Credit Agreement Dated 10/28/99

EXECUTION COPY


$450,000,000


CREDIT AGREEMENT


Dated as of October 28, 1999


Among


MICROAGE TECHNOLOGY SERVICES, L.L.C.
and
PINACOR, INC.,


AS BORROWERS,


MICROAGE, INC.


AS PARENT GUARANTOR,


THE INITIAL LENDERS, INITIAL ISSUING BANK AND
SWING LINE BANK NAMED HEREIN


AS INITIAL LENDERS, INITIAL ISSUING BANK AND SWING LINE BANK,


CITIBANK, N.A.


AS COLLATERAL AGENT,


CITIBANK, N.A.


AS ADMINISTRATIVE AGENT,


IBM CREDIT CORPORATION


AS DOCUMENTATION AGENT


and


THE CIT GROUP/BUSINESS CREDIT, INC.


AS SYNDICATION AGENT
TABLE OF CONTENTS


Section Page ------- ----


ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS


1.01. Certain Defined Terms 1 1.02. Computation of Time Periods; Other Definitional Provisions 29 1.03. Accounting Terms 29


ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT 2.01. The Advances and the Letters of Credit 30 2.02. Making the Advances 31 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit 34 2.04. Repayment of Advances 36 2.05. Termination or Reduction of the Commitments 38 2.06. Prepayments 38 2.07. Interest 39 2.08. Fees 40 2.09. Conversion of Advances 41 2.10. Increased Costs, Etc. 42 2.11. Payments and Computations 43 2.12. Taxes 44 2.13. Sharing of Payments, Etc. 46 2.14. Use of Proceeds 47 2.15. Defaulting Lenders 47 2.16. Evidence of Debt 50 2.17. Increase in the Aggregate Working Capital Commitments 51


ARTICLE III
CONDITIONS OF LENDING ANDISSUANCES OF LETTERS OF CREDIT 3.01. Conditions Precedent to Initial Extension of Credit 53 3.02. Conditions Precedent to Each Borrowing, Increase Date, Issuance
and Increase of Available Amount 59 3.03. Determinations Under Section 3.01 60


ARTICLE IV
REPRESENTATIONS AND WARRANTIES 4.01. Representations and Warranties of the Borrowers and the
Parent Guarantor 60


ARTICLE V
COVENANTS OF THE BORROWERS AND THE PARENT GUARANTOR67 5.01. Affirmative Covenants 67 5.02. Negative Covenants 73 5.03. Reporting Requirements 80 5.04. Financial Covenants 84


ARTICLE VI
EVENTS OF DEFAULT 6.01. Events of Default 86 6.02. Actions in Respect of the Letters of Credit upon Default 90


ARTICLE VII
PARENT GUARANTY 7.01. Guaranty 90 7.02. Guaranty Absolute 91 7.03. Waiver 92 7.04. Payments Free and Clear of Taxes, Etc. 93 7.05. Continuing Guaranty; Assignments 94 7.06. Subrogation 94


ARTICLE VIII
THE AGENTS 8.01. Authorization and Action 96 8.02. Agents' Reliance, Etc. 97 8.03. Citibank and Affiliates 97 8.04. Lender Party Credit Decision 98 8.05. Indemnification 98 8.06. Successor Agents 99 8.07. Other Agents 100


ARTICLE IX
MISCELLANEOUS 9.01. Amendments, Etc. 100 9.02. Notices, Etc. 101 9.03. No Waiver; Remedies 102 9.04. Costs and Expenses 102 9.05. Right of Set-off 104 9.06. Binding Effect 104 9.07. Assignments and Participations 104 9.08. Execution in Counterparts 107 9.09. No Liability of the Issuing Bank 107 9.10. Release of Collateral 108 9.11. Jurisdiction, Etc. 108 9.12. Governing Law 108 9.13. Waiver of Jury Trial 109


SCHEDULES


Schedule I - Commitments and Applicable Lending Offices Schedule II - Borrowers' Account Schedule 4.01(b) - Subsidiaries Schedule 4.01(d) - Authorizations, Approvals, Actions, Notices and Filings Schedule 4.01(f) - Disclosed Litigation Schedule 4.01(r) - Open Years Schedule 4.01(t) - Existing Debt Schedule 4.01(u) - Surviving Debt Schedule 4.01(v) - Owned Real Property Schedule 4.01(w) - Leased Real Property Schedule 4.01(x) - Investments Schedule 4.01(y) - Intellectual Property Schedule 5.02(a) - Liens


EXHIBITS


Exhibit A - Form of Promissory Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Assignment and Acceptance Exhibit D - Form of Security Agreement Exhibit E - Form of Subsidiary Guaranty Exhibit F - Form of Solvency Certificate Exhibit G - Form of Opinion of Counsel to the Loan Parties Exhibit H - Form of Opinion of Local Counsel Exhibit I - Form of Borrowing Base Certificate Exhibit J - Form of Flooring Letter of Credit Exhibit K - Form of Floor Planning Arrangement Intercreditor Agreement
CREDIT AGREEMENT


Dated as of October 28, 1999


MICROAGE TECHNOLOGY SERVICES, L.L.C., a Delaware limited liability company ("MTS"), PINACOR, INC., a Delaware corporation ("PINACOR", and together with MTS, the "BORROWERS"), MICROAGE, INC., a Delaware corporation (the "PARENT GUARANTOR"), the banks, financial institutions and other institutional lenders listed on the signature pages hereof as the Initial Lenders (the "INITIAL LENDERS"), the bank listed on the signature pages hereof as the Initial Issuing Bank (the "INITIAL ISSUING BANK") and the Swing Line Bank (as hereinafter defined), CITIBANK, N.A. ("CITIBANK"), as collateral agent (together with any successor collateral agent appointed pursuant to Article VII, the "COLLATERAL AGENT"), IBM CREDIT CORPORATION, as documentation agent (the "DOCUMENTATION AGENT"), THE CIT GROUP/BUSINESS CREDIT, INC., as syndication agent (the "SYNDICATION AGENT"), and CITIBANK, as administrative agent (together with any successor administrative agent appointed pursuant to Article VII, the "ADMINISTRATIVE AGENT" and, together with the Collateral Agent, the Document Agent and the Syndication Agent, the "AGENTS") for the Lender Parties (as hereinafter defined), hereby agree as follows:


ARTICLE I


DEFINITIONS AND ACCOUNTING TERMS


SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):


"ADMINISTRATIVE AGENT" has the meaning specified in the recital of parties to this Agreement.


"ADMINISTRATIVE AGENT'S ACCOUNT" means the account of the Administrative Agent maintained by the Administrative Agent with Citicorp Industrial Credit at its office at 399 Park Avenue, New York, New York 10043, Account No. 38858061, ABA 021000089, Attention: Shawn Hendrickson, or such other account as the Administrative Agent shall specify in writing to the Lender Parties.


"ADVANCE" means a Working Capital Advance, a Swing Line Advance or a Letter of Credit Advance.


"AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 5% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.


"AGENTS" has the meaning specified in the recital of parties to this Agreement.


"AGREEMENT VALUE" means, for each Hedge Agreement, on any date of determination, an amount determined by the Administrative Agent equal to: (a) in the case of a Hedge Agreement documented pursuant to the Master Agreement (Multicurrency-Cross Border) published by the International Swap and Derivatives Association, Inc. (the "MASTER AGREEMENT"), the amount, if any, that would be payable by any Loan Party or any of its Subsidiaries to its counterparty to such Hedge Agreement, as if (i) such Hedge Agreement was being terminated early on such date of determination, (ii) such Loan Party or Subsidiary was the sole "Affected Party", and (iii) the Administrative Agent was the sole party determining such payment amount (with the Administrative Agent making such determination pursuant to the provisions of the form of Master Agreement); or (b) in the case of a Hedge Agreement traded on an exchange, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement determined by the Administrative Agent based on the settlement price of such Hedge Agreement on such date of determination, or (c) in all other cases, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement determined by the Administrative Agent as the amount, if any, by which (i) the present value of the future cash flows to be paid by such Loan Party or Subsidiary exceeds (ii) the present value of the future cash flows to be received by such Loan Party or Subsidiary pursuant to such Hedge Agreement; capitalized terms used and not otherwise defined in this definition shall have the respective meanings set forth in the above described Master Agreement.


"APPLICABLE LENDING OFFICE" means, with respect to each Lender Party, such Lender Party's Domestic Lending Office in the case of a Base Rate Advance and such Lender Party's Eurodollar Lending Office in the case of a Eurodollar Rate Advance.


"APPLICABLE LETTER OF CREDIT FEE" means a percentage per annum determined by reference to the Debt/EBITDA Ratio as set forth below:
Debt/EBITDA Ratio Applicable Letter of Credit Fee
----------------- -------------------------------
LEVEL I
less than 2.25: 1.0 1.625%


LEVEL II
2.25: 1.0 or greater,
but less than 2.75: 1.0 1.875%


LEVEL III
2.75: 1.0 or greater,
but less than 3.25: 1.0 2.125%


LEVEL IV
3.25: 1.0 or greater,
but less than 3.75: 1.0 2.375%


LEVEL V
3.75: 1.0 or greater,
but less than 4.25:1.0 2.625%


LEVEL VI
4.25:1.0 or greater 2.875%


The Applicable Letter of Credit Fee shall be determined by reference to the ratio in effect from time to time; PROVIDED, HOWEVER, that (A) no change in the Applicable Letter of Credit Fee shall be effective until three Business Days after the date on which the Administrative Agent receives the financial statements required to be delivered pursuant to Section 5.03(b) or (c), as the case may be, and a certificate of the chief financial officer of the Parent Guarantor demonstrating such ratio and (B) the Applicable Letter of Credit Fee shall be at Level VI until the Parent Guarantor has delivered the financial statements for the fiscal quarter ended February 1, 2000 and for so long as the Parent Guarantor has not submitted to the Administrative Agent the information described in clause (A) of this proviso as and when required under Section 5.03(b) or (c), as the case may be.


"APPLICABLE MARGIN" means a percentage per annum determined by reference to the Debt/EBITDA Ratio as set forth below:


Debt/EBITDA Ratio Base Rate Advances Eurodollar Rate Advances
----------------- ------------------ ------------------------
LEVEL I
less than 2.25: 1.0 1.00% 2.00%


LEVEL II
2.25: 1.0 or greater,
but less than 2.75: 1.0 1.25% 2.25%


LEVEL III
2.75: 1.0 or greater,
but less than 3.25: 1.0 1.50% 2.50%


LEVEL IV
3.25: 1.0 or greater,
but less than 3.75: 1.0 1.75% 2.75%


LEVEL V
3.75: 1.0 or greater,
but less than 4.25:1.0 2.00% 3.00%


LEVEL VI
4.25:1.0 or greater 2.25% 3.25%


The Applicable Margin for each Advance shall be determined by reference to the ratio in effect from time to time; PROVIDED, HOWEVER, that (A) no change in the Applicable Margin shall be effective until three Business Days after the date on which the Administrative Agent receives the financial statements required to be delivered pursuant to Section 5.03(b) or (c), as the case may be, and a certificate of the chief financial officer of the Parent Guarantor demonstrating such ratio and (B) the Applicable Margin shall be at Level VI until the Parent Guarantor has delivered the financial statements for the fiscal quarter ended February 1, 2000 and for so long as the Parent Guarantor has not submitted to the Administrative Agent the information described in clause (A) of this proviso as and when required under Section 5.03(b) or (c), as the case may be.


"APPLICABLE PERCENTAGE" means a percentage per annum determined by reference to the Debt/EBITDA Ratio as set forth below:


Debt/EBITDA Ratio Applicable Percentage
----------------- ---------------------
LEVEL I
less than 2.25: 1.0 0.375%


LEVEL II
2.25: 1.0 or greater,
but less than 2.75: 1.0 0.375%


LEVEL III
2.75: 1.0 or greater,
but less than 3.25: 1.0 0.500%


LEVEL IV
3.25: 1.0 or greater,
but less than 3.75: 1.0 0.500%


LEVEL V
3.75: 1.0 or greater,
but less than 4.25:1.0 0.500%


LEVEL VI
4.25:1.0 or greater 0.500%


The Applicable Percentage shall be determined by reference to the ratio in effect from time to time; PROVIDED, HOWEVER, that (A) no change in the Applicable Percentage shall be effective until three Business Days after the date on which the Administrative Agent receives the financial statements required to be delivered pursuant to Section 5.03(b) or (c), as the case may be, and a certificate of the chief financial officer of the Parent Guarantor demonstrating such ratio and (B) the Applicable Percentage shall be at Level VI until the Parent Guarantor has delivered the financial statements for the fiscal quarter ended February 1, 2000 and for so long as the Parent Guarantor has not submitted to the Administrative Agent the information described in clause (A) of this proviso as and when required under Section 5.03(b) or (c), as the case may be.


"ARRANGER" means Salomon Smith Barney Inc.


"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender Party and an Eligible Assignee, and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit C hereto.


"ASSUMING LENDER" has the meaning specified in Section 2.17(d). "ASSUMPTION AGREEMENT" has the meaning specified in Section 2.17(d)(ii).


"AVAILABLE AMOUNT" of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing).


"BASE RATE" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of:


(a) the rate of interest announced publicly by Citibank in New York,
New York, from time to time, as Citibank's base rate; and


(b) 1/2 of 1% per annum above the Federal Funds Rate.


"BASE RATE ADVANCE" means an Advance that bears interest as provided in Section 2.07(a)(i).


"BORROWERS" has the meaning specified in the recital of parties to this Agreement.


"BORROWERS' ACCOUNT" means the account of the Borrowers maintained by the Borrowers with Citibank at its office at 399 Park Avenue, New York, New York 10043, with the account number so designated on Schedule II, or such other account as the Borrowers shall specify in writing to the Administrative Agent.


"BORROWING" means a Working Capital Borrowing or a Swing Line Borrowing.


"BORROWING BASE CERTIFICATE" means a certificate in substantially the form of Exhibit I hereto, duly certified by the chief financial officer of the Parent Guarantor.


"BUSINESS DAY" means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market.


"CAPITAL EXPENDITURES" means, for any Person for any period, the sum of, without duplication, (a) all expenditures made, directly or indirectly, by such Person or any of its Subsidiaries during such period for equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, that have been or should be, in accordance with GAAP, reflected as additions to property, plant or equipment on a Consolidated balance sheet of such Person or have a useful life of more than one year plus (b) the aggregate principal amount of all Debt (including Obligations under Capitalized Leases) assumed or incurred in connection with any such expenditures. For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such proceeds, as the case may be.


"CAPITALIZED LEASES" means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.


"CASH CONCENTRATION ACCOUNT" has the meaning specified in the Security Agreement.


"CASH EQUIVALENTS" means any of the following, to the extent owned by the Parent Guarantor or any of its Subsidiaries free and clear of all Liens other than Liens created under the Collateral Documents and having a maturity of not greater than 180 days from the date of acquisition thereof: (a) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, (b) insured certificates of deposit of or time deposits with any commercial bank that is a Lender Party or a member of the Federal Reserve System, issues (or the parent of which issues) commercial paper rated as described in clause (c) below, is organized under the laws of the United States or any State thereof and has combined capital and surplus of at least $1 billion or (c) commercial paper in an aggregate amount of no more than $1,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of any State of the United States and rated at least "Prime-1" (or the then equivalent grade) by Moody's Investors Service, Inc. or "A-1" (or the then equivalent grade) by Standard & Poor's, a division of The McGraw-Hill Companies, Inc.


"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.


"CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.
"CHANGE OF CONTROL" means the occurrence of any of the following: (a) any Person (other than Jeffrey McKeever) or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of the Parent Guarantor (or other securities convertible into such Voting Stock) representing 20% or more of the combined voting power of all Voting Stock of the Parent Guarantor; or (b) during any period of up to 24 consecutive months, commencing before or after the date of this Agreement, individuals who at the beginning of such 24-month period were directors of the Parent Guarantor shall cease for any reason to constitute a majority of the board of directors of the Parent Guarantor; or (c) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Parent Guarantor or (d) Jeffrey McKeever shall sell more than 50% of his ownership of the combined voting power of the Voting Stock of the Parent Guarantor.


"COLLATERAL" means all "Collateral" referred to in the Collateral Documents and all other property that is or is intended to be subject to any Lien in favor of the Collateral Agent for the benefit of the Secured Parties.


"COLLATERAL AGENT" has the meaning specified in the recital of parties to this Agreement.


"COLLATERAL DOCUMENTS" means the Security Agreement and any other agreement that creates or purports to create a Lien in favor of the Collateral Agent for the benefit of the Secured Parties.


"COMMITMENT" means a Working Capital Commitment or a Letter of Credit Commitment.


"COMMITMENT DATE" has the meaning specified in Section 2.17(b).


"COMMITMENT INCREASE" has the meaning specified in Section 2.17(a).


"CONFIDENTIAL INFORMATION" means information that any Loan Party furnishes to any Agent or any Lender Party in a writing designated as confidential, but does not include any such information that is or becomes generally available to the public or that is or becomes available to such Agent or such Lender Party from a source other than the Loan Parties.


"CONSOLIDATED" refers to the consolidation of accounts in accordance with GAAP.
"CONSOLIDATING" refers to the presentation of the Consolidated financial statements of the Parent Guarantor and the Consolidated financial statements of each Borrower.


"CONTINGENT OBLIGATION" means, with respect to any Person, any Obligation or arrangement of such Person to guarantee or intended to guarantee any Debt, leases, dividends or other payment Obligations ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the Obligation of a primary obligor, (b) the Obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any Obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or de ...