Notice of Default under Inventory and Working Capital Financing Agreement between IBM Credit LLC and Datatec Systems, Inc.
IBM Credit LLC has notified Datatec Systems, Inc. that it is in default under their Inventory and Working Capital Financing Agreement due to Datatec's failure to meet specific financial covenants, including profitability and operating income requirements. As a result, IBM Credit is reserving its rights and intends to pursue all available legal remedies. The notice is addressed to Datatec's Chief Financial Officer and references the agreement originally dated November 10, 2000, as amended through November 7, 2003.
Exhibit 10.1
IBM Credit LLC
December 17, 2003
Datatec Systems, Inc.
23 Madison Road
Fairfield, NJ 07004
Attention: Mr. Mark J. Hirschhorn, Chief Financial Officer
Reference: That certain Inventory and Working Capital Financing Agreement by and between Datatec Systems, Inc. ("Datatec") and IBM Credit LLC, formerly IBM Credit Corporation ("IBM Credit"), and dated as of November 10, 2000 (and as amended, supplemented or otherwise altered or modified from time to time through and including November 7, 2003, the "Agreement").
Dear Mr. Hirschhorn:
IBM Credit is in receipt of Datatec's draft financial statements for the period ending October 31, 2003 and has determined that Datatec has failed to meet certain financial covenants, including, without limitation, the following:
| Covenant | Covenant Requirement | Actual |
| Net Profit After Tax to Revenue | Equal To Or Greater Than 0.1% | A Net Loss of $7,785,000 |
| Operating Income to Interest Expense | Equal To Or Greater Than 1.25:1 | An Operating Loss |
As a result of the foregoing, IBM Credit declares Datatec to be in default of the Agreement effective immediately.
IBM Credit reserves any and all rights it now has or may have in the future. Please be advised that it is IBM Credit's intent, pursuant to Section 9.3 of the Agreement to pursue all remedies available to it at law or in equity in asserting its claims against Datatec.
Please contact me at 914 ###-###-#### or Bruce Gordon at 914 ###-###-#### if you have any questions or you wish to discuss this matter further.
Sincerely,
IBM CREDIT, LLC
/s/ Steven A Flanagan
Steven A. Flanagan
Manager, Global Special Handling
