Exhibit 99.3
EXECUTION COPY
Credit and Supply Agreement
Credit and Supply Agreement ("AGREEMENT"), dated as of May 29, 2001, by and
between Cyberian Outpost, Inc., a Delaware corporation ("OUTPOST") and Merrimack
Services Corporation, a Delaware corporation ("MSC").
WHEREAS, simultaneously with the execution and delivery of this Agreement
an Affiliate of MSC is entering into a certain Merger Agreement (the "MERGER
AGREEMENT") pursuant to which Outpost will merge with an Affiliate of MSC: and,
WHEREAS, in conjunction with the foregoing transactions, Outpost has
requested that MSC provide it with a line of credit (the "WORKIN7e understanding
that the proceeds of such Working Capital Line are to be used by Outpost to fund
necessary payments to trade creditors and others pending the Closing of the
Merger, and MSC is willing to do so upon the terms and conditions hereinafter
set forth;
WHEREAS, in conjunction with the foregoing transactions, Outpost has also
asked MSC to make certain items of inventory available to it for sale to
Outpost's customers, and MSC is willing to do so upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises, terms, covenants,
provisions and conditions set forth herein, and each intending to be legally
bound hereby, the parties agree as follows:
1. CERTAIN DEFINITIONS.
1.1. GENERAL. For the purposes of this Agreement, the terms listed below
shall have the following meanings:
(a) "AFFILIATE" of a specified person shall mean a person who directly
or indirectly through one or more intermediaries controls, is controlled by, or
is under common control with, such specified person, including, without
limitation, any partnership or joint venture in which the person (either alone,
or through or together with any subsidiary) has, directly or indirectly, an
interest of 10% ownership or more.
(b) "COLLATERAL" shall have the meaning defined in the Security
Agreement.
(c) "CREDIT EXTENSION PERIOD" shall mean the period beginning on the
date hereof and terminating on the occurrence of the first Credit Extension
Termination Event.
(d) "CREDIT EXTENSION TERMINATION EVENT" shall mean each of the
following:
(i) An Event of Default shall have occurred and be continuing;
(ii) The Maturity Date shall have occurred;
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(iii) Sixty days shall have passed after the date on which the
Merger Agreement is terminated by Outpost pursuant to Section 10.01(e)
or Section 10.01(f) of the Merger Agreement; or
(iv) Thirty days shall have passed after the date on which a
Subsequent Triggering Event (as such term is defined in the Warrant
Agreement) shall have first occurred.
(e) "EVENT OF DEFAULT" shall have the meaning set forth in the
Promissory Note.
(f) "INTEREST RATE" shall mean prime interest rate as reported in The
Wall Street Journal on the date of this Agreement.
(g) "INVENTORY LINE" shall mean the line of credit made available (and
advances made from time to time) by MSC to Outpost pursuant to Section 2.
(h) "INVENTORY PAYABLE CAP" shall mean five million dollars
($5,000,000), except as otherwise provided in this Agreement.
(i) "INVENTORY PAYABLE DUE DATE" shall mean the date that is seven
calendar days after the date on which the Inventory Payable is first created.
(j) "INVENTORY PAYABLES" shall mean amounts from time to time owing by
Outpost to MSC with respect to Inventory Items purchased by Outpost from MSC or
any Affiliate of MSC.
(k) "LOAN DOCUMENTS" shall mean each of this Agreement, the Security
Agreement, and the Promissory Note.
(l) "MATURITY DATE" shall mean the earliest to occur of
(i) the date which is five days after the Closing Date;
(ii) the date which is ninety days after the date on which the
Merger Agreement is terminated by Outpost pursuant to Section 10.01(e)
or Section 10.01(f) of the Merger Agreement;
(iii) the date on which the Merger Agreement is terminated by
MSC pursuant to Section 10.01(e) or Section 10.01(f) of the Merger
Agreement;
(iv) the date on which the Merger Agreement expires by its terms
or is terminated by either party (except as otherwise provided in
Section 1.1(l)(ii)); or
(v) the date which is sixty days after a Subsequent Triggering
Event (as such term is defined in the Warrant Agreement) shall have
first occurred.
(m) "MERGER AGREEMENT" shall mean that certain Merger Agreement dated as
of the date hereof by and between Outpost and an Affiliate of MSC.
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(n) "OBLIGATIONS" shall mean amounts owing to MSC from time to time
under the Working Capital Line or as Inventory Payables, including without
limitation all interest accrued from time to time.
(o) "SECURITY AGREEMENT" shall mean that certain Security Agreement of
even date herewith by and between MSC and Outpost.
(p) "WARRANT AGREEMENT" shall mean that certain Stock Warrant Agreement
dated as of the date hereof by and between an Affiliate of MSC and Outpost.
(q) "WORKING CAPITAL LINE AMOUNT" shall mean Three Million Dollars
($3,000,000).
1.2. CAPITALIZED TERMS, GENERALLY. Capitalized terms used and not
defined herein shall have the meanings defined in the Merger Agreement. Terms
defined in the singular shall have a comparable meaning when used in the plural,
and vice versa.
2. SALES OF INVENTORY BY MSC TO OUTPOST.
2.1. ORDERING AND DELIVERY OF INVENTORY ITEMS. During the Credit
Extension Period MSC agrees to make inventory ("INVENTORY ITEMS") available to
Outpost at MSC's Wilmington, Ohio warehouse, if the following conditions are
met:
(a) Outpost shall have submitted to MSC its purchase order and such
other documentation as MSC shall reasonably request to evidence its order of the
Inventory Item;
(b) MSC has the Inventory Item ordered by Outpost in stock and ready for
delivery;
(c) The aggregate amount of Inventory Payables that will be outstanding
upon MSC's delivery to Outpost of the requested Inventory Items will not exceed
the Inventory Payable Cap (it being agreed that any addition of any overdue
Inventory Payable to the Working Capital Loan Balance pursuant to Section 2.3
shall not have the effect of decreasing the aggregate amount of Inventory
Payables at the time outstanding); and
(d) Outpost shall have provided evidence satisfactory to MSC that:
(i) the requested Inventory Item has been ordered by a third
party customer of Outpost in the ordinary course of business;
(ii) such customer has provided payment by credit card for such
Inventory Item ("Card Charge");
(iii) Outpost has complied with all applicable credit card fraud
prevention procedures and policies in accepting such Card Charges;
(iv) Outpost has given irrevocable instructions (which by their
terms cannot be altered without the written agreement of MSC) to its
credit card processor that
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all credit card payments be paid by the credit card processor directly
to a bank account in the name of and under the control of MSC, with the
result that all payments of the Card Charges ("Credit Card Payments")
will be made to MSC and not to Outpost;
(v) upon shipment of the Inventory Item Outpost will have a Card
Charge receivable (due and collectible in not more than four (4) days
from the date of Inventory Item shipment) for the purchase price of the
Inventory Item; and
(vi) the related Card Charge receivable and Credit Card Payment
each constitute Collateral under the Loan Documents.
(e) Outpost agrees to cause the procedures described in Section 2.1(d)
to be complied with.
2.2. APPLICATION OF CREDIT CARD PAYMENTS. At the end of each business day
MSC will account to Outpost, reporting the amount of Credit Card Payments
received that day. MSC shall apply the aggregate amount of Credit Card Payments
received each day in the following order:
(a) Such Credit Card Payments shall first be applied so as to pay down
all Inventory Payables that have not been paid by the Inventory Payable Due
Date.
(b) Next, if an Event of Default shall have occurred or a Credit
Extension Termination Event shall have occurred,
(i) any remaining Credit Card Payments shall be applied so as to
pay down the Inventory Payables to which such Credit Card Payment
relate; and then
(ii) any additional remaining Credit Card Payments shall be
applied to pay down the outstanding balance of any Working Capital
Loans; and then
(iii) any additional remaining Credit Card Payments shall be
applied to pay any then unpaid Inventory Payables.
(c) Finally, unless an Event of Default shall have occurred or a Credit
Extension Termination Event shall have occurred, any remaining Credit Card
Payments shall be paid over to Outpost.
2.3. PAYMENT FOR INVENTORY ITEMS. All purchases of Inventory Items shall be
on seven day net terms. The price for each Inventory Item shall be the cost to
MSC of each such Inventory Item plus 5%. Amounts due with respect to Inventory
Items shall be considered to be Inventory Payables hereunder. The full amount of
any Inventory Payable that has not been paid to MSC by the Inventory Payable Due
Date shall be added to the Working Capital Loan balance and shall bear interest
at the Interest Rate.
2.4. RETURNS OF INVENTORY ITEMS. Outpost may return Inventory Items to MSC
only with MSC's prior approval.
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3. WORKING CAPITAL LOANS. Outpost shall have the right to request MSC to
make, on the terms and conditions set forth in this Agreement, working capital
loans (each a "WORKING CAPITAL LOAN" and collectively, the "WORKING CAPITAL
LOANS") to Outpost from time to time during the Credit Extension Period. The
obligations of Outpost with respect to the Working Capital Loans shall be
evidenced by Outpost's promissory note substantially in the form of Exhibit A
(the "PROMISSORY NOTE") to be executed by Outpost before the first Working
Capital Loan is made. Outpost may prepay amounts borrowed as Working Capital
Loans without prepayment penalty.
4. MAXIMUM AMOUNT OF WORKING CAPITAL LOANS. The maximum principal amount of
Working Capital Loans (including, without limitation, Inventory Payables added
to the Working Capital Loans pursuant to Section 2.3) shall not exceed the
Working Capital Line Amount.
5. NOTICE AND MANNER OF BORROWING. Outpost shall submit a written request
that MSC make a Working Capital Loan under this Agreement, specifying (i) the
requested amount of the Loan; (ii) the purposes for which the proceeds of the
Loan will be used, (iii) the date (which shall be not less than three Business
Days after the date ("Request Date") the request is submitted to MSC) on which
Outpost is requesting the Loan to be made, and (iv) such other information as
MSC may reasonably request. MSC will inform Outpost as to whether the Loan
request has been approved not later than two Business Days after the Request
Date. MSC shall have sole and complete discretion in deciding whether or not to
approve a Loan request. If the Loan request has been approved, and if the
preconditions to borrowing set forth in Section 7 (with respect to the initial
Loan) or Section 8 (with respect to all other Loans) are met, not later than
3:00 p.m. on the date such Working Capital Loan is scheduled to be made (as
specified in the Loan request notice from Outpost), MSC will make such Working
Capital Loan available to Outpost by wire transfer to an account that is
designated in writing by Outpost to MSC at the time the notice of proposed
borrowing is delivered.
6. INTEREST.
6.1. GENERAL. Outpost shall pay interest to MSC on the unpaid principal
amount of the Working Capital Loans from time to time outstanding at a rate per
annum equal to the Interest Rate. Interest shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed. Interest on the Working
Capital Loans shall be paid in immediately available funds on the first day of
each calendar month. The final payment of interest shall be paid with the final
payment of the Working Capital Loans (whether on the Maturity Date or
otherwise). Any interest amount not paid by Outpost when due shall not
constitute a default hereunder but shall be added to the principal amount owed
to MSC under the Promissory Note and (to the extent legally permissible) shall
bear interest thereafter at the Interest Rate until paid.
6.2. LIMITATION ON INTEREST PAYABLE. If, at any time, the rate of
interest payable on the Obligations shall be deemed by any competent court of
law, governmental agency or tribunal to exceed the maximum rate of interest
permitted by any applicable law, then, for such time as such rate would be
deemed excessive, its application shall be suspended and there shall be charged
instead the maximum rate of interest permissible under such law.
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6.3. METHOD OF PAYMENT. Outpost shall make each payment under this
Agreement to MSC at its office located at Merrimack, New Hampshire on the date
when due in lawful money of the United States in immediately available funds
pursuant to wire transfer instructions provided by MSC. Whenever any payment to
be made under this Agreement shall be stated to be due on a day other than a day
which is a business day in New Hampshire, such payment shall be made on the next
succeeding business day, and such extension of time shall in such case be
included in the computation of the payment of interest.
7. CONDITIONS PRECEDENT TO INITIAL ADVANCES OF CREDIT UNDER WORKING CAPITAL
LOANS AND INVENTORY LINE. The following conditions shall be satisfied by Outpost
at or before the time MSC advances the first Working Capital Loan or provides
any Inventory Item to Outpost pursuant to the Inventory Line:
7.1. Outpost shall have delivered to MSC the Promissory Note, the
Security Agreement, and any UCC financing statements or other security documents
requested by MSC, together with appropriate certificates of legal existence and
good standing dated at or shortly before the date thereof. The documentation for
such Working Capital Loan shall be reasonably satisfactory in form and substance
to MSC and its counsel;
7.2. No Event of Default shall have occurred and be continuing, and
Outpost shall have delivered to MSC an Officer's Certificate confirming that no
Event of Default has occurred and is continuing; and
7.3. Outpost shall have delivered to MSC a legal opinion of its counsel,
in form and substance reasonably satisfactory to MSC and its counsel, dated the
date of the initial borrowing, as to such matters as MSC shall have reasonably
requested.
8. CONDITIONS PRECEDENT TO SUBSEQUENT ADVANCES OF CREDIT UNDER WORKING
CAPITAL LOANS AND INVENTORY LINE. The following condition shall be satisfied by
Outpost at or before the time MSC advances any Working Capital Loan after the
first Working Capital Loan and before MSC provides any additional Inventory Item
to Outpost pursuant to the Inventory Line:
8.1. No Credit Extension Termination Event shall have occurred; and
8.2. No Event of Default shall have occurred and be continuing, and
Outpost shall have delivered to MSC (upon request of MSC) an Officer's
Certificate confirming that no Event of Default has occurred and is continuing.
9. CREDIT EXTENSION TERMINATION EVENT. From and after the occurrence of a
Credit Extension Termination Event, (a) all obligations of MSC to make Working
Capital Loans hereunder shall terminate and (b) the Inventory Payable Cap shall
become zero dollars.
10. PAYMENT OF OBLIGATION ON OR BEFORE MATURITY DATE. Notwithstanding any
other provisions of the Loan Documents, Outpost agrees to pay all Obligations to
MSC in full on or before the Maturity Date.
11. SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or
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unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
12. RIGHT OF SET-OFF. MSC may transfer any Obligation to any Affiliate.
Obligations may be applied or set off by MSC or any Affiliate against any
liabilities of MSC or any such Affiliate to Outpost at any time whether or not
such liabilities are then due or other collateral is then available and without
regard to the adequacy of any such other collateral.
13. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the substantive laws of New Hampshire without
regard to its principles of conflicts of laws.
14. SECURITY AGREEMENT.
14.1. To secure the payment and performance of all obligations of
Outpost to MSC, Outpost and MSC have entered into the Security Agreement.
15. SUBMISSION TO JURISDICTION. TO INDUCE MSC TO ACCEPT THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS AND TO MAKE EACH OF THE EXTENSIONS OF CREDIT
CONTEMPLATED HEREBY:
15.1. OUTPOST IRREVOCABLY AGREES THAT, OTHER THAN AS MAY BE NECESSARY IN
MSC'S SOLE AND ABSOLUTE DISCRETION TO PRESERVE RIGHTS IN COLLATERAL, ALL ACTIONS
OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED
TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE COLLATERAL SHALL BE LITIGATED
IN COURTS HAVING SITUS WITHIN THE STATE OF NEW HAMPSHIRE.
15.2. Outpost hereby waives any right it may have to transfer or change
the venue of any litigation brought against Outpost by MSC in accordance with
this Section 15.
16. WAIVER OF TRIAL BY JURY. To the extent not prohibited by applicable law
which cannot be waived, Outpost and MSC hereby waive, and covenant that they
will not assert (whether as plaintiff, defendant or otherwise), any right to
trial by jury in any forum in respect of any issue, claim, demand, action, or
cause of action arising out of or based upon this Agreement or any other Loan
Document or the subject matter thereof or any obligation or in any way connected
with or related or incidental to the dealings of MSC or Outpost or any of them
in connection with any of the above, in each case whether now or hereafter
arising and whether sounding in contract or tort or otherwise. Outpost
acknowledges (i) that it has been informed by MSC that the provisions of this
Section 16 constitute a material inducement upon which MSC has relied, is
relying and will rely in entering into this Agreement and each other Loan
Document and (ii) that it has been advised by counsel as to the meaning and
effect of this Section.
17. NO ASSIGNMENT. This Agreement is personal to the parties hereto and may
not be assigned by either party, whether by operation of law or otherwise.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CYBERIAN OUTPOST, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: President & CEO
MERRIMACK SERVICES CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: SVP of Finance & CFO
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Exhibit A
WORKING CAPITAL LOAN PROMISSORY NOTE
$3,000,000 May 29, 2001
FOR VALUE RECEIVED, Cyberian Outpost, Inc., a Delaware corporation
("Outpost"), promises to pay to the order of Merrimack Services Corporation, a
Delaware corporation ("MSC"), on the earlier of (x) the date or dates set forth
in connection with the various Working Capital Loans made by MSC to Outpost and
(y) the Maturity Date, the principal sum of THREE MILLION DOLLARS ($3,000,000),
or such other principal sum as may from time to time be outstanding, and to pay
interest on the unpaid principal balance hereunder on the first day of each
calendar month (commencing on June 1, 2001) and on the Maturity Date, at the
annual Interest Rate determined as provided in the Loan Agreement. Funds paid
hereunder shall be applied first to accrued and unpaid interest and then to the
unpaid principal balance. Capitalized terms used and not defined herein shall
have the meanings defined in the Credit and Supply Agreement between Outpost and
MSC dated as of the date hereof (the "Loan Agreement"). All payments shall be
made at the offices of MSC in Merrimack, New Hampshire, or such other address as
MSC shall designate in a written notice to Outpost.
This Note is issued by Outpost pursuant to, and is governed by and subject
to the terms and conditions of, the Loan Agreement. All capitalized terms used
in this Note that are not defined herein, but that are defined in the Loan
Agreement, shall have the meanings assigned to them therein.
Nothing contained in this Note, the Loan Agreement or the instruments
securing this Note shall be deemed to establish or require the payment of a rate
of interest in excess of the amount legally enforceable. In the event that the
rate of interest so required to be paid exceeds the maximum rate legally
enforceable, the rate of interest so required to be paid shall be automatically
reduced to the maximum rate legally enforceable, and any excess paid over such
maximum enforceable rate shall be automatically credited on account of the
principal hereof without premium or penalty.
This Note may be prepaid in whole or in part at any time without penalty.
The occurrence or existence of any one or more of the following shall
constitute an "Event of Default" hereunder:
Outpost or any Subsidiary shall fail to pay when due and payable any
principal of the Obligations when the same becomes due (including without
limitation any failure to pay any Inventory Payable by the Inventory
Payable Due Date (as such term is defined the Credit Agreement));
Outpost shall fail to take any action provided for in the Loan
Documents with respect to creation or preservation of MSC's rights in the
Collateral;
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Outpost or any Subsidiary shall fail to perform any other term,
covenant or agreement contained in the Loan Documents within fifteen (15)
days after MSC has given written notice of such failure to Outpost;
Any representation or warranty of Outpost or any of its Subsidiaries
in the Loan Documents or in any certificate or notice given in connection
therewith shall have been false or misleading in any material respect at
the time made or deemed to have been made;
Any of the Loan Documents shall cease to be in full force and effect,
and
Dissolution, termination of existence, insolvency, business failure,
appointment of a receiver or custodian of any part of Outpost's property,
assignment or trust mortgage for the benefit of creditors by Outpost, the
recording or existence of any lien for unpaid taxes, the commencement of
any proceeding under any bankruptcy or insolvency laws of any state or of
the United States by or against Outpost, or service upon Secured Party of
any writ, summons, or process designed to affect any of Outpost's accounts
or other property.;
Upon the occurrence or existence of any Event of Default and at any time
thereafter during the continuance of such Event of Default, MSC may by written
notice to Outpost and after any opportunity to cure as set forth in the Loan
Agreement, declare all outstanding obligations payable by Outpost hereunder to
be immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived. In addition to
the foregoing remedies, upon the occurrence or existence of any Event of
Default, MSC may exercise any right, power or remedy permitted to it by law,
either by suit in equity or by action at law, or both.
Notices to Outpost shall be by telecopy, delivery in hand or by courier, or
registered or certified mail (return receipt requested) and shall be deemed to
have been given or made when telegraphed, telecopied (and confirmed received),
delivered in hand or by courier, or five days after being deposited in the
United States mails postage prepaid, registered or certified, return receipt
requested, to Outpost at the address set forth in the Merger Agreement, or at
such other address specified by Outpost in accordance herewith to the holder.
No delay or omission on the part of MSC in exercising any right hereunder
shall operate as a waiver of such right or of any other right of MSC, nor shall
any delay, omission or waiver on any one occasion be deemed a bar to or waiver
of the same or any other right on any future occasion. Every maker, endorser
and guarantor of this Note or the obligations represented hereby waives
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note, assents to any extension or postponement of the time of payment or
any other indulgence, to any substitution, exchange or release of collateral and
to the addition or release of any other party or person primarily or secondarily
liable.
IN WITNESS WHEREOF, the undersigned has executed this Note as an instrument
under seal, as of the date first above written.
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CYBERIAN OUTPOST, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
Title: President & CEO
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