall be deemed to have been madeas of the opening of business on the immediately following Business Day.  Subject to the terms and conditions of thisAgreement, Agent and the Lenders will make the Loans or commence arranging forthe Letter of Credit Accommodations (as requested by Borrowers) on the BusinessDay the request is deemed to have been made or such later Business Day as maybe specified by Borrowers.  All Loans andLetter of Credit Accommodations under this Agreement shall be conclusivelypresumed to have been made to, and at the request of and for the benefit of, Borrowerswhen deposited to the credit of Borrowers or otherwise disbursed or establishedin accordance with the instructions of Borrowers or in accordance with theterms and conditions of this Agreement.

 

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

 

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

 

6.8                                 Pro Rata Treatment.. Except to the extent otherwise provided in this Agreement:  (a) (i) the making and conversionof Revolving Loans shall be made among the Revolving Loan Lenders based ontheir respective Pro Rate Shares as to the Revolving Credit Loans, and (ii) themaking of Term Loans shall be made among the Term Loan Lenders based on theirrespective Pro Rata Shares as to the Term Loans; and (b) each payment onaccount of any Obligations to or for the account of one or more of Lenders inrespect of any Obligations due on a particular day shall be allocated among theLenders entitled to such payments based on their respective Pro Rata Shares andshall 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 counterclaimany Agent or Lender may otherwise have, each Lender shall be entitled, at itsoption (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 itsoffices, in dollars or in any other currency, against any principal of orinterest on any Loans owed to such Lender or any other amount payable to suchLender hereunder, that is not paid when due (regardless of whether such balancesare then due to Borrower), in which case it shall promptly notify Borrowers andAgent thereof; provided, that, such Lender’s failure to give suchnotice shall not affect the validity thereof.

 

(b)                                 Agent andLenders agree that no Lender shall, except upon the prior written consent ofAgent, exercise any right of setoff, banker’s lien or counterclaim such Lendermay have with respect to any property held by such Lender for the account ofany Borrower.  If any Lender (including Agent) shall obtainfrom any Borrower payment of any principal of or interest on any Loan owing toit or payment of any other amount under this Agreement or any other FinancingAgreement through the exercise (inaccordance with the terms hereof) of any right of setoff, banker’s lienor counterclaim or similar right or otherwise (other than from Agent asprovided herein), and, as a result of such payment, such Lender shall havereceived more than its Pro Rata Share of the principal of the Loans or morethan its share of such other amounts then due hereunder or thereunder by suchBorrower to such Lender than the percentage thereof received by any otherLender, it shall promptly pay to Agent, for the benefit of Lenders, the amountof such excess and simultaneously purchase from such other Lenders aparticipation in the Loans or such other amounts, respectively, owing to suchother Lenders (or such interest due thereon, as the case may be) in suchamounts, and make such other adjustments from time to time as shall beequitable, to the end that all Lenders shall share the benefit of such excesspayment (net of any expenses that may be incurred by such Lender in obtainingor preserving

 

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

 

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

 

(d)                                 Nothing contained herein shall requireany Lender to exercise any such right or shall affect the right of any Lenderto exercise, and retain the benefits of exercising, any such right with respectto 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 ofa setoff to which this Section applies, such Lender shall, to the extentpracticable, assign such rights to Agent for the benefit of Lenders and, in anyevent, exercise its rights in respect of such secured claim in a mannerconsistent with the rights of Lenders entitled under this Section to sharein the benefits of any recovery on such secured claim.

 

6.10                           Settlement Procedures.

 

(a)                                  In order to administer the creditfacility provided hereunder in an efficient manner and to minimize the transferof funds between Agent and Lenders, Agent may, subject to the terms of thisSection, make available, on behalf of Lenders, the full amount of the Loansrequested or charged to Borrowers’ loan account(s) or otherwise to beadvanced by Lenders pursuant to the terms hereof, without any requirement ofprior notice to Lenders of the proposed Loans.

 

(b)                                 With respect to all Revolving Loans madeby Agent on behalf of Revolving Loan Lenders as provided in this Section, theamount of each Revolving Loan Lender’s Pro Rata Share of the outstandingRevolving Loans shall be computed weekly, and shall be adjusted upward ordownward on the basis of the amount of the outstanding Revolving Loans as of5:00 p.m. Los Angeles time on the Business Day immediately preceding thedate of each settlement computation; provided, that, Agentretains the absolute right at any time or from time to time to make the abovedescribed adjustments at intervals more frequent than weekly, but in no eventmore than twice in any week.  Agent shalldeliver to each of the Revolving Loan Lenders after the end of each week, or atsuch lesser period or periods as Agent shall determine, a summary statement ofthe amount of outstanding Revolving Loans for such period (such week or lesserperiod or periods being hereinafter referred to as a “Settlement Period”).  If the summary statement is sent by Agent andreceived 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 inthis Section by no later than 2:00 p.m. Los Angeles time on the nextBusiness Day following the date of receipt. If, as of the end of any Settlement Period, the amount of a Lender’s ProRata Share of the outstanding Revolving Loans is more than such Lender’s ProRata Share of the outstanding Revolving Loans as of the end of the previousSettlement Period, then such Lender

 

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shall forthwith (but in no event later than the timeset forth in the preceding sentence) transfer to Agent by wire transfer inimmediately available funds the amount of the increase.  Alternatively, if the amount of a Lender’sPro Rata Share of the outstanding Revolving Loans in any Settlement Period isless than the amount of such Lender’s Pro Rata Share of the outstandingRevolving Loans for the previous Settlement Period, Agent shall forthwithtransfer to such Lender by wire transfer in immediately available funds theamount of the decrease.  The obligationof each of the Revolving Loan Lenders to transfer such funds and effect suchsettlement shall be irrevocable and unconditional and without recourse to or warrantyby Agent.  Each of Agent and RevolvingLoan Lenders agrees to mark its books and records at the end of each SettlementPeriod to show at all times the dollar amount of its Pro Rate Share of theoutstanding Revolving Loans and Letter of Credit Accommodations.  Each Revolving Loan Lender shall only beentitled to receive interest on its Pro Rata Share of the Loans to the extentsuch Loans have been funded by such Lender. Because the Agent on behalf of Revolving Loan Lenders may be advancingand/or may be repaid Revolving Loans prior to the time when Lenders willactually advance and/or be repaid such Revolving Loans, interest with respectto Revolving Loans shall be allocated by Agent in accordance with the amount ofRevolving Loans actually advanced by and repaid to each Revolving Loan Lenderand the Agent and shall accrue from and including the date such Loans are soadvanced to but excluding the date such Loans are either repaid by any Borroweror actually settled with the applicable Lender as described in this Section.

 

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

 

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

 

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

 

(e)                                  Nothing in this Section or elsewherein this Agreement or the other Financing Agreements shall be deemed to requireAgent to advance funds on behalf of any Lender or to relieve any Lender fromits obligation to fulfill its Commitment hereunder or to prejudice any rightsthat any Borrower may have against any Lender as a result of any default by anyLender 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 formsatisfactory to Agent:  (a) on aweekly basis, (i) schedules of sales made, credits issued and cashreceived, which, after the occurrence of an Event of Default or the filing of abankruptcy petition by or against any Borrower, and for so long as such Eventof Default is continuing or such bankruptcy petition has not been dismissed,shall separately account for sales of Inventory subject to the security interestof IBM Credit Corporation, (ii) borrowing base certificates, (iii) schedulesof Inventory (net of fixed assets) separately identifying Inventory by vendor,type, location and age, with perpetual inventory reports, and (iv) schedulesof accounts payable and accrued accounts payable to any vendor holding asecurity interest in any property of the Borrowers; (b) on a monthlybasis, on or before the tenth (10th) Business Day of such month for theimmediately preceding month or more frequently as Agent may request, (i) agingsof accounts receivable, (ii) agings of accounts payable, accrued accountspayable, lease payables and other payables, and (iii) a certificate froman authorized officer of Borrowers representing that each Borrower has madepayment of sales and use taxes during such month or, at Agent’s request, otherevidence of such payment; (c) upon Agent’s request, (i) copies ofcustomer statements and credit memos, remittance advices and reports, andcopies of deposit slips and bank statements, (ii) copies of shipping anddelivery documents, and (iii) copies of purchase orders, invoices anddelivery documents for Inventory and Equipment acquired by Borrowers; and (d) suchother reports as to the Collateral or other property which is security for the Obligationsas Agent shall request from time to time. Borrowers shall provide Agent, as soon as available, but in any eventnot later than five (5) days after receipt by Borrowers, with allstatements received from Apple Computer and any other vendor who may hold asecurity interest

 

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

 

7.2                                 Accounts Covenants.

 

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

 

(b)                                 Each Borrower shall notify Agent promptlyof:  (i) any material delay in anyBorrower’s performance of any of its obligations to any account debtor or theassertion of any claims, offsets, defenses or counterclaims by any accountdebtor, or any disputes with account debtors, or any settlement, adjustment orcompromise thereof, (ii) all material adverse information relating to thefinancial condition of any account debtor and (iii) any event orcircumstance which, to Borrowers’ knowledge would cause Agent to consider anythen existing Accounts as no longer constituting Eligible Accounts.  No credit, discount, allowance or extensionor 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 courseof Borrowers’ business in accordance with its most recent past practices andpolicies.  So long as no Event of Defaultexists or has occurred and is continuing, Borrowers may settle, adjust orcompromise any claim, offset, counterclaim or dispute with any account debtor,Credit Card Issuer or Credit Card/Check Processor in the ordinary course ofBorrowers’ business in accordance with their most recent past practices andpolicies.  At any time that an Event ofDefault 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 CreditCard/Check Processor or grant any credits, discounts or allowances.  Each Borrower shall notify Agent promptly of (i) anynotice of a material default by any Borrower under any of the Credit Card/CheckProcessing Agreements or of any default which might result in the Credit CardIssuer or Credit Card/Check Processor ceasing to make payments or suspendingpayments to Borrowers, (ii) any notice from any Credit Card Issuer orCredit Card/Check Processor that such person is ceasing or suspending, or willcease or suspend, any present or future payments due or to become due toBorrowers from such person, or that such person is terminating or willterminate any of the Credit Card/Check Processing Agreements, and (iii) thefailure of any Borrower to comply with any material terms of the CreditCard/Check Processing Agreements or any terms thereof which might result in theCredit Card Issuer or Credit Card/Check Processor ceasing or suspendingpayments to Borrowers.

 

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

 

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

 

(d)                                 With respect to each Account and CreditCard/Check Processing Receivable:  (i) theamounts shown on any invoice delivered to Agent or schedule thereof deliveredto Agent shall be true and complete, (ii) no payments shall be madethereon except payments delivered to Agent pursuant to the terms of thisAgreement, (iii) no credit, discount, allowance or extension or agreementfor any of the foregoing shall be granted to any account debtor, Credit CardIssuer or Credit Card/Check Processor except as reported to Agent in accordancewith this Agreement and except for credits, discounts, allowances or extensionsmade or given in the ordinary course of Borrowers’ business in accordance withpractices and policies previously disclosed to Agent, (iv) there shall beno setoffs, deductions, contras, defenses, counterclaims or disputes existingor asserted with respect thereto except as reported to Agent in accordance withthe terms of this Agreement, (v) none of the transactions giving risethereto will violate any applicable State or Federal Laws or regulations, alldocumentation relating thereto will be legally sufficient under such laws andregulations and all such documentation will be legally enforceable inaccordance with its terms.

 

(e)                                  Agent shall have the right at any time ortimes, in Agent’s name or in the name of a nominee of Agent, to verify thevalidity, amount or any other matter relating to any Account, Credit Card/CheckProcessing Receivable or other Collateral, by mail, telephone, facsimiletransmission or otherwise.

 

(f)                                    Borrowers shall deliver or cause to bedelivered to Agent, with appropriate endorsement and assignment, with fullrecourse to Borrowers, all chattel paper and instruments which Borrowers nowown 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 anEvent of Default exists or has occurred, (i) notify any or all accountdebtors, Credit Card Issuers or Credit Card/Check Processors that the Accountsand Credit Card/Check Processing Receivables have been assigned to Agent andthat Agent and the Lenders have a security interest therein and Agent maydirect any or all account debtors, Credit Card Issuers or Credit Card/CheckProcessors to make payments of Accounts and Credit Card/Check ProcessingReceivables directly to Agent, (ii) extend the time of payment of,compromise, settle or adjust for cash, credit, return of merchandise orotherwise, and upon any terms or conditions, any and all Accounts and CreditCard/Check

 

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Processing Receivables or other obligations includedin the Collateral and thereby discharge or release the account debtor, CreditCard Issuer, Credit Card/Check Processor or any other party or parties in anyway liable for payment thereof without affecting any of the Obligations, (iii) demand,collect or enforce payment of any Accounts and Credit Card/Check ProcessingReceivables or such other obligations, but without any duty to do so, and Agentshall not be liable for its failure to collect or enforce the payment thereofor for the negligence of its agents or attorneys with respect thereto and (iv) takewhatever other action Agent may deem necessary or desirable for the protectionof its interests.  At any time that anEvent 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 theAccounts due from such account debtor and such other obligations have beenassigned to Agent and are payable directly and only to Agent and Borrowersshall deliver to Agent such originals of documents evidencing the sale anddelivery of goods or the performance of services giving rise to any Accounts asAgent may require.

 

7.3                                 Inventory Covenants. With respect to the Inventory:

 

(a)                                  Borrowers shall at all times maintaininventory records reasonably satisfactory to Agent, keeping correct andaccurate records itemizing and describing the kind, type, quality and quantityof Inventory, Borrowers’ cost therefor and daily withdrawals therefrom and additionsthereto;

 

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

 

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

 

(d)                                 upon Agent’s request, Borrowers shall, attheir expense, no more than three (3) times in any twelve (12) monthperiod as to desktop appraisals, and no more than one (1) time in anytwelve (12) month period as to full appraisals, but at any time or times asAgent may request upon the occurrence and during the continuance of an Event ofDefault, deliver or cause to be delivered to Agent written reports orappraisals as to the Inventory in form, scope and methodology acceptable toAgent and addressing such issues as Agent may require in its commerciallyreasonable judgment, issued by an appraiser acceptable to Agent, and addressedto Agent and Lenders or upon which Agent and Lenders are expressly permitted torely (with the understanding that Agent may revise the definition of ‘EligibleInventory’ hereunder or establish Availability Reserves as Agent may deemadvisable in its sole discretion based upon the results of such updatedappraisals);

 

(e)                                  Borrowers shall produce, use, store andmaintain the Inventory, with all reasonable care and caution and in accordancewith applicable standards of any insurance and in conformity with applicablelaws (including, but not limited to, the requirements of the Federal Fair LaborStandards Act of 1938, as amended and all rules, regulations and orders relatedthereto);

 

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(f)            Borrowers assume all responsibility andliability arising from or relating to the production, use, sale or otherdisposition of the Inventory;

 

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

 

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

 

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

 

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

 

7.4           Equipment Covenants.  With respectto the Equipment:

 

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

 

(b)           Borrowers shall keep the Equipment ingood order, repair, running and marketable condition (ordinary wear and tearexcepted);

 

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

 

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

 

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

 

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

 

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

 

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7.5           Power of Attorney. Each Borrower hereby irrevocably designates and appoints Agent (and allpersons designated by Agent) as such Borrower’s true and lawfulattorney-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 iscontinuing:

 

(i)            demand payment on Accounts, CreditCard/Check Processing Receivables or other proceeds of Inventory or otherCollateral;

 

(ii)           enforce payment of Accounts, CreditCard/Check Processing Receivables or other Obligations included in theCollateral by legal proceedings or otherwise;

 

(iii)          exerciseall of such Borrower’s rights and remedies to collect any Account, CreditCard/Check Processing Receivables or other proceeds of Inventory or otherCollateral;

 

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

 

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

 

(vi)          discharge and release any Accounts andCredit Card/Check Processing Receivables or other Obligations included in theCollateral;

 

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

 

(viii)        notifythe post office authorities to change the address for delivery of such Borrower’smail to an address designated by Agent, and open and dispose of all mailaddressed to such Borrower, provided, that, any such mailreceived by Agent that does not constitute checks or other items of paymentshall be forwarded by Agent to such Borrower promptly after receipt by Agent;and

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)           sign such Borrower’s name on anyverification of Accounts or Credit Card/Check Processing Receivables andnotices thereof to account debtors, Credit Card Issuers or Credit Card/CheckProcessors; and

 

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

 

Each Borrower hereby releases Agent and each Lender and each of theirrespective officers, employees and designees from any liabilities arising fromany act or acts under this power of attorney and in furtherance thereof,whether of omission or commission, except as a result of the gross negligenceor willful misconduct of Agent’s or such Lender’s or their respective officers,employees or designees as determined pursuant to a final non-appealable orderof 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 anyagreement with a third party or pay or bond on appeal any judgment enteredagainst any Borrower, (b) discharge taxes, liens, security interests orother encumbrances at any time levied on or existing with respect to theCollateral and (c) pay any amount, incur any expense or perform any actwhich, in Agent’s judgment, is necessary or appropriate to preserve, protect,insure or maintain the Collateral and the rights of Agent and Lenders withrespect thereto.  Agent and Lenders mayadd any amounts so expended to the Obligations and charge Borrowers’ accounttherefor, such amounts to be repayable by Borrowers on demand.  Agent and Lenders shall be under noobligation 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 byAgent or any Lender under this Section 7.6 shall be without prejudice toany 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 ofBorrowers, 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 duringthe continuance of an Event of Default, (a) Agent or its designee shallhave complete access to all of Borrowers’ premises during normal business hoursand after two (2) Business Days prior notice to Borrowers, or at any timeand without notice to Borrowers if an Event of Default exists or has occurredand is continuing, for the purposes of inspecting, verifying and auditing theCollateral and all of Borrowers’ books and records, including, withoutlimitation, the Records, and (b) Borrowers shall promptly furnish to Agentsuch copies of such books and records or extracts therefrom as Agent mayreasonably request, and (c)Agent may use during normal business hours such of

 

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

 

SECTION 8. REPRESENTATIONS AND WARRANTIES.

 

Each Borrower hereby represents and warrants to Agent and Lenders thefollowing (which shall survive the execution and delivery of this Agreement),the truth and accuracy of which are a continuing condition of the making ofLoans 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 organizedand in good standing under the laws of its state of incorporation and is dulyqualified as a foreign corporation and in good standing in all states or otherjurisdictions where the nature and extent of the business transacted by it orthe ownership of assets makes such qualification necessary, except for thosejurisdictions in which the failure to so qualify would not have a materialadverse effect on such Borrower’s financial condition, results of operation orbusiness or the rights of Agent or any Lender in or to any of theCollateral.  The execution, delivery andperformance of this Agreement, the other Financing Agreements to which any Borroweris a party and the transactions contemplated hereunder and thereunder are allwithin such Borrower’s corporate or company powers, have been duly authorizedand are not in contravention of law or the terms of such Borrower’s certificateof incorporation or formation, by-laws or operating agreement, or otherorganizational documentation, or any indenture, agreement or undertaking towhich such Borrower is a party or by which such Borrower or its property arebound.  This Agreement and the otherFinancing Agreements to which any Borrower is a party constitute legal, validand binding obligations of such Borrower enforceable in accordance with theirrespective terms.  Borrowers do not haveany subsidiaries except as set forth on the Information Certificates.

 

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

 

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

 

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owners and/or operators thereof and, to the best ofBorrowers’ 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 theratable benefit of Lenders, under this Agreement and the other FinancingAgreements to which any Borrower is a party constitute valid and perfectedfirst priority liens and security interests in and upon the Collateral to whichsuch Borrower now has or hereafter acquires rights, subject only to the liensindicated on Schedule 8.4 hereto and the other liens permitted under Section 9.8hereof.  Each Borrower has good andmarketable 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 orpermitted under Section 9.8 hereof.

 

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

 

8.6           Litigation.  Except as setforth on the Information Certificates, there is no present investigation by anygovernmental agency pending, or to the Borrowers’ actual knowledge threatened,against or affecting any Borrower, its assets or business and there is noaction, suit, proceeding or claim by any Person pending, or to the Borrowers’actual knowledge threatened, against any Borrower or its assets or goodwill, oragainst or affecting any transactions contemplated by this Agreement, which ifadversely determined against Borrowers would result in any material adversechange in the assets or business of Borrowers or would impair the ability ofany Borrower to perform its obligations hereunder or under any of the other FinancingAgreements to which it is a party or of Agent or any Lender to enforce anyObligations or realize upon a material portion of the Collateral.

 

8.7           Compliance with Other Agreements andApplicable Laws.  Each Borrower is not in default in anymaterial respect under, or in violation in any material respect of any of theterms of, any agreement, contract, instrument, lease or other commitment towhich it is a party or by which it or any of its assets are bound and eachBorrower is in compliance in all material respects with all applicableprovisions of laws, rules, regulations, licenses, permits, approvals and ordersof any foreign, Federal, State or local governmental authority, except withrespect to the annual reporting obligations imposed by Sections 103 and 104 ofERISA and Section 6039D of the Code with respect to the Plans (as definedin Section 8.10(a) hereof), as to which obligations Borrowers shallcomply promptly.

 

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

 

8.9           Environmental Compliance.

 

(a)           Except as set forth on Schedule 8.9hereto, each Borrower has not generated, used, stored, treated, transported,manufactured, handled, produced or disposed of any Hazardous Materials, on oroff its premises (whether or not owned by it) in any manner which at any timeviolates any applicable Environmental Law or any license, permit, certificate,approval or similar authorization thereunder and the operations of Borrowerscomply 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 8.9hereto, there has been no investigation, proceeding, complaint, order,directive, claim, citation or notice by any governmental authority or any otherperson 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 anyEnvironmental Law by Borrowers or the release, spill or discharge, threatenedor actual, of any Hazardous Material or the generation, use, storage,treatment, transportation, manufacture, handling, production or disposal of anyHazardous Materials or any other environmental, health or safety matter, whichaffects any Borrower or its business, operations or assets or any properties atwhich such Borrower has transported, stored or disposed of any HazardousMaterials.

 

(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 ordisposal of any Hazardous Materials.

 

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

 

8.10         Employee Benefits.

 

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

 

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pursuant to Section 502(i) of ERISA or a taximposed by Section 4975 of the Code and has corrected, or undertakenreasonable efforts to promptly correct, any such transactions it has identifiedduring the course of routine plan administration.

 

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

 

(c)           Full payment has been made of all amountswhich Borrowers or any of their ERISA Affiliates are required under Section 302of ERISA and Section 412 of the Code to have paid under the terms of eachemployee pension benefit plan as contributions to such plan as of the last dayof the most recent fiscal year of such plan ended prior to the date hereof, andno accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412of the Code), whether or not waived, exists with respect to any employeepension benefit plan, including any penalty or tax described in Section 8.10(a) hereofand any deficiency with respect to vested accrued benefits described in Section 8.10(c) hereof.

 

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

 

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

 

8.11         Year 2000 Compliance. Borrowers and any business in which any Borrower holds a substantialinterest and all customers, suppliers and vendors that are material toBorrowers’ business are Year 2000 Compliant. As used herein, “Year 2000 Compliant” shall mean, in regard toany entity, that all software, hardware, firmware, equipment, goods or systemsutilized by or material to the business operations or financial condition ofsuch entity, are properly performing date sensitive functions during and afterthe year 2000.  Borrowers shall, immediatelyupon request, provide to Agent and Lenders such certifications or otherevidence of Borrowers’ compliance with the terms hereof as Agent and Lendersmay from time to time require.

 

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

 

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any material fact necessary in order to make suchinformation not misleading.  No event orcircumstance has occurred which has had or could reasonably be expected to havea material adverse affect on the business or assets of Borrowers, which has notbeen 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 ofthe other Financing Agreements shall survive the execution and delivery of thisAgreement and shall be deemed to have been made again to Agent and Lenders onthe date of each additional borrowing or other credit accommodation hereunderand shall be conclusively presumed to have been relied on by Agent and Lendersregardless of any investigation made or information possessed by Agent or anyLender.  The representations andwarranties set forth herein shall be cumulative and in addition to any otherrepresentations or warranties which Borrowers shall now or hereafter give, orcause 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, forceand effect its corporate existence and rights and franchises with respectthereto and maintain in full force and effect all permits, licenses,trademarks, trade names, approvals, authorizations, leases and contractsnecessary to carry on the business as presently or proposed to beconducted.  Each Borrower shall giveAgent thirty (30) days prior written notice of any proposed change in itscorporate name, which notice shall set forth the new name and such Borrowershall deliver to Agent a copy of the amendment to the Certificate ofIncorporation of such Borrower providing for the name change certified by theSecretary of State of the jurisdiction of incorporation of such Borrower assoon as it is available.

 

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

 

9.3           Compliance with Laws, Regulations, Etc.

 

(a)           Each Borrower shall, at all times, complyin all material respects with all laws, rules, regulations, licenses, permits,approvals and orders applicable to it and duly observe all requirements of anyFederal, State or local governmental authority, including, without limitation,the Employee Retirement Security Act of 1974, as amended, the OccupationalSafety and Hazard Act of 1970, as amended, the Fair Labor Standards Act of1938, as amended, and all statutes, rules, regulations, orders, permits andstipulations relating to environmental pollution and employee health andsafety, including, without limitation, all of the Environmental Laws.

 

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(b)           Borrowers shall take prompt andappropriate action to respond to any of Borrowers’ non-compliance (to theextent Borrowers have knowledge thereof or would have knowledge thereof upondue inquiry) with any of the Environmental Laws and shall report to Agent onsuch response.

 

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

 

(i)            the occurrence of any event involving therelease, spill or discharge, threatened or actual, of any Hazardous Material byany 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 ofany Environmental Law by any Borrower;

 

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

 

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

 

(D)          any other environmental, health or safetymatter, which could have a material adverse effect upon any Borrower or itsbusiness, operations or assets or any properties at which any Borrowertransported, stored or disposed of any Hazardous Materials.

 

(d)           Borrowers shall indemnify and holdharmless Agent, Lenders, and their respective directors, officers, employees,agents, invitees, representatives, successors and assigns, from and against anyand all losses, claims, damages, liabilities, costs, and expenses (includingattorneys’ fees and legal expenses) directly or indirectly arising out of orattributable to the use, generation, manufacture, reproduction, storage, release,threatened release, spill, discharge, disposal or presence of a HazardousMaterial by any Borrower or upon any of its premises, including, withoutlimitation, the costs of any required or necessary repair, cleanup or otherremedial work with respect to any property of such Borrower and the preparationand implementation of any closure, remedial or other required plans.  All representations, warranties, covenantsand indemnifications in this Section 9.3 shall survive the payment of theObligations and the termination or non-renewal of this Agreement.

 

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

 

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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 orassets, except for taxes the validity of which are being contested in goodfaith by appropriate proceedings diligently pursued and available to suchBorrower and with respect to which adequate reserves have been set aside on itsbooks.  Borrowers shall be liable for anytax or penalties imposed on Agent or any Lender as a result of the financingarrangements provided for herein and Borrowers agree to indemnify and holdAgent and Lenders harmless with respect to the foregoing, and to repay to Agentand Lenders on demand the amount thereof, and until paid by Borrowers suchamount shall be added and deemed part of the Loans, provided, that,nothing contained herein shall be construed to require Borrowers to pay anyincome or franchise taxes attributable to the income of Agent or any Lenderfrom any amounts charged or paid hereunder to Agent or any Lender.  The foregoing indemnity shall survive thepayment of the Obligations and the termination or non-renewal of thisAgreement.

 

9.5           Insurance.  Borrowersshall, at all times, maintain with financially sound and reputable insurersinsurance with respect to the Collateral against loss or damage and all otherinsurance of the kinds and in the amounts customarily insured against orcarried by corporations of established reputation engaged in the same orsimilar businesses and similarly situated. Said policies of insurance shall be satisfactory to Agent as to form,amount and insurer.  Borrowers shallfurnish certificates, policies or endorsements to Agent as Agent shall requireas proof of such insurance, and, if Borrowers fail to do so, Agent isauthorized, but not required, to obtain such insurance at the expense ofBorrowers.  All policies shall providefor at least thirty (30) days prior written notice to Agent of any cancellationor reduction of coverage and that Agent may act as attorney for Borrowers inobtaining, and at any time an Event of Default exists or has occurred and iscontinuing, adjusting, settling, amending and canceling such insurance.  Borrowers shall cause Agent to be named as aloss payee and an additional insured (but without any liability for anypremiums) under such insurance policies and Borrowers shall obtainnon-contributory lender’s loss payable endorsements to all insurance policiesin form and substance satisfactory to Agent. Such lender’s loss payable endorsements shall specify that the proceedsof such insurance shall be payable to Agent, for the ratable benefit ofLenders, as its interests may appear and further specify that Agent shall bepaid regardless of any act or omission by Borrowers or any of theiraffiliates.  Subject to the provisions ofthe deed of trust executed by Creative Computers in favor of Agent, at itsoption, Agent may apply any insurance proceeds received by Agent at any time tothe cost of repairs or replacement of Collateral and/or to payment of theObligations, whether or not then due, in any order and in such manner as Agentmay determine or hold such proceeds as cash collateral for the Obligations.

 

9.6           Financial Statements and Other Information.

 

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

 

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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 endof and through such fiscal month, all in reasonable detail, which financialstatements shall be prepared honestly and in good faith (provided that wheresuch fiscal month does not end on the last day of a fiscal quarter, Agentunderstands that such financial statements are based upon information availableat the time of preparation of such financial statements and may therefore not beaccurate or complete), and where such fiscal month ends on the last day of afiscal quarter, shall fairly present the financial position and the results ofthe operations of Borrowers and their subsidiaries, provided, that,if the average daily Excess Availability during any fiscal quarter (asdetermined on the dates on which Agent approves the weekly borrowing basecertificates 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 ofDefault has occurred and is continuing, then during the immediately followingfiscal quarter, such financial statements may be provided on a fiscal quarterbasis on or before the earlier of the forty-fifth (45th) day  after the end of such fiscal quarter or thedate on which Borrowers file their Form 10Q with the Securities andExchange Commission for such fiscal quarter, and (ii) within ninety (90)days after the end of each fiscal year, audited consolidated and consolidatingfinancial statements of Borrowers and their subsidiaries (including in eachcase balance sheets, statements of income and loss, statements of cash flow andstatements of shareholders’ equity), and the accompanying notes thereto, all inreasonable detail, fairly presenting the financial position and the results ofthe operations of Borrowers and their subsidiaries as of the end of and forsuch fiscal year, together with the opinion of independent certified publicaccountants, which accountants shall be an independent accounting firm selectedby Borrowers and reasonably acceptable to Agent, that such financial statementshave been prepared in accordance with GAAP, and present fairly the results ofoperations and financial condition of Borrowers and their subsidiaries as ofthe end of and for the fiscal year then ended.

 

(b)           Borrowers shall promptly notify Agent inwriting of the details of (i) any loss, damage, investigation, action,suit, proceeding or claim which involves an amount in excess of Five HundredThousand Dollars ($500,000) and relates to the Collateral or any other propertywhich is security for the Obligations or which would result in any materialadverse change in any Borrower’s business, properties, assets, goodwill orcondition, financial or otherwise and (ii) the occurrence of any Event ofDefault 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 thesending or filing thereof furnish or cause to be furnished to Agent copies ofall financial reports which Borrowers send to their stockholders generally andcopies of all reports and registration statements which Borrowers file with theSecurities and Exchange Commission, any national securities exchange or theNational Association of Securities Dealers, Inc.

 

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

 

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below, to any participant or assignee or prospectiveparticipant or assignee.  Borrowershereby irrevocably authorize and direct all accountants or auditors to deliverto Agent, at Borrowers’ expense, copies of the financial statements ofBorrowers and any reports or management letters prepared by such accountants orauditors on behalf of Borrowers and to disclose to Agent such information asthey may have regarding the business of Borrowers.  Any documents, schedules, invoices or otherpapers delivered to Agent may be destroyed or otherwise disposed of by Agentone (1) year after the same are delivered to Agent, except as otherwisedesignated by Borrowers to Agent in writing.

 

9.7           Sale of Assets, Consolidation, Merger,Dissolution, Etc.  Each Borrower shall not, directly orindirectly, (a) merge into or with or consolidate with any other Person orpermit 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 otherBorrower upon not less than twenty (20) days prior written notice to Agent, or (b) unlessotherwise consented to by Agent in writing, which consent shall not beunreasonably withheld or delayed, sell, assign, lease, transfer, abandon orotherwise dispose of any capital stock of a subsidiary or indebtedness to anyother Person or any of its assets to any other Person (except for (i) salesof Inventory in the ordinary course of business, (ii) the disposition ofworn-out or obsolete Equipment or Equipment no longer used in the business ofsuch Borrower so long as (A) if an Event of Default exists or has occurredand is continuing, any proceeds are paid to Agent, for the ratable benefit ofLenders and (B) such sales for all Borrowers do not involve Equipmenthaving 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 inexcess of Two Million Dollars ($2,000,000) for all such Equipment disposed ofin any fiscal year of Borrowers and (iii) a sale of the Real Estate for asales price of not less than Two Million Dollars ($2,000,000) cash, so long asno Event of Default has occurred and is continuing or would result from suchsale, and provided that the sale proceeds are applied first to pay in full theoutstanding principal amount of the Term Loan, together with all accrued butunpaid interest thereon, and any balance is applied to the outstandingprincipal amount of the Revolving Loans), or (c) form or acquire anysubsidiaries (except as provided in Section 9.10(d) below), or (d) windup, liquidate or dissolve or (e) agree to do any of the foregoing.  Notwithstanding the foregoing, the assets orcapital stock of ecost may be sold, transferred or otherwise disposed, providedthat 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 hasoccurred and is continuing or would result therefrom.

 

9.8           Encumbrances. Borrowers shall not create, incur, assume or suffer to exist anysecurity interest, mortgage, pledge, lien, charge or other encumbrance of anynature whatsoever on any of their assets or properties, including, withoutlimitation, the Collateral, except:

 

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

 

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

 

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(c)           security deposits in the ordinary courseof business;

 

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

 

(i)            such liens secure indebtedness which isnot overdue; or

 

(ii)           such liens secure indebtedness relatingto claims or liabilities which are fully insured and being defended at the solecost and expense and at the sole risk of the insurer (subject to applicabledeductibles) or being contested in good faith by appropriate proceedings diligentlypursued and available to Borrowers, in each case prior to the commencement offoreclosure or other similar proceedings and with respect to which adequatereserves have been set aside on their books;

 

(e)           zoning restrictions, easements, licenses,covenants and other restrictions affecting the use of real property which donot interfere in any material respect with the use of such real property orordinary conduct of the business of Borrowers as presently conducted thereon ormaterially impair the value of the real property which may be subject thereto;

 

(f)            purchase money security interests inEquipment (including capital leases) and purchase money mortgages on realestate so long as such security interests and mortgages do not apply to anyproperty of Borrowers other than the Equipment or real estate so acquired andany additions or accessions thereto, and the indebtedness secured thereby doesnot exceed the cost of the Equipment or real estate so acquired, as the casemay be; and

 

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

 

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

 

(a)           the Obligations;

 

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

 

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

 

(d)           obligations or indebtedness set forth on Schedule9.9 hereto; provided, that, (i) Borrowers may only makeregularly scheduled payments of principal and interest in respect of suchindebtedness in accordance with the terms of the agreement or instrumentevidencing or giving rise to such indebtedness as in effect on the date hereof,(ii) Borrowers shall

 

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not, directly or indirectly, (A) amend, modify,alter or change the terms of such indebtedness or any agreement, document orinstrument related thereto as in effect on the date hereof, or (B) exceptas otherwise permitted under this Agreement, redeem, retire, defease, purchaseor otherwise acquire such indebtedness, or set aside or otherwise deposit orinvest any sums for such purpose, and (iii) Borrowers shall furnish toAgent all notices or demands in connection with such indebtedness eitherreceived 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 anotherBorrower;

 

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

 

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

 

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

 

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

 

(b)           investments in:

 

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

 

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

 

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

 

(c)           the guarantees set forth in theInformation Certificates;

 

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

 

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

 

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

 

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

 

(iii)          Asof the date of the acquisition of the subject Target and any related Targets orthe making of the subject Subsidiary Investments (as applicable) and aftergiving effect thereto, the Excess Availability would not be less than TenMillion Dollars ($10,000,000);

 

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

 

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

 

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

 

(vii)         NoEvent of Default, or event that with notice or lapse of time or both wouldconstitute an Event of Default, shall have occurred and be continuing or wouldresult from the acquisition of the subject Target or the making of the subjectSubsidiary Investments (as applicable);

 

(viii)        Borrowersshall give prior written notice to Agent of the acquisition of the subjectTarget or the making of the subject Subsidiary Investments as soon as

 

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

 

(ix)           Agent shall have received true, correctand complete copies of the acquisition agreement(s) for the subject Targetand all exhibits, schedules, documents and other agreements relating thereto,together with such financial and other information concerning the subjectTarget 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), asrequired by Section 9.17 hereof.

 

AtBorrowers’ request, the subject Target or the Person acquiring the subjectTarget or the subject New Subsidiary (as applicable) may be added as a borrowerhereunder, but only at the sole election of Agent.  Regardless of whether the subject Target orthe Person acquiring the subject Target or the subject New Subsidiary (asapplicable) is or becomes a borrower hereunder, and regardless of whether theAccounts and Inventory of the subject Target or New Subsidiary qualify underthe definition of “Eligible Accounts” and “Eligible Inventory” in thisAgreement, the inclusion of such Accounts and Inventory in Eligible Accountsand Eligible Inventory shall be subject to:

 

(xi)           Agent’s receipt and approval of fullwritten appraisals as to the inventory of the subject Target or New Subsidiaryin form, scope and methodology reasonable acceptable to Agent and by anappraiser reasonably acceptable to Agent, addressed to Agent, and upon whichAgent is expressly permitted to rely;

 

(xii)          Thecompletion of a field examination by Agent of the subject Target or NewSubsidiary with results reasonably satisfactory to Agent;

 

(xiii)         Suchadditional eligibility criteria, Availability Reserves and percentage advancerates as Agent shall establish in its commercially reasonable discretion inlight of the foregoing appraisals and field examination; and

 

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

 

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

 

(f)            Borrowers may make advances to theiremployees not to exceed One Million Dollars ($1,000,000) in the aggregateoutstanding at any time.

 

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9.11         Dividends and Redemptions. Borrowers shall not, directly or indirectly, declare or pay anydividends on account of any shares of any class of capital stock of Borrowersnow or hereafter outstanding (except to PC Mall), or set aside or otherwisedeposit 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 orinvest any sums for such purpose) for any consideration other than common stockor apply or set apart any sum, or make any other distribution (by reduction ofcapital or otherwise) in respect of any such shares (except to PC Mall) oragree to do any of the foregoing; provided, that, PC Mall mayrepurchase a portion of its capital stock so long as (a) the aggregate sumof all payments made on account of such repurchases shall not exceed TenMillion Dollars ($10,000,000) during the term of this Agreement, (b) theExcess Availability upon giving effect to such repurchases shall not be lessthan Five Million Dollars ($5,000,000), and (c) no Event of Default hasoccurred 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 orexchange 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 ofBorrowers’ business and upon fair and reasonable terms no less favorable to theBorrowers than Borrowers would obtain in a comparable arm’s length transactionwith an unaffiliated person.

 

9.13         Additional Accounts. Borrowers shall not, directly or indirectly, open, establish or maintainany deposit account, investment account, credit card or check processing accountor any other account with any bank or other financial institution, other thanthe Blocked Accounts and the accounts set forth in Schedule 8.8 hereto,except:  (a) as to any new oradditional Blocked Accounts and other such new or additional accounts whichcontain any Collateral or proceeds thereof, with the prior written consent ofAgent and subject to such conditions thereto as Agent may establish and (b) asto any accounts used by Borrowers to make payments of payroll, taxes or otherobligations 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)            terminateany of such employee pension benefit plans so as to incur any liability to thePension Benefit Guaranty Corporation established pursuant to ERISA;

 

(ii)           allow or fail to correct promptly afterdiscovery thereof any prohibited transaction involving any of such employeepension benefit plans or any trust created thereunder which would subjectBorrowers or such ERISA Affiliate to a tax or penalty or other liability onprohibited transactions imposed under Section 4975 of the Code or ERISA;

 

(iii)          failto pay to any such employee pension benefit plan any contribution which theyare obligated to pay under Section 302 of ERISA, Section 412 of theCode or the terms of such plan;

 

(iv)          allow or suffer to exist any accumulatedfunding deficiency, whether or not waived, with respect to any such employeepension benefit plan;

 

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(v)           allow or suffer to exist any occurrenceof a reportable event or any other event or condition which presents a materialrisk of termination by the Pension Benefit Guaranty Corporation of any suchemployee pension benefit plan that is a single employer plan, which terminationcould result in any liability to the Pension Benefit Guaranty Corporation; or

 

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

 

(b)           As used in this Section 9.14, theterm “employee pension benefit plans,” “employee benefit plans”, “accumulatedfunding deficiency” and “reportable event” shall have the respective meaningsassigned to them in ERISA, and the term “prohibited transaction” shall have themeaning 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 NetWorth, calculated in accordance with Exhibit C attached hereto, of notless than Six Million Two Hundred Fifteen Thousand Dollars ($6,215,000), testedas of the last day of each fiscal quarter if the Excess Availability is greaterthan Five Million Dollars ($5,000,000) and as of the last day of each month ifthe 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 ofLenders, on demand all reasonable costs, expenses, filing fees and taxes paidor payable in connection with the preparation, negotiation, execution, delivery,recording, administration, collection, liquidation, enforcement and defense ofthe Obligations, Agent’s and Lender’s rights in the Collateral, this Agreement,the other Financing Agreements and all other documents related hereto orthereto, including any amendments, supplements or consents which may hereafterbe contemplated (whether or not executed) or entered into in respect hereof andthereof, including, but not limited to:

 

(a)           all reasonable costs and expenses offiling or recording (including Uniform Commercial Code financing statementfiling taxes and fees, documentary taxes, intangibles taxes and mortgagerecording taxes and fees, if applicable);

 

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

 

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

 

(d)           customary charges, fees or expensescharged by any bank or issuer in connection with the Letter of CreditAccommodations;

 

(e)           reasonable costs and expenses ofpreserving and protecting the Collateral;

 

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(f)            reasonable costs and expenses paid orincurred in connection with obtaining payment of the Obligations, enforcing thesecurity interests and liens of Agent, for itself and the ratable benefit ofLenders, selling or otherwise realizing upon the Collateral, and otherwiseenforcing the provisions of this Agreement and the other Financing Agreementsor defending any claims made or threatened against Agent and/or Lenders arisingout of the transactions contemplated hereby and thereby (including, withoutlimitation, preparations for and consultations concerning any such matters);

 

(g)           all reasonable out-of-pocket expenses andcosts incurred by Agent’s examiners in the conduct of their periodic fieldexaminations of the Collateral and Borrowers’ operations, plus a per diemcharge at the rate of Seven Hundred Fifty Dollars ($750) per person per day forsuch****examiners in the field and office; and

 

(h)           the reasonable fees and disbursements ofcounsel (including legal assistants) to Agent, any Lender and any Participantin 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 dulyexecuted and delivered, such further agreements, documents and instruments, anddo or cause to be done such further acts as may be necessary or proper toevidence, perfect, maintain and enforce the security interests and the prioritythereof in the Collateral and to otherwise effectuate the provisions orpurposes of this Agreement or any of the other Financing Agreements.  Agent may at any time and from time to timerequest a certificate from an officer of Borrowers representing on behalf ofBorrowers that all conditions precedent to the making of Loans and providingLetter of Credit Accommodations contained herein are satisfied.  In the event of such request by Agent, Agentand Lenders may, at Agent’s option, cease to make any further Loans or provide anyfurther Letter of Credit Accommodations until Agent has received suchcertificate and, in addition, Agent has determined that such conditions aresatisfied.  Where permitted by law,Borrowers hereby authorizes Agent and any Lender to execute and file one ormore UCC financing statements signed only by Agent and any Lender as deemedappropriate by Agent to perfect Agent’s and Lender’s security interests in theCollateral.

 

SECTION 10. EVENTS OF DEFAULT AND REMEDIES.

 

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

 

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

 

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

 

(b)           any representation, warranty or statementof fact made by any Borrower to Agent or any Lender in this Agreement, theother Financing Agreements or any other agreement, schedule, confirmatoryassignment or otherwise shall when made or deemed made be false or misleadingin any material respect;

 

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

 

(d)           any judgment for the payment of money(excluding any such judgment fully covered by insurance) is rendered againstany 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 theaggregate and shall remain undischarged or unvacated for a period in excess ofthirty (30) days or execution shall at any time not be effectively stayed, orany material judgment other than for the payment of money, or injunction,attachment, garnishment or execution is rendered against any of Borrowers orObligors or any of their assets;

 

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

 

(f)            any Borrowers or any Obligor becomesinsolvent (however defined or evidenced), makes an assignment for the benefitof creditors, makes or sends notice of a bulk transfer or calls a meeting ofits creditors or principal creditors;

 

(g)           a case or proceeding under the bankruptcylaws of the United States of America now or hereafter in effect or under anyinsolvency, reorganization, receivership, readjustment of debt, dissolution orliquidation 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 orall or any part of its properties and such petition or application is notdismissed within thirty (30) days after the date of its filing or any Borroweror any Obligor shall file any answer admitting or not contesting such petitionor application or indicates its consent to, acquiescence in or approval of, anysuch action or proceeding or the relief requested is granted sooner;

 

(h)           a case or proceeding under the bankruptcylaws of the United States of America now or hereafter in effect or under anyinsolvency, reorganization, receivership, readjustment of debt, dissolution orliquidation 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 allor any part of its property;

 

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

 

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obligations, contingent indebtedness in connectionwith any guarantee, letter of credit, indemnity or similar type of instrumentin 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 theapplicable cure period, if any, with respect thereto, or any default by anyBorrower or any Obligor under any material contract, lease, license or otherobligation to any person other than Agent and Lenders, which default continuesfor more than the applicable cure period, if any, with respect thereto, unless(in each case and without limiting Agent’s rights to establish AvailabilityReserves for any such defaults) such defaults are being contested in good faithby appropriate proceedings diligently pursued;

 

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

 

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

 

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

 

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

 

10.2         Remedies.

 

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

 

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

 

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(i) accelerate the payment of all Obligations anddemand immediate payment thereof to Agent, for the ratable benefit of Lenders (provided,that, upon the occurrence of any Event of Default described in Sections10.1(g) and 10.1(h), all Obligations shall automatically becomeimmediately due and payable), (ii) with or without judicial process or theaid or assistance of others, enter upon any premises on or in which any of theCollateral may be located and take possession of the Collateral or completeprocessing, manufacturing and repair of all or any portion of the Collateral, (iii) requireBorrowers, at Borrowers’ expense, to assemble and make available to Agent anypart or all of the Collateral at any place and time designated by Agent, (iv) collect,foreclose, receive, appropriate, setoff and realize upon any and allCollateral, (v) remove any or all of the Collateral from any premises onor 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 Agentor 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 theright to purchase the whole or any part of the Collateral at any such publicsale, all of the foregoing being free from any right or equity of redemption ofBorrowers, which right or equity of redemption is hereby expressly waived andreleased by Borrowers and/or (vii) terminate this Agreement.  If any of the Collateral is sold or leased byAgent upon credit terms or for future delivery, the Obligations shall not bereduced as a result thereof until payment therefor is finally collected byAgent, for the ratable benefit of Lenders. If notice of disposition of Collateral is required by law, ten (10) daysprior notice by Agent to Borrowers designating the time and place of any publicsale or the time after which any private sale or other intended disposition ofCollateral is to be made, shall be deemed to be reasonable notice thereof andBorrowers waives any other notice.  Inthe event Agent institutes an action to recover any Collateral or seeksrecovery of any Collateral by way of prejudgment remedy, Borrowers waive theposting of any bond which might otherwise be required.

 

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

 

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

 

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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 andenforcement of this Agreement and the other Financing Agreements and anydispute arising out of the relationship between the parties hereto, whether incontract, tort, equity or otherwise, shall be governed by the internal laws ofthe State of California (without giving effect to principles of conflicts oflaw).

 

(b)           Borrowers, Agent and Lenders irrevocably consentand submit to the non-exclusive jurisdiction of the state courts of the Countyof Los Angeles, State of California and of the United States District Court forthe Central District of California and waive any objection based on venue or forumnonconveniens with respect to any action instituted thereinarising under this Agreement or any of the other Financing Agreements or in anyway connected with or related or incidental to the dealings of the partieshereto in respect of this Agreement or any of the other Financing Agreements orthe transactions related hereto or thereto, in each case whether now existingor hereafter arising, and whether in contract, tort, equity or otherwise, andagree that any dispute with respect to any such matters shall be heard only inthe courts described above (except that Agent or any Lender shall have theright to bring any action or proceeding against Borrowers or their property inthe courts of any other jurisdiction which such Person deems necessary orappropriate in order to realize on the Collateral or to otherwise enforce itsrights against Borrowers or their property).

 

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

 

(d)           BORROWERS, AGENT AND EACH LENDER HEREBYWAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OFACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCINGAGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TOTHE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THEOTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO INEACH 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 ANDTHAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF A COPY OFTHIS

 

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

 

(e)           Neither Agent nor any Lender shall haveany liability to Borrowers (whether in tort, contract, equity or otherwise) forlosses suffered by Borrowers in connection with, arising out of, or in any wayrelated to the transactions or relationships contemplated by this Agreement, orany act, omission or event occurring in connection herewith, unless it isdetermined by a final and non-appealable judgment or court order binding onsuch Person, that the losses were the result of acts or omissions constitutinggross negligence or willful misconduct.

 

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

 

11.3         Amendments and Waivers.

 

(a)           Neither this Agreement nor any provisionhereof shall be amended, modified, waived or discharged orally or by course ofconduct, but only by a written agreement signed as provided in Section 11.3(b) hereof.  Neither Agent nor any Lender shall, by anyact, delay, omission or otherwise be deemed to have expressly or impliedlywaived any of its rights, powers and/or remedies unless such waiver shall be inwriting and signed by an authorized officer of such Person as provided in Section 11.3(b) hereof.  Any such waiver shall be enforceable only tothe extent specifically set forth therein. A waiver by Agent or any Lender of any right, power and/or remedy on anyone 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 anyfuture occasion, whether similar in kind or otherwise.

 

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

 

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

 

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

 

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(iii)          increasein the Commitment of any Lender over the amount thereof then in effect orprovided hereunder (it being understood that a waiver of any Event of Defaultshall not constitute a change in the terms of any Commitment of any Lender);

 

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

 

(v)           the amendment, modification or waiverof:  (A) the terms of the followingdefinitions or any provisions relating thereto: Eligible Accounts, Eligible Inventory, Excess Availability, FinalMaturity Date, Maximum Credit, Required Lenders or Pro Rata Shares, or (B) anyprovision of this Section 11.3;

 

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

 

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

 

(c)           Notwithstanding anything to the contrarycontained in Section 11.3(b) above, in the event that Borrowersrequest that this Agreement or any other Financing Agreements be amended orotherwise modified in a manner which would require the unanimous consent of allof the Lenders and such amendment or other modification is agreed to by theRequired Lenders, then, with the consent of Borrowers and the Required Lenders,Borrowers and the Required Lenders may amend this Agreement without the consentof the Lender or Lenders which did not agree to such amendment or othermodification (collectively, the “Minority Lenders”) to provide for (i) thetermination of the Commitment of each of the Minority Lenders, (ii) theaddition to this Agreement of one or more other Lenders, or an increase in theCommitment 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 asthe Commitments immediately before giving effect to such amendment, (iii) ifany Loans are outstanding at the time of such amendment, the making of suchadditional 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 Lendersimmediately before giving effect to such amendment and (iv) the payment ofall interest, fees and other Obligations payable or accrued in favor of theMinority Lenders and such other modifications to this Agreement as Borrowersand the Required Lenders may determine to be appropriate.

 

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

 

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

 

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11.5         Indemnification. Borrowers shall indemnify and hold Agent and each Lender, and itsdirectors, 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 anyIndemnified Party) in connection with any litigation, investigation, claim orproceeding commenced or threatened related to the negotiation, preparation,execution, delivery, enforcement, performance or administration of thisAgreement, any other Financing Agreements, or any undertaking or proceedingrelated to any of the transactions contemplated hereby or any act, omission,event or transaction related or attendant thereto, including, withoutlimitation, amounts paid in settlement, court costs, and the fees and expensesof counsel.  To the extent that theundertaking to indemnify, pay and hold harmless set forth in this Section 11.5may be unenforceable because it violates any law or public policy, Borrowersshall pay the maximum portion which they are permitted to pay under applicablelaw to Agent and Lenders in satisfaction of indemnified matters under this Section 11.5.  The foregoing indemnity shall survive thepayment of the Obligations and the termination or non-renewal of thisAgreement.

 

SECTION 12.  THE AGENT

 

12.1         Appointment; Powers and Immunities. Each Lender hereby irrevocably designates, appoints and authorizesWachovia Capital Finance Corporation (Western) to act as Agent hereunder andunder the other Financing Agreements with such powers as are specificallydelegated to Agent by the terms of this Agreement and of the other FinancingAgreements, together with such other powers as are reasonably incidentalthereto.  Agent: (a) shall have noduties or responsibilities except those expressly set forth in this Agreementand in the other Financing Agreements, and shall not by reason of thisAgreement or any other Financing Agreement be a trustee or fiduciary for anyLender; (b) shall not be responsible to Lenders for any recitals,statements, representations or warranties contained in this Agreement or in anyother Financing Agreement, or in any certificate or other document referred toor provided for in, or received by any of them under, this Agreement or anyother Financing Agreement, or for the value, validity, effectiveness, genuineness,enforceability or sufficiency of this Agreement or any other FinancingAgreement or any other document referred to or provided for herein or thereinor for any failure by any Borrower or any Obligor or any other Person toperform any of its obligations hereunder or thereunder; and (c) shall notbe responsible to Lenders for any action taken or omitted to be taken by ithereunder or under any other Financing Agreement or under any other document orinstrument referred to or provided for herein or therein or in connectionherewith or therewith, except for its own gross negligence or willfulmisconduct as determined by a final non-appealable judgment of a court ofcompetent jurisdiction.  Agent may employagents and attorneys-in-fact and shall not be responsible for the negligence ormisconduct of any such agents or attorneys-in-fact selected by it in goodfaith.  Agent may deem and treat thepayee of any note as the holder thereof for all purposes hereof unless and untilthe assignment thereof pursuant to an agreement (if and to the extent permittedherein) in form and substance satisfactory to Agent shall have been deliveredto and acknowledged by Agent.

 

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

 

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proper Person or Persons, and upon advice andstatements of legal counsel, independent accountants and other experts selectedby Agent.  As to any matters notexpressly provided for by this Agreement or any other Financing Agreement,Agent shall in all cases be fully protected in acting, or in refraining fromacting, hereunder or thereunder in accordance with instructions given by theRequired Lenders or all of Lenders as is required in such circumstance, andsuch instructions of such Lenders and any action taken or failure to actpursuant thereto shall be binding on all Lenders.

 

12.3         Events of Default.

 

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

 

(b)           Except with the prior written consent ofAgent, no Lender may assert or exercise any enforcement right or remedy inrespect of the Loans, Letter of Credit Accommodations or other Obligations, asagainst any Borrower or any Obligor or any of the Collateral or other propertyof any Borrower or any Obligor.

 

12.4         Wachovia in its Individual Capacity. With respect to its Commitment and the Loans made and Letter of CreditAccommodations issued or caused to be issued by it (and any successor acting asAgent), so long as Wachovia Capital Finance Corporation (Western) shall be aLender hereunder, it shall have the same rights and powers hereunder as anyother Lender and may exercise the same as though it were not acting as Agent,and the term “Lender” or “Lenders” shall, unless the context otherwiseindicates, include Wachovia Capital Finance Corporation (Western) in itsindividual capacity as Lender hereunder. Wachovia Capital Finance Corporation (Western) (and any successor actingas Agent) and its Affiliates may (without having to account therefor to anyLender) lend money to, make investments in and generally engage in any kind ofbusiness with Borrowers and Obligors (and any of their respective Subsidiariesor Affiliates) as if it were not acting as Agent, and Wachovia Capital FinanceCorporation (Western) and its Affiliates may accept fees and otherconsideration from Borrowers

 

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

 

12.5         Indemnification. Lenders agree to indemnify Agent (to the extent not reimbursed byBorrowers hereunder and without limiting the Obligations of Borrowershereunder) ratably, in accordance with their Pro Rata Shares, for any and allclaims of any kind and nature whatsoever that may be imposed on, incurred by orasserted against Agent (including by any Lender) arising out of or by reason ofany investigation in or in any way relating to or arising out of this Agreementor any other Financing Agreement or any other documents contemplated by orreferred to herein or therein or the transactions contemplated hereby orthereby (including the costs and expenses that Agent is obligated to payhereunder) or the enforcement of any of the terms hereof or thereof or of anysuch other documents, provided, that, no Lender shall be liablefor any of the foregoing to the extent it arises from the gross negligence orwillful misconduct of the party to be indemnified as determined by a finalnon-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 onAgent or any other Lender, and based on such documents and information as ithas deemed appropriate, made its own credit analysis of each Borrower andObligors and has made its own decision to enter into this Agreement and that itwill, independently and without reliance upon Agent or any other Lender, andbased on such documents and information as it shall deem appropriate at thetime, continue to make its own analysis and decisions in taking or not takingaction under this Agreement or any of the other Financing Agreements.  Agent shall not be required to keep itselfinformed as to the performance or observance by any Borrower or any Obligor ofany term or provision of this Agreement or any of the other FinancingAgreements or any other document referred to or provided for herein or thereinor to inspect the properties or books of any Borrower or any Obligor.  Agent will use reasonable efforts to provideLenders with any information received by Agent from any Borrower or any Obligorwhich is required to be provided to Lenders hereunder and with a copy of any “Noticeof Default or Failure of Condition” received by Agent from any Borrower, anyObligor or any Lender; provided, that, Agent shall not be liableto any Lender for any failure to do so, except to the extent that such failureis attributable to Agent’s own gross negligence or willful misconduct asdetermined by a final non-appealable judgment of a court of competentjurisdiction.  Except for notices,reports and other documents expressly required to be furnished to Lenders byAgent hereunder, Agent shall not have any duty or responsibility to provide anyLender with any other credit or other information concerning the affairs,financial condition or business of any Borrower or any Obligor that may comeinto the possession of Agent.

 

12.7         Failure to Act. Except for action expressly required of Agent hereunder and under theother Financing Agreements, Agent shall in all cases be fully justified infailing or refusing to act hereunder and thereunder unless it shall receivefurther assurances to its satisfaction from Lenders of their indemnificationobligations under Section 12.5 hereof against any and all liability andexpense that may be incurred by it by reason of taking or continuing to takeany such action.

 

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12.8         Additional Loans.  Agent shallnot make any Revolving Loans or provide any Letter of Credit Accommodations toany Borrower on behalf of Lenders intentionally and with actual knowledge thatsuch Loans or Letter of Credit Accommodations would cause the aggregate amountof the total outstanding Loans and Letter of Credit Accommodations to Borrowersto exceed the amount set forth in Section 2.1(a) hereof (the “BorrowingBase”), without the prior consent of all Lenders, except, that,Agent may make such additional Loans or provide such additional Letter ofCredit Accommodations on behalf of Lenders, intentionally and with actualknowledge that such Loans or Letter of Credit Accommodations will cause thetotal outstanding Loans and Letter of Credit Accommodations to Borrowers exceedthe Borrowing Base as Agent may deem necessary or advisable in its discretion, provided,that:  (a) the totalprincipal amount of the additional Loans or additional Letter of CreditAccommodations to any Borrower which Agent may make or provide after obtainingsuch actual knowledge that the aggregate principal amount of the Loans equal orexceed 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 totalprincipal amount of the Loans and Letter of Credit Accommodations to exceed theMaximum Credit and (b) without the consent of all Lenders, Agent shall notmake any such additional Loans or Letter of Credit Accommodations more thanninety (90) days from the date of the first such additional Loans or Letter ofCredit Accommodations.  Each Lender shallbe obligated to pay Agent the amount of its Pro Rata Share of any suchadditional Loans or Letter of Credit Accommodations provided that Agent isacting in accordance with the terms of this Section 12.8.

 

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

 

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

 

(a)           is deemed to have requested that Agentfurnish Lender, promptly after it becomes available, a copy of each field auditor examination report and a weekly report with respect to the Borrowing Baseprepared by Agent (each field audit or examination report and weekly reportwith 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 thatAgent (i) does not make any representation or warranty as to the accuracyof any Report, or (ii) shall not be liable for any information containedin any Report; provided, that, nothing contained in this Section 12.10shall be construed to limit the liability of Agent under Section 12.1(c) hereofin the event of the gross negligence or willful misconduct of Agent asdetermined pursuant to a final non-appealable order of a court of competentjurisdiction;

 

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(c)           expressly agrees and acknowledges thatthe Reports are not comprehensive audits or examinations, that Agent or otherparty performing any audit or examination will inspect only specificinformation regarding Borrowers and Obligors and will rely significantly uponeach Borrower’s books and records, as well as on representations of eachBorrower’s personnel; and

 

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

 

12.11       Collateral Matters.

 

(a)           Agent may, at its option, from time totime, at any time on or after an Event of Default and for so long as the sameis continuing or upon any other failure of a condition precedent to the Loansand Letter of Credit Accommodations hereunder, make such disbursements andadvances (“Special Agent Advances”) which Agent, in its sole discretion,deems necessary or desirable either (i) to preserve or protect theCollateral or any portion thereof (provided that in no event shall SpecialAgent Advances for such purpose exceed Five Million Dollars ($5,000,000) in theaggregate outstanding at any time), provided, that, unless allLenders otherwise agree in writing, the Special Agent Advances under thisclause (i) shall not cause the aggregate outstanding amount of the Loans,the Letter of Credit Accommodations and such Special Agent Advances to exceedthe Maximum Credit, and Agent shall make commercially reasonable arrangementswith Borrowers for the repayment in full of such Special Agent Advances withina reasonable time, or (ii) to pay any other amount chargeable to any Borrowerpursuant to the terms of this Agreement consisting of costs, fees and expensesand payments to any issuer of Letter of Credit Accommodations.  Special Agent Advances shall be repayable ondemand and be secured by the Collateral. Special Agent Advances shall not constitute Loans but shall otherwiseconstitute Obligations hereunder.  Agentshall notify each Lender and Borrowers in writing of each such Special AgentAdvance, which notice shall include a description of the purpose of suchSpecial Agent Advance.  Withoutlimitation of its obligations pursuant to Section 6.10, each Lender agreesthat it shall make available to Agent, upon Agent’s demand, in immediatelyavailable funds, the amount equal to such Lender’s Pro Rata Share of each suchSpecial Agent Advance.  If such funds arenot made available to Agent by such Lender, Agent shall be entitled to recoversuch funds, on demand from such Lender together with interest thereon, for eachday from the date such payment was due until the date such amount is paid toAgent at the interest rate then payable by Borrowers in respect of theRevolving Loans as set forth in Section 3.1 hereof.

 

(b)           Lenders hereby irrevocably authorizeAgent, 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 theCommitments and payment and satisfaction of all of the Obligations and deliveryof cash collateral to the extent required under Section 13.1 hereof, or (ii) constitutingproperty being sold or disposed of if Borrowers certify to Agent that the saleor disposition is made in compliance with the terms hereof, including Section 9.7hereof (and Agent may rely conclusively on any such certificate, withoutfurther inquiry), or (iii) constituting property in which any Borrower orany Obligor did not own an interest at the time the security interest,

 

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

 

(c)           Without any manner limiting Agent’sauthority to act without any specific or further authorization or consent bythe Required Lenders, each Lender agrees to confirm in writing, upon request byAgent, the authority to release Collateral conferred upon Agent under thisSection.  Agent shall (and is herebyirrevocably authorized by Lenders to) execute such documents as may benecessary to evidence the release of the security interest, mortgage or liensgranted to Agent for itself and the benefit of the Lenders upon any Collateralto the extent set forth above; provided, that, (i) Agentshall not be required to execute any such document on terms which, in Agent’sopinion, would expose Agent to liability or create any obligations or entailany consequence other than the release of such security interest, mortgage orliens without recourse or warranty and (ii) such release shall not in anymanner discharge, affect or impair the Obligations or any security interest,mortgage or lien upon (or obligations of any Borrower in respect of) theCollateral retained by any Borrower.

 

(d)           Agent shall have no obligation whatsoeverto any Lender or any other Person to investigate, confirm or assure that theCollateral 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 ofCollateral meet the eligibility criteria applicable in respect of the Loans orLetter of Credit Accommodations hereunder, or whether any particular reservesare appropriate, or that the liens and security interests granted to Agentherein or pursuant hereto or otherwise have been properly or sufficiently orlawfully created, perfected, protected or enforced or are entitled to anyparticular priority, or to exercise at all or in any particular manner or underany duty of care, disclosure or fidelity, or to continue exercising, any of therights, authorities and powers granted or available to Agent in this Agreementor in any of the other Financing Agreements, it being understood and agreedthat in respect of the Collateral, or any act, omission or event relatedthereto, Agent may act in any manner it may deem appropriate, in itsdiscretion, given Agent’s own interest in the Collateral as a Lender and thatAgent shall have no duty or liability whatsoever to any other Lender.

 

12.12       Agencyfor Perfection.  Agent and each Lender hereby appoints eachLender as agent for the purpose of perfecting the security interests in andliens upon the Collateral of Agent for itself and the ratable benefit ofLenders in assets which, in accordance with Article 9 of the UCC can beperfected only by possession.  Should anyLender obtain possession of any such Collateral, such Lender shall notify Agentthereof, and, promptly upon Agent’s request therefor shall deliver suchCollateral to Agent or in accordance with Agent’s instructions.

 

12.13       Failureto Respond Deemed Consent.  In the event any Lender’sconsent is required pursuant to the provisions of this Agreement and suchLender does not respond to any

 

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** **

request by Agent for such consent within ten (10) daysafter such request is made to such Lender, such failure to respond shall bedeemed a consent.

 

SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS.

 

13.1         Term.

 

(a)           This Agreement and the other FinancingAgreements shall become effective as of the date set forth on the first page hereofand shall continue in full force and effect for a term ending on the FinalMaturity Date, unless sooner terminated pursuant to the terms hereof.  Upon the effective date of termination ofthis Agreement and the other Financing Agreements, Borrowers shall pay toAgent, for the ratable benefit of the Lenders, in full, all outstanding andunpaid non-contingent Obligations and shall furnish cash collateral to Agent,(or at Agent’s option, a letter of credit issued for the account of Borrowersand at Borrowers’ expense, in form and substance satisfactory to Agent, by anissuer acceptable to Agent and payable to Agent as beneficiary, for the ratablebenefit of Lenders) in such amounts as Agent determines are reasonablynecessary to secure (or reimburse) Agent and Lenders from loss, cost, damage orexpense, including attorneys’ fees and legal expenses, in connection with anycontingent Obligations, including issued and outstanding Letter of CreditAccommodations and checks or other payments provisionally credited to theObligations and/or as to which Agent and Lenders have not yet received finaland indefeasible payment.  Such paymentsin respect of the Obligations and cash collateral shall be remitted by wiretransfer in federal funds to such bank account of Agent, as Agent may, in itsdiscretion, designate in writing to Borrowers for such purpose.  Interest shall be due until and including thenext Business Day, if the amounts so paid by any Borrower to the bank accountdesignated by Agent are received in such bank account later than 12:00 noon,Los Angeles time.

 

(b)           No termination of this Agreement or theother Financing Agreements shall relieve or discharge any Borrower of itsrespective duties, obligations and covenants under this Agreement or the otherFinancing Agreements until all Obligations have been fully and finallydischarged and paid, provided, that, Lender shall terminate itssecurity interests in the Collateral upon the payments and furnishing of cashcollateral by Borrowers to Lender in the full sums required in Section 13.1(a) above.

 

(c)           If for any reason this Agreement isterminated prior to the Final Maturity Date, in view of the impracticality andextreme difficulty of ascertaining actual damages and by mutual agreement ofthe parties as to a reasonable calculation of Agent’s and Lenders’ lost profitsas a result thereof, Borrowers agree to pay to Agent, for itself and theratable benefit of Lenders, upon the effective date of such termination, anearly termination fee in the amount set forth below if such termination iseffective 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 |

 

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|   |   | **Amount** | ** ** | **Period** |
|--------|--------|------------|------------|------------|
| (iii)  |   | $          | 0          |       | After September 7,  2006 |
|        |        |            |            |            |  |

 

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

 

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

 

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

 

13.4         Successors.  ThisAgreement, the other Financing Agreements and any other document referred toherein or therein shall be binding upon and inure to the benefit of and beenforceable by Agent, Lenders, Borrowers and their respective successors andassigns, except that Borrowers may not assign its rights under this Agreement,the other Financing Agreements and any other document referred to herein ortherein without the prior written consent of Agent and Lenders.   No Lender may assign its rights andobligations under this Agreement (or any part thereof) without the priorwritten consent of all Lenders and Agent, except as permitted under Section 13.5hereof.  Any purported assignment by aLender without such prior express consent or compliance with Section 13.5where applicable, shall be void.  Theterms and provisions of this Agreement and the other Financing Agreements arefor the purpose of defining the relative rights and obligations of Borrowers,Obligors, Agent and Lenders with respect to the transactions contemplatedhereby and there shall be no third party beneficiaries of any of the terms andprovisions of this Agreement or any of the other Financing Agreements

 

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13.5         Assignments and Participations.

 

(a)           Each Lender may (i) assign all or aportion of its rights and obligations under this Agreement (including, withoutlimitation, a portion of its Commitment, the Loans owing to it and its rightsand obligations as a Lender with respect to Letters of Credit Accommodations)and the other Financing Agreements; to its parent company and/or any Affiliateof such Lender which is at least fifty (50%) percent owned by such Lender orits parent company or to one or more Lenders or (ii) assign all, or ifless than all a portion equal to at least $5,000,000 in the aggregate for theassigning Lender or assigning Lenders, of such rights and obligations underthis Agreement to one or more Eligible Transferees, each of which assigneesshall become a party to this Agreement as a Lender by execution of anAssignment and Acceptance; provided, that, (A) the consentof Agent shall be required in connection with any assignment to an EligibleTransferee pursuant to clause (ii) above, (B) if such EligibleTransferee is not a bank, Agent shall receive a representation in writing bysuch Eligible Transferee that either (1) no part of its acquisition of itsLoans is made out of assets of any employee benefit plan, or (2)  afterconsultation, in good faith, with Borrowers and provision by Borrowers of suchinformation as may be reasonably requested by such Eligible Transferee, theacquisition and holding of such Commitments and Loans does not constitute anon-exempt prohibited transaction under Section 406 of ERISA and Section 4975of the Code, or (3) such assignment is an “insurance company generalaccount,” as such term is defined in the Department of Labor ProhibitedTransaction Class Exemption 95.60 (issued July 12, 1995) (“PTCE95-60”), and, as of the date of the assignment, there is no “employeebenefit plan” with respect to which the aggregate amount of such generalaccount’s reserves and liabilities for the contracts held by or on behalf ofsuch “employee benefit plan” and all other “employee benefit plans” maintainedby the same employer (and affiliates thereof as defined in Section V(a)(1) ofPTCE 95-60) or by the same employee organization (in each case determined inaccordance with the provisions of PTCE 95-60) exceeds ten (10%) percent of thetotal reserves and liabilities of such general account (as determined underPTCE 95-60) (exclusive of separate account liabilities) plus surplus as setforth in the National Association of Insurance Commissioners Annual Statementfiled with the state of domicile of such Eligible Transferee and (C) suchtransfer or assignment will not be effective until recorded by the Agent on theRegister.  As used in this Section, theterm “employee benefit plan” shall have the meaning assigned to it in Title I ofERISA and shall also include a “plan” as defined in Section 4975(e)(1) ofthe Code.

 

(b)           Agent shall maintain a register of thenames and addresses of Lenders, their Commitments and the principal amount oftheir Loans (the “Register”). Agent shall also maintain a copy of each Assignment and Acceptancedelivered to and accepted by it and shall modify the Register to give effect toeach Assignment and Acceptance.  Upon itsreceipt of each Assignment and Acceptance, Agent will give prompt noticethereof to Lenders and deliver to each of them a copy of the executedAssignment and Acceptance.  The entriesin the Register shall be conclusive and binding for all purposes, absentmanifest error, and Borrowers, Obligors, Agent and Lenders may treat eachPerson whose name is recorded in the Register as a Lender hereunder for allpurposes of this Agreement.  The Registershall be available for inspection by Borrowers, Obligors and any Lender at anyreasonable time and from time to time upon reasonable prior notice.

 

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

 

(d)           By execution and delivery of anAssignment and Acceptance, the assignor and assignee thereunder confirm to andagree with each other and the other parties hereto as follows:  (i) other than as provided in suchAssignment and Acceptance, the assigning Lender makes no representation orwarranty and assumes no responsibility with respect to any statements,warranties or representations made in or in connection with this Agreement orany of the other Financing Agreements or the execution, legality,enforceability, genuineness, sufficiency or value of this Agreement or any ofthe other Financing Agreements furnished pursuant hereto, (ii)  theassigning Lender makes no representation or warranty and assumes noresponsibility with respect to the financial condition of Borrowers, Obligors orany of their respective Subsidiaries or the performance or observance by anyBorrower or any Obligor of any of the Obligations; (iii) such assigneeconfirms that it has received a copy of this Agreement and the other FinancingAgreements, together with such other documents and information it has deemedappropriate to make its own credit analysis and decision to enter into suchAssignment and Acceptance, (iv) such assignee will, independently andwithout reliance upon the assigning Lender, Agent or any other Lender and basedon 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 underthis Agreement and the other Financing Agreements, (v) such assigneeappoints and authorizes Agent to take such action as agent on its behalf and toexercise such powers under this Agreement and the other Financing Agreements asare delegated to Agent by the terms hereof and thereof, together with suchpowers as are reasonably incidental thereto, and (vi) such assignee agreesthat it will perform in accordance with their terms all of the obligationswhich by the terms of this Agreement and the other Financing Agreements arerequired 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 anyLender from time to time to assignees and Participants.

 

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

 

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the Participant shall not have any rights under thisAgreement or any of the other Financing Agreements (the Participant’s rightsagainst such Lender in respect of such participation to be those set forth inthe agreement executed by such Lender in favor of the Participant relatingthereto) and all amounts payable by any Borrower or any Obligor hereunder shallbe determined as if such Lender had not sold such participation, and (iv) ifsuch Participant is not a bank, represent that either (A) no part of itsacquisition of its participation is made out of assets of any employee benefitplan, or (B) after consultation, in good faith, with Borrowers andprovision by Borrowers of such information as may be reasonably requested bythe Participant, the acquisition and holding of such participation does notconstitute a non-exempt prohibited transaction under Section 406 of ERISAand Section 4975 of the Code, or (C) such participation is an “insurancecompany general account, “ as such term is defined in the “PTCE 95-60”, and, asof the date of the transfer there is no “employee benefit plan” with respect towhich the aggregate amount of such general account’s reserves and liabilitiesfor the contracts held by or on behalf of such “employee benefit plan” and allother “employee benefit plans” maintained by the same employer (and affiliatesthereof as defined in Section V(a)(1) of PTCE 95-60) or by the sameemployee organization (in each case determined in accordance with theprovisions of PTCE 95-60) exceeds ten (10%) percent of the total reserves andliabilities of such general account (as determined under PTCE 95-60) (exclusiveof separate account liabilities) plus surplus as set forth in the NationalAssociation of Insurance Commissioners Annual Statement filed with the state ofdomicile of the Participant.

 

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

 

(g)           Borrowers shall assist Agent or anyLender permitted to sell assignments or participations under this Section 13.5in whatever manner reasonably necessary in order to enable or effect any suchassignment or participation, including (but not limited to) the execution anddelivery of any and all agreements, notes and other documents and instrumentsas shall be requested and the delivery of informational materials, appraisalsor other documents for, and the participation of relevant management inmeetings 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 affairsprovided, prepared or reviewed by such Borrower that are contained in anyselling materials and all other information provided by it and included in suchmaterials.

 

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

 

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13.7         Confidentiality.  Each Lenderagrees that it will use its reasonable best efforts not to disclose, withoutthe prior consent of Borrowers, confidential information with respect toBorrowers, any Obligor or any of their respective Subsidiaries which isfurnished pursuant to this Agreement and which is specifically designated asconfidential in writing by Borrowers; provided, that, any Lendermay disclose any such information (a) to its employees, auditors orcounsel, or to another Lender if the disclosing Lender or such disclosingLender’s holding or parent company in its sole discretion determines that anysuch party should have access to such information, (b) as has becomegenerally available to the public without a breach of this Section 13.7, (c) asmay be required or appropriate in any report, statement or testimony submittedto any Governmental Authority having or claiming to have jurisdiction over suchLender, (d) as may be required or appropriate in response to any summonsor subpoena or in connection with any litigation, (e) in order to complywith any statute or regulation, and (f) to any prospective or actualassignee or Participant in connection with any contemplated transfer orparticipation of any of the Commitments or any interest therein by such Lender,provided, that, such assignee or Participant has agreed inwriting to the confidentiality of any such confidential information inaccordance with the terms of this Section 13.7.  Anything contained herein to the contrarynotwithstanding, the obligations of confidentiality contained herein, as theyrelate to the transactions contemplated hereby, shall not apply to the federaltax structure or federal tax treatment of such transactions, and each partyhereto (and any employee, representative, or agent of any party hereto) maydisclose to any and all Persons, without limitation of any kind, the federaltax structure and federal tax treatment of such transactions (including allwritten materials related to such tax structure and tax treatment).  The preceding sentence is intended to causethe transactions contemplated hereby to not be treated as having been offeredunder conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (orany successor provision) of the Treasury Regulations promulgated under Section 6011of the United States Internal Revenue Code, and shall be construed in a mannerconsistent with such purpose.  Inaddition, each party hereto acknowledges that it has no proprietary orexclusive rights to the tax structure of the transactions contemplated herebyor any tax matter or tax idea related thereto.

 

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

 

13.9         Publicity.  Borrowersconsent to Agent publishing a tombstone or similar advertising materialrelating to the financing transaction contemplated by this Agreement.

 

SECTION 14.  JOINT ANDSEVERAL 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, eachBorrower hereby waives any claim, right or remedy which either may now have orhereafter acquire

 

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against any other Borrower that arises hereunderincluding, without limitation, any claim, remedy or right of subrogation,reimbursement, exoneration, contribution, indemnification, or participation inany claim, right or remedy of Agent or any Lender against any Borrower or anyCollateral which Agent or any Lender now has or hereafter acquires, whether ornot such claim, right or remedy arises in equity, under contract, by statute,under common law or otherwise until the Obligations are fully paid and finallydischarged.  In addition, each Borrowerhereby waives any right to proceed against the other Borrowers, now or hereafter,for contribution, indemnity, reimbursement, and any other suretyship rights andclaims, whether direct or indirect, liquidated or contingent, whether arisingunder express or implied contract or by operation of law, which any Borrowermay now have or hereafter have as against the other Borrowers with respect tothe Obligations until the Obligations are fully paid and finallydischarged.  Each Borrower also herebywaives any rights of recourse to or with respect to any asset of the otherBorrowers until the Obligations are fully paid and finally discharged.

 

14.2         Authority to Modify Obligations andSecurity.  Each Borrower authorizes Agent and Lenders,without notice or demand and without affecting any Borrowers’ liabilityhereunder, from time to time, whether before or after any notice of terminationhereof 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 otherwisechange any other term or condition of, any document or agreement evidencing orrelating to any Obligations as such Obligations relate to the other Borrowers,including, without limitation, to increase or decrease the rate of interestthereon; (b) accept, substitute, waive, defease, increase, release, exchangeor otherwise alter any Collateral, in whole or in part, securing the otherBorrowers’ Obligations; (c) apply any and all such Collateral and directthe order or manner of sale thereof as Agent and Lenders, in their solediscretion, may determine; (d) deal with the other Borrowers as Agent orany 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 purchaseany of the collateral at any sale thereof; (f) apply any and all paymentsor recoveries from the other Borrowers as Agent or Lenders, in their solediscretion, may determine, whether or not such indebtedness relates to theObligations; all whether such Obligations are secured or unsecured orguaranteed or not guaranteed by others; and (g) apply any sums realizedfrom Collateral furnished by the other Borrowers upon any of its indebtednessor obligations to Agent or Lenders as they in their sole discretion, maydetermine, whether or not such indebtedness relates to the Obligations; allwithout in any way diminishing, releasing or discharging the liability of anyBorrower 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 CivilProcedure, Agent or any Lender may, at their option and without notice to anyBorrower, proceed directly against any Borrower to collect and recover the fullamount of the liability hereunder, or any portion thereof, and each Borrowerwaives any right to require Agent or any Lender to: (a) proceed againstthe other Borrowers or any other person whomsoever; (b) proceed against orexhaust any Collateral given to or held by Agent or any Lender in connectionwith the Obligations; (c) give notice of the terms, time and place of anypublic or private sale of any of the Collateral except as otherwise providedherein; or (d) pursue any other remedy in Agent’s or

 

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

 

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

 

14.5         Additional Waivers. Each Borrower waives any defense arising by reason of any disability orother defense of the other Borrowers or by reason of the cessation from anycause whatsoever of the liability of the other Borrowers or by reason of anyact or omission of Agent or any Lender or others which directly or indirectlyresults in or aids the discharge or release of the other Borrowers or anyObligations or any Collateral by operation of law or otherwise.  The Obligations shall be enforceable againsteach Borrower without regard to the validity, regularity or enforceability ofany of the Obligations with respect to any of the other Borrowers or any of thedocuments related thereto or any collateral security documents securing any ofthe Obligations.  No exercise by Agent orany Lender of, and no omission of Agent or any Lender to exercise, any power orauthority recognized herein and no impairment or suspension of any right orremedy of Agent or any Lender against any Borrower or any Collateral shall inany way suspend, discharge, release, exonerate or otherwise affect any of theObligations or any Collateral furnished by the Borrowers or give to theBorrowers any right of recourse against Agent or any Lender.  Each Borrower specifically agrees that thefailure of Agent or any Lender: (a) to perfect any lien on or securityinterest in any property heretofore or hereafter given any Borrower to securepayment of the Obligations, or to record or file any document relating theretoor (b) to file or enforce a claim against the estate (either inadministration, bankruptcy or other proceeding) of any Borrower shall not inany manner whatsoever terminate, diminish, exonerate or otherwise affect theliability of any Borrower hereunder.

 

14.6         Additional Indebtedness . Additional Obligations may be created from time to time at the requestof any Borrower and without further authorization from or notice to any otherBorrower even though the borrowing Borrower’s financial condition maydeteriorate since the date hereof.  EachBorrower waives the right, if any, to require Agent or any Lender to discloseto such Borrower any information it may now have or hereafter acquireconcerning the other Borrowers’ character, credit, Collateral, financialcondition or other matters.  EachBorrower has established adequate means to obtain from the other Borrowers, ona continuing basis, financial and other information pertaining to such Borrower’sbusiness and affairs, and assumes the responsibility for being and keepinginformed of the financial and other conditions of the other Borrowers and ofall circumstances bearing upon the risk of nonpayment of the Obligations whichdiligent inquiry would reveal.  NeitherAgent nor any Lender need inquire into the powers of any Borrower or theauthority of any of their respective officers, directors, partners or agentsacting or purporting to act in their behalf, and any Obligations created inreliance upon the

 

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

 

14.7         Subordination. Except as otherwise provided in this Section 14.7, any indebtednessof any Borrower now or hereafter owing to any other Borrower is hereby subordinatedto the Obligations, whether heretofore, now or hereafter created, and whetherbefore or after notice of termination hereof, and, following the occurrence andduring the continuation of an Event of Default, no Borrower shall, without theprior consent of Agent, pay in whole or in part any of such indebtedness norwill any such Borrower accept any payment of or on account of any suchindebtedness at any time while such Borrower remains liable hereunder.  At the request of Agent, after the occurrenceand during the continuance of an Event of Default, each Borrower shall pay toAgent all or any part of such subordinated indebtedness and any amount so paidto Agent at its request shall be applied to payment of the Obligations.  Each payment on the indebtedness of anyBorrower to the other Borrowers received in violation of any of the provisionshereof shall be deemed to have been received by any other Borrower as trusteefor Agent and Lenders and shall be paid over to Agent immediately on account ofthe Obligations, but without otherwise affecting in any manner any suchBorrower’s liability under any of the provisions of this Agreement.  Each Borrower agrees to file all claimsagainst the other Borrowers in any bankruptcy or other proceeding in which thefiling of claims is required by law in respect of any indebtedness of the otherBorrowers to such Borrower, and Agent and Lenders shall be entitled to all ofany such Borrower’s rights thereunder. If for any reason any such Borrower fails to file such claim at leastthirty (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 inBorrowers’ name or, in Agent’s discretion, to assign such claim to, and cause aproof 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 claimshall pay to Agent the full amount payable on the claim in the proceeding, andto the full extent necessary for that purpose any such Borrower hereby assignsto Agent, for itself and the ratable benefit of Lenders, all such Borrower’srights to any payments or distributions to which such Borrower otherwise wouldbe entitled.  If the amount so paid isgreater than any such Borrower’s liability hereunder, Agent will pay the excessamount to the person entitled thereto.

 

14.8         Revival.  If anypayments of money or transfers of property made to Agent or any Lender by anyBorrower should for any reason subsequently be declared to be, or in Agent’scounsel’s good faith opinion be determined to be, fraudulent (within themeaning of any state or federal law relating to fraudulent conveyances),preferential or otherwise voidable or recoverable in whole or in part for anyreason (hereinafter collectively called “voidable transfers”) under theBankruptcy Code or any other federal or state law and Agent or any Lender isrequired to repay or restore, or in Agent’s counsel’s good faith opinion may beso liable to repay or restore, any such voidable transfer, or the amount or anyportion thereof, then as to any such voidable transfer or the amount repaid orrestored and all reasonable costs and expenses (including reasonable attorneys’fees) of Agent or any Lender related thereto, such Borrower’s liabilityhereunder shall automatically be revived, reinstated and restored and shallexist as though such voidable transfer had never been made to Agent or suchLender.

 

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

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to beduly 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           |
|                                         |                                                                                |                            |  |  |  |

 

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| 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 |
|                                         |                     |                       |  |  |  |

 

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|   |   |   | 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 |
|        |        |        |                           |  |  |

 

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EXHIBIT A

 

Form of

 

ASSIGNMENTAND ACCEPTANCE AGREEMENT

 

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

 

WITNESSETH:

 

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

 

WHEREAS, as provided under the Loan Agreement, Assignor committed tomaking Loans (the “Committed Loans”) to Borrower in an aggregate amountnot to exceed$                            (the “Commitment”);

 

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

 

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

 

1.                                       Assignment and Acceptance.

 

(a)                                  Subject to the terms and conditions ofthis Assignment and Acceptance, (i) Assignor hereby sells, transfers andassigns to Assignee, and (ii) Assignee hereby purchases, assumes andundertakes from Assignor, without recourse and without representation orwarranty (except as provided in this Assignment and Acceptance) an interest in (A) theCommitment and 

 

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

 

(b)                                 With effect on and after the EffectiveDate (as defined in Section 5 hereof), Assignee shall be a party to theLoan Agreement and succeed to all of the rights and be obligated to perform allof the obligations of a Lender under the Loan Agreement, including therequirements 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 inaccordance with their terms all of the obligations which by the terms of theLoan Agreement are required to be performed by it as a Lender.  It is the intent of the parties hereto thatthe Commitment of Assignor shall, as of the Effective Date, be reduced by anamount equal to the Assigned Commitment Amount and Assignor shall relinquishits rights and be released from its obligations under the Loan Agreement to theextent such obligations have been assumed by Assignee; provided, that,Assignor shall not relinquish their rights under the Loan Agreement to theextent such rights relate to the time prior to the Effective Date.

 

(c)                                  After giving effect to the assignment andassumption set forth herein, on the Effective Date Assignee’s Commitment willbe $                          .

 

(d)                                 After giving effect to the assignment andassumption set forth herein, on the Effective Date Assignor’s Commitment willbe$                            .

 

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

 

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

 

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

 

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

 

5.                                       Effective Date; Notices.

 

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

 

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

 

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

 

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

 

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

 

(b)                                 Promptly following the execution of thisAssignment and Acceptance, Assignor shall deliver to Borrower and Agent foracknowledgment by Agent, a Notice of Assignment in the form attached hereto asSchedule 1.

 

6.                                       Agent.

 

(a)                                  Assignee hereby appoints and authorizesWachovia Capital Finance Corporation (Western) in its capacity as Agent to takesuch action as agent on its behalf to exercise such powers under the LoanAgreement as are delegated to Agent.

 

(b)                                 **[Assignee shall assumeno duties or obligations held by Assignor in its capacity as Agent under theLoan Agreement.]**

 

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

 

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U.S. Internal Revenue Service Form 1001 (whereinAssignee claims entitlement to the benefits of a tax treaty that provides for acomplete exemption from U.S. federal income withholding tax on all paymentshereunder) and agrees to provide new Forms 4224 or 1001 upon the expiration ofany previously delivered form or comparable statements in accordance withapplicable U.S. law and regulations and amendments thereto, duly executed andcompleted 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) itis the legal and beneficial owner of the interest being assigned by it hereunderand that such interest is free and clear of any security interest, lien,encumbrance or other adverse claim, (ii) it is duly organized and existingand it has the full power and authority to take, and has taken, all actionnecessary to execute and deliver this Assignment and Acceptance and any otherdocuments required or permitted to be executed or delivered by it in connectionwith this Assignment and Acceptance and to fulfill its obligations hereunder, (iii) nonotices to, or consents, authorizations or approvals of, any Person arerequired (other than any already given or obtained) for its due execution,delivery and performance of this Assignment and Acceptance, and apart from anyagreements or undertakings or filings required by the Loan Agreement, nofurther action by, or notice to, or filing with, any Person is required of itfor such execution, delivery or performance, and (iv) this Assignment andAcceptance has been duly executed and delivered by it and constitutes thelegal, valid and binding obligation of Assignor, enforceable against Assignorin accordance with the terms hereof, subject, as to enforcement, to bankruptcy,insolvency, moratorium, reorganization and other laws of general applicationrelating to or affecting creditors’ rights and to general equitable principles.

 

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

 

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

 

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

 

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

 

10.                                 Miscellaneous

 

(a)                                  Any amendment or waiver of any provisionof this Assignment and Acceptance must be in writing and signed by the partieshereto, 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 waiverof any breach of the provisions of this Assignment and Acceptance shall bewithout prejudice to any rights with respect to any other for further breachthereof.

 

(b)                                 All payments made hereunder shall be madewithout any set-off or counterclaim.

 

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

 

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

 

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

 

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

 

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*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILEDSEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITHRESPECT TO THE OMITTED PORTIONS.

 

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

 

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

 
|   |   |   | ,      |
|--------|--------|--------|--------|
|   | a      |   |   |
|   |   |   |   |
|   |   |   |   |
|   | By:    |   |   |
|   | Name:  |   |   |
|   | Title: |   |   |
|   |   |   |   |
|   |   |   |   |
|   |   |   | ,      |
|   | a      |   |   |
|   |   |   |   |
|   |   |   |   |
|   | By:    |   |   |
|   | Name:  |   |   |
|   | Title: |   |   |

 

A-6

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*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILEDSEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITHRESPECT 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 900Pasadena, California 91101Attn:

 

                                                                                                                Attn:

 

Re:

 

Ladies and Gentlemen:

 

Reference is hereby made to (a) that certain Amended and RestatedLoan and Security Agreement, dated as of August 1, 2005 (as the same nowexists 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 totime party to the Loan Agreement as lenders (each a “Lender” andcollectively, the “Lenders”) and Wachovia Capital Finance Corporation(Western), as administrative and collateral agent for the Lenders (in suchcapacity, “Agent”) pursuant to which the Lenders have and may continueto make loans and provide other financial accommodations to Borrower, and (b) theother agreements, documents and instruments referred to in the Loan Agreementor at any time executed and/or delivered in connection therewith or relatedthereto (all of the foregoing, together with the Loan Agreement, as the samenow exist or may hereafter be amended, modified, supplemented, extended,renewed, restated or replaced, being collectively referred to herein as the “FinancingAgreements”).  Capitalized terms nototherwise defined herein shall have the respective meanings ascribed thereto inthe Loan Agreement.

 

11.                                 We hereby give you notice of, and requestAgent’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 theAssignment and 

 

A-7

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*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILEDSEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITHRESPECT TO THE OMITTED PORTIONS.

 

Acceptance Agreement attached hereto (the “Assignmentand Acceptance”).  We understand thatAssignor’s Commitment shall be reduced by$                          .

 

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

 

13.                                 The following administrative detailsapply 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 therepresentations, warranties and covenants of each party to the Assignment andAcceptance as contained therein.

 

A-8

----

 

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

 

IN WITNESS WHEREOF, Assignor and Assignee have each caused this Noticeof 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

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

 

EXHIBITB

 

**INFORMATIONCERTIFICATEOF**

 
|   | Dated: |   |
|--------|--------|--------|

 

Wachovia251 South Lake Avenue, Suite 900Pasadena, California 91101

 

Inorder to assist you in the continuing evaluation of the financing you areconsidering of                                            (the “Corporation”) and to expedite the preparation of any documentationwhich may be required and to induce you to provide such financing to theCorporation, we represent and warrant-to you the following information aboutthe Corporation, its organizational structure and other matters of interest toyou:

 

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

 

 

2.                                       The Corporation uses and owns thefollowing 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 theevent any trade name appears on an invoice, a sample copy of such invoice isannexed.

 

3.                                       The date of incorporation of theCorporation was                             ,under the laws of the State of                         ,and the Corporation is in good standing under those laws. The Corporation hasnever been involved in a bankruptcy or reorganization except: (explain)

 

 

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

 

 

B-1

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*** CERTAIN INFORMATIONIN 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 Corporationhas been changed as follows:

 

| **Date**   | ** ** | **Prior  Name** |
|------------|------------|-----------------|
| ** ** | ** ** | ** **      |
| ** ** | ** ** | ** **      |
| ** ** | ** ** | ** **      |

 

6.                                       Since the date of incorporation, the Corporation has made or enteredinto 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 chiefexecutive office referred to in Section 7 above):

 
|           |   |   |   |   |   |   |   |
|----------------|--------|--------|--------|--------|--------|--------|--------|
| Street Address |   | City   |   | State  |   | County |   |

 

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

 
|           |   |   |   |   |   |            |
|----------------|--------|--------|--------|--------|--------|-----------------|
| Street Address |   | City   |   | State  |   | Lessor/Operator |

 
|           |   |   |   |   |   |            |
|----------------|--------|--------|--------|--------|--------|-----------------|
| Street Address |   | City   |   | State  |   | Lessor/Operator |

 

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

 
| **Location** | ** ** | **Mortgagee** | ** ** | **Principal  Balance** |
|--------------|------------|---------------|------------|------------------------|
| ** **   | ** ** | ** **    | ** ** | ** **             |
| ** **   | ** ** | ** **    | ** ** | ** **             |
| ** **   | ** ** | ** **    | ** ** | ** **             |

 

B-2

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*** CERTAIN INFORMATIONIN 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 locationsof any assets used by the Corporation during the last four (4) monthsother 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 followingcorporations (including subsidiaries):

 
| **NAME**   | ** ** | **CHIEF  EXECUTIVE  OFFICE** | ** ** | **JURISDICATION  OF  INCORPORATION** | ** ** | **OWNERSHIP  PERCENTAGE OR  RELATIONSHIP** |
|------------|------------|------------------------------|------------|--------------------------------------|------------|--------------------------------------------|
| ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | ** **                                 |
| ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | ** **                                 |
| ** ** | ** ** | ** **                   | ** ** | ** **                           | ** ** | ** **                                 |

 

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

 

 

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

 

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

 
| **Title**  | ** ** | **Name**   |
|------------|------------|------------|
| ** ** | ** ** | ** ** |
| ** ** | ** ** | ** ** |
| ** ** | ** ** | ** ** |

 

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

 

 

B-3

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*** CERTAIN INFORMATIONIN 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 followingcorporations (indicate name and address of affiliated companies, type ofoperations, ownership percentage or other relationship):

 

 

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

 

 

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

 
| **Name**   | ** ** | **No. of Shares** | ** ** | **Ownership  Percentage** |
|------------|------------|------------------------|------------|---------------------------|
| ** ** | ** ** | ** **             | ** ** | ** **                |
| ** ** | ** ** | ** **             | ** ** | ** **                |
|       |       |                   |       |                      |

 

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

 

 

20.                                 At the present time, there are nodelinquent taxes due (including, but not limited to, all payroll taxes,personal property taxes, real estate taxes or income taxes) except as follows:

 

B-4

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*** CERTAIN INFORMATIONIN 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 andheld free and clear of any security interests, liens or attachments. except asfollows:,

 
| **Lienholder** | ** ** | **Assets** | ** ** | **Amount of  Debt Secured** |
|----------------|------------|------------|------------|-----------------------------|
| ** **     | ** ** | ** ** | ** ** | ** **                  |
| ** **     | ** ** | ** ** | ** ** | ** **                  |
| ** **     | ** ** | ** ** | ** ** | ** **                  |

 

22.                                 The Corporation guarantees the variouscommercial obligations of its subsidiaries.

 

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

.

 

24.                                 The Corporation and its affiliates do nothave any deposit or investment accounts with any bank, savings and loan orother financial institution, except as follows for the purposes and of thetypes indicated:

 
| **Institution** | ** ** | **Account Number** | ** ** | **Branch Address** | ** ** | **Type**   |
|-----------------|------------|--------------------|------------|--------------------|------------|------------|
| ** **      | ** ** | ** **         | ** ** | ** **         | ** ** | ** ** |
| ** **      | ** ** | ** **         | ** ** | ** **         | ** ** | ** ** |
| ** **      | ** ** | ** **         | ** ** | ** **         | ** ** | ** ** |

** **

25.                                 The Corporation’s fiscal year ends:

 

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

 

(a)                    A determination as to qualification hasbeen issued.

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

 

B-5

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*** CERTAIN INFORMATIONIN 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 theCorporation 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 withrespect to any ofthe foregoing. Until such notice is received by you, you shall be entitled torely upon the foregoing in all respects.

 
|                                      | Very truly yours, |
|-------------------------------------------|-------------------|
|                                      |              |
|                                      |              |
| CORPORATE SEAL TO BE

AFFIXED HEREINBELOW |              |

 

 
|   | By:       |   |
|--------|--------------------------|--------|
|   |                     |   |
|   | Title:    |   |

 

B-6

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

 

EXHIBITC

 

InventoryTurn 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

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

 

EXHIBITD

 

AdjustedTangible 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 illustrativepurposes only.

 

D-1

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

 

SCHEDULE 8.4Other 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    |       | [***]                       |       |

 

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

 

SCHEDULE 8.8Accounts

 

**PC Mall, Inc.:**

 
| **Institution**     | ** ** | **Account  Number** | ** ** | **Branch Address**                                   | ** ** | **Type**     |
|---------------------|------------|---------------------|------------|-----------------------------------------------------------|------------|--------------|
| **Bank of America** |       | [***]  [***]        |       | 150 Long Beach  Blvd.  Third Floor  Long Beach, CA  90852 |       | [***]  [***] |

 

**PC MallSales, 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 |       | [***]  [***] |

 

**WFAcquisition 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 INFORMATIONIN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

**AFServices, LLC:**

 
| **Institution**     | ** ** | **Account  Number**                                    | ** ** | **Branch Address**                                        | ** ** | **Type**                                               |
|---------------------|------------|--------------------------------------------------------|------------|-----------------------------------------------------------|------------|--------------------------------------------------------|
| **Bank of America** |       | [***]  [***]  [***]  [***]  [***]  [***]  [***]  [***] |       | 150 Long Beach  Blvd.  Third Floor  Long Beach, CA  90852 |       | [***]  [***]  [***]  [***]  [***]  [***]  [***]  [***] |

 

**PC MallGov, 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 |       | [***]  [***] |

 

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

 

SCHEDULE 8.9Environmental Disclosures

 

None

 

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

 

SCHEDULE 9.9Indebtedness

 
| **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 - LeasedStreet Address             City                StateLessor/Operator: PDC Properties, Inc., 8395 Jackson Road, Suite F,Sacramento, CA 95826

 

Suite 100 NorthArlington Heights, Illinois- LeasedStreet Address             City                StateLessor/Operator: NAAOC, LLC 1156A West Shore Drive, Arlington Heights, Il 60004

 

7355 E. Orchard Road, Suite C-300,Englewood, CO 80111 - LeasedStreetAddress             City                StateLessor/Operator: DJW Properties, LLC, c/o Custom Management Group, 2280 SouthXanadu Way, Suite 107, Aurora, CO 80014

 

N92 W14612 Anthony Ave.,Menomonee Fall, WI 53051 - LeasedStreetAddress             City                StateLessor/Operator: Wangard Partners, Inc., 1200 N. Mayfair Road, Suite 150,Milwaukee, WI 53226

 

Suite 210, 14160Newbrook Drive, Chantilly, Virginia - LeasedStreetAddress             City                StateLessor/Operator: Automotive Parts Remanufacturers Association, 4215 LafayetteCenter Drive, Suite 3, Chantilly, VA 20151-1243

 

Suite 300, 4995Murphy Canyon Road, San Diego, CA 92123-LeasedStreetAddress             City                StateLessor/Operator: Spectrum Huntington Center, LLC, 4320 La Jolla Village Drive,San Diego, CA 92122

 

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*** CERTAIN INFORMATIONIN 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 -LeasedStreetAddress             City                StateLessor/Operator: W &F Developers, Inc.-Winding River, OneWoodbridge Center, 6th Floor, Woodbridge, New Jersey, 07095

 

1100 University Street,2nd Floor, Montreal, QE, Canada- LeasedStreetAddress             City                StateLessor/Operator: CANAPREV, 935 de la Gaichetiere Street West, 8th Floor,Montreal, QE, Canada H3B 2M9

 

19 Morgan Avenue, Irvine,CA 92618-LeasedStreetAddress             City                StateLessor/Operator: Michael G. McNeill and Juliana Sun, 30 Landport, NewportBeach, CA 92660

 

829 West BurbankBoulevard, Burbank, Suite 200, CA- LeasedStreetAddress             City                StateLessor/Operator: C & P Properties #1, 101 S. First Street. # 400,Burbank, CA 91502

 

5601 W. Slauson Ave. Suite 186,Culver City, CA 90230-LeasedStreetAddress             City                StateLessor/Operator: Buckingham Heights Business Park, 5731 W. Slauson Ave., Suite 222,Culver City, CA 90230

 

**AFServices, LLC:**

 

4725 E. Shelby Drive,Memphis, TN 38118 - LeasedStreetAddress             City                StateLessor/Operator: PDC Properties, Inc., 8395 Jackson Road, Suite F,Sacramento, CA 95826

 

**PC MallSales, Inc.:**

 

N92 W14612 Anthony Ave.,Menomonee Fall, WI 53051 - LeasedStreetAddress             City                StateLessor/Operator: Wangard Partners, Inc., 1200 N. Mayfair Road, Suite 150,Milwaukee, WI 53226

 

19 Morgan Avenue, Irvine,CA 92618-LeasedStreetAddress             City                StateLessor/Operator: Michael G. McNeill and Juliana Sun, 30 Landport, NewportBeach, CA 92660

 

**CCIT, Inc.:**

 

6767 S. Spruce Street,#125, Englewood, CO 80112 - LeasedStreetAddress             City                StateLessor/Operator: Toric Properties, LLC c/o Panorama Property Management, 6767S. Spruce Street, #105, Englewood, CO 80112

 

317 Brick Boulevard, Suite 100,Brick, New Jersey 08723 -LeasedStreetAddress             City                State

 

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*** CERTAIN INFORMATIONIN 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 &FDevelopers, Inc.-Winding River, One Woodbridge Center, 6th Floor,Woodbridge, New Jersey, 07095

 

**ComputabilityLimited:**

 

N92 W14612 Anthony Ave.,Menomonee Falls WI 53051 - LeasedStreetAddress             City                StateLessor/Operator: Wangard Partners, Inc., 1200 N. Mayfair Road, Suite 150,Milwaukee, WI 53226

 

**WFAcquisition Sub, Inc.:**

 

19 Morgan Avenue, Irvine,CA 92618-LeasedStreetAddress             City                StateLessor/Operator: Michael G. McNeill and Juliana Sun, 30 Landport, NewportBeach, CA 92660

 

Suite 300, 4995Murphy Canyon Road, San Diego, CA 92123-LeasedStreetAddress             City                StateLessor/Operator: Spectrum Huntington Center, LLC, 4320 La Jolla Village Drive, Suite 220,San Diego, CA 62122

 

829 West BurbankBoulevard, Burbank, Suite 200, CA- LeasedStreetAddress             City                StateLessor/Operator: C & P Properties #1, 101 S. First Street. # 400,Burbank, CA 91502

 

5601 W. Slauson Ave. Suite 186,Culver City, CA 90230-LeasedStreetAddress             City                StateLessor/Operator: Buckingham Heights Business Park, 5731 W. Slauson Ave., Suite 222,Culver City, CA 90230

 

**SIFY, Inc.:**

 

19 Morgan Avenue, Irvine,CA 92618-LeasedStreetAddress             City                StateLessor/Operator: Michael G. McNeill and Juliana Sun, 30 Landport, NewportBeach, CA 92660

 

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