EXHIBIT 99.1
FORBEARANCE AGREEMENT IN REGARDS
TO
CREDIT FACILITIES
AGREEMENT
This FORBEARANCE AGREEMENT IN
REGARDS TO CREDIT FACILITIES AGREEMENT (this
“Agreement”) is entered into and effective as of
February 28, 2006, by and among GTSI Corp., a Delaware corporation
(“GTSI”), Technology Logistics, Inc., a Delaware
corporation (“TLI”; separately and collectively with
GTSI, “Borrower” or “Borrowers”), GE
Commercial Distribution Finance Corporation (“GECDF”),
as Administrative Agent, and GECDF and the other
Lenders.
Recitals
:
A.
GTSI, TLI, Administrative Agent and
Lenders are party to that certain Credit Facilities Agreement dated
as of October 20, 2003, as amended by that certain First Amendment
to Credit Facilities Agreement dated as of March 12, 2004, as
further amended by that certain Second Amendment to Credit
Facilities Agreement dated as of July 29, 2004, as further amended
by that certain Third Amendment to Credit Facilities Agreement
dated as of November 22, 2004, as further amended by that certain
Fourth Amendment to Credit Facilities Agreement dated as of April
28, 2005, as further amended by that certain Fifth Amendment to
Credit Facilities Agreement dated as of August 8, 2005, as further
amended by that certain Sixth Amendment to Credit Facilities
Agreement dated as of August 15, 2005, as further amended by that
certain Seventh Amendment to Credit Facilities Agreement dated as
of November 15, 2005, and as further amended by that certain letter
agreement dated as of February 14, 2006 (the “Original Credit
Agreement”).
B.
Subject only to the Permitted
Security Interests, the Loan Obligations are secured by a first
priority perfected Security Interest and lien in the Collateral,
which includes, without limitation, all the assets of each
Borrower, including, without limitation, inventory, equipment,
fixtures, accounts, contract rights, chattel paper, security
agreements, instruments, deposit accounts, all other personal
property assets of each Borrower (both tangible and intangible),
reserves, documents, general intangibles, judgments, claims,
insurance policies, and payments owed or made to a Borrower
thereon, whether now owned or hereafter acquired, all attachments,
accessories, accessions, returns, repossessions, exchanges,
substitutions and replacements thereto, and all other assets and
collateral described in any Loan Document, together with all
products and proceeds (of any kind or nature, including, without
limitation, insurance and condemnation proceeds)
thereof.
C.
The following Events of Default are
Existing Defaults under the Original Credit Agreement and the Loan
Documents: (i) Borrowers’ failure to comply with the
financial covenants contained in the following sections of the
Original Credit Agreement for the following computation date: (A)
Section 15.4 (Maximum Total Funded Indebtedness to EBITDA) for the
January 31, 2006 computation date, and (B) Section 15.5 (Minimum
EBIT to Net Sales) for the January 31, 2006 computation date; and
(ii) Borrowers’ failure to comply with monthly financial
reporting requirements for the month ended January 31, 2006, under
Section 13.14.3 of the Original Credit Agreement.
D.
As a result of said Existing
Defaults, each Borrower acknowledges that Administrative Agent and
the Lenders may enforce their respective rights pursuant to the
Loan Documents. Furthermore as a result of said Existing Defaults,
Administrative Agent and the Lenders have the legal right to
terminate all Commitments and all such Commitments are hereby
terminated.
E.
As a result of the Existing
Defaults, Administrative Agent and the Lenders have the legal right
to repossess the Collateral and take all other legal actions
against Borrowers and the Collateral.
F.
Borrowers have requested that
Administrative Agent and the Lenders temporarily forbear from
enforcing their respective rights and remedies.
G.
In exchange for Borrowers’
agreements, representations, covenants, releases and confirmations
contained and referenced herein, Administrative Agent and the
Lenders are, subject to the terms and conditions contained herein,
willing to forbear as requested.
J.
Borrowers acknowledge and agree that
Administrative Agent and the Lenders have performed all obligations
on their part to be performed under the Loan Documents and
Borrowers have no offsets or defenses to the payment of the sums
due Administrative Agent and the Lenders nor do Borrowers have any
claims against Administrative Agent and the Lenders of any kind or
nature.
Agreement
Therefore, in consideration of the
mutual agreements herein and other sufficient consideration, the
receipt of which is hereby acknowledged, GTSI, TLI, Administrative
Agent and the Lenders hereby agree as follows:
1.
Definitions. All
references to the “Agreement” or the “Credit
Agreement” in the Original Credit Agreement and in this
Agreement shall be deemed to be references to the Original Credit
Agreement as it may be amended (by this Agreement and others),
restated, extended, renewed, replaced, or otherwise modified from
time to time. Capitalized terms used and not otherwise defined
herein have the meanings given them in the Original Credit
Agreement.
2.
Effectiveness of Agreement. This Agreement shall become effective as
of the date first written above, but only if this Agreement has
been executed by each of GTSI, TLI, Administrative Agent and the
Required Lenders, and only if all of the documents listed on
Exhibit A to this Agreement have been delivered and, as applicable,
executed, sealed, attested, acknowledged, certified, or
authenticated, each in form and substance satisfactory to
Administrative Agent and the Lenders, by each of GTSI, TLI, and/or
GTSI Financial Services, Inc. (“GTSIFS”), as applicable
and the fees required hereunder are paid in full in cash by the
Borrowers and all fees and expenses of Administrative Agent have
been fully reimbursed as requested by Administrative Agent. This
Agreement and each document, note, certificate or agreement listed
on Exhibit A and signed by GTSI, TLI, or GTSIFS, as applicable, is
and shall be deemed (together with all prior documents, notes,
certificates and other agreements defined as Loan Documents in the
Original Credit Agreement) to be a “Loan
Document.”
3.
No Waiver of Default. The Borrowers hereby acknowledge and
agree that (i) Events of Default exist under the terms of the Loan
Documents and such Events of Default will continue for as long as
the Loan Obligations remain unpaid in full in cash, notwithstanding
Administrative Agent’s and the Lenders’ agreement to
forbear as set forth herein, and (ii) Administrative Agent’s
and the Lenders’ agreement to forbear is not, and shall not
be construed as, a waiver of the Existing Defaults or of any
subsequent Defaults or Events of Default and, except as
specifically provided herein, Administrative Agent’s and the
Lenders’ agreement to forbear in no way impairs
Administrative Agent’s and the Lenders’ right to
enforce its remedies for such Existing Defaults and subsequent
Defaults or Events of Default. The Existing Defaults remain Events
of Default.
4.
Lenders “Terminating Lender” Notice; Notice of
Non-Renewal of Aggregate Facilities. Borrowers, Administrative Agent, and each Lender
acknowledges and agrees: (i) All Lenders have
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provided timely notice to Administrative Agent
and Administrative Agent has provided timely notice to each
Borrower and each other Lender (all in accordance with the Original
Credit Agreement and that certain Letter Agreement, dated February
14, 2006 among Borrowers, Administrative Agent and Lenders) that
each Lender has elected to terminate the Aggregate Facilities and
their respective Commitment as of the Initial Maturity Date, and be
deemed a Terminating Lender, pursuant to the provisions of Section
3.7 of the Original Credit Agreement; (ii) Administrative Agent has
delivered timely written notice to each Borrower and each Lender
that none of the Aggregate Facilities, including, but not limited
to the Aggregate Revolving Loan Facility, will be renewed
automatically, and that except as otherwise provided by the
Original Credit Agreement or this Agreement, the earlier of the
Forbearance Termination Date and the Initial Maturity Date will be
the date upon which all Loan Obligations are due and payable in
full; and (iii) Pursuant to Section 3.7 of the Original Credit
Agreement, no existing Lender is required to assume the pro rata
share of the Aggregate Facilities of any other Lender.
5.
Forbearance. In exchange
for the releases (including specifically, Borrowers’ releases
contained in Section 13 below), promises and covenants (including,
without limitation, Borrowers’ covenants in this Section 5
and Section 11 of this Agreement), warranties, representations and
conditions stated herein and in the Loan Documents, Administrative
Agent and the Lenders agree, subject to the terms and conditions in
this Agreement, until the Forbearance Termination Date (as such
term is defined below in Section 7):
5.1. Administrative Agent and the Lenders will
forbear from exercising its rights and remedies against the
Borrowers and the Collateral under this Agreement, the Original
Credit Agreement and the other Loan Documents.
5.2. Administrative Agent and the Lenders will
continue to advance funds to Borrowers as set forth herein and in
the Original Credit Agreement, as amended by this
Agreement.
6.
Borrowers’ Additional Covenants. In addition to any and all covenants and
agreements of Borrowers contained herein, in the Original Credit
Agreement and in the Loan Documents, each Borrower unconditionally
agrees as follows:
6.1. Upon execution of this Agreement, Borrowers
shall pay to Administrative Agent, for the pro rata account of each
Lender, a forbearance fee of $225,000 in consideration of
Administrative Agent’s and the Lenders’ agreement to
forbear as set forth herein, and Borrowers acknowledge and agree
that the foregoing forbearance fee paid to Administrative Agent for
the pro rata benefit of each Lender will be earned by
Administrative Agent and the Lenders upon execution of this
Agreement and will not be refundable to Borrowers for any reason or
under any circumstance, and shall not be applied to any of the Loan
Obligations (including principal and interest) . Borrowers
shall promptly pay to Administrative Agent an amount equal to all
fees, costs and expenses incurred by the Administrative Agent
(including all attorneys fees and expenses) in connection with the
preparation, negotiation, execution and delivery of this Agreement,
the earlier proposed Eighth Amendment to Credit Facilities
Agreement which was not executed, and any further documentation
which may be required in connection herewith or
therewith.
6.2. Administrative Agent shall retain the Collateral
to secure repayment of the Loan Obligations until such time as the
Loan Obligations are paid in full in cash.
6.3. Until the Loan Obligations are repaid in full in
cash, each Borrower shall allow Administrative Agent and its
attorneys, the Advisor, accountants, agents, consultants and
representatives or other Persons authorized by and acting on behalf
of Administrative Agent to perform, and Borrowers shall fully
cooperate with Administrative Agent in connection therewith,
inventory reviews, appraisals, inspections, and examinations of
Borrowers and the Collateral as often as Administrative Agent
determines in its sole and absolute discretion. All inventory
reviews, appraisals, inspections, and
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examinations shall be at Borrowers’ sole
cost and expense, including but not limited to a fee of $525 per
auditor per day plus travel expenses, and Borrowers shall reimburse
Administrative Agent, on demand, for all of its fees, costs and
expenses (including, without limitation, allocated internal charges
and overheads and travel expenses) incurred by Administrative Agent
or its attorneys, accountants, agents, consultants and
representatives or other Persons authorized by and acting on behalf
of Administrative Agent in connection with all inventory reviews,
appraisals, inspections and examinations. Notwithstanding the
foregoing, and effective only after the date of this Agreement,
Borrower shall be responsible for costs and expenses related to not
more than four (4) separate examination engagements per calendar
year. Administrative Agent, and its attorneys, accountants, agents,
consultants and representatives or other Persons authorized by and
acting on behalf of Administrative Agent may make copies or
abstracts of any books and records of any Borrower or its auditors,
and discuss the affairs, finances, Collateral, and books and
records of any Borrower with its auditors, officers, directors,
consultants and employees. Borrowers will deliver to Administrative
Agent any instrument necessary for Administrative Agent to obtain
records from any service bureau maintaining records for
Borrowers.
6.4. Until the Loan Obligations are repaid in full in
cash, each Borrower shall allow Administrative Agent, its
attorneys, and any of their representatives, consultants, and
agents to have their employees and representatives at
Borrower’s corporate headquarters location and any of
Borrower’s other locations (owned or leased) at all times,
with full access to all Collateral, facilities, books and records
(including, without limitation, books and records relating to
financial statements and accounting matters, disbursements,
collections and deposits), and all of Borrower’s employees,
officers and directors as well as Borrower’s independent
outside auditing firm.
6.5.
On or before March 13, 2006,
Borrowers shall have engaged a nationally recognized restructuring
advisor to, among other things, evaluate Borrowers’ financial
restructuring plan and alternatives (“Advisor”). The
identity of the Advisor and the scope of the engagement of the
Advisor, must be satisfactory to Administrative Agent in its
reasonable discretion. Advisor will commence its on-site work with
the Borrowers as soon as possible after Advisor has been retained,
but not later than March 15, 2006. Borrowers shall provide to
Administrative Agent and Lenders copies of all reports prepared by
Advisor pursuant to the engagement. Advisor shall, on or about
April 14, 2006, make a presentation to Administrative Agent and
Lenders which details Advisor’s progress to date, its interim
findings, its recommendations to Borrowers, and the schedule of
work yet to be completed. The presentation by Advisor shall take
place at mutually convenient time and location. Borrowers shall be
responsible for and pay all costs, expenses and fees of such
Advisor. Borrowers shall at all times provide Advisor with
reasonable access to Borrowers’ personnel and financial
restructuring plans and projections and all financial books and
records of Borrowers. Advisor shall be included in the list of
those Persons with whom Administrative Agent shall have access to
and may discuss the business, operations, revenues, financial
condition, or business prospects of Borrowers, all as set forth in
Section 13.27 of the Original Credit Agreement. Borrowers failure
to timely hire the Advisor, pay the costs, fees and expenses of the
Advisor or to otherwise comply with the terms of this Agreement
shall be deemed an Event of Default under the Loan
Documents.
6.6. Each Borrower shall provide to Administrative
Agent promptly upon Administrative Agent’s request such other
financial and operation information relating to such Borrower and
its operations as Administrative Agent may request from time to
time. Furthermore, each Borrower shall, at Borrower’s sole
cost and expense, promptly retain such consultants as
Administrative Agent or the Required Lenders require.
7.
Expiration of Forbearance. Administrative Agent may and may direct the
Lenders, and at the direction of the Required Lenders shall,
immediately, without notice or demand to Borrowers, any Guarantor
or any other Person liable for the Loan Obligations, cease making
Advances to Borrowers,
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proceed to enforce any and all remedies
available to them under the Loan Documents, the Original Credit
Agreement or under Law or at equity, and Administrative Agent and
the Lenders shall be entitled to take such lawful action as they
deem appropriate for the purpose of collecting the Loan
Obligations, including enforcement of their Security Interests and
liens in the Collateral, upon the earlier to occur of (the date of
the occurrence of any of the following, being the
“Forbearance Termination Date”): (A) May 31, 2006; (B)
the date on which a Borrower fails to make any payments due under
this Agreement, the Original Credit Agreement or the Loan Documents
when due; (C) other than the Existing Defaults specifically
referenced in Recital C to this Agreement, the occurrence of any
breach or default by a Borrower of any covenant or agreement or
representation of a Borrower under this Agreement, the Original
Credit Agreement or the other Loan Documents; (D) any warranty or
representation made by a Borrower in this Agreement or in the Loan
Documents is discovered to be false or misleading in any respect or
was false or misleading in any respect at the time made; (E) the
occurrence of any Event of Default other than the Existing
Defaults; or (F) the date on which any of the following events
occur: (i) the entry of a decree or order by a judge of competent
jurisdiction for relief with respect to Borrowers (or any one of
them) under Title XI of the United States Code, as now constituted
or hereinafter amended, or any other applicable federal, state or
foreign bankruptcy law or other similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator,
conservator, or similar official of the Borrowers (or any one of
them) or of any substantial part of their property, or ordering the
winding up of or liquidation of the affairs of the Borrowers (or
any one of them), (ii) the filing by the Borrowers (or any one of
them) or against the Borrowers (or any one of them) of a petition
or answer or consent seeking relief under Title XI of the United
States Code, as now constituted or hereinafter amended, or any
other applicable federal, state or foreign bankruptcy law, or other
similar law, or (iii) the consent by the Borrowers (or any one of
them) to the institution of proceedings thereunder or to the filing
of any such petition or the appointment or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator,
conservator (or other similar official) of the Borrowers (or any
one of them) or of any substantial portion of their property. The
occurrence of the Forbearance Termination Date shall be an
immediate Event of Default, default and breach under each and every
Loan Document without the benefit of any cure periods, and without
the necessity of providing any notice or demand to Borrowers, and
Borrowers hereby waive any right to receive any notice or demand of
any Default or acceleration of the Loan Obligations.
8.
Amendment to Credit Agreement. The Original Credit Agreement is hereby amended
as follows, subject to the terms and provisions of this Agreement
which are controlling in all respects:
8.1.
Replacement Exhibit 3.Exhibit 3 of the Original Credit Agreement is hereby
deleted and replaced with the new Exhibit 3 attached
hereto.
8.2.
Revolving Loan. The first
sentence of Section 3.1.1 of the Original Credit Agreement
is deleted and replaced with the following:
“ 3.1.1.
Aggregate
Amount.
Subject to the limitations in Sections 3.1.2 and 3.5 and elsewhere
herein, each Lender shall make available to Borrower, such
Lender’s pro-rata share (as listed on Exhibit 3, as
applicable) of an “Aggregate Revolving Loan Facility”
that is Forty Million Dollars ($40,000,000) through Maturity, by
funding such Lender’s pro-rata share of Revolving Loan
Advances made from time to time by Administrative Agent as provided
herein.”
8.3.
Limitations on Revolving Loan Advances; Conversion to Discretionary
Facility.Section 3.1.2 of
the Original Credit Agreement is hereby deleted in its entirety and
replaced with the following:
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“ 3.1.2.
Limitations on Revolving Loan Advances; Conversion to Discretionary
Facility. No Revolving Loan Advance will be made which would
result in either: (i) the Aggregate Revolving Loan exceeding the
Maximum Available Amount; or (ii) the Lenders’ Exposure
exceeding the Total Aggregate Facility Limit. No Revolving Loan
Advance will be made on or after the effective date of any
termination of the Aggregate Revolving Loan Facility. Lenders may,
however, in their absolute discretion make such Revolving Loan
Advances, but shall not be deemed by doing so to have increased the
Maximum Available Amount or the Total Aggregate Facility Limit and
shall not be obligated to make any such Revolving Loan Advances
thereafter. The “Maximum Available Amount” (which can
be a negative number) on any date shall be a Dollar amount equal to
the lesser of (i) the amount of the Aggregate Revolving Loan
Facility and (ii) the Borrowing Base, on such date, minus the sum
of (a) the Aggregate Revolving Loan, (b) the Swingline Loan, (c)
the Other Creditor Indebtedness (unless an Intercreditor Agreement
has been executed between Administrative Agent and the holders of
such Other Creditor Indebtedness), (d) the GSA Fee, and (e) the
Letter of Credit Exposure on such date (except to the extent that a
Revolving Loan Advance will be used immediately to reimburse Letter
of Credit Issuer for unreimbursed draws on a Letter of
Credit).
Borrowers, Administrative Agent and
Lenders each acknowledge and agree that, notwithstanding anything
to the contrary in the Credit Agreement, (i) on February 28, 2006,
the Aggregate Revolving Loan Facility shall convert to and
thereafter remain an uncommitted, discretionary credit facility,
(ii) from and after February 28, 2006 that the Aggregate Revolving
Loan Facility shall not be deemed a Commitment by Lenders to lend
money and shall be a discretionary facility, and (iii) on and after
February 28, 2006, neither Administrative Agent or the Lenders
shall be deemed to have given Borrowers, nor shall they be deemed
to have, a Commitment to make Revolving Loan Advances under the
Aggregate Revolving Loan Facility; provided, however, that if
Administrative Agent elects, in its absolute discretion to make a
Revolving Loan Advance or a Swingline Advance from time to time,
each Lender shall make its pro-rata share of such Advances
available to Borrowers in accordance with the Credit Agreement,
including but not limited to Section 3.1.1
thereof.”
8.4.
Borrowing Base. Section 3.1.4 of the Original Credit Agreement is hereby
deleted and replaced with the following:
“3.1.4.
Borrowing Base. The
“Borrowing Base” on any date shall be 85% of the total
outstanding principal balance of all Eligible Accounts (i) as of
the close of business on such date, or (ii) as certified in the
Borrowing Base Certificate most recently furnished to
Administrative Agent as required in Section 13.15.1, whichever is
less; minus the Floorplan Shortfall, minus the Collateral Reserve,
minus the Borrowing Base Reserve and, minus (to the extent not
deducted from Eligible Accounts pursuant to Section 3.1.5) the
Dollar amount, if any, of Inventory that Borrower has been
requested (orally or in writing) to repurchase under any repurchase
agreement or similar arrangement, including the Textron
Agreement.”
8.5.
Floorplan Loan. The first
sentence of Section 3.2.1 of the Original Credit Agreement
is deleted and replaced with the following:
“ 3.2.1.
Floorplan Loan Facility Generally. Each Lender may,
subject to the terms and conditions hereof, make available to
Borrower such Lender’s pro-rata share (as listed on Exhibit
3) of an “Aggregate Floorplan Loan Facility” that is
Seventy-Five Million
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Dollars ($75,000,000) from February
28, 2006 through Maturity, by funding such Lender’s pro-rata
share thereof as provided for herein.”
8.6.
Total Aggregate Facility Limit. Section 3.5 of the Original Credit Agreement is hereby
deleted in its entirety and replaced with the following:
“
3.5. Total Aggregate
Facility Limit . Notwithstanding the Facilities herein,
Borrower, Adminis
