Document:

exv10w5

 

EXHIBIT 10.5

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

     THIS FIRST AMENDMENT TO FIRST AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (herein called
this “Amendment”) made as of the 30th day of June, 2005 by and between Priority Fulfillment
Services, Inc. (“Borrower”) and Comerica Bank (“Bank”),

W I T N
E S S E T H:

     WHEREAS, Borrower and Bank have entered into that certain First Amended and Restated Loan and
Security Agreement dated as of                     , 2004 (as from time to time amended or modified, the
“Original Agreement”) for the purposes and consideration therein expressed, pursuant to which Bank
became obligated to make loans to Borrower as therein provided; and

     WHEREAS, Borrower and Bank desire to amend the Original Agreement to provide for term loans
and for the other purposes set forth herein;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements
contained herein and in the Original Agreement, in consideration of the loans which may hereafter
be made by Bank to Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I.

Definitions and References

     §à 1.1 Terms Defined in the Original Agreement. Unless the context otherwise requires or unless
otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same
meanings whenever used in this Amendment.

     § 1.2. Other Defined Terms. Unless the context otherwise requires, the following terms when
used in this Amendment shall have the meanings assigned to them in this § 1.2.

     “Amendment” means this First Amendment to First Amended and Restated Loan and Security
Agreement.

     “Loan Agreement” means the Original Agreement as amended hereby.

 

 

ARTICLE II.

Amendments to Original Agreement

     §
2.1 Defined Terms.

     (a) The definition of “Committed Revolving Line” in Exhibit A to the Original Agreement is
hereby amended in its entirety to read as follows:

“Committed Revolving Line” means a Credit Extension of up to $7,500,000 (inclusive
of any amounts outstanding under the Letter of Credit Sublimit).

     (b) Clauses (i) and (j) of the definition of “Eligible Accounts” in Exhibit A to the Original
Agreement are hereby amended in their entirety to read as follows:

	 	(i)	 	Accounts with respect to an account debtor (other than Accenture LLP and the
Designated Account Debtor), including Subsidiaries and Affiliates, whose total obligations
to Borrower exceed 25% of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
	 
	 	(j)	 	Accounts with respect to which Accenture LLP is the account debtor, to the extent
that its total obligations to Borrower exceed 40% of all Accounts, except as
approved in writing by Bank;

     (c) The existing clause (m) in the definition of “Permitted Indebtedness” is hereby
redesignated as clause (n), and the following new clause (m) is hereby added to the definition:

	 	(m)	 	Indebtedness of Borrower incurred to guarantee trade payables owed by Supplies
Distributor Canada, Inc. to IBM Canada, Inc., provided that the aggregate amount
guaranteed by Borrower at any time shall not exceed $500,000;

ARTICLE III.

Conditions of Effectiveness

     § 3.1. Effective Date. This Amendment shall become effective as of the date first above
written when and only when Bank shall have received, at Bank’s office, (i) a counterpart of this
Amendment executed and delivered by Borrower and (ii) in consideration of Bank’s commitment to make
Advances, a non-refundable fee in the amount of $15,000.

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ARTICLE IV.

Representations and Warranties

     § 4.1. Representations and Warranties of Borrower. In order to induce Bank to
enter into this Amendment, Borrower represents and warrants to Bank that:

     (a) The representations and warranties contained in Article 5 of the Original Agreement are true and correct at and as of the time of the
effectiveness hereof; provided
Bank acknowledges that Borrower has heretofore given written notice to Bank of Borrower
being named as a co-defendant along with certain former directors of Daisytek in a lawsuit
regarding the transfer of certain assets of Daisytek.

     (b) Borrower is duly authorized to execute and deliver this Amendment and is and will
continue to be duly authorized to borrow and to perform its obligations under the Loan
Agreement. Borrower has duly taken all corporate action necessary to authorize the
execution and delivery of this Amendment and to authorize the performance of the
obligations of Borrower hereunder.

     (c) The execution and delivery by Borrower of this Amendment, the performance by
Borrower of its obligations hereunder and the consummation of the transactions contemplated
hereby do not and will not conflict with any provision of law, statute, rule or regulation
or of the organizational documents of Borrower, or of any material agreement, judgment,
license, order or permit applicable to or binding upon Borrower, or result in the creation
of any lien, charge or encumbrance upon any assets or properties of Borrower. Except for
those which have been duly obtained, no consent, approval, authorization or order of any
court or governmental authority or third party is required in connection with the execution
and delivery by Borrower of this Amendment or to consummate the transactions contemplated
hereby.

     (d) When duly executed and delivered, each of this Amendment and the Loan Agreement
will be a legal and binding instrument and agreement of Borrower, enforceable in accordance
with its terms, except as limited by bankruptcy, insolvency and similar laws applying to
creditors’ rights generally and by principles of equity applying to creditors’ rights
generally.

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ARTICLE V

Miscellaneous

     § 5.1. Ratification of Agreements. The Original Agreement as hereby amended is hereby ratified and confirmed in all respects. Any reference to the
Loan Agreement in any Loan
Document shall be deemed to be a reference to the Original Agreement as hereby amended. The
execution, delivery and effectiveness of this Amendment shall not, except as expressly provided
herein, operate as a waiver of any right, power or remedy of Bank under the Loan Agreement or any
other Loan Document nor constitute a waiver of any provision of the Loan Agreement or any other
Loan Document.

     § 5.2. Survival of Agreements. All representations, warranties, covenants and agreements of Borrower herein shall survive the execution and delivery
of this Amendment and the performance
hereof, including without limitation the making or granting of the Advances and Equipment Advances,
and shall further survive until all of the Obligations are paid in full. All statements and
agreements contained in any certificate or instrument delivered by Borrower hereunder or under the
Loan Agreement to Bank shall be deemed to constitute representations and warranties by, or
agreements and covenants of, Borrower under this Amendment and under the Loan Agreement.

     § 5.3. Loan Documents. This Amendment is a Loan Document, and all provisions in
the Loan Agreement pertaining to Loan Documents apply hereto.

     § 5.4. Governing Law. This Amendment shall be governed by and construed in accordance with the
laws of the State of California and any applicable laws of the United States of America in all
respects, including construction, validity and performance.

     § 5.5. Counterparts. This Amendment may be separately executed in counterparts and by the
different parties hereto in separate counterparts, each of which when so executed shall be deemed
to constitute one and the same Amendment.

     THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.

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     IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.

	 	 	 	 	 
	 	PRIORITY FULFILLMENT SERVICES, INC.

 	 
	 	By:  	 	 
	 	 	     Name:  	 	 
	 	 	     Title:  	 	 
	 

	 	 	 	 	 
	 	COMERICA BANK

 	 
	 	By:  	 	 
	 	 	     Name:  	 	 
	 	 	     Title:  	 	 

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CONSENT
AND AGREEMENT

     PFSWEB, INC., a Delaware corporation, hereby consents to the provisions of this Amendment and
the transactions contemplated herein, and hereby ratifies and confirms the Guaranty dated as of
December ___, 2004, made by it for the benefit of Bank, and agrees that its obligations and
covenants thereunder are unimpaired hereby and shall remain in full force and effect.

	 	 	 	 	 
	 	PFSWEB, INC.

 	 
	 	By:  	 	 
	 	 	     Name:  	 	 
	 	 	     Title:  	 	 
	 

6exv10w1

 

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

     This Employment Agreement, by and between SK2, Inc., a Delaware
corporation (the “Company”), and Scott Kuhlman, a resident of the State of Minnesota (the
"Executive”), is entered into on this 19th day of May, 2005 (the “Effective Date”).

INTRODUCTION

     A. The Company is a Delaware corporation that desires to employ Executive in accordance with
the terms and conditions stated in this employment agreement (the “Agreement”), and wishes to
obtain reasonable protection against unfair competition from Executive following a termination of
employment and to further protect against unfair use of its confidential business and technical
information; and Executive is willing to grant the Company the benefits of a covenant not to
compete for these same purposes.

     B. Executive wishes to receive compensation from the Company for Executive’s continued
services and desires to accept continued employment pursuant to the terms and conditions of this
Agreement.

AGREEMENT

     Now, Therefore, in consideration of the foregoing, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the Company and
Executive, each intending to be legally bound, hereby agree as follows:

     1. Employment.

     Subject to all of the terms and conditions of this Agreement, the Company hereby
agrees to employ Executive as the Company’s Chief Executive Officer, and Executive hereby accepts
such employment. Executive shall report to the Company’s Board of Directors.

     2. Term.

     Unless terminated earlier according to the provisions of Section 5, Executive’s
employment shall commence as of the Effective Date and shall continue for a three (3) year period
(the “Term”).

     3. Duties.

     Executive will devote substantially all of his business hours to and, during such time,
make the best use of his energy, knowledge, and training in advancing the Company’s interests. In
addition, Executive may: (i) serve as an executive officer or consultant to other affiliated
entities engaged in wholesale, retail or design activities; (ii) devote a reasonable amount of time
and attention to civic, charitable, or social organizations; (iii) engage in such other activities
as are specifically approved in writing by the Company’s Board of Directors (the “Board”); and (iv)
make passive personal investments which do not conflict with the Company’s business nor

 

 

require Executive to devote any significant amount of business time to such investment activity.
Executive’s duties and responsibilities shall include, without limitation, assisting in the
management of the Company’s routine day-to-day business operations, business development and
servicing of client accounts, and such other duties and responsibilities as may be assigned by the
Board.

     4. Compensation.

     (a) Base Salary. In consideration for Executive’s services under this Agreement, the
Company hereby agrees to pay Executive an annual salary of One Hundred Fifty Thousand
Dollars ($150,000.00) per year (the “Base Salary”). The Base Salary shall be paid no less
often than monthly.

     (b) Bonus. Executive shall be entitled to a bonus of up to 100% of Executive’s Base
Salary (as set forth in Section 4(a) above), as determined by the Board, or a compensation
committee established by the Board.

     (c) Benefits. Executive shall be entitled to the employee benefits as provided to
other Company employees. In addition, Executive shall be entitled to the following
benefits:

     a) an automobile allowance of up to $500 per month.

     b) a 20 year term life insurance policy with a death benefit of
$2,000,000.

     c) a variable life insurance policy with a death benefit of $353,198.00.

     (d) Reimbursement. The Company shall reimburse Executive for all reasonable
out-of-pocket business expenses incurred by Executive on the Company’s behalf; provided,
however, that Executive properly accounts to the Company for all such expenses in
accordance with the rules and regulations of the Internal Revenue Service under the
Internal Revenue Code of 1986, as amended, and in accordance with any standard policies of
the Company relating to reimbursement of business expenses as such policies exist or may be
implemented in the future.

     5. Termination.

     Prior to the expiration of the Term, this Agreement may be terminated under the
provisions of this Section 5.

     (a) Voluntary Termination. Executive may voluntarily terminate his employment
hereunder for any reason and at any time after giving at least 30 days prior written notice
thereof to the Board.

 

 

     Upon such a voluntary termination, Executive shall have no further rights against the
Company hereunder, except for the right to receive: (i) any unpaid Base Salary with respect
to the period prior to the effective date of termination; and (ii) reimbursement of
expenses to which Executive is entitled under Section 4(d).

     (b) Termination Without Cause. If the Company terminates this Agreement without
cause, then the Company shall pay to Executive Executive’s then-current Base Salary for a
twenty-four (24) month period after the date of such termination, payable over a
twenty-four (24) month period in the same manner as Base Salary is paid and any
unreimbursed out-of-pocket business expenses incurred by Executive on the Company’s behalf
pursuant to Section 4(d).

     (c) Termination For Cause. The Company may terminate Executive’s employment and all
of the Company’s obligations under this Agreement at any time “For Cause” (as defined
below) by giving notice to Executive stating the basis for such termination. Any
Termination under this Section 5(c) shall be effective immediately upon delivery of the
above-described notice or at such other time thereafter as the Company may designate in the
notice. “For Cause” shall mean any of the following: (i) dishonesty, fraud, or material
and deliberate injury or attempted injury, in each case related to the Company or its
business; (ii) Executive’s conviction of a felony; or (iii) Executive’s continued failure
to satisfactorily perform the duties assigned to him pursuant to Section 3 of this
Agreement for a period of 60 days after a written demand by the Board for such satisfactory
performance, which demand specifically identifies the manner in which it is alleged that
Executive has not satisfactorily performed such duties.

     If Executive’s employment is terminated For Cause, Executive shall have no further
rights against the Company hereunder, except for the right to receive: (1) any unpaid Base
Salary with respect to the period prior to the effective date of termination, and (2)
reimbursement of expenses to which Executive is entitled under Section 4(d).

     6. Confidentiality and Noncompetition.

     (a) Confidentiality. As used in this Section 6, “Confidential Information” means
information that is not generally known and that is proprietary to the Company or that the
Company is obligated to treat as proprietary, but shall not include any information known
by Executive prior to the Effective Date. Any information that Executive reasonably
considers Confidential Information, or that the Company treats as Confidential Information,
will be presumed to be Confidential Information (whether the Executive or others originated
it and regardless of how the Executive obtained it).

 

 

     Except as specifically permitted by an authorized officer of the Company or by written
Company policies, Executive will not, either during or after his employment by the Company,
use Confidential Information for any purpose other than the business of the Company or
disclose it to any person who is not also an executive of the Company unless authorized by
the Board. When Executive’s employment with the Company ends, Executive will promptly
deliver to the Company all records and any compositions, articles, devices, apparatuses and
other items that disclose, describe, or embody Confidential Information, including all
copies, reproductions, and specimens of the Confidential Information in Executive’s
possession, regardless of who prepared them and will promptly deliver any other property of
the Company in Executive’s possession (all such foregoing items, the “Materials”), whether
or not Confidential Information. The foregoing sentence shall not apply to any Materials
produced by Executive prior to the Effective Date.

     (b) Competitive Activities. Executive agrees that, during the Term and for a
twenty-four (24) month period afterwards, Executive will not alone or in any capacity with
another firm: directly engage in any commercial activity that competes with the Company’s
Business (as defined below) within any state in the United States or within any state in
which the Company directly markets or intends to market or services products or provides or
intends to provide services.

     Notwithstanding anything to the contrary in this Agreement, the provisions of this
Section 6(b) shall apply in the event that the Executive is terminated without cause for so
long as Executive is receiving installments of the Severance Payment. In addition, this
Section 6 shall not apply to any activity of the Executive from and after such time as the
Company (1) shall have ceased all Business activities for a period of 60 days, or (2) shall
have made a decision through its Board not to continue, or shall have ceased for a period
of 60 days, the Company’s Business activities.

     Notwithstanding anything to the contrary in this Agreement, the provisions of this
Section 6(b) shall not apply in the event the Executive is employed by or provides
consulting services to an “affiliated” entity formed for the purpose of developing, owning
and operating wholesale or retail clothing business. For purposes of this provision,
“affiliated” shall mean any entity which shares common ownership with the Company or is
wholly or partially owned by the Company.

     For purposes of this Section 6, “Business” shall mean the operation of retail
distributors of clothing and the design and marketing of men’s and women’s fashion apparel.
For the sake of clarity, “Business” does not include private label wholesaling.

     7. Conflicts
of Interest.

     Executive agrees that he will not, directly or indirectly, transact
business with the Company personally, or as agent, owner, partner or shareholder of any other
entity; provided, however,

 

 

that any such transaction may be entered into if approved by the Board so long as Executive’s
ownership or relationship is disclosed to or otherwise known by the Board.

     8. General Provisions.

     (a) Successors and Assigns. This Agreement is binding on and inures to the benefit of
the Company’s successors and assigns, all of which are included in the term the “Company”
as it is used in this Agreement; provided, however, that the Company may assign this
Agreement only in connection with a merger, consolidation, assignment, sale, or other
disposition of substantially all of its assets or business.

     (b) Amendment. This Agreement may be modified or amended only by a written agreement
signed by both the Company and Executive.

     (c) Governing Law and Forum. The laws of Minnesota will govern the validity,
construction, and performance of this Agreement. Any legal proceeding related to this
Agreement will be brought in an appropriate Minnesota court, and both the Company and
Executive hereby consent to the exclusive jurisdiction of Minnesota courts for this
purpose.

     (d) Construction. Wherever possible, each provision of this Agreement will be
interpreted so that it is valid under the applicable law. If any provision of this
Agreement is to any extent invalid under the applicable law, that provision will still be
effective to the extent it remains valid. The remainder of this Agreement also will
continue to be valid, and the entire Agreement will continue to be valid in other
jurisdictions.

     (e) No Waiver. No failure or delay by either the Company or Executive in exercising
or enforcing any right or remedy under this Agreement will waive any provision of the
Agreement. Nor will any single or partial exercise by either the Company or Executive of
any right or remedy under this Agreement preclude either of them from otherwise or further
exercising these rights or remedies, or any other rights or remedies granted by any law or
any related document.

     (f) Captions. The headings in this Agreement are for convenience only and shall not
affect this Agreement’s interpretation.

     (g) References. Except as otherwise required or indicated by the context, all
references to Sections in this Agreement refer to Sections of this Agreement.

     (h) Entire Agreement. This Agreement supersedes all previous and contemporaneous oral
negotiations, commitments, writings, and understandings between the parties concerning the
matters in this Agreement.

 

 

     (i) Notices. All notices and other communications required or permitted under this
Agreement shall be in writing and shall be hand delivered or sent by registered or
certified first-class mail, postage prepaid, and shall be effective upon delivery if hand
delivered, or three days after mailing if mailed to the addresses stated below. These
addresses may be changed at any time by like notice:

	 	 	 
	If to the Company:

	 	SK2, Inc.

701 North Third Street

Minneapolis, MN 55401

Attention: Board of Directors

	 
	 	 
	If to Executive:

	 	Scott Kuhlman

5232 Clinton Avenue South

Minneapolis, MN 55419

     (j) Counterparts. This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one agreement binding on all parties. Each party
shall become bound by this Agreement immediately upon signing any counterpart,
independently of the signature of any other party. In making proof of this Agreement,
however, it will be necessary to produce only one copy signed by the party to be charged.

     In Witness Whereof, the undersigned Executive and the Company have executed this
Agreement effective as of the Effective Date.

	 	 	 
	COMPANY:

	 	SK2, INC.,

a Delaware corporation
	 
	 	 
	 

	 	By
	 

	 	 
	 

	 	      Jon Sabes, a Director
	 
	 	 
	EXECUTIVE:

	 	Scott Kuhlman

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