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

 EXHIBIT 10.31 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 July 26, 2001 by and between Datatec Industries, Inc., duly organized under the laws of the State of Delaware ("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 (a) is in default of one or more of its financial covenants contained in the Agreement and (b) has been in default of other terms and conditions of the Agreement within the previous three (3) months (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 Agreement are applicable to the financial results of Customer for the fiscal year ending April 30, 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 - ------------------------------ ---------------------------------- ------ Revenue on an Annual Basis Greater than Zero and to Working Capital Equal to or Less than 25.0 : 1.0 - 25.5 : 1.0 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: 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, that 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:: Page 1 of 2  Covenant Requirement ------------------------------------------ ----------- (i) On and after April 30, 2002 Revenue on an Annual Basis to Working Capital Greater than Zero and Equal to or Less than 25.0 : 1.0 (ii) On and after October 1, 2001 Net Profit after Tax to Revenue Equal to or Greater than 0.10 percent (iii) On and after October 1, 2001 Tangible Net Worth Equal to or Greater than $2,500,000.00 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, and (ii) a waiver fee, in immediately available funds, equal to One Hundred and Seventy - Five Thousand Dollars ($175,000.00) on or prior to July 26, 2001. 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. SECTION 6. ADDITIONAL REQUIREMENTS. None. 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: /s/ Steven A. Flanagan By: /s/ Ron Marino --------------------------------------- ------------------------------------- Print Name: Steven A. Flanagan Print Name: Ron Marino ------------------------------- ------------------------------ Title: Manager Special Handling Title: CFO ------------------------------------ ---------------------------------- Date: July 30, 2001 Date: 7/26/01 ------------------------------------ ---------------------------------- Page 2 of 2