Acknowledgment, Waiver, and Amendment to Inventory and Working Capital Financing Agreement between Datatec Industries, Inc. and IBM Credit Corporation

 EXHIBIT 10.29 ACKNOWLEDGMENT, WAIVER AND AMENDMENT TO FINANCING AGREEMENT This ACKNOWLEDGMENT, WAIVER AND AMENDMENT ("Amendment") TO THE INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT is made as of May 2, 2001 by and between Datatec Industries, Inc., a Delaware corporation ("Customer") and IBM Credit Corporation, a Delaware corporation ("IBM Credit"). RECITALS: WHEREAS, Customer and IBM Credit have entered into that certain Inventory and Working Capital Financing Agreement dated as of November 10, 2000 (as amended, supplemented or otherwise modified from time to time, the "Agreement"); WHEREAS, Customer is in default of one or more of its financial covenants contained in the Agreement (as more specifically explained in Section 2 hereof); and WHEREAS, IBM Credit is willing to waive such defaults subject to the conditions set forth below. AGREEMENT NOW THEREFORE, in consideration of the premises set forth herein, and for other good and valuable consideration, the value and sufficiency of which is hereby acknowledged, the parties hereto agree that the Agreement is amended as follows: SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Agreement. SECTION 2. ACKNOWLEDGMENT. Customer acknowledges that the financial covenants set forth in Attachment A to the Agreement are applicable to the financial results of Customer for the fiscal quarter ending January 31, 2001, and Customer was required to maintain such financial covenants at all times. Customer further acknowledges its actual attainment was as follows: Covenant Covenant Covenant Requirement Actual -------- ----------- -------- Net Profit after Tax to Revenue Equal to or Greater than Net Loss 0.0 percent SECTION 3. WAIVERS TO AGREEMENT. IBM Credit hereby waives the Defaults of Customer with the terms of the Agreement to the extent such Defaults are set forth in Section 2 hereof. SECTION 4. AMENDMENT. The Agreement is hereby amended as follows, notwithstanding any other conditions precedent contained herein: A. Attachment A to the Agreement is hereby amended by deleting such Attachment A in its entirety and substituting, in lieu thereof, the Attachment A attached hereto. Such new Attachment A shall be effective as of the date specified in the new Attachment A. The changes contained in the new Attachment A include, without limitation, the following: (a) Product Financing Charge is increased from Prime Rate plus 0.25% to Prime Rate plus 3.00%; Page 1 of 3  (b) WCO Advance Charge is increased from Prime Rate plus 0.25% to Prime Rate plus 3.00%; (c) PRO Advance Charge is increased from Prime Rate plus 0.25% to Prime Rate plus 3.00%; (d) Credit Line is decreased from Eighteen Million Dollars ($18,000,000.00) to Fourteen Million Dollars ($14,000,000.00); (e) Customer shall be required to maintain the following financial percentage(s) and ratio(s) as of the last day of the fiscal period under review by IBM Credit: Covenant Covenant Requirement, fiscal Covenant Requirement, fiscal quarters ending Requirement, quarters ending October 2001 and fiscal Covenant April/July 2001 thereafter quarters ---------- ------------------- ------------------- ending April 2002 and thereafter ---------- (i) Revenue on an Annual Basis Greater than Zero and Equal to or Greater than Zero and Equal to Greater than Zero and to Working Capital Less than 25.0 :1.0 or Less than 25.0 :1.0 Equal to or Less than 25.0 :1.0 (ii) Net Profit after Tax to Equal to or Greater than 0.10 Equal to or Greater Revenue percent than 0.10 percent (iii) Tangible Net Worth Equal to or Greater than $2.5 Equal to or Greater Million than $5.0 Million B. Schedule A of the Agreement is hereby amended by increasing the Term Loan Finance Charge from Prime Rate plus 0.75% to Prime Rate plus 3.50%. C. Section 2.4. of the Agreement is hereby amended by deleting 2.4.(E) in its entirety and substituting in lieu thereof the following; " (E) In the event of, and within three (3) days after (i) a public offering or private placement of shares of Customer or any of Customer's subsidiaries or (ii) an offering of public or private debt by Customer or any of Customer's subsidiaries, Customer shall make a mandatory prepayment of $750,000 on the term loan. SECTION 5. CONDITIONS TO EFFECTIVENESS OF WAIVER. The waiver set forth in Section 3 hereof shall become effective upon the receipt by IBM Credit from Customer of: (i) This Amendment executed by Customer; (ii) A waiver fee, in immediately available funds, equal to Ninety Four Thousand and Five Hundred Dollars ($94,500.00). Such waiver fee payable to IBM Credit hereunder shall be nonrefundable and shall be in addition to any other fees IBM Credit may charge Customer; Page 2 of 3  (iii) An executed collateralized guaranty of Customer from its parent company, Datatec Systems, Inc., in form and substance satisfactory to IBM Credit in its sole discretion; (iv) An executed collateralized guaranty of Customer from its affiliate, E-Deploy.com, Inc., in form and substance satisfactory to IBM Credit in its sole discretion; and SECTION 6. ADDITIONAL REQUIREMENTS. (a) Customer hereby restates and affirms the provisions of Section 7.1.(C) of the Agreement that as soon as available and in any event within thirty (30) days after the end of each fiscal month of Customer, Customer shall provide; (i) Financial Statements as of the end of such period and for the fiscal year to date, together with a comparison to the Financial Statements for the same periods in the prior year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments and except for the absence of footnotes) by the chief executive officer or chief financial officer of Customer as having been prepared in accordance with GAAP; and (ii) a Compliance Certificate along with a schedule, in substantially the form of Attachment C hereto, of the calculations used in determining, as of the end of such fiscal month, whether Customer is in compliance with the financial covenants set forth in Attachment A; (b) Customer shall provide to IBM Credit on the fifth and twentieth day (or if such day is not a Business Day, on the following Business Day) of each month a Collateral Management Report in form and detail satisfactory to IBM Credit. Such Collateral Management Report shall be as of a date no earlier than the last day of the immediately preceding month or the fifteenth of the current month respectively. SECTION 7. RIGHTS AND REMEDIES. Except to the extent specifically waived herein IBM Credit reserves any and all rights and remedies that IBM Credit now has or may have in the future with respect to Customer, including any and all rights or remedies which it may have in the future as a result of Customer's failure to comply with its financial covenants to IBM Credit. Except to the extent specifically waived herein neither this Amendment, any of IBM Credit's actions or IBM Credit's failure to act shall be deemed to be a waiver of any such rights or remedies. SECTION 8. GOVERNING LAW. This Amendment shall be governed by and interpreted in accordance with the laws which govern the Agreement. SECTION 9. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute one agreement. IN WITNESS WHEREOF, this Amendment has been executed by duly authorized representatives of the undersigned as of the day and year first above written. IBM Credit Corporation Datatec Industries, Inc. By: By: /s/ Ron A. Marino --------------------------------------- ------------------------------------- Print Name: Print Name: Ron A. Marino ------------------------------- ------------------------------ Title: Title: CFO ------------------------------------ ---------------------------------- /s/ William Aloia William Aloia Notary Public, State of New Jersey No. 2162129 Qualified Bergen County Commission Expires February 3, 2004  ATTACHMENT A, ("IWCF ATTACHMENT A") TO INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT") DATED ___________, ____ Customer Name: Datatec Industries, Inc. Effective Date of this IWCF Attachment A: ______________, 20__ I. FEES, RATES AND REPAYMENT TERMS: (A) Credit Line: Fourteen Million Dollars ($14,000,000.00); (B) Borrowing Base: (i) 85% of the amount of the Customer's Eligible Accounts other than Concentration Accounts as of the date of determination as reflected in the Customer's most recent Collateral Management Report; (ii) a percentage, determined from time to time by IBM Credit in its sole discretion, of the amount of Customer's Concentration Accounts for a specific Concentration Account Debtor as of the date of determination as reflected in the Customer's most recent Collateral Management Report; unless otherwise notified by IBM Credit, in writing, the percentage for Concentration Accounts for a specific Concentration Account Debtor shall be the same as the percentage set forth in paragraph (i) of the Borrowing Base; provided that the advance on Eligible Accounts from International Business Machines Corporation as Concentration Account Debtor is 95% (iii) 100% of the Customer's inventory in the Customer's possession as of the date of determination as reflected in the Customer's most recent Collateral Management Report constituting Products (other than service parts) financed through a Product Advance by IBM Credit, provided, however, IBM Credit has a first priority security interest in such Products and such Products are new and in un-opened boxes. The value to be assigned to such inventory shall be based upon the Authorized Supplier's invoice price to Customer for Products net of all applicable price reduction credits. (iv) up to 35% of the value of Customer's inventory in the Customer's possession as of the date of determination as reflected and identified in the Customer's most recent Collateral Management Report constituting Products designated by Customer as "Cable" and not financed through a Product Advance by IBM Credit, provided, however, IBM Credit has a first priority security interest in such Products and such Products are new and in un-opened boxes. The value to be assigned to such inventory shall be determined by commercially reasonable methods, in IBM's sole discretion. (v) up to 25% of the value of Customer's inventory in the Customer's possession as of the date of determination as reflected in the Customer's most recent Collateral Management Report constituting Products not financed through a Product Advance by IBM Credit, provided, however, IBM Credit has a first priority security interest in such Products and such Products are new and in un-opened boxes. The value to be assigned to such inventory shall be determined by commercially reasonable methods, in IBM's sole discretion. (C) Product Financing Charge: Prime Rate plus 3.00% (D) Product Financing Period: 70 days Page 1 of 11  (E) Collateral Insurance Amount: Five Million Dollars ($5,000,000.00) (F) A/R Finance Charge: (i) PRO Advance Charge: Prime Rate plus 3.00% (ii) WCO Advance Charge: Prime Rate plus 3.00% (G) Delinquency Fee Rate: Prime Rate plus 6.500% (H) Shortfall Transaction Fee: Shortfall Amount multiplied by 0.30% (I) Free Financing Period Exclusion Fee: Product Advance multiplied by 0.25% (J) Other Charges: (i) Application Processing Fee: $25,000.00 (ii) Annual Renewal Fee: $20,000.00 (iii) Covenant Recasting Fee: $25,000.00 Page 2 of 11  II. BANK ACCOUNT Customer's Lockbox(es) and Special Account(s) will be maintained at the following Bank(s): Name of Bank: Address: Phone: Lockbox Address: Special Account #: - -------------------------------------------------------------------------------- Name of Bank: Address: Phone: Lockbox Address: Special Account #: - -------------------------------------------------------------------------------- Name of Bank: Address: Phone: Lockbox Address: Special Account #: - -------------------------------------------------------------------------------- Name of Bank: Address: Phone: Lockbox Address: Special Account #: Page 3 of 11  III. FINANCIAL COVENANTS: Definitions: The following terms shall have the following respective meanings in this Attachment. All amounts shall be determined in accordance with generally accepted accounting principles (GAAP). "Consolidated Net Income" shall mean, for any period, the net income (or loss), after taxes, of Customer on a consolidated basis for such period determined in accordance with GAAP. "Current" shall mean within the ongoing twelve month period. "Current Assets" shall mean assets that are cash or expected to become cash within the ongoing twelve months. "Current Liabilities" shall mean payment obligations resulting from past or current transactions that require settlement within the ongoing twelve month period. All indebtedness to IBM Credit shall be considered a Current Liability for purposes of determining compliance with the Financial Covenants. "EBITDA" shall mean, for any period (determined on a consolidated basis in accordance with GAAP), (a) the Consolidated Net Income of Customer for such period, plus (b) each of the following to the extent reflected as an expense in the determination of such Consolidated Net Income: (i) the Customer's provisions for taxes based on income for such period; (ii) Interest Expense for such period; and (iii) depreciation and amortization of tangible and intangible assets of Customer for such period. "Fixed Charges" shall mean, for any period, an amount equal to the sum, without duplication, of the amounts for such as determined for the Customer on a consolidated basis, of (i) scheduled repayments of principal of all Indebtedness (as reduced by repayments thereon previously made), (ii) Interest Expense, (iii) capital expenditures (iv) dividends, (v) leasehold improvement expenditures and (vi) all provisions for U.S. and non U.S. Federal, state and local taxes. "Fixed Charge Coverage Ratio" shall mean the ratio as of the last day of any fiscal period of (i) EBITDA as of the last day of such fiscal period to (ii) Fixed Charges. "Interest Expense" shall mean, for any period, the aggregate consolidated interest expense of Customer during such period in respect of Indebtedness determined on a consolidated basis in accordance with GAAP, including, without limitation, amortization of original issue discount on any Indebtedness and of all fees payable in connection with the incurrence of such Indebtedness (to the extent included in interest expense), the interest portion of any deferred payment obligation and the interest component of any capital lease obligations. "Long Term" shall mean beyond the ongoing twelve month period. "Long Term Assets" shall mean assets that take longer than a year to be converted to cash. They are divided into four categories: tangible assets, investments, intangibles and other. "Long Term Debt" shall mean payment obligations of indebtedness which mature more than twelve months from the date of determination, or mature within twelve months from such date but are renewable or extendible at the option of the debtor to a date more than twelve months from the date of determination. "Net Profit after Tax" shall mean Revenue plus all other income, minus all costs, including applicable taxes. Page 4 of 11  "Revenue" shall mean the monetary expression of the aggregate of products or services transferred by an enterprise to its customers for which said customers have paid or are obligated to pay, plus other income as allowed. "Subordinated Debt" shall mean Customer's indebtedness to third parties as evidenced by an executed Notes Payable Subordination Agreement in favor of IBM Credit. "Tangible Net Worth" shall mean: Total Net Worth minus; (a) goodwill, organizational expenses, pre-paid expenses, deferred charges, research and development expenses, software development costs, leasehold expenses, trademarks, trade names, copyrights, patents, patent applications, privileges, franchises, licenses and rights in any thereof, and other similar intangibles (but not including contract rights) and other current and non-current assets as identified in Customer's financial statements; (b) all accounts receivable from employees, officers, directors, stockholders and affiliates; and (c) all callable/redeemable preferred stock. "Total Assets" shall mean the total of Current Assets and Long Term Assets. "Total Liabilities" shall mean the Current Liabilities and Long Term Debt less Subordinated Debt, resulting from past or current transactions, that require settlement in the future. "Total Net Worth" (the amount of owner's or stockholder's ownership in an enterprise) is equal to Total Assets minus Total Liabilities. "Working Capital" shall mean Current Assets minus Current Liabilities. Customer will be required to maintain the following financial ratios, percentages and amounts as of the last day of the fiscal period under review by IBM Credit: Covenant Covenant Requirement ------------------------------------------ ----------- (i) Revenue on an Annual Basis (i.e. the current Greater than Zero and fiscal year-to-date Revenue annualized) Equal to or Less than 25.0 :1.0 to Working Capital (ii) Net Profit after Tax to Revenue Equal to or Greater than 0.10 percent effective quarter ending 10/31/01 and thereafter (iii) Minimum Tangible Net Worth Equal to or Greater than $2,500 K by quarter ended 10/31/01 and $5,000 K effective fye 4/30/02 and thereafter Page 5 of 11  IV. ADDITIONAL CONDITIONS PRECEDENT PURSUANT TO SECTION 5.1 (J) OF THE AGREEMENT: o Executed Blocked Account Amendment; o Executed Collateralized Guaranty of Datatec Systems, Inc.; o Executed Collateralized Guaranty of E-Deploy.com, Inc.; o Executed Corporate Guaranty of HH Communications, Inc.; o Fiscal year-end financial statements of Datatec Systems, Inc. as of end of Customer's prior fiscal year audited by an independent certified public accountant; o A Certificate of Location of Collateral whereby the Customer certifies where Customer presently keeps or sells inventory, equipment and other tangible Collateral; o A copy of an all-risk insurance certificate pursuant to Section 7.8 (B) of the Agreement; Page 6 of 11  IWCF ATTACHMENT B TO INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT") Customer: Datatec Industries, Inc. I. Liens: II. Locations of Offices, Records and Inventory: (A) Principal Place of Business and Chief Executive Office: (B) Locations of Assets, Inventory and Equipment (including warehouses): Location Leased (Y/N) -------- ------------ III. Fictitious Names: IV. Organization: (A) Subsidiaries: Name Jurisdiction Owner % Owned ---- ------------ ----- ------- (B) Affiliates: Name Capacity ---- -------- V. Judgments: VI. Environmental Matters: VII. Indebtedness: Page 7 of 11  IWCF ATTACHMENT C INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT") COMPLIANCE CERTIFICATE TO: IBM CREDIT CORPORATION ---------------------- ---------------------- The undersigned authorized officers of ____________________________ ("Customer"), hereby certify on behalf of the Customer, with respect to the Inventory and Working Capital Financing Agreement executed by and between ____________ and IBM Credit Corporation ("IBM Credit") on ______________, 20__, as amended from time to time (the "Agreement"), that (A) ___________ has been in compliance for the period from ______________, 20__ to _________ ____, 20__ with the financial covenants set forth in Attachment A to the Agreement, as demonstrated below, and (B) no Default has occurred and is continuing as of the date hereof, except, in either case, as set forth below. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Agreement. I. FINANCIAL COVENANTS: Covenant Covenant Requirement Covenant Actual -------- -------------------- --------------- (i) Annualized Revenue Greater than Zero and to Working Capital Equal to or Less than 25.0 :1.0 effective quarter ending 10/31/01 and thereafter (ii) Net Profit after Tax Equal to or Greater than 0.10 to Revenue percent effective quarter ending 10/31/01and thereafter (iii) MinimumTangible Net Equal to or Greater than Worth $2,500 K effective quarter ending 10/31/01 and equal to or greater than $5,000 K by fiscal year ending 4/30/02 Page 9 of 11  IWCF ATTACHMENT C INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT") (Continued) II. CALCULATION OF TANGIBLE NET WORTH: Total Assets MINUS Total Liabilities LESS: goodwill organizational expenses prepaid expenses deferred charges, etc. leasehold expenses all other callable/redeemable preferred stock officer, employee, director, stockholder and affiliate receivables Total Tangible Net Worth Attached hereto are Financial Statements as of and for the end of the fiscal _____________ ended on the applicable date, as required by Section 7.1 of the Inventory and Working Capital Financing Agreement. Submitted by: - ----------------------------------------- (Customer Name) By: ______________________________________ Print Name: _______________________________ Title: _____________________________________ Page 10 of 11